UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended April 30, 2009
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ____________ to ____________

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

For the quarterly period ended October 31, 2009

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

For the transition period from ____________ to ____________

Commission File No.: 000-30151

Proginet Corporation

(Exact name of registrant as specified in its charter)

Delaware	11-3264929
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

200 Garden City Plaza, Garden City, NY 11530

(Address of principal executive offices) (Zip Code)

(516) 535-3600

(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ~~o No~~__ oNo __

Indicate by check mark whether registrant is a large accelerated filer, accelerated filer, non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer o (Do not check if a smaller reporting company)

Smaller reporting company x

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

Yes ~~o~~ No x X

There were 1416,~~849~~826,~~055~~073 shares of Common Stock outstanding as of ~~June~~November 130, 2009.

PROGINET CORPORATION

FORM 10-Q

FOR THE QUARTER ENDED ~~April~~October 3031, 2009

PART I. FINANCIAL STATEMENTS
Item 1.	Financial Statements
	Balance Sheets as of April 30, 2009 (Unaudited) and July 31, 2008	3
	Balance Sheets as of October 31, 2009 (Unaudited) and July 31, 2009	3
	Statements of Operations for the Three and Nine Months ended April 30, 2009 and 2008 (Unaudited)	4
	Statements of Operations for the Three Months ended October 31, 2009 and 2008 (Unaudited)	4
	Statement of Stockholders' Equity for the Nine Months ended April 30, 2009 (Unaudited)	5
	Statement of Stockholders' Equity for the Three Months ended October 31, 2009 (Unaudited)	5
	Statements of Cash Flows for the Nine Months Ended April 30, 2009 and 2008 (Unaudited)	6
	Statements of Cash Flows for the Three Months Ended October 31, 2009 and 2008 (Unaudited)	6
	Notes to Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1514
Item 3	Quantitative and Qualitative Disclosure About Market Risk	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4T.	Controls and Procedures	2321
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	24
Item 1A	Risk Factors	22
Item 1A.	Risk Factors	24
Item 4.	Submission of Matters to a Vote of Security Holders	22
Item 6.	Exhibits	2422
SIGNATURES		2523

PROGINET CORPORATION

Balance Sheets

	April 30, 2009 (Unaudited)			July 31, 2008
	October 31, 2009 (Unaudited)			July 31, 2009
Assets
Current assets
Cash	$	~~812~~1,~~475~~545,619		$	21,~~338~~106,~~335~~349
Trade accounts receivable, net		1,~~573~~054,~~209~~878			12,~~816~~366,~~388~~174
Prepaid expenses		~~233~~235,~~957~~311			~~262~~207,~~396~~050
Total current assets		2,~~619~~835,~~641~~808			43,~~417~~679,~~119~~573
Property and equipment, net		~~350~~299,~~847~~040			~~181~~323,~~226~~478
Capitalized software development costs, net		4,~~042~~117,~~133~~954			34,~~660~~080,~~387~~434
Purchased software, net		~~208~~58,~~288~~108			~~433~~133,~~558~~198
Customer relationships, net		~~166~~46,~~305~~395			~~346~~106,~~170~~350
Goodwill		135,932			135,932
Other assets		35,870			35,870
	$	7,~~559~~529,~~016~~107		$	98,~~210~~494,~~262~~835
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	~~482~~322,~~303~~394		$	~~170~~395,~~557~~835
Accrued expense		~~837~~479,~~122~~775			1865,~~054,836~~819
Deferred revenues		2,~~864~~105,~~341~~440			32,~~942~~804,~~590~~438
Deferred rent		2126,~~389~~411			1423,~~054~~900
Total current liabilities		42,~~205~~934,~~155~~020			54,~~182~~089,~~037~~992
Other long-term liabilities, excluding current portion		-			148,497
Deferred revenues		51,378			64,919
Deferred revenues		3,362			68,966
Deferred rent		116,498			123,938
Deferred rent		131,378			147,838
		3,101,896			4,278,849
		4,339,895			5,547,338
Stockholders’ equity
Preferred stock, $.01 par value, 10,000,000 shares authorized, none issued		-			-
Preferred stock, $.01 par value, 10,000,000 shares authorized,
Common stock, $.001 par value, 40,000,000 shares authorized, 16,174,281 shares issued at April 30, 2009 and 16,049,281 at July 31, 2008		16,175			16,050
none issued		-			-
Additional paid-in capital		13,283,922			12,877,948
Common stock, $.001 par value, 40,000,000 shares authorized,
Treasury stock 1,325,226, at cost, at April 30, 2009 and July 31, 2008		(606,023	)		(606,023	)
18,151,299 shares issued at October 31, 2009 and 17,847,508 at July 31, 2009		18,152			17,848
Accumulated deficit		(9,474,953	)		(8,625,051	)
Additional paid-in capital		13,931,432			13,799,030
Total stockholders’ equity		3,219,121			3,662,924
Treasury stock 1,325,226, at cost, at October 31, 2009 and July 31, 2009		(606,023	)		(606,023	)
	$	7,559,016		$	9,210,262
Accumulated deficit		(8,916,350	)		(8,994,869	)
Total stockholders’ equity		4,427,211			4,215,986
	$	7,529,107		$	8,494,835

The accompanying notes are an integral part of these financial statements.

PROGINET CORPORATION

Statements of Operations (Unaudited)

	Three months ended	~~Three months ended~~						~~Nine months ended~~
		April 30,						April 30,
	October 31,
		2009			2008			~~2009~~			~~2008~~
Revenues
Software licenses		$	~~554~~631,~~913~~255		$	~~316~~1,~~378~~454,606		$	~~2,944,204~~		$	~~1,125,422~~
Software maintenance fees and other			1,~~201~~439,~~222~~122			1,~~535~~332,~~847~~622			~~3,554,899~~			~~4,589,977~~
Professional services			1496,000			1576,~~950~~138			~~114,139~~			~~98,950~~
			1,770,135			1,868,175			6,613,242			5,814,349
			2,166,377			2,863,366
Operating expense
Cost of software licenses			~~380~~402,~~461~~001			~~356~~443,~~226~~718			~~1,233,257~~			~~1,147,974~~
Cost of maintenance fees and other			~~266~~322,~~328~~311			~~250~~283,~~264~~817			~~805,967~~			~~782,660~~
Cost of professional services			655,~~537~~500			320,~~768~~844			~~32,208~~			~~25,723~~
Commissions			~~145~~149,~~449~~172			~~247~~170,~~870~~049			~~523,316~~			~~640,061~~
Research and development			2313,~~463~~592			7862,~~096~~468			~~155,653~~			~~239,465~~
Selling and marketing			~~501~~437,~~246~~086			~~697~~818,~~460~~810			~~1,933,397~~			~~1,961,254~~
General and administrative			~~797~~709,~~826~~494			~~481~~1,~~365~~073,837			~~2,789,021~~			~~2,219,312~~
			2,121,310			2,115,049			7,472,819			7,016,449
			2,089,156			2,873,543
Loss from operations			(351,175	)		(246,874	)		(859,577	)		(1,202,100	)
Income (loss) from operations			77,221			(10,177	)
Interest income			~~(612~~1,298	)		~~(26~~6,~~890~~925	)		~~(9,675~~	)		~~(86,414~~	)
Loss before income taxes		$	(350,563	)	$	(219,984	)	$	(849,902	)	$	(1,115,686	)
Income (loss) before income taxes		$	78,519		$	(3,252	)
Income Tax Expense			-			-			-			-
Income tax expense			-			-
Net loss		$	(350,563	)	$	(219,984	)	$	(849,902	)	$	(1,115,686	)
Net income (loss)		$	78,519			(3,252	)
Basic and diluted loss per common share		$	(.02	)	$	(.01	)	$	(.06	)	$	(.08	)
Basic income (loss) per common share		$	-		$	-
Weighted average common shares outstanding - basic			14,849,055			14,722,677			14,835,227			14,677,717
Diluted income (loss) per common share		$	-		$	-
Weighted average common shares outstanding - diluted			14,849,055			14,722,677			14,835,227			14,677,717
Weighted average common shares outstanding – basic			16,737,905			14,808,022
Weighted average common shares outstanding – diluted			17,205,238			14,808,022

The accompanying notes are an integral part of these financial statements.

PROGINET CORPORATION

Statement of Stockholders’ Equity

~~Nine~~Three months ended ~~April~~October 3031, 2009 (unaudited)

	Common Stock				Additional paid-in capital		Treasury Stock			~~Accumulated~~Accum- Ulated deficit			Total
	Shares		Amount
Balance – August 1, 2008		16,049,281	$	16,050	$	12,877,948	$	(606,023	)	$	(8,625,051	)	$	3,662,924
Balance – August 1, 2009		17,847,508	$	17,848	$	13,799,030	$	(606,023	)	$	(8,994,869	)	$	4,215,986
Exercise of commons stock options		125,000		125		63,575								63,700
Exercise of common stock options		142,500		143		44,107								44,250
Stock option expense						192,399								192,399
Stock Option Expense						38,456								38,456
Private placement costs fee waiver						150,000								150,000
Private placement, net		161,291		161		49,839								50,000
Net loss											(849,902	)		(849,902	)
Net income											78,519			78,519
Balance – April 30, 2009		16,174,281	$	16,175	$	13,283,922	$	(606,023	)	$	(9,474,953	)	$	3,219,121
Balance – October 31, 2009		18,151,299	$	18,152	$	13,931,432	$	(606,023	)	$	(8,916,350	)	$	4,427,211

The accompanying notes are an integral part of these financial statements.

PROGINET CORPORATION

Statements of Cash Flows (Unaudited)

	Nine months ended
	Three months ended
	April 30,
	October 31,
	2009			2008
Cash flows from operating activities
Net loss	$	(849,902	)	$	(1,115,686	)
Net income (loss)	$	78,519		$	(3,252	)
Adjustments to reconcile net loss to cash
Adjustments to reconcile net loss to cash provided by (used in) operating activities
Depreciation and amortization		1429,~~285,878~~598			1438,~~152,926~~508
Provision for bad debt allowance, net		-			~~234,095~~-
Stock based compensation		~~192~~38,~~399~~456			~~7,743~~-
Deferred revenue		(1712,~~143,852~~539	)		~~276~~(1,~~084~~522,567	)
Deferred rent		(94,~~126~~929	)		(2,~~039~~503	)
Changes in operating assets and liabilities
Trade accounts receivable		~~243~~1,~~179~~311,296			~~578~~1,~~064~~196,220
Prepaid expenses and other assets		(28,~~439~~261	)		232,~~531~~816
Accounts payable and accrued expenses		95(459,~~535~~485	)		~~(187~~205,~~145~~393	)
Net cash provided by (used in) operating activities		(157,450	)		967,573
Net cash provided by operating activities		652,655			314,615
Cash flows from investing activities
Capitalized software development costs		(1304,~~181,067~~476	)		(~~936~~613,~~525~~451	)
Purchases of property and equipment		(~~251~~3,~~043~~159	)		(22210,~~896~~761	)
Net cash used in investing activities		(1307,~~432,110~~635	)		(~~959~~824,~~421~~212	)
Cash flows from financing activities
Exercise of common stock options		63,700			19,342
Proceeds from private placement, net		50,000			-
Net cash provided by financing activities		63,700			19,342
Exercise of common stock options		44,250			63,700
Net decrease in cash		(1,525,860	)		27,494
Net cash provided by financing activities		94,250			63,700
Cash at beginning of period		2,338,335			3,439,988
Net increase (decrease) in cash		439,270			(445,897	)
Cash at end of period	$	812,475		$	3,467,482
Cash at beginning of period		1,106,349			2,338,335
Supplemental Disclosures of Cash Flow Information
Cash at end of period	$	1,545,619		$	1,892,438
Non-cash financing activity:
Private placement costs fee waiver	$	150,000		$	-

The accompanying notes are an integral part of these financial statements.

PROGINET CORPORATION

NOTES TO FINANCIAL STATEMENTS

~~April 30,~~October 31, 2009

(Unaudited)

1.	Interim Financial Data

The accompanying unaudited financial statements have been prepared by Proginet Corporation ~~(“Proginet” or “the Company”)~~ in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). Unless the context otherwise requires, “we,” “our,” “us” and similar expressions refer to Proginet Corporation. In the opinion of management, the accompanying unaudited financial statements contain all adjustments, consisting only of those of a normal recurring nature, necessary for a fair presentation of ~~the~~our ~~Company’s~~ financial position, results of operations and cash flows at the dates and for the periods indicated. These financial statements should be read in ~~conjunction~~ conjunction with the financial statements and notes related thereto, included in the Annual Report on Form 10-~~KSB~~K for year ended July 31, ~~2008~~2009.

These results for the period ended ~~April~~October 3031, 2009 are not necessarily indicative of the results to be expected for the full fiscal year. The preparation of the financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~During~~Subsequent ~~fiscal~~events 2009, the Company embarked on strategic initiatives including but not limited to, (i) transforming our sales model with enhanced focus on our Channels organization, (ii) consolidating product lines for improved efficiency and (iii) innovating new collaborative product offerings for the managed file transfer market. Such initiatives required cash investments and management effort. Operationally, our performance has been negatively affected by the general economic slowdown. Some of our new prospects have ~~delayed~~ ~~or reduced technology purchases and some of our existing customers have~~ been ~~paying~~updated ~~their~~through ~~maintenance~~December ~~invoices with extended payment terms. We have also had a number of canceled maintenance contracts~~14, ~~most of which have been from our older legacy product suites~~2009. Collectively, these factors have caused our cash position to decline over the last nine months. In response, Proginet has reduced operating expenses in recent quarters and expects to continue to monitor such expenses closely. However, if the Company does not generate sufficient cash flow from operations to meet the Company’s operating cash requirements, the Company will need to obtain other sources of capital to help fund its operations, which may or may not be available to the Company at favorable terms, if at all. The Company is exploring various capital raising initiatives so as to bolster its cash reserves given the uncertainty of the current business climate.

2.	Revenue Recognition

We recognize revenue in accordance with ~~Statement~~ ofFASB ~~Position,~~Accounting orStandards ~~SOP, 97-2, “Software Revenue Recognition,” and SOP~~Codification ~~98-9,~~(ASC) ~~“Modification of SOP 97~~985-~~2, Software Revenue Recognition, with Respect to Certain Transactions~~605.” We recognize software license revenues when all of the ~~following~~ following criteria are met: persuasive evidence of an arrangement exists, the fee is fixed or determinable, collectability is probable, delivery of the product has occurred and the customer has accepted the product (including the expiration of an acceptance period) if the terms of the contract include an ~~acceptance~~ acceptance requirement. In instances when any of the criteria are not met, we will either defer recognition of the software license revenue until the criteria are met or we will recognize the software license revenue on a ratable basis, as ~~required~~ required by ~~SOPs~~ASC 97985-~~2 and 98-9~~605. We generally utilize written contracts as the means to establish the terms and conditions by which our products support and services are sold to our customers. Our revenues are derived from our direct sales force and channel partnerships (value-added resellers (VARs), Original Equipment Manufacturers (OEMs), and distributors). Revenues from sales through distributors are recorded at the gross amount charged based on the economic risks and ongoing product support responsibilities we assume.

We consider a non-cancelable agreement signed by us and the customer to be evidence of an arrangement. Delivery is considered to occur when media containing the licensed programs is provided to a common carrier, or the customer is given electronic access to the licensed software. Our typical end user license agreements do not contain acceptance clauses. We consider the fee to be fixed or determinable if the fee is not subject to refund or adjustment. If the fee is not fixed or determinable, we recognize revenue as the amounts become due and payable. Probability of collection is based upon our assessment of the customer’s financial condition through review of its current financial statements or credit reports. Collection is deemed probable if we expect that the customer will be able to pay amounts under the arrangement as payments become due. For follow-on sales to existing customers, prior payment history is also used to evaluate probability of collection. If we determine that collection is not probable, we defer the revenue and recognize the revenue upon cash collection.

~~We consider a non-cancelable agreement~~When signed by us and the customer to be evidence of an arrangement. Delivery is considered to occur when media containing the licensed programs is provided to a common carrier, or the customer is given electronic access to the licensed software. Our typical end user license agreements do not contain acceptance clauses. We consider the fee to be fixed or determinable if the fee is not subject to refund or adjustment. If the fee is not fixed or determinable, we recognize revenue as the amounts become due and payable. Probability of collection is based upon our assessment of the customer’s financial condition through review of its current financial statements or credit reports. Collection is deemed probable if we expect that the customer will be able to pay amounts under the arrangement as payments become due. For follow-on sales to existing customers, prior payment history is also used to evaluate probability of collection. If we determine that collection is not probable, we defer the revenue and recognize the revenue upon cash collection. When our software licenses contain multiple elements, werevenue ~~allocate~~is ~~revenue~~allocated to each element based on the relative fair values of the elements. Multiple element ~~arrangements~~ arrangements generally include post-contract support (PCS or support), software products, and, in some cases, service. Revenue from multiple-element arrangements is allocated to undelivered elements of the arrangement, such as PCS, based on the relative fair values of the ~~elements~~ specific ~~to us~~elements. Our determination of fair value of each element in multi-element arrangements is based on vendor-specific ~~objective~~ objective evidence, which is generally determined by sales of the same element or service to third parties or by reference to a renewal rate specified in the ~~related~~ related arrangement.

Where vendor-specific objective evidence of fair value exists for all undelivered elements, but evidence does not exist for one or more delivered elements, we account for the delivered elements in accordance with the “”Residual Method” prescribed by ~~SOP~~ASC 98985-9605. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. In most cases, the bundled multiple elements include PCS and the software product. In such cases, when vendor-specific objective evidence of fair value exists for all of the undelivered elements (most commonly PCS), the ~~residual~~selling price amount is recognized as revenue and the PCS is recognized ratable over the PCS term, which is typically 12 12 months.

A customer typically prepays maintenance revenues ~~for the first 12 months~~ and ~~the~~such ~~related~~ maintenance revenues ~~are~~ are recognized ratable monthly over the term of the maintenance contract, which is is generally 12 months. Maintenance contracts include the right to ~~unspecified~~ unspecified upgrades on a when-and-if available basis and ongoing support.

Deferred revenues include amounts received from customers for which revenue has not yet been recognized that generally results from agreements where all necessary revenue recognition requirements have not been met, deferred maintenance, consulting or training services not yet rendered and license revenue deferred until all requirements under ~~SOP~~ASC 97985-2 605 are met. ~~Revenue~~Deferred revenue is recognized upon delivery of our products, as services are rendered, or as other requirements requiring deferral under ~~SOP~~ASC 97985-2605 are satisfied.

Based on our interpretation of SOP 97-2 and SOP 98-9, we believe that our current sales contract terms and business arrangements have been properly reported. However, the American Institute of Certified Public Accountants and its Software Revenue Recognition Task Force continue to issue interpretations and guidance for applying the relevant standards to a wide range of sales contract terms and business arrangements that are prevalent in the software industry. Also, the SEC has issued Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements,” which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. Future interpretations of existing accounting standards or changes in our business practices could result in future changes in our revenue accounting policies that could have a material adverse effect on our business, financial condition and results of operations.

Commission Expense

~~Our revenues are derived from direct sales executives, distributors, Value Added Resellers (“VARs”) and Original Equipment Manufacturers (“OEM” partners).~~ Commission expense is recorded at the time of sale. Commission rates to direct ~~sales people~~ salespeople are based on a graduating scale, ranging from 52% to 15% of the sale, dependent upon the revenue volume generated by the sales executive. Distributors are typically compensated at a commission rate of 40% to 50% and VARs are compensated at a commission rate of 25% to 40% of the license revenue generated. The rates vary based upon their level of effort, resources assigned and products sold. The OEM arrangements include a commission structure similar to distributors and also may include specific fixed pricing for the number of “users” the product is licensed for. ~~Revenues from sales through distributors are recorded at the gross amount charged based on the economic risks and ongoing product support responsibilities we assume.~~

3.	Accounts Receivable

~~The~~On a ~~Company~~periodic ~~continually~~basis, ~~reviews~~we ~~accounts~~evaluate ~~for~~our ~~collectability~~accounts receivable and ~~establishes~~establish an ~~allowance~~ allowance for doubtful accounts, when deemed necessary, based on its history of past write-offs and collections and current credit conditions. As of ~~April~~October 3031, 2009 and July 31, ~~2008~~ 2009, there was an allowance for doubtful accounts of $45,000.

4.	Research and Development Costs and Capitalized Software Development Costs

Research and development costs consist of salaries and other costs related to the development and enhancement of computer software programs. Software development costs are capitalized upon the establishment of product technological feasibility until the product is available for general release to the public. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs require considerable judgment by management with respect to certain factors including, but not limited to, the timing of technological feasibility, anticipated future gross revenues, estimated economic life and changes in software and hardware technologies. Software development costs not capitalized are expensed as research and development.

Amortization of capitalized software development costs is provided on a product-by-product basis at the greater of the amount computed using the ratio of current gross revenues for a product to the total of current and anticipated future gross revenues or the straight-line method over the remaining estimated economic life of the product.

Amortization commences once a product becomes available for sale to customers. ~~All costs of a product enhancement~~Generally, ~~including~~an ~~any~~original ~~costs~~estimated ~~carried~~economic ~~over~~life ~~from~~of ~~the~~five ~~original~~years ~~product~~is ~~are~~assigned ~~amortized~~to ~~over~~capitalized ~~the~~software ~~enhancement’s~~development ~~estimated useful life, which is generally five years~~costs. Amortization expense charged to operations was $~~245~~266,~~332~~372 and $~~799~~280,~~323~~137 for the three ~~and nine~~ months ended ~~April~~October 3031, 2009 and 2008, respectively. ~~Amortization~~This expense ~~charged~~is torecorded ~~operations~~under “Cost ~~was~~of ~~$214,078~~software ~~and $704,127~~licenses” ~~for~~on the ~~three~~Statement ~~and nine months ended April 30, 2008~~of Operations. Capitalized software development costs are net of accumulated amortization of $4,~~501~~117,~~723~~966 and $93,~~435~~982,~~093~~530 at ~~April~~October 3031, 2009 and July 31, ~~2008~~2009, respectively. Capitalized software development costs are retired ~~from~~ from the balance sheet when fully amortized ~~or written off if the related product is no longer sold~~. As of ~~April~~October 3031, 2009, $58,~~732~~801,~~693~~ 054 of capitalized software development costs ~~was~~ were retired from the ~~Balance Sheet~~balance sheet.

5.	Corporate Developments

On October 31, 2008, ~~Proginet~~we ~~Corporation (“Proginet”)~~ entered into an Asset Exchange Agreement (the “Asset Exchange Agreement”), with Beta Systems Software of North America, Inc., a Delaware corporation ("Beta America"), and Beta Systems Software of Canada Ltd., a Canadian body corporate ("Beta Canada"), effective as of October 1, 2008. Under the Asset Exchange Agreement, ~~Proginet~~ we (i) ~~has~~have transferred to Beta Canada all of ~~its~~our intellectual property rights, and books and records, relating to ~~Proginet’s~~our Secur-Pass products, and (ii) has assigned to Beta America its customer, maintenance and service agreements relating to ~~Proginet’s~~our Secur-Pass products, in exchange for Beta Canada’s transfer to ~~Proginet~~us of all of its intellectual property rights, and Beta America’s transfer to ~~Proginet~~us of its customer, maintenance and service agreements, each relating to the Harbor NSM and Harbor HFT products. Such agreements were transferred on the effective date. However, because Beta Canada retained the maintenance and service obligations associated with the Harbor NSM and HFT products pursuant to the Services Agreement and Master Distributor Agreement described below, no liability for these agreements was recorded by us. The revenue associated with the customer, maintenance and service agreements of the Secur-Pass products was applied by Beta America as consideration for the Secur-Line License Agreement, discussed below. The Asset Exchange Agreement contains customary ~~representations~~ representations and warranties and indemnities of the parties. The Asset Exchange Agreement was accounted for as a ~~nonmonetary~~non-monetary exchange of assets in accordance with ~~Financial~~ACS ~~Accounting~~845, “Non-Monetary ~~Standard No~~Transactions”. ~~153(as amended).~~

~~Proginet also~~We also entered into a Support Services Agreement (the “Services Agreement”), with ~~Beta~~ Beta Canada on October 31, 2008, under which Beta Canada provides to ~~Proginet certain~~us certain maintenance and support services for ~~Proginet’s~~our CFI Suite and the Harbor NSM and Harbor HFT products. The Services Agreement was effective October 1, 2008 and will continue in effect for two years with automatic one year renewal terms thereafter, subject to certain non-renewal and termination rights. ~~Proginet~~We have ~~has~~ agreed to compensate Beta Canada a percentage of the gross maintenance revenue received by ~~Proginet~~us in respect of the support services provided by Beta Canada under the Services Agreement.

On October 31, 2008, Proginet entered into a Secur-Line Products License Agreement (the “Secur-Line License Agreement”), with Beta America under which Proginet has licensed to Beta America, on a non-exclusive basis, intellectual property rights relating to Proginet’s Secur-Line products, effective October 1, 2008. The consideration for the license is certain retained customer payments and receivables generated under various contracts assigned to Beta America.9

~~Proginet~~On ~~has~~October ~~assigned to Beta America~~31, ~~under the Asset Exchange Agreement~~2008, ~~its~~we ~~customer, maintenance~~entered ~~and~~into ~~service~~a ~~agreements relating to the~~ Secur-Line ~~intellectual property~~Products ~~and~~License ~~technology~~Agreement ~~rights licensed under~~ (the “Secur-Line License ~~Agreement. The~~ ~~Secur-Line associated agreements have been assigned in consideration of certain royalty fees~~Agreement”), ~~payable~~with by Beta America ~~to Proginet, based on gross revenue received by Beta America during the license term~~ under ~~such~~ ~~agreements. Proginet~~which ~~has~~we ~~agreed,~~have ~~in turn,~~ licensed to ~~pay to~~ Beta America ~~commissions~~, ~~equal~~on to a ~~percentage of such gross revenue. The term of the Secur~~non-~~Line~~exclusive ~~License Agreement expires on October 1~~basis, intellectual ~~2028, at which point the~~property ~~underlying~~rights ~~license~~relating ~~grant will continue but be deemed~~ to beour ~~fully~~Secur-~~paid~~Line ~~and royalty-free. All~~products, ~~requirements~~effective ~~to make royalty and commission payments will continue until~~ October 1, ~~2028~~ 2008. The ~~primary~~consideration ~~purpose~~for of the license ~~grant~~ is tocertain ~~permit~~retained ~~Beta~~customer payments ~~America~~and toreceivables ~~provide~~generated ~~support services~~ under ~~the~~ ~~Secur-Line~~various ~~associated~~contracts ~~agreements~~ assigned ~~under the Asset Exchange Agreement and~~ to ~~further license the relevant intellectual property~~Beta America.

~~Under~~We ahave ~~Master~~assigned ~~Distributor~~to ~~Agreement~~Beta (America, under the ~~“Master~~Asset ~~Distributor~~Exchange Agreement”), ~~entered~~its ~~into~~customer, onmaintenance ~~October~~and ~~31,~~service ~~2008~~agreements ~~between~~relating ~~Beta~~to ~~Systems~~the ~~Software~~Secur-Line ~~AG,~~intellectual property aand ~~German~~technology ~~corporation (“Beta~~rights ~~Germany”),~~licensed ~~and~~under ~~Proginet,~~the Secur-Line License Agreement. ~~Beta~~The ~~Germany~~Secur-Line orassociated ~~any~~agreements ofhave ~~its~~been assigned in ~~distributors,~~consideration ~~subsidiaries~~of orcertain ~~associated~~royalty ~~companies~~fees, ~~has~~payable ~~become~~by ~~the~~Beta ~~exclusive distributor,~~America ~~subject~~ to ~~certain exceptions~~us, ~~for~~based ~~Proginet’s~~on gross ~~CFI~~revenue ~~Suite~~received ~~and~~by Beta America during the license term under such ~~Harbor~~agreements ~~NSM~~which ~~and~~is ~~Harbor~~recorded ~~HFT~~at ~~products~~the ~~(Proginet’s~~gross ~~file~~amount ~~transfer~~received ~~product~~under ~~suite)~~the incustomer, ~~Europe~~maintenance and ~~certain~~service agreements in “Maintenance fee and other” ~~countries~~in ~~specified~~the accompanying ~~therein~~Statement of Operations. ~~Beta~~We ~~has~~have ~~also~~ agreed, toin ~~provide~~turn, ~~certain~~to ~~maintenance~~pay to ~~and~~Beta ~~support~~America ~~services~~commissions equal to ~~certain~~a ~~eligible~~percentage of such gross revenue which is ~~customers~~recorded ~~under~~in “Costs of maintenance fees and other” in the ~~Master~~accompanying ~~Distributor~~Statement of ~~Agreement~~Operations. The term of the ~~Master~~ ~~Distributor~~Secur-Line License Agreement isexpires on ~~from~~ October 1, ~~2008~~2028, ~~through~~at ~~July~~which ~~31,~~point ~~2011, subject~~the tounderlying ~~earlier~~license ~~termination~~grant bywill ~~either~~continue but ~~party~~be ~~for~~deemed ~~cause~~to be fully-paid and royalty-free. ~~Under~~All ~~the~~requirements to ~~Master~~make ~~Distributor~~royalty ~~Agreement,~~and ~~Proginet~~commission ~~has~~payments ~~agreed~~will tocontinue ~~compensate~~until ~~Beta~~October ~~Germany a~~1, ~~percentage~~2028. The ofprimary ~~gross~~purpose ~~annual~~of the license ~~and~~grant ~~maintenance~~is ~~and~~to ~~support~~permit ~~services revenue~~Beta ~~collected~~America byto ~~Beta~~provide ~~Germany~~support services under the ~~Master~~Secur-Line ~~Distributor~~associated agreements ~~Agreement. Beta~~assigned ~~Germany~~under ~~has~~the ~~guaranteed~~Asset ~~certain~~Exchange ~~revenue~~Agreement ~~minimums~~and ~~which it~~to ~~will~~further belicense ~~obligated~~the torelevant intellectual ~~pay Proginet annually~~property.

Under a Master Distributor Agreement (the “Master Distributor Agreement”), entered into on October 31, 2008 between Beta Systems Software AG, a German corporation (“Beta Germany”), and ourselves, Beta Germany or any of its distributors, subsidiaries or associated companies, has become the exclusive distributor, subject to certain exceptions, for our CFI Suite and the Harbor NSM and Harbor HFT products (our file transfer product suite) in Europe and certain other countries specified therein. Beta has also agreed to provide certain maintenance and support services to certain eligible customers under the Master Distributor Agreement. The term of the Master Distributor Agreement is from October 1, 2008 through July 31, 2011, subject to earlier termination by either party for cause. Under the Master Distributor Agreement, We have agreed to compensate Beta Germany a percentage of gross annual license and maintenance and support services revenue collected by Beta Germany under the Master Distributor Agreement. Beta Germany has guaranteed certain revenue minimums which it will be obligated to pay us annually.

6.	Purchased Software and Customer Relationships

Purchased software and customer relationships include software and customer relationships purchased in ~~connection~~a ~~with~~prior ~~the~~year ~~Blockade acquisition~~ for an original cost of $1,501,774 and $1,199,078, respectively. Purchased software is net of accumulated amortization of $1,~~293~~443,~~486~~666 and $1,~~068~~368,~~216~~576 at ~~April~~October 3031, 2009 and July 31, ~~2008~~2009, respectively. Customer relationships are net of accumulated amortization of $1,~~032~~152,~~773~~683 and $~~852~~1,~~908~~092,728 at ~~April~~October 3031, 2009 and July 31, ~~2008~~2009, respectively. Purchased software and customer relationships are being amortized over a period of five years. Amortization expense charged to operations for purchased software is $75,090 ~~and $225,270~~ for ~~both~~ the three ~~and nine~~ months ended ~~April 30~~October 31, 2009 and 2008 ~~respectively~~. Amortization expense charged to operations for customer relationships is $59,955 ~~and $179,865~~ for ~~both~~ the three ~~and nine~~ months ended ~~April~~October 3031, 2009 and 2008. ~~Estimated~~ ~~amortization expense for customer relationships and purchased software for the succeeding two years is $59,955 and $75,090 for fiscal 2009 and $106,350 and $133,198 for fiscal 2010, respectively.~~ These assets are expected to be fully amortized by the end of Fiscal 2010.

7.	Accrued Expense

	April 30, 2009 (Unaudited)		July 31, 2008
	October 31, 2009		July 31, 2009
Salaries, commissions and benefits	$	~~210~~170,~~706~~962	$	~~299~~227,~~527~~624
Severance		~~224~~66,~~612~~255		~~551~~148,~~053~~261
Private placement costs		-		150,000
Distributor payable		128,910		304,914
Professional fees		92,250		111,100
Private placement costs		0		19,055
Distributor Fees		271,674		41,771
Professional fees		67,666		91,945
Other		3745,~~880~~982		4974,~~882~~020
Total Accrued Expense		~~837~~479,~~122~~775		1865,~~203,333~~819
Current portion		837,122		1,054,836
Long term portion	$	-	$	148,497

8.	Income (Loss) Per Share

Basic income (loss) per common share (“EPS”) is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS is calculated by dividing net income (loss) by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options and warrants using the “treasury stock” method. During periods of net loss, diluted net loss per share does not differ from basic net loss per share since potential shares of common stock from stock options and warrants are anti-dilutive and therefore are excluded from the calculation.

The following table sets forth the computation of basic and diluted ~~loss~~income ~~per~~(loss) per share:

	Three months ended	~~Three months ended~~						~~Nine months ended~~
		April 30,						April 30,
	October 31,
		2009			2008			2009			2008
	2008			2009
Numerator:
Net loss	$	(350,563	)	$	(219,984	)	$	(849,902	)	$	(1,115,686	)
Net income (loss)	$	78,519		$	(3,252	)
Denominator:
Weighted average number of common shares (basic)		1416,~~849~~737,~~055~~905			14,~~722~~808,~~677~~022			~~14,835,227~~			~~14,677,717~~
Effect of dilutive securities:
Stock Options		-467,333			-			-			-
Warrants		-			-			-			-
Weighted average number of common shares (diluted)		17,205,238			14,808,022
		-			-			-			-
Basic and diluted income (loss) per share	$	-		$	-
Weighted average number of common shares (diluted)		14,849,055			14,722,677			14,835,227			14,677,717
Basic and diluted loss per share	$	(.02	)	$	(.01	)	$	(.06	)	$	(.08	)

Potential common shares of 31,~~545~~756,~~000~~735 and 21,~~882~~839,~~000~~ 735 for the three ~~and nine~~ months ended ~~April~~October 3031, 2009 and ~~2,526,000 and 2,548,667 for the three and nine months ended April 30,~~ 2008 are excluded in computing basic and diluted net loss per share as their effects would be anti-dilutive.

Equity

~~Proginet follows~~We follow the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No.123R) (currently within the scope of FASB ASC Subtopic 718-10) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). The impact on our results of operations of recording share-based compensation expense for the three months ended October 31, 2009 and 2008 were $38,456 and 0 respectively. This expense was recorded to “General and administrative” on the Statement of Operations.

Stock Option activity during the ~~nine~~three months ended ~~April~~October 3031, 2009, is as follows:

	Number of options			Weighted ~~average~~Average exercise price		Weighted ~~average~~Average ~~remaining~~Remaining ~~contracted~~Contracted term (years)		Aggregate intrinsic value
Outstanding at August 1, 2008		2,526,000		$	.78		-	$	-
Outstanding at August 1, 2009		3,481,235		$	.74		-		-
Granted		~~1,849,500~~-			~~.73~~-		-		-
Exercised		(~~125~~142,~~000~~500	)		.5131		-		-
Forfeited		(~~705~~63,~~765~~000	)		.8495		-		-
Options outstanding at April 30, 2009		3,544,735		$	.94		7.39	$	165,445
Options outstanding at October 31, 2009		3,275,735		$	.76		6.20	$	355,370
Options exercisable at April 30, 2009		2,539,233		$	.81		6.40	$	102,950
Options exercisable at October 31, 2009		2,444,733		$	.81		5.22	$	212,310

OnThe ~~November~~impact ~~30,~~on ~~2007,~~our ~~the~~results ~~Board~~ of ~~Directors~~operations ~~granted~~of ~~options~~recording ~~to non~~share-~~employee~~based compensation ~~directors~~expense tofor ~~purchase~~the ~~425,000~~three ~~shares~~months ofended ~~common~~October ~~stock~~31, at2009 anand ~~exercise~~2008 ~~price~~were of $1.38,456 ~~which~~and ~~represented the fair market value of the underlying common stock on~~0 ~~the date of grant~~respectively. ~~Such grant was subject to obtaining stockholder approval of amendments (described below) to the 2000 Stock Option Plan of Proginet Corporation (the “2000 Plan”).~~

On February 14, 2008, the Board of Directors pursuant to an Offer Letter with Mr. Sandison Weil, the Company’s President and Chief Executive Officer (formerly, the Executive Vice President Sales and Marketing) approved a grant of options to purchase 500,000 shares of common stock at an exercise price of $.90 which represented the fair market value of the underlying common stock on April 8, 2008.Certain options vest at different times during the vesting period and certain options vest upon the achievement of certain performance based measures. In addition, Mr. Weil’s offer letter also provided for a grant of options to purchase 100,000 shares of common stock at an exercise price as of October 31, 2008. Such options will vest two years from the grant date based upon meeting performance criteria established by the Board of Directors for an aggregate two year program. Such grants were subject to obtaining stockholder approval of amendments (described below) to the 2000 Plan.

On October 7, 2008, the Board of Directors pursuant to an Offer Letter with Mr. Stephen Flynn, the Company’s Chief Operating Officer approved a grant of options to purchase up to 400,000 shares of common stock at an exercise price of $.45 which represented the fair market value of the underlying commons stock on grant date. Certain options vest immediately and certain options vest upon the achievement of certain performance based measures over a four year period. In addition, Mr. Flynn’s offer letter also provided for a grant of fully vested options to purchase 100,000 shares of commons stock at an exercise price equal to the closing price of the Company’s common stock on the OTC BB on April 6, 2009. Such grants were subject to obtaining stockholder approval of amendments (described below) to the 2000 Plan.

~~At the~~Item ~~Company’~~2. Management's ~~Annual~~Discussion ~~Meeting of Stockholders on November 18, 2008, the stockholders~~and ~~approved~~Analysis ~~amendments to the 2000 Plan which authorized a 3,000,000 share increase in the number~~ of ~~shares~~Financial ofCondition common stock authorized for award grants under the 2000 Plan, increased the maximum number of shares of common stock for which options may be granted under the 2000 Plan to an employee in any calendar year from 250,000 to 750,000, and ~~extended the term of the 2000 Plan by five years to~~Results ~~October 10, 2015.~~of Operations

Based on the approval of the amendments to the 2000 Plan, the Company incurred a compensation cost related to the grants described above, based on the calculated fair value of these awards over the requisite service period (generally the vesting period of the equity award). As of April 30, 2009, such cost amounted to approximately $147,000.

On November 18, 2008, the Board of Directors granted options to non-employee directors to purchase 200,000 shares of common stock at an exercise price of $0.32, which represented the fair market value of the underlying common stock on the date of grant. As of April 30, 2009, compensation cost related to this grant amounted to approximately $22,000.

On December 31, 2008, the Board of Directors granted options to employees to purchase 424,500 shares of common stock at an exercise price of $0.42, which represented the fair market value of the underlying common stock on the date of grant. As of April 30, 2009, compensation cost related to this grant amounted to $20,000.

On April 7, 2009, the Board of Directors granted options to an employee to purchase 200,000 shares of common stock at an exercise price of $0.49, which represented the fair market value of the underlying common stock on the date of grant. As of April 30, 2009, compensation cost related to this grant amounted to $3,000.

Item 2. Management's Discussion and Analysis or Plan of Operations

General

~~You~~Unless the context otherwise requires, “we,” “our,” “us” and similar expressions refer to Proginet Corporation. You should read the following discussion in conjunction with our financial statements and the notes thereto included ~~in Item I of Part I of this Form~~elsewhere ~~10-Q~~herein. Certain statements under the captions “~~Description of~~ Business”, “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Form 10-Q contain “forward-looking statements” within the meaning of the Securities Exchange Act of 1934. Words such as “may”, “should”, “could”, “believe”, “expect”, “anticipate”, “estimate”, “intend”, “strategy”, “likely” and similar expressions are intended to identify forward-looking statements about ~~the~~our ~~Company’s~~ future plans, objectives, performance, intentions and expectations. Such forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors which may cause ~~the Company's~~our actual results of operations and future financial condition to differ materially from those expressed or implied in or by any such forward-looking statements. Such factors include factors that may be beyond ~~the Company’s~~our control and include, among others, the ~~risk~~risks ~~factors~~described in our latest ~~Annual Report on~~ Form 10-~~KSB~~K for the ~~fiscal~~ year ended July 31, 2009. We caution that the foregoing list ~~2008~~of important factors is not exclusive. We do not undertake to update any forward-looking statements contained herein or that may be made from time to time by us or on our behalf.

The Company cautions that the foregoing list of important factors is not exclusive. The Company does not undertake to update any forward-looking statements contained herein or that may be made from time to time by or on behalf of the Company.

Use of Estimates and Critical Accounting Policies

In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our revenues, income from operations, and net income, as well as on the value of certain assets on our balance sheet. We believe that there are several accounting policies that are critical to an understanding of our historical and future performance, as these policies affect the reported amounts of revenues, expenses, and significant estimates and judgments applied by management. While there are a number of accounting policies, methods and estimates affecting our financial statements, areas that are particularly significant include revenue recognition and capitalized software development costs. These policies are described in detail below. In addition, please refer to Note 1 to the accompanying financial statements for further discussion of our accounting policies.

In addition to the estimates and assumptions that we use to prepare our historical financial statements, we monitor our sales pipeline in order to estimate the timing and amount of future revenues. If we are unable to properly estimate the timing and amount of revenues, our future operations could be significantly impacted. Our sales pipeline may not consistently relate to revenues in a particular period, as the data upon which the assumptions and estimates were made by management may change. For example, information technology spending trends may cause customers to delay and reduce purchasing decisions. Accordingly, it may be harder to close contracts with customers, the size of the transactions may decrease, and many of our license contracts are pushed to the very end of the quarter, making it difficult for us to forecast revenues for the quarter, and adjust spending to respond to variations in revenue growth during the quarter, all of which may adversely affect our business, financial condition and results of operations.

1514

Revenue Recognition

We recognize revenue in accordance with ~~Statement~~ ofFASB ~~Position,~~Accounting orStandards ~~SOP, 97-2, “Software Revenue Recognition,” and SOP~~Codification ~~98-9,~~(ASC) ~~“Modification of SOP 97~~985-~~2, Software Revenue Recognition, with Respect to Certain Transactions”~~605. We recognize software license revenues when all of the ~~following~~ following criteria are met: persuasive evidence of an arrangement exists, the fee is fixed or determinable, ~~collectibility~~collectability is probable, delivery of the product has occurred and the customer has accepted the product (including the expiration of an acceptance period) if the terms of the contract include an ~~acceptance~~ acceptance requirement. In instances when any of the criteria are not met, we will either defer recognition of the software license revenue until the criteria are met or we will recognize the software license revenue on a ratable basis, as ~~required~~ required by ~~SOPs~~ASC 97985-~~2 and 98-9~~605. We generally utilize written contracts as the means to establish the terms and conditions by which our products, support and services are sold to our customers.

Our revenues are derived from our direct sales force and channel partnerships (VARs, OEMs, and distributors). Commission expense is recorded at the time of sale. Commission rates to direct sales people are based on a graduating scale, ranging from 2% to 15% of the sale, dependent upon the revenue volume generated by the sales person. Distributors are typically compensated at a commission rate of 40% to 50% and VARs are compensated at a commission rate of 25% to 40% of the license revenue generated. The rates vary based upon their level of effort, resources assigned and products sold. The OEM arrangements include a commission structure similar to distributors and also may include specific fixed pricing for the number of “users” the product is licensed for. Revenues from sales through distributors are recorded at the gross amount charged based on the economic risks and ongoing product support responsibilities we assume.

When our software licenses contain multiple elements, we allocate revenue to each element based on the relative fair values of the elements. Multiple element arrangements generally include post-contract support (PCS or support), software products and, in some cases, service. Revenue from multiple-element arrangements is allocated to undelivered elements of the arrangement, such as PCS, based on the relative fair values of the elements specific to us. Our determination of fair value of each element in multi-element arrangements is based on vendor-specific objective evidence, which is generally determined by sales of the same element or service to third parties or by reference to a renewal rate specified in the related arrangement.

Where vendor-specific objective evidence of fair value exists for all undelivered elements, but evidence does not exist for one or more delivered elements, we account for the delivered elements in accordance with the ~~“Residual~~selling ~~Method”~~price method prescribed by ~~SOP~~ASC 98985-9605. Under the ~~residual~~ selling price method, the ~~fair~~estimated ~~value~~selling price of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. In most cases, the bundled multiple elements include PCS and the software product. In such cases, ~~when~~ when vendor-specific objective evidence of fair value exists for all of the undelivered elements (most commonly PCS), the ~~residual~~selling price amount is recognized as as revenue and the PCS is recognized ~~ratably~~ratable over the PCS term, which is ~~typically~~ typically 12 months.

A customer typically prepays maintenance revenues for the first 12 months and the related maintenance revenues are recognized ratably monthly over the term of the maintenance contract, which is generally 12 months. Maintenance contracts include the right to unspecified upgrades on a when-and-if available basis and ongoing support.15

~~Deferred~~A customer ~~revenues~~typically ~~include~~prepays ~~amounts received~~maintenance ~~from~~revenues ~~customers~~ for ~~which~~the ~~revenue~~first ~~has~~12 ~~not~~months ~~yet~~and ~~been recognized that~~the ~~generally~~related ~~results from deferred~~ maintenance, ~~consulting~~revenues orare ~~training~~recognized ~~services~~ratable ~~not yet~~monthly ~~rendered~~over ~~and~~the ~~license~~term ~~revenue~~of ~~deferred until all requirements under SOP 97-2~~the ~~are~~maintenance ~~met.~~contract, ~~Revenue~~which is ~~recognized~~generally ~~upon~~12 months. ~~delivery~~Maintenance ~~of our products, as services are~~contracts ~~rendered,~~include orthe asright ~~other~~to ~~requirements~~unspecified ~~requiring~~upgrades ~~deferral~~on ~~under~~a ~~SOP 97~~when-2and-if ~~are~~available basis and ~~satisfied~~ongoing support.

~~Based on our interpretation of SOP 97-2~~Deferred ~~and~~revenues ~~SOP~~include ~~98-9,~~amounts wereceived ~~believe~~from ~~that~~customers ~~our~~for ~~current~~which ~~sales~~revenue ~~contract~~has ~~terms~~not ~~and business~~yet ~~arrangements have~~ been ~~properly~~recognized ~~reported. However,~~that ~~the~~generally ~~American Institute~~results offrom ~~Certified~~deferred ~~Public~~maintenance, ~~Accountants~~consulting ~~and its Software Revenue Recognition~~or ~~Task~~training ~~Force~~services ~~continue~~not toyet ~~issue~~rendered ~~interpretations~~ and ~~guidance~~license ~~for~~revenue ~~applying~~deferred ~~the~~until all ~~relevant~~requirements ~~standards~~under toASC a985-605 ~~wide range of sales contract terms and business arrangements that~~ are ~~prevalent in the software industry~~met. ~~Also,~~ ~~the SEC~~Revenue ~~has~~is ~~issued~~recognized ~~Staff~~upon ~~Accounting~~delivery ~~Bulletin~~of our ~~No. 104~~products, ~~“Revenue~~as ~~Recognition~~services ~~in Financial~~are ~~Statements~~rendered,” ~~which provides guidance related to revenue recognition based on interpretations and practices followed by the SEC. Future interpretations of existing accounting standards~~ or ~~changes~~as inother ~~our~~requirements ~~business~~requiring ~~practices~~deferral ~~could~~under ~~result~~ASC in985-605 ~~future~~are ~~changes in our revenue accounting policies that could have a material adverse effect on our business, financial condition and results of operations~~satisfied.

16Based on our interpretation of ASC 985-605, we believe that our current sales contract terms and business arrangements have been properly reported. However, the American Institute of Certified Public Accountants and its Software Revenue Recognition Task Force continue to issue interpretations and guidance for applying the relevant standards to a wide range of sales contract terms and business arrangements that are prevalent in the software industry. Future interpretations of existing accounting standards or changes in our business practices could result in future changes in our revenue accounting policies that could have a material adverse effect on our business, financial condition and results of operations.

Commission Expense

Commission expense is recorded at the time of sale. Commission rates to direct sales people are based on a graduating scale, ranging from 5% to 15% of the sale, dependent upon the revenue volume generated by the sales executive. Distributors are typically compensated at a commission rate of 40% to 50% and VARs are compensated at a commission rate of 25% to 40% of the license revenue generated. The rates vary based upon their level of effort, resources assigned and products sold. The OEM arrangements include a commission structure similar to distributors and also may include specific fixed pricing for the number of “users” the product is licensed for.

Capitalized Software Development Costs

We capitalize our software development costs when the projects under development reach technological feasibility as defined by Financial Accounting Standard (“FAS”) No. 86 (currently within the scope of FASB Accounting Standards Codification (ASC) Subtopic 985-20), and amortize these costs over the products’ estimated useful lives. Under FAS No. 86, we evaluate our capitalized software costs at each balance sheet date to determine if the unamortized balance related to any given product exceeds the estimated net realizable value of that product. Any such excess is written off through accelerated amortization in the quarter it is identified. Determining net realizable value as defined by FAS No. 86 requires that we estimate future cash flows to be generated by the products and use judgment in quantifying the appropriate amount to write off, if any. Actual cash flows and amounts realized from the software products could differ from our estimates. Also, any future changes to our product portfolio could result in significant research and development expenses related to software asset write-offs.

Goodwill, Other Intangible Assets and Other Long-Lived Assets

~~The~~We assess ~~Company~~the ~~performs~~possible animpairment ~~evaluation~~ of ~~whether~~ goodwill isat ~~impaired~~least annually or when events occur or circumstances change that would more likely than not reduce the fair value of the asset below its ~~carrying~~carry amount. Impairment ~~Fair~~is ~~value~~the iscondition ~~determined~~that ~~using~~exists ~~market~~when ~~comparables~~the ~~for~~carrying ~~similar~~amount ~~businesses~~of orthe ~~forecasts~~goodwill ofexceeds ~~discounted future~~its ~~cash~~implied ~~flows.~~fair value. The ~~Company~~first ~~also~~step ~~reviews~~in ~~other~~the ~~intangible~~impairment ~~assets,~~process ~~which~~is ~~are all~~to ~~currently~~determine ~~amortized~~the ~~over~~fair ~~their~~value ~~respective~~of ~~estimated~~the reporting ~~lives,~~unit and ~~other long-lived~~then ~~assets~~compare ~~when~~it ~~indication~~to ofthe ~~potential~~carry ~~impairment exists~~value, ~~such~~including goodwill. We asdetermined athat the market capitalization approach is ~~significant~~the ~~reduction~~most inappropriate ~~cash~~method ~~flows~~of ~~associated~~measuring ~~with~~fair value of the ~~assets,~~reporting ~~significant~~unit, ~~changes~~assuming ina ~~the~~controlling ~~manner~~interest. Under orthis ~~our~~approach, ~~use~~fair ofvalue ~~the~~is calculated ~~assets~~based oron the ~~strategy~~market ~~for~~price ~~our~~of ~~overall business~~common ~~and~~stock, ~~significant~~multiplied ~~negative~~by ~~industry~~the ornumber of ~~economic~~outstanding ~~trends~~shares. A Incontrol ~~addition~~premium, ~~in all~~which ~~cases~~is representative of premiums anpaid ~~impairment~~to ~~review,~~the wemarketplace ~~will~~to ~~re-evaluate~~acquire ~~the~~a ~~remaining~~controlling ~~useful~~interest ~~life~~in a company, ofis ~~the~~then ~~asset~~added ~~and~~to ~~modify~~the ~~it,~~market ascapitalization ~~appropriate.~~to ~~Should~~determine the fair value of the ~~Company's~~asset. If ~~long-lived~~the ~~assets~~fair ~~decline~~value ~~because~~exceeds ofthe ~~reduced~~carrying ~~operating performance~~value, no further ~~market~~action ~~declines,~~is orrequired ~~other~~and ~~indicators~~no ofimpairment loss is recognized. Additional impairment assessments may be performed on an interim basis if we encounter events or changes in circumstances that, amore ~~charge~~than tolikely ~~operations~~than ~~for~~not, the carrying value of goodwill has been impaired. There was no impairment ~~may~~of goodwill bein ~~necessary~~2010 or 2009.

~~Stock-based Compensation~~16

~~Effective~~Stock ~~August~~Options 1,and ~~2006,~~Stock ~~Proginet adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-~~Based Payment” (SFAS No.123R) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).Compensation

17Effective August 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No.123R) (currently within the scope of FASB ASC Subtopic 718-10) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).

Results of Operations

Corporate Developments

On October 31, 2008, ~~Proginet~~we entered into an Asset Exchange Agreement (the “Asset Exchange Agreement”), with Beta Systems Software of North America, Inc., a Delaware corporation ("Beta America"), and Beta Systems Software of Canada Ltd., a Canadian body corporate ("Beta Canada"), effective as of October 1, 2008. Under the Asset Exchange Agreement, ~~Proginet~~we (i) ~~has~~ have transferred to Beta Canada all of its intellectual property rights, and books and records, relating to ~~Proginet’s~~our Secur-Pass products, and (ii) has assigned to Beta America its customer, maintenance and service agreements relating to ~~Proginet’s~~ our Secur-Pass products, in exchange for Beta Canada’s transfer to ~~Proginet~~ us of all of its intellectual property rights, and Beta America’s transfer to ~~Proginet~~us of its customer, maintenance and service agreements, each relating to the Harbor NSM and Harbor HFT products. Such agreements were transferred on the effective date, however, Beta Canada retained the maintenance and service requirements associated with the Harbor NSM and HFT products, as such, no liability for these agreements was recorded by us. The ~~Asset~~revenue ~~Exchange~~associated with the customer, maintenance and service agreements of the Secur-Pass products was applied by Beta America as consideration for the Secur-Line License Agreement, discussed below. The Asset Exchange Agreement contains customary representations and warranties and indemnities of the parties. The Asset Exchange Agreement was accounted for as a non-monetary exchange of assets in accordance with ASC 845, “Non-Monetary Transactions”.

On October 31, 2008, ~~Proginet~~we entered into a Secur-Line Products License Agreement (the “Secur-Line License Agreement”), with Beta America under which ~~Proginet~~we ~~has licensed~~have licensed to Beta America, on a non-exclusive basis, intellectual ~~property~~ property rights relating to ~~Proginet’s~~our Secur-Line products, effective October 1, 2008. The consideration for the license is certain retained customer payments and receivables generated under various contracts assigned to Beta America.

~~Proginet has~~We have assigned to Beta America, under the Asset Exchange Agreement, its customer, maintenance and service agreements relating to the Secur-Line intellectual property and technology rights licensed under the Secur-Line License Agreement. The Secur-Line associated agreements have been assigned in consideration of certain royalty fees, payable by Beta America to ~~Proginet~~us, based on gross revenue received by Beta America during the license term under such agreements which is recorded at the gross amount received under the customer, maintenance and service agreements in “Maintenance fee and other” in the accompanying Statement of Operations. ~~Proginet~~We ~~has~~have agreed, in turn, to pay to Beta America commissions equal to a percentage of such gross revenue which is recorded in “Costs of maintenance fees and other” in the accompanying Statement of Operations. The term of the Secur-Line License Agreement expires on October 1, 2028, at which point the underlying license grant will continue but be deemed to be fully-paid and royalty-free. All requirements to make royalty and commission payments will continue until October 1, 2028. The primary purpose of the license grant is to permit Beta America to provide support services under the Secur-Line associated agreements assigned under the Asset Exchange Agreement and to further license the relevant intellectual property.

Under a Master Distributor Agreement (the “Master Distributor Agreement”), entered into on October 31, 2008 between Beta Systems Software AG, a German corporation (“Beta Germany”), and Proginet, Beta Germany or any of its distributors, subsidiaries or associated companies, has become the exclusive distributor, subject to certain exceptions, for Proginet’s CFI Suite and the Harbor NSM and Harbor HFT products (Proginet’s file transfer product suite) in Europe and certain other countries specified therein. Beta has also agreed to provide certain maintenance and support services to certain eligible customers under the Master Distributor Agreement. The term of the Master Distributor Agreement is from October 1, 2008 through July 31, 2011, subject to earlier termination by either party for cause. Under the Master Distributor Agreement, Proginet has agreed to compensate Beta Germany a percentage of gross annual license and maintenance and support services revenue collected by Beta Germany under the Master Distributor Agreement. Beta Germany has guaranteed certain revenue minimums which it will be obligated to pay Proginet annually.17

18Under a Master Distributor Agreement (the “Master Distributor Agreement”), entered into on October 31, 2008 between Beta Systems Software AG, a German corporation (“Beta Germany”), and ourselves, Beta Germany or any of its distributors, subsidiaries or associated companies, has become the exclusive distributor, subject to certain exceptions, for our CFI Suite and the Harbor NSM and Harbor HFT products (our file transfer product suite) in Europe and certain other countries specified therein. Beta has also agreed to provide certain maintenance and support services to certain eligible customers under the Master Distributor Agreement. The term of the Master Distributor Agreement is from October 1, 2008 through July 31, 2011, subject to earlier termination by either party for cause. Under the Master Distributor Agreement, We have agreed to compensate Beta Germany a percentage of gross annual license and maintenance and support services revenue collected by Beta Germany under the Master Distributor Agreement. Beta Germany has guaranteed certain revenue minimums which it will be obligated to pay us annually.

Revenues

Total revenues for the quarter ended ~~April~~October 3031, 2009 amounted to $12,~~770~~166,~~135~~377, representing a decrease of $98696,~~040~~989, or 524.23% compared to revenues of $12,~~868~~863,~~175~~366 for the quarter ended ~~April~~October 3031, 2008. This ~~Total revenues for the nine months ended April 30, 2009 amounted to $6,613,242 representing an~~ increase ~~of $798,893 or~~is ~~13.7%~~due ~~compared~~ to ~~revenues of $5,814,349 for~~ the ~~nine~~factors ~~months~~described ~~ended April 30, 2008~~below.

Software license revenues for the quarter ended ~~April~~October 3031, 2009 amounted to $~~554~~631,~~913~~255 representing ana ~~increase~~decrease of $~~238~~823,~~535,~~351 or 7556.46%, compared to software license revenues of $~~316~~1,~~378~~454,606 for the quarter ended ~~April~~October 3031, 2008. Software license ~~revenues for~~revenue ~~the~~is nine months ended April 30, 2009 amounted to $2,944,204 representing an increase of $1,818,782, or 161.6%, compared to software license revenues of $1,125,422 for the nine months ended April 30, 2008. Software licenses are sold directly through ~~the~~domestic salespeople ~~Company’s sales executives~~ and indirectly through international distributors, ~~VAR’s~~ and OEM partners ~~(collectively, “Channels”)~~. The ~~increase~~ decrease in software license revenue is ~~due~~primarily attributable to, ~~in approximate order of~~last ~~significance,~~year’s Secur-Line ~~the~~License ~~ratable~~Agreement ~~recognition~~with ofBeta ~~revenue~~America, inmore ~~connection with a fiscal~~fully ~~2008~~described ~~software~~above ~~license~~under ~~sale~~“Corporate toDevelopments”, aunder ~~U.S.~~which ~~government~~certain ~~agency~~deferred maintenance ~~and~~revenue ~~the~~was ~~meeting~~recognized ~~of certain~~as ~~contractual~~license ~~requirements~~revenue ~~with~~in ~~respect~~October to2008, ~~the~~and ~~implementation of the~~is ~~Master~~now ~~Distribution~~being ~~Agreement~~recognized ~~with~~as ~~Beta~~maintenance ~~Germany~~revenue. ~~offset~~This ~~by a~~ decrease inwas ~~sales~~partially tooffset ~~existing~~by ~~customers principally in~~ the ~~advanced~~closing ~~managed~~of ~~file~~one ~~transfer~~significant ~~product line. Secondarily,~~contract ~~for~~with ~~the~~approximately ~~nine months ended April 30~~$230,000 ~~2009, software~~of new license revenue ~~increased~~and ~~primarily~~several ~~due~~other toinsignificant ~~the Secur-Line License Agreement with Beta America~~contracts.

Software maintenance fees and other ~~decreased~~increased by $~~334~~106,~~625~~500, or ~~21.~~8% to $1,~~201~~439,~~222 compared~~122 compared to such fees for the quarter ended ~~April~~October 3031, 2008 of $1,~~535~~332,~~847~~622. ~~Software~~ ~~maintenance fees and other decreased by $1,035,078 or 22.6% to $3,554,899 compared to such fees for the nine months ended April 30, 2008 of $4,589,977.~~ The ~~decrease~~ increase in software maintenance fees and other is primarily due to ~~the~~ last year’s recognition of deferred maintenance revenue ~~relating~~as toa ~~the~~result of the Secur-Line License Agreement with Beta America ~~during~~more ~~the~~fully ~~quarter~~described ~~ended~~above ~~October 31, 2008~~under ~~and~~“Corporate ~~the~~Developments”. As ~~effect~~described ofabove, ~~customer~~per ~~cancellations~~this ~~across~~agreement certain ~~the~~deferred ~~Company’s~~maintenance ~~product~~revenue ~~lines principally~~was recognized as alicense ~~result~~revenue ofin October ~~corporate~~2008, ~~consolidations~~ and ~~other~~is ~~cost~~now ~~cutting measures~~being ~~implemented~~recognized ~~during~~as ~~these~~maintenance ~~economic times~~revenue.

Fees for professional services for the quarter ended ~~April~~October 3031, 2009 amounted to $1496,000 ~~compared~~an toincrease ~~fees for professional services~~ of $1519,~~950 for the quarter ended April 30~~862, ~~2008, representing a decrease of $1,950~~ or 1226.21%~~. Fees for professional services for the nine months ended April 30~~, ~~2009 amounted to $114,139~~ compared to fees for professional services of $9876,~~950~~138 for the ~~nine months~~quarter ended ~~April~~October 3031, 2008~~, representing an increase of $15,189 or 15~~.~~4%. The~~ ~~Company~~Such ~~does not generate significant professional service~~ revenue asis ~~resources are utilized for license revenue~~ related ~~activities. Typically, professional services are related~~ to ad-hoc consulting ~~engagements~~services that are typically provided in response to ~~requests~~ requests for support from existing customers. Consequently, ~~professional~~consulting ~~service~~ revenue can ~~may~~ vary considerably from period to period.

Operating Expenses

Operating expenses ~~increased~~decreased to $2,~~121~~089,~~310~~156 ~~for the quarter ended April 30, 2009~~ from $2,~~115~~873,~~049~~543 for ~~the~~ quarter ended ~~April~~October 3031, ~~2008, an increase of $6,261 or 0.3%.~~ ~~Operating expenses increased to $7,472,819 for the nine months ended April 30,~~ 2009 ~~from~~and ~~$7,016,449~~October ~~for the nine months ended April 30~~31, 2008 respectively, ana ~~increase~~decrease of $~~456~~784,~~370~~387 or 627.53%. The ~~changes~~decrease in operating expenses for the ~~three~~quarter ~~and nine months ended April 30, 2009~~ is primarily a combined result of the following factors:

Cost of software licenses (which primarily includes amortization of capitalized software costs) for the quarter ended ~~April~~October 3031, 2009 amounted to $~~380~~402,~~461~~001, representing an ~~increase~~a decrease of $2441,~~235~~717 or 69.84%, compared to cost of software licenses of $~~356~~443,~~226~~ 718, for the quarter ended ~~April~~October 3031, 2008. ~~Cost~~The ofdecrease ~~licenses~~in ~~for~~cost ~~the nine months ended April 30, 2009 amounted to $1,233,257 representing an increase~~ of ~~$85,283 or~~ ~~7.4%~~software ~~compared~~sales toand ~~cost of software~~ licenses ~~of $1,147,974 for the nine months ended April 30, 2008. The increase~~ is ~~primarily~~ due to the ~~increase~~decrease in amortization expense for internally developed software completed and announced as available for sale ~~offset by capitalized software which was fully amortized~~ during the ~~three and nine month periods ended April 30, 2009~~quarter.

Cost of maintenance fees and other (which principally consists of technical support payroll) for the quarter ended October 31, 2009 amounted to $322,311, representing an increase of $38,494 or 13.6%, compared to cost of maintenance fees and other of $283,817 for the quarter ended October 31, 2008. The increase in cost of maintenance fees and other is primarily due to the implementation of the Services Agreement with Beta Canada more fully described under “Corporate Developments” above offset by a decrease in the employee headcount and payroll allocated costs associated with the technical services rendered directly by us.

Commissions amounted to $149,172 for the quarter ended October 31, 2009 representing a decrease of $20,877 or 12.3% compared to $170,049 for the quarter ended October 31, 2008. The decrease in commission expense for the three months ended October 31, 2009 is primarily due to our no longer incurring distributor commission expense related to the Secur-Pass products as a result of the Asset Exchange Agreement with Beta America, more fully described under “Corporate Developments” above.

Selling and marketing expense for the quarter ended October 31, 2009 amounted to $437,086 representing a decrease of $381,724 or 46.6%, compared to selling and marketing expense of $818,810 for the quarter ended October 31, 2008. The decrease in selling and marketing for the three months ended October 31, 2009 is primarily due to a decrease in employee payroll and employee related expenses, the termination of the our public relations firm as we underwent a cost reduction initiative in November 2008 and decreases in other marketing initiatives such as trade show and conference attendance and sales related travel.

General and administrative expense for the quarter ended October 31, 2009 amounted to $709,494, representing a decrease of $364,343 or 33.9% compared to $1,073,837 in general and administrative expense for the quarter ended October 31, 2008. The decrease in general and administrative expenses is primarily due to a decrease in professional fees, a decrease in consulting fees and a reduction in payroll.

We reported net income of $78,519 and net loss of $3,252 for the three months ended October 31, 2009 and 2008, respectively.

Liquidity, Capital Resources and Financial Condition

At October 31, 2009, we had a cash balance of $1,545,619.

Operating activities provided cash of $652,654 for the three months ended October 31, 2009. This resulted primarily from a decrease to trade accounts receivable of $1,311,296, non-cash charges for depreciation and amortization of $429,598, offset by a decrease in deferred revenue of $712,539 and a decrease in accounts payable and accrued expenses of $459,485 based on the timing of cash disbursements.

Investing activities used cash of $307,635 for the three months ended October 31, 2009 primarily for costs associated with the development of our software products.

Financing activities provided cash of $94,250 from proceeds of our common stock in a private placement and the exercise of stock options.

On September 25, 2009, we entered into an asset based credit facility (the “Credit Agreement”) with Bridge Bank, N.A (the “Lender”). The Credit Agreement provides for advances of up to $800,000 against 80% of eligible accounts receivable. The finance charge, which is assessed against the amount of receivables financed from time to time, is equal to the greater of 4.00% per annum or Lender’s Prime Rate, as announced, plus 0.64%. We are also required to pay the Lender a monthly maintenance fee equal to between 0.2% and 0.3% of the receivables financed. The credit facility is secured by a general pledge of our assets. Under the terms of the Credit Agreement, the obligors on the accounts receivable are to pay Lender directly through a lock box arrangement. If the amount advanced is not paid by the obligors within 90 days of the earlier of the advance or invoice date, we are required to pay the amount.

~~Cost~~The ~~of maintenance~~Credit ~~fees~~Agreement ~~and~~includes ~~other~~usual ~~(which~~and customary ~~principally~~events ~~consists~~ of ~~technical~~default ~~support payroll)~~ for ~~the~~facilities ~~quarter~~of ~~ended~~this ~~April~~nature ~~30,~~and ~~2009~~provides ~~amounted to $266~~that,~~328, representing~~ anupon ~~increase~~the occurrence of ~~$16,064~~an orevent ~~6.4%, compared to cost~~ of ~~maintenance~~default, ~~fees~~all ~~and~~amounts ~~other of~~payable ~~$250,264~~under ~~for~~ the ~~quarter~~Credit Agreement ~~ended~~may ~~April~~be ~~30, 2008~~accelerated. The ~~Cost~~Credit ofAgreement ~~maintenance~~also ~~fees~~restricts ~~and~~our ~~other~~ability ~~for~~to ~~the~~incur ~~nine~~other ~~months~~indebtedness, ~~ended~~other ~~April~~than ~~30,~~payables ~~2009~~in ~~amounted~~the toordinary ~~$805,967,~~course ~~representing~~of anbusiness. Either ~~increase~~party ofcan ~~$23,307~~terminate orthe ~~3.0%,~~Credit ~~compared~~Agreement toat ~~cost~~any time, ofwith ~~maintenance fees~~a ~~and~~required ~~other~~payment of $~~782~~10,~~660~~000 ~~for~~if ~~the~~terminated ~~nine~~by ~~months~~us ~~ended~~in ~~April~~the ~~30,~~first ~~2008. The~~year ~~increase~~after inthe ~~cost~~date of ~~maintenance~~execution. We ~~fees~~are ~~and~~also ~~other~~required ~~is primarily due~~ to ~~the implementation~~ ofpay ~~the~~a ~~Services~~variety ~~Agreement with Beta Canada more~~of ~~fully~~fees ~~described~~aggregating ~~under~~approximately ~~“Corporate~~$35,000 ~~Developments”~~in ~~above~~connection ~~offset~~with byentering ainto ~~decrease in~~ the ~~employee~~facility. We ~~headcount~~have ~~and~~not ~~payroll~~yet ~~allocated~~used ~~costs~~the ~~associated~~Credit ~~with the technical~~Agreement ~~services~~as ~~rendered~~of ~~directly~~the bydate ~~Proginet~~of this filing.

~~Commissions~~We ~~amounted~~believe tothat ~~$145,449~~our ~~for~~present ~~the quarter ended April 30~~cash, ~~2009 compared to commissions of $247,870 for~~ the ~~quarter~~cash ~~ended~~generated ~~April~~from ~~30,~~operations ~~2008,~~and ~~representing a~~amounts ~~decrease~~available ofunder ~~$102,421~~its orpresent ~~41.3%.~~line ~~Commissions~~of ~~amounted~~credit toagreements ~~$523,316~~will ~~for~~be ~~the~~sufficient ~~nine months ended April 30, 2009 compared~~ to ~~commission of $640,061 for the nine~~meet ~~months~~our ~~ended~~cash ~~April~~needs ~~30, 2008, representing a decrease of $116,745 or 18.2%. The decrease in commission expense~~ for ~~the~~at ~~three~~least ~~and nine months ended April 30, 2009 is primarily due to~~ the ~~Company~~next notwelve longer incurring distributor commission expense related to the Secur-Pass products as a result of the Asset Exchange Agreement with Beta America, more fully described under “ Corporate Developments” abovemonths.

Research and development amounted to $23,463 for the three months ended April 30, 2009 compared to $78,096 for the three months ended April 30, 2008, representing a decrease of $54,633 or 70%. Research and development amounted to $155,653 for the nine months ended April 30, 2009 compared to $239,465 for the nine months ended April 30, 2008, representing a decrease of $83,812 or 35.0%. The decrease in research and development expense is attributable to a decrease in development employee headcount resulting in a decrease in allocated payroll and payroll related costs associated with the Company’s research and development activities.

Selling and marketing expense for the quarter ended April 30, 2009 amounted to $501,246 representing a decrease of $196,214 or 28.1%, compared to selling and marketing expense of $697,460 for the quarter ended April 30, 2008. Selling and marketing expense for the nine months ended April 30, 2009 amounted to $1,933,397 representing a decrease of $27,857 or 1.4%, compared to selling and marketing expense of $1,961,254 for the quarter ended April 30, 2008. The decrease in selling and marketing for the three months ended April 30, 2009 is primarily due to a decrease in employee payroll and employee related expenses and the termination of the Company’s public relations firm as the Company underwent a cost reduction initiative in November 2008. The decrease in selling and marketing expense for the nine months ended April 30, 2009 compared to the nine months ended April 30, 2008 was offset by increased expenses for customer visitations, and other marketing initiatives such as lead generation programs and website enhancements.

General and administrative expense for the quarter ended April 30, 2009 amounted to $797,826, representing an increase of $316,461 or 65.7% compared to $481,365 in general and administrative expense for the quarter ended April 30, 2008. General and administrative expense for the nine months ended April 30, 2009 amounted to $2,789,021, representing an increase of $569,709 or 25.7% compared to $2,219,312 in general and administrative expense for the nine months ended April 30, 2008. The increase in general and administrative expense for the three and nine months ended April 30, 2009 is primarily due to an increase in consulting services related to strategic assistance provided in the areas of product management, development and other strategic initiatives, , an increase in discretionary compensation as certain senior management objectives were met, an increase in stock based compensation related to the fair value of vested stock options, offset by a decrease in bad debt expense for sales written off in the prior year. Additionally, in the quarter ended April 30, 2008, general and administrative expenses were favorably impacted by the reversal of a bad debt write off which was fully collected. For the nine months ended April 30, 2009, the Company also experienced an increase in professional fees relating to costs associated with the Red Oak matter described below and other general corporate compliance and governance matters.

The Company reported a net loss of $350,563 and a net loss of $219,984 for the three months ended April 30, 2009 and 2008, respectively and a net loss of $849,902 and a net loss of $1,115,686 for the nine months ended April 30, 2009 and 2008, respectively.

Liquidity and Capital Resources

At April 30, 2009, the Company had a cash and cash equivalent balance of $812,475.

Operating activities used cash of $157,450 for the nine months ended April 30, 2009. This resulted from the net loss of $849,902 and a decrease in deferred revenues of $1,143,852 primarily related to the recognition of deferred maintenance revenue as a result of the Secur-Line Agreement with Beta America offset by non-cash charges for depreciation and amortization of $1,285,878 and stock based compensation of $192,399 and a decreases in trade accounts receivable of 243,179 principally related to the collection of a fiscal 2008 software license sale to a U.S. government agency.

Investing activities used cash of $1,432,110 for the nine months ended April 30, 2009 primarily for costs associated with the development of the Company's software products and the purchases of property and equipment.

Financing activities provided cash of $63,700 from the exercise of stock options.

The Company maintained its line of credit for $1,000,000 with a bank. The interest rate was variable based on the bank’s prime rate. The line of credit was collateralized by accounts receivable of the Company and originally expired November 24, 2008; however, the Company had extended this line of credit until February 24, 2009. The bank has not renewed such line of credit; however, the Company is seeking alternative sources of financing.

During fiscal 2009, the Company embarked on strategic initiatives including but not limited to, (i) transforming our sales model with enhanced focus on our Channels organization, (ii) consolidating product lines for improved efficiency and (iii) innovating new collaborative product offerings for the managed file transfer market. Such initiatives required cash investments and management effort. Operationally, our performance has been negatively affected by the general economic slowdown. Some of our new prospects have delayed or reduced technology purchases and some of our existing customers have been paying their maintenance invoices with extended payment terms. We have also had a number of canceled maintenance contracts, most of which have been from our older legacy product suites. Collectively, these factors have caused our cash position to decline over the last nine months. In response, Proginet has reduced operating expenses in recent quarters and expects to continue to monitor such expenses closely. However, if the Company does not generate sufficient cash flow from operations to meet the Company’s operating cash requirements, the Company will need to obtain other sources of capital to help fund its operations, which may or may not be available to the Company at favorable terms, it at all. The Company is exploring various capital raising initiatives so as to bolster its cash reserves given the uncertainty of the current business climate.

Off-Balance Sheet Arrangements

~~The Company~~We ~~has~~ have no off-balance sheet arrangements.

Note Relating to Shareholder Claim

In early April 2008, we received a letter from Red Oak Partners, LLC (“Red Oak”), which acquired shares of our common stock in a tender offer completed in August 2007, alleging that it was damaged because the directors and management of Proginet made misrepresentations and/or breached their fiduciary duties to Red Oak, Proginet’s stockholders and the investing public with respect to (i) representations concerning the existence of contractually committed orders and future financial performance; (ii) severance arrangements made with Proginet’s former CEO and (iii) a claim with respect to Proginet’s having procured directors and officers insurance from a relative of Proginet’s former CEO. On March 4th,, 2009, Red Oak notified Proginet that it had determined to discontinue pursuing the previously asserted allegations against Proginet. No payment was made to either Proginet or Red Oak in connection with this matter.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

2220

Item 4T. Controls and Procedures

a.	Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the times periods specified in the Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

b.	Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2321

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The information included under the caption “Note Relating to Shareholder Claim” in Item 2. Management's Discussion and Analysis above is incorporated herein by this reference.

Item 1A. Risk Factors

~~Other~~There ~~than~~were ~~the risk factors set forth below, management believes that there have been~~ no material changes infrom the ~~Company’s~~ risk factors aspreviously ~~reported~~disclosed in ~~the Annual~~our Report on Form 10-~~KSB~~K for the year ended July 31, ~~2008,~~2009. ~~which~~For ~~was~~a ~~filed~~full ondescription of ~~October~~these 6risk factors, ~~2008~~please ~~with~~refer to Item 1A (Risk Factors) in our Report on Form 10-K for the ~~Securities~~year ~~and~~ended ~~Exchange~~July ~~Commission~~31, 2009.

~~Changes~~Item in4. Submission ~~the~~of ~~general~~Matters ~~economic~~To A ~~environment~~Vote ~~may~~Of ~~impact~~Security ~~our future business and results of operations.~~Holders

~~Current~~We held ~~economic~~our ~~conditions,~~2009 ~~including~~Annual ~~the~~Meeting ~~credit~~of ~~crisis~~Stockholders ~~affecting~~on ~~global~~November ~~financial markets~~17, ~~and~~2009 ~~the~~in ~~possibility~~Garden ofCity, aNew York. At ~~global~~the ~~recession~~annual meeting, ~~could~~the ~~adversely~~stockholders ~~impact~~voted on the election ~~Company’s~~of ~~future~~nominees ~~business~~to ~~and~~our ~~financial~~six ~~results.~~person ~~These~~Board ~~conditions~~of ~~could~~Directors. Each ~~result~~of Amit Basak, inGeorge ~~reduced~~T. ~~demand~~Hawes, ~~for~~Dr. ~~some~~E. ofKelly ~~the~~Hyslop, ~~Company’s~~Sandison ~~products~~Weil, ~~increased~~Stephen ~~order cancellations~~Kezirian and ~~returns,~~Allen Wolpert ~~increased~~received ~~pressure~~a onplurality of the ~~prices~~votes ofcast for the ~~Company’s~~nominees for director by ~~products,~~the ~~increased~~shares ~~number~~represented at the annual meeting and each was elected as a member of the ~~days~~Board of Directors to ~~collect~~serve ~~outstanding~~until ~~receivables~~the ~~and/or increased~~annual ~~bad~~meeting ~~debts~~of onstockholders ~~outstanding~~to ~~receivables~~be held in the year 2010, and ~~greater~~until ~~difficulty~~their inrespective successors are elected and ~~obtaining~~qualified. The ~~necessary~~votes ~~financing~~for ondirectors ~~favorable~~were ~~terms.~~as follows:

Risk Relating to the Successful Implementation of the Beta Systems Transactions

	Votes
	For	Withheld
Amit Basak	11,488,987	43,749
George T. Hawes	11,438,987	93,749
Dr. E. Kelly Hyslop	11,488,987	43,749
Stephen Kezirian	11,438,987	93,749
Sandison Weil	11,488,987	43,749
Allen Wolpert	11,488,987	43,749

~~Proginet~~There and Beta Systems Software AG and its subsidiaries have entered into agreements, namely the Asset Exchange Agreement, the Services Agreement, the Secur-Line License Agreement and the Master Distribution Agreement (collectively, the “Beta Agreements”) on October 31, 2008. The transactions contemplated by the Beta Agreements were ~~designed to strengthen our competitive position in the managed file transfer market space and help focus the Company on its core competencies. There can be~~ no ~~assurance~~other ~~that~~matters wesubmitted ~~will be able~~ to ~~manage~~a ~~the implementation of~~vote ~~the Beta Agreements effectively or achieve our stated goals. The implementation~~ of the transactions contemplated by Beta Agreements and the integration of the new products acquired by the Company may disrupt our ongoing operations, divert management from day-to-day responsibilities, increase our expenses and adversely impact our business, operating results , financial condition and may reduce our cash available for operationsstockholders. ~~They may also be viewed negatively by customers, financial markets or investors.~~

Item 6. Exhibits

(a) Exhibits

Exhibit 31.1 – Rule 13a-14(a) Certification (Chief Executive Officer)

Exhibit 31.2 – Rule 13a-14(a) Certification (Chief Financial Officer)

Exhibit 32.1 – Section 1350 Certification of Chief Executive Officer

Exhibit 32.2 – Section 1350 Certification of Chief Financial Officer

2422

SIGNATURES

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

PROGINET CORPORATION (Registrant)

		PROGINET CORPORATION
		(Registrant)



Date December 14, 2009	/s/ Sandison Weil
	Sandison Weil, President and
	Chief Executive Officer



Date December 14, 2009	/s/ Joseph Christel
	Joseph Christel
	Chief Financial Officer

Date June 1, 2009		/s/ Sandison Weil
		Sandison Weil, President and
		Chief Executive Officer
Date June 1, 2009		/s/ Debra A. DiMaria
		Debra A. DiMaria
		Chief Financial and Accounting Officer

Filing Compare · PROGINET CORP