UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x		QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

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

For the transition period from to

RIPTIDE WORLDWIDE, INC.

(Exact name of small business issuer as specified in charter)

Nevada		333-130011		20-8514961
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

200 East Palm Valley Drive, 2nd Floor, Oviedo, FL 32765

(Address of principal executive offices) (Zip Code)

(321)-296-7724

(Issuer’s telephone number, including area code)

N/A

(former name, former address, and former fiscal year if change from last report)

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

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

Large accelerated filer o		Accelerated filer o

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

Check whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 64,050,484 as of November 18, 2008.

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Riptide Worldwide, Inc.

	Page No.

PART I FINANCIAL INFORMATION

Item1. Financial Statements

Consolidated Balance Sheets as of September 30, 2008 (unaudited) and December 31, 2007	3

Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007	4

Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007	5

Notes to Unaudited Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3. Quantitative and Qualitative Disclosures about Market Risk	38

Item 4T. Controls and Procedures	38

PART II - OTHER INFORMATION

Item 1. Legal Proceedings	39

Item 1A. Risk Factors	40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 3. Defaults Upon Senior Securities	53

Item 4. Submission of Matters to a Vote of Security Holders	53

Item 5. Other Information	53

Item 6. Exhibits	54

Signatures	54

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RIPTIDE WORLDWIDE, INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

	September 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,068,219		$	737,216
Accounts receivable, net of allowance for doubtful accounts of $416,505 at September 30, 2008 and $754,184 at December 31, 2007	2,253,391			3,087,082
Prepaid expenses and other current assets	293,425			418,111
Total current assets	3,615,035			4,242,409

Property and equipment, net of accumulated depreciation of $477,670 at September 30, 2008 and $238,767 at December 31, 2007 and impairment of $193,996 at September 30, 2008 and $104,012 at December 31, 2007	64,807			353,837
Goodwill, net of impairment	3,639,491			3,511,155
Other intangible assets, net of accumulated amortization of $3,064,533 at September 30, 2008 and $2,514,532 at December 31, 2007 and impairment of $1,408,502 at September 30, 2008 and December 31, 2007	3,863,889			4,413,889
Other assets	649,009			669,033
TOTAL ASSETS	$	11,832,231		$	13,190,323

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Current maturities of notes payable and capital lease obligations	$	5,192,222		$	4,223,998
Accounts payable and accrued expenses	12,522,523			9,421,960
Income taxes payable	734,818			709,455
Deferred revenue	48,395			398,098
Total current liabilities	18,497,958			14,753,511

Long-term subordinated notes payable and capital lease obligations	5,584,901			5,594,069

Mandatory Redeemable Series B Convertible Preferred Stock	2,348,994			2,018,922
Preferred dividends payable in shares of common stock	13,500			56,057
Preferred dividends payable in shares of Series A Preferred Stock	365,120			185,807

STOCKHOLDERS’ (DEFICIT) EQUITY
Series A 8% convertible preferred stock, $0.001 par value per share; 10,000,000 shares authorized; 2,800,000 shares issued and outstanding at September 30, 2008 and December 31, 2007	2,800			2,800
Common stock, $.001 par value per share; 800,000,000 shares authorized; 61,766,731 and 60,855,441 shares issued and outstanding at September 30, 2008 and December 31, 2007;	61,767			60,855
Pending issuance of Series C preferred stock	565,000			—
Additional paid-in capital	16,007,557			15,310,204
Accumulated deficit	(31,615,366		)	(24,791,902		)
Total stockholders’ (deficit) equity	(14,978,242		)	(9,418,043		)
TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	11,832,231		$	13,190,323

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

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RIPTIDE WORLDWIDE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2008 AND 2007

	(Unaudited) Three Months Ended September 30,						(Unaudited) Nine Months Ended September 30,
	2008			2007			2008			2007
Revenue
Professional services fees	$	4,592,221		$	2,909,205		$	12,268,093		$	2,907,905

Cost of revenue
Professional services	3,412,094			2,138,006			8,730,763			2,140,006
Gross Profit	1,180,127			771,199			3,537,330			767,899

Operating Expenses
Selling, general and administrative expenses	1,624,906			2,616,858			6,046,203			5,565,323
Product development expense	—			538,974			147,191			2,136,542
Depreciation and amortization	210,880			438,191			704,632			934,779
Total operating expenses	1,835,785			3,594,023			6,898,026			8,636,644
Operating loss	(655,659		)	(2,822,824		)	(3,360,696		)	(7,868,745		)

Interest income	1,907			4,131			10,035			4,929
Interest expense	(612,045		)	(658,763		)	(2,265,538		)	(715,919		)
Other income	—			—			1,250			—
Registration rights penalty	(826,970		)	—			(2,174,148		)	—
Loss from continuing operations before income taxes	(2,092,766		)	(3,477,456		)	(7,789,097		)	(8,579,735		)
Provision for income taxes	—			—			23,179			—
Loss from continuing operations	(2,092,766		)	(3,477,456		)	(7,812,276		)	(8,579,735		)
Income (loss) from discontinued operations, net of income taxes	716,073			(4,157,195		)	988,812			(4,419,646		)
Net income (loss)	(1,376,693		)	(7,634,651		)	(6,823,464		)	(12,999,381		)
Less preferred stock dividend	(110,897		)	(75,514		)	(330,593		)	(149,311		)
Net income (loss) applicable to common stockholders	$	(1,487,590	)	$	(7,710,165	)	$	(7,154,057	)	$	(13,148,692	)

Basic and diluted earnings (loss) per share
Loss from continuing operations applicable to common stockholders	$	(0.04	)	$	(0.07	)	$	(0.13	)	$	(0.27	)
Earnings (loss) from discontinued operations	0.01			(0.08		)	0.01			(0.14		)
Net income (loss) applicable to common stockholders	$	(0.03	)	$	(0.15	)	$	(0.12	)	$	(0.41	)

Basic and diluted weighted average of common shares outstanding	61,509,633			51,320,308			61,270,027			32,241,669

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

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RIPTIDE WORLDWIDE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS SEPTEMBER 30, 2008 AND 2007

	(Unaudited) Nine Months Ended September 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(6,823,464	)	$	(12,999,381	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization of property and equipment	235,619			54,134
Amortization of other intangible assets	550,000			880,645
Gain from sale of intellectual property	—			(1,000,000		)
Impairment charge	89,984			4,292,533
Stock-based compensation expense	724,247			431,440
Provision for bad debt	8,048			57,949
Amortization of discount on Senior Notes recorded as interest expense	916,519			346,278
Common stock warrants issued in lieu of cash for interest on note payable	440,846			11,500
Changes in operating assets and liabilities, excluding effects of acquisitions and divestitures
Accounts receivable	825,642			(190,136		)
Inventory	—			74,453
Prepaid expenses and other assets	144,710			3,208
Accounts payable and accrued expenses	3,125,926			4,044,704
Deferred revenue	(349,703		)	(251,406		)
NET CASH USED IN OPERATING ACTIVITIES	(111,626		)	(4,244,079		)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment	(36,572		)	(95,934		)
Acquisition of Riptide Software, Inc.	(128,337		)	(4,652,314		)
Acquisition of Bravera, Inc.	—			(1,779,966		)
Proceeds from sale of intellectual property	—			1,000,000
Fee for purchasing public shell for reverse merger	—			(400,000		)
NET CASH USED IN INVESTING ACTIVITIES	(164,909		)	(5,928,214		)

CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of Series A preferred stock	—			2,556,111
Net proceeds from issuance of Series B preferred stock	—			3.137.500
Net proceeds from issuance of notes payable	—			5,940,000
Proceeds from the pending issuance of preferred stock	565,000			—
Proceeds from the conversion of warrants into common stock	—			73,970
Proceeds from short term borrowings	200,000			100,000
Payments on capital lease obligations	(7,462		)	(8,144		)
Payments on notes payable	(150,000		)	(525,336		)
NET CASH PROVIDED BY FINANCING ACTIVITIES	607,538			11,274,101
Net change in cash and cash equivalents	331,003			1,101,808
Cash and cash equivalents at beginning of year	737,216			404,209
Cash and cash equivalents at end of quarter	$	1,068,219		$	1,506,017

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

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RIPTIDE WORLDWIDE, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS continued

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

	(Unaudited) Nine Months Ended September 30,
	2008		2007
Supplemental cash flow information:
Interest paid	$	15,000	$	74,539
Income taxes paid	$	—	$	—
Non-cash financing items:
Series A preferred dividends accrued and payable in shares of Series A Preferred Stock	$	179,323	$	129,797
Fair value of common shares and warrants issued with Series B preferred stock, net of accretion	$	330,072	$	1,228,602
Conversion of accrued preferred dividends into shares of common stock	$	121,500	$	301,875
Fair value of common shares and warrants issued with Senior Notes	—		2,383,855
Shares issued for acquisition of interest in master distributorship	—		18,750
Payment of notes payable with shares of common stock	$	—	$	395,588

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

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RIPTIDE WORLDWIDE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Statements and Basis of Presentation

The accompanying consolidated financial statements of Riptide and its subsidiaries have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). On March 2, 2007, Riptide Worldwide, Inc. (“Riptide” or the “Company”) formerly Shea Development Corp., a public shell, and Information Intellect, Inc. (“Information Intellect”) a private company, merged in a transaction accounted for as a reverse merger. Prior to March 2, 2007 the historical periods presented are those of Information Intellect. All significant intercompany accounts and transactions have been eliminated in consolidation. Prior period reclassifications have been made to conform to the current period presentation and for discontinued operations presentation.

Some information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to rules and regulations promulgated by the Securities and Exchange Commission (the “Commission”). The results of operations for the interim periods shown herein are not necessarily indicative of the results to be expected for any future interim period or for the entire year. The accompanying financial statements reflect all adjustments and disclosures which in the opinion of management are necessary for fair presentation of interim financial statements. These statements should be read together with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-KSB for the year ended December 31, 2007 on file with the Commission.

Description of Business

Effective January 2, 2008, the Company changed its corporate name to Riptide Worldwide, Inc. from Shea Development Corp. The Company’s stock trades on the OTC Bulletin Board under the stock symbol RTWW.

In March 2007, Riptide entered into an agreement to issue Series A Preferred Stock raising approximately $2.8 million before transaction costs to complete the reverse merger. In July 2007, Riptide entered into two agreements for a senior debt financing and a Series B Preferred Stock offering raising approximately $10 million of cash, before transaction costs, to consummate the acquisitions in July 2007 of Riptide Software, Inc. (“RSW”) and RTWW Business Services, Inc., formerly Bravera, Inc. (“RBS”) and to provide working capital to the Company.

The Information Intellect subsidiary had developed, marketed and licensed a line of enterprise asset management software solutions to companies in the utility industry. On August 17, 2007, Information Intellect and Riptide sold its software intellectual property rights to PowerPlan Consultants, Inc., for cash proceeds of $1,000,000. Subsequent to the sale, Information Intellect withdrew from the market and closed its office in Marietta, Georgia. The results of operations of the Information Intellect software business are reflected as discontinued operations in the Riptide Consolidated Statement of Operations for the three and nine months ended September 30, 2008 and 2007. The agreement and transaction are discussed in NOTE D – DISCONTINUED OPERATIONS to the Consolidated Financial Statements.

Riptide was incorporated in the State of Nevada on February 18, 2005. Since the merger on March 2, 2007, the Company has been expanding its products and transitioning its business into a business process management solutions company. The Company plans to continue this transition through strategic acquisitions and in July 2007, the Company completed the acquisition of RSW and RBS. RSW provides custom programming services to build configurable enterprise software solutions for revenue and financial management systems, enterprise application integration, user-interface frameworks, middle-tier frameworks, military and commercial modeling and simulation, and military Command, Control and Communications Centers. RSW’s enterprise software products and services provide customers with a wide array of options to make the product their own through a customizable configuration process. RBS provided document management services for the Federal Emergency Management Agency (FEMA). In August 2008, RBS was notified by FEMA that its contract would be terminated at September 30, 2008. Due to the loss of the FEMA contract, RBS ceased operations on October 1, 2008. The results of operations of RBS are reflected as discontinued operations in the Riptide Consolidated Statement of Operations for the three and nine months ended September 30, 2008 and 2007. See NOTE D – DISCONTINUED OPERATIONS to the Consolidated Financial Statements.

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Energy Technology Group (“ETG”), a wholly owned subsidiary of Information Intellect, located in Fort Worth, Texas provided software and automated metering solutions, under the MeterMesh brand name, for the reading of electric, gas and water meters through a mesh network of radio devices that collect and transmit data to the utility company. Information Intellect and ETG had merged in September 2005 but had operated the businesses as separate business units. In March 2008, Riptide reduced the ETG workforce and operations to a minimal level due to slow demand for the ETG products and services. On March 18, 2008, ETG entered into an exclusive technology licensing agreement with I-Sys, Inc. (“I-Sys”) pertaining to the MeterMesh technology. The technology licensing agreement provides for I-Sys to pay royalties to Riptide up to a maximum of $1,700,000. These royalties are payable to ETG as I-Sys sells the MeterMesh software and hardware to its end user customers. At the point that I-Sys has paid $750,000 of royalties to ETG, then ownership of the MeterMesh intellectual property may transfer to I-Sys. As of November 18, 2008, I-Sys has not made any royalty payments to Riptide. I-Sys also assumed responsibility for the existing operations of the MeterMesh group including managing and supporting existing distributor relationships, existing customers and made offers of employment to some of the MeterMesh personnel. As a result of this transaction, the operations of ETG were reduced to a minimal level to support the transition of the MeterMesh operations to I-Sys, Inc.

Liquidity and Plan of Operations

The Company has received a report from its independent registered public accounting firm for the year ended December 31, 2007 containing an explanatory paragraph that describes the uncertainty regarding its ability to continue as a going concern. At September 30, 2008, the Company had cash and cash equivalents of approximately $1,068,000, negative working capital of approximately $14.9 million, stockholders’ deficit of approximately $15 million and total liabilities exceeded total assets. The Company has experienced recurring operating losses for the three and nine months ended September 30, 2008 and 2007 and for the years ended December 31, 2007 and 2006. In addition, at September 30, 2008, the Company was in technical default of its senior debt agreements.

Historically, the Company has had access to sources of additional funds including cash proceeds of $2.8 million, before transaction costs, received from an equity offering in March 2007 and approximately $10 million of cash proceeds, before transaction costs, raised in July 2007 from a debt and equity offering to fund the acquisitions of RSW and RBS. As a growing technology business with a strategy of growth by acquisition, the Company continues to require new investment from existing and new sources of capital. At September 30, 2008, the Company had a commitment to acquire CRI Advantage, Inc. (“CRI) pending the raising of up to approximately $4 million in funds to finance the acquisitions.

In April 2008, the Company received a non-binding commitment from Matrix Holdings, LLC (“Matrix”), an entity controlled by Riptide’s CEO (the “Related Party”) to fund the Company with up to $15 million of cash for the payment of debts, to finance the acquisitions and for working capital purposes. As of September 30, 2008, approximately $365,000 of liabilities had been settled by funds provided by the Related Party and the Related Party had contributed $200,000 to the Company to fund operations. In October 2008, Matrix paid the Senior Note holders $750,000 and settled $250,000 of liabilities on the behalf of the Company.

As of April 18, 2008 the Company entered into a Waiver Agreement (the “Agreement”) with the holders of the senior debt. The Agreement calls for the repayment of approximately $7.2 million face value of the notes payable plus interest payable of approximately $1.3 million in several installments to be fully paid on or before June 30, 2008. In addition, the Company issued warrants to the holders of the senior debt to acquire 1,574,444 shares of Common Stock at an exercise price of $0.01 per share. These warrants had a fair value of $391,318 which was recorded as interest expense in the second quarter of 2008. Upon final payment the Company expects that the senior debt and the covenant defaults under the senior debt agreements will be fully satisfied and released. The Company expects that the cash to make the payments under this agreement will come from the cash proceeds received from the future issuance of Series C Shares to the Related Party and/or other investors. On July 31, 2008, the Company’s CEO met with the Senior Notes holders and they requested that the Company pay the Senior Notes holders $2 million on or before August 15, 2008. The Company was not able to make this payment. On October 30, 2008, Matrix paid the Senior Notes holders $750,000 on the behalf of the Company.

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Funds from the Related Party financing and other investor financings as well as cash flows from operations are expected to provide sufficient cash balances to fund operations and to execute the Company’s growth strategy of acquiring technology businesses. However, no assurances can be made that the Company will receive the funds from the Related Party commitment or that it will continue to have access to capital in the future or on terms or at rates acceptable to the Company.

Use of Estimates

The preparation of financial statements in conformity with 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 revenue and expenses during the reporting period. Actual results may differ from those estimates.

Revenue Recognition

Revenue consists of amounts earned from professional services including engineering, consulting, implementation and installation services and sales of hardware. Revenue arrangements with multiple deliverables are divided into separate units of accounting if the delivered item(s) have value to the customer on a stand-alone basis, there is objective and reliable evidence of fair value of the undelivered item(s) and delivery/performance of the undelivered item(s) is probable. The total arrangement consideration is allocated among the separate units of accounting based on their relative fair values and the applicable revenue recognition criteria considered for each unit of accounting. For our standard contract arrangements that combine deliverables such as hardware, meter reading system software, installation services, each deliverable is generally considered a single unit of accounting. The amount allocable to a delivered item is limited to the amount that we are entitled to bill and collect and is not contingent upon the delivery/performance of additional items.

Revenue is recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable and (4) collectibility is reasonably assured. Hardware revenue is generally recognized at the time of shipment, receipt by customer, or, where applicable, upon completion of customer acceptance provisions. For software arrangements with multiple elements, revenue recognition is also dependent upon the availability of vendor-specific objective evidence (‘VSOE’) of fair value for each of the elements. The lack of VSOE, or the existence of extended payment terms or other inherent risks, may affect the timing of revenue recognition for software arrangements. If implementation services are essential to a software arrangement, revenue is recognized using either the percentage of completion methodology if project costs can be estimated or the completed contract methodology if project costs can not be reliably estimated. Hardware and software post-sale customer support fees are recognized ratably over the life of the related service contract.

Unearned revenue is recorded for products or services that have not been provided but have been invoiced under contractual agreements or paid for by a customer, or when products or services have been provided but the criteria for revenue recognition have not been met.

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Product Development Expense

The Company follows the guidance provided in SFAS No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, regarding the accounting for the costs of developing its software products. Product development costs include the direct costs of the project, labor, third party contracting fees and a pro rata share of indirect overhead costs. For software to be marketed or sold, financial accounting standards require the capitalization of development costs after technological feasibility is established. Once technological feasibility is established, all software costs should be capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached shortly before the products are released to manufacturing. Costs incurred after technological feasibility has been established have not been material, and, accordingly, all costs to develop our products have been expensed as incurred.

Purchased software and acquired technology (i.e., software and technology acquired from a third party) are classified as intangible assets on the balance sheet and have been recorded at fair value determined at the date of acquisition and measured against its net realizable value at each balance sheet date. Purchased software is amortized to operating expenses over its estimated useful life, generally five years.

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred income tax expenses are provided based upon estimated future tax effects of differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes calculated based upon provisions of enacted laws.

Stock-Based Compensation

On January 1, 2005, the Company adopted the modified prospective method of SFAS No. 123 (revised 2004) (“123R”), Share-Based Payment. SFAS No. 123R supersedes Accounting Principles Board Opinion (“APB”) No. 25, Accounting for Stock Issued to Employees, and amends SFAS No. 95, Statement of Cash Flows. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. Under the modified prospective application, SFAS No. 123R is applied to new awards and to awards modified, repurchased or cancelled after the effective date.

Compensation cost for the portion of awards for which requisite service has not been rendered that are outstanding as of the effective date is recognized as the requisite service is rendered on or after the effective date. The compensation cost for that portion of awards is based on the grant date fair value of those awards as calculated for pro-forma disclosures under SFAS No. 123. The Company’s consolidated financial statements at December 31, 2007 and at September 30, 2008 and for the three and nine months ended September 30, 2008 and 2007 reflect the impact of adopting SFAS No. 123R. See NOTE G – STOCK OPTIONS AND WARRANTS for further details.

Stock-based compensation expense recognized during the period is based on the fair value of the portion of the stock-based payment awards that is ultimately expected to vest. SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company calculates the fair value of each option award on the date of grant using the Black-Scholes option pricing model. Because the Company’s securities have not been traded in a public market expected volatility has been based on the historical volatility of public companies in the same industry. The Company’s computation of expected life follows the guidance in Staff Accounting Bulletin No. 107 for determining the expected life of the awards. The interest rate for the periods within the contractual life of the award is based on the U.S. Treasury yield curve in effect at the time of the grant.

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The adoption of SFAS No. 123R required the Company to record substantial non-cash stock compensation expenses. While the adoption of SFAS No. 123R did not have a significant effect on the Company’s financial condition or cash flows, it did have a significant effect on the Company’s results of operations.

The Company accounts for equity instruments issued to non-employees based upon the fair value of the awards. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur.

Net Loss per Common Share

The Company reports net income (loss) to common stockholders per share in accordance with SFAS No. 128, Earnings per Share. Basic and diluted net loss per common share are computed by dividing net loss to common stockholders by the weighted-average number of shares of common stock outstanding during the year. For the three months ended September 30, 2008 and 2007, the weighted average shares outstanding were 61,509,633 and 51,320,308. For the nine months ended September 30, 2008 and 2007, the weighted average shares outstanding were 61,270,027 and 32,241,669. The dilutive effect of the conversion of warrants, the convertible preferred stock and the convertible notes payable was excluded from the earnings per share calculation because they are anti-dilutive due to the Company being in a net loss position.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and notes payable are carried at cost, which approximates fair value.

Cash and Cash Equivalents

At September 30, 2008 and December 31, 2007, cash and cash equivalents consisted of monies held in checking and money market accounts. The Company considers all highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents.

Accounts Receivable

Trade accounts receivable are generally uncollateralized and are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectibility of specific customer accounts: customer credit worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provided for estimated uncollectible amounts through a charge to expense and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts were written off through a charge to the valuation allowance and a credit to accounts receivable. In addition, the Company maintains an allowance for returns, payment discounts, and other allowances based on historical returns and payment discounts and allowances that may be offered to customers from time-to-time or as incentive to make payments to the Company sooner than the customer’s contractual payment terms. Returns, payment discounts and other adjustments are charged to the allowance when incurred. The Company provides for returns, discounts and other allowances as a reduction of revenue and a credit to the valuation allowance. The allowance for doubtful accounts, returns and allowances was approximately $417,000 and $754,000 at September 30, 2008 and December 31, 2007, respectively. This reduction was due to offsetting a receivable acquired with the acquisition of RBS against the allowance. This receivable was fully reserved at the time of the acquisition

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Property and Equipment

The Company’s property and equipment is stated at cost and depreciation was computed using the straight-line method over the estimated useful lives ranging from one to ten years. Amortization of leasehold improvements was computed using the straight-line method over the lesser of the useful life of the asset or the remaining term of the lease.

Acquisitions

In accordance with SFAS No. 141, Business Combinations, we record the results of operations of the acquired business from the date of acquisition. Net assets of the company acquired and intangible assets that arise from contractual/legal rights, or are capable of being separated, are recorded at their fair values at the date of acquisition. The balance of the purchase price after fair value allocations represents goodwill. Negative goodwill resulting from contingent consideration is recorded as a liability. Contingent payments subsequently made are then applied against the liability. Amounts allocated to in-process research and development (IPR&D) are expensed in the period of acquisition.

Intangible Assets

Purchased intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful lives of the respective assets, generally two to seven years, using the straight line method.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicated that the carrying amount of an asset may not be recoverable and exceeds its fair value in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. If conditions would indicate that an asset might be impaired, the Company would have estimated the future cash flows expected to result from the use of the asset and its eventual disposition. The impairment, if any, would have been measured by the amount by which the asset exceeds its fair value typically represented by quoted market values or, when and if available, the future discounted cash flow associated with the asset.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 provides guidance for using fair value to measure assets and liabilities and only applies when other standards require or permit the fair value measurement of assets and liabilities. It does not expand the use of fair value measurement. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company adopted this standard as required and adoption did not have a significant impact on the Company’s results of operations, financial condition and liquidity.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158). This Statement requires that employers measure plan assets and obligations as of the balance sheet date. This requirement is effective for fiscal years ending after December 15, 2008. The other provisions of SFAS 158 were implemented by the company as of December 31, 2006. The company does not expect the implementation of the measurement date provisions of SFAS 158 to have a material impact on its consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB statement No. 115.” This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. If an entity elects the fair value option for a held-to-maturity or available-for-sale security in conjunction with the adoption of this Statement, that security shall be reported as a trading security under Statement 115, but the accounting for a transfer to the trading category under paragraph 15(b) of Statement 115 does not apply. Electing the fair value option for an existing held-to-maturity security will not call into question the intent of an entity to hold other debt securities to maturity in the future. This statement is effective as of the first fiscal year that begins after November 15, 2007. The Company adopted this standard on January 1, 2008. The implementation did not have a significant impact on the Company’s financial condition or results of operations.

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In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations. The objective of this revised statement is to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. The new standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the information they need to evaluate and understand the nature and financial effect of the business combination. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date. The Company is currently evaluating SFAS 141R and has not yet determined its potential impact on its future results of operations or financial position.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 requires enhanced disclosures about an entity’s derivative Instruments and hedging activities including: (1) how and why an entity uses derivative instruments; (2) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations; and (3) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows, SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with earlier application encouraged. The Company has no derivative instruments so the adoption of SFAS 161 is not expected to have any impact on the Company’s consolidated financial statements and it does not intend to adopt this standard early.

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NOTE B – CONCENTRATION OF CREDIT RISK

Financial instruments that subject the Company to credit risk consist primarily of cash and accounts receivable. The Company’s cash accounts are maintained at a bank, and at times throughout the year, the Company’s bank account balances exceeded the $100,000 FDIC insured limit. Financial instruments which potentially expose the Company to concentrations of credit risk consist primarily of trade accounts receivable. The Company estimates an allowance for doubtful accounts based on the creditworthiness of its customers as well as general economic conditions. Consequently, an adverse change in those factors could affect the Company’s estimate of its bad debt. The United States Army accounted for 66% and 56%, Marriott Vacation Club International accounted for 18% and 26% and two other customers accounted for 7% and 8% of total revenues for the three and nine months ended September 30, 2008, respectively. All other customers accounted for less than 5% of revenue on an individual basis for the three and nine months ended September 30, 2008 and the United States Army accounted for 38%, Marriott Vacation Club International accounted for 35% and Lockheed Martin accounted for 12% of total revenues of total revenue for the three and nine months September 30, 2007. Overall, the U.S. government related revenues accounted for 73% and 66% of the Company’s total revenues for the three and nine months ended September 30, 2008, respectively. This concentration makes the Company vulnerable to a near-term negative impact, should the relationships be terminated or become uncollectible. The following customers accounted for greater than 10% of total accounts receivable at September 30, 2008 and December 31, 2007.

	September 30, 2008		December 31, 2007
Marriott Vacation Club International	$	457,978	$	1,046,684
United States Army	606,022		734,238
Raytheon Technical Services Co.	414,209		283,156

NOTE C - ACQUISITIONS

In July 2007, the Company acquired RSW and RBS. Since RBS operations have been discontinued, the following table represents the pro forma statement of operations of Riptide assuming that the acquisition of RSW occurred at the beginning of 2007.

	(Unaudited) Nine Months Ended September 30, 2007
Revenues	$	9,718,029

Cost of revenue	6,774,010
Gross Profit	2,944,019

Operating Expenses
Selling, general and administrative expenses	6,479,363
Product development expense	2,136,542
Depreciation and amortization	1,350,972
Total operating expenses	9,966,877
Operating loss	(7,022,858		)

Interest income	8,316
Interest expense	(1,975,543		)
Loss from continuing operations before income taxes	(8,990,085		)
Provision for income taxes	413,420
Net loss from continuing operations	(9,403,505		)
Net (loss) from discontinued operations, net of income taxes	(4,419,647		)
Net (loss)	(13,823,152		)
Less preferred stock dividend	(210,797		)
Net (loss) applicable to common stockholders	$	(14,033,949	)

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Pending Acquisition of CRI Advantage, Inc.

On November 7, 2007, Riptide and its wholly-owned subsidiary Shea Development Acquisition No. 4 Corp. (“Merger Sub”) entered into an Agreement and Plan of Merger with CRI Advantage, Inc. (“CRI”) pursuant to which the Company will acquire all of the outstanding stock of CRI in a cash and stock transaction. The acquisition will be accomplished by the merger of Merger Sub into CRI, with CRI surviving the merger as a wholly-owned subsidiary of the Company. The aggregate purchase price is payable in 5,900,000 shares of the Company’s common stock and $3,500,000 in cash before transaction costs primarily consisting of legal, accounting and advisory fees. At closing, $350,000 and 1,500,000 shares of Company common stock will be placed in escrow pending CRI achieving profitability goals during the year ending December 31, 2008. In addition, the Company expects to assume estimated CRI debt and other liabilities of approximately $2,300,000 at closing. The closing of the merger is subject to customary closing conditions including the raising of the $3,500,000 in cash through a debt and/or equity financing transaction. On November 21, 2007, Riptide advanced CRI $180,000. This advance is classified within Other Current Assets on the Balance Sheet. Due to the delay in obtaining the necessary funds to close this transaction, both Riptide and CRI have agreed to review and adjust the terms of this acquisition based on current market conditions when Riptide obtains the necessary funds to finalize the acquisition. There can be no assurance that Riptide can raise the necessary funds.

NOTE D – DISCONTINUED OPERATIONS

On August 17, 2007 Information Intellect sold its Acufile and IntelliPlant Software and associated intellectual property rights to PowerPlan Consultants, Inc., (“PowerPlan”) for $1 million in cash pursuant to an Asset Purchase Agreement between Riptide, Information Intellect and PowerPlan. Following the sale, Riptide and Information Intellect withdrew from its legacy utility software applications business and closed its office in Marietta, Georgia.

This transaction, based on SFAS No. 144, Impairments of Long-Lived Assets and Discontinued Operations, met the criteria of a long-lived asset (disposal group) held for sale at the end of the quarter ended September 30, 2007. As a result, the Company has reflected the results of operations of its legacy utility software applications business for the three and nine months ended September 30, 2008 and 2007 as discontinued operations. Reported revenues for these periods no longer include any revenue or expense from the legacy utility software applications business. The results from the discontinued legacy utility software applications business are reported as loss from discontinued operations, net of income taxes in the Consolidated Statement of Operations.

The components of the income (loss) from discontinued operations, net of income tax, are presented below:

	(Unaudited) Three Months Ended September 30,					(Unaudited) Nine Months Ended September 30,
	2008		2007			2008			2007
Revenue
Professional services fees	$	—	$	210,887		$	—		$	944,966
Software license fees	—		—			—			150,000
Customer support contract services fees	62,381		108,347			324,656			626,605
Total revenue	62,381		319,234			324,656			1,721,571

Cost of revenue	168
Professional and customer support services	52,031		168,459			204,460			619,910
Gross profit	10,350		150,775			120,195			1,101,661

Operating expenses
Selling, general and administrative expenses	4,787		535,174			16,346			1,436,092
Product development expense	—		28,523			—			330,035
Depreciation and amortization	—		5,454			—			16,361
Total operating expenses	4,787		569,151			16,346			1,782,488

Income (loss) from discontinued operations before other income	5,563		(418,376		)	103,849			(680,827		)
Other income, sale of intellectual properties	—		1,000,000			—			1,000,000
Income (loss) from discontinued operations before income taxes	5,563		581,624			103,849			319,173
Provision for income taxes	—		—			(2,184		)	—
Income from discontinued operations	$	5,563	$	581,624		$	101,665		$	308,700

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The Company completed the acquisition of RBS in July 2007. RBS provided document management services for the Federal Emergency Management Agency (FEMA). In August 2008, RBS was notified by FEMA that its contract would be terminated at September 30, 2008. Due to the loss of the FEMA contract, RBS ceased operations on October 1, 2008. The closure of this business and the disposal of the assets met the criteria of SFAS No. 144, Impairments of Long-Lived Assets and Discontinued Operations and the results of operations of RBS are reflected as discontinued operations in the Riptide Consolidated Statement of Operations for the three and nine months ended September 30, 2008 and 2007.

Upon the acquisition of RBS on July 16, 2007, the Company’s subsidiary, RBS, assumed the responsibility to negotiate a contingent liability related to a demand letter from the Defense Finance and Accounting Service (“DFAS”) seeking a refund of approximately $747,000 for alleged “overpayments” on a US Navy contract performed by RBS during the years ended December 31, 2006 and 2005. In November 2007, RBS received a payment demand letter from the US Treasury Department for approximately $1,000,000 representing the alleged overpayment amount of approximately $747,000 plus accrued interest. In 2007, RBS recorded a liability of $999,666 due to demand letter from the US Treasury Department, with the offset being to goodwill that was impaired in 2007. In 2008, the Company and DFAS reached a settlement requiring RBS to pay the US Treasury Department the sum of $265,000. The reduction in the liability of $734,666 was treated as a reduction to the impairment of goodwill in 2008.

The components of the income (loss) from discontinued operations, net of income tax of RBS, are presented below:

	(Unaudited) Three Months Ended September 30,						(Unaudited) Nine Months Ended September 30,
	2008			2007			2008			2007
Total revenue	$	381,882		$	410,633		$	1,159,033		$	410,633

Cost of revenue	153,685			231,632168			500,089			231,632

Gross profit	228,197			179,001			658,944			179,001

Operating expenses
Selling, general and administrative expenses	135,372			651,034			335,493			651,034
Product development expense	—			55,320			—			55,320
Depreciation and amortization	26,995			10,742			80,986			10,742
Impairment (reduction of impairment) of goodwill and other long-lived assets	(644,682		)	4,200,724			(644,682		)	4,200,724
Total operating expenses	(482,315		)	4,917,820			(228,203		)	4,917,820

Income (loss) from discontinued operations before income taxes	710,512			(4,738,819		)	887,147			(4,738,819		)
Provision for income taxes	—			—			—			—
Income (loss) from discontinued operations	$	710,512		$	(4,738,819	)	$	887,147		$	(4,738,819	)

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NOTE E —ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

At September 30, 2008 and at December 31, 2007, accounts payable and accrued liabilities consisted of:

	September 30, 2008		December 31, 2007
	(Unaudited)		(Audited)
Accounts payable	$	3,631,939	$	3,014,404
Acquisition related transactions fees payable	1,465,006		1,491,256
Accrued liability for customer disputes	265,000		999,666
Accrued RBS purchase price payable	700,000		700,000
Accrued payroll and benefits	625,445		763,895
Accrued severance	62,069		109,017
Accrued registration rights penalty	3,003,148		829,000
Accrued interest expense	1,290,535		425,694
Accrued RSW earn-out and retention bonuses	609,587		455,000
Accrued federal and state payroll taxes payable	272,367		272,367
Other accrued liabilities	597,427		361,661
Total accounts payable and accrued liabilities	$	12,522,523	$	9,421,960

NOTE F – NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS

Short-Term Notes Payable

At March 31, 2008, the Company had $200,000 of short term notes payable to three stockholders, one note payable for $50,000 dated March 13, 2008 with a cash interest payment of $5,000 and two notes payable dated March 26, 2008, each for $75,000, and each with a cash interest payment of $7,500. The notes payable were due upon the receipt of either sufficient funds received from accounts receivable collections or newly invested capital. The two $75,000 notes payable plus accrued interest were paid in full in April 2008 with funds provided by the Related Party. The $50,000 note payable remains outstanding as of September 30, 2008. Warrants to acquire 200,000 shares of Common Stock with a five year term and an exercise price of $0.01 per share were also issued to these stockholders pro rata to the principal of each note. The fair value of the warrants of $49,528 was charged to interest expense.

Long Term Notes Payable and Capital Lease Obligations

Notes payable and capital lease obligations consist of the following:

	September 30, 2008		December 31, 2007
	(Unaudited)		(Audited)
Senior Notes	$	5,032,759	$	4,116,240
Seller Notes	5,000,000		5,000,000
Notes payable to stockholders and officers	624,365		574,365
8% note payable	88,560		88,560
Capital lease obligations	31,439		38,902
Totals notes payable and capital lease obligations	10,777,123		9,818,067
Less: Current maturities	5,192,222		4,223,998
Long-term portion of notes payable and capital lease obligations	$	5,584,901	$	5,594,069

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Senior Notes

On July 13, 2007, Riptide entered into a Securities Purchase Agreement (the “Agreement”) to issue (i) senior secured notes at a discount (the “Senior Notes”) in the aggregate principal amount of $7,222,222, (ii) 12,797,500 shares of Riptide common stock and (iii) warrants to purchase 3,500,000 shares of Riptide common stock in return for $6,500,000 of cash proceeds after a 10% debt discount but before transaction costs. The warrants have a term of five years and an exercise price of $0.01 per share. Riptide was required to use the proceeds from the Senior Notes to pay, in one or more payments, the cash portions of purchase price, plus related transaction costs, for the acquisitions of RSW and RBS. The Senior Notes accrue interest at the prime rate as published from time-to-time in the Wall Street Journal (5% at September 30, 2008) plus 4 percent.

In addition, we have entered into Registration Rights Agreements with the holders of Senior Notes and the holders the Series A Shares and the Series B Shares. Each of the agreements contains covenants including the timing for the registration and rights to registered shares, limits on capital expenditures, subsequent borrowings, loans to third parties, investments, acquisitions and divestitures, as well as restrictions on the payment of cash dividends. In addition, the Senior Notes have Leverage and Fixed Charge Coverage Ratios. Additionally, the Senior Notes contain customary events of default including, nonpayment of principal or interest; the violation of a covenant; the occurrence of a material adverse change; the attachment of any portion of our assets; insolvency; material misrepresentations by us; and our default under any other loan agreement. Upon the occurrence of an event of default the applicable interest rate increases to 18% per annum and the debt would become immediately due and payable.

On April 18, 2008, the Company entered into a Waiver Agreement (the “Agreement”) with the holders of the senior debt. The Agreement calls for the repayment of approximately $7.2 million face value of the notes payable plus interest payable of approximately $1.3 million in several installments to be fully paid on or before June 30, 2008. In addition, the Company issued warrants to the holders of the senior debt to acquire 1,574,444 shares of Common Stock at an exercise price of $0.01 per share. These warrants had a fair value of $391,318 which was recorded as interest expense in the second quarter of 2008. Upon final payment the Company expects that the senior debt and the covenant defaults under the senior debt agreements will be fully satisfied and released. The Company expects that the cash to make the payments under this agreement will come from the cash proceeds received from the future issuance of Series C Shares to the Related Party and/or other investors. On July 31, 2008, the Company’s CEO met with the Senior Notes holders and they requested that the Company pay the Senior Notes holders $2 million on or before August 15, 2008. The Company was not able to make this payment. On October 30, 2008, Matrix paid the Senior Notes holders $750,000 on the behalf of the Company.

The Company must also file a registration statement to register the shares under the Registration Rights agreements. In addition, the Company is subject to cash penalties of approximately $3 million at September 30, 2008 for failure to meet the requirements of the Registration Rights Agreements.

On the first business day of each month, beginning January 1, 2008, Riptide is required to pay in cash, 1/30th of the original principal amount of $7,222,222 of the Senior Notes, or approximately $241,000 per month plus unpaid accrued interest to the holders of the Senior Notes. Riptide has not made these required payments in 2008 and is now incurring an 18% late fee on all accrued and unpaid interest. Since the Senior Notes are in technical default, the entire outstanding amount, net of the unamortized balance of the original issue discount is classified as current in the Balance Sheet.

At any time during the term of the Senior Notes, Riptide has the right to prepay in cash, all or a portion of the principal amount of Senior Notes at 110% of the principal amount then outstanding plus accrued interest to the date of repayment. If Riptide becomes party to any change of control transaction, or if Riptide agrees to sell or dispose any of its assets in one or more transactions (whether or not that sale or disposal would constitute a change of control transaction), Riptide would then be required to offer to repay, in cash, the aggregate principal amount of the Senior Notes then outstanding at 115% of the principal amount plus unpaid accrued interest to the date of repayment.

The Senior Notes are secured by a first lien on all of the assets of Riptide and its subsidiaries. Among the restrictions defined in the Senior Notes, the terms of the Senior Notes prohibit the issuance of new senior debt, limit the repurchase of any equity securities outstanding, the investment in or acquisitions of securities of another person or third party entity, restrict payment of dividends, payments for capital expenditures and payment of other debts subordinate to the Senior Notes. In addition, in order for Riptide to pay cash dividends on any of its outstanding preferred or common stock specific debt and interest coverage ratios as defined by the Senior Notes must be met however, these debt and interest coverage ratio covenants do not place any other restrictions on the Company.

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Within 90 days from the Closing Date, Riptide was required to authorize and approve a reverse stock split of its common stock whereby after a reverse split Riptide will have no more than 25,000,000 shares of common stock outstanding. To meet this requirement, the Company entered into a merger agreement with CaminoSoft Corp. on September 6, 2007, to be accounted for as a reverse merger under GAAP, and by which the number of Riptide shares outstanding may be reduced to meet the requirement of the Senior Notes. However, Riptide was not been able to complete the reverse merger, has not implemented a reverse stock split and, as a result, has not met this requirement.

The terms of the Senior Notes also required that debt existing at closing be repaid or subordinated to the Senior Notes. As a result, Riptide (i) repaid notes payable of approximately $249,000 and (ii) entered into subordination agreements with holders of approximately $513,000 of debt outstanding plus accrued interest at the closing date. Interest will continue to accrue on the $513,000 of subordinated notes payable and all principal and interest becomes due 14 days following the full and final payment of the Senior Notes. For entering into the subordination agreements, two holders of notes payable received further consideration of an aggregate of 100,000 shares of Riptide common stock. In addition, one officer of Riptide agreed to subordinate his note payable of approximately $89,000 to the Senior Notes and two officers agreed to fully settle their notes payable of approximately $304,000 for cash payments of approximately $34,000 and 607,176 shares of Riptide common stock.

The following table represents the carrying value of the Senior Notes.

	September 30, 2008			December 31, 2007
	(Unaudited)			(Audited)
Face value of the Senior Notes	$	7,222,222		$	7,222,222
Original note discount	(722,222		)	(722,222		)
Transaction fees	(560,000		)	(560,000		)
Fair value of common stock and warrants issued in conjunction with the issuance of the Senior Notes	(2,383,855		)	(2,383,855		)
Amortization of note discount, transaction fees and fair value of common stock and warrants issued recorded as interest expense	1,476,614			560,095
Total Senior Notes payable	5,032,759			4,116,240
Less current maturities	5,032,759			4,116,240
Long-term Senior Notes payable	$	—		$	—

Seller Notes

In connection with the Riptide Software acquisition, a Riptide subsidiary issued $5,000,000 face amount of convertible subordinated notes to the former shareholders of Riptide Software (the “Seller Notes”) as payment of a portion of the acquisition consideration. $2,080,269 is due to an employee of Riptide Software who is also a director and stockholder of the Company. The balance of $2,919,731 is due to six employees of Riptide Software, five are employees of Riptide Software and are stockholders of the Company. The Seller Notes are convertible into shares of Riptide common stock at a conversion price of $1.00 per share. The Seller Notes have a term of three years with aggregate principal payments, subject to the subordination requirements of the Senior Notes, of $2,000,000 on July 13, 2008, $2,000,000 on July 13, 2009 and $1,000,000 on July 13, 2010. The Seller Notes are subordinated to the Senior Notes that prohibit cash payments of the Seller Notes until the Senior Notes have been paid in full. Interest accrues at the prime rate as published from time-to-time in the Wall Street Journal, (5% per annum on June 30, 2008) and is payable on each anniversary date of the note in shares of common stock. The number of shares of common stock is computed by dividing the accrued interest by the conversion rate of one share for each $1.00 of accrued interest. In addition, income tax payments made by Riptide for income earned by Riptide prior to the acquisition and as a result of Internal Revenue Service mandated migration from cash to accrual accounting methods will be reimbursed by the former shareholders through a reduction in principal payments. As of December 31, 2007, Riptide has recorded a liability of approximately $646,000 for income taxes relating to Riptide Software’s pre-acquisition income. Riptide recorded the offset of this liability as an Other Asset. Cash payments under the Seller Notes are restricted pursuant to a subordination agreement executed in connection with the issuance of the Senior Notes described above.

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Notes Payable to Stockholders and Officers

At September 30, 2008 and December 31, 2007, the Company had a note payable to a stockholder dated March 20, 2003 and originally due September 1, 2010, with a remaining principal amount outstanding $146,494 bearing interest at 9% per annum. Accrued interest payable was $20,203 at September 30, 2008 and $9,508 at December 31, 2007. Payments of $5,050 were due monthly however pursuant to the July 2007 subordination agreement, no principal or interest payments may be made to this note holder until the July 2007 senior note holders are paid in full, and then the Company has 14 days to pay this note holder in full.

At September 30, 2008 and December 31, 2007, the Company had a note payable to a stockholder dated February 2, 2005 and originally due September 1, 2010, with a remaining principal amount outstanding of $189,000 bearing interest at 8% per annum. Accrued interest payable was $ 20,466 at September 30, 2008 and $10,413 at December 31, 2007. Payments of $6,236 were due monthly however pursuant to the July 2007 subordination agreement, no principal or interest payments may be made to this note holder until a July 2007 senior note holders are paid in full, and then the Company has 14 days to pay this note holder in full.

At September 30, 2008 and December 31, 2007, the Company had a $100,000 convertible promissory note payable to a stockholder dated October 17, 2007 with a maturity date of January 17, 2008. The note bears no interest prior to the maturity date and 18% per annum after the maturity date. Accrued interest payable was $12,822 at September 30, 2008. The note payable, principal and accrued interest payable is convertible into shares of Series B Preferred Stock at the option of the holder. As of September 30, 2008 the holder of the note payable had not exercised the conversion and the note payable principal amount plus accrued interest remained outstanding. Approximately 112,800 shares of Series B Preferred Stock would be issuable had the note payable and accrued interest at September 30, 2008 been converted. On October 24, 2008, the Company received a demand letter from the stockholder dated October 17, 2008. The letter demanded payment in full by October 24, 2008. This payment was not made by the Company.

At September 30, 2008 and December 31, 2007, the Company had recorded a non-interest bearing advance of $50,000 due to Bravera Shareholder that was assumed as part of the acquisition of RBS.

At September 30, 2008 and December 31, 2007, the Company had a note payable to an officer and director dated September 28, 2005 and originally due March 1, 2010, with a remaining principal amount outstanding of $88,871 bearing interest at 6% per annum. Accrued interest payable was $6,213 at September 30, 2008 and $2,222 at December 31, 2007. Payments of $8,333 were due monthly however pursuant to the July 2007 subordination agreement no principal or interest payments may be made to this note holder until the senior note holders are paid in full, and then the Company has 14 days to pay this note holder in full.

Other Note Payable

At September 30, 2008 and December 31, 2007, the Company had a note payable due to a financial institution dated September 28, 2005, and originally due September 1, 2010, with a remaining principal amount outstanding of $88,560 bearing interest at 8% per annum. Accrued interest payable was $10.236 at September 30, 2008 and $4,923 at December 31, 2007. Payments of $3,089 were due monthly however pursuant to a July 2007 subordination agreement no principal or interest payments may be made to this note holder until the July 2007 senior note holders are paid in full, and then the Company has 14 days to pay this note holder in full.

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Capital Lease Obligations

During the year ended December 31, 2006, the Company acquired $49,750 of equipment under long-term leases. The future minimum lease payments under capital leases at September 30, 2008 and December 31, 2007 are as follows:

	September 30, 2008		December 31, 2007
	(Unaudited)		(Audited)

Total minimum lease payments	$	47,098	$	65,230
Less amounts representing interest and taxes	15,659		25,328
Present value of net minimum lease payments	31,439		38,902
Current maturities of capital leases obligations	9,463		7,758
Long-term capital leases obligations	$	21,976	$	31,144

NOTE G – INCOME TAXES

The Company has recorded a full valuation allowance to offset its net deferred tax assets. The Company is required to provide a valuation allowance against deferred tax assets when it is more likely than not that some portion, or all of its deferred tax assets, will not be realized. There has been no change in the Company’s circumstances in the current period that would necessitate a reduction or removal of the valuation allowance. Therefore, no tax benefit has been recorded for the Company’s net losses.

The Company and its subsidiaries file a consolidated federal tax return. However, the entities in the consolidated group file separate returns in most states. For the current reporting period, some of the entities in the consolidated group have net income on a stand alone basis. Accordingly, those entities have a state tax liability on their net income, which has been provided for by recording state income tax expense on the consolidated financial statements.

The Company decided to not file its 2007 income tax returns due to the Company not having adequate cash resources to pay the income taxes due. The Company plans to file its returns and pay all related income taxes, penalties and interest when it receives additional funding. The Company believes that the income taxes payable liability as of September 30, 2008 of $734,817 is sufficient to cover the taxes due and any penalties and interest that may be assessed. There can be no assurance that the Company will receive additional funding.

NOTE H – STOCK OPTIONS AND WARRANTS

Adoption of SFAS No. 123R

The Company adopted SFAS No. 123R using the modified prospective transition method beginning January 1, 2005. Accordingly, during the years ended December 31, 2007, 2006 and 2005, the Company determined stock-based compensation expense was immaterial for options granted prior to, but not yet vested, as of January 1, 2005, as if the fair value method required for pro forma disclosure under SFAS No. 123 were in effect for expense recognition purposes, adjusted for estimated forfeitures. For options granted after January 1, 2005, the Company has recognized compensation expense based on the estimated grant date fair value method using the Black-Scholes options pricing model. Compensation expense is recognized on a straight-line basis over the vesting period of the options. SFAS No. 123R requires that stock-based compensation expense be based on awards that are ultimately expected to vest.

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Stock Option Activity

Stock option, restricted shares and other equity incentive awards may be granted under the 2007 Stock Option and Performance Awards Plan (the “Plan”). The following table shows the activity of the awards granted, exercised or cancelled during the nine months ended September 30, 2008:

	Number of Stock Options and Awards Under the Plan	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years	Aggregate Intrinsic Value
Outstanding at December 31, 2007:	6,268,578	$	0.40	9.89
Granted	—	$	0.00	—
Exercised	—	$	0.00	—
Cancelled	273,250	$	0.40	9.59
Outstanding at September 30, 2008:	5,995,328	$	0.40	8.03	$	0.00
Vested and expected to vest at September 30, 2008	5,019,435	$	0.40	9.14	$	0.00
Options and awards exercisable at September 30, 2008	1,000,000	$	0.40	1.0	$	0.00

As part of the termination agreement with the Company’s former chief financial officer, his stock options became fully vested as of June 30, 2008. This accelerated vesting resulted in an additional $235,759 charge to stock compensation in the quarter ended June 30, 2008. No other stock options had vested at June 30, 2008 or September 30, 2008. Stock Options expected to vest is estimated by reducing the aggregate amount of unvested options outstanding at September 30, 2008 by the expected forfeiture rate. The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of Riptide’s common stock for options issued under the Plan that were “in-the-money” at September 30, 2008. No stock options were in-the-money at September 30, 2008.

In addition to the stock options awarded under the Plan, an award for 2,000,000 restricted shares of common stock was outstanding at September 30, 2008. The restricted shares vest 1,000,000 shares on December 20, 2008 and 1,000,000 shares on December 20, 2009. The fair value of this grant was determined to be $498,431 of which $62,304 and $186,912 was charged to stock compensation expense in the three and nine months ended September 30, 2008.

At September 30, 2008, the aggregate number of shares reserved for future awards under the plan was 1,504,672.

The following table details stock-based compensation expense included in the consolidated statement of operations.

	For the Nine Months Ended September 30,
	2008		2007
Stock compensation expense charged to:
Cost of revenue	$	101,005	$	—
Selling, general and administrative expense	618,542		387,697
Discontinued operations	4,700		43,743
Impact on net loss to common stockholders	$	724,247	$	431,440
Impact on net loss per share to common stockholders basic and diluted	$	0.01	$	0.01

As of September 30, 2008, there was approximately $1.4 million of total unrecognized compensation expense related to unvested stock options and restricted stock awards. The cost is expected to be recognized over a weighted-average period of 2.45 years.

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Valuation Assumptions

The Company calculated the fair value of each stock option award on the date of grant using the Black-Scholes option pricing model. The following assumptions were used for each respective period:

	Nine Months Ended September 30,
	2008	2007
Risk-free interest rates	1.35%	4.62%
Expected lives	5 years	5.75 years
Dividend yield	0%	0%
Expected volatility	165%	77%
Weighted-average volatility	165%	77%

The Company was privately held prior to March 2, 2007, and had no active trading market for its common stock. Therefore the Company’s computation of expected volatility for the nine months ended September 30, 2007 was based on the volatility of a publicly-traded competitor adjusted for a risk premium due to the restrictive nature and the illiquidity of the Company’s stock. The Company’s computation of expected life was determined based on the guidance provided in Staff Accounting Bulletin No. 107. The interest rate for the periods within the contractual life of the award is based on the risk free rate in effect at the time of the grant.

Stock Warrant Activity

Warrants for 1,774,444 shares of Common Stock were issued during the nine months ended September 30, 2008. The following table summarizes the stock warrant activity for the nine months ended September 30, 2008.

	Number of Warrants	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term in Years
Outstanding at December 31, 2007:	15,587,500	$	0.49	3.68
Issued	1,774,444	$	0.01	4.61
Exercised	—	—		—
Cancelled	—	—		—
Outstanding at September 30, 2008:	17,361,944	$	0.48	3.78

The fair value of $440,846 of the 1,774,444 warrants was charged to interest expense and was computed using the Black Scholes option pricing model with the following assumptions:

Risk-free interest rates		1.29 – 1.35%
Expected lives		5 yrs
Dividend yield		0
Expected volatility		165% – 185%
Weighted-average volatility		167%

NOTE I – MANDATORY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

The Company has authorized 60,000,000 shares of preferred stock of which 10,000,000 shares have been designated as Series A convertible preferred stock (the “Series A Shares”) and 20,000,000 as Series B mandatory redeemable convertible preferred stock (the “Series B Shares”).

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Mandatory Redeemable Preferred Stock

The Company has 3,600,000 shares of Series B Shares, par value par share of $0.001, issued and outstanding at September 30, 2008. The Series B preferred stock is mandatorily redeemable three years from the date of issuance and, as a result, is classified outside of stockholders’ equity on the balance sheet. The Series B preferred stock may be converted at any time into an aggregate of 7,200,000 shares of common stock, representing a conversion price of $0.50 per share. The Series B preferred stock accrues dividends monthly at a rate of 4.5% per annum payable quarterly in cash or shares of Common Stock subject to the restrictions of the Senior Notes. In addition, the holders of the Series B Shares received 972,000 shares of common stock at closing representing a prepaid dividend as defined in the Series B Preferred Stock Purchase Agreements. The fair value of the prepaid dividend is being accreted to the carrying value of the Series B Shares and to preferred dividends presented in the statement of operations over the three year term of the Series B Shares. The Series B Shares are subject to registration rights agreements for which the Company is in default.

The following table represents the carrying value of the Series B Shares:

Stated value of the Series B Shares	$	3,600,000
Reduced by:
Transaction fees payable in cash	(462,500		)
Fair value of prepaid dividend and warrants issued in conjunction with the issuance of the Series B preferred stock	(1,320,289		)
Accretion of fair value of prepaid dividends and warrants	201,711
Carrying value of Series B Shares at December 31, 2007	2,018,922
Accretion of fair value of prepaid dividends and warrants for the nine months ended September 30, 2008	330,072
Carrying value of Series B Shares at September 30, 2008	$	2,348,994

Preferred Stock

The Company has 2,800,000 shares of Series A Shares, par value per share of $.001, issued and outstanding at September 30, 2008. The Series A Shares accrue dividends at a rate of 8% per annum and is payable in Series A Shares for the first year outstanding and payable in cash thereafter, subject to the dividend restrictions of the Senior Notes. The Series A Shares are classified as part of Stockholders’ Equity and are subject to registration rights agreements for which the Company is in default.

Common Stock

At September 30, 2008, the Company has authorized 800,000,000 shares of common stock, par value $0.001, (the “Common Stock”) of which 61,766,731 are issued and outstanding. During the nine months ended September 30, 2008, 911,290 shares of Common Stock were issued to the holders of the Series B Shares as dividends in lieu of cash pursuant to the restrictions of the Senior Notes. The fair value of the Common Stock issued as dividends on the Series B Shares are presented as preferred dividends in determining Net Loss to Common Shareholders in the consolidated statement of operations.

NOTE J – RELATED PARTY TRANSACTIONS

At September 30, 2008 and at December 31, 2007, the Company has an accrued liability of approximately $700,000 representing the remaining acquisition consideration amount due to the Bravera Shareholder or entities controlled by the Bravera Shareholder. The payments would be made in a subsequent closing which has not occurred. In addition, a liability is recorded for $130,000 representing an advance of funds made by the Bravera Shareholder following the acquisition. Settlement of these liabilities is subject to the outcome of litigation.

The Company has entered into a lease agreement for office space in Oviedo, Florida. The lease is an operating lease, the base term of which expires on November 1, 2012. This office building is owned by an entity controlled by two employees of the Company, one of which is a director of the Company. The Company expensed approximately $246,478 as rent related to this facility in the nine months ended September 30, 2008.

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In 2007, the Company entered into a software development agreement with Saama Technologies, Inc. (“Saama”), a company that participated in the March 2007, Series A Shares transaction. At September 30, 2008 and at December 31, 2007 a liability to Saama of approximately $952,000 is recorded in accounts payable on the Balance Sheet. In June 2008, Saama filed an Arbitration Action, Case No. 74117Y0058708VIAM (hereafter “Action”), with the American Arbitration Association in San Francisco, California seeking $988,441 against Riptide for breach of a certain Master Services Agreement dated March 2, 2007 by and between Saama and Riptide (formerly known as Shea Development Corp.) and Information Intellect, Inc. (a wholly owned Riptide subsidiary). On November 7, 2008, the Company entered into a Settlement Agreement with Saama. The Company agreed to pay Saama $1,075,980 in six equal monthly payments of $179,330 starting December 1, 2008. In addition, a former member of the Company’s board of directors, who resigned on September 5, 2008, received a consulting fee of $7,500 per month from the Company, is also a director of Saama.

On October 17, 2007, a stockholder of the Company loaned the Company $100,000 pursuant to the terms of a convertible promissory note. This note gives the stockholder certain conversion rights at the Company’s next financing. The note had a maturity date of January 17, 2008. The note bears no interest prior to the maturity date and 18% per annum after the maturity date and $12,822 was expensed during the nine months ended September 30, 2008. The Company used the proceeds from this note to advance CaminoSoft $100,000. The Company wrote-off the advance to CaminoSoft as of June 30, 2008 after receiving notification that CaminoSoft had terminated the merger agreement. The stockholder is also a shareholder of CaminoSoft. At September 30, 2008, this note had not been converted by the holder and was outstanding. On October 24, 2008, the Company received a demand letter from the stockholder dated October 17, 2008. The letter demanded payment in full by October 24, 2008. This payment was not made by the Company.

In the first quarter of 2008, the Company had a cash advance outstanding and due from the Chairman and CEO of the Company for approximately $16,000 for business related travel and other expenses. This cash advance was still outstanding as of September 30, 2008.

On April 4, 2008, the Company received a non-binding commitment from Matrix Holdings, LLC (“Matrix”), an entity controlled by Riptide’s CEO to fund the Company with up to $15 million of cash for the payment of debts, to finance the acquisitions and for working capital purposes. In the second quarter of 2008, Matrix paid approximately $365,000 of Riptide’s liabilities and provided the Company with $200,000 for operating needs in anticipation of receiving shares of preferred stock from a new series of preferred stock expected to be authorized and issued in the fourth quarter of 2008. In October 2008, Matrix paid the Senior Note holders $750,000 and settled $250,000 of liabilities on the behalf of the Company.

On March 13, 2008, the Company entered into promissory note agreement with a stockholder of the Company. The Company received proceeds of $50,000 from the stockholder. The note required a $5,000 interest payment and warrants to acquire 50,000 shares of Common Stock issued to the stockholder with a five year term and an exercise price of $0.01 per share. The notes and related interest were repaid in April 2008 from funds provided by the Related Party. The Company recognized the fair value of the warrants of $12,382 as an increase to additional paid in capital with the offset being to interest expense.

On March 26, 2008, the Company entered into promissory note agreements with two stockholders of the Company. The Company received proceeds of $75,000 from each stockholder. Each note required a $7,500 interest payment and warrants to acquire 75,000 shares of Common Stock issued to each stockholder with a five year term and an exercise price of $0.01 per share. The notes and related interest were repaid in April 2008 from funds provided by the Related Party. The Company recognized the fair value of the warrants of $37,147 as an increase to additional paid in capital with the offset being to interest expense.

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On July 11, 2008, a settlement was reached with National Business Search, Inc., a Florida corporation. SEE NOTE K – LITIGATION. Philip Loeffel, a director of the Company, paid $119,375 of the settlement amount. The Company has recorded this payment as an accrued liability to a director.

NOTE K – LITIGATION

On November 13, 2007 Mr. Christopher Watson, Plaintiff, filed a Summons and Complaint in the Court of Common Pleas, Ninth Judicial Circuit, State of South Carolina, County of Charleston styled Chris Watson, Plaintiff vs Bravera, Inc. and Shea Development Corporation, Defendants. The action seeks recovery of a debt in the amount of $130,000 and alleges breach of contract.

On November 21, 2007 Daniel Island Partners LLC, an entity controlled by Mr. Christopher Watson, filed a summons and complaint in the Magistrates Court, State of South Carolina, County of Berkeley in a case styled Daniel Island Partners, LLC, Plaintiff, v. Bravera, Inc., Defendant, Case Number 07K-0915. Plaintiff requests a judgment for $1,638 plus an $80 filing fee for allegedly unpaid rent from October 1 – 23, 2007. This complaint has since been amended by the Plaintiff and the Plaintiff is now requesting a judgment of $7,500 plus fees and expenses.

On December 12, 2007 Shea Development Corp., Bravera, Inc., and IP Holding of Nevada Corp., Plaintiffs, filed a Summons and Compliant in the United States District Court, Southern District of New York in a case styled Shea Development Corp., Bravera, Inc. and IP Holding of Nevada Corp. v. Christopher Watson and Elizabeth Anne Conley. Elizabeth Anne Conley has been dismissed as a defendant in this lawsuit. The Company alleges multiple causes of action including fraudulent misrepresentations and seeks damages of not less than $6,500,000 in connection with the Agreement and Plan of Merger pursuant to which the Company acquired Bravera, Inc. from Mr. Watson.

In December 2007, a lawsuit was filed against Bravera, Inc., styled SD2R Partners, LLC Plaintiff v. Bravera, Inc., Defendant, Civil Action No. 2007-15640, in the Circuit Court for Fairfax County, Virginia. The plaintiff claims that Bravera, Inc. now RBS, breached a lease agreement and owes the plaintiff $167,526, plus various expenses.

On January 15, 2008, a suit styled Christopher Watson and Intellectus, LLC, Plaintiffs, v. Riptide Worldwide, Inc. (f/k/a Shea Development Corp.), Bravera, Inc. and IP Holding of Nevada Corp., Defendants, Case No. 08600114 was filed in the Supreme Court of the State of New York, County of New York. Intellectus, LLC is an entity owned and controlled by Mr. Christopher Watson. Plaintiffs seek damages in excess of $6,000,000.

The foregoing lawsuits filed by or against Watson or related entities in South Carolina, New York and Virginia are referred to herein as the “Watson Litigation.” The Company denies all claims made in the Watson Litigation and planned on vigorously defending these actions.

On July 10, 2008 and again on July 29, 2008, the parties in the Watson Litigation appeared before a U.S. Magistrate Judge in the U.S. District Court for the Southern District of New York for the purpose of mediating a global settlement of the Watson Litigation. A binding and enforceable settlement was reached but had not been consummated as of August 11, 2008. The settlement obligates Riptide to escrow the sum of $275,000 for certain tax liabilities that Watson is obligated to resolve. The settlement also requires Riptide to pay Watson the sum of $175,000 upon Watson’s performance of certain terms of the settlement, which terms had not been performed as of August 11, 2008. That is the extent of Riptide financial responsibilities to Watson. All Watson Litigation will be dismissed, with prejudice. Thereafter, a dispute arose between the parties about the proper interpretation of the settlement. Both parties filed motions and the matter is still pending before the Court. Due to the uncertainty about the consummation of the settlement, Riptide has not reduced the liabilities related to Watson as of September 30, 2008 which are approximately $1.2 million.

On or about June 4, 2008, Elizabeth Anne Conley filed a demand for arbitration before the American Arbitration Association (“AAA”) seeking damages in an unspecified amount for alleged breach of her employment agreement with Bravera, for alleged violations of South Carolina’s Wages Act, and for alleged Civil Rights Act violations. The matter has been set for trial in March 2009. The Company denies all claims and will vigorously defend the demand for arbitration.

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On May 21, 2008, a lawsuit was filed against Riptide styled Mark Hulsizer and Jon Boaz (the “Plaintiffs) v. Riptide Worldwide, Inc. f/k/a Shea Development Corp. f/k/a Information Intellect, Inc. (the “Defendant”), in the 141st Judicial District of Tarrant County, Texas, Cause No. 141-230461-08, removed and restyled as Mark Hulsizer and Jon Boaz v. Riptide Worldwide, Inc. f/k/a Shea Development Corp. f/k/a Information Intellect, Inc., in the U.S. District Court for the Northern District of Texas, Fort Worth Division, Action No. 4:08-cv-408-4 (collectively, the “Litigation”) in which Plaintiffs allege, among other things, that Defendant breached Employment Agreement contracts entered into individually between each Plaintiff and Defendant. The Company denies the claims and has entered into settlement discussions with the Plaintiffs. On August 15, 2008, the Company reached a settlement with Mark Hulsizer and Jon Boaz. The settlement requires the Company to pay Mr. Hulsizer and Mr. Boaz one and one-half months of their former monthly salary and three months of health insurance over a three month period. As of September 30, 2008, one monthly payment was still due. As of October 31, 2008, all required payments were made to Mr. Hulsizer and Mr. Boaz.

In June 2008, Saama filed an Arbitration Action, Case No. 74117Y0058708VIAM (hereafter “Action”), with the American Arbitration Association in San Francisco, California seeking $988,441 against Riptide for breach of a certain Master Services Agreement dated March 2, 2007 by and between Saama and Riptide (formerly known as Shea Development Corp.) and Information Intellect, Inc. (a wholly owned Riptide subsidiary). On November 7, 2008, the Company entered into a Settlement Agreement with Saama. The Company agreed to pay Saama $1,075,980 in six equal monthly payments of $179,330 starting December 1, 2008.

On or about June 10, 2008, a lawsuit styled, Subhash Chander and Sarita Khatri v. Riptide Worldwide, Inc. f/k/a Shea Development Corp., Index No. 601741, was filed in the Supreme Court of the State of New York alleging breach of an agreement to purchase the plaintiffs’ stock in WOW Global Corporation, LLC. The plaintiffs seek $300,000 in damages for their transaction costs, plus attorney’s fees and expenses. Riptide has filed an Answer denying any and all liability and contending that plaintiffs breached the agreement due to material adverse changes in the company’s financial performance. No trial date has been set, but Riptide will vigorously defend the lawsuit.

NOTE L – SUBSEQUENT EVENT

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

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and other reports filed by Registrant from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward looking statements and information that are based upon beliefs of, and information currently available to, Registrant’s management as well as estimates and assumptions made by Registrant’s management. When used in the filings the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan” or the negative of these terms and similar expressions as they relate to Registrant or Registrant’s management identify forward looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this report entitled “Risk Factors”) relating to Registrant’s industry, Registrant’s operations and results of operations and any businesses that may be acquired by Registrant. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Although Registrant believes that the expectations reflected in the forward looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with Registrant’s pro forma financial statements and the related notes that will be filed herein.

In this Quarterly Report on Form 10-Q, references to “we,” “our,” “us,” “our company,” the “combined companies,” or “Riptide” refer to Riptide Worldwide, Inc., a Nevada corporation, Information Intellect, Inc., a Georgia corporation, Riptide Software, Inc., a Florida corporation, and RTWW Business Services, Inc., a Florida corporation and all are wholly owned subsidiaries of the Registrant. “Riptide,” the “Company,” or the “Registrant” refers to Riptide Worldwide, Inc. References to “Information Intellect” refer solely to Information Intellect, Inc. References to “RSW” refer solely to Riptide Software, Inc. References to “RBS” refer solely to RTWW Business Services, Inc., formerly Bravera, Inc. Certain amounts in prior periods have been reclassified to conform to the current period classifications. The results of operations prior to March 2, 2007 are those of Information Intellect.

This Management’s Discussion and Analysis should be read in conjunction with the Registrant’s consolidated financial statements included in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2008 and the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the Commission. Capitalized terms used in this Management’s Discussion and Analysis are defined in the Registrant’s notes to the consolidated financial statements contained in this Quarterly Report on Form 10-Q.

Results of Operations

On January 2, 2008, we changed our corporate name to Riptide Worldwide, Inc. from Shea Development Corp. References to Shea Development Corp. prior to January 2, 2008 have been revised to refer to the Riptide name.

On March 2, 2007, Riptide, a public shell, and Information Intellect, a Georgia based hardware and software developer merged in a transaction accounted for as a reverse merger whereby Information Intellect was deemed the accounting acquirer and therefore, the historical financial statements of Information Intellect became the historical financial statements of Riptide following the merger. Information Intellect operated two business units. Each of the businesses were operated and accounted for separately. The first business was a line of legacy asset management software products and implementation services whereby the business unit licensed its software solutions and provided implementation services to companies operating in the utility industry. On August 17, 2007, we sold the intellectual property rights and exited the legacy utility industry asset management software business. The results of operations of the legacy utility industry asset management software business have been excluded from the results of continuing operations and are presented as discontinued operations in all periods presented.

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The other business unit is Energy Technology Group (“ETG”), a wholly owned subsidiary of Information Intellect and does business under the name MeterMesh. MeterMesh has a line of products that automates the collection of electric, gas and water meter usage data at the source for billing, load management and control purposes. Due to slow demand for the MeterMesh products and services, in March 2008, Riptide reduced the ETG workforce and operations to a minimal level and on March 18, 2008, ETG entered into an exclusive technology licensing agreement with I-Sys, Inc. (“I-Sys”) pertaining to the MeterMesh technology. The technology licensing agreement provides for I-Sys to pay royalties to Riptide up to a maximum of $1,700,000 and payable as I-Sys sells MeterMesh products and services during the two year term of the technology licensing agreement. At the point that I-Sys has paid $750,000 of royalties to Riptide, then ownership of the MeterMesh intellectual property may transfer to I-Sys. I-Sys also assumed responsibility for the existing operations of the MeterMesh group including managing and supporting existing distributor relationships, existing customers and MeterMesh personnel. This business is expected to receive a royalty stream and to maintain the intellectual property until it can be transferred to I-Sys. Therefore the results of operations for this business unit do not qualify for classification as discontinued operations. As of November 15, 2008, the Company has not received any royalty payments from I-Sys.

On July 16, 2007, Riptide entered into agreements for a senior debt financing and a Series B Preferred Stock offering raising approximately $10 million of cash, before transaction costs, to consummate the acquisitions of two private companies, RSW, a custom software programming and information technology services company located in Orlando, Florida and RBS, a document scanning services business with operations in Reston, Virginia. Our results of operations include the revenue and operating expenses of RSW from July 16, 2007 the date of acquisition through December 31, 2007 and for the three and nine months ended September 30, 2008. On September 30, 2008, the operations of RBS were closed. Therefore, the results of operations of RBS have been excluded from the results of continuing operations and are presented as discontinued operations from July 16, 2007 the date of acquisition through December 31, 2007 and for the three and nine months ended September 30, 2008.

Our strategy to grow the business through acquisitions continued when in November 2007, we announced that we entered into a definitive agreement to acquire CRI Advantage, Inc. located in Boise, Idaho (“CRI”). CRI is an information technology consulting and managed services firm with a core focus in the government and commercial industries. The closing of the CRI transactions are subject to Riptide raising funds through a debt and/or equity financing. At September 30, 2008 this transaction had not closed. Therefore, the results of operations of CRI have not been included in our results of operations for the three and nine months ended September 30, 2008 and 2007.

Revenue

	Three Months Ended September 30,
	2008		2007
Revenue from
Professional services fees	$	4,592,221	$	2,909,205

Revenue for the three months ended September 30, 2008 was $4,592,221 and consists of services revenue of RSW and excludes $62,381 of revenue from the Information Intellect legacy utility industry software business related to unexpired customer support services contracts classified as discontinued operations and also excludes $381,882 of revenues from RBS which were primarily revenues for scanning services perform for FEMA that are classified as discontinued operations. The company had $2,909,205 for the three months ended September 30, 2007 after excluding $319,234 of revenue from the Information Intellect legacy utility industry software business representing revenue from software licensing fees and customer support contract services classified to discontinued operations and $410,633 from RBS also classified as discontinued operations. Revenue consists of fees earned from providing professional services including custom programming services, information technology services and fees earned from staff augmentation services. The increase in revenue of $1,683,016 or 58% is due to the revenue generated by the RSW business which was acquired July 16, 2007 and an increase in professional services performed for the U.S. Army.

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	Nine Months Ended September 30,
	2008		2007
Revenue from
Professional services fees	$	12,268,093	$	2,907,905

Revenue for the nine months ended September 30, 2008 was $12,268,093 and consists of services revenue of RSW and excludes $324,656 of revenue from the Information Intellect legacy utility industry software business related to unexpired customer support services contracts classified as discontinued operations and $1,159,033 of revenues from RBS which were primarily revenues for scanning services perform for FEMA that are also classified as discontinued operations. . The company had revenues $2,907,905 for the nine months ended September 30, 2007 after excluding $1,721,571 of revenue from the Information Intellect legacy utility industry software business representing revenue from software licensing fees and customer support contract services classified to discontinued operations and $410,633 of revenue from RBS which were primarily revenues for scanning services perform for FEMA also classified as discontinued operations. Revenue consists of fees earned from providing professional services including custom programming services, information technology services and fees earned from staff augmentation services. The increase in revenue of $9,360,188 or 322% is due to the revenue generated by the RSW business which was acquired in July 2007 and an increase in professional services performed for the U.S. Army.

Our revenue is primarily derived from customers based in the United States. Revenue from the US federal, state and local government agencies accounted for 73% and 66% of our total revenues for the three and nine months ended September 30, 2008. Approximately 90% and 90% of total revenue for the three and nine months ended September 30, 2008 was derived from four customers. The United States Army accounted for 66% and 56%, Marriott Vacation Club International accounted for 18% and 26% and two other customers accounted for 7% and 8% of total revenues, respectively for the three and nine months ended September 30, 2008. All other customers accounted for less than 5% of revenue on an individual basis for the three and nine months ended September 30, 2008.

Pro forma revenue for the nine months ended September 30, 2007 was $9,718,029 and includes revenue from the RSW business as if it had been acquired on January 1, 2007 and excludes revenue classified as discontinued. The increase in revenue for the nine months ended September 30, 2008 versus the pro forma revenue for the nine months ended September 30, 2007 was primarily due to increased RSW contract services revenue.

Cost of Revenue

	Three Months Ended September 30,
	2008		2007
Cost of revenue
Professional services costs	$	3,412,094	$	2,138,006

Cost of revenue primarily consists of the costs of our professional engineers and technical consultants assigned to customer contracts and include their salaries, benefits, direct and indirect overhead costs and specific project direct costs of the contracts. Cost of revenue for the three months ended September 30, 2008 was $3,412,094 and excludes $52,031 of professional and customer support services costs from our Information Intellect legacy utility industry asset management software business classified as discontinued operations and $153,685 in RBS salaries, benefits, contractors, direct and indirect overhead cost associated with supporting the FEMA contract also classified as discontinued operations. The Company had $2,138,006 of cost of revenue for the three months ended September 30, 2007 after excluding $168,459 of professional and customer support services costs related to our Information Intellect legacy utility industry asset management software business classified as discontinued operations and $231,632 in RBS salaries, benefits, contractors, direct and indirect overhead cost associated with supporting the FEMA contract also classified as discontinued operations. The increase in cost of revenue is due to the acquisition of the RSW businesses on July 16, 2007 and higher revenues..

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	Nine Months Ended September 30,
	2008		2007
Cost of revenue
Professional services costs	$	8,730,763	$	2,140,006

Cost of revenue for the nine months ended September 30, 2008 was $8,703,763 and excludes $204,460 of professional and customer support services costs from our Information Intellect legacy utility industry asset management software business classified as discontinued operations$500,089 in RBS salaries, benefits, contractors, direct and indirect overhead cost associated with supporting the FEMA contract also classified as discontinued operations.. The Company had cost of revenue of $2,140,006 for the nine months ended September 30, 2007 after excluding $619,910 of professional and customer support services costs related to our Information Intellect legacy utility industry asset management software business classified as discontinued operations and $231,632 in RBS salaries, benefits, contractors, direct and indirect overhead cost associated with supporting the FEMA contract also classified as discontinued operations. The increase in cost of revenue is due to the acquisition of the RSW business on July 16, 2007.

We expect to see increases in cost of revenue in the future as we add new service contracts and offer new product offerings across all of our businesses. We expect that cost of revenue to vary with increases or decreases in contract services revenue.

Pro forma cost of revenue for the nine months ended September 30, 2007 was $6,774,010 and includes the cost of revenue from the RSW business as if it had been acquired on January 1, 2007 and excludes the cost of revenue classified as discontinued operations. The increase in the cost of revenue for the nine months ended September 30, 2008 versus the pro forma cost of revenue for the nine months ended September 30, 2007 was primarily due to an increase in RSW revenues and increase in the use of third party contractors in the RSW operations.

Gross Margin

	Three Months Ended September 30,
	2008			2007
Revenue	$	4,592,221		$	2,909,205
Cost of revenue	3,412,094			2,138,006
Gross margin	$	1,180,127		$	771,199
Gross margin %	26		%	27		%

	Nine Months Ended September30,
	2008			2007
Revenue	$	12,268,093		$	2,907,905
Cost of revenue	8,730,763			2,140,006
Gross margin	$	3,537,330		$	767,899
Gross margin %	29		%	26		%

We expect that gross margin to vary with increases or decreases in contract services revenue and the mix of commercial versus government contracts. We expect that services revenue from government contracts to have overall lower margins than the margins related to commercial contracts and therefore we expect that a change in the mix of government versus commercial contracts will change gross margins accordingly.

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Pro forma gross margin for the nine months ended September 30, 2007 was $2,944,019 or 30% and includes the gross margin derived from the revenue and cost of revenue generated from the RSW business as if it had been acquired on January 1, 2007 and excludes the revenue and cost of revenue classified as discontinued operations. The increase in the gross margin of $593,311 for the nine months ended September 30, 2008 versus the pro forma gross margin for the nine months ended September 30, 2007 was primarily due to increased revenues.

Selling, General and Administrative Expense

	Three Months Ended September 30,
	2008		2007
Selling, general and administrative expense	$	1,624,906	$	2,616,858

Selling, general and administrative expense (“SG&A”) includes the expenses of our sales, marketing and business development departments, as well as finance, human resources and internal information technology functions. SG&A was $1,624,906 for the three months ended September 30, 2008 excluding SG&A of $4,787 from our Information Intellect legacy utility industry asset management software business and $135,372 from our RBS business classified as discontinued operations. SG&A for the three months ended September 30, 2007 was $2,616,858 and excludes $535,174 of SG&A from our Information Intellect legacy utility industry asset management software business and $651,034 from our RBS business classified as discontinued operations. The decrease in SG&A for the three months ended September 30, 2008 versus the three months ended September 30, 2007 relates to the decrease in payroll and related costs associated with cost reductions actions taken by management at the corporate level and reductions taken at its Meter Mesh business

	Nine Months Ended September 30,
	2008		2007
Selling, general and administrative expense	$	6,046,203	$	5,565,323

SG&A was $6,046,203 for the nine months ended September 30, 2008 excluding SG&A of $16,346 of SG&A from our Information Intellect legacy utility industry asset management software business and $651,034 from our RBS business classified as discontinued operations. . SG&A for the nine months ended September 30, 2007 was $5,565,323 and excludes $1,436,092 of SG&A from our Information Intellect legacy utility industry asset management software business and $651,034 from our RBS business classified as discontinued operations. The increase in SG&A for the nine months ended September 30, 2008 versus the nine months ended September 30, 2007 relates to the SG&A from the businesses acquired and higher legal fees associated with legal defense costs and compliance expenses (filing fees, legal and accounting fees) with respect to becoming a public operating company in March 2007. These increases were partially offset by decreases in payroll and related costs associated with cost reductions actions taken by management at the corporate level and reductions taken at its ETG business.

Pro forma SG&A for the nine months ended September 30, 2007 was $6,479,363 and includes the SG&A incurred by the RSW business as if it had been acquired on January 1, 2007 and excludes the SG&A classified as discontinued operations. The decrease in SG&A of $433,160, or 7% for the nine months ended September 30, 2008 versus the pro forma SG&A for the nine months ended September 30, 2007 was primarily due to a reduction in acquisition related expenses and cost reduction actions taken at the ETG business and the corporate level.

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Product Development Expense

	Three Months Ended September 30,
	2008		2007
Product development expense	$	—	$	538,974

Product development expense for the three months ended September 30, 2008 was $0 versus $1,262,930 for the three months ended September 30, 2007. The elimination of product development expense is due to a reduction in the operations of the ETG business in its MeterMesh product line. In addition, approximately $28,523 of product development expense from our Information Intellect legacy utility industry asset management software business and $55,320 from our RBS business for the three months ended September 30, 2007 was classified as discontinued operations. We expect that due to the reduction in the ETG operations, product development expense will continue to be minimal in future periods.

	Nine Months Ended September 30,
	2008		2007
Product development expense	$	147,191	$	2,136,542

Product development expense for the nine months ended September, 2008 was $147,191 versus $2,136,542 for the nine months ended September 30, 2007. The reduction of product development expense is due to a reduction in the operations of the ETG business in its MeterMesh product line. In addition, approximately $330,035 of product development expense from our Information Intellect legacy utility industry asset management software business and $55,320 from our RBS business for the nine months ended September 30, 2007 was classified as discontinued operations. We expect that due to the reduction in the ETG operations, product development expense will continue to be minimal in future periods.

Depreciation and Amortization

	Three Months Ended September 30,
	2008		2007
Depreciation and amortization	$	27,547	$	42,930
Amortization of intangible assets	183,333		395,261
Total depreciation and amortization	$	210,880	$	438,191

Depreciation and amortization expense related to property and equipment decreased from $42,930 for the three months ended September 30, 2007 to $27,547 for the three months ended September 30, 2008. Depreciation and amortization expense excludes $26,995 from our RBS business for the three months ended September 30, 2008 classified as discontinued operations. Depreciation and amortization expense excludes $5,454 from our Information Intellect legacy utility industry asset management software business and $10,743 from our RBS business for the three months ended September 30, 2007 classified as discontinued operations.

Amortization expense associated with the fair value intangible assets acquired in business acquisitions was $183,333 for the three months ended September 30, 2008 versus $395,261 for the three months ended September 30, 2007. The amortization in the three months ended September 30, 2008 related to the amortization of intangible assets associated with the acquisition of RSW in 2007. The amortization in the three months ended September 30, 2007 included $242,483 of amortization related to the intangible assets associated with the ETG business that were deemed impaired and written off in 2007.

	Nine Months Ended September 30,
	2008		2007
Depreciation and amortization	$	154,632	$	54,134
Amortization of intangible assets	550,000		880,645
Total depreciation and amortization	$	704,632	$	934,779

Depreciation and amortization expense related to property and equipment increased from $54,134 for the nine months ended September 30, 2007 to $154,632 for the nine months ended September 30, 2008. Depreciation and amortization expense excludes $80,986 from our RBS business for the nine months ended September 30, 2008 classified as discontinued operations. Depreciation and amortization expense excludes $16,361 from our Information Intellect legacy utility industry asset management software business and $10,742 from our RBS business for the nine months ended September 30, 2007 classified as discontinued operations.

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Amortization expense associated with the fair value intangible assets acquired in business acquisitions was $550,000 for the nine months ended September 30, 2008 versus $880,645 for the nine months ended September 30, 2007. The amortization in the nine months ended September 30, 2008 related to the amortization of intangible assets associated with the acquisition of RSW in 2007. The amortization in the nine months ended September 30, 2007 included $727,867 of amortization related to the intangible assets associated with the ETG business that were deemed impaired and written off in 2007.

Interest Expense

	Three Months Ended September 30,
	2008		2007
Interest on notes payable	$	306,539	$	312,485
Amortization of original issue discount of Senior Notes	305,506		346,278
Total interest expense	$	612,045	$	658,763

Interest expense decreased from $658,763 for the three months ended September 30, 2007 to $612,045 for the three months ended September 30, 2008. The decrease of $46,718 was related to the decrease in the prime lending rate.

	Nine Months Ended September 30,
	2008		2007
Interest on notes payable	$	892,597	$	369,641
Fair value of warrants issued with note payable	440,846		—
Amortization of original issue discount of Senior Notes	916,518		346,278
Other	15,577		—
Total interest expense	$	2,265,538	$	715,919

Interest expense increased from $715,919 for the nine months ended September 30, 2007 to $2,265,538 for the nine months ended September 30, 2008. The increase of $1,549,619 was related to higher levels of average balances of debt outstanding during the nine months ended September 30, 2008 versus the nine months ended September 30, 2007 and 1,574,444 warrants issued in April 2008 to the Senior Notes holders.

Registration Rights Penalty

The Company recognized a penalty of $826,970 for the three months ended September 30, 2008 and $2,174,148 for the nine months ended September 30, 2008 for the failure to meet the requirements of the Registration Rights Agreements. See Liquidity and Capital Resources for a discussion of the Waiver Agreement that we entered into in April 2008.

Provision for Income Taxes

The Company did not recognize a provision for income taxes for the three months ended September 30, 2008 and 2007.

The Company recognized a provision for income taxes of $23,179 for state income taxes associated with RSW and $2,184 within discontinued operations for the nine months ended September 30, 2008. No tax provision was required to be recorded for the nine months ended September 30, 2007.

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Preferred Stock Dividends

	Three Months Ended September 30,				Nine Months Ended September 30,
	2008		2007		2008		2007
Dividends on Series A Shares	$	60,480	$	56,000	$	179,343	$	129,797
Dividends on Series B Shares,	40,500		11,250		121,500		11,250
Accretion of prepaid dividends	9,917		8,264		29,750		8,264
Total preferred stock dividends	$	110,897	$	75,514	$	330,593	$	149,311

We accrue dividends on the shares of our Series A Shares and the Series B Shares outstanding with a charge to additional paid in capital. The dividends are presented as a reduction to net income or an increase to net loss to arrive at net income (loss) to common shareholders in the Consolidated Statements of Operations. Preferred stock dividends were $110,898 and $75,514 for the three months ended and $330,595 and $149,311 for nine months ended September 30, 2008 and 2007, respectively.

Due to the restrictions of the Senior Notes, we are prevented from paying the dividends in cash. Dividends on the Series A Shares are payable in additional Series A Shares. For the three months ended September 30, 2008, we recorded $60,480 for the issuance of 60,480 Series A Shares as dividends and for the three months ended September 30, 2007, we recorded $56,000 for the issuance of 56,000 Series A Shares as dividends. The increase in the amount is due to the cumulative effect of the Series A Shares. For the nine months ended September 30, 2008, we recorded $179,343 for the issuance of 179,343 Series A Shares as dividends and for the nine months ended September 30, 2007, we recorded $129,797 for the issuance of 129,797 Series A Shares as dividends. The Series A Shares were first issued on March 2, 2007, therefore the increase in the amount is primarily related to the greater number of months outstanding during the nine months ended September 30, 2008 versus the nine months ended September 30, 2007.

Due to the restrictions of the Senior Notes, in lieu of cash dividends on the Series B Shares we may issue shares of Common Stock to the holders of the Series B Shares. During the three months ended September 30, 2008 we accrued the fair value of $40,500 for the issuance of 643,618 shares of Common Stock as dividends to holders of the Series B Shares. For the nine months ended September 30, 2008 we accrued the fair value of $121,500 for the issuance of 958,716 shares of Common Stock as dividends to holders of the Series B Shares. The Series B Shares were first issued in July 2007, $11,250 was accrued for dividends on the Series B Shares were recorded for the three and nine months ended September 30, 2007. In addition, pursuant to the terms of the Series B Shares, in July 2007 we issued 972,000 shares of Common Stock as prepaid dividends to the holders of the Series B Shares. The fair value of these prepaid dividends of approximately $119,000 is being accreted ratably over the thirty-six month term of the Series B Shares of which $9,917 and $8,264 was recognized for the three months ended September 30, 2008 and 2007, respectively and $29,750 and $8,264 for the nine months ended September 30, 2008 and 2007, respectively.

Cash Flows Used In Operating Activities

At September 30, 2008, we had cash and cash equivalents of approximately $1,068,000, negative working capital of approximately $14.9 million and stockholders’ deficit of approximately $15 million. Cash and cash equivalents during the first nine months of 2008 increased approximately $331,000. During the nine months ended September 30, 2008, cash used in operating activities was approximately $112,000 representing a net loss of approximately $6.8 million. This loss was partially offset by non-cash charges of approximately $786,000 for depreciation and amortization, an impairment charge of approximately $90,000 relating to the write-off of the RBS assets, approximately $724,000 related to stock based compensation expenses, approximately $441,000 for Common Stock warrants issued on notes payable as interest, approximately $917,000 in non-cash interest expense associated with the amortization of discount on the Senior Notes, approximately $8,000 relating to a provision for returns, allowances and bad debts and an increase to cash associated with approximately $3.7 million change in net operating assets and liabilities.

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During the nine months ended September 30, 2007, cash used in operating activities was approximately $4.2 million representing a net loss of approximately $13 million which included a gain of the sale of Information Intellect’s intellectual property. This net loss was partially offset by non-cash charges of approximately $935,000 for depreciation and amortization, impairment charges of approximately $4.3 million, approximately $443,000 related to stock based compensation expenses and payment of expenses with common stock, approximately $346,000 in non-cash interest expense associated with the amortization of discount on the Senior Notes, approximately $58,000 relating to a provision for returns, allowances and bad debts and an increase to cash associated with approximately $3.7 million change in net operating assets and liabilities.

Cash Flows Used In Investing Activities

Cash flows used in investing activities was approximately $165,000 during the nine months ended September 30, 2008. Approximately $37,000 was expended to acquire property and equipment and $128,000 was an additional recognition of goodwill associated with the acquisition of RSW for retention bonuses earned by certain RSW key employees. Cash flows used in investing activities in the first nine months of 2007 of approximately $5.9 million includes approximately $96,000 of purchases of property and equipment, approximately $400,000 to acquire the Riptide public shell in the March 2, 2007 merger transaction, approximately $4.7 million to acquire RSW and approximately $1.8 million to acquire RBS. A fee of $1 million was obtained from the sale of Information Intellect’s intellectual property in August of 2007.

Cash Flows From Financing Activities

Cash flows from financing activities during the first nine months of 2008 were approximately $607,000. Proceeds from the pending issuance of preferred stock for the Related Party were $565,000 and net proceeds from short term notes payable were $50,000. Approximately $7,000 of payments was made on capital leases.

Cash flows from financing activities during the nine months ended September 30, 2007 were approximately $11.3 million. The Company received approximately $2.6 million net of cash transaction costs from the issuance of 2,800,000 of the Company’s Series A Shares, approximately $3.1 million net of cash transaction costs from the issuance of 3,600,000 of the Company’s Series B Shares, approximately $5.9 million for the issuance of senior notes payable net of transaction costs and the notes’ discount, approximately $74,000 from the conversion of warrants into common shares and $100,000 from short term borrowings. In addition, the Company repaid approximately $525,000 of notes payable and $8,000 of capital leases.

Liquidity and Capital Resources

We have received a report from our independent registered public accounting firm for the year ended December 31, 2007 containing an explanatory paragraph that describes the uncertainty regarding our ability to continue as a going concern. At September 30, 2008, we had cash and cash equivalents of approximately $1,068,000, negative working capital of approximately $14.9 million, a stockholders’ deficit of approximately $15 million and total liabilities exceeded total assets. We have experienced recurring operating losses for the three and nine months ended September 30, 2008 and 2007 and for the years ended December 31, 2007 and 2006. In addition, at September 30, 2008, we are in technical default of our senior debt agreements and the subsequent waiver agreement.

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Historically, we have had access to sources of additional funds including cash proceeds of $2.8 million, before transaction costs, received from an equity offering in March 2007 and approximately $10 million of cash proceeds, before transaction costs, raised in July 2007 from a debt and equity offering to fund the acquisitions of RSW and RBS. As a growing technology business with a strategy of growth by acquisition, we continue to require new investment from existing and new sources of capital. At March 31, 2008, we had commitments to acquire CRI Advantage, Inc. (“CRI”) and WOW Global Corporation, LLC (“WOW”) pending the raising of up to approximately $9 million in funds to finance the acquisitions. As of April 25, 2008, we terminated our acquisition plan and the agreement to acquire WOW thereby reducing the expected funds required to be raised to approximately $4 million to acquire CRI.

In April 2008, we received a commitment from the Related Party to fund the Company with up to $15 million of cash for the payment of debts, to finance the acquisitions and for working capital purposes. Approximately $365,000 of liabilities were settled in the second quarter of 2008 with funds provided by the Related Party. In addition, the Related Party provided the Company with $200,000 for operations. In October 2008, the Related Party paid the Senior Note holders $750,000 on the behalf of the Company and paid $250,000 of the Company’s accounts payable.

As of April 18, 2008, we entered into a Waiver Agreement (the “Agreement”) with the holders of the senior debt. The Agreement calls for the repayment of approximately $7.2 million face value of the notes payable plus interest payable of approximately $1.3 million in several installments to be fully paid on or before June 30, 2008 plus the issuance of warrants to the holders of the senior debt to acquire 1,574,444 shares of Common Stock at an exercise price of $0.01 per share. These warrants had a fair value of $391,318 which was recorded as interest expense in the second quarter of 2008. Upon final payment the Company expects that the senior debt and the covenant defaults under the senior debt agreements will be fully satisfied and released. The Company expects that the cash to make the payments under this agreement will come from the cash proceeds received from the future issuance of Series C Shares to the Related Party and/or other investors, however no assurances can be made that we will raise the cash necessary to make these payments or that the defaults will be waived as expected. On July 31, 2008, the Company’s CEO met with the Senior Notes holders and they requested that the Company pay the Senior Notes holders $2 million on or before August 15, 2008. The Company was not able to make this payment. In October 2008, the Related Party paid the Senior Note holders $750,000 on the behalf of the Company.

Funds from the Related Party financing and other investor financings as well as cash flows from operations are expected to provide sufficient cash balances to fund operations and to execute our growth strategy of acquiring technology businesses. However no assurances can be made that we will receive the funds from the Related Party $15 million commitment or that we will continue to have access to capital in the future or on terms or at rates acceptable to us.

Contractual Obligations

A summary of the Company’s contractual obligations at September 30, 2008 is as follows:

Contractual Obligations	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years

Notes Payable (1)	$	12,935,147	$	7,372,222	$	5,562,925	$	—	$	—

Capital lease obligations	31,439		9,463		21,792		184		—

Operating lease obligations (2)	1,471,501		417,205		721,932		332,364		—

Purchase obligations	—		—		—		—		—

Other long-term liabilities reflected on the Registrant’s balance sheet under GAAP:
Preferred stock dividends (3)	378,620		378,620		—		—		—
Totals	$	14,816,707	$	8,177,510	$	6,306,649	$	332,548	$	—

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(1) The face value of the Senior Notes is included in the Note Payable balance.

(2) The operating leases are for office space in Florida, and Texas and for computer equipment. The operating lease commitments for the office spaces reflect contractual and reasonably assured rent escalations under the lease arrangements.

(3) The preferred dividends are contractually obligated to be paid in cash or shares of common stock of the Company under the Series B Preferred Stock Purchase Agreement or shares of Series A Preferred Stock under the Series A Preferred Stock Purchase Agreement and are subject to the payment restrictions of the Senior Notes.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Sensitivity

The interest rate on our Senior Notes is prime rate plus 4 percentage points and therefore varies with changes in the prime rate. During the nine months ended September 30, 2008, the changes in the prime rates were

January 1, 2008	7.25	%
January 22, 2008	6.50	%
January 30, 2008	6.00	%
March 18, 2008	5.25	%
April 30, 2008	5.00	%

Item 4T. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2008, the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our chief executive officer and our chief financial officer, of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) of the Exchange Act). Based on the evaluation, it was concluded that our disclosure controls and procedures need improvement and were not adequately effective as of September 30, 2008. As a result, additional deductive procedures, primarily financial statement and account analysis, were performed by the Company’s controller and the Company’s accounting personnel, to assure that the preparation of the financial statements including the balance sheet, the results of operations, the statement of cash flow, and the statement of stockholders’ (deficit) equity and the notes thereto were presented in accordance with GAAP and the reporting requirements of the SEC. No new material weaknesses were identified beyond those reported in the Registrant’s Annual Report on Form 10-KSB. In addition, the material weaknesses, reported in the Registrant’s Annual Report on Form 10-KSB are being addressed and remediation actions are being developed.

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Changes in internal controls.

We established a Disclosure Review Committee that includes the CEO, the controller, two senior managers from RSW and RBS, and our outside legal counsel to review SEC filings prior to release. There were no other changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Plaintiff requests a judgment for $1,638 plus an $80 filing fee for allegedly unpaid rent from October 1 – 23, 2007. This complaint has since been amended by the Plaintiff and the Plaintiff is now requesting a judgment of $7,500 plus fees and expenses.

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Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. The following risk factors and all of the other information in this Quarterly Report on Form 10-Q should be carefully considered and read in conjunction with our Annual Report on Form 10-KSB filed April 15, 2008. The risks and uncertainties described below are not the only ones that Riptide will face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. Actual results may differ materially from those anticipated in these forward-looking statements. Riptide operates in a market environment that is difficult to predict and that involves significant risks and uncertainties, many of which will be beyond our control.

If any of the following risks and uncertainties develops into actual events, the business, financial condition or results of operations of the combined company could be materially adversely affected. If that happens, the trading prices of our shares of common stock could decline significantly and could result in a complete loss of your investment. The actual results of the combined company may differ materially from those anticipated in these forward-looking statements. The risk factors below contain forward-looking statements. See the cautionary statement regarding Forward-Looking Statements above.

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WE HAVE RECEIVED A GOING CONCERN REPORT FROM OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, HAVE A HISTORY OF NET LOSSES AND WILL NEED ADDITIONAL FINANCING TO CONTINUE AS A GOING CONCERN.

We have received a report from our independent registered public accounting firm for the year ended December 31, 2007 containing an explanatory paragraph that describes the uncertainty regarding our ability to continue as a going concern. At September 30, 2008, we had cash and cash equivalents of approximately $1,068,000, negative working capital of approximately $15.6 million, a stockholders’ deficit of approximately $15.7 million and total liabilities exceeded total assets. We have experienced recurring operating losses for the three and nine months ended September 30, 2008 and 2007 and for the years ended December 31, 2007 and 2006. In addition, at September 30, 2008, we are in technical default of our senior debt agreements and the subsequent waiver agreement.

As of April 18, 2008, we entered into a Waiver Agreement (the “Agreement”) with the holders of the Senior Notes. The Agreement calls for the repayment of approximately $7.2 million face value of the notes payable plus interest payable of approximately $1.3 million in several installments to be fully paid on or before June 30, 2008 plus the issuance of warrants to the holders of the Senior Notes to acquire 1,574,444 shares of Common Stock at an exercise price of $0.01 per share. These warrants had a fair value of $391,318 which was recorded as interest expense in the second quarter of 2008. Upon final payment the Company expects that the senior debt and the covenant defaults under the senior debt agreements will be fully satisfied and released. The Company expects that the cash to make the payments under this agreement will come from the cash proceeds received from the future issuance of Series C Shares to the Related Party and/or other investors, however no assurances can be made that we will raise the cash necessary to make these payments or that the defaults will be waived as expected. On July 31, 2008, the Company’s CEO met with the Senior Notes holders and they requested that the Company pay the Senior Notes holders $2 million on or before August 15, 2008. The Company was not able to make this payment. In October 2008, the Related Party paid the Senior Note holders $750,000 on the behalf of the Company.

Funds from the Related Party financing and other investor financings as well as cash flows from operations are expected to provide sufficient cash balances to fund operations and to execute our growth strategy of acquiring technology businesses. However no assurances can be made that we will receive the funds from the Related Party commitment or that we will continue to have access to capital in the future or on terms or at rates acceptable to us.

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WE ARE EXECUTING AN ACQUISITION GROWTH STRATEGY AND CANNOT ASSURE YOU THAT THIS WILL BE SUCCESSFUL RESULTING IN OUR FAILURE TO MEET GROWTH AND REVENUE EXPECTATIONS.

We expect to grow our company through the acquisition of profitable private companies doing business in the business software and services industry. We intend to pursue opportunities to acquire businesses within our industry that are complementary or related to current product lines or in businesses that are similarly structured. We may not be able to locate suitable acquisition candidates at prices that we consider appropriate or to finance acquisitions on terms that are satisfactory to us. If we do identify an appropriate acquisition candidate, we may not be able to negotiate successfully the terms of an acquisition, or, if the acquisition occurs, integrate the acquired business into our existing business.

Acquisitions of businesses or other material operations may require debt financing or additional equity financing, resulting in leverage or dilution of ownership. Integration of acquired business operations could disrupt our business by diverting management away from day-to-day operations. The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. We also may not be able to maintain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits we anticipated when selecting our acquisition candidates. In addition, we may need to record write-downs from future impairments of intangible assets, which could reduce our future reported earnings. At times, acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition. In addition, expectations of cash flows at the date of acquisition could be significantly different once the acquired business is integrated into our existing operating structure. If there is an adverse change in expected cash flows we may experience an impairment charge to our results of operations as we did in the year ended December 31, 2007 (See Annual Report on Form 10-KSB for the year ended December 31, 2007 filed with the SEC on April 15, 2008). There can be no assurance that any given proposed acquisition will be able to successfully obtain governmental approvals which are necessary to consummate such acquisitions, to the extent required. If our acquisition strategy is unsuccessful, we will not grow our operations and revenues at the rate that we anticipate.

WE CANNOT ASSURE YOU THAT OUR ORGANIC GROWTH STRATEGY WILL BE SUCCESSFUL WHICH MAY RESULT IN A NEGATIVE IMPACT ON OUR GROWTH, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND CASH FLOW.

We expect that the companies that we have acquired or may acquire in the future will continue to grow organically. One of our strategies is to grow organically through increasing the distribution and sales of our products and services to commercial and public sector customers within the United States. Our primary targeted customers are federal, state and local government agencies, as well as commercial customers in the hospitality industry. We expect to target additional markets in the future. Sales cycles are impacted by many factors including the customer’s needs for our services, budget constraints, capital availability and industry or general economic conditions. Long sales cycles allow competitors that could have greater capital resources available to them to penetrate our targeted markets and limit our ability to grow revenue as planned. In addition, the companies we have acquired and expect to acquire have been small entrepreneur driven companies that following combination may not achieve the synergies of a larger company that positively impact organic growth. Factors such as brand awareness, market acceptance of the company’s offerings and effective sales distribution channels may not exist for the combined companies and therefore limit organic growth potential. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products and services in any additional markets. Our inability to implement this organic growth strategy successfully may have a negative impact on our growth, future financial condition, results of operations or cash flows.

IF WE ARE NOT ABLE TO IMPLEMENT OUR STRATEGIES IN ACHIEVING OUR BUSINESS OBJECTIVES, OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE MAY BE ADVERSELY AFFECTED.

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Our business plan is based on circumstances currently prevailing and the basis and assumptions that certain circumstances will or will not occur, as well as the inherent risks and uncertainties involved in various stages of development, including our transition to a business process management company through a strategy of acquiring companies, products and or lines of business in the business process management space. However, there is no assurance that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful achievement of our objectives. If we are not able to successfully implement our strategies, our business operations and financial performance may be adversely affected.

IF WE NEED ADDITIONAL CAPITAL TO FUND ACQUISITIONS AND OUR OPERATIONS, WE MAY NOT BE ABLE TO OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR OPERATIONS.

In connection with our growth strategies, we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products and services by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures, including acquisitions. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

If we cannot obtain additional funding, we may be required to: (i) limit our investments in research and development; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital expenditures. Such reductions could materially adversely affect our business and our ability to compete.

Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing stockholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

THE COMPANY HAS A LIMITED OPERATING HISTORY AS A PUBLIC COMPANY THAT MAKES IT IMPOSSIBLE TO RELIABLY PREDICT FUTURE GROWTH AND OPERATING RESULTS.

The merger between Riptide (formerly Shea Development Corp.) and Information Intellect occurred on March 2, 2007 (the “Merger”). In addition, the acquisitions of RSW and RBS have only recently occurred. All of these companies had been private companies and their management is new to the requirements of a public company including but not limited to financial reporting, compliance with the Sarbanes-Oxley Act of 2002, insider trading rules and other securities laws. Following the Merger and the acquisitions of RSW and RBS, the management team of Riptide became responsible for the operations of and the reporting of the combined company. The requirements of operating the newly combined company in a public environment are new to this management team and the employees as a whole. The transformation of the individual private enterprises into a public company requires us to obtain outside assistance from legal, accounting, investor relations, or other professionals that could be more costly than planned. We may also be required to hire additional staff to comply with additional SEC reporting requirements and compliance under the Sarbanes-Oxley Act of 2002 not previously required of Information Intellect, RSW or RBS as private companies prior to their acquisitions and merger. Our failure to comply with reporting requirements and other provisions of securities laws could negatively affect our stock price and adversely affect our results of operations, cash flow and financial condition.

Operating as a small public company also requires us to make projections about future operating results and to provide forecast guidance to the public markets. We have limited experience as a management team in the combined company with dealing with the public markets and as a result our projections may not be made timely or established at expected performance levels and could materially affect the price of our stock. Any failure to meet published projections that adversely affect our stock price could result in losses to investors, stockholder lawsuits or other litigation, sanctions or restrictions issued by the SEC or the stock market upon which the combined company’s stock is traded.

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WE ARE EXPOSED TO RISKS FROM LEGISLATION REQUIRING COMPANIES TO EVALUATE INTERNAL CONTROL OVER FINANCIAL REPORTING.

Section 404 of the Sarbanes-Oxley Act of 2002 requires our management to perform an assessment of, and provide a report on, the effectiveness on our internal control over financial reporting for the year ended December 31, 2007. In addition, for the year ending December 31, 2009, our independent registered public accounting firm will be required to audit management’s assertions as to the effectiveness of internal control over financial reporting. In order to comply with this requirement, we must establish an ongoing program to perform the system and process assessment and the testing necessary to provide the assessments and to report on the effectiveness of our internal control over financial reporting. We have only just begun to establish an ongoing program and process of performing the assessment and we expect that the cost of this program will require us to incur significant expenses and to devote additional time and resources to Section 404 compliance on an ongoing basis. As a result of our review of the effectiveness of internal controls over financial reporting at December 31, 2007 we determined that our controls were ineffective and identified eleven material weaknesses that must be remediated. Due to a lack of cash, staffing resources, adequate time and the related cost of implementing the remediations, we may not be able to remediate all of the identified material weaknesses. We may also identify additional weaknesses for remediation. We cannot predict how investors and regulators will react to any inability to remediate all of the material weaknesses or what effect that this might have on our stock price.

We are a newly formed public company and recently acquired several private companies that must be combined and integrated under a system of internal control sufficient to provide effective financial reporting. In addition, we have a strategy of growing the company through the acquisition of small privately held companies. Our strategy of growing the company through acquisitions poses additional risks as we may not be successful in integrating our processes, policies and procedures in the new companies that we acquire. To facilitate the section 404 internal control requirements over financial reporting the Company is implementing new accounting, forecasting and payroll systems to integrate the companies. Until these systems have been fully deployed and implemented and the internal control processes fully documented and defined, it may be difficult to assess the effectiveness of internal controls over financial reporting. It is difficult for us to predict how long it will take to complete the assessment of the effectiveness of our internal control over financial reporting for each fiscal year. In addition, we cannot determine the time or the cost necessary to remediate any deficiencies in our internal control over financial reporting. As a result, we may not be able to complete the assessment and remediation process on a timely basis. In the event that our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firm determine that our internal control over financial reporting is not effective as defined under Section 404, we cannot predict how regulators will react or how the market prices of our shares will be affected.

WE CANNOT BE CERTAIN THAT OUR INTERNAL CONTROL OVER FINANCIAL REPORTING WILL BE EFFECTIVE OR SUFFICIENT IN THE FUTURE.

Our ability to manage our operations and growth requires us to maintain effective operations, compliance and management controls, as well as our internal control over financial reporting. We may not be able to implement necessary improvements to our internal control over financial reporting in an efficient and timely manner and may discover deficiencies and weaknesses in existing systems and controls, especially when such systems and controls are tested by an increasing rate of growth or the impact of acquisitions. In addition, upgrades or enhancements to our computer systems could cause internal control weaknesses. It may be difficult to design and implement effective internal control over financial reporting for combined operations as we integrate acquired businesses in the future. In addition, differences in existing controls of acquired businesses may result in weaknesses that require remediation when internal controls over financial reporting are combined.

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If we fail to maintain an effective system of internal control or if management or our independent registered public accounting firm were to discover material weaknesses in our internal control systems we may be unable to produce reliable financial reports or prevent fraud. If we are unable to assert that our internal control over financial reporting is effective at any time in the future, or if our independent registered public accounting firm is unable to attest to the effectiveness of our internal controls, is unable to deliver a report at all or can deliver only a qualified report, we could be subject to regulatory enforcement and may lose investor confidence in our ability to operate in compliance with existing internal control rules and regulations, either of which could result in a decline in our stock price.

GENERAL ECONOMIC CONDITIONS MAY ADVERSELY AFFECT OUR GROWTH AND OUR ABILTY TO RAISE CAPITAL FOR ACQUISITIONS.

The current economic and capital market conditions in the United States indicate that the U.S. economy may have moved into a recession and the stock market volatility since January 1, 2008 has depressed stock prices and severely reduced capital availability. A downturn in the economy could delay projects and limit budgets for our services in both the commercial and government markets reducing future growth in revenue and could potentially have a negative effect on our future results of operations. In addition, a limited availability of debt or equity capital or capital raised at prices unacceptable to the company could limit our ability to grow the company through acquisitions or limit our ability to raise funds for working capital purposes.

WE FACE COMPETITIVE PRESSURES FROM A VARIETY OF COMPANIES IN THE MARKETS WE SERVE.

We are a small company in a highly competitive market. Some of our present and potential competitors have, or may have, substantially greater financial, marketing, technical or manufacturing resources, and in some cases, greater name recognition and experience than we have. Some competitors may enter markets we serve and provide services at lower prices than us in order to obtain market share. Our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the development, promotion and sale of their products and services than we can. Current and potential competitors may make strategic acquisitions or establish cooperative relationships among themselves or with third parties that enhance their ability to address the needs of our prospective customers. It is possible that new competitors or alliances among current and new competitors may emerge and rapidly gain significant market share. Other companies may also provide services that are equal or superior to our services, which could reduce our market share, reduce our overall revenue and require us to invest additional funds in new technology development. If we cannot compete successfully against current or future competitors, this will have a material adverse effect on our business, financial condition, results of operations and cash flow.

A SIGNIFICANT SOURCE OF OUR REVENUE IS DERIVED FROM A SMALL NUMBER OF CUSTOMERS, THE LOSS OF WHICH COULD NEGATIVELY AFFECT OUR BUSINESS OPERATIONS, FUTURE REVENUE, CASH FLOW AND RESULTS OF OPERATIONS.

For the year ended December 31, 2007, we derived approximately 37% of our revenues from commercial customers and 63% from federal, state and local government agencies. Contracts with the US Army represents approximately 33% of our total 2007 revenue, contracts with Marriott Vacation International provided approximately 32% of our total 2007 revenue and a contract with the Federal Emergency Management Agency (“FEMA”) provided approximately 10% of our total revenue. Revenue derived from the FEMA contract is now classified as discontinued operations. The United States Army accounted for 66% and 56%, Marriott Vacation Club International accounted for 18% and 28% and two other customers accounted for 7% and 8% of total revenues for the three and nine months ended September 30, 2008, respectively. All other customers accounted for less than 5% of revenue on an individual basis for the three and nine months ended September 30, 2008. The United States Army accounted for 38%, Marriott Vacation Club International accounted for 35%, Lockheed Martin accounted for 12% and no customer accounted for greater than 5% of total revenue for the three and nine months September 30, 2007. Overall, the U.S. government related revenues accounted for 73% and 66% of the Company’s total revenues for the three and nine months ended September 30, 2008, respectively. This concentration makes the Company vulnerable to a near-term negative impact, should the relationships be terminated or become uncollectible.

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Our relationship with these significant customers is excellent but the loss of any one, or all of these customers could have a material adverse effect on our business operations and future results of operations. The loss of any of these customers would require us to reduce employees assigned to these contracts and would reduce our future revenue projections and cash flow from operations.

WE DEPEND ON CONTRACT EXTENSIONS AND NEW CONTRACTS FROM EXISTING CUSTOMERS

Because of the type of applications that we build, e.g. training environments, hospitality management systems, model simulators, etc., we expect that our existing customers will extend current contracts or enter into new contracts to use our services for application support and the development of new features and functionality to their existing applications. In addition, the volume of contract work performed for existing customers is likely to vary from year to year, and a significant customer in one year may not use our services in a subsequent year. A decline in the recurring revenue from contract extensions or new contracts from existing customers could reduce future revenue, cash flow and could have a material adverse effect on future results of operations.

OUR FINANCIAL FORECASTS MAY NOT BE ACHIEVED, INCLUDING DUE TO THE UNPREDICTABILITY OF CUSTOMER BUYING PATTERNS, WHICH COULD MAKE OUR STOCK PRICE MORE VOLATILE.

Revenue in any year or quarter is dependent, in significant part, on contracts entered into or services delivered in that period. . Customer contracting patterns are dependent upon their need for our services, budget availability and resource capacity of customer project management teams. As a result of these factors the volume of the service delivery may be highly variable and forecasts may not be achieved, either because expected delivery schedules are delayed or do not occur or because they occur at lower prices or on terms that are less favorable to us.

In addition, fluctuations may be caused by a number of other factors, including:

· the timing and volume of customer contracts and customer delivery schedules;

· a change in our revenue mix of types of services and a resulting change in the gross margins;

· the timing and amount of our expenses;

· the introduction of competitive products or services by existing or new competitors;

· reduced demand for any given application or service;

· quarterly seasonality of customer buying patterns due to budget cycles, holidays and vacation patterns; available customer project resources; and

· the market’s transition to new technologies.

Due to these factors, forecasts may not be achieved, either because expected revenues do not occur or because they occur at lower prices, at later times, or on terms that are less favorable to us. In addition, these factors increase the chances that our results could diverge from the expectations of investors and analysts. If so, the market price of our stock would likely decrease and may result in stockholder lawsuits.

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WE FACE RISKS ASSOCIATED WITH GOVERNMENTAL CONTRACTING.

For the year ended December 31, 2007, approximately 63% our revenue was derived from customers in federal, state and local government agencies and 66% for the nine months ended September 30, 2008. These public sector customers are subject to budget cycles often dictated by politics, law or regulation. Government agencies present us with processes that are unique to these organizations including procurement, budgetary constraints and cycles, contract modifications, termination for convenience clauses and government audits.

Contracting with public sector customers is highly competitive and can be expensive and time-consuming, often requiring that we incur significant upfront time and expense without any assurance that we will win a contract. In addition, contract awards may only be let to large prime contractors where we then must compete for a portion of the contract award as a subcontractor, or conversely the contract awards may only be available to Small Business Administration certified companies where we do not compete. Public sector customers may also change the way they procure new contracts and may adopt new rules or regulations governing contract procurement, including required competitive bidding or use of “open source” products, where available. Demand and payment for our products and services are impacted by public sector budgetary cycles and funding availability, with funding reductions or delays adversely impacting public sector demand for our products and services.

Public sector customers often have contractual or other legal rights to terminate current contracts for convenience or due to a default. If a contract is cancelled for convenience, which can occur if the customer’s product needs change, we may only be able to collect for products and services delivered prior to termination. If a contract is cancelled because of default, we may only be able to collect for products and services delivered, and we may be forced to pay any costs incurred by the customer for procuring alternative products and services.

Government agencies routinely investigate and audit government contractors’ administrative processes. They may audit our performance and pricing and review our compliance with applicable rules and regulations. If they find that we have improperly allocated costs, they may require us to refund those costs or may refuse to pay us for outstanding balances related to the improper allocation. An unfavorable audit could result in a reduction of revenue, and may result in civil or criminal liability if the audit uncovers improper or illegal activities.

WE MAY FACE LIABILITY ASSOCIATED WITH THE USE OF PRODUCTS FOR WHICH PATENT OWNERSHIP OR OTHER INTELLECTUAL PROPERTY RIGHTS ARE CLAIMED.

We may be subject to claims or inquiries regarding alleged unauthorized use of a third party’s intellectual property. An adverse outcome in any intellectual property litigation could subject us to significant liabilities to third parties, require us to license technology or other intellectual property rights from others, require us to comply with injunctions to cease marketing or using certain products or brands, or require us to redesign, re-engineer, or re-brand our products or packaging, any of which could adversely affect our business, financial condition and results of operations. If we are required to seek licenses under patents or other intellectual property rights of others, we may not be able to acquire these licenses on acceptable terms, if at all. In addition, the cost of responding to an intellectual property infringement claim is expensive, in terms of legal fees, expenses and the diversion of management resources, whether or not the claim is valid, and therefore could have a material adverse effect on our business, financial condition and results of operations.

If our products infringe the intellectual property rights of others, we may be required to indemnify our customers for any damages they suffer. We generally indemnify our customers with respect to infringement by our products of the proprietary rights of third parties. Third parties may assert infringement claims against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products.

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WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY.

While we believe that our patent pending technologies and other intellectual property have value, it is uncertain that our intellectual property, or any intellectual property acquired or developed by us in the future, will provide meaningful competitive advantages. There can be no assurance that our pending applications will be approved, not be challenged, invalidated or circumvented by competitors or that rights granted thereunder will provide meaningful proprietary protection. Moreover, competitors may infringe our patents or successfully avoid them through design innovation. To combat infringement or unauthorized use, we may need to commence litigation, which can be expensive, time-consuming and divert management attention from successfully operating the business. In addition, in an infringement proceeding a court may decide that a patent or other intellectual property right of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology or other intellectual property right at issue on the grounds that it is non-infringing. Policing unauthorized use of our intellectual property is difficult and expensive, and we cannot provide assurance that we will be able to, or have the resources to, prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as do the laws of the United States.

OUR CUSTOM SOFTWARE DEVELOPED UNDER CUSTOMER CONTRACTS MAY HAVE DEFECTS AND ERRORS THAT COULD LEAD TO A LOSS OF REVENUES OR PRODUCT LIABILITY CLAIMS.

Our custom software programming services use complex development technologies and may contain defects or errors, especially when first introduced or when new versions or enhancements are released. Despite quality control testing, we may not detect errors in our new products or product enhancements until after we have commenced commercial shipments. If defects and errors are discovered after commercial release of either new versions or enhancements of our products:

· potential customers may delay purchases;

· customers may react negatively, which could reduce future sales;

· our reputation in the marketplace may be damaged;

· we may have to defend product liability claims;

· we may be required to indemnify our customers, distributors, original equipment manufacturers or others;

· we may incur additional service and warranty costs; and

· we may have to divert additional development resources to correct the defects and errors, which may result in the delay of new product releases or upgrades.

If any or all of the foregoing occur, we may lose revenues, incur higher operating expenses and lose market share, any of which could severely harm our financial condition and operating results.

WE ARE SUBJECT TO REGULATORY COMPLIANCE.

We are subject to various governmental regulations including those related to occupational safety and health, labor and wage practices and regulations regarding the performance of certain engineering services. Failure to comply with current or future regulations could result in the imposition of substantial fines, suspension of production, alteration of our production processes, cessation of operations or other actions, which could materially and adversely affect our business, financial condition and results of operations.

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WE MAY INCUR LIABILITIES ARISING FROM THE USE OF HAZARDOUS MATERIALS.

Our business and our facilities are subject to a number of federal, state and local laws, regulations and ordinances governing, among other things, the storage, discharge, handling, emission, generation, manufacture, disposal, remediation of, or exposure to toxic or other hazardous substances and certain waste products. Many of these environmental laws and regulations subject current or previous owners or operators of land to liability for the costs of investigation, removal or remediation of hazardous materials. In addition, these laws and regulations typically impose liability regardless of whether the owner or operator knew of, or were responsible for, the presence of any hazardous materials and regardless of whether the actions that led to the presence were conducted in compliance with the law. In the ordinary course of our business, like that of other companies engaged in similar businesses, we use metals, solvents and similar materials, which are stored on site. The waste created by the use of these materials is transported off site on a regular basis by unaffiliated waste haulers. Many environmental laws and regulations require generators of waste to take remedial actions at the off site disposal location even if the disposal was conducted in compliance with the law. The requirements of these laws and regulations are complex, change frequently and could become more stringent in the future. Failure to comply with current or future environmental regulations could result in the imposition of substantial fines, suspension of production, alteration of our production processes, cessation of operations or other actions, which could materially and adversely affect our business, financial condition and results of operations. There can be no assurance that a claim, investigation or liability will not arise with respect to these activities, or that the cost of complying with governmental regulations in the future, will not have a material adverse effect on us.

WE HAVE A HISTORY OF NET LOSSES AND MAY NEED OR DECIDE TO SEEK ADDITIONAL FINANCING TO FUND OPERATIONS.

We have experienced recurring operating losses in the three and nine months ended September 30, 2008 and the years ended the years ended December 31, 2007 and 2006 and as a growing technology business we continue to require new investment from existing and new sources of capital. The Company has access to sources of additional funds and during July 2007 raised approximately $10 million to fund the acquisitions of Bravera, Inc. and Riptide Software, Inc. Funds from new financings and the combined cash flows from Information Intellect and the newly acquired businesses is expected to provide sufficient cash balances to fund operations. In April 2008 we received a commitment from an entity controlled by our CEO to fund up to $15 million of cash for working capital purposes and to finance acquisitions; but as of November 15, 2008 only approximately $1,565,000 of funds had been received from this commitment. There can be no assurance that due to continued operating losses or other factors outside of the Company’s control that the Company will continue to have access to sufficient capital resources to continue operations or to execute it strategy to acquire other companies.

WE ARE IN TECHNICAL DEFAULT OF THE DEBT COVENANTS OF OUR SENIOR NOTES THAT MAY ADVERSELY AFFECT OUR BUSINESS, REDUCE OUR CASH FLOW AND AFFECT THE VALUE OF OUR COMMON STOCK.

On July 13, 2007, we entered into agreements to issue (i) the “Senior Notes in the aggregate principal amount of $7,222,222, (ii) 12,797,500 shares of our Common Stock and (iii) warrants to purchase 3,500,000 shares of Common Stock in return for $6,500,000 of cash proceeds after a ten (10) percent debt discount but before transaction costs. In addition, we have entered into Registration Rights Agreements with the holders of Senior Notes and the holders the Series A Shares and Series B Shares. Each of the agreements contains covenants including the timing for the registration and rights to registered shares, limits on capital expenditures, subsequent borrowings, loans to third parties, investments, acquisitions and divestitures, and restrictions on the payment of cash dividends. In addition, the Senior Notes have Leverage and Fixed Charge Coverage Ratios. Additionally, the Senior Notes contain customary events of default including, nonpayment of principal or interest; the violation of a covenant; the occurrence of a material adverse change; the attachment of any portion of our assets; insolvency; material misrepresentations by us; and our default under any other loan agreement. Upon the occurrence of an event of default the applicable interest rate increases to 18% per annum and the debt would become immediately due and payable.

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At September 30, 2008, we had not received notice of default but were in technical default of the covenants under the Senior Notes and the Registration Rights Agreements and the subsequent Waiver Agreement. The curing of the technical default is dependent upon the Company raising additional debt or equity funds to make the required payments under the Senior Notes. In addition, we must also file a registration statement to register the shares under the Registration Rights agreements. As a result of the technical defaults, the Company is subject to cash penalties of approximately $3 million at September 30, 2008.

As of April 18, 2008, the Company entered into a Waiver Agreement (the “Agreement”) with the holders of the Senior Notes. The Agreement calls for the repayment of approximately $7.2 million face value of the notes payable plus interest payable of approximately $1.3 million in several installments to be fully paid on or before June 30, 2008 plus the issuance of warrants to the holders of the Senior Notes to acquire 1,574,444 shares of Common Stock at an exercise price of $0.01 per share. Upon final payment the Company expects that the Senior Notes and the covenant defaults under the Senor Notes will be fully satisfied and released. As of September 30, 2008, payments have been made pursuant to the Agreement. The Company expects that the cash to make the payments under this agreement will come from the cash proceeds received from the future issuance of Series C Shares to the Related Party and/or other investors, however no assurances can be made that we will raise the cash necessary to make these payments or that the defaults will be waived as expected.

Our failure to comply with our debt-related obligations could result in an event of default which, if not cured or waived, could result in an acceleration of our indebtedness. This in turn could have a material adverse effect on our operations, our revenues and our common stock value. In the event we were unable to restructure or refinance our debt or secure other financing to repay this debt, our lenders could foreclose upon the collateral securing that debt.

OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY THE UNCERTAIN GEOPOLITICAL ENVIRONMENT AND UNFAVORABLE FACTORS AFFECTING ECONOMIC AND MARKET CONDITIONS.

Adverse factors affecting economic conditions worldwide have contributed to a general slowdown in the US economy and could possible initiate a downturn in information technology and software spending that may adversely impact our business, resulting in:

· Reduced demand for our services as a result of a decrease in technology spending by our customers and potential customers;

· Increased price competition for our services; and

· Higher overhead costs as a percentage of revenues.

STOCKHOLDERS MAY EXPERIENCE SIGNIFICANT DILUTION IF FUTURE EQUITY OFFERINGS ARE USED TO FUND OPERATIONS OR ACQUIRE COMPLEMENTARY BUSINESSES.

We expect that future operations and acquisitions may be financed through the issuance of equity securities and stockholders could experience significant dilution. The equity and debt financing completed in July 2007 was dilutive to our existing stockholders. In addition, securities issued in connection with future financing activities or potential acquisitions may have rights and preferences senior to the rights and preferences of our common stock. We have established an incentive stock award plan for management and employees and we expect to grant options to purchase shares of our common stock to our management, directors, employees and consultants and we will grant additional options in the future. The issuance of shares of our common stock upon the exercise of these options may result in dilution to our stockholders.

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WE MAY HAVE DIFFICULTY DEFENDING OUR INTELLECTUAL PROPERTY RIGHTS FROM INFRINGEMENT RESULTING IN LAWSUITS REQUIRING US TO DEVOTE FINANCIAL AND MANAGEMENT RESOURCES THAT WOULD HAVE A NEGATIVE IMPACT ON OUR OPERATING RESULTS.

We regard our service marks, trademarks, trade secrets, patents and similar intellectual property as critical to our success. We rely on trademark, patent and trade secret law, as well as confidentiality and license agreements with certain of our employees, customers and others to protect our proprietary rights. No assurance can be given that our patents and licenses will not be challenged, invalidated, infringed or circumvented, or that our intellectual property rights will provide competitive advantages to us.

WE MAY BE SUBJECT TO LITIGATION THAT WILL BE COSTLY TO DEFEND OR PURSUE AND UNCERTAIN IN ITS OUTCOME.

On occasion our business may bring us into conflict with our customers, vendors, suppliers, current or former employees or other individuals or companies with whom we have contractual or other business relationships, or with our competitors or others whose interests differ from ours. If we are unable to resolve those conflicts on terms that are satisfactory to all parties, we may become involved in litigation brought by or against us. We are currently involved in several lawsuits and other proceedings more fully described in Item 3 – Legal Proceedings. Litigation is likely to be expensive and may require a significant amount of management’s time and attention, at the expense of other aspects of our business. The outcome of litigation is always uncertain, and in some cases could include judgments against us that require us to pay damages, enjoin us from certain activities, or otherwise affect our legal or contractual rights, which could have a significant adverse effect on our business.

OUR EXECUTIVE OFFICERS, BOARD OF DIRECTORS AND KEY EMPLOYEES ARE CRUCIAL TO OUR BUSINESS, AND WE MAY NOT BE ABLE TO RECRUIT, INTEGRATE AND RETAIN THE PERSONNEL WE NEED TO SUCCEED.

We are dependent upon our Executive Officers, including our Chairman and Chief Executive Officer, our directors, and our key employees in our technology, finance, sales and marketing operations. Our success depends upon a number of key management, sales, technical and other critical personnel, including our executive officers, the Board of Directors and key employees. In addition, our management team is new and has a brief history of working together. Several of our executives and key managers come from private entity entrepreneurial businesses where there are no compliance requirements of a public company. These executives and key managers may find it difficult to adjust to the public company environment and could decide to voluntarily terminate their employment with the Company or the Company could decide to terminate their employment. The loss of the services of any key personnel, or our inability to attract, integrate and retain highly skilled technical, management, sales and marketing personnel could result in significant disruption to our operations, including the timeliness of new product introductions, success of product development and sales efforts, quality of customer service, and successful completion of our initiatives, including growth plans and the results of our operations. Any failure by us to find suitable replacements for our key senior management may be disruptive to our operations. Competition for such personnel in the technology industries is intense, and we may be unable to attract, integrate and retain such personnel successfully.

OUR STOCK PRICE IS VOLATILE, AND THE VALUE OF YOUR INVESTMENT MAY DECLINE.

Our common stock is traded on the OTC Bulletin Board (“OTCBB”), and trading volume is often limited and sporadic. As a result, the trading price of our common stock on OTCBB is not necessarily a reliable indicator of our fair market value. The price at which our common stock trades is highly volatile, and may fluctuate as a result of a number of factors, including the number of shares available for sale in the market, quarterly variations in our operating results, actual or anticipated announcements of new products or services by us or competitors, regulatory investigations or determinations, acquisitions or strategic alliances by us or our competitors, recruitment or departures of key personnel, the gain or loss of significant customers, changes in the estimates of our operating performance, market conditions in our industry and the economy as a whole.

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A SIGNIFICANT PORTION OF OUR STOCK IS CONTROLLED BY FOUR STOCKHOLDERS WHO COULD SELL SHARES AND SUBSTANTIALLY INFLUENCE THE PRICE OF OUR STOCK

As of September 15, 2008, the investment management groups, Centrecourt Asset Management, RENN Capital Group, Lewis Asset Management, and Bridgepointe Master Fund Ltd., through entities controlled by these management groups, own large blocks of Riptide Common Stock and our convertible securities including, Series A Preferred Stock, Series B Preferred Stock and common stock warrants. Collectively these management groups beneficially own approximately 70% of the Riptide Common Stock. Beneficial ownership is computed according to Rule 13d-3 of the Securities Exchange Act as of September 15, 2008. Any sale by one or all of these stockholders, in large blocks of Riptide Common Stock or the conversion and sale of the shares of Riptide Common Stock underlying the convertible securities could depress our stock price or significantly increase the volatility of our stock price. Further, any such large sale may result in a change in our control of the company.

INVESTORS’ INTERESTS IN OUR COMPANY WILL BE DILUTED AND INVESTORS MAY SUFFER DILUTION IN THEIR NET BOOK VALUE PER SHARE IF WE ISSUE ADDITIONAL SHARES OR RAISE FUNDS THROUGH THE SALE OF EQUITY SECURITIES.

In the event that we are required to issue any additional shares or enter into private placements to raise financing through the sale of equity securities, investors’ interests in our company will be diluted and investors may suffer dilution in their net book value per share depending on the price at which such securities are sold. If we issue any such additional shares, such issuances also will cause a reduction in the proportionate ownership and voting power of all other stockholders. Further, any such issuance may result in a change in our control.

WE HAVE NEVER PAID CASH DIVIDENDS AND DO NOT INTEND TO DO SO.

We have never declared or paid cash dividends on our common stock. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends. Payments of any cash dividends in the future will depend on our financial condition, results of operations and capital requirements, as well as other factors deemed relevant by our board of directors. In addition, the payment of dividends to holders of our common stock is subject to restrictions and prohibitions under the Senior Notes, the Series A Preferred Stock Purchase Agreement and the Series B Preferred Stock Purchase Agreement.

WE WILL NEED ADDITIONAL FINANCING.

We will need additional financing to maintain and expand our business and to fund future acquisitions. Such financing may not be available on favorable terms, if at all. We may finance our business through the private placement or public offering of equity or debt securities. If we raise additional funds by issuing equity securities, such financing may result in further dilution to our stockholders. Any equity securities issued also may provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise additional funds by issuing additional debt securities, these debt securities would have rights, preferences and privileges senior to those of holders of our common stock, and the terms of the debt securities issued could impose significant restrictions on our operations. Additional financing may not be available on favorable terms, if at all. If we need funds and cannot raise them on acceptable terms, we may not be able to execute our business plan and our shareholders may lose substantially all of their investment.

In April 2008, the Company received a non-binding commitment from Matrix Holdings, LLC, an entity controlled by Riptide’s CEO (the “Related Party”) to fund the Company with up to $15 million of cash for the payment of debts, to finance the acquisitions and for working capital purposes. We would be required to issue a new series of preferred stock in return for the invested funds. As of September 30, 2008, approximately $365,000 of liabilities had been settled by funds provided by the Related Party and the Related Party provided the Company $200,000 for operations for which shares of stock are expected to be issued. In October 2008, the Related Party paid the Senior Note holders $750,000 on the behalf of the Company and paid $250,000 of the Company’s accounts payable. In addition, there can be no assurance that any additional funds may be invested by the Related Party beyond amounts already received.

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WE BECAME A PUBLICLY TRADED COMPANY THROUGH A MERGER WITH A PUBLIC SHELL COMPANY, AND WE COULD BE LIABLE FOR UNANTICIPATED LIABILITIES OF OUR PREDECESSOR ENTITY.

We became a publicly traded company through a merger effective March 2, 2007 between Information Intellect, Inc. and Shea Development Corp., a publicly traded shell company that had previously been an Exploration Stage Company as defined by Statement of Financial Accounting Standard (“SFAS”) No. 7. Shea had acquired a mineral property located in the Province of British Columbia, Canada and had not determined whether this property contained reserves that were economically recoverable. Although we believe the shell company had substantially no material assets and liabilities as of the merger date, we may be subject to claims related to the historical business of the shell.

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

During the nine months ended September 30, 2008 the Registrant issued 911,290 unregistered shares of Common Stock in lieu of cash dividends to holders of Series B Shares. No proceeds were received.

Item 3. Defaults Upon Senior Securities

The Registrant has not made any of the required principal or interest payments since January 1, 2008 to the holders of the Senior Notes and as a result the Registrant is in technical default of the terms of the Senior Notes. Payments of principal and interest are due monthly beginning January 1, 2008. Unpaid payments at March 31, 2008 were approximately $722,000 of principal payments and approximately $422,873 of interest payments. On April 18, 2008, The Registrant entered into a Waiver Agreement with the holders of the Senior Note. The Waiver Agreement calls for the repayment of approximately $7.2 million face value of the notes payable and interest payable of approximately $1,346,000 in several installments to be fully paid on or before June 30, 2008. In addition, the Registrant will issue warrants to the holders of the Senior Notes to acquire 1,574,444 shares of Common Stock at an exercise price of $0.01 per share. These warrants had a fair value of $391,318 which was recorded as interest expense in the second quarter of 2008. Upon final payment the Company expects that the senior debt and the covenant defaults under the senior debt agreements will be fully satisfied and released. No payments have been made under the Waiver Agreement. The Company expects that the cash to make the payments under this agreement will come from the cash proceeds received from the future issuance of Series C Shares to the entity controlled by the Registrant’s CEO Related Party and/or other investors, however no assurances can be made that we will raise the cash necessary to make these payments or that the defaults will be waived as expected. On July 31, 2008, the Company’s CEO met with the Senior Notes holders and they requested that the Company pay the Senior Notes holders $2 million on or before August 15, 2008. The Company was not able to make this payment. In October 2008, the Related Party paid the Senior Note holders $750,000 on the behalf of the Company.

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

None

Item 5. Other Information

None

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Item 6. Exhibits.

A. The following exhibits are included with this Form 10-Q filing.

Exhibit Number		Description

31.1		Certification of Chief Executive Officer and Chief Accounting Officer pursuant to Rule 13a -14(a)/15d — 14(a) under the Securities Exchange Act of 1934
32.1		Certifications of Chief Executive Officer and Chief Accounting Officer pursuant to Section 18 U.S.C. Section 1350

SIGNATURES

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

November 19, 2008	RIPTIDE WORLDWIDE, INC. Registrant


	By: /s/ FRANCIS E. WILDE
	Francis E. Wilde
	Chairman, CEO and Chief Accounting Officer

Riptide Worldwide, Inc. 10-Q