UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2008

TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT

For the transition period from ___________ to _____________

Commission file number 333-145487

ENTERCONNECT INC.

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

Nevada		20-8002991
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

100 Century Center Court

Suite 650

San Jose, California 95112-4537

(Address of principal executive offices)

	(408) 441-9500
	(Issuer's telephone number)


	(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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 T No £

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.

Large accelerated filer £		Accelerated filer £
Non-accelerated filer £ (Do not check if a smaller reporting company)		Smaller reporting company T

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No T

The numbers of shares outstanding of each of the issuer's classes of common equity, as of February 10, 2009, are as follows:

Class of Securities		Shares Outstanding
Common Stock, $0.001 par value		27,205,261

ENTERCONNECT INC.

		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Financial Statements:
	Condensed Balance Sheets as of December 31, 2008 (unaudited) and March 31, 2008	3
	Condensed Statements of Operations for the three and nine months ended December 31, 2008 and 2007 (unaudited)	4
	Condensed Statements of Cash Flows for the nine months ended December 31, 2008 and 2007 (unaudited)	5
	Notes to Unaudited Condensed Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	16
Item 4.	Controls and Procedures	16

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	17
Item 1A.	Risk Factors	17
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Submission of Matters to a Vote of Security Holders	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
	Signatures	21

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PART 1. FINANCIAL INFORMATION

Item 1. CONDENSED FINANCIAL STATEMENTS

ENTERCONNECT INC.

Condensed Balance Sheets

	December 31, 2008			March 31, 2008
	(unaudited)
ASSETS
Current Assets:
Cash	$	89,509		$	2,131,711
Restricted cash		25,142			200,569
Accounts receivable, net		72,600			-
Prepaid expenses and other current assets		167,130			204,614
Total current assets		354,381			2,536,894

Property and equipment, net		28,327			36,955
Intangible assets, net		428,571			749,999
Deposits		15,878			15,500

TOTAL ASSETS	$	827,157		$	3,339,348

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current Liabilities:
Accounts payable	$	429,470		$	306,525
Accrued expenses		381,883			114,401
Deferred revenue		19,400			-
Convertible notes payable, net		1,782,277			342,536
Total current liabilities		2,613,030			763,462

Stockholders' Equity (Deficit):
Preferred stock: $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding		-			-
Common stock: $0.001 par value; 100,000,000 shares authorized; 27,205,261 shares issued and outstanding		27,205			27,205
Additional paid-in capital		10,511,763			10,514,261
Deferred compensation		(1,928,291	)		(1,931,345	)
Accumulated deficit		(10,396.550	)		(6,034,235	)
Total stockholders’ (deficit) equity		(1,785,873	)		2,575,886

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	827,157		$	3,339,348

See accompanying notes to condensed financial statements.

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ENTERCONNECT INC.

Condensed Statements of Operations

(unaudited)

	Three months ended December 31,						Nine months ended December 31,
	2008			2007			2008			2007
Revenues:
Subscription and support	$	76,134		$	37,300		$	170,666		$	67,300
Professional services		30,750			15,000			56,125			50,998
Total revenues		106,884			52,300			226,791			118,298

Cost of revenues		15,161			-			60,981			-
Gross profit		91,723			52,300			165,810			118,298

Operating expenses:
General and administrative		336,534			289,700			1,147,672			833,709
Sales and marketing		51,314			117,287			516,582			358,930
Research and development		328,768			292,513			1,284,714			940,732
Total operating expenses		716,616			699,500			2,948,968			2,133,371

Loss from operations		(624,893	)		(647,200	)		(2,783,158	)		(2,015,073	)

Other (income) expenses:
Interest expense, net		543,298			1,087,568			1,610,510			1,101,532
Other (income) expense		(210,620)			-			(32,953	)		-
Total other expenses		332,678			1,087,568			1,577,557			1,101,532

Loss from operations before income taxes		(957,571	)		(1,734,768	)		(4,360,715	)		(3,116,605	)

Income taxes		1,600			-			1,600			-

Net loss	$	(959,171	)	$	(1,734,768	)	$	(4,362,315	)	$	(3,116,605	)

Net loss per common share - basic and diluted	$	(0.03	)	$	(0.07	)	$	(0.16	)	$	(0.13	)

Weighted average number of common shares outstanding – basic and diluted		27,205,261			25,020,928			27,205,261			23,482,097

See accompanying notes to condensed financial statements.

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ENTERCONNECT INC.

Condensed Statements of Cash Flows

(unaudited)

	Nine months ended December 31,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,362,315	)	$	(3,116,605	)
Adjustments to reconcile net loss to net cash used in operating activities:
Allowance for doubtful accounts		19,978			-
Depreciation and amortization		337,528			201,611
Accretion of discount on convertible notes payable		1,253,241			440,098
Common stock issued for services		-			136,443
Changes in assets and liabilities:
Increase in accounts receivable		(92,578	)		(67,480	)
Decrease (increase) in other current assets		37,106			(139,261	)
Increase (decrease) in accounts payable		122,949			(15,250	)
Increase in accrued expenses		267,480			49,935
Increase in deferred revenue		19,400			28,101
Interest accrued to convertible notes payable		186,500			-
Net Cash Used in Operating Activities		(2,210,711	)		(2,482,408	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment		(7,472	)		-
Net Cash Used in Investing Activities		(7,472	)		-

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible notes		-			4,257,368
Proceeds from issuance of common stock		-			700,000
Proceeds from short-term notes		-			656,500
Other		554			-
Net Cash Provided by Financing Activities		554			5,613,868

NET CHANGE IN CASH		(2,217,629	)		3,131,460
Decrease in restricted cash		175,427			-
CASH AT BEGINNING OF PERIOD		2,131,711			114,246
CASH AT END OF PERIOD	$	89,509		$	3,245,706

SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING:
Non-cash financing and investing activities:
Common stock issued for deferred compensation	$	-		$	2,000,000
Accrued compensation converted to common stock		-			136,443

See accompanying notes to condensed financial statements.

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ENTERCONNECT INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF BUSINESS AND GOING CONCERN

Business Description

EnterConnect Inc. was incorporated on November 13, 2006 under the laws of the State of Nevada under the name Priority Software, Inc. On January 4, 2007, the stockholders approved an amendment to the Certificate of Incorporation to change the name to EnterConnect Inc. (“EnterConnect”, or the “Company”). The Company is the developer of “EnterConnect” an out-of-the-box, enterprise-level intranet/extranet solution that includes document management, content management, collaboration, search and security. EnterConnect is an intranet/extranet tool enabling companies to deploy internal employee, division, department, team portals and external customer, partner, and investor portals while leveraging a scalable portal infrastructure to accomplish present as well as future organizational requirements, initiatives and projects.

Fiscal Year

The Company’s fiscal year ends on March 31. A reference to fiscal 2008 and fiscal 2009 refers to the fiscal years ending March 31, 2008 and 2009, respectively. A reference to fiscal 2007 refers to the period from November 13, 2006 (date of inception) through March 31, 2007.

Basis of Presentation

The accompanying unaudited condensed financial statements for the interim period ended December 31, 2008 and 2007 have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the financial information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of the Company’s management, the unaudited condensed financial statements have been prepared on the same basis as the audited financial statements in the Form 10-KSB, and include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the Company’s statement of financial position as of December 31, 2008, and its results of operations and its cash flows for the three and Nine months ended December 31, 2008 and 2007. All adjustments are of a normal recurring nature. The results for the three and nine month periods ended December 31, 2008 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending March 31, 2009. The accompanying statements should be read in conjunction with the Auditor’s Report and accompanying audited financial statements and Note 1thereto contained in the Company’s fiscal 2008 Form 10-KSB filed with the Securities and Exchange Commission (the “SEC”) on July 14, 2008 in which the Company’s CPA firm states in its Report, and the Company states in Note 1, that there is substantial doubt in the Company’s ability to continue as a going concern.

Going Concern

The accompanying condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate the Company as a going concern. However, the Company has sustained operating losses since inception and has used substantial amounts of working capital in its operations. These conditions raise substantial doubt in the Company’s ability to continue as a going concern. Realization of a major portion of the assets reflected on the accompanying condensed balance sheet is dependent upon continued operations of the Company which, in turn, is dependent upon the Company’s ability to meet its financing requirements and succeed in its future operations. While the Company is attempting to produce sufficient sales, the Company’s cash position may not be sufficient to support the Company’s daily operations. Management has raised funds by way of private placement offerings and the issuance of senior convertible notes. While the Company believes in the viability of its strategy to produce sales volume and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan and generate sufficient sales revenues.

These condensed financial statements do not reflect adjustments that would be necessary if the Company was unable to continue as a going concern. While management believes that the actions already taken or planned will mitigate the adverse conditions and events which raise doubt about the validity of the going concern assumption used in preparing these condensed financial statements, there can be no assurance that these actions will be successful.

If the Company were unable to continue as a going concern, then substantial adjustments would be necessary to the carrying values of assets, the reported amounts of its liabilities, the reported revenues and expenses, and the balance sheet classifications used.

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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. The use of estimates and assumptions may affect the reported amounts in the condensed financial statements and accompanying notes. Actual results could differ from those estimates and such differences could be material.

Segment Information

The Company operates in one segment.

Cash and Cash Equivalents

Cash equivalents include demand deposits and money market and investment funds for purposes of the statements of cash flows. EnterConnect considers all highly liquid monetary instruments with original maturities of three months or less to be cash equivalents.

Restricted Cash

In February 2008, EnterConnect was required to open a $200,000 certificate of deposit to secure for possible losses from corporate credit card purchases. The certificate of deposit was reduced to $75,000 and then to $25,000 in August and October, 2008, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the respective assets. The estimated useful lives used in computing depreciation are summarized as follows:

	Class of Asset	Useful Life in Years
	Computer equipment	3 years
	Furniture and fixtures	5 years

Ordinary repair and maintenance costs are charged to expense as incurred. When assets are retired, the cost and accumulated depreciation and amortization are removed from their respective accounts and any loss on such retirement is reflected in operating expenses. When assets are otherwise disposed of, the cost and related accumulated depreciation and amortization are removed from their respective accounts and any gain or loss on such sale or disposal is reflected in other income.

Impairment of Long-Lived Assets

Long-lived assets, including identifiable intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. EnterConnect evaluates the recoverability of its long-lived assets based on estimated undiscounted future cash flows and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset. If impaired, the long-lived asset is written down to its estimated fair value. When alternative courses of action to recover the carrying amount of a long-lived asset are under consideration, a probability-weighted approach is used for developing estimates of future undiscounted cash flows. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying value over its fair value, such that the asset’s carrying value is adjusted to its estimated fair value. The assumptions used by management in its projections of undiscounted cash flows involve significant judgment of material estimates of future revenue and customer acceptance. If the assumptions utilized in the projections do not materialize, the carrying values could become impaired resulting in a substantial impairment expense in the future.

Management assesses the fair value of long-lived assets using commonly accepted techniques, and may use more than one source. Sources to determine fair value may include, but are not limited to, recent third party comparable sales, internally developed discounted cash flow analysis and analysis from outside advisors. Significant changes in market conditions resulting from events such as changes in condition of an asset, or a change in management’s intent to utilize the asset, would generally require management to re-assess the cash flows related to the long-lived assets. At December 31, 2008, the Company determined that there was no impairment based on management’s evaluation.

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Fair Value Measurement

Effective March 31, 2008, the Company implemented Statement of Financial Accounting Standards No. 157, Fair Value Measurement, or SFAS 157, for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The adoption of SFAS 157 to the Company’s financial assets and liabilities did not have an impact on the Company’s financial results. SFAS 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1.

Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2.

Include other inputs that are directly or indirectly observable in the marketplace.

Level 3.

Unobservable inputs which are supported by little or no market activity.

EnterConnect’s financial instruments consist of cash and cash equivalents, short-term investments, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and convertible notes payable. The following represents the Company’s cash and cash equivalents and short-term investments that are measured at fair value on a recurring basis as of December 31, 2008 and indicates the fair value hierarchy of the valuation: Level 1: time deposits and short-term investments – quoted market prices for identical assets. The carrying value of accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair values due to their short maturities. The fair value of EnterConnect’s convertible notes payable approximates its carrying value as these financial instruments are reflected net of discounts which management of EnterConnect believes to be reflective of discounts that a willing party would require in order to invest in a similar type of debt instrument.

Revenue Recognition

The Company derives its revenues from two (2) sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing its on-demand application service, and from customers purchasing additional support beyond the standard support that is included in the basic subscription fee; and (2) related professional services revenue. Because the Company provides its application as a service, the Company follows the provisions of the Securities and Exchange Commission’s, or SEC, Staff Accounting Bulletin No. 104, Revenue Recognition and Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables. The Company recognizes revenue when all of the following conditions are met:

There is persuasive evidence of an arrangement;

The service has been provided to the customer;

The collection of the fees is reasonably assured; and

The amount of fees to be paid by the customer is fixed or determinable.

The Company’s arrangements do not contain general rights of return.

Subscription and support revenues are recognized ratably over the contract terms beginning on the commencement date of each contract. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether the revenue recognition criteria have been met.

Professional services revenues, when sold with subscription and support offerings, are accounted for separately when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value of each deliverable. When accounted for separately, revenues are recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts. The majority of the Company’s consulting contracts are on a time and material basis. For revenue arrangements with multiple deliverables, such as an arrangement that includes subscription, premium support, consulting or training services, the Company allocates the total amount the customer will pay to the separate units of accounting based on their relative fair values, as determined by the price of the undelivered items when sold separately.

In determining whether the consulting services can be accounted for separately from subscription and support revenues, the Company considers the following factors for each consulting agreement: availability of the consulting services from other vendors, whether objective and reliable evidence for fair value exists for the undelivered elements, the nature of the consulting services, the timing of when the consulting contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the consulting work. If a consulting arrangement does not qualify for separate accounting, the Company recognizes the consulting revenue ratably over the remaining term of the subscription contract. Additionally, in these situations, the Company defers only the direct costs of the consulting arrangement and amortizes those costs over the same time period as the consulting revenue is recognized. These deferred costs are included in prepaid expenses and other current assets and other assets. As of December 31, 2008, there are no deferred costs on the accompanying balance sheets.

Income Taxes

The Company follows Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statements of operations in the period that includes the enactment date.

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As of March 31, 2008, the Company had deferred tax assets of approximately $2.1 million resulting from temporary differences and net operating loss (“NOL”) carry-forwards of approximately $6 million, which are available to offset future taxable income, if any, through 2027. As utilization of the net operating loss carry-forwards and temporary difference is not assured, the deferred tax asset has been fully offset by a valuation allowance.

The Company recorded a provision for income taxes of $1,600 and $0 for the nine months ended December 31, 2008 and 2007, respectively.

Net Loss Per Common Share

Net loss per common share is computed pursuant to Statement of Financial Accounting Standards No. 128. "Earnings per Share" ("SFAS No. 128"). Basic net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. As of December 31, 2008 and 2007, 18,663,694 and 9,031,192 warrants, respectively, were excluded from the diluted loss per share computation, as their effect would be anti-dilutive.

Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported losses.

Recently Issued Accounting Pronouncements

In June 2003, the Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-8934 on June 26, 2008. Commencing with the Company’s Annual Report for the year ending March 31, 2010, the Company is required to include a report of management on the Company’s internal control over financial reporting. The internal control report must include a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the Company; of management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of year-end and; of the framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting. Furthermore, in the following fiscal year, it is required to file the auditor’s attestation report separately on the Company’s internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.

In December 2007, the FASB issued FASB Statement No. 141 (Revised 2007) “Business Combinations” (“SFAS No. 141(R)”), which requires the Company to record fair value estimates of contingent consideration and certain other potential liabilities during the original purchase price allocation, expense acquisition costs as incurred and does not permit certain restructuring activities previously allowed under Emerging Issues Task Force Issue No. 95-3 to be recorded as a component of purchase accounting. SFAS No. 141(R) 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, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company has not determined the effect that the adoption of SFAS No. 141(R) will have on the financial results of the Company.

In December 2007, the FASB issued FASB Statement No. 160 “Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51” (“SFAS No. 160”), which causes noncontrolling interests in subsidiaries to be included in the equity section of the balance sheet. SFAS No. 160 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, except for the presentation and disclosure requirements, which shall be applied retrospectively for all periods presented. The Company has not determined the effect that the adoption of SFAS No. 160 will have on the financial results of the Company.

In March 2008, the FASB issued FASB Statement No. 161 “Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133” (“SFAS No. 161”), which changes the disclosure requirements for derivative instruments and hedging activities. Pursuant to SFAS No.161, Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008 with early application encouraged. SFAS No. 161 encourages but does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In years after initial adoption, this Statement requires comparative disclosures only for periods subsequent to initial adoption. The Company does not expect the adoption of SFAS No. 161 to have a material impact on the financial results of the Company.

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Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying condensed financial statements.

NOTE 3 – COMMITMENTS AND CONTINGENCIES

In accordance with the registration rights in favor of investors associated with the December 6, 2007 private placement (“December 6, 2007 Registration Rights”), the Company was required to issues additional common stock warrants to the investors if the registration statement is not declared effective by the SEC within 120 days of filing. Consequently, if the company is unable to obtain an amendment and waiver from all of the December 6, 2007 investors, additional warrants of up to 93,333 (or up to 10% of the total shares purchased under the December 6, 2007 offering) may be issued by the Company.

The Company also executed a registration rights agreement (“December 20, 2007 Registration Rights Agreement”) in connection with issuance of its December 20, 2007 senior secured convertible notes (“December 20, 2007 Notes”). Under the December 20, 2007 Registration Rights Agreement, the Company is required to file a registration statement with the SEC for an amount equal to 130% of the shares underlying the December 20, 2007 Notes within 30 days of the offering date, and have the registration statement declared effective by the SEC within 120 days of filing (“Registration Effective Date Requirement”). On June 19, 2008, the Company entered into a Waiver and Amendment Agreement with the majority holder of the December 20, 2007 Notes to extend the Registration Effective Date Requirement from 120 days to 240 days from the filing date, and to register 2,369,176 warrant shares and no shares underlying the December 20, 2007 Notes. In addition, the December 20, 2007 Registration Rights Agreement provides for penalties of up to 3% per month on the outstanding December 20, 2007 Note balance if certain registration covenants are not met by the Company, including the Registration Effective Date Requirement. Since the Company was not previously in compliance with all of the covenants in the December 20, 2007 Registration Rights Agreement, the Company recorded a penalty in accrued expenses during the previous quarter ended September 30, 2008. The registration statement was declared effective by the SEC on October 3, 2008.

The December 20, 2007 Notes outstanding on December 31, 2008 had an optional redemption provision whereby the Note holders had the right to give notice to the Company by December 20, 2008 to redeem the outstanding principal balance of their Notes in cash, plus interest (“Redemption Notices”). The Company received Redemption Notices from certain Note holders exercising that right. On December 17, 2008, the Company entered into a Waiver and Amendment Agreement with the majority holder of the December 20, 2007 Notes to (i) extend the optional redemption date of the Notes from December 20, 2008 to June 20, 2009; (ii) amend the conversion price of the Notes from $0.60 to $0.10 per share, (iii) provided for an optional redemption by the Company for a portion of the Notes prior to the optional redemption date; (iv) waived any adjustment to the number of warrant shares issuable upon exercise of the SPA Warrants that would occur as a result of adjustment to the exercise price under the Warrants, and (v) waived the event of default associated with the Company’s failure to have the registration statement declared effective on or before the additional effectiveness deadline. As a result of the waiver of the event of default, the Company reversed the previously recorded penalty from accrued expenses in the condensed financial statements as of December 31, 2008. The Company was in compliance with all of the covenants in the December 20, 2007 Registration Rights Agreement as of December 31, 2008.

On June 19, 2007, the Company entered into a Memorandum of Understanding (“MOU”) with Global Media Fund, Inc. (“Global”) under which Global agreed to distribute newspaper features, radio features and other marketing media regarding the Company in return for 1,000,000 shares of Company Common Stock (the “Global Shares”) with an agreed-upon value of $2,000,000. The MOU provides that if the market value of the Global Shares falls below an aggregate value of $700,000, (“the minimum threshold”), then all work by Global under the MOU shall cease. The Company then has the option to issue an additional number of shares or to give cash to Global sufficient to bring the aggregate value of the Global Shares up to $1 million, failing which Global has the right to terminate the MOU. Global sold the Global Shares in 2007. The Company and Global disagree whether the minimum threshold provision in the MOU remains applicable. As of December 31, 2008 the value of the Global Shares was less than $700,000. Global has informed the Company that it does not intend to exercise its right to terminate the MOU and will continue to provide all services to the Company under the MOU through December 31, 2009.

NOTE 4 – LEGAL PROCEEDINGS

During the period November 2008 through January 2009, three civil claims have been filed against the Company in the State of California for unpaid services. The claims total approximately $120,000 and are accrued in the balance sheet as of December 31, 2008. The Company intends to pursue settlement of the claims.

NOTE 5 – SUBSEQUENT EVENTS

As discussed in Part 1, Item 1, Note 1 and in Part I, Item 2 hereof, there is substantial doubt in the Company’s ability to continue as a going concern. The Company is presently facing a severe cash flow challenge. It is the opinion of Company Management that there is a reasonable possibility for the Company to raise sufficient funds in the near term to enable the Company to continue as a going concern. However, Management can offer no assurances of such a result. The Company is currently in the process of seeking additional funding in the form of debt or equity. In connection with these efforts, the Company has entered into a Financial & Strategic Advisory Agreement with John Thomas Financial, Inc. under which the Company will receive investment banking and management consulting services, including without limitation, sale of equity or debt securities by the Company, corporate partnering by the Company, potential Company transactions with target or acquiring companies, and review of the Company’s business, operations and financial condition (the “JFT Advisory Agreement”). A copy of the JFT Advisory Agreement is attached hereto as Exhibit 10.1.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Information set forth herein contains "forward-looking statements" which can be identified by the use of forward-looking terminology such as "believes," "expects," "may,” “should" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. No assurance can be given that the future results covered by the forward-looking statements will be achieved. The Company cautions readers that important factors may affect the Company’s actual results and could cause such results to differ materially from forward-looking statements made by or on behalf of the Company. These factors include the Company’s lack of historically profitable operations, dependence on key personnel, the success of the Company’s business, ability to manage anticipated growth and other factors identified in the Company's filings with the Securities and Exchange Commission, press releases and/or other public communications.

OVERVIEW

EnterConnect Inc. (“EnterConnect”, or the “Company”) is a leading provider of enterprise-proven on-demand business portals that improve communication, collaboration and business processes to help companies increase customer satisfaction, growth and productivity. Our portals enable customers, employees, partners, suppliers and other stakeholders to securely consolidate, collaborate and connect online - at anytime, from anywhere - to accelerate business on-demand. EnterConnect solutions are based on a rich technology foundation in use at more than 50 Fortune 1000 companies.

EnterConnect Inc. was incorporated in accordance with the laws of the State of Nevada to acquire, develop, market and sell EnterConnect™, a software program that provides document management, content management, collaboration, search and security (“EnterConnect”). In November 2006, the Company commenced a Regulation D Offering of its securities to acquire the EnterConnect platform from Enterpulse, Inc., a Georgia corporation. On December 21, 2006, the Company and Enterpulse consummated an Asset Purchase Agreement whereby the Company acquired the EnterConnect platform and certain related assets and personnel for the aggregate purchase price of $1.1 million.

Our plan of operation is to add substantial numbers of paying subscriptions and provide high quality technical support to our customers. We intend to sell our EnterConnect Product Suite to marketplace partners and marketplace customers. Additionally, we intend to generate revenues from sharing fees we collect from the partners doing business through the marketplace and from referral fees and partner storefront hosting fees.

To continue active business operations we will need to:

hire additional personnel, particularly in sales and other customer-related areas;

expand our selling and marketing activities;

increase our research and development activities to upgrade and extend our service offerings and to develop new services and technologies;

add to our infrastructure to support our growth; and

expand our operational systems to manage a growing business.

Additionally, in our effort to further strengthen and extend our service offering, we may in the future acquire or make investments in complementary companies, services and technologies. We anticipate that these activities will require $4 million of funding. There can be no assurance that we will have raised sufficient funds or generate sufficient revenues to implement any of these growth strategies.

At December 31, 2008, our cash position was $0.1 million. At our current rate of expenditures, we should have cash available to maintain operations through February 28, 2009. Please refer to Part I, Item 1, Note 5 (Subsequent Events) hereof. We are seeking additional sources to fund our operations for the next 12 months in the form of debt or equity in one or more public or private offerings of Company securities. Such additional funds may not become available on acceptable terms, if at all, and there can be no assurance that any additional funding that we do obtain will be sufficient to meet our needs in the long term.

In the event that we do not have sufficient funds necessary to fund our plan of operations for the next 12 months, we may be required to further scale down our sales and marketing and research and development expense.

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Sources of Revenues

We derive our revenues from two sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing our on-demand application service; and (2) related professional services and other revenues. Other revenues consist primarily of implementation and other hosting fees. Subscription revenues accounted for approximately 75 percent of our total revenues for the nine months ended December 31, 2008. Subscription revenues are driven primarily by the number of paying subscribers of our service and the subscription price of our service. One of our customers, who is also a related third-party, accounted for 51 percent of our revenues during the nine months ended December 31, 2008.

Subscription and support revenues are recognized ratably over the contract terms beginning on the commencement dates of each contract. The typical subscription and support term is 12 to 24 months. Our subscription and support contracts are non-cancelable, though customers typically have the right to terminate their contracts for cause if we materially fail to perform. We generally invoice our customers in advance, in quarterly or monthly installments, and typical payment terms provide that our customers pay us within 30 days of invoice. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue, or in revenue depending on whether the revenue recognition criteria have been met. In general, we collect our billings in advance of the subscription service period.

Professional services and other revenues consist of fees associated with consulting, implementation, training and hosting services. Our professional services engagements are typically billed on a fixed fee basis. Our typical payment terms provide that our customers pay us within 30 days of invoice.

We recognize revenue in accordance with the provisions of SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” or SAB 104, and Emerging Issues Task Force, or EITF, Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables,” or EITF 00-21. In determining whether professional services can be accounted for separately from subscription and support revenues, we consider a number of factors, which are described in “Critical Accounting Policies and estimates —Revenue Recognition” below.

Cost of Revenues and Operating Expenses

Cost of Revenues. Cost of subscription and support revenues primarily consists of expenses related to hosting our service and providing support.

We intend to continue to invest additional resources in our on-demand application service and in our consulting services. The timing of these additional expenses will affect our cost of revenues, both in terms of absolute dollars and as a percentage of revenues, in a particular quarterly period.

General and Administrative. General and administrative expenses consist of salaries and related expenses for the senior management team, finance and accounting, legal costs, professional fees, other corporate expenses and allocated overhead. We expect that in the future, general and administrative expenses will increase in absolute dollars as we add personnel and incur additional professional fees and insurance costs related to the growth of our business.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries and related expenses for our sales and marketing staff and marketing programs consisting of advertising, events, corporate communications and brand building and product marketing activities.

We plan to continue to invest heavily in sales and marketing by increasing the number of direct sales personnel in order to add new customers, build brand awareness and sponsor additional marketing events. We expect that in the future, sales and marketing expenses will increase in absolute dollars.

Research and Development. Research and development expenses consist primarily of salaries, contractors, and related expenses and allocated overhead. We continue to focus our research and development efforts on increasing the functionality and enhancing the ease of use of our on-demand application service. Our scalable and secure multi-tenant architecture enables us to provide all of our customers with a service based on a single version of our application. As a result, we do not have to maintain multiple versions, which enable us to have relatively low research and development expenses as compared to traditional enterprise software companies. We expect that in the future, research and development expenses will increase in absolute dollars as we upgrade and extend our service offerings and develop new technologies.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Critical accounting policies are those that we believe are both significant and that require us to make difficult, subjective or complex judgments, often because we need to estimate the effect of inherently uncertain matters. We base our estimates and judgments on historical experiences, which are of a limited duration given our status as an early stage company. We also consider factors and assumptions we believe to be appropriate under the circumstances, but in some cases we do not control the implementation timelines associated with the assumptions we must formulate. Actual results may differ from our current and previous estimates, and we might obtain or formulate different estimates if we used different assumptions or conditions. We believe the critical accounting polices briefly described below affect our current evaluations and the estimates used in the preparation of our financial statements. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

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Revenue Recognition

We derive our revenues from two (2) sources: (1) subscription revenues, which are comprised of subscription fees from customers accessing its on-demand application service and (2) related professional services revenue. Because the Company provides its application as a service, the Company follows the provisions of the Securities and Exchange Commission’s, or SEC, Staff Accounting Bulletin No. 104, Revenue Recognition and Emerging Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables . The Company recognizes revenue when all of the following conditions are met:

There is persuasive evidence of an arrangement;

The service has been provided to the customer;

The collection of the fees is reasonably assured; and

The amount of fees to be paid by the customer is fixed or determinable.

Our arrangements do not contain general rights of return.

Professional services revenues, when sold with subscription and support offerings, are accounted for separately when these services have value to the customer on a standalone basis and there is objective and reliable evidence of fair value of each deliverable. When accounted for separately, revenues are recognized as the services are rendered for time and material contracts, and when the milestones are achieved and accepted by the customer for fixed price contracts. The majority of our consulting contracts are on a fixed fee basis. For revenue arrangements with multiple deliverables, such as an arrangement that includes subscription, premium support, consulting or training services, we allocate the total amount the customer will pay to the separate units of accounting based on their relative fair values, as determined by the price of the undelivered items when sold separately.

In determining whether the consulting services can be accounted for separately from subscription and support revenues, we consider the following factors for each consulting agreement: availability of the consulting services from other vendors, whether objective and reliable evidence for fair value exists for the undelivered elements, the nature of the consulting services, the timing of when the consulting contract was signed in comparison to the subscription service start date, and the contractual dependence of the subscription service on the customer’s satisfaction with the consulting work. If a consulting arrangement does not qualify for separate accounting, we recognize the consulting revenue ratably over the remaining term of the subscription contract. Additionally, in these situations, we defer only the direct costs of the consulting arrangement and amortizes those costs over the same time period as the consulting revenue is recognized. These deferred costs are included in prepaid expenses and other current assets and other assets. As of December 31, 2008, there are no deferred costs on the accompanying condensed balance sheet.

Impairment of Long-Lived Assets

Long-lived assets, including identifiable intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We evaluate the recoverability of its long-lived assets based on estimated undiscounted future cash flows and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the long-lived asset. If impaired, the long-lived asset is written down to its estimated fair value. When alternative courses of action to recover the carrying amount of a long-lived asset are under consideration, a probability-weighted approach is used for developing estimates of future undiscounted cash flows. If the carrying value of the long-lived asset is not recoverable based on these estimated future undiscounted cash flows, the impairment loss is measured as the excess of the asset’s carrying value over its fair value, such that the asset’s carrying value is adjusted to its estimated fair value. The assumptions used by management in its projections of undiscounted cash flows involve significant judgment of material estimates of future revenue and customer acceptance. If the assumptions utilized in the projections do not materialize, the carrying values could become impaired resulting in a substantial impairment expense in the future.

Management assesses the fair value of long-lived assets using commonly accepted techniques, and may use more than one source. Sources to determine fair value include, but are not limited to, recent third party comparable sales, internally developed discounted cash flow analysis and analysis from outside advisors. Significant changes in market conditions resulting from events such as changes in commodity prices or the condition of an asset, or a change in management’s intent to utilize the asset would generally require management to re-assess the cash flows related to the long-lived assets.

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Results of Operations

The following tables set forth selected data for each of the periods indicated. All data is unaudited.

	Three months ended December 31,						Nine months ended December 31,
	2008			2007			2008			2007
Revenues:
Subscription and support	$	76,134		$	37,300		$	170,666		$	67,300
Professional services		30,750			15,000			56,125			50,998
Total revenues		106,884			52,300			226,791			118,298

Cost of revenues		15,161			-			60,981			-
Gross profit		91,723			52,300			165,810			118,298

Operating expenses:
General and administrative		336,534			289,700			1,147,672			833,709
Sales and marketing		51,314			117,287			516,582			358,930
Research and development		328,768			292,513			1,284,714			940,732
Total operating expenses		716,616			699,500			2,948,968			2,133,371

Loss from operations		(624,893	)		(647,200	)		(2,783,158	)		(2,015,073	)

Other (income) expenses:
Interest expense, net		543,298			1,087,568			1,610,510			1,101,532
Other (income) expense		(210,620)			-			(32,953	)		-
Total other expenses		332,678			1,087,568			1,577,557			1,101,532

Loss from operations before income taxes		(957,571	)		(1,734,768	)		(4,360,715	)		(3,116,605	)

Income taxes		1,600			-			1,600			-

Net loss	$	(959,171	)	$	(1,734,768	)	$	(4,362,3154	)	$	(3,116,605	)

Net loss per common share - basic and diluted	$	(0.03	)	$	(0.07	)	$	(0.16	)	$	(0.13	)

Weighted average number of common shares outstanding – basic and diluted		27,205,261			25,020,928			27,205,261			23,482,097

Overview of the Three Months Ended December 31, 2008

Total revenues for the three months ended December 31, 2008 increased to $106,884, or 104%, from $52,300 in the same period in 2007. The revenues are not significant and we are beginning in fiscal 2009 to invest in our sales efforts to generate new subscribers.

Gross profit increased to $91,723 during the three months ended December 31, 2008 from $52.300 in the same year ago period. The gross profit percentage was 86% for the three months ended December 31, 2008 and 100% for the same period in 2007. Cost of revenues will increase in absolute dollars as we add new subscribers and add personnel to support an increased customer base.

General and administrative expense increased 16% to $336,534 during the three months ended December 31, 2008 from $289,700 in the same period in 2007. The increase resulted from expenses associated with being a public company and additional personnel costs. General and administrative costs are expected to increase in absolute dollars in fiscal 2009 in order to support expected revenue growth.

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Sales and marketing expense decreased (44)% to $51,314 during the three months ended December 31, 2008 from $117,287 in the same period in 2007. The decrease resulted from a reduction in sales and marketing personnel. Sales and marketing expense is expected to increase in absolute dollars in fiscal 2009 as we add new sales and marketing personnel to support revenue growth.

Research and development expense increased 12% to $328,768 during the three months ended December 31, 2008 from $292,513 in the same period in 2007. Effective April 1, 2008, the Company reduced the amortization period prospectively of its acquired technology down to a total useful life of 36 months. Consequently, amortization expense increased to $107,000 for the three months ended December 31, 2008 from $50,000 in the same period in 2007. Research and development expense in expected to increase in absolute dollars in fiscal 2009 in order to upgrade and extend our service offerings.

Overview of the Nine Months Ended December 31, 2008

Total revenues for the nine months ended December 31, 2008 increased to $226,791, or 92%, from $118,298 in the same period in 2007. The revenues are not significant and we are beginning in fiscal 2009 to invest in our sales efforts to generate new subscribers.

Gross profit increased to $165,810 during the nine months ended December 31, 2008 from $118,298 in the same year ago period. The gross profit percentage was 73% for the nine months ended December 31, 2008 and 100% for the same period in 2007. Cost of revenues will increase in absolute dollars as we add new subscribers and add personnel to support an increased customer base.

General and administrative expense increased 39% to $1,147,672 during the nine months ended December 31, 2008 from $833,709 in the same period in 2007. The increase resulted from expenses associated with being a public company and additional personnel costs. General and administrative costs are expected to increase in absolute dollars in fiscal 2009 in order to support expected revenue growth.

Sales and marketing expense increased 44% to $516,582 during the nine months ended December 31, 2008 from $358,930 in the same period in 2007. The increase resulted from sales personnel hired during the nine months ended December 31, 2008 and an increase in marketing and trade show expenses. Sales and marketing expense is expected to increase in absolute dollars in fiscal 2009 as we add new sales and marketing personnel to support revenue growth.

Research and development expense increased 37% to $1,284,714 during the nine months ended December 31, 2008 from $940,732 in the same period in 2007. Effective April 1, 2008, the Company reduced the amortization period prospectively of its acquired technology down to a total useful life of 36 months. Consequently, amortization expense increased to $321,000 for the nine months ended December 31, 2008 from $150,000 in the same period in 2007. The increase was also attributable to the increase in personnel and consultant costs. Research and development expense in expected to increase in absolute dollars in fiscal 2009 in order to upgrade and extend our service offerings.

Recently Issued Accounting Pronouncements

In June 2003, the Securities and Exchange Commission (“SEC”) adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), as amended by SEC Release No. 33-8934 on June 26, 2008. Commencing with the Company’s Annual Report for the year ending March 31, 2010, the Company is required to include a report of management on the Company’s internal control over financial reporting. The internal control report must include a statement of management’s responsibility for establishing and maintaining adequate internal control over financial reporting for the Company; management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of year-end; and the framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting. Furthermore, in the following fiscal year, the Company is required to file its auditor’s attestation report on the Company’s internal control over financial reporting stating whether the auditor believes that the Company has maintained effective internal control over its financial reporting in all material respects.

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Liquidity and Going Concern

The condensed financial statements included in this Form 10-Q have been prepared assuming that we will continue as a going concern, however, there can be no assurance that we will be able to do so, and our condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty. At December 31, 2008, the Company had an accumulated deficit of $(10.4) million and $0.1 million in non-restricted cash. Cash flows used in operations was $2.3 million during the nine month period ended December 31, 2008. We have incurred net losses since our inception and we anticipate that we will continue to operate in a deficit position for the foreseeable future. We believe that our existing funds will be sufficient to fund our current operations through February 28, 2009 based upon our estimated future operations. Due to our inability to generate sufficient revenue to cover operating expenses, we will require additional financing in order to conduct our normal operating activities and cover our monthly expenses. There can be no assurance that we will be able to obtain the additional financing we require, or be able to obtain such additional financing on terms favorable to our Company. These circumstances raise substantial doubt about our ability to continue as a going concern. The financial statements in this Report should be read in conjunction with the Auditor’s Report and accompanying audited financial statements and Note 1thereto contained in the Company’s fiscal 2008 Form 10-KSB filed with the Securities and Exchange Commission on July 14, 2008 in which the Company’s CPA firm states in its Report, and the Company states in Note 1, that there is substantial doubt in the Company’s ability to continue as a going concern.

We expect to increase our revenues during fiscal 2009. However, we cannot be certain that the anticipated revenues and corresponding cash flows will materialize. If our revenues and cash flows are not adequate to enable us to meet our obligations; we will need to raise additional funds to cover the shortfall through either commercial loans or additional public or private offerings of our securities. We are currently investigating additional funding opportunities, talking to potential investors who could provide financing.

Based on our prior success in raising capital when required through private placements and the issuance of convertible notes, we are hopeful that we will be able to secure appropriate financing in the future. We have no current commitments for additional financing, and there can be no assurance that any private or public offering of debt or equity securities or other funding arrangements could be effected on a timely basis or to an extent sufficient to enable us to continue to satisfy our capital requirements. If we fail to demonstrate an ability to generate sufficient revenue to meet our obligations and sustain our operations, our ability to continue to raise capital may be impaired and we may not be able to continue as a going concern.

Our minimum rental commitment under a non-cancelable operating lease as of December 31, 2008 is as follows:

2009	$	21,366
2010		86,960
2011		36,679
Total	$	145,005

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate sensitivity

We had cash and cash equivalents totaling $0.1 million at December 31, 2008. These amounts were invested primarily in direct deposits or certificates of deposits with credit ratings of at least single A or better. The cash and cash equivalents are held for working capital purposes with capital preservation as the primary objective.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures

We performed an evaluation under the supervision and with the participation of our management, including our chief executive and chief financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of March 31, 2008. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within our company to disclose material information otherwise required to be set forth in our periodic reports. Based on this evaluation, we concluded that the Company's controls were ineffective as of the end of the fiscal year due to inherent weaknesses present in the Company’s financial controls which led to the Company’s Chief Executive Officer being reimbursed in excess of the expenses paid on the Company’s behalf. The Company believes that it has taken steps for remediation of these weaknesses including the retention of a permanent Chief Financial Officer and the institution of additional financial controls.

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During fiscal 2008, the Company began its project to become compliant with the requirements of Section 404 of the Sarbanes-Oxley Act. While not fully compliant with Section 404 requirements as of December 13, 2008, activities to date involve reviewing the Company’s documentation of control procedures being followed and improving or strengthening those controls where necessary. The Company plans to continue with assessment, documentation, testing and improvement of internal controls over financial reporting and expects to become Section 404 compliant during fiscal 2009.

(b) Changes in internal control over financial reporting

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, during the Company’s third fiscal quarter we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any material change in our internal control over financial reporting during the quarter covered by this report that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Item 1A. RISK FACTORS

A restated description of the risk factors associated with our business is set forth below. This description includes any material changes to and supersedes the description of the risk factors included in our Annual Report on Form 10-KSB for the fiscal year ended March 31, 2008. The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations and financial condition.

We Have a Limited Operating History

We were only recently formed and have no significant operating history in our intended field of endeavor and have sustained substantial losses. Since inception, we have suffered net losses of $(10.4) million. There can be no assurance that we will be successful in building our business or that our business model will prove to be successful.

We Have Material Future Financing Needs

Our business model requires additional financing in order to expand our marketing and sales efforts. No assurance can be given that additional financing will be available to us on acceptable terms, if at all. If we raise additional funds by issuing additional equity securities, further dilution to existing equity holders will result. If adequate additional funds are not available, we may be required to curtail significantly our long-term business objectives and our results from operations may be materially and adversely affected. Accordingly, there is substantive doubt whether we can fulfill our business plan or commence revenue generating operations.

If We Are Unable To Raise Capital In The Future, We May Be Unable To Fund Operating Cash Shortfalls

There can be no assurance that additional financing may be available to us on acceptable terms, or at all. Our inability to obtain any needed financing could hinder our ability to fund our operations and our sales efforts. Any financing may cause significant dilution to existing shareholders. Any debt financing or other financing of securities senior to common stock likely will include financial and other covenants that will restrict our flexibility. At a minimum, we expect these covenants to include restrictions on our ability to pay dividends on our common stock.

Our Directors, Executive Officers and Principal Stockholders have Effective Control of the Company, Preventing Non-Affiliate Stockholders from Significantly Influencing Our Direction and Future

Our directors, officers, 5% stockholders and their affiliates control a majority of our outstanding shares of common stock and are expected to continue to control a majority of our outstanding common stock following any financing transactions projected for the foreseeable future. These directors, officers and affiliates effectively control all matters requiring approval by the stockholders, including any determination with respect to the acquisition or disposition of assets, future issuances of securities, declarations of dividends and the election of directors. This concentration of ownership may also delay, defer, or prevent a change in control and otherwise prevent stockholders other than our affiliates from influencing our direction and future.

There is Only a Limited Public Market for Our Common Stock, and even if a Market Develops, It Will Likely be Thin and Subject To Manipulation

There is only a limited public market for our common stock and we can provide no assurance that a public market for our common stock will develop in the future. Even if a public market does develop, the volume of trading in our common stock will presumably be limited and likely dominated by a few individuals. The limited volume, if any, will make the price of our common stock subject to manipulation by one or more stockholders and will significantly limit the number of shares that one can purchase or sell in a short period of time. An investor may find it difficult to dispose of shares of our common stock or obtain a fair price for our common stock in the market.

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The Market Price for Our Common Stock Will Likely Be Volatile and May Change Dramatically At Any Time

The market price of our common stock, like that of the securities of other early-stage companies, may be highly volatile. Our stock price may change dramatically as the result of announcements of our quarterly results, the rate of our expansion, significant litigation or other factors or events that would be expected to affect our business or financial condition, results of operations and other factors specific to our business and future prospects. In addition, the market price for our common stock may be affected by various factors not directly related to our business, including the following:

●

intentional manipulation of our stock price by existing or future stockholders;

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short selling of our common stock or related derivative securities;

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a single acquisition or disposition, or several related acquisitions or dispositions, of a large number of our shares;

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the interest, or lack of interest, of the market in our business sector, without regard to our financial condition or results of operations;

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the adoption of governmental regulations and similar developments in the United States or abroad that may affect our ability to offer our products and services or affect our cost structure;

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developments in the businesses of companies that purchase our products; and

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economic and other external market factors, such as a general decline in market prices due to poor economic indicators or investor distrust.

Our Ability to Issue Preferred Stock and Common Stock May Significantly Dilute Ownership and Voting Power, Negatively Affect the Price of Our Common Stock and Inhibit Hostile Takeovers

Under our Articles of Incorporation, we are authorized to issue up to 10,000,000 shares of preferred stock and 100,000,000 shares of common stock without seeking stockholder approval. Our board of directors has the authority to create various series of preferred stock with such voting and other rights superior to those of our common stock and to issue such stock without stockholder approval. Any issuance of such preferred stock or common stock would dilute the ownership and voting power of existing holders of our common stock and may have a negative effect on the price of our common stock. The issuance of preferred stock without stockholder approval may also be used by management to stop or delay a change of control, or might discourage third parties from seeking a change of control of our company, even though some stockholders or potential investors may view possible takeover attempts as potentially beneficial to our stockholders.

Arbitrary Determination of Offering Price

The offering price for the shares of Common Stock was determined arbitrarily, and such price should not be considered an indication of the actual value of the Company as it bears no relationship to the book value, assets, or earnings to the Company or to other recognized criteria of value.

We Depend on Key Management Personnel for our Future Success

Our success depends in large part on the continued services of Sam Jankovich, our Chief Executive Officer and Director. The loss of his services may materially and adversely affect our business and results of operations. In addition, if any key management personnel resign to join a competitor or form a competing company, the loss of such personnel, together with the loss of any clients or potential clients to such competitor, could materially and adversely affect the business and results of operations of the Company. Currently, we do not have any agreements with Mr. Jankovich prohibiting him from joining competitors, forming competing companies, soliciting existing clients or disclosing information deemed confidential to us; there is no guarantee that such agreements will be effective in preventing the key management personnel from engaging in these actions. We cannot guarantee that we will be able to replace any of these individuals in the event their services become unavailable.

Expansion and Retention of Customer Accounts

Our success depends on our ability to attract and retain customers; these customers can terminate their accounts on little or short notice. Currently, we have engaged in only limited sales and have few customers. Accordingly, we may lose or gain significant accounts each year. There can be no assurance that we can retain our existing customers and add new customers as we attempt to expand our business.

Competition

Although we believe we will be able to compete on the basis of the quality of our service, price and reputation, and build personal relationships with customers, there can be no assurance that we will be able to generate or improve our competitive position as we implement our proposed marketing program.

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Control by Current Stockholders

We are currently controlled by Sam Jankovich, our Chief Executive Officer and Director, and Private Capital Group, LLC (“PCG”), whose principal, Michael Wainstein, serves as a Director, and who own approximately 33% and 28% of our Common Stock, respectively. The principal stockholders will continue to own our common stock giving them voting control over the remaining stockholders. Since the common stock does not have cumulative voting rights, they will be able to determine and direct our affairs and policies and the use of all funds available to us. Conversely, purchasers of common stock will have no effective voice in the management of the Company.

Absence of Cash Dividends

It is unlikely we will declare or pay dividends on our common stock in the foreseeable future out of future earnings, if any, even if permitted to do so under applicable law. We currently intend to retain earnings, if any, to fund our continued operations and proposed expansion.

If the Protection of Intellectual Property is Inadequate, Competitors May Gain Access to Our Content and Technology

We seek to develop and maintain the proprietary aspects of our products and technology. To protect this proprietary content and technology, we rely primarily on a combination of contractual provisions, confidentiality procedures, trade secrets and patent, copyright, and trademark laws.

We seek to avoid disclosure of our trade secrets through a number of means including, but not limited to, requiring those persons with access to our proprietary information to execute confidentiality agreements. We seek to protect our software, documentation, and other written materials under trade secret and copyright laws, which afford only limited protection. We cannot be certain that any of our proprietary rights with respect to our products and services will be viable or of value in the future because, among other reasons, the validity, enforceability and type of protection of proprietary rights in our industries are uncertain and still evolving and many different entities are simultaneously seeking intellectual property rights relevant to software based applications.

We have no patents and may not receive a patent related to any of our products and services. Our future patents, if any, may be successfully challenged, rendering them invalid or unenforceable, or may not provide us with any competitive advantages. We may not develop proprietary products or technologies that are patentable and other parties may have dominating patent claims. Additionally, other parties may have patent rights relating to the same subject matter covered by patents issued to us, enabling them to use the patented technology or license it to others without our consent. The validity and enforceability of our future patents, if any, may also be affected by future legislative actions or judicial decisions.

Our trademarks may not provide us with any competitive advantages. None of our trademarks may be registrable, and other parties may have priority of use of such trademarks or variants thereof.

Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products and intellectual property or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and while we are unable to determine the extent to which piracy of our intellectual property exits, piracy can be expected to be a persistent problem. In addition, the laws and enforcement mechanisms of some foreign countries do not protect our proprietary rights as much as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate and our competitors may independently develop similar technology, duplicate our products, or design around patents issued to us, our content, or other intellectual property.

There has been a substantial amount of litigation in the internet industry regarding intellectual property rights. It is possible that in the future third parties may claim that we or our current or potential future products or services infringe upon their intellectual property. We expect that developers and providers of e-commerce solutions will increasingly be subject to infringement claims as the number of products and competitors in this industry segment grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause delays in implementation of our services or require us to enter into license agreements. Licenses, if required, may not be available on terms acceptable to us, which could seriously harm our business.

Our Business is Subject to U.S. and Foreign Government Regulation of the Internet

We are affected by government regulation of the Internet by the United States, at the state, local and federal government levels, and foreign governmental bodies. Because new legislation is continuously being created and implemented, we are not certain how our business will be impacted and cannot predict if or how any future legislation would impact our business. In addition, we may be indirectly affected by certain new legislation to the extent it impacts our clients and potential clients.

We Incur Increased Costs as a Result of Being a Public Company

As a public company, with a class of reporting securities, we incur significant legal, accounting and other expenses that we did not incur as a private company. We incur costs associated with our public company reporting requirements. We also anticipate that we will incur costs associated with the new rules implemented by the Securities and Exchange Commission. We expect these rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly.

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Our Stock is a Penny Stock and There are Significant Risks Related to Buying and Owning Penny Stocks

Rule 15g-9 under the Securities Exchange Act of 1934 imposes additional sales practice requirements on broker-dealers that sell non-NASDAQ listed securities except in transactions exempted by the rule, including transactions meeting the requirements of Rule 506 of Regulation D under the Securities Act and transactions in which the purchaser is an institutional accredited investor (as defined) or an established customer (as defined) of the broker or dealer. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. Consequently, this rule may adversely affect the ability of broker-dealers to sell our securities and may adversely affect your ability to sell any of the securities you own.

The Securities and Exchange Commission regulations define a “penny stock” to be any non-Nasdaq equity security that has a market price (as defined in the regulations) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to some exceptions. For any transaction by a broker-dealer involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations (bid and ask prices) for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Our market liquidity could be severely and adversely affected by these rules on penny stocks.

ITEM 2. UNREGISTERED SALES OF SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.

ITEM 5. OTHER INFORMATION

In a November 17, 2008 press release, the Company announced that it signed a Letter of Intent to purchase V-Rooms, a division of Due Diligence Online LLC. V-Rooms is an Internet-based, on-demand service designed to speed completion of financial transactions. The Company’s acquisition of V-Rooms has been postponed with no extension agreed upon due to lack of available financing for the transaction. The two companies continue to work together as strategic partners and on joint sales opportunities. The Company intends to initiate a revised Letter of Intent once financing is identified.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

Exhibit Number	Description

10.1	EnterConnect, Inc.-John Thomas Financial, Inc. Financial & Strategic Advisory Agreement dated March 5, 2009

31.1	Section 302 Certification Of Chief Executive Officer and Principal Financial Officer

32.1	Certification of Chief Executive Officer and Principal Financial Officer Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002

Reports on Form 8-K

During the fiscal quarter ended December 31, 2008, the Company filed a Current Report on Form 8-K on October 14, 2008 disclosing the resignation of the Company’s Chief Financial Officer. A Current Report on Form 8-K was also filed on December 19, 2008 disclosing a waiver and amendment to the Company’s December 20, 2007 Senior Secured Convertible Notes and its December 20, 2007 Warrants to Purchase Common Stock.

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SIGNATURES

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

	ENTERCONNECT INC.


	/s/ Sam Jankovich
	Sam Jankovich
	Title:	Chairman, Chief Executive Officer and Principal Financial Officer


	Date:	February 23, 2009

EnterConnect Inc 10-Q