##### Table of Contents



United States
Securities and Exchange Commission
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Quarterly Period Ended March 31, 2008
 o
    
    Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File Number: 0-29129
 Utah
    
    Innuity, Inc.
    
    87-0370820(State or other Jurisdiction of 
Incorporation or Organization)
    
    Exact Name of Small Business Issuer as
Specified in its Charter
    
    (I.R.S. Employer
Identification No.)8644 154thAvenue NE
Redmond, WA 98052
(Address of Principal Executive Offices)
  þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
 
 Class
    
    Outstanding at May 16, 2008Common stock
$.00025 par value
    
    26,258,392




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##### 



Innuity, Inc.
  
  PagePART I
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2008 and
December 31, 2007 (Unaudited)
    
    
    2Condensed Consolidated Statements of Operations for the three
months ended March 31, 2008 and 2007 (Unaudited)
    
    
    3Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 2008 and 2007 (Unaudited)
    
    
    4Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    17PART II
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    17Item 1A.
    
    Risk Factors
    
    
    17Item 2.
    
    Unregistered Sale of Equity Securities and Use of Proceeds
    
    
    30Item 6.
    
    Exhibits
    
    
    31SIGNATURES
    
    
    31EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




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INNUITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 March 31,
    
    December 31,2008
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    52,354
    
    
    $
    200,877Settlement deposits
    
    
    358,747
    
    
    
    361,675Settlement receivable, net of allowance for doubtful
accounts of $18,615 and $18,615, respectively
    
    
    121,375
    
    
    
    156,817Trade accounts receivable, net of allowance for doubtful
accounts of $35,970 and $50,883, respectively
    
    
    221,901
    
    
    
    322,131Current assets relating to discontinued operations
    
    
    1,379,801
    
    
    
    1,252,763Other current assets
    
    
    96,769
    
    
    
    132,634Total Current Assets
    
    
    2,230,947
    
    
    
    2,426,897Property and equipment, net
    
    
    466,174
    
    
    
    578,864Intangible assets, net
    
    
    301,592
    
    
    
    412,915Long-term assets relating to discontinued operations
    
    
    2,073,633
    
    
    
    2,195,993Total Assets
    
    $
    5,072,346
    
    
    $
    5,614,669LIABILITIES AND STOCKHOLDERS DEFICITCurrent LiabilitiesTrade accounts payable
    
    $
    1,347,391
    
    
    $
    1,449,062Accrued salaries and wages
    
    
    431,780
    
    
    
    413,737Merchant settlement payable
    
    
    412,947
    
    
    
    389,993Accrued liabilities
    
    
    809,431
    
    
    
    854,785Deferred revenues
    
    
    186,607
    
    
    
    183,093Line of credit
    
    
    85,412
    
    
    
    Related party notes payable, current portion, net of discount of
$27,854 and $73,754, respectively
    
    
    616,481
    
    
    
    684,703Long-term debt, current portion, net of discount of $39,853 and $99,633, respectively
    
    
    1,226,280
    
    
    
    1,103,847Capital lease obligations, current portion
    
    
    189,146
    
    
    
    195,662Current liabilities relating to discontinued operations
    
    
    4,994,153
    
    
    
    4,624,111Total Current Liabilities
    
    
    10,299,628
    
    
    
    9,898,993Long-Term LiabilitiesLong-term debt, net of current portion
    
    
    57,668
    
    
    
    82,821Capital lease obligations, net of current portion
    
    
    120,398
    
    
    
    165,074Total Long-Term Liabilities
    
    
    178,066
    
    
    
    247,895Total Liabilities
    
    
    10,477,694
    
    
    
    10,146,888Commitments and ContingenciesStockholders DeficitCommon stock; 200,000,000 shares authorized; par value $0.00025 per share;
24,820,228 shares and 23,595,228 shares issued and outstanding, respectively
    
    
    6,205
    
    
    
    5,899Additional paid-in capital
    
    
    35,204,003
    
    
    
    34,905,591Accumulated deficit
    
    
    (40,615,556
    )
    
    
    (39,443,709
    )Total Stockholders Deficit
    
    
    (5,405,348
    )
    
    
    (4,532,219
    )Total Liabilities and Stockholders Deficit
    
    $
    5,072,346
    
    
    $
    5,614,669
 See accompanying notes to condensed consolidated financial statements.
 2




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INNUITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 For the Three Months Ended March 31,
    
    2008
    
    2007RevenuesMerchant services
    
    $
    691,413
    
    
    $
    662,492Promotion services
    
    
    511,628
    
    
    
    620,945Total revenues
    
    
    1,203,041
    
    
    
    1,283,437Operating expensesCost of merchant services
    
    
    158,232
    
    
    
    196,220Cost of promotion services
    
    
    235,301
    
    
    
    256,421General and administrative
    
    
    687,716
    
    
    
    951,873Selling and marketing
    
    
    483,354
    
    
    
    602,168Research and development
    
    
    338,148
    
    
    
    458,417Amortization expense
    
    
    111,323
    
    
    
    111,323Loss from operations
    
    
    (811,033
    )
    
    
    (1,292,985
    )Other expenseInterest expense, net
    
    
    (217,235
    )
    
    
    (95,554
    )Loss before income taxes
    
    
    (1,028,268
    )
    
    
    (1,388,539
    )Income tax benefit
    
    
    
    
    
    
    Loss from continuing operations
    
    
    (1,028,268
    )
    
    
    (1,388,539
    )Loss from discontinued operations
    
    
    (143,579
    )
    
    
    (166,166
    )Net loss
    
    $
    (1,171,847
    )
    
    $
    (1,554,705
    )Basic and Diluted Loss from Continuing Operations
Per Common Share
    
    $
    (0.04
    )
    
    $
    (0.06
    )Basic and Diluted Loss from Discontinued
Operations Per Common Share
    
    $
    (0.01
    )
    
    $
    (0.01
    )Basic and Diluted Loss Per Common Share
    
    $
    (0.05
    )
    
    $
    (0.07
    )Basic and Diluted Weighted-Average
Common Shares Outstanding
    
    
    24,039,459
    
    
    
    21,446,188
 See accompanying notes to condensed consolidated financial statements.
 3




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INNUITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 For the Three Months Ended March 31,
    
    2008
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (1,171,847
    )
    
    $
    (1,554,705
    )Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    350,494
    
    
    
    351,268Accretion of discount on notes payable
    
    
    143,180
    
    
    
    41,749Non-cash share based compensation
    
    
    298,718
    
    
    
    246,011Common stock issued for services
    
    
    
    
    
    
    111,202Bad debt provision
    
    
    24,891
    
    
    
    52,623Changes in assets and liabilities, net of acquisitions:Settlement deposits
    
    
    2,928
    
    
    
    (170,469
    )Trade accounts receivable
    
    
    (85,162
    )
    
    
    (88,579
    )Settlement receivable
    
    
    35,442
    
    
    
    26,143Inventories
    
    
    53,101
    
    
    
    26,585Other current assets
    
    
    16,227
    
    
    
    6,454Trade accounts payable
    
    
    110,420
    
    
    
    344,095Merchant settlement payable
    
    
    22,954
    
    
    
    340,366Accrued salaries and wages
    
    
    65,731
    
    
    
    (31,987
    )Deferred revenues
    
    
    68,989
    
    
    
    772,141Accrued liabilities
    
    
    (566
    )
    
    
    (219,907
    )Total adjustments
    
    
    1,107,347
    
    
    
    1,807,695Net cash provided by (used in) operating activities
    
    
    (64,500
    )
    
    
    252,990Cash flows from investing activitiesPurchase of property and equipment
    
    
    (4,121
    )
    
    
    (20,454
    )Cash flows from financing activitiesIncrease in line of credit
    
    
    85,412
    
    
    
    Payments on related party notes payable
    
    
    (114,122
    )
    
    
    Payments on long-term debt
    
    
    
    
    
    
    (123,412
    )Payments on capital lease obligations
    
    
    (51,192
    )
    
    
    (34,663
    )Payments on line of credit
    
    
    
    
    
    
    (149,425
    )Net cash used in financing activities
    
    
    (79,902
    )
    
    
    (307,500
    )Net decrease in cash and cash equivalents
    
    
    (148,523
    )
    
    
    (74,964
    )Cash and cash equivalents at beginning of period
    
    
    200,877
    
    
    
    307,483Cash and cash equivalents at end of period
    
    $
    52,354
    
    
    $
    232,519
 See accompanying notes to condensed consolidated financial statements.
 4




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INNUITY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
 For the Three Months Ended March 31,
    
    2008
    
    2007Supplemental disclosure of cash flow informationCash paid during the period for interest
    
    $
    60,086
    
    
    $
    14,989Noncash investing and financing activitiesDebt converted to common stock
    
    
    
    
    
    
    280,405Accrued interest converted to common stock
    
    
    
    
    
    
    75,760Conversion of accounts payable to common stock
    
    
    
    
    
    
    40,618
 See accompanying notes to condensed consolidated financial statements.
 5




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INNUITY, INC.
AND SUBSIDIARIES
 
 Notes to Condensed Consolidated Financial Statements
March 31, 2008
(Unaudited)
         6




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2008
    
    2007Dividend yield
    
    
    0.0%
    
    
    
    0.0%Expected Volatility
    
    
    161%
    
    
    
    197%Risk-free interest rate
    
    
    3.1%
    
    
    
    4.6%Expected term
    
    5.86 years
    
    
    5.86 years
   WeightedWeighted
    
    
    AverageShares
    
    
    Average
    
    
    Remaining
    
    
    Aggregateunder
    
    
    Exercise
    
    
    Contract
    
    
    IntrinsicOption
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at December
31, 2007
    
    
    3,618,511
    
    
    $
    0.64Granted
    
    
    10,000
    
    
    $
    0.24Forfeited or expired
    
    
    (235,003
    )
    
    $
    0.50Outstanding at March 31,
2008
    
    
    3,393,508
    
    
    $
    0.65
    
    
    8.25 Years
    
    $
    19,188Exercisable at March 31,
2008
    
    
    1,743,399
    
    
    $
    0.69
    
    
    7.50 Years
    
    $
    19,188
 7




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2008
    
    
    2007Cost of services
    
    $
    2,232
    
    
    $
    2,488General and administrative expense
    
    
    94,188
    
    
    
    79,329Sales and marketing expense
    
    
    57,629
    
    
    
    99,723Research and development expense
    
    
    6,883
    
    
    
    7,664Total share-based payment expense from
continuing operations
    
    
    160,932
    
    
    
    189,204Discontinued operations
    
    
    137,786
    
    
    
    56,807Total share-based payment expense
    
    $
    298,718
    
    
    $
    246,011
    March 31,
    
    December 31,2008
    
    2007Note payable to an unrelated party, interest at 15%,
net of discount of $39,853 and $99,633, paid in full May 2008
    
    $
    1,072,647
    
    
    $
    975,367Note payable to an unrelated party, interest imputed at 2.49%,
matures October 2008, monthly payments of $8,357
    
    
    211,301
    
    
    
    211,301Total debt
    
    $
    1,283,948
    
    
    $
    1,186,668Less current maturities
    
    
    (1,226,280
    )
    
    
    (1,103,847
    )Long-term debt
    
    $
    57,668
    
    
    $
    82,821
 8




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March 31,
    
    December 31,2008
    
    2007Notes payable to a shareholder, interest at 12%,
paid in full May 2008
    
    $
    200,000
    
    
    $
    200,000Note payable to former owner of Jadeon, interest at 5%,
net of discount of $2,587 and $10,587, paid in full May 2008
    
    
    96,748
    
    
    
    202,870Convertible note payable to related parties, interest at 15%,
matures beginning April 2008, net of discount
of $25,267 and $63,167, secured
    
    
    319,733
    
    
    
    281,833Total related party notes payable
    
    $
    616,481
    
    
    $
    684,703Less current maturities
    
    
    (616,481
    )
    
    
    (684,703
    )Long-term related party notes payable
    
    $
    
    
    
    $
    
   March 31,
    
    
    December 31,2008
    
    
    2007Trade accounts receivable, net of allowance for doubtful
accounts of $50,811 and $54,871, respectively
    
    $
    775,506
    
    
    $
    615,005Inventories, net of allowance for obsolete inventory of
$217,751and $209,962, respectively
    
    
    497,595
    
    
    
    550,696Other current assets
    
    
    106,700
    
    
    
    87,062Total current assets related to discontinued operations
    
    $
    1,379,801
    
    
    $
    1,252,763Property and equipment, net
    
    $
    124,359
    
    
    $
    107,455Intangible assets, net
    
    
    116,054
    
    
    
    255,318Goodwill
    
    
    1,833,220
    
    
    
    1,833,220Total long-term assets related to discontinued operations
    
    $
    2,073,633
    
    
    $
    2,195,993Trade accounts payable
    
    $
    1,803,903
    
    
    $
    1,591,812Accrued salaries and wages
    
    
    301,751
    
    
    
    254,063Accrued liabilities
    
    
    220,881
    
    
    
    176,093Deferred revenues
    
    
    2,667,618
    
    
    
    2,602,143Total current liabilities related to discontinued operations
    
    $
    4,994,153
    
    
    $
    4,624,111
 9




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Earnings Per Share
   Promotion
 Commerce
  10




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For the Three Months Ended March 31, 2008Promotion
    
    Commerce
    
    TotalRevenue from external customers
    
    $
    511,628
    
    
    $
    691,413
    
    
    $
    1,203,041Depreciation and amortization
    
    
    126,532
    
    
    
    63,843
    
    
    
    190,375Interest expense
    
    
    15,053
    
    
    
    
    
    
    
    15,053Segment loss
    
    
    (242,287
    )
    
    
    (81,261
    )
    
    
    (323,548
    )Segment assets
    
    
    638,900
    
    
    
    887,854
    
    
    
    1,526,754
  For The Three Months Ended March 31, 2007Promotion
    
    Commerce
    
    TotalRevenue from external customers
    
    $
    620,945
    
    
    $
    662,492
    
    
    $
    1,283,437Depreciation and amortization
    
    
    124,941
    
    
    
    65,382
    
    
    
    190,323Interest expense
    
    
    1,693
    
    
    
    
    
    
    
    1,693Segment loss
    
    
    (343,775
    )
    
    
    (153,196
    )
    
    
    (496,971
    )Segment assets
    
    
    1,279,975
    
    
    
    1,427,936
    
    
    
    2,707,911
  2008
    
    2007Total Segment income (loss)
    
    $
    (323,548
    )
    
    $
    (496,971
    )Unallocated items:Share-based payments from continuing operations
    
    
    (160,931
    )
    
    
    (300,406
    )Interest expense
    
    
    (202,182
    )
    
    
    (93,861
    )Professional services
    
    
    (61,492
    )
    
    
    (203,228
    )Executive and other
    
    
    (280,115
    )
    
    
    (294,073
    )Loss from continuing operations
    
    $
    (1,028,268
    )
    
    $
    (1,388,539
    )
 11




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Total segment assets
    
    $
    1,526,754Cash and cash equivalents
    
    
    52,354Current assets related to discontinued operations
    
    
    1,379,801Long-term assets related to discontinued operations
    
    
    2,073,633Other assets not allocated to segments
    
    
    39,804Total assets
    
    $
    5,072,346
     12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The statements contained in this quarterly report on Form 10-Q that are not purely historical
are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
forward-looking statements involve various risks and uncertainties. Forward-looking statements
contained in this report include statements regarding our plans to develop and deliver products and
services, market opportunities and acceptance, expectations, goals, revenues, financial
performance, strategies, mission and intentions for the future. Such forward-looking statements
are included under Managements Discussion and Analysis of Financial Condition and Results of
Operations and encompass our beliefs, expectations, hopes or intentions regarding future events.
Words such as expects, intends, believes, anticipates, should, and likely also identify
forward-looking statements. All forward-looking statements included in this report are made as of
the date hereof, based on information available to us as of such date, and we assume no obligation
 and specifically disclaim any obligation  to update any forward-looking statement. It is
important to note that such statements may not prove to be accurate and that our actual results and
future events will vary, and may vary materially, from those anticipated in such statements. Among
the factors that could cause actual results to differ materially from our expectations are those
described in this section of this quarterly report entitled Managements Discussion and Analysis
of Financial Condition and Results of Operations, and those identified in Item 1A of part II
entitled Risk Factors. All subsequent written and oral forward-looking statements attributable
to Innuity or persons acting on our behalf are expressly qualified in their entirety by this
section and other factors included elsewhere in this report. Unless otherwise indicated we,
us, our,, Innuity and the Company refer to Innuity, Inc., a Utah corporation, and its
subsidiaries.
 The following managements discussion and analysis of financial condition and results of
operation should be read in conjunction with our audited financial statements and accompanying
notes to those financial statements that appear in our annual report on Form 10-K for the year
ended December 31, 2007.
 Overview
     Recent Developments
  13




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Critical Accounting Policies
 Managements Discussion and Analysis of Financial Condition and Results of Operations
 Operations Review
  Analysis of Condensed Consolidated Statements of Operations
 14




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Three Months Ending March 31,%2008
    
    
    2007
    
    
    ChangeRevenuesMerchant services
    
    $
    691,413
    
    
    $
    662,492
    
    
    
    4
    %Promotion services
    
    
    511,628
    
    
    
    620,945
    
    
    
    -18
    %Total revenues
    
    
    1,203,041
    
    
    
    1,283,437
    
    
    
    -6
    %Operating expensesCost of merchant services
    
    
    158,232
    
    
    
    196,220
    
    
    
    -19
    %Cost of promotion services
    
    
    235,301
    
    
    
    256,421
    
    
    
    -8
    %General and administrative
    
    
    687,716
    
    
    
    951,873
    
    
    
    -28
    %Selling and marketing
    
    
    483,354
    
    
    
    602,168
    
    
    
    -20
    %Research and development
    
    
    338,148
    
    
    
    458,417
    
    
    
    -26
    %Amortization expense
    
    
    111,323
    
    
    
    111,323
    
    
    
    0
    %Loss from operations
    
    
    (811,033
    )
    
    
    (1,292,985
    )
    
    
    -37
    %Other income (expense)Interest expense
    
    
    (217,235
    )
    
    
    (95,554
    )
    
    
    127
    %Total other income (expense)
    
    
    (217,235
    )
    
    
    (95,554
    )
    
    
    127
    %Net loss from continuing
operations
    
    $
    (1,028,268
    )
    
    $
    (1,388,539
    )
    
    
    -26
    %
  Revenues
  Expenses
 Cost of merchant services
 Cost of Promotion services.
 15




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General and administrative.
 Selling and marketing.
 Research and development.
 Interest.
 Liquidity and Capital Resources
     16




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Off-Balance Sheet Arrangements
  
   
   
  
   
   We have incurred losses since our inception, and we may not achieve or maintain profitability.
  17




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If we fail to obtain additional funding to support our operations and capital expenditures, we
may be required to reduce the scope of our business.
  The loss of key customers could negatively affect our revenues and profitability.
  We face intense and growing competition from larger, more established companies, as well as
new entrants into our market, and we may not be able to compete effectively, which could reduce
demand for our services.
   Our future revenues may be uncertain because of reliance on third parties for marketing and
distribution.
  18




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Our business will be harmed if we are unable to develop or offer additional Internet
technology applications and solutions in a timely and cost-effective manner.
  Expansion in the sales of our Internet technology applications and solutions will depend on
the continued acceptance of the Internet as a communications and commerce platform for small
businesses.
   19




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We may find that it is difficult to identify, or license or acquire additional Internet
technology solutions on favorable terms, or to integrate future technology or business
acquisitions, which could limit our growth, disrupt our business and adversely affect our operating
results.
   If we are unable to expand or appropriately enhance or modify our Internet technology
solutions offerings quickly and efficiently, our business and operating results will be adversely
affected.
  
    
    identify and anticipate emerging technological and market trends affecting the
small business segment in which we do business;
    
    enhance our current services offerings so as to increase their functionality,
features and cost-effectiveness;
    
    develop, license or acquire new applications or services that meet emerging
customer needs;
    
    modify our services offerings in response to changing business practices and
technical requirements of our customers, as well as new regulatory requirements;
    
    integrate our current and future services offerings with third-party systems
and services; and
    
    create and maintain interfaces to changing customer and third party systems and
services.
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If we are unable to maintain our existing private label distribution arrangements or if we are
unable to enter into additional private label distribution arrangements, our future revenues could
be significantly reduced and our expenses would increase.
   If we are unable to sell additional services to our existing customers, or if our renewal
rates decline for any reason, our revenues may decrease and our business will be harmed.
  Our systems and our third-party providers systems may fail due to factors beyond our control,
which could interrupt our service, causing us to lose business and increase our costs.
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
    
    loss of revenues;
    
    loss of customers;
    
    loss of customers credit card data;
    
    harm to our business or reputation;
    
    exposure to fraud losses or other liabilities;
    
    negative publicity;
    
    additional operating and development costs; and/or
    
    diversion of technical and other resources.
 Changes to credit card association rules or practices could adversely impact our business.
  Our reliance on suppliers and vendors could adversely affect our ability to provide our
services and products to our small business customers on a timely and cost-efficient basis, which
could reduce our revenues.
  We have faced, and may in the future face, significant chargeback liability if our small
business customers refuse or cannot reimburse chargebacks resolved in favor of their customers, and
we may also face potential liability for merchant or customer fraud; we may not accurately forecast
or protect ourselves against these liabilities.
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On occasion, we experience increases in interchange costs; if we cannot pass these increases
along to our small business customers, our profit margins will be reduced.
  Our ability to effectively improve a websites positioning in search rankings depends on our
ability to determine search engine algorithms; a significant change in the way these algorithms
function could negatively affect our business.
  
    
    search engines stop providing critical data used by our internally developed
tools;
    
    search engine algorithms arbitrarily prevent new sites from obtaining rankings;
    
    search engine algorithms weigh new factors that are more difficult for us to
influence;
    
    search engines implementation of new algorithms; or
    
    search engines switch to an entirely fee-based system, eliminating natural
rankings as currently used.
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Margins on pay-per-click advertising may become too low to be profitable.
  Hackers or black-hat search engine optimization companies may negatively impact the publics
perception of the search engine optimization industry, which could impair our ability to maintain
our current customers and attract new customers.
  If we fail to manage our growth, our business could suffer.
  The loss of any members of our senior management could harm our current and future operations
and prospects.
 ,
 We face significant competition for a limited supply of qualified software engineers,
consultants and sales and marketing personnel.
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We may be unable to protect our intellectual property adequately or cost-effectively, which
may cause us to lose market share or force us to reduce our prices.
  Our Internet technology applications and solutions involve the storage and transmission of our
small business customers proprietary information, as well as the personal information of their
customers. Our business could be harmed if there is a breach of privacy.
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Our technical systems are vulnerable to interruption and damage that may be costly and
time-consuming for us to resolve and may harm our business and reputation, and we could be subject
to liability as a result of service interruptions by cyber-terrorists or fraudulent or illegal use
of our services.
    We rely heavily on the reliability, security, and performance of our internally developed
systems and operations, and any difficulties in maintaining these systems may result in service
interruptions, decreased customer service, or increased expenditures.
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Our business may be harmed by errors in our software.
  
    
    we may suffer a loss of revenues if, due to software errors, we are temporarily
unable to provide Internet technology applications and solutions to our customers;
    
    we may not be paid for the applications and services provided to a customer
that contain or result in errors, or we may be liable for losses or damages sustained
by a customer or its subscribers as a result of such errors;
    
    we may incur additional expenses to correct errors in our software, or to fund
product development projects that we may undertake to minimize the occurrence of such
errors in the future;
    
    we may damage our relationships with customers or suffer a loss of reputation
within our industry;
    
    we may become subject to litigation or regulatory scrutiny; and
    
    our customers may terminate or fail to renew their agreements with us or reduce
the services they purchase from us.
 If economic or other factors negatively affect the small business sector, our customers may
become unwilling or unable to purchase our Internet technology applications and solutions and
related products, which could cause our revenues to decline and impair our ability to operate
profitably.
  If we are unable to respond to the rapid technological changes that are characteristic of our
industry, our Internet technology applications and solutions may not be competitive.
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We and our small business customers must comply with complex and changing laws and
regulations.
  Government regulation of the Internet may adversely affect our business and operating results.
  
    
    the Digital Millennium Copyright Act and its related safe harbors, are intended
to reduce the liability of online service providers for listing or linking to
third-party websites that include materials that infringe copyrights or other rights of
others;
    
    the Childrens Online Protection Act and the Childrens Online Privacy
Protection Act are intended to restrict the distribution of certain materials deemed
harmful to children, and impose additional restrictions on the ability of online
services to collect user information from minors;
    
    the Protection of Children from Sexual Predators Act of 1998 requires online
service providers to report evidence of violations of federal child pornography laws
under certain circumstances; and
    
    the CAN-SPAM Act of 2003 and certain state laws are intended to regulate
interstate commerce by imposing limitations and penalties on the transmission of
unsolicited commercial electronic mail via the Internet.
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We may be subject to lawsuits for information displayed on our small business customers
websites, which may affect our business.
  State and local governments may in the future be permitted to levy additional taxes on
Internet access and electronic commerce transactions, which could result in a decrease in the
attractiveness of the Internet to our customers and potential customers, and could reduce demand
for our Internet technology applications and solutions.
  Shares of our common stock may continue to be subject to price volatility and illiquidity
because our shares may continue to be thinly traded and may never become eligible for trading on
Nasdaq or a national securities exchange.
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Our stock price may be volatile, and you may lose some or all of your investment.
  
    
    variations in our operating results;
    
    announcements of technological innovations, new services or service
enhancements, or significant agreements, by us or by our competitors;
    
    recruitment or departure of key personnel;
    
    changes in estimates of our operating results, or changes in recommendations by
any securities analysts that may follow us;
    
    sales of our common stock, particularly sales by officers, directors and
significant shareholders; or
    
    conditions in our industry, the industries of our customers and the economy as
a whole.
 Our stock may be subject to regulation as a penny stock, which could severely limit the
liquidity of your securities.
  
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ExhibitNo.
    
    Description
    
    Filed Herewith
    
    Form
    
    Exhibit No.
    
    Filing Date10.1
    
    Asset purchase
agreement with
Radiant Systems,
Inc. for the sale
of substantially
all of the assets
of Innuity, Inc.s
wholly owned
subsidiary Jadeon,
Inc. dated May 2,
2008.
    
    
    
    8-K
    
    
    10.1
    
    
    05/07/200831.1
    
    Certification of
Chief Executive
Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002
    
    X31.2
    
    Certification of
Chief Financial
Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002
    
    X32.1
    
    Certification of
Chief Executive
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
    
    X32.2
    
    Certification of
Chief Financial
Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act
of 2002
    
    X
 
   INNUITY, INC. 
(Registrant)By:
    /s/ JOHN R. WALLJohn R. WallChief Executive Officer, Treasurer and Secretary
(Principal executive officer)By:
    /s/ LINDEN N BARNEYLinden N BarneyChief Financial Officer
(Principal financial and accounting officer)  31