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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-KSB

Amendment 1



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

For the Fiscal Year Ended December 29, 2006

OR



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

For the transition period from
             to

Commission File Number: 000-31715



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Jagged Peak, Inc.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 91-2007478                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                                  |  |           
|------------------------------------------------- |  | ----------
|13577 Feather Sound Dr. Suite 330, Clearwater, FL |  | 33762     
|(Address of principal executive offices)          |  | (Zip Code)

Registrants telephone number, including area code: (727) 499-1717



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Securities registered pursuant
to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

Title of each class:

Common Stock,
par value $.001 per share



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Check
whether the issuer is not required to file reports pursuant to section 13 or 15(d) of the Exchange Act. ̈

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 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.    x  YES ̈NO

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the
best of registrants knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.    x

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

Issuers revenues for its most recent fiscal year ended December 29, 2006 was $11,462,300.

Aggregate market
value of the voting stock held by non-affiliates of the registrant at March 20, 2007 was $2,789,967.

There were 13,949,837 shares of the
Registrants $.001 par value common stock outstanding as of March 20, 2007.

Transitional Small Business Format (check
one).    Yes  x    No ̈



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Jagged Peak, Inc.

ANNUAL REPORT ON FORM 10-KSB

FOR THE FISCAL YEAR ENDED

DECEMBER 29, 2006

TABLE OF CONTENTS



|           |  |                                                                                                              |  |    |  | 
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | -- |  | 
|PART I     |  | 1                                                                                                           
|Item 1.    |  | Description of Business                                                                                      |  | 10
|Item 2.    |  | Description of Properties                                                                                    |  | 10
|Item 3.    |  | Legal Proceedings                                                                                            |  | 11
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 11
|           | 
|PART II    |  | 11                                                                                                          
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 11
|Item 6.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 12
|Item 7.    |  | Financial Statements                                                                                         |  | 18
|Item 8.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 18
|Item 8A.   |  | Controls and Procedures                                                                                      |  | 18
|Item 8B.   |  | Other Information                                                                                            |  |   
|           | 
|PART III   |  | 18                                                                                                          
|Item 9.    |  | Directors and Executive Officers of the Registrant                                                           |  | 18
|Item 10.   |  | Executive Compensation and Discussion and Analysis                                                           |  | 20
|Item 11.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 24
|Item 12.   |  | Certain Relationships and Related Transactions                                                               |  | 25
|Item 13.   |  | Exhibits                                                                                                     |  | 26
|Item 14.   |  | Principal Accountants Fees and Services                                                                      |  | 27
|           | 
|SIGNATURES |  |                                                                                                             



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PART I

This
Annual Report on Form 10-KSB includes 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. The Company has based these
forward-looking statements on the Companys current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us and the Companys
subsidiaries that may cause the Companys actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, will, should, could, would, expect, plan,
anticipate, believe, estimate, continue or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a material difference include, but are not limited to,
those discussed elsewhere in this Annual Report, including the section entitled Risks Particular to The Companys Business and the risks discussed in the Companys other Securities and Exchange Commission filings. The following
discussion should be read in conjunction with the Companys audited Financial Statements and related Notes thereto included elsewhere in this report.



|Item 1. | Description of Business
|------- | -----------------------

OVERVIEW

Jagged Peak, Inc. (the Company or Jagged Peak) is an e-business software and services company headquartered in Clearwater, Florida, providing
Demand and Supply Chain management, CRM execution and e-Fulfillment solutions and services. The Companys flagship product, EDGE (E-Business Dynamic Global Engine), is a web-based software application that enables companies to control and
coordinate multi-channel orders, catalogs, multi-warehouse inventories, and fulfillment across multiple customers, suppliers, employees, and partners in real-time. The Companys clients are able to build and operate custom branded portals such
as e-commerce, incentive and rebate programs, customer service, repair and reverse logistics and automate other business processes through the use of the EDGE application and its related tools.

Jagged Peaks multi-channel, enterprise EDGE application provides a comprehensive, integrated platform for e-business management that supports a broad range of
business and operational applications. Clients can use EDGE as an enterprise application or as an integrator and consolidator for multiple businesses, processes and applications. EDGE has built in tools to extend the application which enables
clients to create complex and robust e-commerce, CRM related customer services and repair and reverse logistics solutions. The EDGE application permits users to manage order capturing, processing, tracking, fulfillment, settlement, creating and
managing dynamic catalogs, customer relation management, marketing and reporting, all in real-time. The EDGE application is built to industry-standard best practices. The application has been integrated seamlessly with legacy and back-office
management systems as well as industry leading ERP, WMS, TMS and CRM software systems. In addition to the traditional software license sales model, Jagged Peak offers its software with a flexible managed services transaction based pricing model.
Jagged Peak also offers its clients third party fulfillment services that are typically bundled with its software and sold as a turnkey web-to-ship solution.

The EDGE platform has been deployed in multiple vertical markets such as consumer goods, financial services, distribution, travel and tourism and manufacturing. The following are representative of our client base:



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LOGO

There are a variety of risks associated with the Companys ability to achieve strategic objectives, including the ability
to increase market penetration, acquire and profitably manage additional businesses, current reliance on key customers, the risks inherent in expanding, and the intense competition in the industry. For a more detailed discussion of these risks, see
the section of this Item 1 entitled Risks Particular to The Companys Business.

INDUSTRY OVERVIEW

Forrester Research, which analyzes online trends and statistics, projects the online retail market for U.S. businesses to be $230 billion by 2008. This represents
approximately 10 percent of the anticipated total U.S. retail sales. Internet is also driving profitability, according to research from IPSOS. The IPSOS survey discovered that, far from being an extra expense, Internet operations boosted
businesses bottom lines. 48 percent felt the Internet helped to expand their geographic reach in the United States and 73 percent saved money by decreasing administrative costs.

According to most market indicators e-commerce sales continue to grow at a rapid pace. Many industry analysts predict strong e-commerce growth rates to continue in the U.S., with even higher expected growth rates in
European and Asia-Pacific markets. There are a number of growth factors to be considered: (i) adoption of the Internet as a means of commerce; (ii) increase in users with high speed internet connection, which enables providers to create
more interactive and customer specific web portals; (iii) Internet users like the convenience of buying products online and the ability to have that product delivered to their destination of choice; (iv) enhancements to online store
functionality, enabling not only the user additional purchase options, it also enables sellers ability to quickly take advantage of market fluctuations through immediate price changes and adjustments to sales promotions; (v) sellers are able to
better track customer buying habits and Internet activity, which enables them to focus marketing efforts and costs on the ideal customer group; and (vi) businesses are placing increased emphasis on their online business.

Despite the fact that large companies have become more reliant on sophisticated software applications to run their businesses, many enterprises have been dissatisfied
with the return on their investments. Deploying new business applications and keeping them up and running has taken them more time, effort and money than anticipated. Most companies today have a variety of order management systems, which are
segregated based on different channels, verticals, and/or lines of business. Each system typically has different workflows and order cycles to accomplish the requirements of the business. This leads to a lack of visibility into customer interactions
across the enterprise, and an inability to optimize orders across multiple order systems. For most companies, managing order-to-delivery is largely a manual process that requires numerous staff to pull information from multiple systems and
coordinate order fulfillment with suppliers and logistics providers using phone, fax, e-mail, and Electronic Data Interchange (EDI) messages. These manual systems are expensive to manage, error-prone, not scalable, and typically break down under the
real-time demands and compressed business cycles of todays environment.



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COMPETITIVE ADVANTAGES

The Company provides a suite of services to help businesses worldwide grow their revenues and avoid the costs and risks associated with running a global technology operation in-house. The Company provides vertically integrated e-business
solutions that include e-commerce, order management, CRM, digital and physical product fulfillment, email marketing, business process automation and strategic marketing services. At the core of these services is the Companys proprietary
software EDGE. The EDGE application provides a complete multi-channel, multi distribution center, multi-enterprise, highly functional software solution that can be deployed in minimal time, requires a lower upfront purchase cost or activation fee,
and is easy to use and maintain. As a result, Jagged Peak believes it is able to deliver a complete enterprise commerce management software solution faster and at a lower cost than the competition. Jagged Peak offers its clients an end-to-end web
based order management software solution that has a compelling return-on-investment proposition that is the result of an attractive and flexible transaction-based pricing model coupled with reduced implementation requirements. The Company believes
its EDGE application maintains additional advantages relative to the competition such as complete web-native architecture, platform or vendor independence, highly scalable solution, role-based hierarchical security, real-time order visibility and
ease of use. We believe that we are uniquely positioned to assist our clients accelerate and manage their growth.

GROWTH STRATEGY

The Companys growth strategy includes:



| |  |  | Increasing Market Share - Jagged Peak believes that it can leverage its success with existing clients to obtain new clients. The Company has a
proven ability to add new client relationships by utilizing its scalable business model to increase its clients base while maintaining its ability to provide a high quality software product.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the Company believes that current clients will begin to increase their spending on technology solutions in an effort to update legacy order capture and order
management applications that are no longer efficient and will ultimately become obsolete. Jagged Peak expects that its growing number of new client relationships, combined with its proven ability to expand its revenue base with existing clients,
will enable the Company to capture a greater portion of its clients global outsourced e-commerce related expenditures.

Jagged Peak believes that
significant opportunities exist to leverage its current client base to increase its penetration in attractive end markets such as consumer retail, financial services & insurance, healthcare & pharmaceutical, travel &
tourism, general manufacturing, and government.



| |  |  | Developing Brand Recognition- The Company must continue to incur expenses to develop the brand of Jagged Peak and EDGE. The
Company intends to leverage the Companys broader set of capabilities with the goal of capturing business opportunities, which would not normally be available to smaller companies.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding EDGE Application Offerings - Jagged Peak has a proven ability to identify and develop new applications for its EDGE product offering to meet
the needs of the marketplace. The Company plans to continue to diversify its EDGE software platform by adding capabilities such as demand forecasting, marketing data mining, analytical tools and communications, as well as multi-vendor selection and
permissions for purchasing and procurement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding the Sales Force and Investment in Marketing - Jagged Peak has achieved an impressive customer base without the efforts of a dedicated sales
force and little investment in marketing. Client referrals and prior client relationships have fueled the growth of the Company to date. Management believes, however, in order to fully capitalize on the market opportunity, a direct sales force and
marketing organization needs to be established and complimented with focused channel partners. The Company intends to recruit direct salespeople with enterprise software sales experience and long-standing relationships in various targeted vertical
markets. The Company believes that it could significantly enhance its business development efforts by increasing the number of sales people and leveraging the resources of a mature sales and marketing organization.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Future Software Product Development - The EDGE application was first released in January of 2000 and has been under continual development. Significant
functionality has been added over the years and the current product is highly functional and robust, yet easy to use and rapidly deployed. Features have been added based on real world demand from clients. The Company plans to continuously invest in
and enhance the EDGE product.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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OPERATIONS AND SERVICES

Software Product and Technology

Jagged Peaks proprietary EDGE application is a highly scalable e-business platform that
empowers companies to effectively conduct business and communicate with their customers, vendors, suppliers, employees and distribution partners. The EDGE application is a web-based, end-to-end transaction processing and information management
system that enables companies to achieve complete automation and total integration of their demand management, e-business and related processes. EDGE is comprised of integrated modules that work together seamlessly in real-time.

Fulfillment Services

Jagged Peak leads its sales and marketing of
new business development efforts with its EDGE application. It also offers customers a complete turnkey solution, if desired, which can include both physical and digital fulfillment services. EDGE is used for our fulfillment, which includes
reporting, order fulfillment, return authorizations, back order processing, and full transaction auditing capabilities.

Hosting and Managed Services
(ASP)

Jagged Peaks hosting and managed services (ASP) transaction pricing model provides a strong recurring revenue stream for the Company as it
builds its customer base. Managed services contracts are typically three years in length with minimum transaction volumes guaranteed. The managed services model provides a lower initial cost, a turnkey outsourced solution with a very rapid path to
deployment, which requires less of our clients internal resources.

INFORMATION SYSTEMS

A key component of the Jagged Peak growth strategy is the significant capital, planning and corporate intelligence that is deployed towards technology as we deliver our
solution primarily through the EDGE application. To remain competitive, we must continue to enhance and improve the responsiveness, features and functionality of the EDGE application and the underlying network infrastructure. We are continuously
working to improve our infrastructure, core applications and software products.

EDGE is a highly available, scalable platform that is designed to handle
an unlimited number of stores and products. An EDGE cluster consists of a configurable number of redundant web servers configured to J2EE standards that serves data from a cluster of Microsoft SQL or similar database servers. Part of our standard
architecture includes the use of a sophisticated database configured and designed to maintain flexibility and speed. Due to the programming architecture and network design of the EDGE platform, it can seamlessly be extended with additional modules
and components. The EDGE administrative system allows instantaneous system wide changes to be implemented and administrated by the end user to support rapid response to industry changes, including business logic changes, payment processing changes,
warehouse and logistics concerns, requirements for taxes, and pricing rules. EDGE allows the end user to create dynamic, time sensitive business rules to control what items are available to specific users, based upon a highly configurable set of
data. EDGE also supports real time based transactions in all instances as opposed to a batching process, enabling our clients inventory and orders to have real-time accuracy and in synch with external systems.

Our environment architecture consists of multiple layers to ensure smooth operation with minimal interruption. By co-locating our mission critical systems we enable
ourselves to separate our web accessible systems from those that support our internal functions. Each network is protected using industry standard encryption, authentication, firewalls, and anti-virus software. With dependant clients spanning the
entire globe, state of the art monitoring is used to provide alerting, logging, and the timely notifications needed to support a twenty-four hour, three hundred and sixty-five day operation. Whenever possible we continue to improve and implement the
latest in best-practices to ensure that our system infrastructure remains current and up-to-date, allowing us to keep sensitive information safe and our systems secure while meeting the changing demands of our clients and an always evolving
industry.

In executing this strategy, the Company has and will continue to invest significant management and financial resources to deliver these
technologies. The Company believes these technologies will provide financial and competitive advantages in the years ahead and will increase our sustainable competitive advantages in the marketplace.

CUSTOMERS, SALES AND MARKETING

Jagged Peaks EDGE application
addresses the large market opportunity for e-commerce software applications that can integrate across Supply Chain Management (SCM) and Customer Relationship Management (CRM) systems. Since 2000, the generally accepted definition of SCM has expanded
to include all applications relating to demand management, e-commerce, and order execution. Many companies today are trying to cost effectively and rapidly web enable their legacy order managements systems. Larger corporations have many departments,
divisions, or subsidiary companies that are seeking to optimally manage their demand chain. In general, companies are attempting to enhance communications and create more efficient business processes and visibility within an enterprise and across
customers, vendors, suppliers or other external relationships. EDGE facilitates the integration of multiple applications across the Web, while providing companies a way to effectively manage transactions of every nature with multiple parties. The
market for SCM software is expected to be more than $3 billion in the next few years. Factors contributing to the historical and projected growth in the SCM software market include: increased emphasis on the customer  and supplier-centric



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approach to managing revenues and expenses, increasing profits, and expanding overall competitive positioning. In addition, current economic conditions have
increased companies requirements for short-term Return-On-Investment (ROI) and proof of value.

A significant portion of the Companys revenue
comes from a few customers. (See Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Policies, Concentration of Risk.)

SEASONALITY

Historically, the Companys revenues and
profitability have been subject to moderate quarterly seasonal trends. The first quarter has traditionally been the weakest and the fourth quarter has traditionally been the strongest. Typically, this pattern has been the result of factors such as,
national holidays, customer demand and economic conditions. Additionally, significant portions of the Companys revenues are from clients whose business levels are impacted by seasonality and the economy.

PERSONNEL

At December 29, 2006, the Company had approximately
74 full time employees working for Jagged Peak. At this time, none of the Companys employees are covered by a collective bargaining agreement. The Company recognizes the employees as one of its most valuable asset and provides above industry
average compensation and benefits. The recruitment, training and retention of qualified employees are essential to support continued growth and to meet the service requirements of our clients.

RISK MANAGEMENT

The Company maintains general liability, errors and
omissions, property, property of others and workers compensation insurance. The Company could incur claims in excess of the policy limits or incur claims not covered by the insurance policy.

CORPORATE INFORMATION

Compass Marketing Services, Inc.
(Compass), a Florida corporation, was formed in 1990. On August 22, 2000, Compass merged with IBIS Business Internet Solutions, Inc., a Florida corporation, in a merger of equals and amended its name to Jagged Peak, Inc. (the
Company). In July 2005, Jagged Peak, Inc. merged with a subsidiary of Absolute Glass Inc., which was incorporated in Nevada in November of 1999. Absolute Glass, Inc. subsequently amended its articles of incorporation and changed its name
to Jagged Peak Inc. (the Company) The Companys principal executive offices are located at 13577 Feather Sound Drive, Suite 330, Clearwater, Florida 33762. The telephone number is (727) 499-1717 and the Internet website address
is www.JaggedPeak.com.

RISKS PARTICULAR TO THE COMPANYS BUSINESS

LIMITED OPERATING HISTORY

The Company is in the expansion stage and accordingly, the Companys business is
subject to the risks inherent in the transition to a large-scale business. Failure by the Company to develop the ability to consistently provide high quality products and services to its clients would have a material adverse effect on the
Companys business, operating results and financial condition. To address these risks, the Company must, among other things, respond to competitive developments, attract and motivate qualified personnel, develop market acceptance for its
products, establish effective distribution channels, effectively manage growth and continue to improve its proprietary technologies and successfully commercialize products incorporating such technologies. In addition, the Companys limited
operating history makes forecasting difficult.

CONTROL FROM OFFICERS AND DIRECTORS

The Companys executive officers and directors and their affiliates together control more than 50% of the Companys voting shares outstanding. As a result, these stockholders, if they act together, will be
able to control all matters requiring the Companys stockholders approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may delay, prevent or deter a change in
control, and could deprive the Companys stockholders of an opportunity to receive a premium for their common stock as part of a sale of the Company or its assets.

LOSSES FROM OPERATIONS; NO ASSURANCES OF PROFITABILITY

Jagged Peak had losses before tax benefit of approximately
$1,851,100 for the fiscal year ended December 29, 2006, and losses before tax benefit of approximately $1,029,900 for the fiscal year ended December 30, 2005, and there can be no assurance that the Company will not incur additional losses
in the future. The Companys operating expenses have increased as the business has grown and can be expected to increase significantly because of expansion efforts. There is no assurance that the Company will be able to generate sufficient
revenue to meet its operating expenditures or to operate profitably.



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A LOSS OF ANY CLIENT THAT ACCOUNTS FOR A LARGE PORTION OF OUR REVENUE WOULD CAUSE OUR REVENUE TO DECLINE

Sales to one of our clients accounted for approximately 50% of our revenue in 2006. Contracts with our clients are generally two to three years in
length. If any one of these key contracts is not renewed or otherwise terminates, or if revenues from these clients decline for any other reason (such as competitive developments), our revenue would decline and our ability to obtain profitability
would be impaired. It is important to our ongoing success that we maintain these key client relationships and at the same time develop new client relationships.

COMPETITION

Competition in the market for providing transaction management software is intense. The Companys software products face
competition from many larger, more established companies. In addition, other companies could seek to introduce competing products or services and increased competition could result in a decrease in the price charged by the Companys competitors
for their products and services or reduce demand for the Companys products and services, which would have a material adverse effect on the Companys business, operating results and financial condition. There can be no assurance that the
Company will be able to compete successfully with its existing or potential competitors, which may have substantially greater financial, technical, and marketing resources, longer operating histories, greater name recognition or more established
relationships in the industry than the Company. If any of these competitors provide competitive software products and services to the marketplace in the future, the Company cannot be sure that it will have the resources or expertise to compete
successfully.

LACK OF MARKET ACCEPTANCE FOR PRODUCTS

The market for the Companys software may develop at a slower pace than expected as a result of lack of acceptance by companies involved in implementing a supply-chain execution software system for their business processes. If the
market develops more slowly than expected, or if the Companys software products do not achieve significant market acceptance, the Companys business, operating and financial condition would be materially adversely affected.

OUR OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS IN DEMAND FOR PRODUCTS AND SERVICES OFFERED BY OUR CLIENTS OR US

Our quarterly and annual operating results are subject to fluctuations in demand for the products or services offered by our clients or us. If, as a result, our annual or
quarterly revenues or operating profits fail to meet the guidance we provide to securities analysts and investors, or we otherwise fail to meet their expectations, the trading price of our common stock will likely decline.

NEED FOR FURTHER PRODUCT DEVELOPMENT

Although the Company currently
has the capability to achieve installation of its software products for enterprise initiatives, additional ongoing development is necessary to continue to enhance the quality, efficiency and reliability of the Companys software product
offerings. If the Company were unable to continue to develop and install market leading software products, then the Companys business, operating results and financial condition would be materially adversely affected.

INTERNATIONAL OPERATIONS

In the normal course of business, the
Company may enter into contractual relationships with companies located worldwide. Accordingly, the Company may be subject to general geopolitical risks in connection with some of its contracts, such as political, social and economic instability,
changes in diplomatic and trade or business relationships and other factors beyond the Companys control. There can be no assurance that such factors will not impact the Companys operations in the future or require the Company to modify
its anticipated research practices.

DEVELOPMENTS IN ACCOUNTING STANDARDS MAY CAUSE US TO INCREASE OUR RECORDED EXPENSES, WHICH IN TURN WOULD JEOPARDIZE
OUR ABILITY TO OBTAIN PROFITABILITY

The Financial Accounting Standards Board recently adopted a proposal to require that the fair value of stock
options and other share based payments be reflected as an expense item in the financial statements of public companies for quarters beginning after December 15, 2005. As a result of the adoption of this, we recorded a significant additional
non-cash expense as compared to prior years.



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THE GROWTH OF THE MARKET FOR OUR SERVICES DEPENDS ON THE DEVELOPMENT AND MAINTENANCE OF THE INTERNET INFRASTRUCTURE

Our business is based on delivering services over the Internet, and the success of our business therefore depends on the development and maintenance of
a sound Internet infrastructure. This includes maintenance of a reliable network backbone with the necessary speed, data capacity and security, as well as timely development of complementary products such as high-speed modems, for providing reliable
Internet access and services. Our ability to increase the speed and scope of our services is limited by, and depends upon, the speed and reliability of both the Internet and our clients internal networks. Consequently, as Internet usage
increases, the growth of the market for our services depends upon improvements made to the Internet as well as to individual clients networking infrastructures to alleviate overloading and congestion. In addition, any delays in the adoption of
new standards and protocols required to govern increased levels of Internet activity or increased governmental regulation may have a detrimental effect on the Internet infrastructure.

WE MAY BECOME LIABLE TO CLIENTS WHO ARE DISSATISFIED WITH OUR SERVICES

We design, develop, implement and manage
e-commerce solutions that are crucial to the operation of our clients businesses. Defects in the solutions we develop could result in delayed or lost revenue, adverse end-user reaction, and/or negative publicity, which could require expensive
corrections. As a result, clients who experience these adverse consequences either directly or indirectly as a result of our services could bring claims against us for substantial damages. Any claims asserted could exceed the level of any insurance
coverage that may be available to us. Moreover, the insurance we carry may not continue to be available on economically reasonable terms, or at all. The successful assertion of one or more large claims that are uninsured, that exceed insurance
coverage or that result in changes to insurance policies (including premium increases) could adversely affect our operating results or financial condition.

CHANGES IN GOVERNMENT REGULATION COULD LIMIT OUR INTERNET ACTIVITIES OR RESULT IN ADDITIONAL COSTS OF DOING BUSINESS OVER THE INTERNET

We
are subject to the same federal, state and local laws as other companies conducting business over the Internet. Today, there are relatively few laws specifically directed towards conducting business over the Internet. The adoption or modification of
laws related to the Internet could harm our business, operating results and financial condition by increasing our costs and administrative burdens. Due to the increasing popularity and use of the Internet, many laws and regulations relating to the
Internet are being debated at the international, federal and state levels.

Applicability to the Internet of existing laws governing issues such as
property ownership, copyrights and other intellectual property issues, taxation, libel, obscenity and personal privacy could also harm our operating results and substantially increase the cost to us of doing business.

LAWS RELATING TO USER INFORMATION AND ONLINE PRIVACY MAY LIMIT THE COLLECTION AND USE OF END-USER DATA FOR OUR CLIENTS

We collect and maintain end-user data for our clients, which subjects us to increasing international, federal and state regulation related to online privacy and the use
of personal user information. Congress recently enacted anti-SPAM legislation with which we must comply when providing email campaigns for our clients. Bills are pending in Congress and in various states that address online privacy protections.
Several states have proposed, and some have enacted, legislation that would limit the use of personal user information or require online services to establish privacy policies. In addition, the U.S. Federal Trade Commission, or FTC, has urged
Congress to adopt legislation regarding the collection and use of personal identifying information obtained from individuals when accessing Web sites.

Even in the absence of laws requiring companies to establish these procedures, the FTC has settled several proceedings resulting in consent decrees in which Internet companies have been required to establish programs regarding the manner in
which personal information is collected from users and provided to third parties. We could become a party to a similar enforcement proceeding. These regulatory and enforcement efforts could limit our collection of demographic and personal
information from end-users, which could adversely affect our ability to comprehensively serve our clients.

INTERNET-RELATED STOCK PRICES ARE ESPECIALLY
VOLATILE AND THIS VOLATILITY MAY DEPRESS OUR STOCK PRICE OR CAUSE IT TO FLUCTUATE SIGNIFICANTLY

The stock market, and the trading prices of
Internet-related companies in particular, have been notably volatile. This volatility is likely to continue in the short-term and is not necessarily related to the operating performance of affected companies. This broad market and industry
volatility could significantly reduce the price of our common stock at any time, without regard to our operating performance.

INTERRUPTION OF BUSINESS
DUE TO INCREASED SECURITY MEASURES IN RESPONSE TO TERRORISM

The continued threat of terrorism within the United States and the ongoing military action
and heightened security measures in response to such threat has and may cause significant disruption to commerce. The U.S. economy in general is being adversely affected by the terrorist activities and potential activities. Any economic downturn
could adversely impact the Companys results of



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operations, impair the Companys ability to raise capital or otherwise adversely affect the Companys ability to grow the business. It is
impossible to predict how this may affect the Companys business or the economy in the U.S. and in the world, generally. In the event of further threats or acts of terrorism, the Companys business and operations may be severely and
adversely affected or destroyed.

REGULATION

The
Companys operations are subject to various federal, state and local laws and regulations. Although compliance with these laws and regulations has not had a material effect on the Companys operations or financial condition, there is no
assurance that additions or changes to current laws or regulations will not have a material effect on us, the Companys profitability and financial condition.

SUBSTANTIAL ALTERATION OF THE COMPANYS CURRENT BUSINESS AND REVENUE MODEL

The Companys present business and revenue model
represents the current view of the optimal business and revenue structure, which is to derive revenues and achieve profitability in the shortest period. There can be no assurance that current models will not be altered significantly or replaced with
an alternative model that is driven by motivations other than near-term revenues and/or profitability (for example, building market share before the Companys competitors). Any such alteration or replacement of the business and revenue model
may ultimately result in the deferring of certain revenues in favor of potentially establishing larger market share. The Company cannot assure that any adjustment or change in the business and revenue model will prove to be successful.

INABILITY TO MANAGE GROWTH AND INTERNAL EXPANSION

The Company has
not yet undergone the significant managerial and internal expansion that the Company expects will occur, and the Companys inability to manage growth could hurt the results of operations. Expansion of operations will be required to address
anticipated growth of the Companys customer base and market opportunities. Expansion will place a significant strain on the Companys management, operational and financial resources. Currently, the Company has a limited number of
employees. The Company will need to improve existing procedures and controls as well as implement new transaction processing, operational and financial systems, procedures and controls to expand, train and manage the Companys employee base.
The Companys failure to manage growth effectively could have a damaging effect on the Companys business, results of operations and financial condition.

DEPENDENCE ON KEY MANAGEMENT; LOSS OF KEY MANAGEMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON OPERATIONS

The Companys success depends
in part upon retaining the services of certain executive officers, software developers and other key employees. In addition, because of the Companys rapid pace of growth, the Company is also dependent on its ability to recruit, retain and
motivate personnel with technical, marketing, sales and managerial skills. If the Company loses key personnel or is unable to recruit qualified personnel, the ability to manage the day-to-day aspects of the business will be weakened. The
Companys operations and prospects depend in large part on the performance of the senior management team. The loss of the services of one or more members of the senior management team could have a material adverse effect on the business,
financial condition and results of operation. Because the senior management team has exceptional experience with the Company and in the industry, it would be difficult to replace them without adversely effecting the Companys business
operations.

WE ARE NOT REQUIRED TO MEET OR MAINTAIN ANY LISTING STANDARDS FOR OUR COMMON STOCK TO BE QUOTED ON THE OTC BULLETIN BOARD, WHICH COULD
AFFECT OUR STOCKHOLDERS ABILITY TO ACCESS TRADING INFORMATION ABOUT OUR COMMON STOCK

OTCBB market is separate and distinct from the Nasdaq Stock
Market and any national stock exchange, such as the New York Stock Exchange or the American Stock Exchange. Although the OTC Bulletin Board is a regulated quotation service operated by the National Association of Securities Dealers
(NASD), that displays real-time quotes, last sale prices, and volume information in over-the-counter (OTC) equity securities like our common stock, we are not required to meet or maintain any qualitative or quantitative
standards for our common stock to be quoted on the OTCBB. Our common stock does not presently meet the minimum listing standards for listing on the Nasdaq Capital Market or any national securities exchange, which could affect our stockholders
ability to access trading information about our common stock.

IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS, WE COULD BE REMOVED FROM THE
OTC BULLETIN BOARD, WHICH WOULD LIMIT THE ABILITY OF BROKERDEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDER TO SELL THEIR SECURITIES IN THE SECONDARY MARKET

Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13,
in order to maintain price quotation privileges on the OTC



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##### Table of Contents

Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board. As a result, the market
liquidity for our securities could be severely adversely affected by limiting the ability of brokerdealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

RECENTLY ENACTED AND PROPOSED CHANGES IN SECURITIES LAWS AND REGULATIONS WILL INCREASE OUR COSTS

The Sarbanes-Oxley Act, which became law in July 2002, and rules subsequently implemented by the SEC and the Nasdaq National Market have imposed various new requirements on public companies, including requiring
changes in corporate governance practices. Our management and other personnel will need to continue to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations have increased our annual legal and
financial compliance costs, have made some activities more time-consuming and costly, and could expose us to additional liability. In addition, these rules and regulations may make retention and recruitment of qualified persons to serve on our board
of directors or executive management more difficult. We continue to evaluate and monitor regulatory and legislative developments and cannot reliably estimate the timing or magnitude of all costs we may incur as a result of the Sarbanes-Oxley Act or
other related legislation or regulation.

OUR ABILITY TO COMPETE AND PURSUE STRATEGIC ALTERNATIVES COULD BE JEOPARDIZED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS OR INFRINGE ON INTELLECTUAL PROPERTY RIGHTS OF OTHERS

We rely on a combination of patent, copyright, trademark and trade
secret laws and restrictions on disclosure to protect our intellectual property rights. We also enter into confidentiality or license agreements with our employees, consultants and corporate partners and control access to and distribution of our
products, documentation and other proprietary information. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. Monitoring unauthorized use of our
products is difficult and we cannot be certain that the steps we have taken will prevent unauthorized use of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. If
competitors are able to use our technology, our ability to compete and pursue strategic alternatives effectively could be harmed. Litigation may be necessary to enforce our intellectual property rights. Any such litigation could result in
substantial costs and diversion of resources and could have a material adverse affect on our business, operating results and financial condition.

Our
industry is characterized by the existence of a large number of patents and frequent claims and related litigation regarding patents and other intellectual property rights. In the course of our business, we may receive claims of infringement or
otherwise become aware of potentially relevant patents or other intellectual property rights held by other parties. We evaluate the validity and applicability of these intellectual property rights, and determine in each case whether we must
negotiate licenses or cross-licenses to incorporate or use the proprietary technologies in our products.

Any parties asserting that our products infringe
upon their proprietary rights would require us to defend ourselves, and possibly our customers, manufacturers or suppliers against the alleged infringement. Regardless of their merit, these claims could result in costly litigation and subject us to
the risk of significant liability for damages. Such claims would likely be time consuming and expensive to resolve, would divert management time and attention and would put us at risk to:



| |  |  | Stop selling, incorporating or using our products that incorporate the challenged intellectual property;
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | Obtain from the owner of the intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms,
or at all;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Redesign those products that use such technology; or
| | - |  | ----------------------------------------------------



| |  |  | Accept a return of products that use such technologies.
| | - |  | -------------------------------------------------------

If we are forced to take any of the foregoing actions, our business may be seriously harmed.

In addition, we license public domain software and
proprietary technology from third parties for use in our existing products, as well as new product development and enhancements. We cannot be assured that such licenses will be available to us on commercially reasonable terms in the future, if at
all. The inability to maintain or obtain any such license required for our current or future products and enhancements could require us to substitute technology of lower quality or performance standards or at greater cost, either of which could
adversely impact the competitiveness of our products.



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##### Table of Contents

VOLATILITY OF THE MARKET PRICE OF THE COMPANYS STOCK

The market price of the Companys common stock may be volatile, which could cause the value of your investment to decline. Any of the following factors could affect
the market price of our common stock:



| |  |  | Changes in earnings estimates and outlook by financial analysts;
| | - |  | ----------------------------------------------------------------



| |  |  | Our failure to meet financial analysts and investors performance expectations;
| | - |  | --------------------------------------------------------------------------------



| |  |  | Changes in market valuations of other transportation and logistics companies; or
| | - |  | --------------------------------------------------------------------------------



| |  |  | General market and economic conditions.
| | - |  | ---------------------------------------

ACCORDING TO THE SEC, THE MARKET FOR PENNY STOCKS HAS SUFFERED FROM PATTERNS OF FRAUD AND ABUSE

Such patterns include:



| |  |  | Control of the market for the security by one or a few brokerdealers that are often related to the promoter or issuer;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;
| | - |  | -------------------------------------------------------------------------------------------------------------------



| |  |  | Boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | Excessive and undisclosed bidask differentials and markups by selling brokerdealers; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | The wholesale dumping of the same securities by promoters and brokerdealers after prices have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor losses.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, many of the risks described elsewhere in this Risk
Factors section could adversely affect the stock price. The stock markets have experienced price and volume volatility that have affected many companies stock prices. Stock prices for many companies have experienced wide fluctuations
that have often been unrelated to the operating performance of those companies. These types of fluctuations may affect the market price of our common stock.

APPLICABILITY OF LOW PRICED STOCK RISK DISCLOSURE REQUIREMENTS

The Companys common stock may be considered a low priced security
under rules promulgated under the Securities Exchange Act of 1934 (Exchange Act). Under these rules, broker-dealers participating in transactions in low priced securities must first deliver a risk disclosure document which describes that
risks associated with such stock, the broker-dealers duties, the customers rights and remedies, and certain market and other information, and make a suitability determination approving the customer for low priced stock transactions based
on the customers financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing and provide monthly account statements to the customer, and obtain specific written consent of the
customer. With these restrictions, the likely effect of designation as a low price stock, would be to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity of the stock and to increase the transaction
costs of sales and purchase of such stocks compared to other securities.

NO DIVIDENDS ANTICIPATED

The Company intends to retain all future earnings for use in the development of the Companys business and does not anticipate paying any cash dividends on the
Common Stock in the near future.



|Item 2. | Description of Properties
|------- | -------------------------

The
Companys executive offices are located in 10,000 square feet of leased office space located at 13577 Feather Sound Drive, Suite 330, Clearwater, Florida 33762. Monthly rent expense is approximately $10,000 per month under a lease that expires
April 2008. In addition the Company leases approximately 90,000 square feet of warehouse space at 118 18thStreet
South, St. Petersburg, Florida. The monthly rent expense is approximately $30,000 per month under a lease that expires May 2011.



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##### Table of Contents

The following is an annual schedule of approximate future minimum rental payments required under operating facilities
leases that have an initial or remaining non-cancelable lease term in excess of 1 year as of December 29, 2006:



|            |  |                         |          
|----------- |  | ----------------------- | ---------
|Year Ending |  | Minimum Rental Payments
|2007        |  | $                       | 462,000  
|2008        |  | $                       | 389,000  
|2009        |  | $                       | 357,000  
|2010        |  | $                       | 364,000  
|2011        |  | $                       | 122,000  
|            |  |                         |          
|Total       |  | $                       | 1,694,000
|            |  |                         |          

The Company believes the facilities are in reasonable condition, the correct size, adequately insured and
adequately provide for the Companys immediate and foreseeable needs.



|Item 3. | Legal Proceedings
|------- | -----------------

In the ordinary course of business, the Company
may be a party to a variety of legal actions that affect any business. The Company does not anticipate any of these matters or any matters in the aggregate to have a material adverse effect on the Companys business or its financial position or
results of operations.



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

None

PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------

The Companys common stock is traded on the OTC under the symbol JGPK. The table below sets forth the high and low bid prices for the Companys
common stock for the quarters within 2005 and 2006 since the Jagged Peak Inc. and Absolute Glass merger in July of 2005 as reported by NASDAQ. Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.



|                   |  |   |  |                    |  |      |      |     |   |     
|------------------ |  | - |  | ------------------ |  | ---- | ---- | --- | - | ----
|Period             |  |   |  |                    |  | High |      | Low
|July 15, 2005      |  | - |  | September 30, 2005 |  | $    | 1.70 |     | $ | 1.10
|October 1, 2005    |  | - |  | December 30, 2005  |  | $    | 2.50 |     | $ | 1.40
|December 31, 2005  |  | - |  | March 31, 2006     |  | $    | 2.70 |     | $ | 1.60
|April 1, 2006      |  | - |  | June 30, 2006      |  | $    | 2.40 |     | $ | 1.08
|July 1, 2006       |  | - |  | September 29, 2006 |  | $    | 1.50 |     | $ | 0.52
|September 30, 2006 |  | - |  | December 29, 2006  |  | $    | 1.06 |     | $ | 0.30

The Company has approximately 80 investors of record. The Company has never paid cash dividends on the
Companys common stock. The Company intends to keep future earnings, if any, to finance the expansion of the Companys business, and the Company does not anticipate that any cash dividends will be paid in the near future. The
Companys future payment of dividends will depend on the Companys earnings, capital requirements, expansion plans, financial condition and other relevant factors.

RECENT SALES OF UNREGISTERED SECURITIES

In December of 2005, the Company issued 125,000 common stock shares, $0.001
par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchase price of the stock was $87,500 or $.70 per share and used for working capital.



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##### Table of Contents

In January of 2006, the Company issued 125,000 common stock shares, $0.001 par value per share, under Regulation D
promulgated under the Securities Act of 1933, as amended. The purchase price of the stock was $125,000 or $1.00 per share and used for working capital.

In
February of 2006, the Company purchased 394,462 shares from a certain investor for $100,000 and an option to purchase 20,000 Jagged Peak common shares at $2.00 per share. The purchase price of the stock was $0.25 per share. The stock was purchased
for another investor where Jagged Peak issued 394,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchaser was an accredited investor as such term is
defined under such Regulation D. The purchase price of the stock is $110,000 or $0.28 per share. In addition the Company issued 100,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933,
as amended. The purchaser was an accredited investor as such term is defined under such Regulation D. The purchase price of the stock is $100,000 or $1.00 per share. Approximately $26,000 was paid in fees related to these transactions.
The net cash received from the above transaction was $84,000, which will be used for working capital.

In April of 2006, the Company issued 125,000 common
stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchase price of the stock was $125,000 or $1.00 per share and used for working capital.

In August of 2006, the Company issued 100,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as
amended. The stock was issued for services related to assisting management capitalize the Company. The stock was valued at the market price on the date of issue of approximately $75,000 or $0.75 per share.



|Item 6. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

This discussion is intended to further the readers understanding of the Companys financial condition and results of operations and should be read in conjunction with the Companys financial statements
and related notes included elsewhere herein. This discussion also contains forward-looking statements. The Companys actual results could differ materially from those anticipated in these forward-looking statements as a result of the risks and
uncertainties set forth elsewhere in this Annual Report and in the Companys other SEC filings. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. The Company is not
party to any transactions that would be considered off balance sheet pursuant to disclosure requirements under ITEM 303(c) of Regulation S-B.

OVERVIEW

Jagged Peak, Inc. (the Company or Jagged Peak) is an e-business software and services company
headquartered in Clearwater, Florida, providing Demand and Supply Chain Management, CRM execution and e-Fulfillment solutions and services. The Companys flagship product, EDGE (E-Business Dynamic Global Engine), is a web-based software
application that enables companies to control and coordinate multi-channel orders, catalogs, multi-warehouse inventories, and fulfillment across multiple customers, suppliers, employees, and partners in real-time. The Companys clients are able
to build and operate custom branded portals such as e-commerce, incentive and rebate programs, customer service, repair and reverse logistics and automate other business processes through the use of the EDGE application and its related tools.

Effective January 1, 2003, the Company elected to change its fiscal year end to correspond to accounting periods based on a 52/53 week reporting
year. Therefore, the periods ended December 29, 2006 and December 30, 2005 consisted of 52 weeks.

On July 8, 2005, Absolute Glass
Protection, Inc. (Absolute) completed the acquisition of Jagged Peak, Inc. a Florida corporation (Jagged Peak), through a reverse triangular merger in which Jagged Peak merged with Absolute Glass Protection Acquisition
Corporation, a Nevada corporation (Absolute Sub) that was a wholly owned subsidiary of Absolute with no assets or liabilities formed solely for the purpose of facilitating the merger (the Merger). This transaction is
accounted for as a reverse merger, with Jagged Peak treated as the accounting acquirer for financial statement purposes. This transaction closed effective July 8, 2005, and Absolute changed its corporate name to Jagged Peak, Inc.

CRITICAL ACCOUNTING POLICIES

Use of Estimates

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. These
principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The Company reviews its estimates, including but not limited to, capitalization of software,



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##### Table of Contents

work in process, recoverability of long-lived assets, recoverability of prepaid expenses, valuation on deferred tax assets and allowance for doubtful
accounts, on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made, as information is available. Management believes that these
estimates are reasonable and have been discussed with the audit committee; however, actual results could differ from these estimates.

Revenue
Recognition

The Company recognizes revenues in accordance with Statement of Position (SOP) 97-2, (Software Revenue Recognition) as amended by SOP 98-9
(Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions).Revenue from software license agreements is recognized when an agreement exists, delivery of the software has occurred, the fee is fixed or
determinable, and collectibility is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among the elements based on the relative fair value of each of the elements. Maintenance and
support agreement revenues are amortized over the contract period, which is usually one year.

Additional technology revenues are derived from software
development services, managed services, transaction fees, and consulting and customized technology assignments. Revenue from technology service arrangements and software development services is recognized as services are provided or on the
percentage of completion method for those arrangements with specified milestones. The percentage of completion is based on labor hours incurred to total labor hours expected to be incurred.

Revenue is also derived from fulfillment service arrangements. Services included under fulfillment arrangements include account services, shipping and handling, order
processing, packaging, storage and reporting. These services are based on established monthly charges as well as handling fees based on volume. Work in process represents unbilled costs and services. Shipping and handling costs are classified as
cost of sales.

Concentration of Risk

Financial
instruments, which potentially subject the Company to concentrations of credit risk, are cash and cash equivalents and accounts receivables.

The majority
of cash is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and, therefore, bear minimal
risk.

Sales to a single customer amounted to approximately $5,681,000 or approximately 50% and sales to two customers amounted to approximately $5,043,000
or approximately 52% of total revenues during the 52-week periods ended December 29, 2006 and December 30, 2005, respectively. Accounts receivable from the one customer at December 29, 2006 was approximately $476,400 or approximately
40% and from the two customers at December 30, 2005, accounts receivable amounted to approximately $312,000 or approximately 29% of the balance. The risk of this is mitigated as the deferred revenue and customer deposits from the single
customer at December 29, 2006 was approximately $250,000 and from the two customers at December 30, 2005 the deferred revenue and customer deposits amounted to approximately $391,000.

The Company extends credit to its various customers based on evaluation of the customers financial condition and ability to pay the Company in accordance with the
payment terms. The Company provides for estimated losses on accounts receivable considering a number of factors, including the overall aging of accounts receivables, customers payment history and the customers current ability to pay its
obligation. Based on managements review of accounts receivable and other receivables, an allowance for doubtful accounts of approximately $105,000 and $45,000 is considered necessary as of December 29, 2006 and December 30, 2005,
respectively. The Company charges uncollectible accounts against the allowance account once the invoices are deemed unlikely to be collectible. Although management believes that accounts receivable are recorded at their net realizable value, a 10%
decline in historical collection rate would increase the current bad debt expense for the period ended December 29, 2006 by approximately $18,000. We do not accrue interest on past due receivables.

Contingent Liabilities

In the normal course of business the Company
is party to legal actions, which are not material to operations pursuant to Item 301 of Regulation S-B.



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##### Table of Contents

RESULTS OF OPERATIONS

For the 52-week period ended December 29, 2006 compared to the period ended December 30, 2005.

The following table summarizes
selected financial data of the Company:



|                                    |  |      |            |   |      |   |            |        |  |   |           |   |  |    |  
|----------------------------------- |  | ---- | ---------- | - | ---- | - | ---------- | ------ |  | - | --------- | - |  | -- | -
|                                    |  | 2006 |            |   | 2005 |   |            | Change |  |   | Percent   |  
|Gross revenue                       |  | $    | 14,442,600 |   |      | $ | 11,196,500 |        |  | $ | 3,246,100 |   |  | 29 | %
|Net revenue                         |  |      | 11,462,300 |   |      |   | 9,682,000  |        |  |   | 1,780,300 |   |  | 18 | %
|                                    |  |      |            |  
|Cost of goods sold                  |  |      | 8,862,400  |   |      |   | 7,567,100  |        |  |   | 1,295,300 |   |  | 17 | %
|                                    |  |      |            |   |      |   |            |        |  |   |           |   |  |    |  
|Gross profit                        |  |      | 2,599,900  |   |      |   | 2,114,900  |        |  |   | 485,000   |   |  | 23 | %
|                                    |  |      |            |   |      |   |            |        |  |   |           |   |  |    |  
|Selling, general and administrative |  |      | 4,184,000  |   |      |   | 2,913,500  |        |  |   | 1,270,500 |   |  | 44 | %
|                                    |  |      |            |   |      |   |            |        |  |   |           |   |  |    |  
|Net loss from operations            |  | $    | (1,584,100 | ) |      | $ | (798,600   | )      |  | $ | (785,500  | ) |  | 98 | %
|                                    |  |      |            |   |      |   |            |        |  |   |           |   |  |    |  

CAPITALIZATION

The following table sets forth the Companys capitalization as of December 29, 2006. The table should be read in conjunction with the Companys financial statements and related notes included elsewhere in this Form 10-KSB
filing.



|                                                                                                                           |  |   |            |  
|-------------------------------------------------------------------------------------------------------------------------- |  | - | ---------- | -
|Total current liabilities                                                                                                  |  | $ | 2,078,900  |  
|Long-term liabilities                                                                                                      |  |   | 2,074,400  |  
|Stockholders equity:                                                                                                      |  |   |            |  
|Common stock; $.001 par value; 70,000,000 shares authorized; 13,869,297 shares issued and outstanding at December 29,
2006 |  |   | 13,900     |  
|Additional paid-in capital                                                                                                 |  |   | 3,274,100  |  
|Accumulated deficit                                                                                                        |  |   | (2,474,000 | )
|                                                                                                                           |  |   |            |  
|Total stockholders equity                                                                                                 |  | $ | 814,000    |  

For the 52-week period ended December 29, 2006 compared to the 52-week period ended December 30,
2005.

Net revenues increased approximately $1,780,300, or 18%, to approximately $11,462,300 for the 52-week period ended December 29, 2006, as
compared to approximately $9,682,000 for the 52-week period ended December 30, 2005. The increases in revenue primarily related to (i) the continued expansion of services to existing customers, (ii) customer growth, and (iii) the
new customers resulting from marketing efforts.

Costs of sales, which consist primarily of labor, software amortization, technology, facilities, postage,
freight, and packing supplies increased by approximately $1,295,300, or 17%, to approximately $8,862,400 for the 52-week period ended December 29, 2006, as compared to approximately $7,567,100 for the 52-week period ended December 30,
2005. As a percentage of revenues cost of sales amounted to approximately 77% of related revenues for the 52-week period ended December 29, 2006, as compared with approximately 78% for the 52-week period ended December 30, 2005. Increased
costs of service and decreases as a percentage of revenue resulted primarily from (i) increased revenue, (ii) management efforts to reduce costs, and (iii) costs related to increased shipping revenue. Management intends to continue
its strategic plan to change the Companys infrastructure, production and technology to enable the Company to increase productivity without significant additional resources and allow the Company to better capitalize on economies of scale as
revenues increase.

General and administrative expense increased by approximately $1,270,500 or 44% to approximately $4,184,000 for the 52-week period
ended December 29, 2006 as compared to approximately $2,913,500 for the 52-week period ended December 30, 2005. The increase was primarily related to (i) $303,400 related to the termination of a management agreement,
(ii) $484,300 related to the termination of capital raising efforts, (iii) $414,500 related to stock based employee compensation, (iv) increased executive management and sales force, (v) $74,000 related to the early
extinguishment of debt, (vi) increased overhead expenses related to the sales and marketing plan, and (vii) increases in expenses directly related to being a public entity. The elimination of reverse acquisition expenses and other
unnecessary expenses of approximately $400,000 offset these increases. Management will continue to implement strategies to maintain low general and administrative expenses while building a scaleable infrastructure. Management does expect expenses
related to its sales force to grow significantly in the 2007 as the Company accelerates its growth initiatives.



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##### Table of Contents

The Company realized a loss from continuing operations before provisions for income taxes of approximately $1,851,100 for
the 52-week period ended December 29, 2006, compared with the loss from continuing operations before provisions for income taxes of approximately $1,029,900 for the 52-week period ended December 30, 2005.

The income tax benefit was approximately $472,000 for the 52-week period ended December 29, 2006 compared to an income tax benefit of approximately $300,000 for the
52-week period ended December 30, 2005. Differences between the effective tax rate used for 2006 and 2005, as compared to the U.S. Federal and State statutory rate, are primarily due to permanent differences. As of December 29, 2006, the
Company had federal and state net operating loss carry-forwards totaling approximately $3,300,000, which begin to expire in 2024. Management believes that there will be sufficient future earnings to support the more than likely realization of
deferred tax assets in excess of existing taxable temporary differences. The amount of deferred tax assets considered realizable, however, could be reduced in the near-term if estimates of future taxable income are reduced.

Basic loss per share from continuing operations for the 52-week period ended December 29, 2006 was $.10 per weighted average share, compared with basic loss of $.06
per weighted average share for the 52-week period ended December 30, 2005.

EBITDA

EBITDA for the 52-week period ended December 29, 2006 was approximately $(1,187,700) compared to approximately $(257,900) in the comparable period of the prior year.
The decrease in the EBITDA directly relates to (i) $303,400 related to the termination of a management agreement, (ii) $484,300 related to the termination of capital raising efforts, (iii) $414,500 related to stock based employee
compensation, and (iv) $74,000 related to the early extinguishment of debt. This was offset by the elimination of the $350,000 of reverse acquisition expenses incurred during the prior year. The Company defines EBITDA as earnings before
interest, taxes, depreciation and amortization costs. The Company also excludes the cumulative effect of a change in accounting principle, discontinued operations, and the impact of restructuring and other charges from the computation. The Company
believes EBITDA is a useful measure of operating performance before the impact of investing and financing transactions, making comparisons between companies earnings power more meaningful and providing consistent comparisons of the
Companys performance. In order to provide consistent comparisons of year-over-year EBITDA, the following reconciliation is provided.



|                              |  |                      |            |   |                   |   |          |  
|----------------------------- |  | -------------------- | ---------- | - | ----------------- | - | -------- | -
|                              |  | For the period ended |           
|                              |  | December 29, 2006    |            |   | December 30, 2005 |  
|Net loss as reported          |  | $                    | (1,379,100 | ) |                   | $ | (729,900 | )
|Income tax benefit            |  |                      | (472,000   | ) |                   |   | (300,000 | )
|Interest expense              |  |                      | 182,700    |   |                   |   | 231,300  |  
|Depreciation and amortization |  |                      | 480,700    |   |                   |   | 540,700  |  
|                              |  |                      |            |   |                   |   |          |  
|EBITDA                        |  | $                    | (1,187,700 | ) |                   | $ | (257,900 | )
|                              |  |                      |            |   |                   |   |          |  

USE OF GAAP AND NON-GAAP MEASURES

In addition to results presented in accordance with generally accepted accounting principles (GAAP), the Company has included in this report earnings EBITDA, with EBITDA being defined by the
Company as earnings before interest, taxes, depreciation and amortization. The Company also excludes the cumulative effect of a change in accounting principle, discontinued operations, and the impact of restructuring and other charges from the
computation of EBITDA. For each non-GAAP financial measure, the Company has presented the most directly comparable GAAP financial measure and has reconciled the non-GAAP financial measure with such comparable GAAP financial measure.

These non-GAAP financial measures provide useful information to investors to assist in understanding the underlying operational performance of the Company. Specifically,
EBITDA is a useful measure of operating performance before the impact of investing and financing transactions, making comparisons between companies earnings power more meaningful and providing consistent period-over-period comparisons of the
Companys performance. In addition, the Company uses these non-GAAP financial measures internally to measure its on-going business performance and in reports to bankers to permit monitoring of the Companys ability to pay outstanding
liabilities.



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##### Table of Contents

Liquidity and Capital Resources

As of December 29, 2006, the Company has approximately $599,800 of positive working capital compared to approximately $851,000 of negative working capital at December 30, 2005. As of December 29, 2006,
the Company has cash and cash equivalents of approximately $947,200 compared with approximately $20,500 of cash and cash equivalents at December 30, 2005. The significant increase in working capital is primarily the result of the Companys
capital raising efforts in 2006, the refinancing of the Companys debt and the improved cash flow from operations.

During the 52-week period ended
December 29, 2006 cash increased by approximately $926,700. During the 52-week period ended December 29, 2006 there were significant losses from operations, which included non-cash expenses of (i) $303,400 related to the termination
of a management agreement, (ii) $468,300 related to the termination of capital raising efforts, (iii) $414,500 related to stock based employee compensation, and (iv) $74,000 related to the early extinguishment of debt, in addition to
the changes in assets and liabilities. Financing activities provided approximately $1,004,500 of cash through the sale of stock and through the Companys new debt facility. Management expects to have limited cash flow from operations in the
short term, while the Company continues to experience rapid internal growth, progresses with the Companys marketing campaigns and establishes the necessary infrastructure to support the Companys future plans. During the course of the
year management expects the Company to have positive cash flow from operations as the product becomes more mature in the market and the Company is able to capitalize on its technology investments.

The Company has ceased all new capital raising efforts. The Company raised approximately $320,000 in 2006 as follows:

In January of 2006, the Company issued 125,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as
amended. The purchase price of the stock was $125,000 or $1.00 per share.

In February of 2006, the Company purchased 394,462 shares from a certain investor
for $100,000 and an option to purchase 20,000 Jagged Peak common shares at $2.00 per share. The purchase price of the stock was $0.25 per share. The stock was purchased for another investor where Jagged Peak issued 394,000 common stock shares,
$0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchaser was an accredited investor as such term is defined under such Regulation D. The purchase price of the stock is
$110,000 or $0.28 per share. In addition, the Company issued 100,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchaser was an accredited investor
as such term is defined under such Regulation D. The purchase price of the stock is $100,000 or $1.00 per share. Approximately $26,000 was paid in fees related to these transactions. The net cash received from the above transaction was $84,000.

In April of 2006, the Company issued 125,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of
1933, as amended. The purchase price of the stock was $125,000 or $1.00 per share and used for working capital.

All of the capital raised has been used as
working capital.

In December 2006, the Company entered into a Security and Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company
(Laurus and the Closing), whereby we agreed to a Secured Convertible Term Note (the Note or Convertible Note) in the principal amount of two million dollars ($2,000,000), which is convertible into an
aggregate of 2,000,000 shares of the Companys Common Stock at a conversion price of $1.00 per share. The interest rate of the Convertible Note is two percent (2%) above prime with a floor of ten percent (10%) and is paid on a monthly
basis. Monthly principal payments of $45,000 per month will begin in December of 2007 with a final balloon payment of $920,000 due in December of 2009. The proceeds from the Convertible Note were used to extinguish all remaining loans of the Company
and provide the necessary working capital to accelerate the Companys growth initiatives. The Note is personally guaranteed by one of the stockholders.

Laurus also provides the Company a Secured Revolving Note (the Revolving Note) in the amount of one million dollars ($1,000,000). The loan is secured by the Companys account receivables and is advanced at a rate of 90% of
eligible receivables. The interest rate of the Revolving Note is two percent (2%) above prime with a floor of ten percent (10%) and is paid on a monthly basis. The term of the Revolving Note is three years and terminates in December 2009.
There was no outstanding balance as of December 29, 2006 and the full $1,000,000 was available for advancement.

To ensure that the Company has
adequate near-term liquidity, the officers of the Company have loaned the Company short-term capital. In most cases the loans are for less than 30 days and no interest is expensed or paid to the officers. During the course of the year there was less
than $200,000 of total transactions and at December 29, 2006 there were no amounts owed to officers of the Company.



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##### Table of Contents

Management does not expect the Company to require additional cash flow resources to fund operations during the next
twelve (12) months.

The Company has embarked on marketing activities, upgrades to technology and increasing infrastructure that it believes will
enhance cash flows and business opportunities in the future. In addition, the Company uses its warehouse to provide a portion of its e-fulfillment services. When the Company outgrows the capabilities of this warehouse facility, the Company may elect
to outsource these additional fulfillment service arrangements to other warehouse services providers, or elect to add additional warehouse space. If the Company elected to add additional warehouse space, we may need to obtain additional financing.
There is no assurance that we will be able to obtain financing on terms favorable to the Company or successfully implement infrastructure growth strategies.

Our strategy is to continue to expand primarily through internal development, which will depend on a number of factors that are beyond our control. There can be no assurance that we will be successful in implementing our growth strategy or
successful obtaining adequate financing on favorable terms for these strategies.

From time to time the Company may become a defendant in legal proceedings
in the normal course of business. Since the Company has not established a reserve in connection with such claims or any general reserve for legal expenses or claims, any such liability, if at all, would be recorded as an expense in the period
incurred or estimated. This amount, even if not material to the Companys overall financial condition, could adversely affect the Companys results of operations in the period recorded.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2006, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 48, (FIN 48) Accounting for uncertainty in income taxes  an interpretation of SFAS No. 109. This Interpretation provides guidance for recognizing and
measuring uncertain tax positions, as defined in FASB No. 109, Accounting for income taxes. FIN 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized
in the financial statements. Guidance is also provided regarding derecognition, classification and disclosure of uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not
expect that this Interpretation will have a material impact on their financial position, results of operations or cash flows.

In September 2006, the FASB
issued SFAS No. 157 (SFAS 157), Fair Value Measurements. SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability.
Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does
not expect the adoption of SFAS 157 to have a material impact on their financial position, results of operations or cash flows.

In December 2006, the FASB
issued the FASB Staff Position (FSP) No. EITF 00-19-2, (FSP EITF 00-19-2), Accounting for Registration Payment Arrangements. This FSP addresses an issuers accounting for registration payment arrangements. This FSP specifies that
the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be
separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies. The guidance in this FSP amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and
No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, and FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, to include scope exceptions for registration payment arrangements. This FSP further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with
other applicable generally accepted accounting principles (GAAP) without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. This FSP shall be effective immediately for registration payment
arrangements and the financial instruments subject to those arrangements that are entered into or modified subsequent to the date of issuance of this FSP, or for financial statements issued for fiscal years beginning after December 15, 2006,
and interim periods within those fiscal years. The Company has adopted FSP EITF 00-19-2 for the year ended December 29, 2006.

In September 2006, the
Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Current Year Misstatements. SAB No. 108 requires analysis of
misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides a one-time cumulative effect transition adjustment. SAB No. 108 is effective for our 2006 annual
financial statements. The adoption of SAB No. 108 did not have a material impact on the consolidated financial statements.

Other recent accounting
pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Companys present or future financial statements.



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##### Table of Contents

|Item 7. | Financial Statements
|------- | --------------------

Financial Statements

Jagged Peak, Inc.

For the Fiscal Years Ended December 29, 2006 and December 30, 2005

Report of Independent Registered
Public Accounting Firm

Contents



|                                                        |  |       
|------------------------------------------------------- |  | ------
|Report of Independent Registered Public Accounting Firm |  | F-2   
|Financial Statements:                                   |  |       
|Balance Sheets                                          |  | F-3   
|Statements of Operations                                |  | F-4   
|Statements of Changes in Stockholders Equity           |  | F-5   
|Statements of Cash Flows                                |  | F-6   
|Notes to Audited Financial Statements                   |  | F-7-19



F-1



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##### Table of Contents

Report of Independent Registered Public Accounting Firm

Board of Directors

Jagged Peak, Inc.

Clearwater, Florida

We have audited the accompanying balance sheets of Jagged Peak, Inc. as of December 29, 2006 and December 30, 2005, and the related statements of operations,
changes in stockholders equity, and cash flows for the 52-week periods then ended. These financial statements are the responsibility of the management of Jagged Peak, Inc. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Jagged Peak, Inc. as of December 29, 2006 and December 30, 2005, and the results of its operations and its cash flows for the 52-week periods then ended in conformity with United States generally accepted accounting principles.

Pender Newkirk & Company LLP

Certified Public Accountants

Tampa, Florida

March 16, 2007



F-2



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##### Table of Contents

Jagged Peak, Inc.

Balance Sheets



|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                                          |  | December 29,2006 |            |   | December 30,2005 |  
|Assets                                                                                                                                                                                    |  |                  |            |   |                  |   |            |  
|Current assets:                                                                                                                                                                           |  |                  |            |   |                  |   |            |  
|Cash                                                                                                                                                                                      |  | $                | 947,200    |   |                  | $ | 20,500     |  
|Accounts receivable, net of allowance for doubtful accounts of $105,000 and $45,000 at December 29, 2006 and December 30, 2005,
respectively                                              |  |                  | 1,192,100  |   |                  |   | 1,063,300  |  
|Other receivables                                                                                                                                                                         |  |                  | 50,000     |   |                  |   | 41,000     |  
|Work in process, net of allowance of $20,000 and $32,000 at December 29, 2006 and December 30, 2005, respectively                                                                         |  |                  | 23,700     |   |                  |   | 148,800    |  
|Deferred tax asset                                                                                                                                                                        |  |                  | 67,700     |   |                  |   | 171,100    |  
|Other current assets                                                                                                                                                                      |  |                  | 398,000    |   |                  |   | 132,500    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total current assets                                                                                                                                                                      |  |                  | 2,678,700  |   |                  |   | 1,577,200  |  
|                                                                                                                                                                                          |  |                 
|Property and equipment, net of accumulated depreciation of $1,536,400 and $1,473,400 at December 29, 2006 and December 30, 2005,
respectively                                             |  |                  | 323,800    |   |                  |   | 373,800    |  
|                                                                                                                                                                                          |  |                 
|Other assets:                                                                                                                                                                             |  |                  |            |   |                  |   |            |  
|EDGE application, net of accumulated amortization of $1,075,100 and $739,200 at December 29, 2006 and December 30, 2005,
respectively                                                     |  |                  | 220,300    |   |                  |   | 556,300    |  
|Deferred tax asset                                                                                                                                                                        |  |                  | 1,115,100  |   |                  |   | 539,700    |  
|Other assets                                                                                                                                                                              |  |                  | 629,400    |   |                  |   | 1,103,600  |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total long-term assets                                                                                                                                                                    |  |                  | 2,288,600  |   |                  |   | 2,573,400  |  
|                                                                                                                                                                                          |  |                 
|Total assets                                                                                                                                                                              |  | $                | 4,967,300  |   |                  | $ | 4,150,600  |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|                                                                                                                                                                                          |  |                 
|Liabilities and Stockholders Equity                                                                                                                                                      |  |                  |            |   |                  |   |            |  
|Current liabilities:                                                                                                                                                                      |  |                  |            |   |                  |   |            |  
|Accounts payable, trade                                                                                                                                                                   |  | $                | 1,096,400  |   |                  | $ | 1,032,500  |  
|Accrued payroll and bonuses                                                                                                                                                               |  |                  | 340,000    |   |                  |   | 70,300     |  
|Other accrued expenses                                                                                                                                                                    |  |                  | 30,400     |   |                  |   | 227,900    |  
|Revolving Note, $1,000,000 available at December 29, 2006                                                                                                                                 |  |                  |           |   |                  |   |           |  
|Deferred rent                                                                                                                                                                             |  |                  | 20,300     |   |                  |   | 14,200     |  
|Notes payable, current portion                                                                                                                                                            |  |                  | 45,000     |   |                  |   | 325,000    |  
|Deferred revenue and customer deposits                                                                                                                                                    |  |                  | 546,800    |   |                  |   | 758,700    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total current liabilities                                                                                                                                                                 |  |                  | 2,078,900  |   |                  |   | 2,428,600  |  
|                                                                                                                                                                                          |  |                 
|Long-term liabilities:                                                                                                                                                                    |  |                  |            |   |                  |   |            |  
|Notes payable, net of current portion                                                                                                                                                     |  |                  | 1,955,000  |   |                  |   | 613,900    |  
|Deferred rent, long term                                                                                                                                                                  |  |                  | 119,400    |   |                  |   | 139,000    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total long-term liabilities                                                                                                                                                               |  |                  | 2,074,400  |   |                  |   | 752,900    |  
|                                                                                                                                                                                          |  |                 
|Stockholders equity:                                                                                                                                                                     |  |                  |            |   |                  |   |            |  
|Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding at December 29, 2006 and December 30,
2005                                                 |  |                  |            |   |                  |   |            |  
|Common stock, $.001 par value; 70,000,000 shares authorized; 13,869,297 shares issued and outstanding at December 29, 2006, 13,619,759
shares issued and outstanding at December 30, 2005 |  |                  | 13,900     |   |                  |   | 13,600     |  
|Additional paid-in capital                                                                                                                                                                |  |                  | 3,274,100  |   |                  |   | 2,050,400  |  
|Accumulated deficit                                                                                                                                                                       |  |                  | (2,474,000 | ) |                  |   | (1,094,900 | )
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total stockholders equity                                                                                                                                                                |  |                  | 814,000    |   |                  |   | 969,100    |  
|                                                                                                                                                                                          |  |                 
|Total liabilities and stockholders equity                                                                                                                                                |  | $                | 4,967,300  |   |                  | $ | 4,150,600  |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  

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



F-3



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##### Table of Contents

Jagged Peak, Inc.

Statements of Operations

52-Week Period Ended



|                                                                                  |  |            |            |   |            |   |            |  
|--------------------------------------------------------------------------------- |  | ---------- | ---------- | - | ---------- | - | ---------- | -
|                                                                                  |  | 12/29/2006 |            |   | 12/30/2005 |  
|Revenue                                                                           |  |            |            |   |            |   |            |  
|Gross revenue                                                                     |  | $          | 14,442,600 |   |            | $ | 11,196,500 |  
|Discounts, freight and other                                                      |  |            | (2,980,300 | ) |            |   | (1,514,500 | )
|                                                                                  |  |            |            |   |            |   |            |  
|Net revenues                                                                      |  |            | 11,462,300 |   |            |   | 9,682,000  |  
|Cost of sales                                                                     |  |            | 8,862,400  |   |            |   | 7,567,100  |  
|                                                                                  |  |            |            |   |            |   |            |  
|Gross profit                                                                      |  |            | 2,599,900  |   |            |   | 2,114,900  |  
|                                                                                  |  |            |            |   |            |   |            |  
|Selling, general and administrative expenses                                      |  |            | 4,184,000  |   |            |   | 2,913,500  |  
|                                                                                  |  |            |            |   |            |   |            |  
|Loss from operations                                                              |  | $          | (1,584,100 | ) |            | $ | (798,600   | )
|                                                                                  |  |            |            |   |            |   |            |  
|Other expenses                                                                    |  |            |            |   |            |   |            |  
|Interest expense                                                                  |  |            | (182,700   | ) |            |   | (231,300   | )
|Other expense                                                                     |  |            | (84,300    | ) |            |   |            |  
|                                                                                  |  |            |            |   |            |   |            |  
|Total other expenses                                                              |  |            | (267,000   | ) |            |   | (231,300   | )
|                                                                                  |  |            |            |   |            |   |            |  
|Loss before income taxes                                                          |  | $          | (1,851,100 | ) |            | $ | (1,029,900 | )
|                                                                                  |  |            |            |   |            |   |            |  
|Provision for income tax benefit                                                  |  |            | (472,000   | ) |            |   | (300,000   | )
|Net loss                                                                          |  | $          | (1,379,100 | ) |            | $ | (729,900   | )
|                                                                                  |  |            |            |   |            |   |            |  
|Net loss per common share                                                         |  | $          | (.10       | ) |            | $ | (.06       | )
|                                                                                  |  |            |            |   |            |   |            |  
|Weighted average number of common shares outstanding                              |  |            | 13,937,345 |   |            |   | 12,871,444 |  
|                                                                                  |  |            |            |   |            |   |            |  
|Diluted loss per common share                                                     |  | $          | (.10       | ) |            | $ | (.06       | )
|                                                                                  |  |            |            |   |            |   |            |  
|Weighted average number of common shares and common equivalent shares outstanding |  |            | 13,937,345 |   |            |   | 12,871,444 |  
|                                                                                  |  |            |            |   |            |   |            |  

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



F-4



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##### Table of Contents

Jagged Peak, Inc.

Statements of Changes in Stockholders Equity

52-Week Period Ended December 29, 2006 and
December 30, 2005



|                                                                                 |  |              |   |  |            |        |   |                |   |           |                    |  |   |               |   |  |       |        |   |  |   |            |  
|-------------------------------------------------------------------------------- |  | ------------ | - |  | ---------- | ------ | - | -------------- | - | --------- | ------------------ |  | - | ------------- | - |  | ----- | ------ | - |  | - | ---------- | -
|                                                                                 |  | Common Stock |   |  | Additional |        |   |                |   |           |                    |  |   |               |  
|                                                                                 |  | Shares       |   |  | Amount     |        |   | Paid inCapital |   |           | AccumulatedDeficit |  |   | TreasuryStock |   |  | Total |       
|Balance, December 31, 2004                                                       |  | 11,466,666   |   |  | $          | 4,900  |   |                | $ | 765,400   |                    |  | $ | (365,000      | ) |  | $     | (5,600 | ) |  | $ | 399,700    |  
|Warrants issued in connection with long term debt                                |  |              |   |  |            |        |   |                |   | 111,000   |                    |  |   |               |   |  |       |        |   |  |   | 111,000    |  
|Reverse acquisition                                                              |  | 1,161,426    |   |  |            | 7,700  |   |                |   | (13,300   | )                  |  |   |               |   |  |       | 5,600  |   |  |   | 0          |  
|Issuance of common stock held in escrow as part of the acquisition agreement     |  | 200,000      |   |  |            | 200    |   |                |   | 253,800   |                    |  |   |               |   |  |       |        |   |  |   | 254,000    |  
|Issuance of common stock for services                                            |  | 666,667      |   |  |            | 700    |   |                |   | 846,100   |                    |  |   |               |   |  |       |        |   |  |   | 846,800    |  
|Issuance of common stock                                                         |  | 125,000      |   |  |            | 100    |   |                |   | 87,400    |                    |  |   |               |   |  |       |        |   |  |   | 87,500     |  
|Net loss for the period                                                          |  |              |   |  |            |        |   |                |   |           |                    |  |   | (729,900      | ) |  |       |        |   |  |   | (729,900   | )
|                                                                                 |  |              |   |  |            |        |   |                |   |           |                    |  |   |               |   |  |       |        |   |  |   |            |  
|Balance, December 30, 2005                                                       |  | 13,619,759   |   |  |            | 13,600 |   |                |   | 2,050,400 |                    |  |   | (1,094,900    | ) |  |       | 0      |   |  |   | 969,100    |  
|Issuance of stock, net of offering costs                                         |  | 744,000      |   |  |            | 800    |   |                |   | 433,200   |                    |  |   |               |   |  |       |        |   |  |   | 434,000    |  
|Issuance of stock related to offering                                            |  | 100,000      |   |  |            | 100    |   |                |   | 74,900    |                    |  |   |               |   |  |       |        |   |  |   | 75,000     |  
|Acquisition of stock from dissenting investor                                    |  | (394,462     | ) |  |            | (400   | ) |                |   | (99,600   | )                  |  |   |               |   |  |       |        |   |  |   | (100,000   | )
|Amortization of officer, director and employee compensation                      |  |              |   |  |            |        |   |                |   | 414,500   |                    |  |   |               |   |  |       |        |   |  |   | 414,500    |  
|Cancellation of common stock held in escrow as part of the acquisition agreement |  | (200,000     | ) |  |            | (200   | ) |                |   | (253,800  | )                  |  |   |               |   |  |       |        |   |  |   | (254,000   | )
|Issuance of warrants related to debt                                             |  |              |   |  |            |        |   |                |   | 654,500   |                    |  |   |               |   |  |       |        |   |  |   | 654,500    |  
|Net loss for the period                                                          |  |              |   |  |            |        |   |                |   |           |                    |  |   | (1,379,100    | ) |  |       |        |   |  |   | (1,379,100 | )
|                                                                                 |  |              |   |  |            |        |   |                |   |           |                    |  |   |               |   |  |       |        |   |  |   |            |  
|Balance, December 29, 2006                                                       |  | 13,869,297   |   |  | $          | 13,900 |   |                | $ | 3,274,100 |                    |  | $ | (2,474,000    | ) |  | $     | 0      |   |  | $ | 814,000    |  
|                                                                                 |  |              |   |  |            |        |   |                |   |           |                    |  |   |               |   |  |       |        |   |  |   |            |  

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



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Jagged Peak, Inc.

Statements of Cash Flows

52-Week Period Ended



|                                                                                          |  |            |            |   |            |   |          |  
|----------------------------------------------------------------------------------------- |  | ---------- | ---------- | - | ---------- | - | -------- | -
|                                                                                          |  | 12/29/2006 |            |   | 12/30/2005 |  
|Operating activities                                                                      |  |            |            |   |            |   |          |  
|Net loss                                                                                  |  | $          | (1,379,100 | ) |            | $ | (729,900 | )
|                                                                                          |  |            |            |   |            |   |          |  
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |            |            |   |            |   |          |  
|Depreciation and amortization                                                             |  |            | 480,700    |   |            |   | 540,700  |  
|Non-cash consulting expense                                                               |  |            | 381,000    |   |            |   | 42,000   |  
|Amortization of warrants related to debt                                                  |  |            | 94,300     |   |            |   | 16,700   |  
|Non-cash amortization of officers, director and employees compensation                    |  |            | 414,500    |   |            |   |          |  
|Non-cash write off of capitalized capital raising costs                                   |  |            | 484,300    |   |            |   |          |  
|Loss on the disposal of assets                                                            |  |            | 10,300     |   |            |   |          |  
|Adjustment to allowance for bad debt expense                                              |  |            | 175,500    |   |            |   | 25,000   |  
|Changes in:                                                                               |  |            |            |   |            |   |          |  
|Accounts receivable                                                                       |  |            | (304,300   | ) |            |   | 265,300  |  
|Work-in-process                                                                           |  |            | 125,100    |   |            |   | (106,900 | )
|Other current assets                                                                      |  |            | (37,800    | ) |            |   | (17,800  | )
|Deferred tax asset                                                                        |  |            | (472,000   | ) |            |   | (167,400 | )
|Other assets                                                                              |  |            |            |   |            |   | (129,800 | )
|Accounts payable and accrued expenses                                                     |  |            | 296,100    |   |            |   | 65,300   |  
|Deferred rent                                                                             |  |            | (13,500    | ) |            |   | 47,300   |  
|Deferred revenue and customer deposits                                                    |  |            | (211,900   | ) |            |   | 196,900  |  
|Deferred tax liability                                                                    |  |            |            |   |            |   | (132,600 | )
|                                                                                          |  |            |            |   |            |   |          |  
|Net cash provided by (used in) operating activities                                       |  |            | 43,200     |   |            |   | (85,200  | )
|                                                                                          |  |            |            |   |            |   |          |  
|Investing activities                                                                      |  |            |            |   |            |   |          |  
|Acquisition of property and equipment                                                     |  |            | (105,000   | ) |            |   | (14,800  | )
|Acquisition/development of software - EDGE platform                                       |  |            |            |   |            |   | (292,200 | )
|                                                                                          |  |            |            |   |            |   |          |  
|Net cash used by investing activities                                                     |  |            | (105,000   | ) |            |   | (307,000 | )
|                                                                                          |  |            |            |   |            |   |          |  
|Financing activities                                                                      |  |            |            |   |            |   |          |  
|Proceeds from the issuance of stock                                                       |  |            | 318,000    |   |            |   | 87,500   |  
|Payments made on capital leases                                                           |  |            |            |   |            |   | (10,900  | )
|Proceeds from bank notes payable                                                          |  |            |            |   |            |   | 100,000  |  
|Proceeds from notes payable                                                               |  |            | 1,703,700  |   |            |   | 250,000  |  
|Payments on notes payable and bank notes                                                  |  |            | (1,033,200 | ) |            |   | (100,100 | )
|                                                                                          |  |            |            |   |            |   |          |  
|Net cash provided by financing activities                                                 |  |            | 988,500    |   |            |   | 326,500  |  
|                                                                                          |  |            |            |   |            |   |          |  
|Net increase (decrease) in cash                                                           |  |            | 926,700    |   |            |   | (65,700  | )
|Cash, beginning of period                                                                 |  |            | 20,500     |   |            |   | 86,200   |  
|                                                                                          |  |            |            |   |            |   |          |  
|Cash, end of period                                                                       |  | $          | 947,200    |   |            | $ | 20,500   |  
|                                                                                          |  |            |            |   |            |   |          |  
|Supplemental disclosure of cash flow information and non-cash financing activities:       |  |            |            |   |            |   |          |  
|Cash paid during the period for interest                                                  |  | $          | 151,500    |   |            | $ | 204,000  |  
|                                                                                          |  |            |            |   |            |   |          |  
|Cash paid during the period for taxes                                                     |  | $          |            |   |            | $ |          |  
|                                                                                          |  |            |            |   |            |   |          |  
|Warrants issued related to debt                                                           |  | $          | 654,500    |   |            | $ | 111,000  |  
|                                                                                          |  |            |            |   |            |   |          |  
|Stock issued to escrow related to acquisition                                             |  | $          |            |   |            | $ | 254,000  |  
|                                                                                          |  |            |            |   |            |   |          |  
|Cancellation of escrow stock related to acquisition                                       |  | $          | (254,000   | ) |            | $ |          |  
|                                                                                          |  |            |            |   |            |   |          |  
|Stock issued for other assets                                                             |  | $          |            |   |            | $ | 846,800  |  
|                                                                                          |  |            |            |   |            |   |          |  

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



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Jagged Peak, Inc.

Notes to Audited Financial Statements

52-Week Period Ended December 29, 2006 and December 30, 2005



|1. | General Background Information
|-- | ------------------------------

Jagged Peak, Inc. is headquartered
in Clearwater, Florida, providing enterprise commerce management (ECM) solutions. The Companys proprietary E-Business Dynamic Global Engine (EDGE) application is a multi language, completely web-based solution, which allows our
clients to promote and maintain their brands while leveraging our investment in infrastructure and technology. Our clients access our platform over the Internet, enabling companies to capture orders through e-commerce or other business to business
portals, control and coordinate distribution of orders, manage inventory, and fulfill orders electronically or physically across multiple suppliers, warehouses and partners in real-time. From a shopper perspective, end-users enter the client site
and seamlessly communicate with EDGE. End-users can then browse for products and create orders online, once orders are made, we either deliver the products digitally through the Internet or communicate the order seamlessly to either our own
fulfillment warehouse or to a third-party fulfillment agency for physical delivery, which is all based on established client business rules to ensure optimal delivery performance.

Effective January 1, 2003, the Company elected to change its fiscal year end to correspond to accounting periods based on a 52/53 week reporting year. Therefore, the period ended December 29, 2006 and the
period ended December 30, 2005 consists of 52 weeks.

On July 8, 2005, Absolute Glass Protection, Inc. (Absolute) completed the
acquisition of Jagged Peak, Inc. a Florida corporation (Jagged Peak), through a reverse triangular merger in which Jagged Peak merged with Absolute Glass Protection Acquisition Corporation, a Nevada corporation (Absolute Sub)
that was a wholly owned subsidiary of Absolute with no assets or liabilities formed solely for the purpose of facilitating the merger (the Merger). This transaction is accounted for as a reverse merger, with Jagged Peak treated as the
accounting acquirer for financial statement purposes. This transaction closed effective July 8, 2005, and Absolute changed its corporate name to Jagged Peak, Inc. Only operations of Jagged Peak remain post merger and therefore no
pro-forma information is presented in these financial statements.



|2. | Significant Accounting Policies
|-- | -------------------------------

Use of Estimates

The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America. These
principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The Company reviews its estimates, including but not limited to, capitalization of software, work in process, recoverability of long-lived assets, recoverability of prepaid expenses, valuation on
deferred tax assets and allowance for doubtful accounts, on a regular basis and makes adjustments based on historical experiences and existing and expected future conditions. These evaluations are performed and adjustments are made, as information
is available. Management believes that these estimates are reasonable and have been discussed with the audit committee; however, actual results could differ from these estimates.

Revenue Recognition

The Company recognizes revenues in accordance with Statement of Position (SOP) 97-2, (Software
Revenue Recognition) as amended by SOP 98-9 (Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions).Revenue from software license agreements is recognized when an agreement exists, delivery of the
software has occurred, the fee is fixed or determinable, and collectibility is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among the elements based on the relative fair value
of each of the elements. Maintenance and support agreement revenues are amortized over the contract period, which is usually one year.

Additional
technology revenues are derived from software development services, managed services, transaction fees, and consulting and customized technology assignments. Revenue from technology service arrangements and software



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##### Table of Contents

development services is recognized as services are provided or on the percentage of completion method for those arrangements with specified milestones. The
percentage of completion is based on labor hours incurred to total labor hours expected to be incurred.

Revenue is also derived from fulfillment service
arrangements. Services included under fulfillment arrangements include account services, shipping and handling, order processing, packaging, storage and reporting. These services are based on established monthly charges as well as handling fees
based on volume. Work in process represents unbilled costs and services. Shipping and handling costs are classified as cost of sales.

Software and
Development Enhancements

Software and development enhancements expenses include payroll and employee benefit costs associated with product development.
The EDGE application is continually being enhanced with new features and functions. Once technological feasibility of new features and functions is established, the cost incurred until release to production are capitalized and amortized over a
three-year useful life. There were no amounts capitalized during the 52-week period ended December 29, 2006 and approximately $292,200 during the 52-week period ended December 30, 2005. Amortization expenses related to capitalized software
and charged to operations for the 52-week period ended December 29, 2006 and December 30, 2005 were approximately $336,000 and approximately $398,600, respectively.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and investments in money market funds with
high quality financial institutions. The Company considers all highly liquid instruments purchased with a remaining maturity of less than three months at the time of purchase as cash equivalents.

Fiduciary Relationship

The Company has control of funds collected on
behalf of customers and funds established by our customers, for the payment of our customers incentive programs. These accounts total approximately $53,800 and $26,000 at December 29, 2006 and December 30, 2005, respectively. Because the
accounts represent funds held for customers and our customers purposes, the cash and the corresponding liability for future payments are not shown on the statement.

Concentration of Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk,
are cash and cash equivalents and accounts receivables.

The majority of cash is maintained with a major financial institution in the United States.
Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand, and, therefore, bear minimal risk.

Sales to a single customer amounted to approximately $5,681,000 or approximately 50% and sales to two customers amounted to approximately $5,043,000 or approximately 52% of total revenues during the 52-week periods
ended December 29, 2006 and December 30, 2005, respectively. Accounts receivable from the one customer at December 29, 2006 was approximately $476,400 or approximately 40% and from the two customers at December 30, 2005, accounts
receivable amounted to approximately $312,000 or approximately 29% of the balance. The risk of this is mitigated as the deferred revenue and customer deposits from the single customer at December 29, 2006 was approximately $250,000 and from the
two customers at December 30, 2005 the deferred revenue and customer deposits amounted to approximately $391,000.

The Company extends credit to its
various customers based on evaluation of the customers financial condition and ability to pay the Company in accordance with the payment terms. The Company provides for estimated losses on accounts receivable considering a number of factors,
including the overall aging of accounts receivables, customers payment history and the customers current ability to pay its obligation. Based on managements review of accounts receivable and other receivables, an allowance for
doubtful accounts of approximately $105,000 and $45,000 is considered necessary as of December 29, 2006 and December 30, 2005, respectively. The Company charges uncollectible accounts against the allowance account once the invoices are
deemed unlikely to be collectible. We do not accrue interest on past due receivables.



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Identified Intangible Assets

The Company follows the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which establishes accounting standards for the impairment of long-lived assets such as property, plant and
equipment and intangible assets subject to amortization. The Company reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If
the sum of the undiscounted expected future cash flows over the remaining useful life of a long-lived asset is less than its carrying amount, the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying
amount of the asset exceeds the fair value of the asset. When fair values are not available, the Company estimates fair value using the expected future cash flows discounted at a rate commensurate with the risks associated with the recovery of the
asset. For the 52-week period ended December 29, 2006 and December 30, 2005, there was no impairment of intangible assets.

Property and
Equipment

Property and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives, principally three to
ten years. Accelerated methods are used for tax depreciation. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account
and related accumulated depreciation account are relieved, and any gain or loss is included in operations. Equipment held under capital leases are stated at the present value of the minimum lease payments and amortized on a straight-line basis over
the estimated useful life of the asset.

Depreciation is calculated by the straight-line method over the following estimated useful lives of the related
assets:



|                                |  |           
|------------------------------- |  | ----------
|                                |  | Years     
|Furniture and equipment         |  | 3-7       
|Computer equipment and software |  | 1-4       
|Warehouse equipment             |  | 3-10      
|Leasehold improvements          |  | Lease term

Estimated Fair Value of Financial Instruments

The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial
instruments approximated their fair values. These financial instruments include cash and cash equivalents, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial
instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. The fair value of the Companys debt is estimated based upon the quoted market prices for the same
or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.

Income Taxes

Taxes on income are provided in accordance with SFAS No. 109, Accounting for Income Taxes. Deferred income tax assets and liabilities are recognized for the
expected future tax consequences of events that have been reflected in the financial statements. Deferred tax assets and liabilities are determined based on the differences between the book values and the tax bases of particular assets and
liabilities and the tax effects of net operating loss and capital loss carry forwards. 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 the tax rate is recognized as income or expense in the period that included the enactment date. Through the reverse acquisition with Absolute Glass
the Company acquired net operating losses for tax purposes of approximately $2.4 million. Internal Revenue Code Sec. 382 places limitations on the utilization of the acquired net operating losses. Due to the limitation, the Company
has placed a full valuation allowance against that asset of approximately $900,000.

Stock-Based Compensation

The Company previously applied the intrinsic value method provisions of Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees,
and related interpretations for stock-based compensation. Accordingly, the Company recognized compensation expense on our restricted stock awards, but no compensation expense was recognized for fixed option plans as all option grants under the plan
had an exercise price equal or greater to the fair market value of the



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underlying common stock on the date of grant. As permitted, the Company had previously elected to adopt the disclosure-only provisions of Statement of
Financial Accounting Standard No. 123, Accounting for Stock-Based Compensation.

In December 2004, the FASB issued SFAS No. 123
(revised 2004), Share-Based Payment (SFAS 123R), which replaces SFAS No. 123; Accounting for Stock-Based Compensation, (SFAS 123) and supercedes APB Opinion No. 25, Accounting for Stock Issued
to Employees, (APB 25). SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Under SFAS 123R, the Company
is required to measure the cost of employee services received in exchange for stock options and similar awards based on the grant-date fair value of the award and recognize this cost in the income statement over the period during which an employee
is required to provide service in exchange for the award. The pro forma disclosures previously permitted under SFAS 123 are no longer an alternative to financial statement recognition. The Company adopted SFAS 123R on December 31,
2005 using the modified prospective method, which did not require the recognition of any non-cash charges, as there were no unvested stock options on that date.

Compensation cost is also recognized for the unvested portion of awards granted prior to adoption. Prior periods were not restated to reflect the impact of adopting the new standard, and there is no cumulative effect.

As a result of adopting SFAS 123(R), our earnings before income taxes and net earnings for the year ended December 29, 2006 were approximately $414,500 or
approximately $0.03 per share lower than if we had continued to account for stock based compensation under APB Opinion No. 25 for our stock option grants. There was no impact on cash flows from operating or financing activities or effect on the
income tax benefit.

The fair value concepts were not changed significantly in FAS 123R; however, in adopting FAS 123R, companies must choose among
alternative valuation models and amortization assumptions. After assessing alternative valuation models and amortization assumptions, the Company will continue using the Black-Scholes valuation model and has elected to use the ratable method to
amortize compensation expense over the vesting period of the grant.

The value of each grant under FAS 123R is estimated at the grant date using the
Black-Scholes option model with the following weighted average assumptions for options granted in 2006: the historical dividend rate of 0%; the risk-free interest rate of 4.7% for periods within the contractual life of the option is based on the
U.S. Treasury yield curve in effect at the time of grant; the expected term of 5 years which was calculated based on the Companys historical pattern of options granted are expected to be outstanding; and expected volatility of 120% which was
calculated by review of the Companys historical activity as well as comparable peer companies.

As of December 29, 2006, there was approximately
$127,000 of unrecognized stock-based compensation expense related to nonvested stock options. This expense will be recognized over a weighted average period of approximately two years.

During 2006, there was $0 of cash received from the exercise of stock options.

The following table represents our
nonvested stock option activity for the year ended December 31, 2006:



|                                      |  |                  |   |  |                                       |     
|------------------------------------- |  | ---------------- | - |  | ------------------------------------- | ----
|                                      |  | Number ofOptions |   |  | Weighted AverageGrant Date Fair Value
|Nonvested options  December 31, 2005 |  | 0                |   |  | $                                     | 0.00
|Granted                               |  | 1,170,000        |   |  | $                                     | 0.47
|Vested                                |  | (875,000         | ) |  | $                                     | 0.46
|Forfeited                             |  |                 |   |  | $                                     |    
|                                      |  |                  |   |  |                                       |     
|Nonvested options - December 31, 2006 |  | 295,000          |   |  | $                                     | 0.43
|                                      |  |                  |   |  |                                       |     



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##### Table of Contents

The aggregate intrinsic value of options outstanding at December 29, 2006, based on the Companys closing stock
price of $0.55 as of the last business day of the period ended December 29, 2006, which would have been received by the optionees had all options been exercised on that date was $50,800. The aggregate intrinsic value of options exercisable at
December 29, 2006, based on the Companys closing stock price of $0.55 as of the last business day of the period ended December 29, 2006, which would have been received by the optionees had all options exercisable been exercised on
that date was $22,820. There were no options exercised during the years ended December 29, 2006 and December 30, 3005.

Below is a table
illustrating the pro forma effect on net income for the 52-week period ending December 30, 2005, prior to the adoption of SFAS 123R as if we had applied the fair value recognition provisions of SFAS 123 during such period.

For the 52-week period ended December 30, 2005:



|                                                                                                                             |  |      |            |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | -
|                                                                                                                             |  | 2005 |           
|Net loss:                                                                                                                    |  |      |            |  
|As reported                                                                                                                  |  | $    | (729,900   | )
|Total stock-based employee compensation expense included in reported net income applicable to common stockholder, net of tax |  |      |           |  
|Total stock-based employee compensation determined under fair value based method, net of related tax effects                 |  |      | (295,400   | )
|                                                                                                                             |  |      |            |  
|Pro forma                                                                                                                    |  |      |            |  
|Net loss                                                                                                                     |  | $    | (1,025,300 | )
|(Loss) earnings per share                                                                                                    |  |      |            |  
|Basic  as reported                                                                                                          |  | $    | (0.06      | )
|Basic  pro forma                                                                                                            |  | $    | (0.08      | )
|Diluted (loss) earnings per share                                                                                            |  |      |            |  
|Diluted  as reported                                                                                                        |  | $    | (0.06      | )
|Diluted  pro forma                                                                                                          |  | $    | (0.08      | )
|Weighted average fair value of options granted during the year                                                               |  | $    | 0.90       |  

The preceding pro forma results were calculated with the use of the Black-Scholes option pricing model. The
following assumptions were used for the year ended December 30, 2005 (1) risk-free interest rate of 3.62%, (2) no dividend yield, (3) expected lives of 5.0 years, and (4) volatility of 75%. Results may vary depending on the
assumptions applied within the model. Compensation expense recognized in providing pro forma disclosures may not be representative of the effects on net income for future years.

Earnings per Share

Earnings per common share are computed in accordance with SFAS No. 128, Earnings Per
Share, which requires companies to present basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding during the
year. Diluted earnings per common share are computed by dividing net income by the weighted average number of shares of common stock outstanding and dilutive options outstanding during the year. The weighted average number of shares was 13,937,345
and 12,871,444 for the 52-week period ended December 29, 2006 and December 30, 2005. The diluted weighted average number of shares was 14,719,029 and 13,404,458 for the 52-week period ended December 29, 2006 and period ended
December 30, 2005, respectively. The earning per share calculation for the 52-week period ended December 29, 2006 and the December 30, 2005 considers the shares issued in the reverse acquisition as outstanding at the beginning of
2005.



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##### Table of Contents

Common stock equivalents for the 52-week period ended December 29, 2006 and December 30, 2005 were
anti-dilutive due to the net losses sustained by the Company during these periods. Therefore, the diluted weighted average common shares outstanding for the dilutive weighted average share calculation in the period ended December 29, 2006 and
December 30, 2005 excludes approximately 782,000 shares and 533,000 shares that could dilute earnings per share in future periods, respectively.

Recently Issued Financial Accounting Standards

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48, (FIN 48) Accounting for uncertainty in income taxes  an interpretation of SFAS No. 109. This Interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in FASB
No. 109, Accounting for income taxes. FIN 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized in the financial statements. Guidance is also
provided regarding derecognition, classification and disclosure of uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect that this Interpretation will have a material
impact on their financial position, results of operations or cash flows.

In September 2006, the FASB issued SFAS No. 157 (SFAS 157),
Fair Value Measurements. SFAS 157 clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that
prioritizes the information used to develop those assumptions. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of SFAS 157 to have a material
impact on their financial position, results of operations or cash flows.

In December 2006, the FASB issued the FASB Staff Position (FSP) No. EITF 00-19-2,
(FSP EITF 00-19-2), Accounting for Registration Payment Arrangements. This FSP addresses an issuers accounting for registration payment arrangements. This FSP specifies that the contingent obligation to make future payments or
otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance
with FASB Statement No. 5, Accounting for Contingencies. The guidance in this FSP amends FASB Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity, and FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to include scope exceptions
for registration payment arrangements. This FSP further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with other applicable generally accepted accounting principles (GAAP)
without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. This FSP shall be effective immediately for registration payment arrangements and the financial instruments subject to those
arrangements that are entered into or modified subsequent to the date of issuance of this FSP, or for financial statements issued for fiscal years beginning after December 15, 2006, and interim periods within those fiscal years. The Company has
adopted FSP EITF 00-19-2 for the year ended December 29, 2006.

In September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements When Quantifying Current Year Misstatements. SAB No. 108 requires analysis of misstatements using both an income statement (rollover)
approach and a balance sheet (iron curtain) approach in assessing materiality and provides a one-time cumulative effect transition adjustment. SAB No. 108 is effective for our 2006 annual financial statements. The adoption of SAB No. 108
did not have a material impact on the consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its EITF),
the AICPA, and the SEC did not or are not believed by management to have a material impact on the Companys present or future financial statements.



|3. | Property and Equipment
|-- | ----------------------

Property and equipment consist of:



|                                |  |                  |           |                  |   |          
|------------------------------- |  | ---------------- | --------- | ---------------- | - | ---------
|                                |  | December 29,2006 |           | December 30,2005
|Furniture and equipment         |  | $                | 193,100   |                  | $ | 183,100  
|Computer equipment and software |  |                  | 1,023,600 |                  |   | 951,600  
|Warehouse equipment             |  |                  | 562,900   |                  |   | 542,300  
|Leasehold improvements          |  |                  | 80,600    |                  |   | 170,200  
|Total property and equipment    |  |                  | 1,860,200 |                  |   | 1,847,200
|                                |  |                  |           |                  |   |          
|Less accumulated depreciation   |  |                  | 1,536,400 |                  |   | 1,473,400
|                                |  |                  |           |                  |   |          
|                                |  | $                | 323,800   |                  | $ | 373,800  
|                                |  |                  |           |                  |   |          



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##### Table of Contents

Depreciation expense for the 52-week periods ended December 29, 2006 and December 30, 2005 were approximately
$144,700 and $144,200 respectively.



|4. | Other Assets
|-- | ------------

Other assets consist of:



|                                                  |  |                  |         |                  |   |           |  
|------------------------------------------------- |  | ---------------- | ------- | ---------------- | - | --------- | -
|                                                  |  | December 29,2006 |         | December 30,2005 |  
|Escrow deposit                                    |  |                  |         |                  | $ | 254,000   |  
|Deferred offering cost                            |  |                  |         |                  |   | 553,300   |  
|Prepaid management fee                            |  |                  |         |                  |   | 381,000   |  
|Capitalized debt cost                             |  | $                | 950,800 |                  |   |           |  
|                                                  |  |                  |         |                  |   |           |  
|                                                  |  |                  | 950,800 |                  |   | 1,188,300 |  
|Current portion classified as other current asset |  |                  | 321,400 |                  |   | (84,700   | )
|                                                  |  |                  |         |                  |   |           |  
|                                                  |  | $                | 629,400 |                  | $ | 1,103,600 |  
|                                                  |  |                  |         |                  |   |           |  



|5. | Notes Payable and Secured Revolving Note
|-- | ----------------------------------------

Notes payable consist of:



|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | ---------------- | - | ---------
|                                                                                                                                                                                                                                                                                                                                                                |  | December 29,2006 |           | December 30,2005
|Laurus Bank Note payable; interest at prime plus 2.0% (10.25% at December 29, 2006); interest only payments due monthly with the
principal payments of $45,000 per month beginning in December 2007, for two years, and the remaining balance due in December 2009; collateralized by all the business assets and personal guarantees by a certain stockholder. |  | $                | 2,000,000 |                  |   |          
|Bank Note payable; interest at prime plus 1.50% (8.75% at December 31, 2005); interest only payments due monthly with the principal due
the earlier of the sale of equity securities or December 2005; collateralized by all the business assets and personal guarantees by certain stockholders. Paid in full as of December 2006.                             |  |                  |           |                  | $ | 450,000  
|Bank Note payable; interest at prime plus 1.50% (8.75% at December 31, 2005); monthly payments of principal of $8,300 plus interest;
final payment due at maturity in September 2008; collateralized by all business assets and personal guarantees of certain stockholders. Paid in full as of December 2006.                                                  |  |                  |           |                  |   | 333,300  
|Note payable; interest at 12%; interest payments monthly with scheduled principal payments; collateralized by all business assets and personal
guarantees of certain stockholders. Amount does not reflect $94,400 discount at December 30, 2005. Paid in full as of December 2006.                                                                             |  |                  |           |                  |   | 250,000  
|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          
|                                                                                                                                                                                                                                                                                                                                                                |  |                  | 2,000,000 |                  |   | 1,033,300
|Less current portion                                                                                                                                                                                                                                                                                                                                            |  |                  | 45,000    |                  |   | 325,000  
|Less discount                                                                                                                                                                                                                                                                                                                                                   |  |                  |           |                  |   | 94,400   
|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          
|Long-term portion of notes payable                                                                                                                                                                                                                                                                                                                              |  | $                | 1,955,000 |                  | $ | 613,900  
|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          

Laurus Agreements:

In December 2006, the Company entered into a Security and Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company (Laurus and the Closing), whereby we agreed to a Secured Convertible Term Note (the
Note or



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##### Table of Contents

Convertible Note) in the principal amount of two million dollars ($2,000,000), which is convertible into an aggregate of 2,000,000 shares of the
Companys Common Stock at a conversion price of $1.00 per share. The interest rate of the Convertible Note is two percent (2%) above prime with a floor of ten percent (10%) and is paid on a monthly basis. Monthly principal payments of
$45,000 per month will begin in December of 2007 with a final balloon payment of $920,000 due in December of 2009. The proceeds from the Convertible Note were used to extinguish all remaining loans of the Company and provide the necessary working
capital to accelerate the Companys growth initiatives. The Note is personally guaranteed by one of the stockholders.

The Company also agreed to a
Secured Revolving Note (the Revolving Note) in the amount of one million dollars ($1,000,000). The loan is secured by the Companys account receivables and is advanced at a rate of 90% of eligible receivables. The interest rate of
the Revolving Note is two percent (2%) above prime with a floor of ten percent (10%) and is paid on a monthly basis. The term of the Revolving Note is three years and terminates in December 2009. There was no outstanding balance as of
December 29, 2006 and the full $1,000,000 was available for advancement.

Laurus must convert all or a portion of the monthly principal payments for
the Convertible Note into shares of our Common Stock if: (i) the average closing price of our Common Stock for the five trading days immediately proceeding such payment is greater than or equal to 115% of the Fixed Conversion Price; and
(ii) the amount of such conversion does not exceed twenty-five percent of the aggregate dollar trading volume of the Common Stock for the period of twenty-two trading days immediately preceding such payment date; however if subsection
(i) of the Conversion Criteria is met but subsection (ii) of the Conversion Criteria is not met as to the entire monthly principle payment, the Holder shall convert only such part of the monthly principle payment that meets subsection
(ii) of the Conversion Criteria. Any portion of the monthly principle payment due on an Amortization Date that the Holder has not been able to convert into shares of Common Stock due to the failure to meet the Conversion Criteria, shall be paid
in cash by the Company, jointly and severally, at the rate of 100% of the monthly principle payment otherwise due on such Amortization Date, within three (3) business days of such Amortization Date.

The Company may prepay the Note in cash by giving Laurus a notice of repayment, ten (10) days before such intent to prepay, and by paying Laurus an amount equal to
130% of the outstanding principal amount. The Note includes a provision whereby Laurus is not entitled to convert any portion of this Note in excess of that portion of this Note upon exercise of which the sum of (1) the number of shares of
Common Stock beneficially owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of this Note or the unexercised or unconverted portion of any
other security of the Holder subject to a limitation on conversion analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the
determination of this is being made, would result in beneficial ownership by the Holder and its Affiliates of any amount greater than 9.99% of the then outstanding shares of Common Stock (whether or not, at the time of such conversion, the Holder
and its Affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock).

Additionally, if the shares of Common Stock are
subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock or any preferred stock issued by the Company in shares of Common Stock, the Fixed Conversion Price shall be
proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately
after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event.

Any default under the Security and
Purchase agreement will constitute a default under the Convertible Note and the Revolving Note (Both Notes). Events of default under the Security and Purchase agreement include our failure to pay amounts due under Both Notes; breach of
any covenants under Both Notes, if not cured within 15 business days; breach of any warranties found in the Security Agreement, Both Notes or any other Related Agreement; the occurrence of any default under any agreement, which causes any contingent
obligation to become due prior to its stated maturity or to become payable; any change or occurrence likely to have a material adverse effect on the business, assets, liabilities, financial condition, our operations or prospects; our bankruptcy; a
judgment against us in excess of $50,000, which has not been vacated, discharged or stayed, within thirty (30) days of the date of entry; our insolvency; a change in control of the Company; an indictment or other proceedings against the Company
or any executive officer; if the Company breaches any provision of the Securities Purchase Agreement, or any other Related Agreements.



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Following the occurrence and during the continuance of an Event of Default, the Company shall, jointly and severally, pay
additional interest on the outstanding principal balance of both notes in an amount equal to one percent (1%) per month, and all outstanding Obligations, including unpaid interest, shall continue to accrue interest at such additional interest
rate from the date of such Event of Default until the date such Event of Default is cured or waived.

If an event of default were to occur under the
Security Agreement, Laurus may at its option, demand repayment in full of all obligations and liabilities owed to it by us under Both Notes, Securities Purchase Agreement and any Related Agreement and may require us to immediately pay 130% of the
principal amount outstanding under the Both Notes, plus any accrued and unpaid interest.

The Company gave Laurus registration rights to the shares
issuable to Laurus in connection with the Convertible Note and the warrants, pursuant to a Registration Rights Agreement. The Registration Rights Agreement provided for the Company to file a Registration Statement with the Securities and Exchange
Commission within 120 days of the Closing. If we do not obtain effectiveness of this Registration Statement within 150 days of the Closing; such Registration Statement ceases to be effective for more than 30 days or more than 20 consecutive days
during the 365 day period following the effectiveness of the Registration Statement; or our Common Stock is not listed or quoted, or is suspended from trading for a period of three days, which we have been unable to cure within 30 days of notice
thereof, we agreed to pay Laurus, as liquidated damages, an amount equal to .5% each thirty (30) day period, on a daily bases that such event listed above exceeds the time period given, however the total amount of liquidated damages shall not
exceed five percent (5%) of the initial principle amount of the Convertible note. There was no liability recorded at December 29, 2006 because it was determined by management that the possibility of the liability was remote.

In addition the Company entered into a Funds Escrow Agreement and an Intellectual Property Security Agreement with Laurus.

In connection with the Security and Purchase agreement, we agreed to pay Laurus Capital Management, L.L.C., the manager of Laurus, a fee equal to 3.50% of the aggregate
amount of Both Notes and other fees, totaling approximately $135,000 in cash and 706,000 warrants exercisable at $0.01 per common share. We agreed to pay Stonegate Securities $160,000 in cash and 70,600 warrants exercisable at $0.01 per common share
as a finders fee. Other fees such as legal and the escrow company were approximately $15,000. The total debt cost related to this agreement was approximately $310,000 in cash and warrant cost of approximately $654,500, which is capitalized in
other assets and will be expensed over the three year term of the agreements.

Bank Notes:

The Companys previous bank loans were subject to restrictions pursuant to which, the Company was to maintain maximum total liabilities to tangible net worth ratio of not more than 3 to 1 and a minimum debt
service coverage ratio of 1.25 to 1. For the 52-week period ended December 30, 2005, the Company was not in compliance with these financials covenants and thus the entire balance has been classified as short term. As of December 29, 2006
all of these notes have been paid.

The Company has an unsecured stand-by letter of credit to serve as a deposit on a property that the Company leases for
$50,000.

The following is a schedule by year of future minimum principle payments required under the terms of the above notes payable as of
December 29, 2006:



|                     |  |   |          
|-------------------- |  | - | ---------
|Year Ending December |  |  
|2007                 |  | $ | 45,000   
|2008                 |  |   | 540,000  
|2009                 |  |   | 1,415,000
|                     |  |   |          
|Total                |  | $ | 2,000,000
|                     |  |   |          



|6. | Lease Commitments and Contingent Liabilities
|-- | --------------------------------------------



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##### Table of Contents

The Company leases its facilities and certain equipment under operating leases with various terms. The following is a
schedule, by year, of future minimum rental payments required under operating leases that have an initial or remaining noncancelable lease term in excess of one year as of December 29, 2006:



|                     |  |   |          
|-------------------- |  | - | ---------
|Year Ending December |  |  
|2007                 |  | $ | 473,000  
|2008                 |  |   | 391,500  
|2009                 |  |   | 356,500  
|2010                 |  |   | 364,000  
|2011                 |  |   | 122,200  
|                     |  |   |          
|Total                |  | $ | 1,707,200

Rent expense amounted to approximately $478,000 and $520,000 for the 52-week period ended December 29, 2006
and December 30, 2005, respectively.

Litigation

In the ordinary course of business, the Company may be a party to a variety of legal actions that affect any business. The Company does not anticipate any of these matters or any matters in the aggregate to have a material adverse effect on
the Companys business or its financial position or results of operations.

Employment Agreements

In December 2005, the Company entered into an employment agreement with the Companys Chief Financial Officer, which was amended in 2006 to extend the term to 2009.
Under the employment agreement, which is for a five-year term, the Chief Financial Officer is paid an initial base salary of $125,000, with minimum annual increases of $10,000. Additional performance-based bonuses are provided for, and the employee
was granted options to purchase 200,000 shares of Company stock. Benefits under the agreement are accelerated on a change of control, and the employee is subject to certain non-competition covenants.



|7. | Income Taxes
|-- | ------------

The provision for income taxes is as follows:



|                                   |  |              |         |              |   |        
|---------------------------------- |  | ------------ | ------- | ------------ | - | -------
|                                   |  | Period Ended
|                                   |  | December 29, |         | December 30,
|                                   |  | 2006         |         | 2005        
|Deferred benefit                   |  |              |         |              |   |        
|Federal                            |  | $            | 426,000 |              | $ | 271,000
|State                              |  |              | 46,000  |              |   | 29,000 
|                                   |  |              |         |              |   |        
|Provision benefit for income taxes |  | $            | 472,000 |              | $ | 300,000
|                                   |  |              |         |              |   |        



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##### Table of Contents

Income taxes are based on the estimation of the annual effective tax rate and evaluations of possible future events and
transactions and may be subject to subsequent refinement or revision. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing
this difference are as follows:



|                                                                 |  |                  |          |   |                  |   |          |  
|---------------------------------------------------------------- |  | ---------------- | -------- | - | ---------------- | - | -------- | -
|                                                                 |  | Period Ended     |         
|                                                                 |  | December 29,2006 |          |   | December 30,2005 |  
|Tax expense (benefit) at U.S. statutory rate                     |  | $                | (632,100 | ) |                  | $ | (330,900 | )
|State income tax expense (benefit), net of federal benefit       |  |                  | (67,500  | ) |                  |   | (56,600  | )
|Effect of general non-deductible expenses                        |  |                  | 71,600   |   |                  |   | 22,600   |  
|Effect of amortization of employee stock option compensation     |  |                  | 156,000  |   |                  |   |          |  
|Effect of non-deductible expenses related to reverse acquisition |  |                  |          |   |                  |   | 64,900   |  
|                                                                 |  |                  |          |   |                  |   |          |  
|                                                                 |  | $                | (472,000 | ) |                  | $ | (300,000 | )
|                                                                 |  |                  |          |   |                  |   |          |  

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities at December 29, 2006 and December 30, 2005 are as follows:



|                                                  |  |                  |           |   |                  |   |          |  
|------------------------------------------------- |  | ---------------- | --------- | - | ---------------- | - | -------- | -
|                                                  |  | December 29,2006 |           |   | December 30,2005 |  
|Current deferred tax assets:                      |  |                  |           |   |                  |   |          |  
|Allowance for doubtful accounts                   |  | $                | 39,500    |   |                  | $ | 16,900   |  
|Net operating loss carryforward                   |  |                  |           |   |                  |   | 97,500   |  
|Work-in-process reserve                           |  |                  | 7,500     |   |                  |   | 12,300   |  
|Other                                             |  |                  | 20,700    |   |                  |   | 44,400   |  
|                                                  |  |                  |           |   |                  |   |          |  
|Total current deferred tax assets                 |  |                  | 67,700    |   |                  |   | 171,100  |  
|Long-term deferred tax assets (liability):        |  |                  |           |   |                  |   |          |  
|Net operating loss carryforward                   |  |                  | 1,244,000 |   |                  |   | 785,600  |  
|Depreciation and amortization variance            |  |                  | (128,900  | ) |                  |   | (245,900 | )
|                                                  |  |                  |           |   |                  |   |          |  
|Total long-term deferred tax assets (liabilities) |  |                  | 1,115,100 |   |                  |   | 539,700  |  
|Net deferred tax asset                            |  | $                | 1,182,800 |   |                  | $ | 710,800  |  
|                                                  |  |                  |           |   |                  |   |          |  

Management believes that there will be sufficient future earnings to support the more than likely realization of
deferred tax assets in excess of existing taxable temporary differences. The amount of deferred tax assets considered realizable, however, could be reduced in the near-term if estimates of future taxable income are reduced.

As of December 29, 2006 and December 30, 2005 the Company had federal and state net operating loss carry-forwards totaling approximately $3,305,000 and
$2,400,000, respectively, which begin to expire in 2024.



|8. | Equity
|-- | ------

Common Stock

Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when
declared by the Board of Directors (the Board), subject to the prior rights of the holders of all classes of stock outstanding. The Company records stock as issued when the consideration is received or the obligation is incurred.



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##### Table of Contents

The Companys 2005 Stock Incentive Plan (the Plan) authorizes the Board of Directors the authority to
grant up to 2,000,000 options to key employees, officers, directors, and consultants. The aggregate fair market value of grants to one individual shall not exceed $100,000 during any one calendar year for grants of both incentive stock options and
non-qualified stock options. Options granted under the Plan must be exercised within ten years of the date of grant. The Option Price payable for the shares of Common Stock covered by any Option shall be determined by the Board of Directors, but
shall in no event be less than the fair market value of the Common Stock. The Option Price for Incentive Stock Options shall not be less than the Fair Market Value of one share of Common Stock on the Date of Grant. The Option Price for Nonstatutory
Options may be less than the Fair Market Value of Common Stock on the Date of Grant only if the Committee determines that special circumstances warrant a lower exercise price.

The Companys 2000 Stock Incentive Plan authorizes up to 100,000 shares of common stock to any employee or Consultant during any one calendar year for grants of both incentive stock options and non-qualified
stock options to key employees, officers, directors, and consultants. Options granted under the Plan must be exercised within ten years of the date of grant. The Option Price payable for the shares of Common Stock covered by any Option shall be
determined by the Board of Directors, but shall in no event be less than the par value of Common Stock. The Option Price for Incentive Stock Options shall not be less than the Fair Market Value of one share of Common Stock on the Date of Grant. The
Option Price for Nonstatutory Options may be less than the Fair Market Value of Common Stock on the Date of Grant only if the Committee determines that special circumstances warrant a lower exercise price.

The following summarizes the Companys stock option and warrant activity and related information:



|                                               |  |           |   |  |                         |           |                                |   |     
|---------------------------------------------- |  | --------- | - |  | ----------------------- | --------- | ------------------------------ | - | ----
|                                               |  | Shares    |   |  | Range of ExercisePrices |           | Weighted AverageExercise Price
|Outstanding at December 31, 2004               |  | 973,598   |   |  | $                       | 1.01-1.50 |                                | $ | 0.92
|Warrants and options granted                   |  | 1,156,871 |   |  | $                       | 0.01-1.10 |                                | $ | 0.76
|Warrants and options cancelled or expired      |  | (479,482  | ) |  | $                       | 0.75-2.13 |                                | $ | 0.83
|                                               |  |           |   |  |                         |           |                                |   |     
|Outstanding at December 30, 2005               |  | 1,650,987 |   |  | $                       | 0.01-2.13 |                                | $ | 0.80
|Warrants, Convertible Debt and options granted |  | 4,176,600 |   |  | $                       | 0.01-2.50 |                                | $ | 0.69
|Warrants and options cancelled or expired      |  | (233,343  | ) |  | $                       | 0.01      |                                | $ | 0.01
|                                               |  |           |   |  |                         |           |                                |   |     
|Outstanding at December 29, 2006               |  | 5,594,244 |   |  | $                       | 0.01-2.50 |                                | $ | 0.75
|                                               |  |           |  
|Exercisable at December 29, 2006               |  | 5,274,244 |   |  | $                       | 0.01-2.13 |                                | $ | 0.73
|Exercisable at December 30, 2005               |  | 1,650,987 |   |  | $                       | 0.01-2.13 |                                | $ | 0.80

The following table summarizes information about options and warrants outstanding and exercisable as of
December 29, 2006:



|                       |  |                                  |  |                                  |  |                       |  |                                |  |                    |  |                      
|---------------------- |  | -------------------------------- |  | -------------------------------- |  | --------------------- |  | ------------------------------ |  | ------------------ |  | ---------------------
|                       |  | Outstanding Warrants and Options |  | Exercisable Warrants and Options
|Range of ExercisePrice |  | NumberOutstanding                |  | Weighted AverageRemaining Life   |  | Weighted AveragePrice |  | Weighted AverageRemaining Life |  | Number Exercisable |  | Weighted AveragePrice
|$0.01                  |  | 1,100,717                        |  | 31.9 years                       |  | $0.01                 |  | 31.9 years                     |  | 1,100,717          |  | $0.01                
|$0.55-0.77             |  | 1,538,529                        |  | 4.6 years                        |  | $0.62                 |  | 4.5 years                      |  | 1,373,529          |  | $0.63                
|$1.00-2.50             |  | 2,954,998                        |  | 3.1 years                        |  | $1.10                 |  | 3.1 years                      |  | 2,799,998          |  | $1.05                

As of December 29, 2006 and December 30, 2005, there were approximately 5,274,244 and 1,651,000 options
exercisable at a weighted average exercise price of $0.73 and $0.80, respectively. The weighted average fair value of options at the date of grant of the options was $0.47 and $0.51 for 2006 and 2005, respectively.

Equity Funding

In December of 2005, the Company issued 125,000
common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchase price of the stock was $87,500 or $.70 per share and used for working capital.



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##### Table of Contents

In January of 2006, the Company issued 125,000 common stock shares, $0.001 par value per share, under Regulation D
promulgated under the Securities Act of 1933, as amended. The purchase price of the stock was $125,000 or $1.00 per share and used for working capital.

In
February of 2006, the Company purchased 394,462 shares from a certain investor for $100,000 and an option to purchase 20,000 Jagged Peak common shares at $2.00 per share. The purchase price of the stock was $0.25 per share. The stock was purchased
for another investor where Jagged Peak issued 394,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchaser was an accredited investor as such term is
defined under such Regulation D. The purchase price of the stock is $110,000 or $0.28 per share. In addition the Company issued 100,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933,
as amended. The purchaser was an accredited investor as such term is defined under such Regulation D. The purchase price of the stock is $100,000 or $1.00 per share. Approximately $26,000 was paid in fees related to these transactions.
The net cash received from the above transaction was $84,000, which will be used for working capital.

In April of 2006, the Company issued 125,000 common
stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as amended. The purchase price of the stock was $125,000 or $1.00 per share and used for working capital.

In August of 2006, the Company issued 100,000 common stock shares, $0.001 par value per share, under Regulation D promulgated under the Securities Act of 1933, as
amended. The stock was issued for services related to assisting management capitalize the Company. The stock was valued at the market price on the date of issue of approximately $75,000 or $0.75 per share.



|9. | Related Party Transactions
|-- | --------------------------

To ensure that the Company has adequate
near-term liquidity, the officers of the Company have loaned the Company short-term capital. In most cases the loans are for less than 30 days and no interest is expensed or paid to the officers. During the course of the year there was less than
$200,000 of total transactions and at December 29, 2006 there were no amounts owed to officers of the Company.

The Company contracted with Norco
Accounting and Consulting Inc. (Norco) to provide accounting and consulting services. The Company spent approximately $9,600 and $11,400 for the 52-week period ended December 29, 2006 and December 30, 2005, respectively. Norco
is 50% owned by Andrew J. Norstrud, who joined the Company in October of 2005, as the Companys Chief Financial Officer. The Company no longer uses Norco for consulting, however does occasionally use Norco for temporary accounting staffing
needs under the contract signed prior to Andrew J. Norstrud joining the Company.

The above related party transactions are not necessarily indicative of
the amounts and terms that would have been incurred had comparable transactions been entered into with independent parties.



|10. | Subsequent Events
|--- | -----------------

In 2007, the Company established an Employee
Stock Ownership Plan (ESOP). All employees of Jagged Peak that meet the 1,000 hours work requirement are eligible to participate in the ESOP. Under the ESOP, which is 100% Company funded, Jagged Peak allocates contributed shares to participants
based on their eligible annual compensation. Compensation shall include but not limited to the regular salaries and wages, overtime pay, bonuses, commissions and other amounts paid by Jagged Peak and taxable to the employee. The value or number of
Jagged Peak common stock that is contributed to the ESOP on an annual basis is completely subject to the discretion of the board of directors. Any cash dividends or distributions paid with respect to shares of the ESOP trust will be retained and
allocated in the same manner as other income of the ESOP trust. Shares held by the ESOP trust will be treated as all other issued and outstanding common shares for earnings per share calculations.

In 2007, the employee stock ownership trust purchased 300,000 common shares from a non-related private party for $45,000 to be contributed to the ESOP. Jagged Peak had
accrued and recognized compensation expense of approximately $45,000 for the 52-week ended December 29, 2006 related to this approved contribution to the ESOP plan for services provided during the 52-week period ended December 29, 2006.



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##### Table of Contents

|Item 8. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.



|Item 8A. | Controls and Procedures
|-------- | -----------------------

Under the supervision and with the
participation of management, including the CEO and CFO, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act), as of December 29, 2006. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective for timely gathering, analyzing,
and disclosing the information we are required to disclose in our reports filed under the Securities Act of 1934, as amended. There has been no significant change in the Companys internal control over financial reporting during the fiscal year
ended December 29, 2006 that materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting.



|Item 8B. | Other Information
|-------- | -----------------

In 2007, the Company established an Employee
Stock Ownership Plan (ESOP). All employees of Jagged Peak that meet the 1,000 hours work requirement are eligible to participate in the ESOP. Under the ESOP, which is 100% Company funded, Jagged Peak allocates contributed shares to participants
based on their eligible annual compensation. Compensation shall include but not limited to the regular salaries and wages, overtime pay, bonuses, commissions and other amounts paid by Jagged Peak and taxable to the employee. The value or number of
Jagged Peak common stock that is contributed to the ESOP on an annual basis is completely subject to the discretion of the board of directors. Any cash dividends or distributions paid with respect to shares of the ESOP trust will be retained and
allocated in the same manner as other income of the ESOP trust. Shares held by the ESOP trust will be treated as all other issued and outstanding common shares for earnings per share calculations.

PART III



|Item 9. | Directors and Executive Officers of the Registrant
|------- | --------------------------------------------------

The
Companys directors and executive officers as of March 26, 2007 were as follows:



|                    |  |     |  |                                                                   
|------------------- |  | --- |  | ------------------------------------------------------------------
|Name                |  | Age |  | Position                                                          
|Paul Demirdjian     |  | 46  |  | Chairman of the Board of Directors and Chief Executive Officer    
|Vince Fabrizzi      |  | 49  |  | Senior Vice President, Chief Sales and Marketing Officer, Director
|Dan Furlong         |  | 59  |  | Chief Operations Officer, Director                                
|Andrew J. Norstrud  |  | 33  |  | Chief Financial Officer                                           
|Primrose Demirdjian |  | 47  |  | Director                                                          

The following is a brief summary of the business experience of the foregoing directors and executive officers.

The following sets forth information concerning the officers and directors, including present principal occupations, other business experience during the
last 5 years, membership on committees of the Board of Directors and directorships in other publicly held companies.

Paul Demirdjian  Chief
Executive Officer, Board Member

Mr. Demirdjian has over twenty years of experience in senior management, including executive positions of Senior
Vice President of Operations, Chief Information Officer and Director for over ten years at Davel Communications, a publicly held telecom company



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##### Table of Contents

operating private payphones, operator services, and long distance services. Mr. Demirdjian is in the process of applying for patents on a number of
e-business methodologies and has written numerous articles published in Public Communications Magazine. Paul Demirdjian has served on the Board since the inception of Jagged Peak in 2000 and is married to Primrose Demirdjian, another member
of the Board. Mr. Demirdjian attended the University of South Florida where he studied Engineering Technology. He is a member of the Engineering Honor Society (Tau Alpha Pi).

Vince Fabrizzi  Chief Sales and Marketing Officer, Board Member

Prior to joining Jagged Peak Mr. Fabrizzi
was Chief Executive Officer and Co-Founder of Compass Marketing Services, a logistics services, warehouse management, and fulfillment services company. Previously, Mr. Fabrizzi co-founded Paradigm Communications in 1989 with Mr. Furlong,
and together over the next eight years they built the company into one of the Southeasts largest nationally recognized advertising agencies with over 160 employees, $60 million in revenues and an impressive list of Fortune 500 clients. Prior
to co-founding Paradigm, Mr. Fabrizzi was a Vice President and Partner at FKQ Advertising. Vince Fabrizzi has served on the Board since the inception of Jagged Peak in 2000. Mr. Fabrizzi holds a B.S. in Mechanical Engineering from West
Virginia University.

Dan Furlong  Chief Operating Officer, Board Member

Prior to joining Jagged Peak, Mr. Furlong was President and Co-Founder with Mr. Fabrizzi of both Compass Marketing Services and Paradigm Communications. Previously, Mr. Furlong was Vice President of
Marketing for Dollar Rent-A-Car of Florida  the largest Dollar Rent-A-Car franchise in the country. During his tenure, business at the Florida division increased ten-fold. Mr. Furlong has served as an officer and a board member since the
inception of Jagged Peak in 2000. Mr. Furlong graduated from the University of Wyoming with both undergraduate and graduate degrees in Accounting.

Andrew J. Norstrud  Chief Financial Officer

Mr. Norstrud joined Jagged Peak in October of 2005 from Segmentz, Inc., where he
served as Chief Financial Officer, and played an instrumental role in the company achieving its strategic goals by pursuing and attaining growth initiatives, building an exceptional financial team, completing and integrating strategic acquisitions
and implementing the structure required of public companies. Previously, Mr. Norstrud has worked for Grant Thornton LLP, Norco Accounting and Consulting, Aerosonic and PricewaterhouseCoopers LLP and has extensive experience with young, rapid
growth public companies. Mr. Norstrud earned a Master of Accounting with a systems emphasis from the University of Florida and is a Florida licensed Certified Public Accountant.

Primrose Demirdjian  Board Member

Primrose Demirdjian is focused on expanding the international arm of Jagged
Peak as well as serving as the Companys Public Relations Director. She currently serves on the board of the Tampa Bay International Business Council and serves the Greater Tampa Chamber of Commerces Committee of One Hundreds
international committees. In addition, she serves the Childrens Cancer Research Group at St. Josephs Childrens Hospital and is a trustee for Academy at the Lakes, a K-12 independent school. Prior to her tenure as president and
co-founder of IBIS (June 1996), an Internet-related company, Mrs. Demirdjian was employed by GTE Data Services, Inc. where she held various administrative and technical positions. Primrose Demirdjian is married to Paul Demirdjian, the CEO of
the Company. Mrs. Demirdjian has served as a board member since the inception of Jagged Peak in 2000. Mrs. Demirdjian holds a Bachelor of Science in Management Information Systems from Nova Southeastern University of Florida.

AUDIT COMMITTEE

The Audit Committee consists of the entire Board,
as there are no independent Board members. The Audit Committee; reviews the results and scope of the audit and other services provided by the Companys independent auditors, and reviews and evaluates the Companys internal control
functions. As an advisory function of the committee, members also participate in financings, review and budgets and review budgets versus historical results throughout the year. The Board of Directors determined that Dan Furlong qualifies as an
audit committee financial expert as defined under the regulations of the Securities and Exchange Commission.

CODE OF ETHICS

The Companys Board of Directors has adopted a Code of Ethics applicable to all of the Companys employees, including the Companys Chief Executive
Officer, Chief Sales and Marketing Officer, Chief Operating Officer, Chief Financial Officer, and Principal Accounting Officer and Controller. A copy of the Companys Code of Ethics is attached as an exhibit to the December 30, 2005 Annual
Report on Form 10-KSB. The Company intends to provide any disclosures which are required by the rules of the Securities and Exchange Commissions, or which the Company would otherwise determine to be appropriate, with respect to amendments of, and
waivers from the Companys Code of Ethics by posting such disclosures on the Companys Internet website, www.JaggedPeak.com.



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##### Table of Contents

SECTION 16(a) BENEFICIAL OWNERSHIP REPORING COMPLIANCE

Based solely on the Companys review of copies of forms filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, and written
representations from certain reporting persons, the Company believes that during 2006 all reporting persons timely complied with all filing requirements applicable to them.

Section 16(a) of the Securities and Exchange Act of 1934 (the Exchange Act) requires the Companys directors and executive officers, and persons who own more than 10% of a registered class of the
Companys equity securities, to file with the Securities and Exchange Commission (SEC) and any securities exchanges on which the equities of the Company trade, initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. Officers, directors and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of these reports.



|Item 10. | Executive Compensation and Discussion and Analysis
|-------- | --------------------------------------------------

COMPENSATION

General

The Compensation Committee of the Board of
Directors is currently composed of all four directors and is not independent.

The Company is engaged in highly competitive businesses and competes
nationally for personnel at the executive and technical staff level. Outstanding candidates are aggressively recruited, often at premium salaries. Highly qualified employees are essential to our success. The Companys objective is to provide a
competitive compensation and work environment that helps attract, retain, and motivate the highly skilled people the Company requires. The Company strongly believes that a considerable portion of the compensation for the Chief Executive Officer and
other top executives must be tied to the achievement of business objectives and overall financial performance, both current and long-term.

The
Companys compensation program is based on the philosophy that the total cash compensation should vary with the performance of both the individual and the Company and any long-term incentive should be closely aligned with the interest of the
stockholders. There are two cash components of the executives salary, which include a base salary and a bonus structure that compensates the executive for both their individual performance and the overall Company performance.

Long-term incentives are generally realized through the granting of stock options to executives and key employees. We have also granted certain non-qualified options to
our executive officers. The Company implemented an employee stock ownership plan in 2007 for the benefit of its employees. At this time, the Company has no other long-term incentive plans for our officers and employees.

Stock Options

Stock options are granted to aid in the retention of
executive and key employees and to align the interests of executive and key employees with those of the stockholders. The level of stock options granted (i.e., the number of shares subject to each stock option grant) is based on the employees
ability to impact future corporate results. An employees ability to impact future corporate results depends on the level and amount of job responsibility of the individual. Therefore, the level of stock options granted is proportional to the
Companys evaluation of each employees job responsibility. Stock options are granted at a price not less than the fair market value on the date granted.

The following table sets forth a summary of the compensation paid for the three fiscal years ended December 29, 2006 to or for the benefit of the Companys Chief Executive Officer, Chief Financial Officer and other named
executives that are considered the Companys most highly compensated whose total annual salary and bonus compensation exceeded $100,000 (the Named Executive Officers).

SUMMARY COMPENSATION TABLE



|                          |  |                            |     |                     |           |  |                          |  |                |  |         |     |  |   |  |        
|------------------------- |  | -------------------------- | --- | ------------------- | --------- |  | ------------------------ |  | -------------- |  | ------- | --- |  | - |  | -------
|                          |  | Summary Compensation Table |     | OptionAwards($) (A) |           |  | All OtherCompensation($) |  | Total ($)     
|Name Principal Positions  |  | YearEnded                  |     |                     | Salary($) |  | Bonus($)                 |  | StockAwards($) |  |         |    
|Paul Demirdjian, Chairman |  | 2006                       |     |                     | 161,000   |  | 65,000                   |  |               |  | 92,500  | (3) |  |  |  | 318,500
|and Chief Executive       |  | 2005                       |     |                     | 221,000   |  |                         |  |               |  | 100,200 | (1) |  |  |  | 321,200
|Officer                   |  | 2004                       |     |                     | 106,000   |  |                         |  |               |  |        |     |  |  |  | 106,000
|Vince Fabrizzi            |  | 2006                       |     |                     | 160,000   |  | 55,000                   |  |               |  | 92,500  | (3) |  |  |  | 307,500
|Chief Sales and           |  | 2005                       |     |                     | 211,000   |  |                         |  |               |  | 113,200 | (2) |  |  |  | 324,200
|Marketing Officer         |  | 2004                       |     |                     | 96,000    |  |                         |  |               |  |        |     |  |  |  | 96,000 
|Dan Furlong               |  | 2006                       | (1) |                     | 160,000   |  | 55,000                   |  |               |  | 92,500  | (3) |  |  |  | 307,500
|Chief Operations Officer  |  | 2005                       |     |                     | 211,000   |  |                         |  |               |  | 113,200 | (2) |  |  |  | 324,200
|                          |  | 2004                       |     |                     | 96,000    |  |                         |  |               |  |        |     |  |  |  | 96,000 
|Andrew J. Norstrud (5)    |  | 2006                       | (2) |                     | 149,000   |  | 55,000                   |  |               |  | 92,500  | (3) |  |  |  | 296,500
|Chief Financial Officer   |  | 2005                       |     |                     | 42,300    |  |                         |  |               |  | 106,800 | (4) |  |  |  | 149,100
|                          |  | 2004                       |     |                     |           |  |                          |  |                |  |         |     |  |   |  | N/A    





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##### Table of Contents

---

|(A) | Reflects the grant date fair
value calculated in accordance with FAS 123(R). The following assumptions were used for the years ended December 29, 2006 and December 30, 2005 (1) risk-free interest rate of between 4.87% and 3.62%, (2) no dividend yield,
(3) expected lives of 5.0 years, and (4) volatility of between 120% and 75%. Results may vary depending on the assumptions applied within the model. Compensation expense recognized in providing pro forma disclosures may not be
representative of the effects on net income for future years.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(1) | 100,000 at strike price of $1.10 per share and 90,000 at strike price of $.77 per share, both vested
immediately and expire five years from date of grant.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 100,000 at strike price of $1.10 per share and 120,000 at strike price of $.77 per share, both vested
immediately and expire five years from date of grant.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 200,000 at strike price of $0.55 per share, vested immediately, expire five years from date of grant and
are not part of any approved stock option plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 100,000 at strike price of $1.10 per share and 120,000 at strike price of $.77 per share, both vested immediately and expire five years from date of grant.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Mr. Norstrud joined the Company in October of 2005.
|--- | ---------------------------------------------------

The
Companys Board appoints the executive officers to serve at the discretion of the Board.

DIRECTOR COMPENSATION

Directors who are also employees receive no compensation for serving on the Board. The Companys non-employee directors receive options to purchase shares of common
stock at the market price on the date they are granted, reimbursement of expenses incurred consequential to their service and may receive additional options at the discretion of the Board.

The following table summarizes compensation paid to all of our non-employee directors:



|                    |  |                              |   |                |   |                 |  |                                         |   |  |                                                                       |        |                          |  |           |   |  |   |   |  |   |       
|------------------- |  | ---------------------------- | - | -------------- | - | --------------- |  | --------------------------------------- | - |  | --------------------------------------------------------------------- | ------ | ------------------------ |  | --------- | - |  | - | - |  | - | ------
|Name                |  | FeesEarned orPaid inCash ($) |   | StockAwards($) |   | OptionAwards($) |  | Non-EquityIncentive PlanCompensation($) |   |  | Change inPension
ValueandNonqualifiedDeferredCompensationEarnings ($) |        | All OtherCompensation($) |  | Total ($)
|Primrose Demirdjian |  | $                            |  |                | $ |                |  | $                                       |  |  | $                                                                     | 37,200 | (1)                      |  | $         |  |  | $ |  |  | $ | 37,200

---

|(1) | Includes a grant made on September 8, 2006 for 25,000 options at a strike price of $2.00 that expire September 8, 2011; and a grant made on December 27, 2006 for
50,000 option at a strike price of $0.55 that expire December 27, 2011.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(A) | Reflects the grant date fair
value calculated in accordance with FAS 123(R). The following assumptions were used for the year ended December 29, 2006 (1) risk-free interest rate of between 4.87% and 3.62%, (2) no dividend yield, (3) expected lives of 5.0
years, and (4) volatility of between 120% and 125%. Results may vary depending on the assumptions applied within the model. Compensation expense recognized in providing pro forma disclosures may not be representative of the effects on net
income for future years.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

EMPLOYMENT AGREEMENTS

In December 2005, the Company entered into an employment agreement with Andrew J. Norstrud, the Companys Chief Financial Officer, which terminates December 2007. In addition to expense allotment and other
reasonable expense reimbursement, this



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##### Table of Contents

agreement provides for a base salary of $125,000 with annual increases in salary and bonuses at the discretion of the Board of Directors. The agreement
provided for an option to purchase 100,000 shares of common stock at a price of $1.00 per share and an additional option to purchase 100,000 shares at $.75 per share and both are completely vested. The agreement was amended in 2006 to extend the
termination date of the contract to 2009.

OPTION GRANTS TO NAMED EXECUTIVES IN LAST FISCAL YEAR

During 2006, we granted awards to our Chief Executive Officer, Chief Financial Officer and other named executive officers outside of any stock option plan. Information
with respect to each of these awards, including estimates regarding future payouts under each of these awards on a grant by grant basis, is set forth in the table below.



|                        |  |           |  |                                                            |  |                                                                     |  |                                                 |      |                                              |   |       
|----------------------- |  | --------- |  | ---------------------------------------------------------- |  | ------------------------------------------------------------------- |  | ----------------------------------------------- | ---- | -------------------------------------------- | - | ------
|Name                    |  | GrantDate |  | All OtherStock Awards:Number ofShares of StockOr Units (#) |  | All OtherOption Awards:Number
ofSecurities Under- Lying Options (#) |  | Exercise orBase PriceOf OptionAwards($ / Share) |      | Grant DateFair ValueOf Stock andOptionAwards
|Paul Demirdjian, CEO    |  | 12/27/06  |  |                                                           |  | 200,000                                                             |  | $                                               | 0.55 |                                              | $ | 92,500
|Vince Fabrizzi, CSMO    |  | 12/27/06  |  |                                                           |  | 200,000                                                             |  | $                                               | 0.55 |                                              | $ | 92,500
|Dan Furlong, COO        |  | 12/27/06  |  |                                                           |  | 200,000                                                             |  | $                                               | 0.55 |                                              | $ | 92,500
|Andrew J. Norstrud, CFO |  | 12/27/06  |  |                                                           |  | 200,000                                                             |  | $                                               | 0.55 |                                              | $ | 92,500

During 2006 the board voted to issue a total of three hundred seventy thousand options (370,000) to other
employees other than named executives or directors. The exercise price was the closing price on the date of the grant and ranged from $0.55 to $2.50 per share. The options primarily have a five-year term and vest over a two-year period from date and
are exercisable only while the employee is employed with the Company. The grants ranged in size from 10,000 to 50,000 with the average being 15,000.

STOCK OPTION PLANS

The Companys 2005 Stock Incentive Plan (the Plan) authorizes the Board of Directors the authority to
grant up to 2,000,000 options to key employees, officers, directors, and consultants. The aggregate fair market value of grants to one individual shall not exceed $100,000 during any one calendar year for grants of both incentive stock options and
non-qualified stock options. Options granted under the Plan must be exercised within ten years of the date of grant. The Option Price payable for the shares of Common Stock covered by any Option shall be determined by the Board of Directors, but
shall in no event be less than the fair market value of the Common Stock. The Option Price for Incentive Stock Options shall not be less than the Fair Market Value of one share of Common Stock on the Date of Grant. The Option Price for Nonstatutory
Options may be less than the Fair Market Value of Common Stock on the Date of Grant only if the Committee determines that special circumstances warrant a lower exercise price.

The Companys 2000 Stock Incentive Plan authorizes up to 100,000 shares of common stock to any employee or Consultant during any one calendar year for grants of both incentive stock options and non-qualified
stock options to key employees, officers, directors, and consultants. Options granted under the Plan must be exercised within ten years of the date of grant. The Option Price payable for the shares of Common Stock covered by any Option shall be
determined by the Board of Directors, but shall in no event be less than the par value of Common Stock. The Option Price for Incentive Stock Options shall not be less than the Fair Market Value of one share of Common Stock on the Date of Grant. The
Option Price for Nonstatutory Options may be less than the Fair Market Value of Common Stock on the Date of Grant only if the Committee determines that special circumstances warrant a lower exercise price.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

The
following table summarizes equity awards granted to our Chief Executive Officer, Chief Financial Officer and other named executive officers that were outstanding as of December 29, 2006.



|                            |  |                                                                 |  |                                                                                      |  |                         |  |                      |                                                       |                                                    |                                                                                           |              |                                                                                                          |  |   |  |   |  |  
|--------------------------- |  | --------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | ----------------------- |  | -------------------- | ----------------------------------------------------- | -------------------------------------------------- | ----------------------------------------------------------------------------------------- | ------------ | -------------------------------------------------------------------------------------------------------- |  | - |  | - |  | -
|Name                        |  | Number ofSecuritiesUnderlyingOptions(#)Exercisable              |  | Option Awards                                                                        |  | OptionExercisePrice ($) |  | OptionExpirationDate |                                                       | NumberofSharesor Unitsof StockThatHaveNotVested(#) |                                                                                           | Stock Awards
|                            |  | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable |  | EquityIncentivePlanAwards:Number
ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#) |  |                         |  |                      | MarketValueofSharesorUnitsofStockThatHaveNotVested($) |                                                    | EquityIncentivePlanAwards:NumberofUnearnedShares,Units orOtherRightsThatHave
NotVested(#) |              | EquityIncentivePlanAwards:Marketor PayoutValue ofUnearnedShares,Units
orOtherRightsThatHave NotVested($)
|Paul Demirdjian, CEO (1)    |  | 390,000                                                         |  |                                                                                     |  |                        |  | $                    | 0.74                                                  |                                                    | 5 yearsfromGrant                                                                          |              |                                                                                                         |  |  |  |  |  | 
|Vince Fabrizzi, CSMO (2)    |  | 443,529                                                         |  |                                                                                     |  |                        |  | $                    | 0.70                                                  |                                                    | 5 yearsfromGrant                                                                          |              |                                                                                                         |  |  |  |  |  | 
|Dan Furlong, COO (3)        |  | 443,529                                                         |  |                                                                                     |  |                        |  | $                    | 0.70                                                  |                                                    | 5 yearsfromGrant                                                                          |              |                                                                                                         |  |  |  |  |  | 
|Andrew J. Norstrud, CFO (4) |  | 400,000                                                         |  |                                                                                     |  |                        |  | $                    | 0.71                                                  |                                                    | 5 yearsfromGrant                                                                          |              |                                                                                                         |  |  |  |  |  | 



---

##### Table of Contents

---

|(1) | Includes a grant made on October 7, 2005 for 90,000 options at a strike price of $0.77 that expire October 7, 2010; a grant made on December 29, 2005 for 100,000
options with a strike price of $1.10 that expire December 29, 2010; and a grant made on December 27, 2006 for 200,000 option at a strike price of $0.55 that expire December 27, 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Includes a grant made on August 22, 2000 for 7,842 at a strike price of $0.01 that expire January 1, 2010; a grant made on August 22, 2000 for 15,687 at a strike
price of $0.01 that expire January 1, 2010; a grant made on October 7, 2005 for 120,000 options at a strike price of $0.77 that expire October 7, 2010; a grant made on December 29, 2005 for 100,000 options with a strike price of
$1.10 that expire December 29, 2010; and a grant made on December 27, 2006 for 200,000 option at a strike price of $0.55 that expire December 27, 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes a grant made on August 22, 2000 for 7,842 at a strike price of $0.01 that expire January 1, 2010; a grant made on August 22, 2000 for 15,687 at a strike
price of $0.01 that expire January 1, 2010; a grant made on October 7, 2005 for 120,000 options at a strike price of $0.77 that expire October 7, 2010; a grant made on December 29, 2005 for 100,000 options with a strike price of
$1.10 that expire December 29, 2010; and a grant made on December 27, 2006 for 200,000 option at a strike price of $0.55 that expire December 27, 2011.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Includes a grant made on October 7, 2005 for 100,000 options at a strike price of $0.75 that expire October 7, 2010; a grant made on December 29, 2005 for 100,000
options with a strike price of $1.00 that expire December 29, 2010; and a grant made on December 27, 2006 for 200,000 option at a strike price of $0.55 that expire December 27, 2011.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

OPTION EXERCISES AND HOLDINGS

The following table contains
information with respect to the exercise of options to purchase shares of common stock during the fiscal year ended December 29, 2006, by the Companys Chief Executive Officer and by each of the Companys executive officers who earned
more than $100,000 during the fiscal year ended December 29, 2006 (the bid price of the Companys stock was $0.55 as reported on the Over-The-Counter Bulletin Board).

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES



|                        |  |                               |             |                  |               |                                                                         |             |                                                               |               |   |        |  |   |  
|----------------------- |  | ----------------------------- | ----------- | ---------------- | ------------- | ----------------------------------------------------------------------- | ----------- | ------------------------------------------------------------- | ------------- | - | ------ |  | - | -
|Name / Position         |  | SharesAcquired onExercise (#) |             | ValueRealized($) |               | Number of
SecuritiesUnderlying Unexercised Options at December 29, 2006 |             | Value of UnexercisedIn-the- Money Options atDecember 29, 2006
|                        |  |                               | Exercisable |                  | Unexercisable |                                                                         | Exercisable |                                                               | Unexercisable
|Paul Demirdjian, CEO    |  | 0                             |             | 0                |               | 390,000                                                                 |             |                                                              |               | $ |       |  | $ | 
|Vince Fabrizzi, CSMO    |  | 0                             |             | 0                |               | 443,529                                                                 |             |                                                              |               | $ | 12,700 |  | $ | 
|Dan Furlong, COO        |  | 0                             |             | 0                |               | 443,529                                                                 |             |                                                              |               | $ | 12,700 |  | $ | 
|Andrew J. Norstrud, CFO |  | 0                             |             | 0                |               | 400,000                                                                 |             |                                                              |               | $ |       |  | $ | 



---

##### Table of Contents

|Item 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information, as of December 29, 2006 with
respect to the Companys stock option plans under which common stock is authorized for issuance, as well as other compensatory options granted outside of the Companys stock option plans.



|                                                                                                      |  |                                                                                          |  |                                                                          |      |                                                                                                                                       |        
|----------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ---- | ------------------------------------------------------------------------------------------------------------------------------------- | -------
|                                                                                                      |  | (a)                                                                                      |  | (b)                                                                      |      | (c)                                                                                                                                  
|Plan Category                                                                                         |  | Number of securities tobe issued upon exerciseof outstanding options,warrants and rights |  | Weighted-averageexercise price ofoutstanding options,warrants and rights |      | Number of securitiesremaining available forfuture issuance underequity compensationplan (excluding securities reflected incolumn (a))
|Equity compensation related to 2005 stock option plan that is not approved by shareholders            |  | 1,293,529                                                                                |  | $                                                                        | 0.98 |                                                                                                                                       | 706,471
|Equity compensation not related to a stock option plan                                                |  | 800,000                                                                                  |  | $                                                                        | 0.55 |                                                                                                                                       |       
|Equity compensation related to the 2000 stock option plan and other warrants approved by shareholders |  | 727,458                                                                                  |  | $                                                                        | 0.68 |                                                                                                                                       |       
|                                                                                                      |  |                                                                                          |  |                                                                          |      |                                                                                                                                       |        
|Total                                                                                                 |  | 2,820,987                                                                                |  | $                                                                        | 0.80 |                                                                                                                                       | 706,471
|                                                                                                      |  |                                                                                          |  |                                                                          |      |                                                                                                                                       |        

The Companys 2005 Stock Incentive Plan (the Plan) authorizes the Board of Directors the
authority to grant up to 2,000,000 options to key employees, officers, directors, and consultants. The aggregate fair market value of grants to one individual shall not exceed $100,000 during any one calendar year for grants of both incentive stock
options and non-qualified stock options. Options granted under the Plan must be exercised within ten years of the date of grant. The Option Price payable for the shares of Common Stock covered by any Option shall be determined by the Board of
Directors, but shall in no event be less than the fair market value of the Common Stock. The Option Price for Incentive Stock Options shall not be less than the Fair Market Value of one share of Common Stock on the Date of Grant. The Option Price
for Nonstatutory Options may be less than the Fair Market Value of Common Stock on the Date of Grant only if the Committee determines that special circumstances warrant a lower exercise price.

The Companys 2000 Stock Incentive Plan authorizes up to 100,000 shares of common stock to any employee or Consultant during any one calendar year for grants of
both incentive stock options and non-qualified stock options to key employees, officers, directors, and consultants. Options granted under the Plan must be exercised within ten years of the date of grant. The Option Price payable for the shares of
Common Stock covered by any Option shall be determined by the Board of Directors, but shall in no event be less than the par value of Common Stock. The Option Price for Incentive Stock Options shall not be less than the Fair Market Value of one
share of Common Stock on the Date of Grant. The Option Price for Nonstatutory Options may be less than the Fair Market Value of Common Stock on the Date of Grant only if the Committee determines that special circumstances warrant a lower exercise
price.

PRINCIPAL SHAREHOLDERS

The following table
sets forth information known to us, as of the date of this Form 10-KSB filing, relating to the beneficial ownership of shares of common stock by:



| |  |  | each person who is known by us to be the beneficial owner of more than 5% of the Companys outstanding common stock;
| | - |  | --------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | each director;
| | - |  | --------------



| |  |  | each executive officer; and
| | - |  | ---------------------------



| |  |  | all executive officers and directors as a group.
| | - |  | ------------------------------------------------

Under securities laws, a person is considered to be the beneficial owner of securities owned by him (or certain persons whose ownership is attributed to him) and that can be acquired by him within 60 days from the date of this Form 10-KSB
filing, including upon the exercise of options, warrants or convertible securities. The Company determined a beneficial owners percentage ownership by assuming that options, warrants or convertible securities that are held by him, but not
those held by any other person, and which are exercisable within 60 days of the date of this Form 10-KSB filing, have been exercised or converted.

Except
with respect to beneficial ownership of shares attributed to the named person, the following table does not give effect to the issuance of shares in the event outstanding common stock purchase warrants are exercised.

The Company believes that all persons named in the table have sole voting and investment power with respect to all shares of common stock shown as being owned by them.
Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Jagged Peak, Inc., 13577 Feather Sound Drive, Suite 330, Clearwater, Florida 33762.



|                                                           |  |                                          |  |                    |  
|---------------------------------------------------------- |  | ---------------------------------------- |  | ------------------ | -
|Name/Address of Beneficial Owner                           |  | Amount and Nature ofBeneficial Ownership |  | Percentageof Class |  
|Paul Demirdjian and Primrose Demirdjian(1)                 |  | 5,455,084                                |  | 29                 | %
|Dan Furlong(2)                                             |  | 3,310,077                                |  | 18                 | %
|Vince Fabrizzi(3)                                          |  | 3,310,077                                |  | 18                 | %
|Andrew J. Norstrud(4)                                      |  | 400,000                                  |  | 2                  | %
|Laurus Master Fund Ltd(5)                                  |  | 2,706,000                                |  | 15                 | %
|                                                           |  |                                          |  |                    |  
|Executive Officers, Directors and others (as a group of 5) |  | 15,181,238                               |  | 82                 | %

---

|(1) | Mr. Demirdjian is the Companys Chairman, Chief Executive Officer and a Director.
Mrs. Demirdjian is a director of the Company. All shares are held jointly with Primrose Demirdjian and include 100,000 shares underlying common stock purchase options exercisable at $1.10 per share, 180,000 shares underlying common stock
purchase warrants exercisable at $.77 per share, 25,000 shares underlying common stock purchase warrants exercisable at $2.00 per share and 250,000 shares underlying common stock purchase warrants exercisable at $0.55 per share.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Mr. Furlong is the Companys Chief Operating Officer and a Director. Includes 443,529 shares
underlying common stock purchase options exercisable between $.01 per share and $1.10 per share.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Mr. Fabrizzi is the Companys Chief Sales and Marketing Officer and a Director. Includes
443,529 shares underlying common stock purchase options exercisable between $.01 per share and $1.10 per share.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Mr. Norstrud is the Companys Chief Financial Officer and a Director. Includes 400,000 shares
underlying common stock purchase options exercisable between $0.55 per share and $1.00 per share.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Laurus Master Fund Ltd is an unrelated party to the Company with an address of PO Box 309 GT, Ugland
House, George Town South Church Street, Grand Cayman, Cayman islands; includes 706,000 shares of underlying common stock purchase warrants exercisable at $0.01 and a $2,000,000 convertible note with a conversion price of $1.00 per common share.
There is a conversion limitation of 9.99% of the then outstanding common shares, however the limitation can be waived by the Holder upon provision of no less than sixty-one (61) days prior notice to the Company and shall automatically become
null and void following notice to the Company upon the occurrence and during the continuance of an Event of Default.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 12. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------

To
ensure that the Company has adequate near-term liquidity, the officers of the Company have loaned the Company short-term capital. In most cases the loans are for less than 30 days and no interest is expensed or paid to the officers. During the
course of the year there was less than $200,000 of total transactions and at December 29, 2006 there were no amounts owed to officers of the Company.

The Company contracted with Norco Accounting and Consulting Inc. (Norco) to provide accounting and consulting services. The Company spent approximately $9,600 and $11,400 for the 52-week period ended
December 29, 2006 and December 30, 2005, respectively. Norco is 50% owned by Andrew J. Norstrud, who joined the Company in October of 2005, as the Companys Chief Financial Officer. The Company no longer uses Norco for consulting,
however does



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##### Table of Contents

occasionally use Norco for temporary accounting staffing needs under the contract signed prior to Andrew J. Norstrud joining the Company.

The above related party transactions are not necessarily indicative of the amounts and terms that would have been incurred had comparable transactions
been entered into with independent parties.



|Item 13. | Exhibits
|-------- | --------



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|2.1           |  | Acquisition and Plan of Merger (filed as exhibit 2.1 to the form 8k filed with the SEC on July 11, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                                   
|              | 
|3.1           |  | Articles of Incorporation (filed as Exhibit 3.1 to the Form 10SB12G filed with the SEC on October 10, 2000, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                               
|              | 
|3.2           |  | Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.5 to the Form 8-K filed with the SEC on July 12, 2005, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                          
|              | 
|3.3           |  | By-Laws (filed as Exhibit 3.2 to the Form 10SB12G filed with the SEC on October 10, 2000, and incorporated herein by reference)                                                                                                                                                                                                                                                                                                                                                 
|              | 
|10.1          |  | Security and Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|              | 
|10.2          |  | Secured Convertible Term Note                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|10.3          |  | Secured Revolving Note                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|10.4          |  | Registration Rights Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|10.5          |  | Intellectual Property Security Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                        
|              | 
|10.6*         |  | Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|10.7*         |  | 2005 Stock Incentive Plan (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                         
|              | 
|10.8*         |  | 2000 Stock Incentive Plan (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                         
|              | 
|10.9*         |  | Andrew J. Norstrud Employment Agreement (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                           
|              | 
|14.1          |  | Executive Management Code of Ethics (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                               
|              | 
|14.2          |  | Company Code of Conduct (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                           
|              | 
|31.1          |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|              | 
|31.2          |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|              | 
|32.1          |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)



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##### Table of Contents

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|32.2 |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)

---

|* | Management contract or compensatory plan or arrangement required to be filed as an exhibit.
|- | -------------------------------------------------------------------------------------------



|Item 14. | Principal Accountants Fees and Services
|-------- | ---------------------------------------

Audit Fees

During 2006, our accountants, Pender Newkirk & Company, billed us approximately $60,800 for audit work and review of our Form 10-QSB and 8K
filings. During 2005, we were billed by Pender Newkirk & Company, approximately $127,000 for audit and review fees associated with our 10-QSB and 10-KSB filings.

Audit Related Fees

None

Tax Fees

During 2006 we were billed by our accountants, Pender Newkirk & Company, approximately $19,500 to
prepare our federal and state tax returns. During 2005 we were billed by our accountants, Pender Newkirk & Company, approximately $7,400 to prepare our federal and state tax returns. The audit committee approved all fees.

All Other Fees

None

The Board of Directors has not adopted any pre-approval policies and approves all engagements with the Companys auditors prior to performance of services by them.



---

##### Table of Contents

SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Tampa, State of
Florida, on March 26, 2007.



JAGGED PEAK, INC.BY:

/s/ Paul DemirdjianPaul Demirdjian(Chairman of the Board of Directors and
Chief Executive Officer)




BY:

/s/ Andrew J. NorstrudAndrew J. Norstrud(Chief Financial Officer)


PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.



|                        |  |                                                                |  |               
|----------------------- |  | -------------------------------------------------------------- |  | --------------
|SIGNATURE               |  | TITLE                                                          |  | DATE          
|/s/ Paul Demirdjian     |  | Chairman of the Board of Directors and Chief Executive Officer |  | March 26, 2007
|Paul Demirdjian         |  |                                                                | 
|                        |  |                                                               
|/s/ Vince Fabrizzi      |  | Chief Sales and Marketing Officer and Director                 |  | March 26, 2007
|Vince Fabrizzi          |  |                                                                | 
|                        |  |                                                               
|/s/ Dan Furlong         |  | Chief Operations Officer and Director                          |  | March 26, 2007
|Dan Furlong             |  |                                                                | 
|                        |  |                                                               
|/s/ Primrose Demirdjian |  | Director                                                       |  | March 26, 2007
|Primrose Demirdjian     |  |                                                                | 



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##### Table of Contents

Exhibit Index



|              |  |                                                                                                                                                                       
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                           
|2.1           |  | Acquisition and Plan of Merger (filed as exhibit 2.1 to the form 8k filed with the SEC on July 11, 2005 and incorporated herein by reference)                         
|              | 
|3.1           |  | Articles of Incorporation (filed as Exhibit 3.1 to the Form 10SB12G filed with the SEC on October 10, 2000, and incorporated herein by reference)                     
|              | 
|3.2           |  | Certificate of Amendment to Articles of Incorporation (filed as Exhibit 3.5 to the Form 8-K filed with the SEC on July 12, 2005, and incorporated herein by reference)
|              | 
|3.3           |  | By-Laws (filed as Exhibit 3.2 to the Form 10SB12G filed with the SEC on October 10, 2000, and incorporated herein by reference)                                       
|              | 
|10.1          |  | Security and Purchase Agreement                                                                                                                                       



---

##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.2  |  | Secured Convertible Term Note                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      | 
|10.3  |  | Secured Revolving Note                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|      | 
|10.4  |  | Registration Rights Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      | 
|10.5  |  | Intellectual Property Security Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                        
|      | 
|10.6* |  | Employee Stock Ownership Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|      | 
|10.7* |  | 2005 Stock Incentive Plan (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                         
|      | 
|10.8* |  | 2000 Stock Incentive Plan (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                         
|      | 
|10.9* |  | Andrew J. Norstrud Employment Agreement (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                           
|      | 
|14.1  |  | Executive Management Code of Ethics (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                               
|      | 
|14.2  |  | Company Code of Conduct (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 30, 2005 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                           
|      | 
|31.1  |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|      | 
|31.2  |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                              
|      | 
|32.1  |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)
|      | 
|32.2  |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)

---

|* | Management contract or compensatory plan or arrangement required to be filed as an exhibit.
|- | -------------------------------------------------------------------------------------------