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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-KSB







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

For the Fiscal Year Ended December 28, 2007

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





Jagged Peak, Inc.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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





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





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 28, 2007 was $14,416,600.

Aggregate market value of the voting stock held by non-affiliates of the registrant at March 21,
2008 was $2,925,500.

There were 14,627,594 shares of the Registrants $.001 par value common stock outstanding as of March 21, 2008.

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









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Jagged Peak, Inc.

ANNUAL REPORT ON FORM 10-KSB

FOR THE FISCAL YEAR ENDED

DECEMBER 28, 2007

TABLE OF CONTENTS



|           |  |          |  |                                                                                                                                      |  |   
|---------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | --
|PART I     |  | 1       
|           |  | Item 1.  |  | Description of Business                                                                                                              |  | 1 
|           |  | Item 2.  |  | Description of Properties                                                                                                            |  | 9 
|           |  | Item 3.  |  | Legal Proceedings                                                                                                                    |  | 10
|           |  | Item 4.  |  | Submission of Matters to a Vote of Security Holders                                                                                  |  | 10
|           | 
|PART II    |  | 10      
|           |  | Item 5.  |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities                         |  | 10
|           |  | Item 6.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                |  | 10
|           |  | Item 7.  |  | Financial Statements                                                                                                                 |  | 16
|           |  | Item 8.  |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                                                 |  | 17
|           |  | Item 8A. |  | Controls and Procedures                                                                                                              |  | 17
|           |  | Item 8B. |  | Other Information                                                                                                                    |  | 17
|           | 
|PART III   |  | 18      
|           |  | Item 9.  |  | Directors, Executive Officers, Promoters, Control person and Corporate Governance; compliance with section 16(a) of the exchange act |  | 18
|           |  | Item 10. |  | Executive Compensation                                                                                                               |  | 19
|           |  | Item 11. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                                       |  | 23
|           |  | Item 12. |  | Certain Relationships and Related Transactions                                                                                       |  | 25
|           |  | Item 13. |  | Exhibits                                                                                                                             |  | 25
|           |  | Item 14. |  | Principal Accountants Fees and Services                                                                                              |  | 26
|           | 
|SIGNATURES |  | 28      



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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. The EDGE platform has been deployed in multiple
vertical markets such as consumer goods, financial services, distribution, travel and tourism and manufacturing.

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 application. 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
offers its clients third party fulfillment services that are typically bundled with its software and sold as a turnkey web-to-ship solution. Jagged Peak has a network of fulfillment warehouses throughout North America that enables
its clients to provide better service to their customers, while lowering their overall delivery costs. The EDGE application is able to automatically route the orders to the optimal warehouse based on an established set of factors such as service,
cost and priority. This enables our clients to achieve their customer service goals while reducing cost and internal infrastructure.

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) continued adoption of the Internet
as a means of commerce; (ii) increase in users



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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) the 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.

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 EDGE software. 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 base while maintaining its ability to provide a high quality software product.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition, the Company believes that current clients will continue 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.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | Expanding the Sales Force and Investment in Marketing - Jagged Peak has achieved an impressive customer base without the efforts of a large dedicated
sales force. 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 began to recruit direct salespeople with enterprise software sales experience and long-standing relationships in various targeted vertical markets in 2007. The Company has
not recognized a significant benefit from those efforts, however it will continue its efforts to build impactful 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Mergers and Acquisitions -Jagged Peak has a strong management team with extensive experience in mergers and acquisitions. The Company is looking for
strategic acquisitions that will expand Jagged Peaks web-based technology services and its clientele.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, warehouse optimization, 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 serve 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 to be 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



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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 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 28, 2007, the Company had approximately 105 full time employees. 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. 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

OUR 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,
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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.

OUR OFFICERS AND DIRECTORS OWN A CONTROLLING INTEREST IN OUR STOCK AND INVESTORS HAVE A LIMITED VOICE IN OUR MANAGEMENT

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.

WE HAVE EXPERIENCED LOSSES
FROM OPERATIONS AND MAY NOT BE PROFITABLE IN THE FUTURE

Jagged Peak had losses before tax benefit of approximately $518,600 for the fiscal year ended
December 28, 2007, and losses before tax benefit of approximately $1,851,100 for the fiscal year ended December 29, 2006, 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.

WE ARE DEPENDENT ON A SMALL NUMBER OF CLIENTS FOR A LARGE PORTION OF OUR SALES AND 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, Nespresso USA, a division of Nestle,
accounted for approximately 61% of our revenue in 2007, an increase since 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, particularly this
contract, or if revenues from this or other key 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.



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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.

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 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.



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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 STOCKHOLDERS 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 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.



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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.

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.
| | - |  | ---------------------------------------



| |  |  | A large number of shares are being registered for resale pursuant hereto.
| | - |  | -------------------------------------------------------------------------



| |  |  | We have a small trading volume.
| | - |  | -------------------------------



| |  |  | The sale of any significant number of shares could materially negatively impact our stock.
| | - |  | ------------------------------------------------------------------------------------------

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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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.

THE ISSUANCE OF OUR STOCK UPON CONVERSION OF OUR CONVERTIBLE NOTES COULD ENCOURAGE SHORT SALES BY THIRD PARTIES, WHICH COULD CONTRIBUTE TO THE FUTURE DECLINE OF OUR
STOCK PRICE AND MATERIALLY DILUTE EXISTING STOCKHOLDERS EQUITY AND VOTING RIGHTS

The convertible notes we have issued have the potential to cause
significant downward pressure on the price of our common stock. This is particularly the case if the shares issued upon conversion of the notes exceed the markets ability to absorb the increased number of shares of stock. Such an event could
place further downward pressure on the price of our common stock, which presents an opportunity to short sellers and others to contribute to the future decline of our stock price. If there are significant short sales of our stock, the price decline
that would result from this activity will cause the share price to decline more so, which, in turn, may cause long holders of the stock to sell their shares thereby contributing to sales of stock in the market. If there is an imbalance on the sell
side of the market for the stock, our stock price will decline. Falling prices may encourage investors to profit by engaging in short sales by borrowing shares that they do not own in anticipation of a decline in price to enable the seller to cover
the sale with a purchase at a later date, at a lower price, and thus at a profit, which further contributes to a decline in the price of our stock. If this occurs, the number of shares of our common stock that is issuable upon conversion of the
convertible notes will increase, which will materially dilute existing stockholders equity and voting rights.

IF AN EVENT OF DEFAULT OCCURS UNDER
THE SECURITY AND PURCHASE AGREEMENT, OUR LENDER COULD TAKE POSSESSION OF ALL OUR ASSETS

In connection with the security and purchase agreement entered
into in December, 2006, we granted to Laurus Master Fund, Ltd. (Laurus) a first priority security interest in our assets. The security and purchase agreement provides that upon the occurrence of an event of default under the agreement,
Laurus shall have the right to take possession of the collateral, to operate our business using the collateral, and have the right to assign, sell, lease or otherwise dispose of and deliver all or any part of the collateral, at public or private
sale or otherwise to satisfy our obligations under these agreements. Any attempt by Laurus to foreclose on our assets could likewise cause us to curtail our current operations.



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

The Companys executive offices are located in 23,000 square feet of leased office space located at 13577 Feather Sound Drive, Suite 330, Clearwater, Florida 33762. Monthly rent expense is approximately $15,000
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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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 28, 2007:



|            |  |                        |          
|----------- |  | ---------------------- | ---------
|Year Ending |  | MinimumRental Payments
|2008        |  | $                      | 409,000  
|2009        |  | $                      | 357,000  
|2010        |  | $                      | 364,000  
|2011        |  | $                      | 122,000  
|2012        |  | $                      |          
|            |  |                        |          
|Total       |  | $                      | 1,252,000
|            |  |                        |          

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
|------- | -----------------

None.



|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 2006 and 2007. Quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.



|                   |  |      |  |                    |  |   |      |  |   |     
|------------------ |  | ---- |  | ------------------ |  | - | ---- |  | - | ----
|Period             |  | High |  | Low               
|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
|December 30, 2006  |  |     |  | March 30, 2007     |  | $ | 0.65 |  | $ | 0.16
|March 31, 2007     |  |     |  | June 29, 2007      |  | $ | 0.40 |  | $ | 0.17
|June 30, 2007      |  |     |  | September 28, 2007 |  | $ | 0.60 |  | $ | 0.20
|September 29, 2007 |  |     |  | December 28, 2007  |  | $ | 0.30 |  | $ | 0.12

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.



|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



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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. The EDGE platform has been deployed in multiple vertical markets such as
consumer goods, financial services, distribution, travel and tourism and manufacturing.

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 28, 2007 and December 29, 2006 consisted of 52 weeks.

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, 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 $8,560,000 or approximately 61% and amounted to approximately $5,681,000 or approximately 50%
of total revenues during the 52-week periods ended December 28, 2007 and December 29, 2006, respectively. Accounts receivable from the one customer was approximately $1,099,200 or approximately 45% of total accounts receivable and
approximately $476,400 or approximately 40% of total accounts receivable at December 28, 2007 and December 29, 2006, respectively. The risk of this is mitigated as the deferred revenue and customer deposits from the single customer at
December 28, 2007 and at December 29, 2006 was approximately $250,000.

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



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##### Table of Contents

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 $130,000 and $105,000 is considered necessary as of December 28, 2007 and December 29, 2006,
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 28, 2007 by approximately $8,000. We do not accrue interest on past due receivables.

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.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB
Statement No. 109. The Company recognized no adjustment in the liability for unrecognized income tax benefits as a result of the adoption of FIN No. 48.

RESULTS OF OPERATIONS

For the 52-week period ended December 28, 2007 compared to the 52-week period ended
December 29, 2006.

The following table summarizes selected financial data of the Company:



|                                             |  |      |            |      |   |            |        |  |   |           |   |  |     |   
|-------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | ------ |  | - | --------- | - |  | --- | --
|                                             |  | 2007 |            | 2006 |   |            | Change |  |   | Percent   |  
|Gross revenue                                |  | $    | 17,574,000 |      | $ | 14,442,600 |        |  | $ | 3,131,400 |   |  | 22  | % 
|Net revenue                                  |  |      | 14,416,600 |      |   | 11,462,300 |        |  |   | 2,954,300 |   |  | 26  | % 
|                                             |  |      |            |     
|Cost of sales                                |  |      | 10,888,700 |      |   | 8,862,400  |        |  |   | 2,026,300 |   |  | 23  | % 
|                                             |  |      |            |      |   |            |        |  |   |           |   |  |     |   
|Gross profit                                 |  |      | 3,527,900  |      |   | 2,599,900  |        |  |   | 928,000   |   |  | 36  | % 
|                                             |  |      |            |      |   |            |        |  |   |           |   |  |     |   
|Selling, general and administrative expenses |  |      | 3,519,600  |      |   | 4,184,000  |        |  |   | (664,400  | ) |  | (16 | )%
|                                             |  |      |            |      |   |            |        |  |   |           |   |  |     |   
|Income (loss) from operations                |  | $    | 8,300      |      | $ | (1,584,100 | )      |  | $ | 1,592,400 |   |  | 101 | % 
|                                             |  |      |            |      |   |            |        |  |   |           |   |  |     |   

The following table sets forth the Companys capitalization as of December 28, 2007. 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                                                                                                  |  | $ | 3,434,300  |  
|Long-term liabilities                                                                                                      |  |   | 1,509,000  |  
|Stockholders equity:                                                                                                      |  |   |            |  
|Common stock; $.001 par value; 70,000,000 shares authorized; 14,627,594 shares issued and outstanding at December 28,
2007 |  |   | 14,700     |  
|Additional paid-in capital                                                                                                 |  |   | 3,334,500  |  
|Accumulated deficit                                                                                                        |  |   | (2,834,000 | )
|                                                                                                                           |  |   |            |  
|Total stockholders equity                                                                                                 |  | $ | 515,200    |  



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For the 52-week period ended December 28, 2007 compared to the 52-week period ended December 29, 2006.

Net revenues increased approximately $2,954,300, or 26%, to approximately $14,416,600 for the 52-week period ended December 28, 2007, as compared to
approximately $11,462,300 for the 52-week period ended December 29, 2006. 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 $2,026,300, or 23%, to approximately $10,888,700 for the 52-week period ended December 28, 2007, as compared to approximately $8,862,400 for the 52-week period ended December 29,
2006. As a percentage of revenues cost of sales amounted to approximately 76% of related revenues for the 52-week period ended December 28, 2007, as compared with approximately 77% for the 52-week period ended December 29, 2006. Increased
costs of sales 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 decreased by approximately $664,400 or 16% to approximately $3,519,600 for the 52-week period ended
December 28, 2007 as compared to approximately $4,184,000 for the 52-week period ended December 29, 2006. The decrease was primarily related to the absence of 2006 expenses including (i) a one time charge of $303,400 related to the
termination of a management agreement and (ii) a one time charge of $484,300 related to the termination of capital raising efforts. The decrease was offset by increases related to (i) increased executive management and sales force,
(ii) increased overhead expenses related to the sales and marketing plan, and (iii) increased infrastructure to accommodate the rapid growth. Management will continue to implement strategies to maintain low general and administrative
expenses while building a scaleable infrastructure, but management does expect expenses related to its sales force to grow significantly in 2008 as the Company accelerates its growth initiatives.

The Company realized a loss from continuing operations before provisions for income taxes of approximately $518,600 for the 52-week period ended December 28, 2007,
compared with the loss from continuing operations before provisions for income taxes of approximately $1,851,100 for the 52-week period ended December 29, 2006.

The income tax benefit was approximately $158,600 for the 52-week period ended December 28, 2007 compared to an income tax benefit of approximately $472,000 for the 52-week period ended December 29, 2006.
Differences between the effective tax rate used for 2007 and 2006, as compared to the U.S. Federal and State statutory rate, are primarily due to permanent differences. As of December 28, 2007, the Company had federal and state net operating
loss carry-forwards totaling approximately $3,800,000, 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 28, 2007 was $.03 per weighted average share, compared with basic loss of $.10 per weighted average share for the 52-week
period ended December 29, 2006. This was based on 14,200,768 and 13,937,345 weighted average number common shares outstanding for the 52-week period ended December 28, 2007 and December 29, 2006, respectively.

EBITDA

EBITDA for the 52-week period ended December 28, 2007
was approximately $337,300 compared to approximately $(1,187,700) in the comparable period of the prior year. The increase in the EBITDA directly relates to (i) a one time charge of $303,400 related to the termination of a management agreement
in 2006, (ii) a one time charge of $468,300 related to the termination of capital raising efforts in 2006, (iii) $74,000 related to the early extinguishment of debt in 2006, (iv) increased gross margin in 2007 and (v) increased
revenue in 2007. 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.



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##### Table of Contents

|                              |  |                      |          |   |                   |   |            |  
|----------------------------- |  | -------------------- | -------- | - | ----------------- | - | ---------- | -
|                              |  | For the period ended |         
|                              |  | December 28, 2007    |          |   | December 29, 2006 |  
|Net loss as reported          |  | $                    | (360,000 | ) |                   | $ | (1,379,100 | )
|Income tax benefit            |  |                      | (158,600 | ) |                   |   | (472,000   | )
|Interest expense              |  |                      | 526,900  |   |                   |   | 182,700    |  
|Depreciation and amortization |  |                      | 329,000  |   |                   |   | 480,700    |  
|                              |  |                      |          |   |                   |   |            |  
|EBITDA                        |  | $                    | 337,300  |   |                   | $ | (1,187,700 | )
|                              |  |                      |          |   |                   |   |            |  

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 EBITDA, with EBITDA being defined by the Company as
earnings before interest, taxes, depreciation and amortization. The Company 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.

This non-GAAP financial measure provides 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 this non-GAAP financial measure 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.

Liquidity and Capital Resources

As of
December 28, 2007, the Company has approximately $62,900 of negative working capital compared to approximately $599,800 of positive working capital at December 29, 2006. As of December 28, 2007, the Company has cash and cash
equivalents of approximately $74,000 compared with approximately $947,200 of cash and cash equivalents at December 29, 2006. The significant decrease in working capital is primarily the result of the increase in the short term portion of the
long-term debt.

During the 52-week period ended December 28, 2007 cash decreased by approximately $873,200. During the 52-week period ended
December 28, 2007 there were losses from operations, which included non-cash expenses of (i) approximately $329,000 related to depreciation and amortization, (ii) approximately $321,400 related to the amortization of debt cost, and
(iii) approximately $57,200 related to stock based employee compensation. The increase in accounts receivable and accounts payable is directly related to the significant increase of sales in the fourth quarter. In addition there was
approximately $297,500 used by investing activities for the purchase of fixed assets and the development of software, approximately $1,564,100 was used by operations for the increase in account receivables and work in process, approximately $634,800
was provided by operations for the increase in accounts payable and accrued salaries and approximately $120,500 was provided by financing activities. 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.

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 began 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 approximately
$164,900 outstanding as of December 28, 2007 and approximately $835,100 was available for advancement.



14



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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. The Companys current strategy has been to build a network of partner warehouses to fulfill the
additional order requirements. 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 through both internal development and mergers and acquisitions, 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 February 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities, which permits
entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons
between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the
effect, if any, the adoption of SFAS No. 159 will have on its financial statements.

In June 2007, the FASB ratified the consensus reached by the
Emerging Issues Task Force (EITF) in EITF Issue No. 07-3, Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities (EITF 07-3), which
requires that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities be deferred and amortized over the period that the goods are delivered or the related services are
performed, subject to an assessment of recoverability. EITF 07-3 is effective for fiscal years beginning after December 15, 2007. The company does not expect EITF 07-3 to have a material impact on our results of operations or financial
condition.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (SAB 110). SAB 110 expresses the views of the staff
regarding the use of a simplified method, as discussed in SAB No. 107, in developing an estimate of the expected term of plain vanilla share options in accordance with SFAS No. 123 (revised 2004). The Company
does not expect SAB 110 to have a material impact on its results of operations or financial condition.

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

Financial Statements

Jagged Peak, Inc.

For the Fiscal Years Ended December 28, 2007 and December 29, 2006

Report of Independent Registered
Public Accounting Firm

Contents



|                                                        |  |       
|------------------------------------------------------- |  | ------
|Report of Independent Registered Public Accounting Firm |  | F-1   
|                                                        | 
|Financial Statements:                                   |  |       
|                                                        | 
|Balance Sheets                                          |  | F-2   
|Statements of Operations                                |  | F-3   
|Statements of Changes in Stockholders Equity           |  | F-4   
|Statements of Cash Flows                                |  | F-5   
|Notes to Audited Financial Statements                   |  | F-6-18



16



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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 28, 2007 and December 29, 2006, 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 28, 2007 and December 29, 2006, and the results of its operations and its cash flows for the 52-week periods then ended in conformity with accounting principles generally accepted in the United States of
America.

Pender Newkirk & Company LLP

Certified
Public Accountants

Tampa, Florida

March 21, 2008



F-1



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##### Table of Contents

Jagged Peak, Inc.

Balance Sheets



|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                                                                                          |  | December 28,2007 |            |   | December 29,2006 |  
|Assets                                                                                                                                                                                    |  |                  |            |   |                  |   |            |  
|Current assets:                                                                                                                                                                           |  |                  |            |   |                  |   |            |  
|Cash                                                                                                                                                                                      |  | $                | 74,000     |   |                  | $ | 947,200    |  
|Accounts receivable, net of allowance for doubtful accounts of $130,000 and $105,000 at December 28, 2007 and December 29, 2006,
respectively                                             |  |                  | 2,503,400  |   |                  |   | 1,192,100  |  
|Other receivables                                                                                                                                                                         |  |                  | 122,000    |   |                  |   | 50,000     |  
|Work in process, net of allowance of $30,000 and $20,000 at December 28, 2007 and December 29, 2006, respectively                                                                         |  |                  | 195,900    |   |                  |   | 23,700     |  
|Deferred tax asset                                                                                                                                                                        |  |                  | 75,300     |   |                  |   | 67,700     |  
|Other current assets                                                                                                                                                                      |  |                  | 400,800    |   |                  |   | 398,000    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total current assets                                                                                                                                                                      |  |                  | 3,371,400  |   |                  |   | 2,678,700  |  
|                                                                                                                                                                                          |  |                 
|Property and equipment, net of accumulated depreciation of $1,683,000 and $1,536,400 at December 28, 2007 and December 29, 2006,
respectively                                             |  |                  | 387,400    |   |                  |   | 323,800    |  
|                                                                                                                                                                                          |  |                 
|Other assets:                                                                                                                                                                             |  |                  |            |   |                  |   |            |  
|EDGE application, net of accumulated amortization of $1,251,600 and $1,075,100 at December 28, 2007 and December 29, 2006,
respectively                                                   |  |                  | 125,200    |   |                  |   | 220,300    |  
|Deferred tax asset                                                                                                                                                                        |  |                  | 1,266,100  |   |                  |   | 1,115,100  |  
|Other assets                                                                                                                                                                              |  |                  | 308,400    |   |                  |   | 629,400    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total long-term assets                                                                                                                                                                    |  |                  | 2,087,100  |   |                  |   | 2,288,600  |  
|Total assets                                                                                                                                                                              |  | $                | 5,458,500  |   |                  | $ | 4,967,300  |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|                                                                                                                                                                                          |  |                 
|Liabilities and Stockholders Equity                                                                                                                                                      |  |                  |            |   |                  |   |            |  
|Current liabilities:                                                                                                                                                                      |  |                  |            |   |                  |   |            |  
|Accounts payable, trade                                                                                                                                                                   |  | $                | 1,563,400  |   |                  | $ | 1,096,400  |  
|Accrued payroll and bonuses                                                                                                                                                               |  |                  | 472,500    |   |                  |   | 340,000    |  
|Other accrued expenses                                                                                                                                                                    |  |                  | 65,700     |   |                  |   | 30,400     |  
|Revolving Note, $835,100 available at December 28, 2007                                                                                                                                   |  |                  | 164,900    |   |                  |   |           |  
|Deferred rent                                                                                                                                                                             |  |                  | 25,500     |   |                  |   | 20,300     |  
|Notes payable, current portion                                                                                                                                                            |  |                  | 540,000    |   |                  |   | 45,000     |  
|Deferred revenue and customer deposits                                                                                                                                                    |  |                  | 602,300    |   |                  |   | 546,800    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total current liabilities                                                                                                                                                                 |  |                  | 3,434,300  |   |                  |   | 2,078,900  |  
|                                                                                                                                                                                          |  |                 
|Long-term liabilities:                                                                                                                                                                    |  |                  |            |   |                  |   |            |  
|Notes payable, net of current portion                                                                                                                                                     |  |                  | 1,415,000  |   |                  |   | 1,955,000  |  
|Deferred rent, long term                                                                                                                                                                  |  |                  | 94,000     |   |                  |   | 119,400    |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total long-term liabilities                                                                                                                                                               |  |                  | 1,509,000  |   |                  |   | 2,074,400  |  
|                                                                                                                                                                                          |  |                 
|Stockholders equity:                                                                                                                                                                     |  |                  |            |   |                  |   |            |  
|Preferred stock, $.001 par value; 5,000,000 shares authorized; no shares issued or outstanding at December 28, 2007 and December 29, 2006                                                 |  |                  |            |   |                  |   |            |  
|Common stock, $.001 par value; 70,000,000 shares authorized; 14,627,594 shares issued and outstanding at December 28, 2007, 13,869,297
shares issued and outstanding at December 29, 2006 |  |                  | 14,700     |   |                  |   | 13,900     |  
|Additional paid-in capital                                                                                                                                                                |  |                  | 3,334,500  |   |                  |   | 3,274,100  |  
|Accumulated deficit                                                                                                                                                                       |  |                  | (2,834,000 | ) |                  |   | (2,474,000 | )
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  
|Total stockholders equity                                                                                                                                                                |  |                  | 515,200    |   |                  |   | 814,000    |  
|Total liabilities and stockholders equity                                                                                                                                                |  | $                | 5,458,500  |   |                  | $ | 4,967,300  |  
|                                                                                                                                                                                          |  |                  |            |   |                  |   |            |  

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



F-2



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##### Table of Contents

Jagged Peak, Inc.

Statements of Operations

52-Week Period Ended



|                                                                                  |  |            |            |   |            |   |            |  
|--------------------------------------------------------------------------------- |  | ---------- | ---------- | - | ---------- | - | ---------- | -
|                                                                                  |  | 12/28/2007 |            |   | 12/29/2006 |  
|Revenue                                                                           |  |            |            |   |            |   |            |  
|Gross revenue                                                                     |  | $          | 17,574,000 |   |            | $ | 14,442,600 |  
|Discounts, freight and other                                                      |  |            | (3,157,400 | ) |            |   | (2,980,300 | )
|                                                                                  |  |            |            |   |            |   |            |  
|Net revenue                                                                       |  |            | 14,416,600 |   |            |   | 11,462,300 |  
|                                                                                  |  |           
|Cost of sales                                                                     |  |            | 10,888,700 |   |            |   | 8,862,400  |  
|                                                                                  |  |            |            |   |            |   |            |  
|Gross profit                                                                      |  |            | 3,527,900  |   |            |   | 2,599,900  |  
|                                                                                  |  |            |            |   |            |   |            |  
|Selling, general and administrative expenses                                      |  |            | 3,519,600  |   |            |   | 4,184,000  |  
|                                                                                  |  |            |            |   |            |   |            |  
|Income (loss) from operations                                                     |  | $          | 8,300      |   |            | $ | (1,584,100 | )
|                                                                                  |  |            |            |   |            |   |            |  
|Other expenses                                                                    |  |            |            |   |            |   |            |  
|Interest expense                                                                  |  |            | (526,900   | ) |            |   | (182,700   | )
|Other expense                                                                     |  |            |            |   |            |   | (84,300    | )
|                                                                                  |  |            |            |   |            |   |            |  
|Total other expenses                                                              |  |            | (526,900   | ) |            |   | (267,000   | )
|                                                                                  |  |            |            |   |            |   |            |  
|Loss before income taxes                                                          |  | $          | (518,600   | ) |            | $ | (1,851,100 | )
|                                                                                  |  |            |            |   |            |   |            |  
|Provision for income tax benefit                                                  |  |            | (158,600   | ) |            |   | (472,000   | )
|                                                                                  |  |           
|Net loss                                                                          |  | $          | (360,000   | ) |            | $ | (1,379,100 | )
|                                                                                  |  |            |            |   |            |   |            |  
|Net loss per common share                                                         |  | $          | (.03       | ) |            | $ | (.10       | )
|                                                                                  |  |            |            |   |            |   |            |  
|Weighted average number of common shares outstanding                              |  |            | 14,200,768 |   |            |   | 13,937,345 |  
|                                                                                  |  |            |            |   |            |   |            |  
|Diluted loss per common share                                                     |  | $          | (.03       | ) |            | $ | (.10       | )
|                                                                                  |  |            |            |   |            |   |            |  
|Weighted average number of common shares and common equivalent shares outstanding |  |            | 14,200,768 |   |            |   | 13,937,345 |  
|                                                                                  |  |            |            |   |            |   |            |  

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 Changes in Stockholders Equity

52-Week Period Ended December 28, 2007 and December 29, 2006



|                                                                                 |  |              |   |  |                          |        |   |                    |   |           |       |  |   |            |   |  |   |            |  
|-------------------------------------------------------------------------------- |  | ------------ | - |  | ------------------------ | ------ | - | ------------------ | - | --------- | ----- |  | - | ---------- | - |  | - | ---------- | -
|                                                                                 |  | Common Stock |   |  | AdditionalPaid inCapital |        |   | AccumulatedDeficit |   |           | Total | 
|                                                                                 |  | Shares       |   |  | Amount                   |        |   |                    |  
|Balance, December 30, 2005                                                       |  | 13,619,759   |   |  | $                        | 13,600 |   |                    | $ | 2,050,400 |       |  | $ | (1,094,900 | ) |  | $ | 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 | ) |  | $ | 814,000    |  
|Issuance of stock related to services or exercise of warrants                    |  | 758,297      |   |  |                          | 800    |   |                    |   | 3,200     |       |  |   |            |   |  |   | 4,000      |  
|Amortization of officer, director and employee compensation                      |  |              |   |  |                          |        |   |                    |   | 57,200    |       |  |   |            |   |  |   | 57,200     |  
|Net loss for the period                                                          |  |              |   |  |                          |        |   |                    |   |           |       |  |   | (360,000   | ) |  |   | (360,000   | )
|                                                                                 |  |              |   |  |                          |        |   |                    |   |           |       |  |   |            |   |  |   |            |  
|Balance, December 28, 2007                                                       |  | 14,627,594   |   |  | $                        | 14,700 |   |                    | $ | 3,334,500 |       |  | $ | (2,834,000 | ) |  | $ | 515,200    |  
|                                                                                 |  |              |   |  |                          |        |   |                    |   |           |       |  |   |            |   |  |   |            |  

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 Cash Flows

52-Week Period Ended



|                                                                                          |  |            |            |   |            |   |            |  
|----------------------------------------------------------------------------------------- |  | ---------- | ---------- | - | ---------- | - | ---------- | -
|                                                                                          |  | 12/28/2007 |            |   | 12/29/2006 |  
|Operating activities                                                                      |  |            |            |   |            |   |            |  
|Net loss                                                                                  |  | $          | (360,000   | ) |            | $ | (1,379,100 | )
|                                                                                          |  |            |            |   |            |   |            |  
|Adjustments to reconcile net loss to net cash (used in) provided by operating activities: |  |            |            |   |            |   |            |  
|Depreciation and amortization                                                             |  |            | 329,000    |   |            |   | 480,700    |  
|Non-cash consulting expense                                                               |  |            | 3,400      |   |            |   | 381,000    |  
|Amortization of warrants related to debt                                                  |  |            | 321,400    |   |            |   | 94,300     |  
|Non-cash amortization of officers, director and employees compensation                    |  |            | 57,200     |   |            |   | 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                                              |  |            | 80,600     |   |            |   | 175,500    |  
|Changes in:                                                                               |  |            |            |   |            |   |            |  
|Accounts receivable                                                                       |  |            | (1,391,900 | ) |            |   | (304,300   | )
|Work-in-process                                                                           |  |            | (172,200   | ) |            |   | 125,100    |  
|Other current assets                                                                      |  |            | (72,000    | ) |            |   | (37,800    | )
|Deferred tax asset                                                                        |  |            | (158,600   | ) |            |   | (472,000   | )
|Other assets                                                                              |  |            | (3,200     | ) |            |   |            |  
|Accounts payable and accrued expenses                                                     |  |            | 634,800    |   |            |   | 296,100    |  
|Deferred rent                                                                             |  |            | (20,200    | ) |            |   | (13,500    | )
|Deferred revenue and customer deposits                                                    |  |            | 55,500     |   |            |   | (211,900   | )
|                                                                                          |  |            |            |   |            |   |            |  
|Net cash (used in) provided by operating activities                                       |  |            | (696,200   | ) |            |   | 43,200     |  
|                                                                                          |  |            |            |   |            |   |            |  
|Investing activities                                                                      |  |            |            |   |            |   |            |  
|Acquisition of property and equipment                                                     |  |            | (216,100   | ) |            |   | (105,000   | )
|Acquisition/development of software - EDGE platform                                       |  |            | (81,400    | ) |            |   |            |  
|                                                                                          |  |            |            |   |            |   |            |  
|Net cash used by investing activities                                                     |  |            | (297,500   | ) |            |   | (105,000   | )
|                                                                                          |  |            |            |   |            |   |            |  
|Financing activities                                                                      |  |            |            |   |            |   |            |  
|Proceeds from the issuance of stock                                                       |  |            | 600        |   |            |   | 318,000    |  
|Proceeds and payments, net from revolving note                                            |  |            | 164,900    |   |            |   | 1,703,700  |  
|Payments on notes payable and bank notes                                                  |  |            | (45,000    | ) |            |   | (1,033,200 | )
|                                                                                          |  |            |            |   |            |   |            |  
|Net cash provided by financing activities                                                 |  |            | 120,500    |   |            |   | 988,500    |  
|                                                                                          |  |            |            |   |            |   |            |  
|Net (decrease) increase in cash                                                           |  |            | (873,200   | ) |            |   | 926,700    |  
|Cash, beginning of period                                                                 |  |            | 947,200    |   |            |   | 20,500     |  
|                                                                                          |  |            |            |   |            |   |            |  
|Cash, end of period                                                                       |  | $          | 74,000     |   |            | $ | 947,200    |  
|                                                                                          |  |            |            |   |            |   |            |  
|Supplemental disclosure of cash flow information and non-cash financing activities:       |  |            |            |   |            |   |            |  
|Cash paid during the period for interest                                                  |  | $          | 205,500    |   |            | $ | 151,500    |  
|                                                                                          |  |            |            |   |            |   |            |  
|Warrants issued related to debt                                                           |  | $          |            |   |            | $ | 654,500    |  
|                                                                                          |  |            |            |   |            |   |            |  
|Cancellation of escrow stock related to acquisition                                       |  | $          |            |   |            | $ | (254,000   | )

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 28, 2007 and December 29, 2006

1. General Background
Information

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. The EDGE platform has been
deployed in multiple vertical markets such as consumer goods, financial services, distribution, travel and tourism and manufacturing.

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
application. 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 offers its clients third party fulfillment services that are typically bundled with its software and sold as a turnkey web-to-ship solution. Jagged Peak has a network of fulfillment warehouses throughout North
America that enables its clients to provide better service to their customers, while lowering their overall delivery costs. The EDGE application is able to automatically route the orders to the optimal warehouse based on an established set of
factors such as service, cost and priority. This enables our clients to achieve their customer service goals while reducing cost and internal infrastructure.

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.

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 28, 2007 and the period ended December 29, 2006 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.



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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 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
was approximately $81,400 capitalized during the 52-week period ended December 28, 2007 and no expenses were capitalized during the 52-week period ended December 29, 2006. Amortization expenses related to capitalized software and charged
to operations for the 52-week period ended December 28, 2007 and December 29, 2006 were approximately $176,500 and approximately $336,000, 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 $33,800 and $53,800 at December 28, 2007 and December 29, 2006, 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.



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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 $8,560,000 or approximately 61% and amounted to approximately $5,681,000 or approximately 50% of total revenues during the 52-week periods ended December 28, 2007 and December 29, 2006,
respectively. Accounts receivable from the one customer was approximately $1,099,200 or approximately 45% and approximately $476,400 or approximately 40% of the balance at December 28, 2007 and December 29, 2006, respectively. The risk of
this is mitigated as the deferred revenue and customer deposits from the single customer at December 28, 2007 and at December 29, 2006 was approximately $250,000.

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 $130,000 and $105,000 is considered necessary as of December 28, 2007 and December 29, 2006, 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 28, 2007 by approximately $8,000. We do not accrue interest on past due receivables.

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 28, 2007 and December 29,
2006, 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



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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.

Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109. The Company recognized no adjustment in the liability for
unrecognized income tax benefits as a result of the adoption of FIN No. 48.

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 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 28, 2007 and December 29, 2006 were
approximately $57,200 and $414,500, respectively 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 2007: the historical dividend rate of 0%; the risk-free interest rate of 5% 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; an expected volatility of
154% which was calculated by review of the Companys historical activity as well as comparable peer companies; and an option exercise experience rate for employees of 50% based on the Companys historical rate of employee options being
exercised prior to expiration or termination.



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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 28, 2007, there was approximately $34,600 of unrecognized
stock-based compensation expense related to nonvested stock options. This expense will be recognized over a weighted average period of approximately one year.

During 2007 and 2006, there was $0 of cash received from the exercise of stock options.

The following table represents our nonvested stock option
activity for the years ended December 28, 2007 and December 29, 2006:



|                                      |  |                  |   |  |                                      |     
|------------------------------------- |  | ---------------- | - |  | ------------------------------------ | ----
|                                      |  | Number ofOptions |   |  | Weighted AverageGrant DateFair Value
|Nonvested options - December 31, 2005 |  | 0                |   |  | $                                    | 0.00
|                                      |  |                 
|Granted                               |  | 1,170,000        |   |  | $                                    | 0.47
|Vested                                |  | (875,000         | ) |  | $                                    | 0.46
|Forfeited                             |  |                 |   |  | $                                    |    
|                                      |  |                  |   |  |                                      |     
|Nonvested options - December 29, 2006 |  | 295,000          |   |  | $                                    | 0.43
|                                      |  |                 
|Granted                               |  | 150,000          |   |  | $                                    | 0.27
|Vested                                |  | (112,500         | ) |  | $                                    | 0.50
|Forfeited                             |  | 230,000          |   |  | $                                    | 0.26
|                                      |  |                  |   |  |                                      |     
|Nonvested options - December 28, 2007 |  | 102,500          |   |  | $                                    | 0.50
|                                      |  |                  |   |  |                                      |     

There was no aggregate intrinsic value of options outstanding at December 28, 2007, based on the
Companys closing stock price of $0.30 as of the last business day of the period ended December 28, 2007, which would have been received by the optionees had all options been exercised on that date. There was no aggregate intrinsic value
of options exercisable at December 28, 2007, based on the Companys closing stock price of $0.30 as of the last business day of the period ended December 28, 2007, which would have been received by the optionees had all options
exercisable been exercised on that date.

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 28, 2007 and December 29, 2006.



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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 14,200,768 and 13,937,345 for the 52-week period ended December 28, 2007 and December 29, 2006. The diluted weighted average number of shares was
14,942,703 and 14,719,029 for the 52-week period ended December 28, 2007 and December 29, 2006, respectively.

Common stock equivalents for the
52-week period ended December 28, 2007 and December 29, 2006 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 28, 2007 and December 29, 2006 excludes approximately 741,935 shares and 781,684 shares that could dilute earnings per share in future periods, respectively.

Recently Issued Financial Accounting Standards

In February 2007, the
FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required
to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007. The Company is in the process of evaluating the effect, if any, the adoption of SFAS No. 159 will have on its financial statements.

In June 2007, the FASB ratified the consensus reached by the Emerging Issues Task Force (EITF) in EITF Issue No. 07-3, Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and Development Activities (EITF 07-3), which requires that nonrefundable advance payments for goods or services that will be used or rendered
for future research and development activities be deferred and amortized over the period that the goods are delivered or the related services are performed, subject to an assessment of recoverability. EITF 07-3 is effective for fiscal years
beginning after December 15, 2007. The company does not expect EITF 07-3 to have a material impact on our results of operations or financial condition.

In December 2007, the SEC issued Staff Accounting Bulletin No. 110 (SAB 110). SAB 110 expresses the views of the staff regarding the use of a simplified method, as discussed in SAB No. 107, in
developing an estimate of the expected term of plain vanilla share options in accordance with SFAS No. 123 (revised 2004). The Company does not expect SAB 110 to have a material impact on its results of operations or financial
condition.

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 28,2007 |           | December 29,2006
|Furniture and equipment         |  | $                | 197,800   |                  | $ | 193,100  
|Computer equipment and software |  |                  | 1,189,700 |                  |   | 1,023,600
|Warehouse equipment             |  |                  | 602,300   |                  |   | 562,900  
|Leasehold improvements          |  |                  | 80,600    |                  |   | 80,600   
|                                |  |                  |           |                  |   |          
|Total property and equipment    |  |                  | 2,070,400 |                  |   | 1,860,200
|Less accumulated depreciation   |  |                  | 1,683,000 |                  |   | 1,536,400
|                                |  |                  |           |                  |   |          
|                                |  | $                | 387,400   |                  | $ | 323,800  
|                                |  |                  |           |                  |   |          

Depreciation expense for the 52-week periods ended December 28, 2007 and December 29, 2006 were
approximately $152,500 and $144,700 respectively.



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##### Table of Contents

4. Other Assets

Other assets consist of:



|                                                  |  |                  |         |                  |   |        
|------------------------------------------------- |  | ---------------- | ------- | ---------------- | - | -------
|                                                  |  | December 28,2007 |         | December 29,2006
|Capitalized debt cost                             |  | $                | 629,400 |                  | $ | 950,800
|                                                  |  |                  |         |                  |   |        
|                                                  |  |                  | 629,400 |                  |   | 950,800
|                                                  |  |                 
|Current portion classified as other current asset |  |                  | 321,000 |                  |   | 321,400
|                                                  |  |                  |         |                  |   |        
|                                                  |  | $                | 308,400 |                  | $ | 629,400
|                                                  |  |                  |         |                  |   |        

5. Notes Payable and Secured Revolving Note

Notes payable consist of:



|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | ---------------- | - | ---------
|                                                                                                                                                                                                                                                                                                                                                                |  | December 28,2007 |           | December 29,2006
|Laurus Bank Note payable; interest at prime plus 2.0% (10.25% at December 29, 2007); 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. |  | $                | 1,955,000 |                  | $ | 2,000,000
|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          
|                                                                                                                                                                                                                                                                                                                                                                |  |                  | 1,955,000 |                  |   | 2,000,000
|Less current portion                                                                                                                                                                                                                                                                                                                                            |  |                  | 540,000   |                  |   | 45,000   
|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          
|Long-term portion of notes payable                                                                                                                                                                                                                                                                                                                              |  | $                | 1,415,000 |                  | $ | 1,955,000
|                                                                                                                                                                                                                                                                                                                                                                |  |                  |           |                  |   |          

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 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 Fixed Conversion Price). 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.

Laurus must convert all or a portion of the monthly principal and interest 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 (the Conversion Criteria); 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 principal payment, Laurus shall convert only such part of the monthly principle payment that meets subsection (ii) of the Conversion Criteria. If the monthly payment (or a portion of such monthly payment if not
all of the payment may be converted into shares of Common Stock) is required to be paid in shares of Common Stock, the number of such shares to be issued by the Company shall be the number determined by dividing (i) the portion of such payment
converted into shares of Common Stock, by (ii) $1.00 (subject to certain adjustments). Any portion of the monthly principal payment that Laurus 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 principal payment otherwise due on such Amortization Date, within three (3) business days of such due Date.



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In addition, Laurus may from time to time voluntarily convert all or a portion of the outstanding principal amount of the
Note plus all accrued but unpaid interest into shares of common stock at a price of $1.00 (subject to certain adjustments).

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 the Note in excess of that portion of the Note upon exercise of which the sum of (1) the number of shares of Common Stock beneficially owned by Laurus 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 Laurus 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 Laurus 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, Laurus and its affiliates beneficially own more than 9.99% of the then outstanding shares of Common Stock). The limitation can be
waived by the Laurus 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.

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 (each, an Event of Default).

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.

On September 28,
2007, the Company obtained the effectiveness of a Registration Statement (333-142099) for the resale of 1,000,000 shares by Laurus. On July 23, 2007, Laurus and the Company entered into an amendment to the Laurus registration rights
agreement, pursuant to which Laurus agreed that: (1) the total number of shares to be registered on behalf of Laurus on such Registration Statement would be 1,000,000 (the Reduced Shares), all of which consist of shares of common
stock issuable upon conversion of the Note, and (2) such reduction in shares will not give rise to a breach of the Registration Rights Agreement nor to any liquidated damages or other obligations; provided, however, that upon the earlier of
(a) the date Laurus has sold all of the Reduced Shares and (b) six months after the Effectiveness Date, the Company shall use its commercially reasonable efforts, in compliance with any applicable Commission guidance, and subject to the
remaining terms of the Registration Rights Agreement, to register the balance of the Registerable Securities on separate registration statements; provided, further, that in no event shall the Company be required to register Registerable Securities
in excess of that number of shares that is permitted to be registered by the Commission on behalf of selling security holders as a secondary offering under Rule 415; provided, further, that the Company shall not be required to file any additional
registration statements or to keep any such additional registration statements effective after the earlier of the date (i) all Registrable Securities owned by Laurus have been sold or (ii) all Registrable Securities owned by Laurus may be
sold immediately



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##### Table of Contents

without registration under the Securities Act and without volume restrictions pursuant to Rule 144(k). Further, Laurus agreed to waive any liquidated damages
that have arisen, or will arise through August 31, 2007, under Section 2(b) of the Registration Rights Agreement solely as a result of the delay in Effectiveness Date of the Registration Statement of the Company as otherwise required
pursuant to the terms of the Registration Rights Agreement.

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 closing payment equal to $105,000 and other fees, totaling approximately $135,000 in cash and 706,000 warrants exercisable at $0.01 per common share. Additionally, 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. In addition, in a transaction unrelated to the Laurus Private Placement we agreed with the former holders of the Companys debt (JP Funding Inc. and Andrew Krusen) to an early
extinguishment of the debt, cancellation of all previously issued, variable warrants, in consideration of, among other things, the issuance of 230,000, three-year warrants exercisable at $0.01 per common share. We have agreed to register all such
warrants pursuant to this registration statement.

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 28, 2007:



|                    |  |   |          
|------------------- |  | - | ---------
|Year EndingDecember |  |  
|2008                |  | $ | 540,000  
|2009                |  |   | 1,415,000
|                    |  |   |          
|Total               |  | $ | 1,955,000
|                    |  |   |          

6. Lease Commitments and Contingent Liabilities

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 28, 2007:



|                    |  |   |          
|------------------- |  | - | ---------
|Year EndingDecember |  |  
|2008                |  | $ | 427,700  
|2009                |  |   | 372,600  
|2010                |  |   | 380,100  
|2011                |  |   | 138,300  
|2012                |  |   | 11,000   
|                    |  |   |          
|Total               |  | $ | 1,329,700

Rent expense amounted to approximately $514,700 and $478,000 for the 52-week period ended December 28, 2007
and December 29, 2006, 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.



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##### Table of Contents

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 28,2007 |         | December 29,2006
|Deferred benefit                   |  |                  |         |                  |   |        
|Federal                            |  | $                | 143,200 |                  | $ | 426,000
|State                              |  |                  | 15,400  |                  |   | 46,000 
|                                   |  |                  |         |                  |   |        
|Provision benefit for income taxes |  | $                | 158,600 |                  | $ | 472,000
|                                   |  |                  |         |                  |   |        

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 28,2007 |          |   | December 29,2006 |  
|Tax expense (benefit) at U.S. statutory rate                 |  | $                | (176,300 | ) |                  | $ | (632,100 | )
|State income tax expense (benefit), net of federal benefit   |  |                  | (15,400  | ) |                  |   | (67,500  | )
|Effect of general non-deductible expenses                    |  |                  | 15,600   |   |                  |   | 71,600   |  
|Effect of amortization of employee stock option compensation |  |                  | 17,500   |   |                  |   | 156,000  |  
|                                                             |  |                  |          |   |                  |   |          |  
|                                                             |  | $                | (158,600 | ) |                  | $ | (472,000 | )
|                                                             |  |                  |          |   |                  |   |          |  



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##### Table of Contents

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred
tax liabilities at December 28, 2007 and December 29, 2006 are as follows:



|                                                  |  |                  |           |   |                  |   |           |  
|------------------------------------------------- |  | ---------------- | --------- | - | ---------------- | - | --------- | -
|                                                  |  | December 28,2007 |           |   | December 29,2006 |  
|Current deferred tax assets:                      |  |                  |           |   |                  |   |           |  
|Allowance for doubtful accounts                   |  | $                | 48,900    |   |                  | $ | 39,500    |  
|Work-in-process reserve                           |  |                  | 11,300    |   |                  |   | 7,500     |  
|Other                                             |  |                  | 15,100    |   |                  |   | 20,700    |  
|                                                  |  |                  |           |   |                  |   |           |  
|Total current deferred tax assets                 |  |                  | 75,300    |   |                  |   | 67,700    |  
|                                                  |  |                 
|Long-term deferred tax assets (liability):        |  |                  |           |   |                  |   |           |  
|Net operating loss carryforward                   |  |                  | 1,326,100 |   |                  |   | 1,244,000 |  
|Depreciation, amortization variance and other     |  |                  | (60,000   | ) |                  |   | (128,900  | )
|                                                  |  |                  |           |   |                  |   |           |  
|Total long-term deferred tax assets (liabilities) |  |                  | 1,266,100 |   |                  |   | 1,115,100 |  
|                                                  |  |                 
|Net deferred tax asset                            |  | $                | 1,341,400 |   |                  | $ | 1,182,800 |  
|                                                  |  |                  |           |   |                  |   |           |  

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 28, 2007 and December 29, 2006 the Company had federal and state net operating loss carry-forwards totaling approximately $3,550,000 and
$3,305,000, 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 any outstanding senior classes of stock, of which there are currently none. The
Company records stock as issued when the consideration is received or the obligation is incurred.

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 with regards to 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 payable for the shares of Common Stock covered by any Option shall be determined by the Board of Directors, but with regards to 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.



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





|                                               |  |           |   |  |                         |           |                                |   |     
|---------------------------------------------- |  | --------- | - |  | ----------------------- | --------- | ------------------------------ | - | ----
|                                               |  | Shares    |   |  | Range of ExercisePrices |           | Weighted AverageExercise Price
|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
|Warrants, Convertible Debt and options granted |  | 150,000   |   |  | $                       | 0.50      |                                | $ | 0.50
|Warrants exercised                             |  | (765,818  | ) |  | $                       | 0.01      |                                | $ | 0.01
|Warrants and options cancelled or expired      |  | (588,528  | ) |  | $                       | 0.50-2.00 |                                | $ | 1.03
|                                               |  |           |   |  |                         |           |                                |   |     
|Outstanding at December 28, 2007               |  | 4,389,898 |   |  | $                       | 0.01-2.50 |                                | $ | 0.84
|Exercisable at December 28, 2007               |  | 4,287,398 |   |  | $                       | 0.01-2.50 |                                | $ | 0.83
|Exercisable at December 29, 2006               |  | 5,274,244 |   |  | $                       | 0.01-2.13 |                                | $ | 0.73

The following table summarizes information about options and warrants outstanding and exercisable as of
December 28, 2007:



|                        |  |                                  |  |                                  |  |                      |      |                               |           |                   |           |                      |   |     
|----------------------- |  | -------------------------------- |  | -------------------------------- |  | -------------------- | ---- | ----------------------------- | --------- | ----------------- | --------- | -------------------- | - | ----
|                        |  | Outstanding Warrants and Options |  | Exercisable Warrants and Options
|Range of Exercise Price |  | NumberOutstanding                |  | WeightedAverageRemainingLife     |  | WeightedAveragePrice |      | WeightedAverageRemaining Life |           | NumberExercisable |           | WeightedAveragePrice
|$0.01                   |  | 334,899                          |  | 3.3 years                        |  | $                    | 0.01 |                               | 3.3 years |                   | 334,899   |                      | $ | 0.01
|$0.55-0.77              |  | 1,473,529                        |  | 3.6 years                        |  | $                    | 0.63 |                               | 3.4 years |                   | 1,423,529 |                      | $ | 0.61
|$1.00-2.50              |  | 2,581,470                        |  | 2.2 years                        |  | $                    | 1.07 |                               | 2.1 years |                   | 2,528,970 |                      | $ | 1.01

As of December 28, 2007 and December 29, 2006, there were approximately 4,287,398 and 5,274,244 options
exercisable at a weighted average exercise price of $0.83 and $0.73, respectively. The weighted average fair value of options at the date of grant of the options was $0.27 and $0.47 for 2007 and 2006, respectively.

Equity Funding

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 approximately $100,000 and the Company granted that certain investor an option to
purchase 20,000 Jagged Peak common shares at $2.00 per share. The purchase price of the stock was approximately $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, in February, 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 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. There were no loans made from officers in 2007 and during the course of 2006 there was less than $200,000 of total transactions and at December 28, 2007 and
December 29, 2006 there were no amounts owed to officers of the Company.



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The Company contracted with Norco Accounting and Consulting Inc. (Norco) to provide accounting and consulting
services. The Company spent approximately $36,300 and $9,600 for the 52-week period ended December 28, 2007 and December 29, 2006, 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. Employee Stock Ownership Plan

In 2007, the Company established an Employee Stock Ownership Plan (ESOP), for the benefit of it employees and to purchase shares of the Companys common stock from time to time in the open market or in negotiated
transactions at prices deemed to be attractive. Contributions to the ESOP are made at the discretion of the Board of Directors. 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 shares that are 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. All ESOP shares are considered
outstanding for earnings per share computations. All shares acquired in 2007 are allocated.

The ESOP shares were as follows:



|                               |  |         
|------------------------------ |  | --------
|                               |  | 12/28/07
|Allocated shares               |  | 300,000 
|Shares released for allocation |  |         
|Unreleased shares              |  |         
|                               |  |         
|Total ESOP shares              |  | 300,000 
|                               |  |         



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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
|-------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

The Companys Chief Executive Officer and acting Chief Financial Officer has evaluated the effectiveness of the Companys
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the fiscal period ending December 28, 2007 covered by this Annual Report on Form 10-KSB. Based upon such evaluation, the Chief
Executive Officer and acting Chief Financial Officer has concluded that, as of the end of such period, the Companys disclosure controls and procedures were effective as required under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This
conclusion by the Companys Chief Executive Officer and acting Chief Financial Officer does not relate to reporting periods after December 28, 2007.

Managements Report on Internal Control Over Financial Reporting

Management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) of the Company. Internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

The Companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, under the supervision of the Companys Chief Executive Officer and acting Chief Financial Officer, conducted an evaluation of the effectiveness of
internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that
the Companys internal control over financial reporting was effective as of December 28, 2007 under the criteria set forth in the in Internal ControlIntegrated Framework.

This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting.
Managements report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only managements report in this Annual Report on Form 10-KSB.

Changes in Internal Control Over Financial Reporting

No change in
the Companys internal control over financial reporting occurred during the quarter ended December 28, 2007, that materially affected, or is reasonably likely to materially affect, the Companys internal control over financial
reporting.



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

None.



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PART III



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

The
Companys directors and executive officers as of March 24, 2008 were as follows:



|                    |  |     |  |                                                                   
|------------------- |  | --- |  | ------------------------------------------------------------------
|Name                |  | Age |  | Position                                                          
|Paul Demirdjian     |  | 47  |  | Chairman of the Board of Directors and Chief Executive Officer    
|Vince Fabrizzi      |  | 50  |  | Senior Vice President, Chief Sales and Marketing Officer, Director
|Dan Furlong         |  | 60  |  | Chief Operations Officer, Director                                
|Andrew J. Norstrud  |  | 34  |  | Chief Financial Officer                                           
|Primrose Demirdjian |  | 48  |  | 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 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 holds a B.S. in Engineering Technology from the University of South Florida, where he was a member of the Engineering Honor Society (Tau Aplha 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



18



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##### Table of Contents

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 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.

SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING 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 2007 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
|-------- | ----------------------

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, 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.



19



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##### Table of Contents

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 28, 2007 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 |     |  |           |  |          |  |               
|Name Principal Positions    |  | YearEnded                  |     |  | Salary($) |  | Bonus($) |  | StockAwards($) |  | OptionAwards($) (A) |     |  | All OtherCompensation($) |  | Total($)
|Paul Demirdjian, Chairman   |  | 2007                       |     |  | 208,500   |  | 35,000   |  |               |  |                    |     |  |                         |  | 243,500 
|and Chief Executive Officer |  | 2006                       |     |  | 161,000   |  | 65,000   |  |               |  | 92,500              | (3) |  |                         |  | 318,500 
|                            |  | 2005                       |     |  | 221,000   |  |         |  |               |  | 100,200             | (1) |  |                         |  | 321,200 
|                            |  |                            |     |  |           |  |         
|Vince Fabrizzi              |  | 2007                       |     |  | 198,500   |  | 35,000   |  |               |  |                    |     |  |                         |  | 233,500 
|Chief Sales and             |  | 2006                       |     |  | 160,000   |  | 55,000   |  |               |  | 92,500              | (3) |  |                         |  | 307,500 
|Marketing Officer           |  | 2005                       |     |  | 211,000   |  |         |  |               |  | 113,200             | (2) |  |                         |  | 324,200 
|                            |  |                            |     |  |           |  |         
|Dan Furlong                 |  | 2007                       |     |  | 198,500   |  | 35,000   |  |               |  |                    |     |  |                         |  | 233,500 
|Chief Operations Officer    |  | 2006                       | (1) |  | 160,000   |  | 55,000   |  |               |  | 92,500              | (3) |  |                         |  | 307,500 
|                            |  | 2005                       |     |  | 211,000   |  |         |  |               |  | 113,200             | (2) |  |                         |  | 324,200 
|                            |  |                            |     |  |           |  |         
|Andrew J. Norstrud (5)      |  | 2007                       |     |  | 191,600   |  | 35,000   |  |               |  |                    |     |  |                         |  | 226,600 
|Chief Financial Officer     |  | 2006                       | (2) |  | 149,000   |  | 55,000   |  |               |  | 92,500              | (3) |  |                         |  | 296,500 
|                            |  | 2005                       |     |  | 42,300    |  |         |  |               |  | 106,800             | (4) |  |                         |  | 149,100 



|(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 may receive options to purchase shares of common stock at the market price on the date they are granted, and are entitled to reimbursement of expenses incurred
consequential to their service.



20



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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 |  | 2007 |  |                             |   |                |   |                 |  |   |                                         |     |                                                                      |   |                          |  |          |   |  |   |   |  |   |       
|                    |  | 2006 |  | $                           |  |                | $ |                |  | $ | 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 options 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 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 2007, no options were granted to our Chief Executive
Officer, Chief Financial Officer or other named executives. 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 2007, the board voted to issue a total of one hundred and fifty thousand options (150,000) to other
employees other than named executives or directors. The exercise price was approximately $0.50 per share. The options primarily have a five-year term and vest over a two-year period and are exercisable only while the employee is employed with the
Company. There was only one grant of 150,000 options during the year.

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 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.



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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 with regards to 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 payable for the shares of Common Stock covered by any Option shall be determined by
the Board of Directors, but with regards to 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 28, 2007.



|                            |  |                                                    |  |                                                                 |  |                                                                                      |  |                         |      |                      |                  |                                                   |   |                                                       |   |                                                                                           |   |                                                                                                          |  
|--------------------------- |  | -------------------------------------------------- |  | --------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ |  | ----------------------- | ---- | -------------------- | ---------------- | ------------------------------------------------- | - | ----------------------------------------------------- | - | ----------------------------------------------------------------------------------------- | - | -------------------------------------------------------------------------------------------------------- | -
|                            |  |                                                    |  | Option Awards                                                   |  |                                                                                      |  |                         |      |                      |                  | Stock Awards                                     
|Name                        |  | Number ofSecuritiesUnderlyingOptions(#)Exercisable |  | Number ofSecuritiesUnderlyingUnexercisedOptions(#)Unexercisable |  | EquityIncentivePlanAwards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions(#) |  | OptionExercisePrice ($) |      | OptionExpirationDate |                  | NumberofSharesor UnitsofStockThatHaveNotVested(#) |   | MarketValueofSharesorUnitsofStockThatHaveNotVested($) |   | 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 |                                                   |  |                                                       |  |                                                                                           |  |                                                                                                          | 



|(1) | Consists of 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) | Consists of 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Consists of 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) | Consists of 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 28, 2007, by the Companys Chief Executive Officer and other named executive officers who earned more than
$100,000 during the fiscal year ended December 28, 2007 (the bid price of the Companys stock was $0.30 as reported on the Over-The-Counter Bulletin Board on December 28, 2007).

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



|                        |  |                              |  |                  |  |                                                                        |  |                                                               |  |             |       |               |   |  
|----------------------- |  | ---------------------------- |  | ---------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------------- |  | ----------- | ----- | ------------- | - | -
|                        |  |                              |  |                  |  | Number of SecuritiesUnderlying UnexercisedOptions at December 28, 2007 |  | Value of UnexercisedIn-the- Money Options atDecember 28, 2007
|Name / Position         |  | SharesAcquired onExercise(#) |  | ValueRealized($) |  | Exercisable                                                            |  | Unexercisable                                                 |  | Exercisable |       | Unexercisable
|Paul Demirdjian, CEO    |  | 0                            |  | 0                |  | 390,000                                                                |  | 0                                                             |  | $           | 0     |               | $ | 0
|Vince Fabrizzi, CSMO    |  | 0                            |  | 0                |  | 443,529                                                                |  | 0                                                             |  | $           | 6,800 |               | $ | 0
|Dan Furlong, COO        |  | 0                            |  | 0                |  | 443,529                                                                |  | 0                                                             |  | $           | 6,800 |               | $ | 0
|Andrew J. Norstrud, CFO |  | 0                            |  | 0                |  | 400,000                                                                |  | 0                                                             |  | $           | 0     |               | $ | 0



|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 28, 2007, with
respect to the Companys stock option plans under which common stock is authorized for issuance, as well as information regarding other compensatory options granted outside of the Companys stock option plans.



23



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##### Table of Contents

|                                                                                                      |  |                                                                                          |  |                                                                          |      |                                                                                                                                      |        
|----------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------ | ---- | ------------------------------------------------------------------------------------------------------------------------------------ | -------
|                                                                                                      |  | (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 (excludingsecurities reflected incolumn (a))
|Equity compensation related to 2005 stock option plan that is not approved by shareholders            |  | 1,178,529                                                                                |  | $                                                                        | 0.96 |                                                                                                                                      | 821,471
|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 |  | 170,587                                                                                  |  | $                                                                        | 0.58 |                                                                                                                                      |       
|                                                                                                      |  |                                                                                          |  |                                                                          |      |                                                                                                                                      |        
|Total                                                                                                 |  | 2,149,116                                                                                |  | $                                                                        | 0.78 |                                                                                                                                      | 821,471
|                                                                                                      |  |                                                                                          |  |                                                                          |      |                                                                                                                                      |        

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;
|- |  | --------------------------------------------------------------------------------------------------------------------



| |  | 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                                |  | 30                 | %  
|Dan Furlong(2)                                             |  | 3,310,077                                |  | 18                 | %  
|Vince Fabrizzi(3)                                          |  | 3,310,077                                |  | 18                 | %  
|Andrew J. Norstrud(4)                                      |  | 440,000                                  |  | 2                  | %  
|Laurus Master Fund Ltd(5)                                  |  | 1,910,289                                |  | 10                 | % *
|Executive Officers, Directors and others (as a group of 5) |  | 12,515,238                               |  | 67                 | %  



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##### Table of Contents



|(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 3,722 shares of common stock underlying warrants exercisable at $0.01, 677,757 common shares and a portion of the shares underlying a $2,000,000 convertible Note as the Note contains a
conversion limitation of 9.99% of the then outstanding common shares. 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.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|* | Actual 9.99%
|- | ------------



|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. There were no
loans made from officers in 2007 and during the course of 2006 there was less than $200,000 of total transactions and at December 28, 2007 and 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 $36,300 and $9,600 for the 52-week period ended December 28, 2007 and December 29, 2006, 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.



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



|               |  |                                                                                                                                                                              
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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 (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by
reference)



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2  |  | Secured Convertible Term Note (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                     
|      | 
|10.3  |  | Secured Revolving Note (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                            
|      | 
|10.4  |  | Registration Rights Agreement (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                     
|      | 
|10.5  |  | Intellectual Property Security Agreement (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                          
|      | 
|10.6* |  | Employee Stock Ownership Plan (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                     
|      | 
|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.
|- | -------------------------------------------------------------------------------------------



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

Audit Fees

During 2007, our accountants, Pender Newkirk & Company, billed us approximately $69,400 for audit work and review of our Form 10-QSB and 8K
filings. 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.



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##### Table of Contents

Audit Related Fees

None

Tax Fees

During
2007, we were billed by our accountants, Pender Newkirk & Company, approximately $9,000 to prepare our federal and state tax returns. During 2006, we were billed by our accountants, Pender Newkirk & Company, approximately $19,500
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.



27



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##### 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 24, 2008.



JAGGED PEAK, INC.BY:

/s/ Paul DemirdjianPaul Demirdjian(Chairman of the Board of Directorsand 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 Paul Demirdjian         |  | Chairman of the Board of Directors andChief Executive Officer |  | March 24, 2008
|                                            |  |                                                              
|/s/ Vince Fabrizzi Vince Fabrizzi           |  | Chief Sales and Marketing Officer andDirector                 |  | March 24, 2008
|                                            |  |                                                              
|/s/ Dan Furlong Dan Furlong                 |  | Chief Operations Officer and Director                         |  | March 24, 2008
|                                            |  |                                                              
|/s/ Primrose Demirdjian Primrose Demirdjian |  | Director                                                      |  | March 24, 2008



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##### Table of Contents

Exhibit Index

Exhibit
Index



|               |  |                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | 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 (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by
reference)         
|               | 
|10.2           |  | Secured Convertible Term Note (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)           
|               | 
|10.3           |  | Secured Revolving Note (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)                  
|               | 
|10.4           |  | Registration Rights Agreement (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)           
|               | 
|10.5           |  | Intellectual Property Security Agreement (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by
reference)
|               | 
|10.6*          |  | Employee Stock Ownership Plan (Included as an exhibit to Registrants Annual Report on Form 10-K for the year ended December 29, 2006 and incorporated herein by reference)           
|               | 
|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                                                                                    



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##### Table of Contents

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|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.
|- | -------------------------------------------------------------------------------------------