**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**


**FORM
      10-K**


**(Mark
      One)**


x
            Annual
                Report Pursuant to Section 13 or 15(d) of the
                Securities


Exchange
      Act of 1934


For
      the fiscal year ended January 31, 2008


**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 1-11601





**iDNA,
      INC.**


(Exact
      name of registrant as specified in its charter)





Delaware
            
            34-1816760(State
                of incorporation)
            
            (I.R.S.
                Employer Identification No.)





415 Madison Avenue, 7thFloor, New York New York
            
            10017(Address
                of principal executive offices)
            
            (Zip
                Code)





Registrant’s
      telephone number, including area code: (212)
      644-1400





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


Title
      of class


**None**





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


Title
      of each class


**Common
      Stock, par value $.05 per share**





Indicate
      by check mark if the registrant is a well known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes  ̈ No x





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Act. Yes  ̈ No x





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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not be contained, to the best
      of registrant’s knowledge, in definitive proxy or information statements
      incorporated by reference in Part III of this Form 10-K or any amendment to
      this
      Form 10-K.  ̈





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


Large
                accelerated filer ̈
            Accelerated
                filer ̈
            Non-accelerated
                filerx
            Smaller
                reporting company ̈







Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act)


Yes  ̈ No x





Aggregate
      market value of the registrant’s common stock held by non-affiliates at July 31,
      2007, was approximately $3,144,147 (Based on the closing price of the
      registrant’s common stock as quoted on the OTC Bulletin Board on July 31,
      2007).





As
      of May
      14, 2008, 10,585,864 **** shares
      of
      common stock, par value $0.05, of iDNA, Inc. were outstanding.





**DOCUMENTS
      INCORPORATED BY REFERENCE**





Document
                Incorporated by Reference
            Part
                of Report into Which IncorporatedProxy
                Statement for 2008 Annual Meeting
            Part
                IIIOf
                Stockholder








**TABLE
      OF CONTENTS**





PagePart
                IItem
            1.
            Business
            11A.
            Risk
                Factors
            41B.
            Unresolved
                Staff Comments
            92.
            Properties
            103.
            Legal
                Proceedings
            104.
            Submission
                of Matters to a Vote of Security Holders
            11Part
                IIItem
            5.
            Market
                for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                Purchases of Equity Securities
            126.
            Selected
                Financial Data
            167.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            187A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            368.
            Financial
                Statements and Supplementary Data
            379.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            879A(T).
            Controls
                and Procedures
            879B.
            Other
                Information
            88Part
                IIIItem
            10.
            Directors,
                Executive Officers and Corporate Governance
            8911.
            Executive
                Compensation
            8912.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            8913.
            Certain
                Relationships and Related Transactions, and Director
                Independence
            8914.
            Principal
                Accounting Fees and Services
            89Part
                IVItem
            15.
            Exhibits,
                Financial Statement Schedules
            90








**PART
      I**





Some
      of
      the information in this Annual Report on Form 10-K (including the section titled
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operation) contains forward looking statements within the meaning of the federal
      securities laws that relate to future events or our future financial performance
      and involve known and unknown risks, uncertainties and other factors that may
      cause us or our industry’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 the
      forward-looking statements. You should not rely on forward-looking statements
      in
      this report. Forward-looking statements typically are identified by use of
      terms
      such as “anticipate”, “believe”, “plan”, “expect”, “intend”, “may”, “will”,
“should”, “estimate”, “predict”, “potential”, “continue” and similar words
      although some forward-looking statements are expressed differently. This report
      may contain forward-looking statements attributed to third parties relating
      to
      their estimates regarding the growth of our markets or other factors. All
      forward-looking statements address matters that involve risk and uncertainties,
      and there are many important risks, uncertainties and other factors that could
      cause our actual results, as well as those of the markets we serve, levels
      of
      activity, performance, achievements and prospects to differ materially from
      the
      forward-looking statements contained in this report. You should also consider
      carefully the statements under other sections of this report which address
      additional facts that could cause our actual results to differ from those set
      forth in any forward-looking statements. We undertake no obligation to publicly
      update or review any forward-looking statements, whether as a result of new
      information, future developments or otherwise.





iDNA,
      Inc. (“iDNA” or the “Company”)) files reports with the Securities and Exchange
      Commission (“SEC”). iDNA makes available on its website ( www.idnausa.com )
      free of
      charge its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
      Reports on Form 8-K and amendments to those reports as soon as reasonably
      practical after iDNA electronically files such materials with or furnishes
      them
      to the SEC. Information appearing on iDNA’s website is not part of this Annual
      Report on Form 10-K. You can also read and copy any materials iDNA files with
      the SEC at its Public Reference Room at 100 F Street, NE, Washington DC 20549.
      You can obtain additional information about the operation of the Public
      Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC
      maintains an Internet site ( www.sec.gov )
      that
      contains reports, proxy and information statements regarding issuers that file
      electronically with the SEC, including iDNA.





**Item
      1. Business.**





**GENERAL
      DEVELOPMENT OF BUSINESS**





iDNA
      began operations in 1969 and was incorporated in Delaware in 1971. iDNA’s
      operations are comprised of three principal reportable segments: (i) strategic
      communications services, (ii) information services and (iii) entertainment.
      iDNA
      manages each segment separately as a consequence of different marketing, service
      requirements and technology strategies.





The
      strategic communications services segment provides content development via
      the
      design, development and production of media, collateral material, logistics,
      support and/or broadcast services for presentations at corporate and
      institutional events, meetings, training seminars and symposiums. The
      presentations may be live at single or multi-site venues and can include video
      conferencing, satellite broadcasting and webcasting or the presentations may
      be
      provided via on-demand access via internet websites, DVD or video
      tape.




1




The
      information services segment utilizes custom wireless communication technology
      and proprietary software to facilitate client audience interaction,
      participation and polling to collect, exchange and/or analyze data and
      information in real-time during a meeting or event. The wireless communication
      services are available as a turn-key service provided by iDNA during a scheduled
      meeting or event or alternatively, a client can purchase from iDNA the required
      electronic components and related proprietary software to administer its needs
      independently.





As
      of
      consequence of iDNA’s investment in the Angelika Film Centers, LLC (“AFC”), iDNA
      operates in the movie exhibition and entertainment industry.





Prior
      to
      Fiscal 2003 (as defined below), iDNA was engaged in the sub-prime used
      automobile finance business. At that time, iDNA, then known as National Auto
      Credit, Inc. (“NAC”), invested in sub-prime used automobile consumer loans,
      which took the form of installment loans collateralized by the related vehicle.
      NAC purchased such loans, or interests in pools of such loans, from member
      dealerships, and performed the related underwriting and collection functions.
      NAC formally discontinued its automobile finance business effective December
      31,
      2001 (see Note 17 to Notes to Consolidated Financial Statements included in
      this
      report).





iDNA
      continues to examine new business opportunities, which may be pursued through
      the investment in or acquisition of existing corporate operating businesses
      or
      other means. iDNA will also continue to pursue reductions and/or synergies
      in
      its operating expenses and new debt or equity financing (although there can
      be
      no assurance that iDNA will obtain such financing or that such financing can
      be
      obtained on commercially reasonable terms) as means of supplementing iDNA’s
      resources available to pursue new acquisitions, joint ventures or other business
      development opportunities. At January 31, 2008, iDNA had cash and cash
      equivalents and trading securities of $1.6 million which together with any
      cash
      flow derived from iDNA’s operations may be used to pursue such opportunities.





iDNA
      uses
      a January 31 year-end for financial reporting purposes. References herein to
      the
      term “Fiscal 2008” shall mean iDNA’s fiscal year ended January 31, 2008 and
      references to other “Fiscal” years shall mean the year that ended (or ends, as
      the case may be) on January 31 of the year indicated. The terms the “Company” or
“iDNA” as used herein refers to iDNA, Inc. together with its consolidated
      subsidiaries unless the context otherwise requires.





iDNA's
      principal executive offices are located at 415 Madison Avenue, 7 th Floor,
      New York, New York, 10017. Its telephone number is 212-644-1400.





**CORPORATE
      COMMUNICATION BUSINESS**





*Strategic
      Communication Services*


iDNA,
      through its wholly-owned subsidiaries Campus Group Companies, Inc. (“CGC”), iDNA
      Healthcare Communications, Inc. (“iDNA Healthcare”) and OMI Business
      Communications, Inc. (“OMI”), provides a broad range of strategic content
      development, management and broadcast services for single and multiple site
      corporate and institutional events, meetings and symposiums.





iDNA
      serves Fortune 100 pharmaceutical and financial services organizations as well
      as other companies, institutions and industries seeking to develop communication
      and education content for periodic meetings, events and symposiums. Through
      a
      collaborative effort between iDNA and its clients, relevant education, product
      information, regulatory requirements, strategic initiatives, training or other
      communication initiatives are developed and executed. Frequently, these services
      result in the development of corporate communication, education and/or training
      videos which are then broadcast at a single site or simulcast via
      satellite/internet to multiple sites both domestic and international.
      Furthermore, once produced, such content is frequently modified and integrated
      into a corporate website for future on-demand access by a broad range of
      geographically dispersed users.




2




*Information
      Services*


iDNA,
      through its wholly-owned subsidiaries Audience Response Systems, Inc. (“ARS”)
      and Option Technologies Interactive, LLC (“OTI”), provides custom wireless
      communication technology and proprietary software systems (“iDNA Insight”) to
      facilitate client audience interaction, participation, training and polling
      to
      collect, exchange and/or analyze data and information in real-time during a
      meeting or event. Clients can obtain and respond dynamically in real-time to
      audience preferences, attitudes or responses to specific queries within an
      event. These data collection and analysis services assist in further engaging
      corporate and other audiences in understanding and relating to the overall
      communication program, ensuring better information retention, providing a record
      of responses for regulatory and testing purposes and in many cases providing
      clients with live field data not otherwise as easily obtained.





Each
      of
      ARS’ and OTI’s proprietary interactive audience response software frequently
      utilizes various wireless communication electronic components using either
      radio
      frequency (“RF”) or infrared (“IR”) technology. Although ARS’ and OTI’s
      proprietary software are each distinct, custom software applications, they
      both
      operate across a myriad of communication devices, including internet
      applications. iDNA’s wireless communication services are available as a turn-key
      service provided by iDNA during a scheduled meeting or event or alternatively,
      a
      client can purchase from iDNA the required electronic components and related
      proprietary software to administer its needs independently. The electronic
      components are readily available from a myriad of electronic component
      suppliers.





*Competition*


The
      corporate communication, symposium, education and training industries in which
      iDNA’s strategic communication services and information services segments
      primarily compete is very fragmented and highly competitive. Certain of iDNA's
      competitors, including several diversified companies, may have greater financial
      and other resources than iDNA. Most competitors generally operate on a local
      or
      regional level. As clients increasingly require vendors to offer comprehensive
      services and support sophisticated broadcast technologies, many operators may
      not have the capital resources, management skills and technical expertise
      necessary to compete, or to provide integrated communication services. Although
      iDNA believes that it has certain creative design, technological, managerial
      and
      other advantages over its competitors, there can be no assurance that iDNA
      will
      maintain such advantages.





*Clients*


iDNA's
      clients include national and multi-national pharmaceutical, financial services
      and consumer product companies such as Actellion Ltd., American Express Company,
      Booz Allen Hamilton Inc. (“Booz Allen”), Caterpillar, Inc., Deloitte LLP, KPMG
      International LLP, Pfizer Inc. (“Pfizer”), PricewaterhouseCoopers LLP,
      OptionFinder Europe GmbH, and R&D Strategic Solutions, Inc. as well as other
      companies seeking to develop communication, education and/or training content
      for periodic events.





Revenues
      for Fiscal 2008, Fiscal 2007 and Fiscal 2006 were $14.6 million, $15.4 million
      and $14.1 million, respectively. Pfizer Inc. and R&D Strategic Solutions,
      Inc. accounted for 12% and 15%, respectively, of revenues for Fiscal 2008.
      Pfizer, Inc. accounted for 17% of revenues for Fiscal 2007. Pfizer Inc. and
      BearingPoint, Inc. accounted for 21% and 13%, respectively of revenues for
      Fiscal 2006.




3




*Patents
      and Trademarks*


iDNA
      does
      not hold any material patents for its current business operations. iDNA does,
      however, maintain certain trademarks in connection with its business such as
      Audience Response Systems ® ,
      Power
      Poll ® ,
      Compliance XR ® ,
      OptionFinder ® and
      Option Power ® .





**MOVIE
      EXHIBITION BUSINESS**





iDNA
      engages in the movie exhibition business through its investment in AFC. AFC
      owns
      and operates the Angelika Film Center. The real property constituting the
      Angelika Film Center is held under a long term lease having a remaining term
      of
      approximately 18 years. AFC is owned 50% by iDNA and 50% by Reading
      International, Inc. Each of the owners of AFC is entitled to a proportionate
      share of the cash distributions that are paid by AFC.





The
      Angelika Film Center is a 17,000 square foot, six screen multiplex theater
      and
      café that focuses on the exhibition of art and specialty films. The exhibition
      of art and specialty films, while seasonal in nature, is less so than the film
      exhibition business in general. Art and specialty films tend to be released
      more
      evenly over the course of the year and, if successful, tend to enjoy a longer
      run than wide release films. Art and specialty films are obtained from a number
      of sources ranging from divisions of the larger film distributors specializing
      in specialty films to individuals who have acquired domestic rights to one
      film.
      Generally film payment terms are based on an agreed upon percentage of the
      box
      office receipts.





**EMPLOYEES**





As
      of
      January 31, 2008, iDNA employed sixty-eight (68) people on a full-time basis
      and
      four (4) persons on a part-time basis. None of iDNA’s employees are covered by a
      collective bargaining agreement. iDNA believes it maintains good relations
      with
      its employees.





**Item
      1A. Risk Factors.**





*The
      following are certain risk factors that could affect our business, financial
      performance, and results of operations. These risk factors should be considered
      in connection with evaluating the forward-looking statements contained in this
      Annual Report on Form 10-K for Fiscal 2008, as the forward-looking statements
      are based upon current expectations, and actual results and conditions could
      differ materially from the current expectations. Investing in iDNA securities
      involves a degree of risk, and before making an investment decision, a
      prospective investor should consider these risk factors as well as other
      information included or incorporated by reference in the other reports iDNA
      files with the Securities and Exchange Commission.*





In
      addition to other information set forth herein, consider carefully the following
      risk factors in evaluating iDNA and its business. Any of these risks could
      materially affect iDNA’s business, financial condition, or results of
      operations. These risks could also cause our actual results to differ materially
      from those indicated in the forward-looking statements contained herein and
      elsewhere. The risks described below are not the only risks facing iDNA.
      Additional risks not currently known to us or those we currently deem to be
      immaterial may also materially and adversely affect iDNA’s business
      operations.




4




*iDNA
      is integrating significant new strategic components into its business
      plan*


As
      a
      consequence of a series of acquisitions, investments and initiatives, iDNA
      has
      been in the process of a strategic transformation of its operations to a
      strategic communications, information services, technology, and entertainment
      enterprise from a company engaged in the automobile financing business. iDNA
      operates in the movie exhibition segment, through the activities of AFC,
      acquired in April 2000, and added business communications, media services and
      technology services such as satellite videoconferencing, multi-media production
      services and corporate and institutional meeting services, web-site development
      and content management as a result of the acquisitions of (i) CGC and ARS
      (collectively known as the “Campus Group”), acquired in July 2003, (ii) OMI,
      acquired in April 2003, and (iii) OTI, acquired in November 2005 and the
      formation of iDNA Healthcare in July 2006. There can be no assurance that iDNA
      will be able to effectuate this new business plan successfully, that revenue
      growth will occur once the plan is enacted, or that any of these new lines
      of
      business will achieve profitability or sustain such profitability, once
      achieved.





*iDNA’s
      business is subject to significant competitive pressures*


iDNA’s
      competitors may have greater financial, technical and other resources than
      iDNA,
      which may provide such competitors with certain advantages, including the
      ability to allocate greater resources for development, marketing and other
      purposes.





AFC
      faces
      varying degrees of competition from other motion picture exhibitors with respect
      to licensing films and attracting customers. Competitors have built theatres
      in
      the area where AFC operates. AFC also competes with a number of other motion
      picture delivery systems including cable television, pay-per-view, DVDs and
      videocassettes, satellite and home video systems. New technologies for movie
      delivery (such as video on demand) could also have a material adverse effect
      on
      AFC's business and results of operations. While the impact of these alternative
      types of motion picture delivery systems on the motion picture exhibition
      industry is difficult to determine precisely, there is a risk that they could
      adversely affect attendance at motion pictures shown in theatres. Movie theatres
      also face competition from a variety of other forms of entertainment competing
      for the public's leisure time and disposable income, including sporting events,
      concerts, live theatre and restaurants.





*iDNA’s
      performance may fluctuate when its clients are affected simultaneously by the
      same economic or regulatory factors*


iDNA's
      revenues are significantly concentrated in communications, media and
      entertainment and iDNA’s clients are concentrated within specific industries
      including pharmaceuticals, legal and professional services, and financial
      services. These industries are subject to fluctuations of business
      communications needs based upon the timing of research and development
      activities, new product launches, continuing educational support, marketplace
      communication, general budgetary levels, regulatory changes and general economic
      trends. Consequently, many of iDNA’s clients will likely be influenced at the
      same time by similar economic or regulatory factors, which can affect the level
      of spending for advertising, marketing, promotion and communication services.
      In
      the event of a decline, projected decline or delay in such spending, the
      management of iDNA’s clients may choose to cut back or defer spending for iDNA’s
      services. It is reasonable to expect that, if one client reduces or delays
      its
      spending in response to a major economic factor, other clients will also decide
      to reduce or delay their spending at approximately the same time. Accordingly,
      iDNA’s revenues are subject to fluctuations as a result of factors that affect
      its client’s expenditures.




5




*iDNA
      has significant outstanding indebtedness*


At
      January 31, 2008, iDNA has an aggregate of $17.6 million in outstanding
      indebtedness comprised of (i) Acquisition Debt (defined below) in the aggregate
      principal amount of $13.0 million, (ii) a Term Loan (defined below) in the
      principal amount of $4.25 million and (iii) other financing obligations in
      the
      aggregate principal amount of $376,000.





Principally
      as a consequence of the means in which iDNA has financed the acquisitions of
      OTI, ARS and CGC (ARS and CGC collectively known as the “Campus Group”), iDNA
      has outstanding debt in the aggregate principal amount of $13.0 million
      (collectively the “Acquisition Debt”) which bears interest at the weighted
      average rate of 5% per annum. The indebtedness is secured by essentially all
      of
      iDNA's interest in OTI and the Campus Group, respectively. Repayment of
      principal attributable to the Acquisition Debt is based upon a formula of cash
      flows of each of the underlying acquired businesses.





iDNA,
      via
      its wholly-owned subsidiary, iDNA Cinemas Holdings, Inc. (“Holdings”),
      consummated a Master Loan and Security Agreement (the “Loan Agreement”) with a
      third party lender in the principal amount of $4.25 million (the “Term Loan”).
      The Term Loan is secured by a pledge of all of Holdings assets, including all
      of
      the outstanding shares of National Cinemas, Inc. (“NCI”), which owns a 50%
      membership interest in AFC. The interest rate attributable to the Term Loan
      is a
      variable annual rate based upon the prime rate, as published by Citibank N.A.
      (“Prime Rate”) plus 4%, or, if greater, 12.25%. As a consequence, iDNA’s
      interest charges under the Term Loan are subject to fluctuations based upon
      changes in the credit markets and the corresponding Prime Rate. For each 1%
      increase in the Prime Rate above 8.25%, iDNA’s interest costs on the Term Loan
      would increase approximately $42,000 per annum. At
      January 31, 2008, the Prime Rate was 6.0%. Repayment of principal attributable
      to the Term Loan is based upon a formula of cash distributions received from
      AFC
      during the term.





*iDNA
      is subject to credit risk from its clients*


iDNA
      extends credit to clients in the normal course of business. iDNA continuously
      monitors collections and payments from clients and maintains an allowance for
      doubtful accounts based upon historical experience and any specific client
      collection issues that have been identified. Since accounts receivable are
      concentrated in a relatively few number of clients, a significant change in
      the
      liquidity or financial position of any of these clients could have a material
      adverse impact on the collectability of the accounts receivable and future
      operating results.





*The
      businesses purchased by iDNA may turn out to be worth less than expected at
      the
      time of acquisition*


Management
      reviews the carrying value of its long-lived assets for impairment whenever
      events or changes in circumstances indicate that the carrying amount of these
      assets may not be fully recoverable. As a consequence of iDNA’s series of
      acquisitions, iDNA carries goodwill as an asset that it annually assesses for
      impairment by comparing the carrying value of the goodwill to its fair value.
      When it is determined that the carrying amount of long-lived assets and goodwill
      may not be fully recoverable, impairment is measured by comparing an asset’s
      estimated fair value to its carrying value. The determination of fair value
      is
      based on quoted market prices in active markets, if available, or independent
      appraisals; sales price negotiations; or projected future cash flows discounted
      at a rate determined by management to be commensurate with iDNA’s business risk.
      The estimation of fair value utilizing discounted forecasted cash flows includes
      significant judgments regarding assumptions of revenue, operating and marketing
      costs; selling and administrative expenses; interest rates; property and
      equipment additions and retirements; and industry competition, general economic
      and business conditions, among other factors.




6




During
      the second quarter of Fiscal 2007, the results of the operations of the CGC
      reporting unit raised questions as to whether projections used at the last
      valuation date were still valid. Accordingly, management performed additional
      impairment tests as of July 31, 2006 for CGC and determined that impairment
      charges were required at that date. Accordingly, based upon iDNA’s assessment,
      second quarter Fiscal 2007 operations were charged $1.9 million and $2.6 million
      for the estimated impairment of CGC’s goodwill and other intangible assets,
      respectively. At January 31, 2008, the goodwill for each of iDNA’s business
      segments (information services and strategic communications services) was tested
      for additional impairment. As a consequence of the testing and initial
      assessment for Fiscal 2008, iDNA determined that the carrying value of both
      its
      information services and its strategic communications services business segments
      exceeded their fair value, which was estimated based upon the present value
      of
      each reporting units expected future cash flows. As a consequence, iDNA charged
      to operations an aggregate of $8.0 million for the estimated impairment of
      goodwill and other intangible assets relating to (i) its information services
      segment in the amount of $5.9 million, and (ii) strategic communication services
      segment in the amount of $2.1 million, respectively (see Note 2 to Notes to
      Consolidated Financial Statements included in this report).





As
      a
      consequence of this impairment charge and other factors, iDNA has initiated
      preliminary discussions with the former shareholders of the Campus Group
      (defined below) to restructure the Campus Notes (defined below) in the aggregate
      amount of $12.1 million and/or reduce the original purchase consideration of
      the
      Campus Group acquisition (see Note 7 to Notes to Consolidated Financial
      Statements). Currently, iDNA’s payment obligations are deferred until certain
      performance criteria are met. Although iDNA is seeking to restructure its
      obligations under the Campus Notes and/or reduce the original purchase
      consideration, there can be no assurance that such negotiations will result
      in a
      restructuring and/or a reduction in the original purchase consideration. iDNA
      believes that the available cash and cash equivalents and investments in trading
      securities totaling $1.6 million at January 31, 2008 and any cash distributions
      from its investment in AFC and cash flow from operations will be sufficient
      to
      pay operating expenses, existing liabilities, fund existing debt repayments
      and
      fund its activities through the next twelve months, notwithstanding these
      impairment charges.





*iDNA’s
      success is dependent upon key personnel*


iDNA’s
      success depends, in part, upon the continued services of key personnel, such
      as:
      James J. McNamara, Chairman of the Board and Chief Executive Officer; Robert
      V.
      Cuddihy, Jr., Chief Financial Officer and certain divisional managers and sales
      strategists with iDNA. The loss of the services of any one of them could have
      a
      material adverse effect on iDNA.





*Future
      acquisitions or investments could disrupt iDNA’s ongoing business, distract
      management and employees, increase expenses and adversely affect results of
      operations*


iDNA
      has
      made three significant acquisitions since April 2003 and has started another
      business. Management's attention may be diverted from operations towards
      identifying potential acquisitions and negotiating and consummating them. Any
      acquisitions or investments iDNA makes in the future will involve risks. iDNA
      may not be able to make acquisitions or investments on commercially acceptable
      terms. If iDNA does acquire another company, iDNA could have difficulty
      retaining and assimilating the acquired company's personnel. In addition, iDNA
      could have difficulty assimilating acquired products, services or technologies
      into iDNA’s existing operations. These difficulties could disrupt iDNA’s ongoing
      business, distract management and employees, increase expenses and materially
      and adversely affect the results of operations. Furthermore, iDNA may incur
      debt
      or issue equity securities to pay for any future acquisitions, which could
      dilute its stockholders’ ownership interest in iDNA or subordinate such
      ownership interest in priority to additional senior obligations.





7


*iDNA
      may not be able to hire, train, motivate, retain and manage professional staff*


iDNA’s
      management must hire, train, motivate, retain and manage highly skilled
      employees. Competition for skilled employees who can perform the services that
      iDNA requires is intense. iDNA might not be able to hire enough of them or
      to
      train, motivate, retain and manage the employees it does hire. Hiring, training,
      motivating, retaining and managing employees with the skills required is
      time-consuming and expensive.





*iDNA
      is unlikely to pay dividends for the foreseeable future*


iDNA
      has
      not paid cash dividends on its common stock. iDNA intends to reinvest any
      earnings in its business to finance future growth and acquisitions. Accordingly,
      iDNA’s Board of Directors does not anticipate declaring any cash dividends in
      the foreseeable future.





*Adverse
      decisions in iDNA’s litigation matters would adversely affect iDNA’s business*


iDNA
      is
      involved in certain legal proceedings in the normal course of its business.
      If a
      major case is decided against iDNA, iDNA could be held liable for an amount
      that
      would adversely affect iDNA’s ability to do business. Additionally, iDNA
      maintained and continues to maintain self-insurance for claims relating to
      bodily injury or property damage from accidents involving the vehicles rented
      to
      customers by its discontinued automobile rental and finance operations. iDNA
      was, when required by either governing state law or the terms of its rental
      agreement, self-insured for the first $1.0 million per occurrence, and for
      losses in excess of $5.0 million per occurrence, for bodily injury and property
      damage resulting from accidents involving its rental vehicles. iDNA was also
      self-insured, up to certain retained limits, for bodily injury and property
      damage resulting from accidents involving iDNA vehicles operated by employees
      within the scope of their employment. In connection therewith, iDNA established
      certain reserves in its financial statements for the estimated cost of
      satisfying those claims. If there is a material change in the assumptions used
      or the ultimate outcome of the self-insurance claims, iDNA could experience
      additional future charges to operations.





*iDNA
      may be unable to fund its additional capital needs*


iDNA’s
      access to capital may be limited because of iDNA’s indebtedness. As a result,
      iDNA may be unable to make the capital expenditures that iDNA would otherwise
      believe necessary. In addition, iDNA cannot assure its stockholders that iDNA’s
      business will generate sufficient cash flow from operations, that currently
      anticipated revenue growth will be realized or that future capital will be
      available to iDNA to enable it to fund its capital expenditure needs.





*Certain
      Officers and Directors own a substantial portion of iDNA’s Common Stock*


As
      of May
      14, 2008, iDNA's executive officers and directors beneficially owned
      approximately 42.4% of iDNA’s common stock, $0.05 par value (“Common Stock”).
      While no individual is a beneficial owner of a majority of the outstanding
      shares of iDNA’s Common Stock, these stockholders have substantial influence
      and, if they act together, may be able to control decisions on corporate
      matters, including the election of directors. Such concentration of ownership
      may also have the effect of preventing a change in control of iDNA. In addition,
      the interests of management may not always be identical to the interests of
      non-management stockholders.





*Future
      sales of iDNA’s Common Stock in the public market could lower its stock price
      and impair its ability to raise funds in new stock
      offerings*


As
      of
      January 31, 2008, there were 10,010,864 shares of iDNA’s Common Stock
      outstanding. An aggregate of 6,474,117 additional shares of Common Stock may
      be
      issued upon the exercise or conversion, as the case may be, of all of the stock
      options, warrants and convertible debentures outstanding on such date. If the
      holders of a large number of these securities elect to exercise them for or
      convert them into Common Stock and then sell the shares of Common Stock they
      acquire, the market price of the Common Stock could decline. Sales by existing
      stockholders of a large number of shares at any one time could also adversely
      affect the market price of iDNA’s Common Stock and could impair iDNA’s ability
      to raise funds in additional stock offerings. Moreover, the mere possibility
      that these sales could be made in the future could have the same effect even
      if
      these sales are not actually made.




8




*Trading
      in iDNA’s Common Stock has been and may continue to be limited, which may make
      it difficult to resell shares*


iDNA’s
      Common Stock is quoted on the Over-the-Counter Bulletin Board. The
      Over-the-Counter Bulletin Board is not, however, a national securities exchange,
      and trading in securities on the Over-the-Counter Bulletin Board is often more
      sporadic than trading in securities listed on an exchange (including NASDAQ).
      Consequently, an investor may have difficulty reselling any shares of iDNA’s
      Common Stock that it purchases.





*The
      market price of iDNA’s Common Stock can be highly volatile*


The
      average daily trading volume of iDNA’s Common Stock has generally been low,
      which iDNA believes has had a significant effect on the historical market price
      of iDNA’s Common Stock. As a result, such market price has been highly volatile
      and may not be indicative of the market price in a more liquid market. The
      market price of iDNA’s Common Stock could be subject to significant fluctuations
      in response to a number of factors, including the depth and liquidity of the
      market for iDNA’s Common Stock, public announcements by iDNA, its clients and
      its competitors, investor perception of iDNA and general economic and other
      conditions, which may or may not relate to iDNA's performance. Fluctuations
      in
      iDNA’s Common Stock's market price may affect iDNA’s ability to raise
      capital.





*Because
      iDNA’s Common Stock is deemed to be “Penny Stock” under the Securities Exchange
      Act of 1934, investors may not be readily able to resell iDNA’s shares in the
      public markets*


iDNA’s
      Common Stock is currently deemed penny stock under the Securities Exchange
      Act
      of 1934 and the rules of the Securities and Exchange Commission. These rules
      impose additional sales practices and disclosure requirements on broker-dealers
      who sell iDNA’s shares to persons other than certain accredited investors. For
      covered transactions, a broker-dealer must make a suitability determination
      for
      each purchaser and receive a purchaser’s written agreement before the sale. In
      addition, the broker-dealer must make certain mandated disclosures in
      transactions of penny stocks. These rules affect the ability of broker-dealers
      to make a market in iDNA’s Common Stock and adversely affect an investor’s
      ability to resell shares of iDNA’s Common Stock.





**Item
      1B. Unresolved Staff Comments.**





Not
      applicable.





9


**Item
      2. Properties.**





iDNA
      occupies a series of leased facilities as follows:





Location
            
            Square Feet
            
            Base
                  Annual
              Rent
            
            Expiration of Term
            
            PurposeBohemia,
                NY
            
            
            15,000
            
            $
            100,000
            
            
            April
                2010
            
            
            Warehouse
                and distributionEvansville,
                IN
            
            
            6,800
            
            $
            57,000
            
            
            September
                2008
            
            
            Sales,
                service and field supportNew
                York, NY
            
            
            6,838
            
            $
            294,000
            
            
            December
                2012
            
            
            Corporate
                Headquarters, Creative Services and Production StudioOrlando,
                FL
            
            
            8,000
            
            $
            53,000
            
            
            September
                2010
            
            
            Sales,
                service and field supportTuckahoe,
                NY
            
            
            11,000
            
            $
            75,000
            
            
            April
                2010
            
            
            Creative
                Services and Production Studio





In
      addition to the above facilitates, OTI leases approximately 3,500 square feet
      and 1,000 square feet of office space on a month-to-month basis in Ogden, UT
      and
      Chicago, IL, respectively. The combined monthly rent for these additional
      facilities is $4,000.





All
      of
      iDNA’s leased real properties are in good working condition, and iDNA believes
      that they are adequate to meet its current operations needs. In addition, iDNA
      believes that all such properties are adequately covered by
      insurance.





**Item
      3. Legal Proceedings.**





*Self-Insurance
      Reserves for Property Damage and Personal Injury Claims.*


iDNA,
      under the names Agency Rent-A-Car, Inc. (“ARAC”), Altra Auto Rental and Automate
      Auto Rental, previously engaged in the rental of automobiles on a short-term
      basis, principally to the insurance replacement market. In Fiscal 1996, iDNA
      discontinued its automobile rental fleet business through the sale of certain
      assets and through certain leases to a national car rental company. All
      liabilities related to the discontinued rental business, principally
      self-insurance claims, were retained by ARAC.





iDNA’s
      wholly-owned subsidiary ARAC maintained and continues to maintain self-insurance
      for claims relating to bodily injury or property damage from accidents involving
      the vehicles rented to customers by its discontinued automobile rental
      operations occurring in Fiscal 1996 and prior. ARAC was, when required by either
      governing state law or the terms of its rental agreement, self-insured for
      the
      first $1.0 million per occurrence, and for losses in excess of $5.0 million
      per
      occurrence, for bodily injury and property damage resulting from accidents
      involving its rental vehicles. ARAC was also self-insured, up to certain
      retained limits, for bodily injury and property damage resulting from accidents
      involving ARAC vehicles operated by employees within the scope of their
      employment.





ARAC
      is
      the subject to certain self-insurance claims and litigation expenses relating
      to
      its discontinued automobile rental operations. iDNA’s management estimates
      ARAC’s required self-insurance liability based upon specific identification of
      the known matters subject to future claims, the nature of the claim and the
      estimated costs to be incurred. These estimates include, but are not limited
      to,
      ARAC’s historical loss experience and projected loss factors. The required
      self-insurance liability is subject to adjustment in the future based upon
      changes in the nature of the remaining claims or the ultimate cost. As a
      consequence of iDNA’s sale of its automobile rental operations in 1995, iDNA
      believes that all incurred claims have been reported to ARAC and that there
      are
      no longer any incurred but not yet reported claims to be received by ARAC.
      iDNA’s self-insurance liability at January 31, 2008 and 2007 was $172,000 and
      $235,000, respectively.




10




Because
      of the uncertainties related to several residual small claims and legal
      proceedings involving iDNA’s former rental operations and self-insurance claims,
      it is difficult to project the ultimate effect the adjudication or settlement
      of
      these matters will have on iDNA. As additional information regarding iDNA’s
      potential liabilities becomes available, iDNA will revise the estimates as
      appropriate.





*Other
      Litigation*




In
      the
      normal course of its business, iDNA is named as defendant in legal proceedings.
      It is the policy of iDNA to vigorously defend litigation and/or enter into
      settlements of claims where its management deems appropriate.





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





None.




11


**PART
      II**





**Item
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.**





**MARKET
      INFORMATION**





iDNA’s
      Common Stock has been quoted on the Over-the-Counter Bulletin Board (the
“OTCBB”), operated by The Nasdaq Stock Market, Inc., since March 23, 1998. As a
      consequence of iDNA’s corporate name change in January 2006, iDNA applied for
      and received a new ticker symbol. Effective March 8, 2006, iDNA’s Common Stock
      began to be quoted under the ticker symbol “IDAI”. Prior to March 8, 2006,
      iDNA’s Common Stock was quoted under the ticker symbol “NAKD”.





The
      following table sets forth the range of the high and low closing quotations
      for
      iDNA’s Common Stock on the OTCBB during the periods indicated as reported by the
      OTCBB. Such market quotations reflect inter-dealer prices, without mark-up,
      mark-downs or commissions and may not necessarily represent actual
      transactions





High
            
            LowYear
                ended January 31, 2008First
                Quarter (February 1 - April 30)
            
            $
            .96
            
            $
            .60Second
                Quarter (May 1 - July 31)
            
            
            .73
            
            
            .34Third
                Quarter (August 1 - October 31)
            
            
            .44
            
            
            .22Fourth
                Quarter (November 1 - January 31)
            
            
            .27
            
            
            .14Year
                ended January 31, 2007First
                Quarter (February 1 - April 30)
            
            $
            1.12
            
            $
            .33Second
                Quarter (May 1 - July 31)
            
            
            1.02
            
            
            .46Third
                Quarter (August 1 - October 31)
            
            
            .50
            
            
            .33Fourth
                Quarter (November 1 - January 31)
            
            
            .99
            
            
            .35





12


**Stock
      Performance Graph**





The
      following graph compares the yearly change in iDNA’s cumulative total
      shareholder return on its Common Stock (based on the market price of iDNA’s
      Common Stock) with the cumulative total return of the S&P 600 Small Cap
      Index, the Russell 2000 Index, and Reading International, Inc. (a theatre and
      real estate concern). The comparisons shown in the graph below are based upon
      historical data. The stock price performance shown in the graph below is not
      necessarily indicative of, or intended to forecast, the future performance
      of
      iDNA’s Common Stock. The stock performance graph shall not be deemed to be
“soliciting material” or to be “filed” with the Commission under the Securities
      Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of
      1934, as amended (the “Exchange Act”), or incorporated by reference by any
      document so filed.





IDNA Chart





2/1/03
            
            1/31/04
            
            1/31/05
            
            1/31/06
            
            1/31/07
            
            1/31/08iDNA,
                Inc.
            
            
            100
            
            
            428
            
            
            228
            
            
            264
            
            
            593
            
            
            100S&P
                600 Small Cap Index
            
            
            100
            
            
            147
            
            
            169
            
            
            200
            
            
            215
            
            
            198Russell
                2000 Index
            
            
            100
            
            
            156
            
            
            168
            
            
            197
            
            
            215
            
            
            192Reading International, Inc.
            
            
            100
            
            
            154
            
            
            198
            
            
            200
            
            
            215
            
            
            244





For
      purposes of the above table, iDNA is compared to Reading International Inc.
      because that company is engaged principally in the operation of various film
      theatres. iDNA’s current operations are comprised principally of its investment
      in AFC and its providing strategic communication services and information
      services.





**STOCKHOLDERS**





At
      May 9,
      2008 there were 1,202 stockholders of record of iDNA's Common Stock based upon
      a
      securities position listing furnished to iDNA by American Stock Transfer &
Trust Company, iDNA’s transfer agent. On that date, the closing bid quotation of
      iDNA’s Common Stock on the OTCBB was $0.10 per share.




13




**DIVIDEND
      POLICY**





It
      has
      been iDNA's policy to retain any earnings and preserve its cash resources to
      finance the growth of its business, provide resources for future acquisition(s)
      and reduce outstanding debt and other liabilities; accordingly, iDNA has
      generally not declared or paid cash dividends. iDNA intends to reinvest any
      earnings in its business to finance future growth and acquisitions. Accordingly,
      iDNA’s Board of Directors does not anticipate declaring any cash dividends in
      the foreseeable future. However, iDNA does from time to time reassess its cash
      dividend policy and may declare and pay cash dividends in the future if
      circumstances warrant. No cash dividends were declared during Fiscal 2008 or
      Fiscal, 2007.





**RECENT
      SALE OF UNREGISTERED SECURITIES**





iDNA
      did
      not engage in sales of unregistered securities during Fiscal 2008 that have
      not
      been reported heretofore in a Quarterly Report on Form 10-Q or in a Current
      Report on Form 8-K.





**REPURCHASE
      OF EQUITY SECURITIES**





iDNA
      did
      not repurchase any shares of its equity securities (including shares of its
      Common Stock) during the fourth quarter of Fiscal 2008.





**SECURITIES
      AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS**





The
      following table sets forth, as of January 31, 2008, relevant information with
      respect to compensation plans (including individual compensation arrangements)
      under which equity securities of iDNA are authorized for issuance.





**Plan Category**
            
            **Number of securities to**
              **be issued upon exercise**
              **of outstanding options,**
              **warrants and rights**
              **( a )**
            
            **Weighted-average**
              **exercise price of**
              **outstanding**
              **options, warrants**
              **and rights**
              **( b )**
            
            **Number of securities remaining**
              **available for future issuance**
              **under equity compensation**
              **plans (excluding securities**
              **reflected in column (a))**
              **( c )**Equity
                compensation plans approved by security holders
            
            
            3,030,784
            
            $
            0.70
            
            
            560,068Equity
                compensation plans not approved by security holders
            
            
            -
            
            
            -
            
            
            28,000Total
            
            
            3,030,784
            
            $
            0.70
            
            
            588,068





14


*2003
      Restricted Stock Plan*


iDNA
      sponsors a 2003 Restricted Stock Plan (the “2003 Plan”) that authorizes the
      grant of up to a maximum of 400,000 restricted shares of Common Stock to
      employees of iDNA. During Fiscal 2004, there were 372,000 shares of Common
      Stock
      granted pursuant to the terms of the 2003 Plan at an estimated fair value of
      $0.32 per share. No such shares were granted to any of iDNA’s executive officers
      or directors. There were no further grants under the 2003 Plan during Fiscal
      2008, Fiscal 2007 and Fiscal 2006. Each grant under the 2003 Plan is subject
      to
      vesting at the rate of 20% per year over a five year period. Shares granted
      under the 2003 Plan may not be sold, transferred, pledged or otherwise disposed
      until they vest. During the vesting period, unvested shares are voted by the
      manager of each business unit.





15


**Item
      6. Selected Financial Data.**





The
      following sets forth certain selected financial data appearing in or derived
      from iDNA’s historical financial statements, adjusted for the discontinued
      operations of its automobile finance and auto rental businesses. The selected
      financial data should be read in conjunction with the consolidated financial
      statements appearing elsewhere herein, and with Item 7 – Management’s Discussion
      and Analysis of Financial Condition and Results of Operations (in thousands,
      except per share amounts):





Years Ended January 31,2008
            
            2007
            
            2006
            
            2005
            
            2004**STATEMENT
                OF OPERATIONS DATA**Revenues
            
            $
            14,617
            
            $
            15,444
            
            $
            14,090
            
            $
            11,343
            
            $
            7,144Operating
                costs and expenses
            
            $
            18,728
            
            $
            19,334
            
            $
            16,621
            
            $
            14,294
            
            $
            11,001Loss
                from continuing operations
            
            $
            (11,823
            )
            $
            (7,591
            )
            $
            (515
            )
            $
            (3,164
            )
            $
            (3,383
            )Discontinued
                operations, net of tax1
            
            
            10
            
            
            11
            
            
            14
            
            
            -
            
            
            401Net
                loss
            
            $
            (11,813
            )
            $
            (7,580
            )
            $
            (501
            )
            $
            (3,164
            )
            $
            (2,982
            )Basic
                and diluted (loss) earnings per share:Continuing
                operations
            
            $
            (1.19
            )
            $
            (.83
            )
            $
            (.05
            )
            $
            (.33
            )
            $
            (.41
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            .05Total
            
            $
            (1.19
            )
            $
            (.83
            )
            $
            (.05
            )
            $
            (.33
            )
            $
            (.36
            )Weighted
                average number of shares outstanding:Basic
            
            
            9,933
            
            
            9,167
            
            
            9,250
            
            
            9,529
            
            
            8,182Diluted
            
            
            9,933
            
            
            9,167
            
            
            9,250
            
            
            9,529
            
            
            8,182





As of January 31,2008
            
            2007
            
            2006
            
            2005
            
            2004**BALANCE
                SHEET DATA**Cash
                and cash equivalents
            
            $
            169
            
            $
            277
            
            $
            1,144
            
            $
            471
            
            $
            376Total
                assets
            
            $
            13,553
            
            $
            22,078
            
            $
            28,847
            
            $
            28,089
            
            $
            30,916Long
                term debt and convertible debt(2)
            
            $
            16,198
            
            $
            13,896
            
            $
            12,941
            
            $
            11,475
            
            $
            11,794Total
                stockholders' equity (deficit)
            
            $
            (8,646
            )
            $
            2,745
            
            $
            9,572
            
            $
            10,577
            
            $
            13,480





1 See
      Note
      17 of Notes to Consolidated Financial Statements included in this report for
      further discussion of discontinued operations.


2 Amount
      at January 31, 2008 is presented net of the effect of the unamortized fair
      value
      of $306,000 for the 1.5 million warrants issued pursuant to the terms of the
      Loan Agreement. The fair value of the warrants is reported as a reduction of
      principal at January 31, 2008. See Note 7 of Notes to the Consolidated Financial
      Statements included in this report.




16


The
      selected statements of operations data for the quarters ended April 30, July
      31,
      October 31, and January 31 for Fiscal 2008 and 2007 set forth below have been
      derived from iDNA’s unaudited quarterly historical financial statements. The
      selected financial data should be read in conjunction with the consolidated
      financial statements appearing elsewhere herein and with Item 7 – Management’s
      Discussion and Analysis of Financial Condition and Results of Operations (in
      thousands, except per share data):





**STATEMENT
      OF OPERATIONS DATA**





For the Three Months EndedJanuary 31,
            
            October 31,
            
            July 31,
            
            April 30,
            
            January 31,
            
            October 31,
            
            July 31,
            
            April 30,2008
            
            2007
            
            2007
            
            2007
            
            2007
            
            2006
            
            2006
            
            2006Revenues
            
            $
            3,123
            
            $
            5,070
            
            $
            2,824
            
            $
            3,600
            
            $
            3,716
            
            $
            4,758
            
            $
            3,538
            
            $
            3,432Gross
                profit
            
            $
            859
            
            $
            2,569
            
            $
            779
            
            $
            1,079
            
            $
            1,498
            
            $
            2,204
            
            $
            1,497
            
            $
            1,098Income
                (loss) from continuing operations
            
            $
            (9,475
            )
            $
            255
            
            $
            (1,560
            )
            $
            (1,043
            )
            $
            (1,020
            )
            $
            (280
            )
            $
            (5,137
            )
            $
            (1,154
            )Discontinued
                operations, net of tax1
            
            
            2
            
            
            
            
            
            3
            
            
            5
            
            
            8
            
            
            1
            
            
            1
            
            
            1Net
                income (loss)
            
            $
            (9,473
            )
            $
            255
            
            $
            (1,557
            )
            $
            (1,038
            )
            $
            (1,012
            )
            $
            (279
            )
            $
            (5,136
            )
            $
            (1,153
            )Basic and diluted income (loss) 2earnings
                per share:Continuing
                operations
            
            $
            (.95
            )
            $
            .03
            
            $
            (.16
            )
            $
            (.11
            )
            $
            (.11
            )
            $
            (.03
            )
            $
            (.56
            )
            $
            (.13
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            (.95
            )
            $
            .03
            
            $
            (.16
            )
            $
            (.11
            )
            $
            (.11
            )
            $
            (.03
            )
            $
            (.56
            )
            $
            (.13
            )Weighted
                average number of shares outstanding:Basic
            
            
            9,960
            
            
            9,955
            
            
            9,955
            
            
            9,861
            
            
            9,451
            
            
            9,098
            
            
            9,081
            
            
            9,036Diluted
            
            
            9,960
            
            
            9,955
            
            
            9,955
            
            
            9,861
            
            
            9,451
            
            
            9,098
            
            
            9,081
            
            
            9,036





1 See
      Note
      17 of Notes to Consolidated Financial Statements included in this report for
      further discussion of discontinued operations.


2 The sum
      of the quarters do not equal year to date




17




**Item
      7. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations.**





**GENERAL**





iDNA,
      Inc. (the “Company” or “iDNA”), began operations in 1969 and was incorporated in
      Delaware in 1971. iDNA’s operations are comprised of three principal reportable
      segments: (i) strategic communications services, (ii) information services
      and
      (iii) entertainment. iDNA manages each segment separately as a consequence
      of
      different marketing, service requirements and technology strategies.





The
      strategic communications services segment provides content development via
      the
      design, development and production of media, collateral material, logistics,
      support and/or broadcast services for presentations at corporate and
      institutional events, meetings, training seminars and symposiums. The
      presentations may be live at single or multi-site venues and can include video
      conferencing, satellite broadcasting and webcasting, or the presentations may
      be
      provided via on-demand access via internet websites, DVD or video
      tape.





The
      information services segment utilizes custom wireless communication technology
      and proprietary software to facilitate client audience interaction,
      participation and polling to collect, exchange and/or analyze data and
      information in real-time during a meeting or event. The wireless communication
      services are available as a turn-key service provided by iDNA during a scheduled
      meeting or event or alternatively, a client can purchase from iDNA the required
      electronic components and related proprietary software to administer its needs
      independently.





As
      of
      consequence of iDNA’s investment in the Angelika Film Centers, LLC (“AFC”), iDNA
      operates in the movie exhibition and entertainment industry.





***Significant
      Developments Fiscal 2008***





For
      Fiscal 2008, iDNA’s strategic initiatives were focused upon (i) marketing of its
      products and services, (ii) reduction of overhead expenses and (iii) refinancing
      certain of its short-term debt obligations. iDNA’s marketing initiatives have
      led to (i) iDNA’s consolidation its strategic communications service marketing
      group at its New York City headquarters, (ii) iDNA’s elimination of certain
      redundant expenses and (iii) a renewed interest by certain clients in iDNA’s
      satellite broadcasting services. iDNA also streamlined elements of its marketing
      of its information services to achieve more effective client acquisition,
      identify new applications and provide consultative data management and analysis
      services with certain strategic clients. Additionally, during the third and
      fourth quarters of Fiscal 2008, iDNA began to consolidate all of its strategic
      communication services from various satellite operational service locations
      within the New York metropolitan area into its New York City headquarters in
      an
      effort to reduce overhead expenses.





On
      November 21, 2007, iDNA, via its wholly owned subsidiary, iDNA Cinema Holdings,
      Inc. (“Holdings”), consummated a Master Loan and Security Agreement (the “Loan
      Agreement”) with Silar Advisors, L.P. (“Silar”), as Lender and Administrative,
      Payment and Collateral Agent, pursuant to which Silar provided a term loan
      in an
      aggregate principal amount of $4.25 million (the “Term Loan”) to Holdings (the
“Term Loan Financing”). Interest accrues on the Term Loan at a per annum rate
      equal to the variable annual rate of interest designated from time to time
      by
      Citibank N.A. as its “prime rate,” plus 4%, or, if greater, 12.25%, and is
      payable by Holdings on a quarterly basis. The Term Loan matures on November
      20,
      2009 unless extended for one year at the option of Holdings, upon written notice
      provided to Silar between fifteen (15) and forty-five (45) days prior to the
      Maturity Date, provided that no default is then ongoing and that Holdings is
      then in compliance with its financial covenants under the Loan Agreement. The
      remaining details of the Term Loan Financing .are set forth below under the
      sub-heading “LIQUIDITY AND CAPITAL RESOURCES” and are furthermore described in
      Note 7 of Notes to Consolidated Financial Statements.




18




iDNA
      has
      utilized the proceeds from the Term Loan Financing in the following manners:
      (i)
      approximately $1.0 million was applied for the repayment and retirement of
      iDNA’s indebtedness to Seasons Go Round Inc.; (ii) $263,000 was used for
      prepayment of interest on the Term Loan; (iii) $207,000 was paid to Silar or
      its
      designee in satisfaction of fees and expenses due in connection with the Term
      Loan Financing; (iv) $60,000 was paid to a consultant for its role in
      facilitating the Term Loan Financing; and (v) the remaining proceeds of
      approximately $2.7 million have been and will continue to be utilized for
      working capital purposes. iDNA incurred various loan origination fees in the
      amount of $511,000, inclusive of the $207,000 paid to Silar at closing, and
      iDNA
      amortizes the origination fees to interest expense over the expected term of
      the
      Term Loan. At January 31, 2008, iDNA charged to interest expense $33,000 for
      loan origination fees.




As
      discussed in more detail below, iDNA recorded a non-cash charge to operations
      in
      the amount of $8.0 million for the impairment of goodwill and certain intangible
      assets due to the impact of the historical and projected performance of its
      information services and strategic communications services reporting units
      on
      their fair values in relation to the carrying value of their underlying net
      assets. At January 31, 2008, iDNA has reduced the carrying value of all goodwill
      and other intangible assets to zero. As a consequence of this impairment charge
      and other factors, iDNA has initiated preliminary discussions with the former
      shareholders of the Campus Group (defined below) to restructure the Campus
      Notes
      (defined below) in the aggregate amount of $12.1 million and/or reduce the
      original purchase consideration of the Campus Group acquisition (see Note 7
      of
      Notes to Consolidated Financial Statements). Currently, iDNA’s payment
      obligations are deferred until certain performance criteria are met. Although
      iDNA is seeking to restructure its obligations under the Campus Notes and/or
      reduce the original purchase consideration, there can be no assurance that
      such
      negotiations will result in a restructuring and/or a reduction in the original
      purchase consideration. iDNA believes that the available cash and cash
      equivalents and investments in trading securities totaling $1.6 million at
      January 31, 2008 and any cash distributions from its investment in AFC and
      cash
      flow from operations will be sufficient to pay operating expenses, existing
      liabilities, fund existing debt repayments and fund its activities through
      the
      next twelve months, notwithstanding these impairment charges.




***Significant
      Developments Fiscal 2007***





*Strategic
      Initiatives for Fiscal 2007*


iDNA
      implemented a number of strategic initiatives during Fiscal 2007 designed to
      assist iDNA with expanding its service offerings to clients, creation of custom
      products and/or solutions for client communication programs, diversification
      of
      its client base, formation of strategic business relationships with third
      parties, effecting capital investments in new digital mediums and formats,
      and
      launching of iDNA’s corporate website and relocation of its corporate offices to
      new facilities in New York City, New York.




iDNA’s
      website ( www.idnausa.com ),
      launched in May 2006, is part of an evolving program to unify iDNA’s diverse
      product and service offerings under a full-service, turn-key strategic
      communications umbrella. iDNA’s website provides information regarding the
      products and services available from iDNA, insights into strategic
      communications and capabilities, and is a portal to more detailed information.
      The website provides links, as needed, to individual supporting iDNA subsidiary
      websites.




19




iDNA
      moved its New York-based headquarters to a new, expanded facility in June 2006.
      The new offices house iDNA’s executive offices and allowed for the subsequent
      consolidation of iDNA’s facility with two other New York-based iDNA offices
      which were moved into the new facility; one move was completed in December
      2006
      and the second move was completed in September 2007. Through the consolidation
      of the New York facilities, iDNA eliminated approximately $254,000 in annual
      base rent expenses.





In
      July
      2006, iDNA formed iDNA Healthcare Communications, Inc. (“iDNA Healthcare”), to
      further focus iDNA’s marketing efforts for strategic communications services
      targeted specifically for the medical and pharmaceutical symposium and the
      pharmaceutical-physician-patient communication markets. In addition, iDNA
      Healthcare hired three new pharmaceutical communications specialists and aligned
      the Concepts of Medicine Division from the Campus Group Companies, Inc. (“CGC”)
      into iDNA Healthcare.





iDNA
      made
      a series of strategic capital investments principally during Fiscal 2007 which
      aggregated $274,000 for additional wireless communication service components,
      $44,000 in supporting data collectors and related computer components and
      $123,000 in upgraded and new digital editing suites. Each capital investment
      made by iDNA is designed to yield positive results in future periods by helping
      iDNA to obtain new client projects, reducing costs of performing such projects
      and providing unique, cost effective communication products.





*Employment
      Agreement with James J. McNamara*


Also
      in
      Fiscal 2007, the Board of Directors of iDNA approved, and iDNA consummated,
      an
      employment agreement with James J. McNamara (the “ Employment
      Agreement ”)
      on
      November 29, 2006. Under the terms of the Employment Agreement, Mr. McNamara
      shall be employed as the Company’s Chief Executive Officer for an initial term
      of approximately three years, until January 31, 2010. The detailed terms of
      the
      Employment Agreement are set forth more fully in Note 11 to Notes to
      Consolidated Financial Statements.





***Significant
      Developments Fiscal 2006***





*Name
      Change Approved*


On
      January 31, 2006, the Company’s shareholders approved, among other corporate
      matters, the Board of Directors’ recommendation for a change of the Company’s
      name to iDNA, Inc. from National Auto Credit, Inc. The change of name was
      proposed as a consequence of the Company’s transformation of its business,
      beginning in Fiscal 2001, to a strategic communications, information services
      and entertainment company from a company that formerly invested in sub-prime
      used automobile consumer loans.





*Acquisition
      of Option Technologies Interactive, LLC.*


On
      November 18, 2005, iDNA  consummated
      the acquisition of 100% of the membership interests of Option Technologies
      Interactive, LLC (“OTI”) from Flexner Wheatley & Associates (“FWA”) and
      MeetingNet Interactive, Inc. (“MeetingNet”). OTI is a technology company
      providing interactive software and hardware systems and services that facilitate
      audience interaction, participation and polling to collect exchange and/or
      analyze data and information in real-time for use in live events, training
      and
      education satellite videoconferencing and corporate or institutional meeting
      services. Prior to the acquisition of OTI, iDNA’s subsidiary Audience Response
      Systems, Inc. (“ARS”) also provided similar services. With the acquisition of
      OTI, iDNA (i) gained access to important new clients, industries and market
      segments, (ii) acquired a fully developed and integrated propriety software
      that
      is an “add-in” application module with Microsoft ® Office
      PowerPoint ® which,
      among other attributes, allows clients to develop and self-administrate audience
      interaction programs at smaller and other venues not then served by iDNA and
      (iii) expanded its solutions-based communication product offering to meet
      dynamic demands of current and potential clients. The significant value in
      the
      acquired company lay principally in its (i) industry position, (ii) assembled
      workforce, (iii) proprietary software, (iv) trademarks and (iv) client lists
      and
      client relations.





20




In
      exchange for the acquisition of all of the outstanding membership interests
      in
      OTI, iDNA (i) paid $744,000 at closing from iDNA’s available cash balances, (ii)
      issued to FWA and MeetingNet promissory notes in an aggregate principal amount
      of $1.5 million (“OTI Promissory Notes”) and (iii) issued an aggregate of
      496,250 shares of iDNA Common Stock to FWA and MeetingNet valued at $258,000,
      representing the fair value of such number of shares of iDNA’s Common Stock at
      the date of acquisition. For financial reporting purposes, the transaction
      was
      treated as a purchase with an effective date of November 18, 2005. The purchase
      price is subject to an upward and downward adjustment not to exceed $412,500
      based upon OTI meeting, or failing to meet, certain minimum financial
      performance criterion for Fiscal 2007 and Fiscal 2008. As of January 31, 2008,
      OTI did not meet all of the minimum financial performance criterion and, as
      a
      consequence, iDNA retains an option to reduce the purchase price in amount
      estimated between $206,000 and $412,000. iDNA has not exercised its option
      to
      reduce the purchase price of OTI as of May 14, 2008 and no adjustment to the
      OTI
      Promissory Notes was recorded at January 31, 2008.





**Critical
      Accounting Policies**





iDNA’s
      consolidated financial statements are prepared in accordance with generally
      accepted accounting principles, which require iDNA to make estimates and
      assumptions. Those estimates and assumptions affect the reported amounts of
      assets and liabilities, the disclosure of contingent assets and liabilities,
      and
      the reported revenues and expenses of iDNA. iDNA’s significant accounting
      policies are described in Note 1 of Notes to Consolidated Financial Statements.
      However, certain accounting policies are deemed “critical”, as they require
      management’s highest degree of judgment, estimates and assumptions. These
      accounting estimates and disclosures have been discussed with the Audit
      Committee of iDNA’s Board of Directors. A discussion of iDNA’s critical
      accounting policies, the judgments and uncertainties affecting their
      application, and the likelihood that materially different amounts would be
      reported under different conditions or using different assumptions are as
      follows:





Revenues:  iDNA’s
      revenues are earned within short time periods, generally less than one week.
      iDNA recognizes revenue from its strategic communications segment, including
      video production, video editing, meeting services and broadcast satellite or
      webcast services and its information services segment when the services are
      complete and delivered or all technical services have been rendered. Deposits
      and other prepayments are recorded as deferred revenue until revenue is
      recognized. iDNA does not have licensing or other arrangements that result
      in
      additional revenues following the delivery of the video or a broadcast. Costs
      accumulated in the production of the video, meeting services or broadcasts
      are
      deferred until the sale and delivery are complete. Deferred production costs
      of
      $90,000 and $115,000, respectively, are included as a component of other current
      assets at January 31, 2008 and 2007.





iDNA
      recognizes revenue from the sale of electronic equipment, proprietary software
      and related components at the time of shipment. Deposits and other prepayments
      received prior to shipment are recorded as deferred revenue until the electronic
      equipment and related software is shipped. iDNA has licensing and technical
      support arrangements for future software enhancements and upgrades for technical
      support for previously delivered electronic equipment. Revenues derived from
      licensing and technical support are recognized over the term of the licensing
      and technical support period which are generally sold in increments of one
      year
      of coverage. For Fiscal 2008, Fiscal 2007 and Fiscal 2006, electronic equipment
      sales were $2.1 million, $2.6 million and $1.3 million,
      respectively.





iDNA
      recognizes revenue from website design and development when the customer accepts
      the completed project. Deposits and other prepayments are recorded as deferred
      revenue until revenue is recognized. These contracts are generally limited
      to
      the design and development of websites and the presentation of site library
      content developed by iDNA. Clients also have the option to engage iDNA to
      maintain and upgrade their websites. These projects are separate from the
      website development and design engagements, and the related revenue is
      recognized over the term of the agreement, which is generally up to one
      year.




21




Cost
      of Revenues: Cost of
      revenues consists of direct expenses specifically associated with client
      revenues. The cost of revenues includes direct salaries and benefits, purchased
      products or services for clients, web hosting, support services, and shipping
      and delivery costs.





Accounts
      Receivable: iDNA
      extends credit to clients in the normal course of business. iDNA continuously
      monitors collections and payments from clients and maintains an allowance for
      doubtful accounts based upon historical experience and any specific client
      collection issues that have been identified. Since accounts receivable are
      concentrated in a relatively few number of clients, a significant change in
      the
      liquidity or financial position of any of these clients could have a material
      adverse impact on the collectibility of the accounts receivable and future
      operating results. i DNA
      does
      not have any off-balance sheet credit exposure related to its
      customers.





Valuation
      of Long-Lived Assets and Goodwill: iDNA
      reviews the carrying value of its long-lived assets whenever events or changes
      in circumstances indicate that its carrying amount may not be recoverable.
      When
      indicators of impairment exist, iDNA determines whether the estimated
      undiscounted sum of the future cash flows of such assets is less than their
      carrying amounts. If less, an impairment loss is recognized in the amount,
      if
      any, by which the carrying amount of such assets exceeds their respective fair
      values. The determination of fair value is based on quoted market prices in
      active markets, if available, or independent appraisals; sales price
      negotiations; or projected future cash flows discounted at a rate determined
      by
      management to be commensurate with iDNA’s business risk. The estimation of fair
      value utilizing discounted forecasted cash flows includes significant judgments
      regarding assumptions of revenue, operating and marketing costs; selling and
      administrative expenses; interest rates; property and equipment additions and
      retirements; industry competition; and general economic and business conditions,
      among other factors.





iDNA
      conduct s
      an
      annual analysis of goodwill. iDNA estimates the fair value of its reporting
      units and compares those values to the carrying values of those reporting units.
      If the estimated fair value of the reporting unit is less than the estimated
      book value, then an impairment is deemed to have occurred. In estimating the
      fair value of each reporting unit, iDNA used primarily the income approach
      (which utilizes forecasted discounted cash flows to estimate the fair value
      of
      the reporting unit). iDNA concluded that as of January 31, 2006 there was no
      impairment of its goodwill based upon the then estimated fair value of its
      reporting units.





However,
      during the second quarter of Fiscal 2007, as a consequence of declining revenues
      and the loss of a client, the results of the operations of the Campus Group
      Companies, Inc. (“CGC”) reporting unit raised questions as to whether
      projections used at the last valuation date were still valid. Accordingly,
      management performed additional impairment tests as of July 31, 2006 for CGC
      and
      determined that impairment charges were required at that date. Accordingly,
      based upon iDNA’s preliminary assessment, second quarter operations for Fiscal
      2007 were charged $2.6 million and $1.9 million for the estimated impairment
      of
      CGC’s goodwill and other intangible assets, respectively. Additionally, iDNA
      determined it appropriate to reduce the useful life of the CGC client
      relationships intangible asset from 17 years to 10 years. iDNA will continue
      to
      monitor CGC’s operations and will recognize further impairment charges if and
      when deemed appropriate. iDNA conducted its Fiscal 2007 annual analysis of
      goodwill as of January 31, 2007. iDNA estimated the fair value of its reporting
      units and compared those values to the carrying values of those reporting units.
      iDNA concluded that as of January 31, 2007 there were no additional impairments
      of its goodwill based upon the then estimated fair value of its reporting units.




22




At
      January 31, 2008, the goodwill for each of iDNA’s business segments (information
      services and strategic communications services) was tested for additional
      impairment. As a consequence of that testing, iDNA determined that the carrying
      value of both its information services and its strategic communications services
      business segments exceeded their fair values, which were estimated based upon
      the present value of each reporting units expected future cash flows. As a
      consequence, iDNA charged to operations an aggregate of $8.0 million for the
      estimated impairment of goodwill and other intangible assets relating to (i)
      its
      information services segment in the amount of $5.9 million, and (ii) strategic
      communication services segment in the amount of $2.1 million, respectively.





Self-Insurance
      Claims: iDNA’s
      wholly-owned subsidiary ARAC, Inc. (“ARAC”) maintained and continues to maintain
      self-insurance for claims and associated litigation expenses relating to bodily
      injury or property damage from accidents involving the vehicles rented to
      customers by its discontinued automobile rental operations occurring in Fiscal
      1996 and prior. ARAC was, when required by either governing state law or the
      terms of its rental agreement, self-insured for the first $1.0 million per
      occurrence, and for losses in excess of $5.0 million per occurrence, for bodily
      injury and property damage resulting from accidents involving its rental
      vehicles. ARAC was also self-insured, up to certain retained limits, for bodily
      injury and property damage resulting from accidents involving ARAC vehicles
      operated by employees within the scope of their employment.





ARAC
      is
      the subject to certain self-insurance claims and associated litigation expenses
      relating to its discontinued automobile rental operations. iDNA’s management
      estimates ARAC’s required self-insurance liability based upon specific
      identification of the known matters subject to future claims, the nature of
      the
      claim and the estimated costs to be incurred. These estimates include, but
      are
      not limited to, ARAC’s historical loss experience and projected loss factors.
      The required self-insurance liability is subject to adjustment in the future
      based upon changes in the nature of the remaining claims or the ultimate cost.
      As a consequence of iDNA’s sale of its automobile rental operations in 1995,
      iDNA believes that all incurred claims have been reported to ARAC and that
      there
      are no longer any incurred but not yet reported claims to be received by ARAC.
      During Fiscal 2008 and Fiscal 2006, iDNA paid out $63,000 and $21,000,
      respectively for residual self-insurance claims previously accrued. iDNA did
      not
      incur or pay out residual insurance claims for Fiscal 2007. iDNA’s
      self-insurance liability at January 31, 2008 and 2007 was $172,000 and $235,000,
      respectively.





Because
      of the uncertainties related to several residual small claims and legal
      proceedings involving iDNA’s former rental operations and self-insurance claims,
      it is difficult to project the ultimate effect the adjudication or settlement
      of
      these matters will have on iDNA. As additional information regarding iDNA’s
      potential liabilities becomes available, iDNA will revise the estimates as
      appropriate.




Accounting
      for Stock-Based Compensation :
      Effective February 1, 2006, iDNA adopted the provisions of Statement of
      Financial Accounting Standards (“SFAS”) No. 123R (revised 2004), *Share-Based
      Payment* ,
      which
      replaces SFAS No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123(R)”), and supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      SFAS
      No. 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 beginning with the first interim or annual period after
      December 15, 2005. iDNA elected the prospective method of adopting SFAS No.
      123R
      which requires that compensation expense be recorded over the remaining periods
      for what would have been the remaining fair value under SFAS No. 123 of all
      unvested stock options and restricted stock at the beginning of the first
      quarter of adoption. The compensation costs for that portion of awards is based
      on the grant-date fair value of the awards as calculated for pro forma
      disclosures under SFAS No. 123.




23




Prior
      to
      the adoption of SFAS No. 123(R), iDNA followed the intrinsic value method in
      accordance with APB No. 25 to account for its employee stock options.
      Historically, substantially all stock options have been granted with an exercise
      price equal to the fair market value of the iDNA’s Common Stock. As a
      consequence, no compensation expense was recognized from substantially all
      option grants to employees, officers and directors.





In
      Fiscal
      2008, Fiscal 2007 and Fiscal 2006, iDNA issued options to acquire 300,000,
      1,605,000 and 507,509 shares of Common Stock options, respectively, to iDNA’s
      employees, officers, directors and advisors. Each of the stock options granted
      in Fiscal 2008, Fiscal 2007 and Fiscal 2006 were subject to vesting and at
      January 31, 2008, options to acquire 2,365,170 shares of Common Stock had vested
      pursuant to the terms of the grants. Options to acquire 143,668 and 455,557
      shares of Common Stock were cancelled in Fiscal 2008 and Fiscal 2006,
      respectively. As a consequence of adopting SFAS 123(R), iDNA has recorded
      charges to operations for stock-based compensation expense for Fiscal 2008
      and
      Fiscal 2007 of $260,000 and $724,000, respectively. If iDNA had recorded
      compensation expense using the fair value method of SFAS 123(R) for Fiscal
      2006,
      iDNA’s net after tax charge to operations would have been $67,000.





Income
      Taxes: iDNA
      recognizes deferred tax assets and liabilities based on differences between
      the
      financial statement carrying amounts and the tax basis of assets and
      liabilities. Loss carrybacks, reversal of deferred tax liabilities, tax planning
      and estimates of future taxable income are considered in assessing the need
      for
      a valuation allowance. At the time it is determined that iDNA will more likely
      than not be able to realize deferred tax assets in excess of the recorded
      amount, net of its valuation allowance, an adjustment to reduce the valuation
      allowance would be recorded that would increase income in the period such
      determination was made. Likewise, should management determine that iDNA would
      not be able to realize all or part of net deferred tax assets generated in
      the
      future, increase to the valuation allowance would be charged to and reduce
      income in the period such determination was made.





24


**RESULTS
      FROM CONTINUING OPERATIONS**





The
      following table sets forth for Fiscal 2008, Fiscal 2007 and Fiscal 2006 certain
      statements of operations data by segment obtained from iDNA’s consolidated
      statement of operations (in thousands).





Information Services
            
            Strategic Communication Services
            
            Intersegment EliminationYear Ended January 31,
            
            Year Ended January 31,
            
            Year Ended January 31,2008
            
            2007
            
            2006
            
            2008
            
            2007
            
            2006
            
            2008
            
            2007
            
            2006Revenues
            
            $
            8,711
            
            $
            9,478
            
            $
            5,958
            
            $
            6,052
            
            $
            6,083
            
            $
            8,322
            
            $
            (146
            )
            $
            (117
            )
            $
            (190
            )Cost
                of revenues
            
            
            5,345
            
            
            5,510
            
            
            3,581
            
            
            4,132
            
            
            3,754
            
            
            4,771
            
            
            (146
            )
            
            (117
            )
            
            (190
            )Selling,
                general and admininistrative expenses
            
            
            4,693
            
            
            4,486
            
            
            2,289
            
            
            4,045
            
            
            4,582
            
            
            4,088
            
            
            -
            
            
            -
            
            
            -Operating
                income (loss)
            
            
            (7,267
            )
            
            (482
            )
            
            (54
            )
            
            (4,225
            )
            
            (6,807
            )
            
            (465
            )
            
            -
            
            
            -
            
            
            -Depreciation
                and amortization expense
            
            
            874
            
            
            871
            
            
            587
            
            
            713
            
            
            719
            
            
            757
            
            
            -
            
            
            -
            
            
            -Impairment
                charge
            
            
            5,940
            
            
            -
            
            
            -
            
            
            2,093
            
            
            4,482
            
            
            -
            
            
            -
            
            
            -
            
            
            -





Entertainment
            
            Undistributed Corporate Expenses
            
            ConsolidatedYear Ended January 31,
            
            Year Ended January 31,
            
            Year Ended January 31,2008
            
            2007
            
            2006
            
            2008
            
            2007
            
            2006
            
            2008
            
            2007
            
            2006Revenues
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            14,617
            
            $
            15,444
            
            $
            14,090Cost
                of revenues
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            9,331
            
            
            9,147
            
            
            8,162Selling,
                general and admininistrative expenses
            
            
            25
            
            
            20
            
            
            -
            
            
            634
            
            
            1,099
            
            
            2,082
            
            
            9,397
            
            
            10,187
            
            
            8,459Operating
                income (loss)
            
            
            630
            
            
            590
            
            
            738
            
            
            (960
            )
            
            (902
            )
            
            (664
            )
            
            (11,822
            )
            
            (7,601
            )
            
            (445
            )Depreciation
                and amortization expense
            
            
            -
            
            
            -
            
            
            -
            
            
            49
            
            
            62
            
            
            67
            
            
            1,636
            
            
            1,652
            
            
            1,411Impairment
                charge
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            
            
            
            8,033
            
            
            4,482
            
            
            -





Revenues: Revenues
      for Fiscal 2008, Fiscal 2007 and Fiscal 2006 were $14.6 million, $15.4 million
      and $14.1 million, respectively.





Revenues
      attributed to the information services segment decreased $767,000 to $8.7
      million for Fiscal 2008 as compared to $9.5 million for Fiscal 2007. The
      decrease in revenues was principally due to (i) the $117,000 decrease in
      revenues derived from iDNA’s meeting services and (ii) a decline of $653,000 in
      equipment and software application sales. The decline in equipment and software
      application sales from Fiscal 2007 to Fiscal 2008 was due to the combined effect
      of (i) a delay in iDNA’s introduction of new hardware and software products that
      iDNA originally scheduled in the fall of 2008 (but which will be introduced
      in
      Fiscal 2009), (ii) changes in client timing and/or scope of purchases and (iii)
      general changes in the overall economic climate causing prospective clients
      to
      delay, defer or cancel purchase plans until a future date. Revenues for Fiscal
      2007 increased $3.5 million to $9.5 million as compared to $6.0 million for
      Fiscal 2006. The increase in revenues was principally due to the net effects
      of
      (i) an increase in revenues derived from OTI, acquired November 18, 2005, of
      $3.7 million, offset by (ii) a decline of $206,000 in core information service
      revenues as a consequence of changes in the timing and/or scope of the projects
      during Fiscal 2007 as compared to Fiscal 2006.





Revenues
      attributed to the strategic communication services segment remained stable
      at
      $6.1 million for each of Fiscal 2008 and Fiscal 2007. Overall client spending
      with iDNA remained consistent from year-to-year with various programs and events
      scheduled for each period of similar scope, size and general timing. Revenues
      for Fiscal 2007 decreased $2.2 million to $6.1 million as compared to $8.3
      million for Fiscal 2006. The decrease in revenues was principally due to (i)
      a
      series of projects performed in Fiscal 2006 which aggregated $1.8 million for
      a
      client that were not repeated in Fiscal 2007 due to the client’s budgetary
      constraints and a change/reduction scope of its communications initiatives
      and
      (ii) a decline of $347,000 attributed to a pharmaceutical client due to a change
      in its budgetary spending from Fiscal 2006 to Fiscal 2007.




25




The
      nature of iDNA’s business is such that the nature and timing of assignments
      completed for clients, and the resulting revenue, will vary from period to
      period in terms of scope, size of projects and the ultimate revenues derived.
      iDNA’s continues to pursue the consolidation of its previously decentralized
      marketing for strategic communication services in an effort to improve the
      coordination and program value for current and prospective clients. Through
      this
      consolidation initiative, each of iDNA’s senior marketing strategists develop
      new marketing initiatives, create new project opportunities, seek new clients
      for its services and expand existing client relationships to generate new
      revenues to reduce period to period fluctuations. Although no assurances can
      be
      made, iDNA continues to seek revenue expansion through its new marketing
      strategist’s initiatives as a means to reduce year-to-year and
      quarter-to-quarter fluctuations in its revenues as well as to ultimately
      increase revenues.





Cost
      of Revenues: Cost of
      revenues for Fiscal 2008, Fiscal 2007 and Fiscal 2006 were $9.3 million, $9.1
      million and $8.2 million, respectively.





Cost
      of
      revenues attributed to the information services segment decreased $165,000
      to
      $5.3 million as compared to $5.5 million for Fiscal 2007. The decrease in the
      cost of revenues was principally due to the net effects of (i) a decline in
      revenues offset by (ii) an increase in direct project costs. Cost of revenues
      for Fiscal 2007 increased $1.9 million to $5.5 million for Fiscal 2007 as
      compared to $3.6 million for Fiscal 2006. The increase in cost of revenues
      was
      principally due to (i) an increase in cost of revenues derived from OTI,
      acquired November 18, 2005, of $1.7 million and (ii) an increase of $211,000
      in
      core information service cost of revenues as a consequence of increased project
      expenses and related overhead during Fiscal 2007 as compared to Fiscal
      2006.





The
      gross
      profit realized by the information services segment for Fiscal 2008, Fiscal
      2007
      and Fiscal 2006 was $3.4 million, $4.0 million and $2.4 million, respectively.
      The gross profit decrease of $602,000 for Fiscal 2008 as compared to Fiscal
      2007
      was due principally to the net effects of (i) a decline in revenues offset
      by
      (ii) an increase in direct project costs as a consequence of increased project
      and pricing competition. The gross profit increase of $1.6 million for Fiscal
      2007 as compared to Fiscal 2006 was due principally to the net effects of (i)
      the increase in gross profit derived from OTI, acquired November 18, 2005,
      of
      $2.0 million offset by (ii) a decrease of $417,000 in gross profit attributable
      to the core information services as a consequence of (a) a decline in revenues
      of $206,000 and (b) an increase of project expenses and related overhead during
      Fiscal 2007 as compared to Fiscal 2006. The gross margin for Fiscal 2008 was
      38.6% as compared to 41.8% for Fiscal 2007 and 39.9% for Fiscal 2006. The
      decrease in overall gross margin of 3.2% for Fiscal 2008 as compared to Fiscal
      2007 was principally due to the net effects of (i) a 4.2% increase in direct
      project costs as a consequence of increased project and pricing competition
      offset by (iii) a 1.0% decrease in indirect production and overhead expenses.
      The increase in overall gross margin of 2.0% for Fiscal 2007 as compared to
      Fiscal 2006 is principally due to the net effects of (i) reduced variable
      project costs of 4.9%, offset by, (ii) an increase in indirect production and
      overhead costs of 2.9%. The gross profit increase of $229,000 for Fiscal 2007
      as
      compared to Fiscal 2006 was principally due to the increase in gross profit
      derived from OTI.





Cost
      of
      revenues attributable to the strategic communication segment increased $378,000
      to $4.1 million for Fiscal 2008 as compared to $3.8 million for Fiscal 2007.
      The
      increase in the cost of revenues was principally due to an increase in direct
      project costs as a consequence of the completion of smaller, lower margin
      projects during the period and an increase in production costs. For Fiscal
      2007,
      cost of revenues decreased $1.0 million to $3.8 million for Fiscal 2007 as
      compared to $4.8 million for Fiscal 2006. The decrease in the costs of revenues
      was principally due to a reduction in direct project costs as a consequence
      of
      the $2.2 million decrease in revenues for Fiscal 2007.




26




The
      gross
      profit realized by the strategic communication segment for Fiscal 2008, Fiscal
      2007 and Fiscal 2006 was $1.9 million, $2.3 million and $3.5 million,
      respectively. The gross profit decrease of $409,000 for Fiscal 2008 as compared
      to Fiscal 2007 was principally due to the net effect of (i) an increase in
      direct project costs of $470,000 offset by (ii) a decrease in indirect
      production and overhead expenses of $92,000. The gross profit decrease of $1.2
      million to $2.3 million for Fiscal 2007 as compared to $3.5 million for Fiscal
      2006 was principally due to the decrease of revenues and corresponding project
      margins from Fiscal 2006 to Fiscal 2007. The gross margin for Fiscal 2008 was
      31.7% as compared to 38.2% for Fiscal 2007 and 42.7% for Fiscal 2006. The
      decrease in gross margin of 6.5% is principally due to the net effects of (i)
      a
      7.9% increase in direct project costs offset by (ii) a 1.4% decrease in indirect
      production and overhead expenses. The decrease in gross margin of 4.5% for
      Fiscal 2007 as compared to Fiscal 2006 is principally due to (i) an unfavorable
      project price variance of 2.6% and (ii) an increase in fixed production overhead
      costs, as a percentage of revenues, of 1.9%.





Selling,
      General and Administrative Expense (“SG&A”): SG&A
      for Fiscal 2008, Fiscal 2007 and Fiscal 2006 were $9.4 million, $10.2 million
      and $8.5 million, respectively.





SG&A
      attributed to the information services segment increased $207,000 to $4.7
      million for Fiscal 2008 as compared to $4.5 million for Fiscal 2007. The
      increase in SG&A was due principally to (i) an increase in professional
      services of $142,000 pertaining to consulting, legal and accounting services
      provided to iDNA and (ii) an increase of personnel expenses of $27,000. For
      Fiscal 2007, SG&A increased $2.2 million to $4.5 million as compared to $2.3
      million for Fiscal 2006. The increase in SG&A was principally due to (i) an
      increase of $2.0 million in SG&A derived from OTI, acquired November 18,
      2005, and (ii) an increase in SG&A of $243,000 attributable to the core
      information services as a consequence of increased marketing, personnel and
      professional service costs incurred.





SG&A
      attributable to the strategic communication services segment decreased $537,000
      to $4.0 million for Fiscal 2008 as compared to $4.6 million for Fiscal 2007.
      The
      decrease in SG&A was due principally to the net effect of (i) a decrease in
      personnel expenses of $364,000, (ii) a decrease of facility expenses of $571,000
      offset by (iii) an increase in professional services of $436,000 pertaining
      to
      consulting, legal and accounting services These personnel and facility expense
      reductions resulted from iDNA’s (i) consolidating certain personnel functions
      and eliminating redundant expenses, (ii) centralizing its marketing initiatives
      and (iii) eliminating redundant facility expenses through the consolidation
      of
      the New York office. For Fiscal 2007 SG&A increased $494,000 to $4.6 million
      as compared to $4.1 million for Fiscal 2006. The increase in SG&A was
      principally due to (i) an increase of $276,000 in marketing personnel expenses,
      (ii) an increase of $112,000 in rent and related facility costs and (iii) and
      an
      increase of $106,000 in other SG&A incurred.





SG&A
      for undistributed corporate expenses for Fiscal 2008, Fiscal 2007 and Fiscal
      2006 was $634,000, $1.1 million and $2.1 million, respectively. The corporate
      expenses incurred by iDNA relate principally to expenses incurred at its
      executive offices for executive and corporate finance personnel, certain
      employee benefits, professional services such as consulting, legal and
      accounting fees, corporate insurance, corporate marketing initiatives and the
      costs associated with maintaining its New York facility. iDNA allocates to
      its
      various business segments or units the proportionate share of corporate expenses
      that directly relate to and/or benefit each business segment or unit. The
      undistributed corporate expense reflect the remaining expenses incurred but
      not
      directly attributable to a business segment or unit. The decline in corporate
      SG&A of $465,000 in Fiscal 2008 as compared to Fiscal 2007 was due
      principally to (i) a reduction of $200,000 in personnel expenses and (ii) an
      increase in the allocation of corporate expenses directly to the operating
      segments as a consequence of iDNA having centralized components of its
      operations within its New York City headquarters. The decline in corporate
      SG&A of $1.0 million for Fiscal 2007 as compared to Fiscal 2006 was due
      principally to (i) a reduction in legal expenses of $225,000, (ii) the
      elimination of the one-time charge incurred in Fiscal 2006 of $208,000 for
      the
      premium paid by iDNA over market value in order to acquire 1,562,500 shares
      of
      iDNA’s Common Stock, and (iii) an increased proportionate share of corporate
      expense allocated to OTI, acquired November 18, 2005, of $625,000.




27




Interest
      Income: Interest
      income is derived principally from interest earned on iDNA’s investments in
      commercial paper, and money market accounts. Interest earned on iDNA’s
      investments for Fiscal 2008, Fiscal 2007 and Fiscal 2006 was $36,000, $19,000
      and $20,000, respectively. The change in interest income over each fiscal period
      is due principally to changes in the weighted average investment balances during
      the periods.





In
      addition to the interest income earned on investments, iDNA also recorded
      interest income as a result of (i) interest associated with the net proceeds
      received from the New York Settlement Stipulation of $24,000 in Fiscal 2006.





Income
      from Investment in AFC: iDNA
      accounts for its investment in AFC using the equity method. For Fiscal 2008,
      Fiscal 2007 and Fiscal 2006, iDNA’s share of the net income of AFC was $655,000,
      $609,000 and $744,000, respectively. AFC’s fiscal year ends December 31. The
      following sets forth summarized operating results for AFC (in
      thousands):




Years Ended December 31,2007
            
            2006
            
            2005Revenues
            
            $
            6,494
            
            $
            6,328
            
            $
            6,487Operating
                costs
            
            
            4,135
            
            
            4,037
            
            
            3,980Depreciation
                and amortization
            
            
            781
            
            
            775
            
            
            752General
                and administrative expenses
            
            
            269
            
            
            298
            
            
            2685,185
            
            
            5,110
            
            
            5,000Net
                income
            
            $
            1,309
            
            $
            1,218
            
            $
            1,487iDNA's
                proportionate share of net income
            
            $
            655
            
            $
            609
            
            $
            744





AFC’s
      revenues increased $166,000 to $6.5 million for the year ended December 31,
      2007
      as compared to $6.3 million for the year ended December 31, 2006. The increase
      in AFC’s revenues was principally as a result of the net effects of (i) an
      increase of 2.1% in attendance, (ii) an increase of 1.6% in ticket prices offset
      by (iii) a decrease of 1.4% in café, concessions and other revenues, or $18,000.
      AFC’s revenues decreased $159,000 to $6.3 million for the year ended December
      31, 2006 as compared to $6.5 million for the year ended December 31, 2005.
      The
      decrease in AFC’s revenues was principally as a result of the net effects of (i)
      a 5.2% decrease in attendance, offset by, (ii) an increase in ticket prices
      of
      1.2% and (iii) an increase in café, concessions and other revenues of 3.7%, or
      $48,000. AFC’s revenues can fluctuate from month-to-month and year-to-year
      principally as a result of film attendance, and at times, the ticket prices,
      depending on audience interest in, and the popularity of the films AFC exhibits.





For
      the
      years ended December 31, 2007, 2006 and 2005, film rental expense (a component
      of operating expenses) was $1.5 million, $1.6 million and $1.5 million,
      respectively. Film expense, as a percentage of revenues, was 23.0%, 24.8% and
      22.9% for the years ended December 31, 2007, 2006 and 2005, respectively. Film
      rental expense generally is a factor of a fixed percentage rental rate per
      film
      multiplied by the number of tickets sold. AFC experiences fluctuations in film
      rental expense, as a percentage of revenue, depending upon the rental rate
      per
      film, length of time the film is exhibited and the popularity of the film.




28




For
      the
      years ended December 31, 2007, 2006 and 2005, operating costs (excluding film
      rental expense) were $2.6 million, $2.5 million and $2.5 million, respectively.
      Furthermore, operating costs, as a percentage of revenues were 40.6%, 39.0%
      and
      38.4%for the years ended December 31, 2007, 2006 and 2005, respectively. The
      nature of AFC’s operating costs tend to generally be more fixed overhead related
      costs and advertising expenses. Due to the fixed overhead nature of AFC’s
      operating expenses, these costs are not significantly affected by fluctuations
      in attendance from period to period as the expenses remained stable from the
      year ended December 31, 2005 through the year ended December 31, 2007.





As
      a
      result of the net cash flow realized by AFC, distributions by AFC to iDNA for
      Fiscal 2008, Fiscal 2007 and Fiscal 2006 were $750,000, $1.2 million and
      $878,000, respectively. The timing and dollar value of AFC distributions are
      dependent upon the combined effects of (i) the operating performance of AFC
      from
      period-to-period and (ii) working capital of AFC at the time of distribution.





Interest
      Expense: For
      Fiscal 2008, Fiscal 2007 and Fiscal 2006, iDNA incurred interest expense of
      $369,000, $488,000 and $662,000, respectively. During Fiscal 2008, Fiscal 2007
      and Fiscal 2006, iDNA’s weighted average of borrowings was $15.4 million, $14.4
      million and $13.0 million, respectively. The effective weighted average rate
      of
      interest expense incurred for each of Fiscal 2008, Fiscal 2007 and Fiscal 2006
      was 2.4%, 3.4% and 5.1%, respectively. iDNA financed a portion of the cost
      of
      its acquisitions through the issuance of promissory notes, bearing interest
      at
      5% per annum, to the selling shareholders or members. The aggregate weighted
      average of the promissory notes issued and outstanding as a consequence of
      financing acquisitions for Fiscal 2008, Fiscal 2007 and Fiscal 2006 was $13.5
      million, $13.5 million and $12.6 million, respectively.





The
      effective weighted average rate of interest for Fiscal 2008 was 2.4% as compared
      to 3.4% for Fiscal 2007. The decline in the effective interest rate is due
      to
      the net effect of (i) the interest abatement attributable to the Base Notes,
      Trailing Notes and Convertible Notes (each defined below, collectively known
      as
      the “Campus Notes”) during Fiscal 2008 (see the interest expense abatement
      discussion below) offset by (ii) additional interest expense incurred during
      the
      fourth quarter of Fiscal 2008 as a consequence of the Term Loan. The effective
      weighted average interest rate for Fiscal 2007 was 3.4% as compared to 5.1%
      for
      Fiscal 2006. The decline in the effective interest rate was due principally
      to
      the suspension of interest attributable to the Campus Notes for the period
      August 1, 2006 through January 31, 2007. The aggregate principal amount of
      the
      Campus Notes outstanding during the interest suspension period in Fiscal 2008
      and Fiscal 2007 was $12.1 million (in both such years) and the value of the
      foregone interest was $616,000 and $314,000, respectively.





Interest
      expense abatement :
      The
      Campus Notes issued by iDNA in its acquisition of Audience Response Systems,
      Inc. (“ARS”) and CGC (collectively, the “Campus Group”) bear interest at 5% per
      annum and are repayable in quarterly installments according to a formula based
      upon the future cash flows realized from The Campus Group. For the trailing
      twelve month period ended July 31, 2006, the Campus Group’s financial
      performance fell below certain minimum operating cash flow thresholds
      established pursuant to the terms of the Campus Notes. As a consequence, the
      interest expense incurred by iDNA during the twelve month period ended July
      31,
      2006 was abated. As a consequence of the interest abatement, iDNA realized
      a
      gain of $631,000 for Fiscal 2007. For the period August 1, 2006 through January
      31, 2007 and for Fiscal 2008, the Campus Group’s financial performance remained
      below the minimum operating cash flow thresholds (see the above interest expense
      discussion),and as a consequence, additional interest expense has been suspended
      until the thresholds are met. Prospectively, once the thresholds are achieved,
      interest will begin to accrue pursuant to the terms of the Campus
      Notes.




29




Income
      Taxes: For
      Fiscal 2008, iDNA recorded income tax expense of $1,000 from continuing
      operations representing various net state and local income tax. For Fiscal
      2007,
      iDNA recorded income tax benefits of $10,000 from continuing operations and
      $7,000 attributable to discontinued auto rental and finance operations. For
      Fiscal 2006, iDNA incurred $70,000 in income tax expense from continuing
      operations comprised of (i) $25,000 in federal alternate minimum income tax
      expense and (ii) $45,000 for state and local income taxes.





As
      of
      January 31, 2008 iDNA has federal net operating loss carryforwards of $91.5
      million of which approximately $24.5 million is estimated to expire due to
      the
      limitations described below. As a consequence, iDNA’s federal net operating loss
      carryforwards of $67.0 million may be used to reduce future taxable income.
      Such
      net operating loss carryforwards will expire: $22.6 million in Fiscal 2019,
      $13.5 million in Fiscal 2020, $7.2 million in Fiscal 2021, $10.6 million in
      Fiscal 2022, $5.3 million in Fiscal 2023, $3.0 million in Fiscal 2024, $607,000
      in Fiscal 2025, $1.4 million in Fiscal 2027 and $2.7 million in Fiscal 2028.
      As
      of January 31, 2008, iDNA has state and local operating loss carryforwards
      of
      $53.6 million which will expire: $5.7 million in Fiscal 2018, $1.1 million
      in
      Fiscal 2019, $14.2 million, in Fiscal 2021, $9.8 million in Fiscal 2022, $9.1
      million in Fiscal 2023, $4.4 million in Fiscal 2024, $525,000 in Fiscal 2025,
      $3.0 million in Fiscal 2027 and $6.0 million in Fiscal 2028.





As
      a
      consequence of iDNA’s November 3, 2000 repurchase of shares of its Common Stock,
      iDNA underwent a “change in ownership” as defined for the purposes of Sections
      382 and 383 of the Internal Revenue Code. As a result of the “change in
      ownership” described above, the use of net operating loss carryforwards totaling
      $61.0 million (“Section 382 NOL”) incurred prior to November 3, 2000 will be
      subject to significant annual limitation. As of January 31, 2008, iDNA has
      utilized approximately $858,000 of the Section 382 NOL. Furthermore, an iDNA
      subsidiary has a Separate Return Loss Year that is also subject to “change of
      ownership” limitations of $2.2 million as of January 31, 2008. The use of the
      net operating loss carryforwards incurred after November 3, 2000, which total
      $28.2 million as of January 31, 2008, are not subject to the Section 382
      limitation.




As
      of
      January 31, 2008, iDNA also has unused low income housing credits (“LIHC”)
      totaling $4.3 million which expire: $569,000 in Fiscal 2013, $820,000 in Fiscal
      2019, $953,000 in Fiscal 2020, $968,000 in Fiscal 2021, $898,000 in Fiscal
      2022
      and smaller amounts expiring in Fiscal 2023 through Fiscal 2028. Of such low
      income housing credits, $3.4 million were generated prior to November 3, 2000
      and are therefore subject to the Section 383 limitation described above. iDNA
      estimates that the entire LIHC of $3.4 million subject to the Section 383
      limitation will expire unused.




As
      of
      January 31, 2008, iDNA has $919,000 of minimum tax credits, which may be applied
      against any future regular income taxes which exceed alternative minimum taxes.
      These credits may be carried forward indefinitely and are also subject to the
      Section 383 limitation.





iDNA’s
      adoption of FIN No. 48 for the year ended January 31, 2008 resulted in an
      adjustment to retained deficit of $329,000 to reflect potential liabilities
      for
      iDNA’s uncertain tax positions, inclusive of interest and penalties. iDNA
      adjusted its initial estimates developed during the first quarter of Fiscal
      2008
      as iDNA refined its calculations and assessment of its uncertain tax positions.
      In addition, iDNA’s tax years open for examination vary by jurisdiction. iDNA’s
      last taxable year under examination by the IRS was January 31, 1998.





30


**SEASONALITY
      OF BUSINESS**





iDNA’s
      revenues are derived from services performed for clients principally on a
      project-by-project basis. The nature, scope and timing of client projects are
      determined independently by each client based upon their own internal operating
      and communications needs which fluctuate from quarter-to-quarter and
      year-to-year. To date, iDNA has not experienced any determinable revenue trends
      based upon seasonality.





**DISCONTINUED
      OPERATIONS**





iDNA,
      under the names Agency Rent-A-Car, Inc. (“ARAC”), Altra Auto Rental and Automate
      Auto Rental, previously engaged in the rental of automobiles on a short-term
      basis, principally to the insurance replacement market. During Fiscal 1996,
      iDNA
      disposed of its rental fleet business through the sale of certain assets and
      through certain leases to a national car rental company. All liabilities related
      to the discontinued rental business, principally self-insurance claims, were
      retained by ARAC.





The
      results of both the auto rental and finance operations are included in the
      results of discontinued operations. For Fiscal 2008, Fiscal 2007 and Fiscal
      2006, the results of the discontinued operations principally represent the
      effects of the residual collection of previously charged off loans, and the
      settlement of, and changes in iDNA’s, provisions for income taxes and reserves
      for claims against ARAC related to the self-insured claims.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      a
      consequence of periodic fluctuations in iDNA’s working capital needs based upon
      the timing of collections, distributions from AFC, and periods of increased
      production activity, on November 21, 2007, Holdings consummated the Loan
      Agreement with Silar, pursuant to which Silar agreed to provide the Term Loan
      in
      an aggregate principal amount of $4.25 million to Holdings. Interest is to
      accrue on the Term Loan at a per annum rate equal to the variable annual rate
      of
      interest designated from time to time by Citibank N.A. as its “prime rate,” plus
      4%, or, if greater, 12.25%, and is payable by Holdings on a quarterly basis.
      At
      January 31, 2008, the “prime rate” was 6.0%. The Term Loan matures on November
      20, 2009 unless extended for one year at the option of Holdings, upon written
      notice provided to Silar between fifteen (15) and forty-five (45) days prior
      to
      the Maturity Date, provided that no default is then ongoing and that Holdings
      is
      then in compliance with its financial covenants under the Loan Agreement. At
      January 31, 2008, Holdings and iDNA were in compliance with the financial
      covenants under the Loan Agreement. iDNA’s obligations under the Term Loan are
      secured by a pledge of all of Holdings’ assets, including all of the outstanding
      shares of NCI, which owns a 50% membership interest in AFC .
      The
      Term Loan is also guaranteed by (i) iDNA (with such guaranty being secured
      by a
      pledge of substantially all of iDNA’s assets, other than the shares of its
      operating subsidiaries) and (ii) NCI (with such guaranty being secured by a
      pledge of substantially all of NCI’s assets, other than its 50% membership
      interest in AFC).





On
      January 31, 2008, ARS consummated an auto loan with a financing institution
      for
      the purchase of a delivery van in the principal amount of $24,000. The auto
      loan
      is repayable in monthly installments of $755 with the last payment due February
      2011. The auto loan bears interest at the rate of 9.0% and is collateralized
      by
      the van purchased with the proceeds from the loan.




31




On
      July
      20, 2006, iDNA consummated a Loan and Security Agreement with a lender and
      issued a Promissory Note (the “Note”) in the principal amount of $1.0 million.
      The lender, Seasons Go Round, was an unaffiliated third party lender. Pursuant
      to the terms of the Note, (i) the outstanding principal of the Note was due
      February 15, 2008, (ii) iDNA was required to pay interest only, monthly and
      in
      arrears, during the term and (iii) the Note bore interest at fourteen percent
      (14%) per annum. iDNA prepaid the Note in full without a prepayment penalty
      on
      November 21, 2007 from the net proceeds derived from the Term Loan
      Financing.





As
      a
      consequence of iDNA’s acquisition of OTI effective November 18, 2005, iDNA
      issued to FWA and MeetingNet the OTI Promissory Notes in the aggregate principal
      amount of $1.5 million. The OTI Promissory Notes bear interest at the rate
      of 5%
      per annum and are repayable in quarterly installments according to a formula
      based upon the future cash flows realized from OTI’s operations. iDNA’s
      obligations under the OTI Promissory Notes are secured by the membership
      interests of OTI. At January 31, 2008, iDNA had outstanding principal
      obligations under the terms of the OTI Promissory Notes of $855,000 and an
      accrued interest obligation of $12,000.





As
      a
      consequence of iDNA’s acquisition of the Campus Group effective July 31, 2003,
      iDNA issued to Mr. Campus and certain family trusts promissory notes (the former
      shareholders of the Campus Group) in an aggregate principal amount of $9.9
      million and issued to a family trust a convertible promissory note in the
      principal amount of $2.8 million (collectively, the “Campus Notes”). Of the $9.9
      million in promissory notes issued by iDNA, $6.6 million of the promissory
      notes
      (“Base Notes”) bear interest at 5% per annum and are repayable in quarterly
      installments according to a formula based upon the future cash flows realized
      from The Campus Group over a period not to exceed seven years. The remaining
      $3.3 million in promissory notes (“Trailing Notes”) issued by iDNA bear interest
      at 5% per annum and are repayable in quarterly installments, commencing upon
      the
      retirement of the Base Notes, according to a formula based upon the future
      cash
      flows realized from The Campus Group over a period not to exceed three years
      subsequent to the retirement of the Base Notes. The $2.8 million convertible
      promissory note (“Convertible Note”) (i) bears interest at 5% per annum, payable
      quarterly in cash or accumulating as principal at the election of iDNA, (ii)
      requires principal payments to commence upon the retirement of the Base Notes
      and Trailing Notes and is then repayable in quarterly installments according
      to
      a formula based upon the future cash flows realized from the Campus Group over
      a
      period not to exceed three years and (iii) is convertible at the option of
      the
      holder into shares of iDNA Common Stock at a base conversion price of $1.50
      per
      share. The holder may not convert the convertible promissory note into iDNA
      Common Stock prior to repayment of the Base Notes and Trailing Notes. iDNA’s
      obligations under the Campus Notes are secured by the capital stock of the
      companies comprising the Campus Group. At January 31, 2008, iDNA had outstanding
      principal obligations under the terms of the Base Notes, Trailing Notes and
      Convertible Notes of $6.0 million, $3.3 million and $2.8 million, respectively
      and accrued interest obligations of $156,000.





For
      the
      trailing twelve month period ended July 31, 2006, The Campus Group’s financial
      performance had fallen below certain minimum operating cash flow thresholds
      established pursuant to the terms of the Campus Notes. As a consequence, the
      interest expense incurred by iDNA during the twelve month period ended July
      31,
      2006 was abated. As a consequence of the interest abatement, iDNA realized
      a
      gain from the abatement of interest on the Campus Notes of $631,000 during
      the
      second quarter of Fiscal 2007. For the period August 1, 2006 through January
      31,
      2007 and for Fiscal 2008, the Campus Group’s financial performance remained
      below the minimum operating cash flow thresholds. As a consequence no interest
      was incurred on the Campus Notes during the period August 1, 2006 through
      January 31, 2007 or for Fiscal 2008. Prospectively, interest may accrue pursuant
      to the terms of the Campus Notes once the minimum operating cash flow thresholds
      are achieved.





As
      a
      consequence of iDNA’s acquisition of OMI, iDNA assumed a $402,000 loan
      guaranteed by the U.S. Small Business Administration (the “SBA Loan”). At
      January 31, 2008, the remaining balance of the SBA Loan of $299,000 is repayable
      in monthly installments of $3,309 with the last payment due in April 2017.
      The
      loan bears interest at the rate of 4% per annum. OMI’s obligations under the SBA
      Loan are collateralized by substantially all of OMI's assets and the personal
      guarantee of Mr. Dean Thompson, President of OMI.




32




In
      September 2006, OMI consummated equipment financing in the form of a capital
      lease with a financing institution to acquire $102,000 in various digital media
      production and editing equipment. The capital lease is payable in monthly
      installments with the last payment due in July 2009 and bears an implied
      interest rate of 10%. OMI’s obligations under the capital lease are
      collateralized by the digital media production and editing equipment acquired
      by
      OMI. At January 31, 2008, the remaining balance due under the capital lease
      was
      $53,000.





For
      Fiscal 2008, iDNA’s cash and cash equivalents decreased $108,000 principally due
      to the net effects of (i) the cash flows used by operations $2.0 million, (ii)
      capital expenditures of $201,000,(iii) the repayment of debt of $1.3 million,
      (iv) the purchase of trading securities of $1.1 million, and (v) the payment
      of
      loan origination fees of $468,000, offset by (vi) proceeds from the issuance
      of
      the Term Loan of $4.25 million and the auto loan of $24,000, (vii) the net
      proceeds derived from the exercise of stock options of $14,000, (viii) AFC
      distributions of $750,000.





For
      Fiscal 2007, iDNA’s cash and cash equivalents decreased $867,000 due to the net
      effects of (i) cash flows used by operations of $1.2 million, (ii) capital
      expenditures of $579,000, (iii) repayment of the amounts due to the former
      OTI
      Members of $530,000, (iv) the repayment of debt of $453,000 (v) the purchase
      of
      trading securities of $271,000, offset by (vi) proceeds from AFC distributions
      of 1.2 million and (vii) proceeds from the issuance of the Note and a capital
      lease of $1.0 million and $102,000, respectively.





For
      Fiscal 2006, iDNA’s cash and cash equivalents increased $673,000 due to the net
      effects of (i) cash flows provided by operations of $2.5 million, inclusive
      of
      the net proceeds of $2.0 million derived from the Settlement Fund, (ii) proceeds
      from AFC distributions of $878,000, offset by, (iii) payments to repurchase
      iDNA
      Common Stock of $1.1 million, (iv) payments to acquire OTI, net of cash
      acquired, of $827,000, (v) the repayment of debt of $524,000 and (vi) capital
      expenditures of $285,000. The principal components of iDNA’s cash flow from
      operations for Fiscal 2006 included the collection of iDNA’s income tax refund
      of $826,000 and the net proceeds derived from the New York Settlement
      Stipulation of $2.0 million. iDNA also used $7,000 of cash principally for
      legal
      and claim expenses associated with iDNA’s discontinued operations.





Prior
      to
      the Term Loan, iDNA had limited external sources of financing and has operated
      on its existing cash balances, cash flows from operations and distributions
      from
      its investment in AFC. iDNA will continue to pursue reductions in its operating
      expenses, invest in marketing initiatives and seek new debt or equity financing
      (though there can be no assurance iDNA will obtain such financing) as means
      of
      supplementing iDNA’s resources available to pursue new acquisitions, joint
      ventures or other business development opportunities. At January 31, 2008,
      iDNA
      had unrestricted cash of $169,000 and investments in trading securities of
      $1.4
      million, which together with any cash flow derived from its investment in AFC
      and the operations of iDNA’s corporate communications business will be used to
      pursue such opportunities and reduce debt.





iDNA
      believes that the available cash and cash equivalents and investments in trading
      securities totaling $1.6 million at January 31, 2008 and any cash distributions
      from its investment in AFC and cash flow from operations will be sufficient
      to
      pay operating expenses, existing liabilities, fund existing debt repayments
      and
      fund its activities through the next twelve months as iDNA explores new
      strategic business alternatives. However, as previously discussed, iDNA’s lack
      of external financing sources may limit its ability to pursue strategic business
      alternatives being considered by iDNA’s Board of Directors. Such limitations may
      have an adverse impact on iDNA’s financial position, results of operations and
      liquidity.




33




The
      following table presents certain payments due under contractual obligations
      with
      minimum firm commitments as of January 31, 2008 (in thousands):




Payments Due by PeriodLess Than
            
            
            
            
            
            More ThanContractual Obligations
            
            Total
            
            1 Year
            
            1 - 3 Years
            
            3 - 5 Years
            
            5 YearsLong-term
                Debt Obligations
            
            $
            17,575
            
            $
            1,088
            
            $
            10,175
            
            $
            1,702
            
            $
            4,610Capital
                Lease Obligation
            
            
            57
            
            
            39
            
            
            18
            
            
            -
            
            
            -Operating
                Lease Obligation
            
            
            2,075
            
            
            567
            
            
            918
            
            
            590
            
            
            -Purchase
                Obligation
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -Other
                Long-Term Liabilities
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -$
            19,707
            
            $
            1,694
            
            $
            11,111
            
            $
            2,292
            
            $
            4,610





**OFF-BALANCE
      SHEET ARRANGEMENTS**





iDNA
      has
      no off-balance sheet arrangements.





**OTHER**





*New
      Accounting Pronouncements*


In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards (“SFAS”) No. 157, *Fair
      Value Measurement* (“SFAS
      No. 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value in accordance with Generally Accepted Accounting Principles
      (“GAAP”), and expands disclosures about fair value measurements. The provisions
      of SFAS No. 157 are effective for fiscal years beginning after November 15,
      2007. The FASB agreed to a one-year deferral of the effective date for
      non-financial assets and liabilities that are recognized or disclosed at fair
      value on a non-recurring basis. iDNA does not anticipate the application of
      this
      pronouncement will have a material impact on iDNA’s reported consolidated
      financial position or results of operations.





In
      February 2007, the FASB issued Statement No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* (“SFAS
      No. 159”). SFAS No. 159 allows entities the option to measure eligible financial
      instruments at fair value as of specified dates. Such election, which may be
      applied on an instrument by instrument basis, is typically irrevocable once
      elected. SFAS No. 159 is effective for fiscal years beginning after November
      15,
      2007, and early application is allowed under certain circumstances. iDNA is
      currently evaluating the impact SFAS No. 159 will have on its consolidated
      financial position.





In
      December 2007, the FASB issued SFAS No. 141-R, *Business
      Combinations* .
      SFAS
      No. 141-R applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. The objective of SFAS No. 141-R
      is to improve the relevance, representational faithfulness and comparability
      of
      the information that a reporting entity provides in its financial reports about
      a business combination. SFAS No, 141-R changes the requirements for an
      acquirer’s recognition and measurement of the assets acquired and the
      liabilities assumed in a business combination. iDNA does not anticipate the
      application of this pronouncement will have a material impact on iDNA’s reported
      consolidated financial position or results of operations.




34




In
      December 2007, the FASB issued FSAS No. 160, *Noncontrolling
      Interest in Consolidated Financial Statements – an amendment to ARB
      No.51* .
      SFAS
      No. 160 requires that (i) noncontrolling (minority) interests be reported as
      a
      component of shareholders’ equity, (ii) net income attributable to the parent
      and to the noncontrolling interest be separately identified in the consolidated
      statement of operations, (iii) changes in a parent’s ownership interest while
      the parent retains its controlling interest be accounted for as equity
      transactions, (iv) any retained noncontrolling equity investment upon the
      deconsolidation of a subsidiary be initially measured at fair value, and (v)
      sufficient disclosures are provided that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners. SFAS No.160 is effective for annual periods beginning after December
      15,
      2008.





*Inflation*





Inflation
      has not had a material effect on iDNA’s business.




35




**Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk.**





Like
      virtually all commercial enterprises, iDNA can be exposed to the risk (“market
      risk”) that the cash flows to be received or paid relating to certain financial
      instruments could change as a result of changes in interest rate, exchange
      rates, commodity prices, equity prices and other market changes.





iDNA
      does
      not engage in trading activities, does not utilize interest rate swaps or other
      derivative financial instruments and does not buy or sell foreign currency,
      commodity or stock indexed futures or options. Accordingly, iDNA is not exposed
      to market risk from these sources.





As
      of
      January 31, 2008, the interest rates under iDNA’s long term and convertible
      debt, exclusive of the Term Loan, are fixed. As a result iDNA has limited market
      risk associated with market interest rates. The interest rate attributable
      to
      the Term Loan is a variable annual rate based upon the prime rate, as published
      by Citibank N.A. (“Prime Rate”) plus 4%, or, if greater, 12.25%. As a
      consequence, iDNA interest charges under the Term Loan are subject to
      fluctuations based upon changes in the credit markets and the corresponding
      Prime Rate. For each 1% increase in the Prime Rate above 8.25%, iDNA’s interest
      costs on the Term Loan would increase approximately $42,000 per annum. At
      January 31, 2008, the Prime Rate was 6.0%.





36


**Item
      8. Financial Statements and Supplementary Data.**





REPORT
      OF
      INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





To
      the
      Board of Directors and Stockholders of


iDNA,
      Inc. and Subsidiaries


New
      York,
      New York





We
      have
      audited the accompanying consolidated balance sheets of iDNA, Inc. and
      subsidiaries as of January 31, 2008 and 2007, and the related consolidated
      statements of operations, comprehensive income (loss), stockholders’ equity
      (deficit) and cash flows for the three years in the period ended January 31,
      2008. ** Our
      audits of the basic financial statements included the financial statement
      schedule listed in the index appearing under item 15(a)(2). These financial
      statements and financial statement schedule are the responsibility of the
Company’s management. ** Our
      responsibility is to express an opinion on these financial statements and
      financial statement schedule 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 audit to obtain reasonable
      assurance about whether the financial statements are free of material
      misstatement. The
      Company is not required 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
      also includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, 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 consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of iDNA, Inc. and subsidiaries
      as of January 31, 2008 and 2007, and the results of their operations and their
      cash flows for each of the three years in the period ended January 31, 2008
      in
      conformity with accounting principles generally accepted in the United States
      of
      America. Also in our opinion, the related financial statement schedule, when
      considered in relation to the basic financial statements taken as a whole,
      presents fairly, in all material respects, the information set forth
      therein.





As
      discussed in Notes 1 and 8 to the consolidated financial statements, effective
      February 1, 2007, the Company adopted Financial Accounting Standards Board
      Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109,
      Accounting for Income Taxes.*





/s/
      GRANT
      THORNTON LLP




Cleveland,
      Ohio


May
      14,
      2008





37


**iDNA,
      Inc. and Subsidiaries**


**Consolidated
      Balance Sheets**


**(In
      Thousands, Except Share Amounts)**





January 31,2008
            
            2007**ASSETS**Cash
                and cash equivalents (Note 1)
            
            $
            169
            
            $
            277Restricted
                cash (Note 1)
            
            
            147
            
            
            147Investment
                in trading securities (Note 1)
            
            
            1,421
            
            
            271Accounts
                receivable, net of allowance of $75 and $82, respectively (Note
                1)
            
            
            1,453
            
            
            1,796Income
                taxes refundable (Note 8)
            
            
            19
            
            
            19Inventory
                (Note 1)
            
            
            165
            
            
            232Prepaid
                expenses
            
            
            444
            
            
            293Other
                current assets
            
            
            90
            
            
            115Total
                current assets
            
            
            3,908
            
            
            3,150Property
                and equipment, net of accumulated depreciation of $3,325 and $2,833,
                respectively (Notes 1 and 3)
            
            
            2,102
            
            
            2,752Investment
                in AFC (Note 4)
            
            
            7,129
            
            
            7,224Goodwill
                (Notes 1, 2 and 12)
            
            
            -
            
            
            2,728Other
                intangible assets, net of accumulated amortization of $2,183, respectively
                (Notes 1, 2 and 12)
            
            
            -
            
            
            6,115Other
                assets
            
            
            414
            
            
            109$
            13,553
            
            $
            22,078**LIABILITIES
                AND STOCKHOLDERS' EQUITY (DEFICIT)**LIABILITIESCurrent
                maturities of long term obligations (Note 7)
            
            $
            1,123
            
            $
            805Accounts
                payable
            
            
            1,220
            
            
            1,621Deferred
                revenue (Note 1)
            
            
            1,552
            
            
            1,033Self-insurance
                claims (Note 11)
            
            
            172
            
            
            235Other
                liabilities (Note 6)
            
            
            1,324
            
            
            1,445Total
                current liabilities
            
            
            5,391
            
            
            5,139Long
                term obligations (Note 7)
            
            
            13,373
            
            
            11,071Convertible
                promissory note (Note 7)
            
            
            2,825
            
            
            2,825Accrued
                income taxes, long term (Note 8)
            
            
            610
            
            
            29822,199
            
            
            19,333COMMITMENTS
                AND CONTINGENCIES (Note 11)
            
            
            -
            
            
            -STOCKHOLDERS'
                EQUITY (DEFICIT) (Note 9)Preferred
                stock
            
            
            -
            
            
            -Common
                stock - $.05 par value, authorized 50,000,000 shares, issued 39,949,589
                and 39,949,589 shares, respectively
            
            
            1,997
            
            
            1,997Additional
                paid-in capital
            
            
            175,537
            
            
            174,837Retained
                deficit
            
            
            (164,076
            )
            
            (151,699
            )Deferred
                compensation
            
            
            (18
            )
            
            (41
            )Treasury
                stock, at cost, 29,938,725 and 30,294,975 shares,
                respectively
            
            
            (22,086
            )
            
            (22,349
            )Total
                stockholders' equity (deficit)
            
            
            (8,646
            )
            
            2,745$
            13,553
            
            $
            22,078





See
      accompanying notes to consolidated financial statements.




38





**iDNA,
      Inc. and Subsidiaries**


**Consolidated
      Statements of Operations**


**(In
      Thousands, Except Per Share Amounts)**





Years Ended January 31,2008
            
            2007
            
            2006Revenues
                (Notes 1 and 14)
            
            $
            14,617
            
            $
            15,444
            
            $
            14,090Cost
                of revenues (Note 1)
            
            
            9,331
            
            
            9,147
            
            
            8,162Gross
                profit
            
            
            5,286
            
            
            6,297
            
            
            5,928Selling,
                general and administrative
            
            
            9,397
            
            
            10,187
            
            
            8,459Impairment
                charge (Notes 1 and 2)
            
            
            8,033
            
            
            4,482
            
            
            -Loss
                from operations
            
            
            (12,144
            )
            
            (8,372
            )
            
            (2,531
            )Interest
                income
            
            
            36
            
            
            19
            
            
            44Income
                from AFC investment (Note 4)
            
            
            655
            
            
            609
            
            
            744Interest
                expense (Note 7)
            
            
            (369
            )
            
            (488
            )
            
            (662
            )Interest
                abatement (Note 7)
            
            
            -
            
            
            631
            
            
            -Other
                income (Note 18)
            
            
            -
            
            
            -
            
            
            1,960Loss
                from continuing operations before income taxes
            
            
            (11,822
            )
            
            (7,601
            )
            
            (445
            )Provision
                (benefit) for income taxes (Note 8)
            
            
            1
            
            
            (10
            )
            
            70Loss
                from continuing operations
            
            
            (11,823
            )
            
            (7,591
            )
            
            (515
            )Income
                from discontinued operations, net of tax (Note 17)
            
            
            10
            
            
            11
            
            
            14Net
                loss applicable to common stock
            
            $
            (11,813
            )
            $
            (7,580
            )
            $
            (501
            )Basic
                and diluted (loss) earnings per share:Continuing
                operations
            
            $
            (1.19
            )
            $
            (.83
            )
            $
            (.05
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -Net
                loss per share
            
            $
            (1.19
            )
            $
            (.83
            )
            $
            (.05
            )Weighted
                average number of shares outstanding:Basic
                and diluted
            
            
            9,933
            
            
            9,167
            
            
            9,250





See
      accompanying notes to consolidated financial statements.




39


**iDNA,
      Inc. and Subsidiaries**


**Consolidated
      Statements of Stockholders’ Equity (Deficit)**


**and
      Comprehensive Income (Loss)**


**Years
      Ended January 31, 2008, 2007 and 2006**


**(In
      Thousands, Except Share Amounts)**





Preferred Stock
            
            Common Stock
            
            Additional
            
            
            
            
            
            Deferred
            
            
            
            ComprehensivePar
            
            
            
            Par
            
            Paid-In
            
            Retained
            
            Treasury
            
            Compensation
            
            
            
            IncomeShares
            
            Value
            
            Shares
            
            Value
            
            Capital
            
            Deficit
            
            Stock
            
            Expense
            
            Total
            
            (Loss)BALANCE,
                JANUARY 31, 2005
            
            
            -
            
            $
            -
            
            
            39,949,589
            
            $
            1,997
            
            $
            174,454
            
            $
            (143,383
            )
            $
            (22,402
            )
            $
            (89
            )
            $
            10,577Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (501
            )
            
            
            
            
            
            
            
            (501
            )
            
            (501
            )Treasury
                stock issued for services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (42
            )
            
            75
            
            
            
            
            
            33Treasury
                stock issued to acquire OTI (Note 12)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (108
            )
            
            366
            
            
            
            
            
            258Treasury
                stock purchased (Note 18)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (844
            )
            
            
            
            
            (844
            )Fair
                value of Eligible Shareholder warrants to be issued (Note
                18)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            25
            
            
            
            
            
            
            
            
            
            
            
            25Deferred
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            24
            
            
            24BALANCE,
                JANUARY 31, 2006
            
            
            -
            
            
            -
            
            
            39,949,589
            
            
            1,997
            
            
            174,479
            
            
            (144,034
            )
            
            (22,805
            )
            
            (65
            )
            
            9,572
            
            $
            (501
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (7,580
            )
            
            
            
            
            
            
            
            (7,580
            )
            
            (7,580
            )Share-based
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            358
            
            
            
            
            
            
            
            
            
            
            
            358Treasury
                stock issued
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (85
            )
            
            456
            
            
            
            
            
            371Deferred
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            24
            
            
            24BALANCE,
                JANUARY 31, 2007
            
            
            -
            
            
            -
            
            
            39,949,589
            
            
            1,997
            
            
            174,837
            
            
            (151,699
            )
            
            (22,349
            )
            
            (41
            )
            
            2,745
            
            $
            (7,580
            )Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (11,813
            )
            
            
            
            
            
            
            
            (11,813
            )
            
            (11,813
            )Share-based
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            374
            
            
            
            
            
            
            
            
            
            
            
            374Treasury
                stock issued
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (235
            )
            
            263
            
            
            
            
            
            28Deferred
                warrant expense (Note 7)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            326
            
            
            
            
            
            
            
            
            
            
            
            326Deferred
                compensation expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            23
            
            
            23Cummulative
                adjustment for the adoption of FIN 48 (Note 7)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (329
            )
            
            
            
            
            
            
            
            (329
            )BALANCE,
                JANUARY 31, 2008
            
            
            -
            
            $
            -
            
            
            39,949,589
            
            $
            1,997
            
            $
            175,537
            
            $
            (164,076
            )
            $
            (22,086
            )
            $
            (18
            )
            $
            (8,646
            )
            $
            (11,813
            )





See
      accompanying notes to consolidated financial statements.




40


**iDNA,
      Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows**


**(In
      Thousands)**





Years Ended January 31,2008
            
            2007
            
            2006**Cash
                Flows from Continuing Operating Activities**Net
                loss
            
            $
            (11,813
            )
            $
            (7,580
            )
            $
            (501
            )Adjustments
                to reconcile net loss to net cash provided by (used in) continuing
                operating activities:Depreciation
                and amortization
            
            
            1,636
            
            
            1,652
            
            
            1,411Non-cash
                interest
            
            
            53
            
            
            -
            
            
            -Impairment
                charge
            
            
            8,033
            
            
            4,482Income
                from AFC investment
            
            
            (655
            )
            
            (609
            )
            
            (744
            )Share-based
                compensation expense
            
            
            260
            
            
            724
            
            
            -Stock
                issued as compensation for services rendered
            
            
            128
            
            
            5
            
            
            33Excess
                payment over fair value of tresury stock purchased
            
            
            -
            
            
            -
            
            
            208Amortization
                of deferred compensation expense
            
            
            23
            
            
            24
            
            
            24Fair
                value of Eligible Shareholder warrants
            
            
            -
            
            
            -
            
            
            25Loss
                on disposal of assets
            
            
            25
            
            
            -
            
            
            -Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            343
            
            
            249
            
            
            882Accrued
                income tax/refundable
            
            
            (17
            )
            
            (79
            )
            
            856Accounts
                payable
            
            
            (401
            )
            
            158
            
            
            77Deferred
                revenue
            
            
            519
            
            
            141
            
            
            (351
            )Self
                insurance claims
            
            
            (63
            )
            
            -
            
            
            (21
            )Other
                operating assets and liabilities, net
            
            
            (50
            )
            
            (363
            )
            
            584Net
                cash provided by (used in) operating activities
            
            
            (1,979
            )
            
            (1,196
            )
            
            2,483**Cash
                Flows from Investing Activities**Acquisition
                of OTI net of cash acquired
            
            
            -
            
            
            -
            
            
            (827
            )Purchase
                of letter of credit, increase in restricted cash
            
            
            -
            
            
            (147
            )
            
            -Purchase
                of marketable securities, net
            
            
            (1,150
            )
            
            (271
            )
            
            -Proceeds
                from AFC distributions
            
            
            750
            
            
            1,207
            
            
            878Purchase
                of other property and equipment
            
            
            (201
            )
            
            (579
            )
            
            (285
            )Net
                cash provided by (used in) investing activities
            
            
            (601
            )
            
            210
            
            
            (234
            )**Cash
                Flows from Financing Activities**Proceeds
                from issuance of the Term Loan
            
            
            4,250
            
            
            -
            
            
            -Proceeds
                from issuance of promissory note
            
            
            -
            
            
            1,000
            
            
            -Proceeds
                from borrowings under a capital lease and installment
                loans
            
            
            24
            
            
            102
            
            
            -Proceeds
                from exercise of stock options
            
            
            14
            
            
            -
            
            
            -Payments
                of loan origination fees
            
            
            (468
            )
            
            -
            
            
            -Payments
                on debt, notes payable and capital lease
            
            
            (1,348
            )
            
            (453
            )
            
            (524
            )Payments
                to acquire treasury stock
            
            
            -
            
            
            -
            
            
            (1,052
            )Payments
                to retire due to the former OTI Members
            
            
            -
            
            
            (530
            )
            
            -Net
                cash provided by (used in) financing activities
            
            
            2,472
            
            
            119
            
            
            (1,576
            )Increase
                (decrease) in cash and cash equivalents from operations
            
            
            (108
            )
            
            (867
            )
            
            673Cash
                and cash equivalents at beginning of year
            
            
            277
            
            
            1,144
            
            
            471Cash
                and cash equivalents at end of year
            
            $
            169
            
            $
            277
            
            $
            1,144





-
      continued -





See
      accompanying notes to consolidated financial statements.




41


**iDNA,
      Inc. and Subsidiaries**


**Consolidated
      Statements of Cash Flows - Continued**


**(In
      Thousands)**





Years Ended January 31,2008
            
            2007
            
            2006**Supplemental
                Disclosures of Cash Flow Information**Interest
                paid
            
            $
            530
            
            $
            166
            
            $
            489Income
                taxes paid
            
            $
            17
            
            $
            55
            
            $
            45Acquisition
                of OTI:Non-cash
                assets acquired
            
            
            
            
            
            
            
            $
            3,605Liabilities
                assumed
            
            
            
            
            
            
            
            
            (1,031
            )2,574Promissory
                notes issued
            
            
            
            
            
            
            
            
            (1,489
            )Treasury
                stock issued
            
            
            
            
            
            
            
            
            (258
            )Cash
                paid, net of cash acquired
            
            
            
            
            
            
            
            $
            827





See
      accompanying notes to consolidated financial statements.





42


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





ORGANIZATION:  iDNA,
      Inc. (the “Company” or “iDNA”) began operations in 1969 and was incorporated in
      Delaware in 1971. iDNA’s operations are comprised of three principal reportable
      segments: (i) strategic communications services, (ii) information services
      and
      (iii) entertainment. iDNA manages each segment separately as a consequence
      of
      different marketing, service requirements and technology strategies (see Note
      13).





The
      strategic communications services segment provides content development via
      the
      design, development and production of media, collateral material, logistics,
      support and/or broadcast services for presentations at corporate and
      institutional events, meetings, training seminars and symposiums. The
      presentations may be live at single or multi-site venues and can include video
      conferencing, satellite broadcasting and webcasting or the presentations may
      be
      provided via on-demand access via internet websites, DVD or video
      tape.





The
      information services segment utilizes custom wireless communication technology
      and proprietary software to facilitate client audience interaction,
      participation and polling to collect, exchange and/or analyze data and
      information in real-time during a meeting or event. The wireless communication
      services are available as a turn-key service provided by iDNA during a scheduled
      meeting or event or alternatively, a client can purchase from iDNA the required
      electronic components and related proprietary software to administer its needs
      independently.





As
      of
      consequence of iDNA’s investment in the Angelika Film Centers, LLC (“AFC”), iDNA
      operates in the movie exhibition and entertainment industry (see Note
      4).





Prior
      to
      Fiscal 2003, iDNA was engaged in the sub-prime used automobile finance business.
      At that time, iDNA, then known as National Auto Credit, Inc. (“NAC”), invested
      in sub-prime used automobile consumer loans, which took the form of installment
      loans collateralized by the related vehicle. NAC purchased such loans, or
      interests in pools of such loans, from member dealerships, and performed the
      related underwriting and collection functions. NAC formally discontinued its
      automobile finance business effective December 31, 2001 (see Note
      17).





PRINCIPLES
      OF CONSOLIDATION: The consolidated financial statements include the accounts
      of
      iDNA and its wholly owned subsidiaries and its investment in AFC, a 50% owned
      limited liability company, which is accounted for under the equity method.
      All
      material intercompany accounts and transactions have been eliminated in
      consolidation.





ESTIMATES:
      The preparation of financial statements and the accompanying notes thereto,
      in
      conformity with generally accepted accounting principles in the United States
      of
      America, requires management to make estimates and assumptions that affect
      reported amounts of assets and liabilities and disclosure of contingent assets
      and liabilities at the date of the financial statements and reported amounts
      of
      revenues and expenses during the respective reporting periods. Actual results
      could differ from those estimates.





43





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





CASH
      EQUIVALENTS: All highly liquid investments, such as commercial paper and debt
      instruments with initial maturities of three months or less are considered
      to be
      cash equivalents. Cash equivalents are stated at cost, which approximates the
      market value. As of January 31, 2008, the Company’s cash balance, inclusive of
      its restricted cash, was $316,000 and the bank balance was $1.2 million. Of
      the
      total bank balance, $230,000 was covered by federal depository insurance and
      $1.0 million was uninsured.





INVESTMENT
      IN TRADING SECURITIES: iDNA’s investment in trading securities is comprised of
      an investment in a mutual fund which invests in highly liquid, AAA fixed income
      securities. iDNA’s investment in trading securities that are available for
      trading is carried at their fair market value at January 31, 2008. Unrealized
      gains or losses at on trading securities are credited or charged to operations
      for Fiscal 2008 and Fiscal 2007. Interest and dividend earned on the investment
      are recorded as interest income.




RESTRICTED
      CASH :
      In June
      2006, iDNA obtained a letter of credit in an amount of $147,000 that was issued
      in favor of the landlord of iDNA’s new New York headquarters. The letter of
      credit is collateralized by an interest bearing money market account in the
      same
      amount. Therefore, $147,000 is classified as restricted cash as of January
      31,
      2008 and 2007.





GOODWILL
      AND OTHER INTANGIBLE ASSETS: Intangible assets with indefinite lives, including
      goodwill, are not subject to amortization but are subject to testing for
      impairment at least annually or whenever there is an impairment indicator (see
      Note 2).





In
      its
      acquisition of Option Technologies Interactive, LLC (“OTI”) on November 18, 2005
      (see Note 12), iDNA acquired certain intangible assets including client
      relationships and lists and a non-competition agreement with an aggregate fair
      value of $703,000. The useful lives of these intangibles are estimated to be
      5
      to 7 years. The intangible assets with definite useful lives are amortized
      using
      the straight-line method over those lives. For Fiscal 2008, Fiscal 2007 and
      from
      November 18, 2005, the date of acquisition, to January 31, 2006, iDNA charged
      to
      operations $105,000, $114,000 and $10,000, respectively, for the amortization
      of
      these intangible assets.





In
      its
      acquisition of Audience Response Systems, Inc. (“ARS”) and the Campus Group
      Companies, Inc. (“CGC” and collectively with ARS, the “Campus Group”) on July
      31, 2003, iDNA acquired certain intangible assets including client relationships
      and lists and a non-competition agreement with an initial aggregate fair value
      of $9.5 million. The adjusted useful lives (see Note 2) of these intangibles
      are
      estimated to be 10 years and 9 years, respectively. The intangible assets with
      definite useful lives are amortized using the straight-line method over those
      lives. For Fiscal 2008, Fiscal 2007 and Fiscal 2006, iDNA charged to operations
      $705,000, $639,000 and $568,000, respectively, for the amortization of these
      intangible assets. As a consequence of the impairment charge recorded for Fiscal
      2008, there will not be any charges to operations in the future for the
      amortization of other intangible assets.




44


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





IMPAIRMENT
      OF LONG-LIVED ASSETS: iDNA reviews the carrying value of its long-lived assets
      (other than goodwill) whenever events or changes in circumstances indicate
      that
      its carrying amount may not be recoverable. When indicators of impairment exist,
      iDNA determines whether the estimated undiscounted sum of the future cash flows
      of such assets is less than their carrying amounts. If less, an impairment
      loss
      is recognized in the amount, if any, by which the carrying amount of such assets
      exceeds their respective fair values. The determination of fair value is based
      on quoted market prices in active markets, if available, or independent
      appraisals; sales price negotiations; or projected future cash flows discounted
      at a rate determined by management to be commensurate with iDNA’s business risk.
      The estimation of fair value utilizing discounted forecasted cash flows includes
      significant judgments regarding assumptions of revenue, operating and marketing
      costs; selling and administrative expenses; interest rates; property and
      equipment additions and retirements; industry competition; and general economic
      and business conditions, among other factors.




Certain
      of these long-lived assets were disposed of or have been written-down to their
      estimated fair value during Fiscal 2008 and Fiscal 2007 (see Note
      2).





ACCOUNTS
      RECEIVABLE: Accounts receivable are recorded at the invoiced amount and do
      not
      bear interest. The allowance for doubtful accounts is iDNA’s best estimate of
      the amount of probable credit losses in iDNA’s existing accounts receivable.
      iDNA determines the allowance based on analysis of historical bad debts, client
      concentrations, client credit-worthiness and current economic trends. iDNA
      reviews its allowance for doubtful accounts quarterly. Past-due balances over
      90
      days and specified other balances are reviewed individually for collectibility.
      All other balances are reviewed on an aggregate basis. Account balances are
      written off against the allowance after all means of collection have been
      exhausted and the potential for recovery is considered remote. iDNA does not
      have any off-balance sheet credit exposure related to its clients.





INVENTORY:
      Inventory is comprised principally of electronic equipment and related
      components held for sale to clients. Inventory is valued at the lower of cost
      or
      market using the first-in – first-out inventory cost method.





PROPERTY
      AND EQUIPMENT: Property and equipment is stated at cost (see Note 3).
      Depreciation is computed using the straight-line method over the estimated
      useful lives of the assets, which range from eighteen months to ten years.
      Leasehold improvements are amortized using the straight-line method over the
      shorter of the lease term or the estimated useful lives of the related
      improvements.





45





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





INCOME
      TAXES: Deferred income taxes are provided for all temporary differences between
      the book and tax basis of assets and liabilities. Deferred income taxes are
      adjusted to reflect new tax rates when they are enacted into law. The effect
      on
      deferred tax assets and liabilities of a change in tax rates is recognized
      in
      income in the period that includes the enactment date. A valuation allowance
      is
      recognized if it is anticipated that some or all of a net deferred tax asset
      may
      not be realized (see Note 8).





In
      February 2007, iDNA adopted the provisions of FASB Interpretation No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”), an interpretation of FASB Statement No. 109, *Accounting
      for Income Taxes* .
      FIN 48
      prescribes a recognition threshold and measurement attribute for the financial
      recognition and measurement of a tax position taken or expected to be taken
      on a
      tax return. The interpretation requires that iDNA recognize the impact of a
      tax
      position in the financial statements if that position is more likely than not
      of
      being sustained on audit, based on the technical merits of the position. FIN
      48
      also provides guidance on derecognition classification, interest and penalties,
      accounting in interim periods and disclosure. In accordance with the provisions
      of FIN 48, any cumulative effect resulting from the change in accounting
      principle is to be recorded as an adjustment to the opening balance of retained
      earnings (deficit).





As
      a
      consequence of the adoption of the provisions of FIN 48, iDNA recorded an
      adjustment to retained deficit of $329,000 as of February 1, 2007 to reflect
      potential liabilities for iDNA’s uncertain tax positions, inclusive of interest.
      iDNA adjusted its initial estimates developed during the first quarter of Fiscal
      2008 as iDNA refined its calculations and assessment of its uncertain tax
      positions. iDNA recognizes interest and penalties associated with uncertain
      tax
      positions as a component of tax expense (benefit).





SELF-INSURANCE
      CLAIMS: iDNA’s wholly-owned subsidiary ARAC, Inc. (“ARAC”) is subject to certain
      self-insurance claims and associated litigation expenses relating to its
      discontinued automobile rental operations (see Notes 11 and 17). iDNA’s
      management estimates the required self-insurance liability based upon specific
      identification of the known matters subject to future claims, the nature of
      the
      claim and the estimated costs to be incurred. These estimates include, but
      are
      not limited to, ARAC’s historical loss experience and projected loss factors.
      The required self-insurance liability is subject to adjustment in the future
      based upon changes in the nature of the remaining claims or the ultimate cost.
      As a consequence of iDNA’s sale of its automobile rental operations in 1995,
      iDNA believes that all incurred claims have been reported to ARAC and that
      there
      are no longer any incurred but not yet reported claims to be received by ARAC.





Because
      of the uncertainties related to several residual small claims and legal
      proceedings involving iDNA’s former rental operations and self-insurance claims,
      it is difficult to project the ultimate effect the adjudication or settlement
      of
      these matters will have on iDNA. As additional information regarding iDNA’s
      potential liabilities becomes available, iDNA will revise the estimates as
      appropriate.





46


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





REVENUES:
      iDNA’s revenues are earned within short time periods, generally less than one
      week. iDNA recognizes revenue from its strategic communications segment,
      including the video production, video editing, meeting services and broadcast
      satellite or webcast services, and its information services segment when the
      services are complete and delivered or all technical services have been
      rendered. Deposits and other prepayments are recorded as deferred revenue until
      revenue is recognized. iDNA does not have licensing or other arrangements that
      result in additional revenues following the delivery of the video or a
      broadcast. Costs accumulated in the production of the video, meeting services
      or
      broadcasts are deferred until the sale and delivery are complete. Deferred
      production costs of $90,000 and $115,000, respectively, are reported as other
      current assets at January 31, 2008 and 2007.





iDNA
      recognizes revenue from the sale of electronic equipment, proprietary software
      and related components at the time of shipment. Deposits and other prepayments
      received prior to shipment are recorded as deferred revenue until the electronic
      equipment and related software is shipped. iDNA has licensing and technical
      support arrangements for future software enhancements and upgrades for technical
      support for previously delivered electronic equipment. Revenues derived from
      licensing and technical support are recognized over the term of the licensing
      and technical support period which generally are sold in increments of one
      year
      of coverage. For Fiscal 2008, Fiscal 2007 and Fiscal 2006, electronic equipment
      sales were $2.1 million, $2.6 million and $1.3 million,
      respectively.





iDNA
      recognizes revenue from website design and development when the customer accepts
      the completed project. Deposits and other prepayments are recorded as deferred
      revenue until revenue is recognized. These contracts are generally limited
      to
      the design and development of websites and the presentation of site library
      content developed by iDNA. Clients also have the option to engage iDNA to
      maintain and upgrade their websites. These projects are separate from the
      website development and design engagements, and the related revenue is
      recognized over the term of the agreement, which is generally up to one
      year.





COST
      OF
      REVENUES: Cost of revenues consists of direct expenses specifically associated
      with client revenues. The cost of revenues includes direct salaries and
      benefits, purchased products or services for clients, web hosting, support
      services and shipping and delivery costs.





RESEARCH
      AND DEVELOPMENT COSTS: As a consequence of the acquisition of OTI, iDNA incurs
      certain research and development costs. Research and development costs are
      comprised principally of personnel costs incurred for enhancements,
      modifications, updates, service and support expenditures for iDNA’s proprietary
      software. Research and development costs are charged to operations as incurred
      and are included as a component of costs of revenues. For Fiscal 2008, Fiscal
      2007 and from November 18, 2005, the date of acquisition of OTI, to January
      31,
      2006, iDNA charged $416,000, $416,000 and $75,000, respectively, to product
      research and development expense.





47


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





ACCOUNTING
      FOR STOCK-BASED COMPENSATION: Effective February 1, 2006, iDNA adopted the
      provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R
      (revised 2004), *Share-Based
      Payment* (“SFAS
      No. 123(R)”), which replaces SFAS No. 123, *Accounting
      for Stock-Based Compensation* (“SFAS
      No. 123”), and supersedes APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* .
      SFAS
      No. 123(R) 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 beginning with the first interim or annual period after
      December 15, 2005. iDNA elected the prospective method of adopting SFAS No.
      123(R) which requires that compensation expense be recorded over the remaining
      periods for what would have been the remaining fair value under SFAS No. 123
      of
      all unvested stock options and restricted stock at the beginning of the first
      quarter of adoption. The compensation costs for that portion of awards is based
      on the grant-date fair value of the awards as calculated for pro forma
      disclosures under SFAS No. 123.





Prior
      to
      the adoption of SFAS No. 123(R), iDNA followed the intrinsic value method in
      accordance with APB No. 25 to account for its employee stock options.
      Historically, substantially all stock options have been granted with an exercise
      price equal to the fair market value of the iDNA’s common stock, $0.05 par value
      (“Common Stock”). As a consequence, no compensation expense was recognized from
      substantially all option grants to iDNA’s employees, officers and directors.





EARNINGS
      PER SHARE: Basic earnings (loss) per share is computed by dividing net income
      (loss) by the weighted-average number of shares of iDNA Common Stock outstanding
      for the year. Dilutive earnings per share for all years presented is the same
      as
      basic earnings per share because the inclusion of common stock equivalents
      would
      have an anti-dilutive effect on loss per share for Fiscal 2008, Fiscal 2007,
      and
      Fiscal 2006. For Fiscal 2008, Fiscal 2007 and Fiscal 2006 there were no common
      stock equivalents, in the form of stock options and warrants, excluded from
      the
      earnings (loss) per share due to their dilutive effect.





48


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**





NEW
      ACCOUNTING PRONOUNCEMENTS: In September 2006, the Financial Accounting Standards
      Board (“FASB”) issued SFAS No. 157, *Fair
      Value Measurement* (“SFAS
      No. 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value in accordance with Generally Accepted Accounting Principles
      (“GAAP”), and expands disclosures about fair value measurements. The provisions
      of SFAS No. 157 are effective for fiscal years beginning after November 15,
      2007. The FASB agreed to a one-year deferral of the effective date for
      non-financial assets and liabilities that are recognized or disclosed at fair
      value on a non-recurring basis. iDNA does not anticipate the application of
      this
      pronouncement will have a material impact on iDNA’s reported consolidated
      financial position or results of operations.





In
      February 2007, the FASB issued Statement No. 159, *The
      Fair Value Option for Financial Assets and Financial
      Liabilities* (“SFAS
      No. 159”). SFAS No. 159 allows entities the option to measure eligible financial
      instruments at fair value as of specified dates. Such election, which may be
      applied on an instrument by instrument basis, is typically irrevocable once
      elected. SFAS No. 159 is effective for fiscal years beginning after November
      15,
      2007, and early application is allowed under certain circumstances. iDNA is
      currently evaluating the impact SFAS No. 159 will have on its consolidated
      financial position.





In
      December 2007, the FASB issued SFAS No. 141-R, *Business
      Combinations* .
      SFAS
      No. 141-R applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. The objective of SFAS No. 141-R
      is to improve the relevance, representational faithfulness and comparability
      of
      the information that a reporting entity provides in its financial reports about
      a business combination. SFAS No, 141-R changes the requirements for an
      acquirer’s recognition and measurement of the assets acquired and the
      liabilities assumed in a business combination. iDNA does not anticipate the
      application of this pronouncement will have a material impact on iDNA’s reported
      consolidated financial position or results of operations.





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interest in Consolidated Financial Statements – an amendment to ARB
      No.51* .
      SFAS
      No. 160 requires that (i) noncontrolling (minority) interests be reported as
      a
      component of shareholders’ equity, (ii) net income attributable to the parent
      and to the noncontrolling interest be separately identified in the consolidated
      statement of operations, (iii) changes in a parent’s ownership interest while
      the parent retains its controlling interest be accounted for as equity
      transactions, (iv) any retained noncontrolling equity investment upon the
      deconsolidation of a subsidiary be initially measured at fair value, and (v)
      sufficient disclosures are provided that clearly identify and distinguish
      between the interests of the parent and the interests of the noncontrolling
      owners. SFAS No.160 is effective for annual periods beginning after December
      15,
      2008.





RECLASSIFICATIONS:
      Certain prior year amounts have been reclassified to conform to the current
      year
      presentation.





49


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      2 – IMPAIRMENT OF LONG-LIVED ASSET** **S
      AND GOODWILL**





Pursuant
      to iDNA’s established accounting policies, iDNA
      conducts an annual analysis of goodwill. iDNA estimates the fair value of its
      reporting units and compares those values to the carrying values of those
      reporting units. If the estimated fair value of the reporting unit is less
      than
      the estimated book value, then an impairment is deemed to have occurred. In
      estimating the fair value of each reporting unit, iDNA used primarily the income
      approach (which utilizes forecasted discounted cash flows to estimate the fair
      value of the reporting unit). iDNA concluded that as of January 31, 2006 there
      was no impairment of its goodwill based upon the then estimated fair value
      of
      its reporting units.





However,
      during the second quarter of Fiscal 2007, as a consequence of declining revenues
      and the loss of a client, the results of the operations of the Campus Group
      Companies, Inc. (“CGC”) reporting unit raised questions as to whether
      projections used at the last valuation date were still valid. Accordingly,
      management performed additional impairment tests as of July 31, 2006 for CGC
      and
      determined that impairment charges were required at that date. Accordingly,
      based upon iDNA’s preliminary assessment, second quarter operations for Fiscal
      2007 were charged $2.6 million and $1.9 million for the estimated impairment
      of
      CGC’s goodwill and other intangible assets, respectively. Additionally, iDNA
      determined it appropriate to reduce the useful life of the CGC client
      relationships intangible asset from 17 years to 10 years. iDNA will continue
      to
      monitor CGC’s operations and will recognize further impairment charges if and
      when deemed appropriate. iDNA conducted its Fiscal 2007 annual analysis of
      goodwill as of January 31, 2007. iDNA estimated the fair value of its reporting
      units and compared those values to the carrying values of those reporting units.
      iDNA concluded that as of January 31, 2007 there were no additional impairments
      of its goodwill based upon the then estimated fair value of its reporting units.





At
      January 31, 2008, the goodwill for each of iDNA’s business segments (information
      services and strategic communications services) was tested for additional
      impairment. As a consequence of the testing and initial assessment for Fiscal
      2008, iDNA determined that the carrying value of both its information services
      and its strategic communications services business segments exceeded their
      fair
      value, which was estimated based upon the present value of each reporting units
      expected future cash flows. As a consequence, iDNA charged to operations an
      aggregate of $8.0 million for the estimated impairment of goodwill and other
      intangible assets relating to (i) its information services segment in the amount
      of $5.9 million, and (ii) strategic communication services segment in the amount
      of $2.1 million, respectively. At
      January 31, 2008, iDNA has reduced the carrying value of all goodwill and other
      intangible assets to zero.




50




**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      3 – PROPERTY AND EQUIPMENT**





The
      components of property and equipment are as follows (in thousands):





January 31,Description
            
            2008
            
            2007
            
            Estimated Useful LifeLeasehold
                improvements
            
            $
            227
            
            $
            368
            
            
            Lesser
                of useful life or term of leaseMachinery
                & equipment
            
            
            2,036
            
            
            2,008
            
            
            5
                yearsComputer
                equipment
            
            
            1,127
            
            
            1,108
            
            
            3
                yearsFurniture
                & fixtures
            
            
            240
            
            
            308
            
            
            5
                yearsAutomobiles
            
            
            63
            
            
            59
            
            
            2
                - 3 yearsSoftware
            
            
            1,574
            
            
            1,576
            
            
            5
                to 10 yearsSmall
                tools
            
            
            30
            
            
            28
            
            
            18
                to 24 monthsFilm
                library
            
            
            130
            
            
            130
            
            
            5
                years5,427
            
            
            5,585LessAccumulated
                depreciation
            
            
            (3,325
            )
            
            (2,833
            )$
            2,102
            
            $
            2,752





Depreciation
      expense was $826,000, $899,000 and $833,000 for Fiscal 2008, Fiscal 2007 and
      Fiscal 2006, respectively.





**NOTE
      4 – INVESTMENT IN AFC**





On
      April
      5, 2000, iDNA, through its wholly owned subsidiary National Cinemas, Inc.,
      purchased a 50% membership interest in AFC. AFC is the owner and operator of
      the
      Angelika Film Centers, which is a multiplex cinema and café complex in the Soho
      District of Manhattan in New York City. The 50% membership interest was
      purchased from Reading International, Inc. (“Reading”) for an initial investment
      of $11.1 million. At April 5, 2000, the investment exceeded iDNA’s share of the
      net assets of AFC by approximately $5.6 million, which is being treated in
      a
      manner similar to goodwill (see Note 1).





AFC
      is
      currently owned 50% by iDNA and 50% by Reading. The articles and bylaws of
      AFC
      provide that for all matters subject to a vote of AFC’s members, a majority is
      required, except that in the event of a tie vote, the Chairman of Reading shall
      cast the deciding vote.





iDNA
      uses
      the equity method to account for its investment in AFC. AFC uses a December
      31
      year-end for financial reporting purposes. iDNA reports on a January 31
      year-end, and for its fiscal quarters ending April 30, July 31, October 31
      and
      January 31 records its pro-rata share of AFC’s earnings on the basis of AFC’s
      fiscal quarters ending March 31, June 30, September 30, and December 31,
      respectively. For Fiscal 2008, Fiscal 2007 and Fiscal 2006, iDNA recorded income
      from its investment in AFC of $655,000, $609,000 and $744,000, respectively,
      representing its share of AFC’s income.




51


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      4 – INVESTMENT IN AFC (CONTINUED)**





Summarized
      financial statement information for AFC as of December 31, 2007 and 2006 and
      for
      the years ended December 31, 2007, 2006 and 2005 is as follows (in
      thousands):





December 31,2007
            
            2006**Condensed
                Balance Sheet:**Current
                assets
            
            $
            1,237
            
            $
            1,223Property
                and equipment, net
            
            
            734
            
            
            833Intangible
                with definitive life
            
            
            5,117
            
            
            5,707Other
                assets
            
            
            80
            
            
            80$
            7,168
            
            $
            7,843Current
                liabilities
            
            $
            661
            
            $
            480Non-current
                liabilities
            
            
            2,168
            
            
            2,083Members'
                equity
            
            
            4,339
            
            
            5,280$
            7,168
            
            $
            7,843





For the Year Ended December 31,2007
            
            2006
            
            2005**Condensed
                Statement of Earnings:**Revenues
            
            $
            6,494
            
            $
            6,328
            
            $
            6,487Operating
                costs
            
            
            4,135
            
            
            4,037
            
            
            3,980Depreciation
                and amortization
            
            
            781
            
            
            775
            
            
            752General
                and administrative expenses
            
            
            269
            
            
            298
            
            
            2685,185
            
            
            5,110
            
            
            5,000Net
                income
            
            $
            1,309
            
            $
            1,218
            
            $
            1,487iDNA's
                proportionate share of net income
            
            $
            655
            
            $
            609
            
            $
            744





**NOTE
      5 – FINANCIAL INSTRUMENTS**





iDNA
      has
      various financial instruments including cash and cash equivalents, and
      investments in trading securities and in affordable housing limited
      partnerships, miscellaneous other assets, promissory notes, Term Loan (as
      defined in Note 7) and a loan guaranteed by the U.S. Small Business
      Administration (the “SBA Loan”). Many of these instruments are short-term in
      nature and the fair value of these financial instruments has been estimated
      based on available market information and appropriate valuation methodologies.
      iDNA has determined that the carrying values of such instruments approximate
      estimated fair values. The OTI Promissory Note, Base Promissory Notes, Trailing
      Notes and Convertible debt (as defined in Note 7) are stated at cost since
      the
      obligations under these instruments arose pursuant to the terms of related
      purchase agreements and since there are currently no market prices available
      for
      similar instruments.




52


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      6 – OTHER LIABILITIES**





The
      components of other liabilities are as follows (in thousands):





January 31,2008
            
            2007Accrued
                interest
            
            $
            168
            
            $
            176Accrued
                salary, wages and related benefits
            
            
            532
            
            
            427Accrued
                expenses
            
            
            617
            
            
            790Accrued
                state and local taxes
            
            
            7
            
            
            52Total
            
            $
            1,324
            
            $
            1,445





**NOTE
      7 – CURRENT AND LONG TERM OBLIGATIONS**





On
      November 21, 2007, iDNA, via its wholly owned subsidiary, iDNA Cinema Holdings,
      Inc. (“Holdings”), consummated a Master Loan and Security Agreement (the “Loan
      Agreement”) with Silar Advisors, L.P. (“Silar”), as Lender and Administrative,
      Payment and Collateral Agent, pursuant to which Silar provided a term loan
      in an
      aggregate principal amount of $4.25 million (the “Term Loan”) to Holdings (the
“Term Loan Financing”). Interest accrues on the Term Loan at a per annum rate
      equal to the variable annual rate of interest designated from time to time
      by
      Citibank N.A. as its “prime rate,” plus 4%, or, if greater, 12.25%, and is
      payable by Holdings on a quarterly basis. At January 31, 2008, the “prime rate”
was 6.0%. The Term Loan matures on November 20, 2009 unless extended for one
      year at the option of Holdings, upon written notice provided to Silar between
      fifteen (15) and forty-five (45) days prior to the Maturity Date, provided
      that
      no default is then ongoing and that Holdings is then in compliance with its
      financial covenants under the Loan Agreement. At January 31, 2008, Holdings
      and
      iDNA were in compliance with the financial covenants under the Loan Agreement.





iDNA
      has
      utilized the proceeds from the Term Loan Financing in the following manners:
      (i)
      approximately $1.0 million was applied for the repayment and retirement of
      iDNA’s indebtedness to Seasons Go Round Inc.; (ii) $263,000 was used for
      prepayment of interest on the Term Loan; (iii) $207,000 was paid to Silar or
      its
      designee in satisfaction of fees and expenses due in connection with the Term
      Loan Financing; (iv) $60,000 was paid to a consultant for its role in
      facilitating the Term Loan Financing; and (v) the remaining proceeds of
      approximately $2.7 million have been and will continue to be utilized for
      working capital purposes. iDNA incurred various loan origination fees in the
      amount of $511,000, inclusive of the $207,000 paid to Silar at closing, and
      iDNA
      amortizes the origination fees to interest expense over the expected term of
      the
      Term Loan. At January 31, 2008, iDNA charged to interest expense $33,000 for
      loan origination fees.




Holdings’
      obligations under the Term Loan are secured by a pledge of all of Holdings’
assets, including all of the outstanding shares of National Cinemas, Inc.
      (“NCI”), which owns a 50% membership interest in AFC .
      The
      Term Loan is also guaranteed by (i) iDNA (with such guaranty being secured
      by a
      pledge of substantially all of iDNA’s assets, other than the shares of its
      operating subsidiaries) and (ii) NCI (with such guaranty being secured by a
      pledge of substantially all of NCI’s assets, other than its 50% membership
      interest in AFC).




53


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      7 – CURRENT AND LONG TERM OBLIGATIONS (CONTINUED)**





In
      connection with the consummation of the Term Loan, as required by the Loan
      Agreement, iDNA issued warrants to Silar and a consultant (the “Warrants”) to
      purchase 1.5 million and 60,000 shares, respectively, of iDNA’s Common Stock at
      an exercise price of $0.27 per share. The number of shares issuable upon
      exercise of the Warrants is subject to customary adjustment in the event of
      a
      stock dividend, stock split, reverse stock split or similar event and is
      furthermore subject to a weighted-average antidilution protection in the event
      that iDNA issues additional shares of Common Stock for consideration less than
      the existing exercise price under the Warrants. Additionally, pursuant to the
      Warrants, the holder thereof has been granted (subject to certain conditions,
      including the reimbursement of iDNA’s costs) three demand registration rights
      for the underlying shares of Common Stock, as well as unlimited piggyback
      registration rights for such shares of Common Stock. The fair value of the
      Warrants at the date of grant was $339,000. At January 31, 2008, the unamortized
      fair value of the Warrants issued in the amount of $306,000 was recorded as
      a
      component of additional paid in capital and a reduction of the principal on
      the
      Term Loan. iDNA charges to interest expense the fair value of the Warrants
      over
      the expected three year term of the Term Loan. For the period November 21,
      2007
      to January 31, 2008, iDNA charged to interest expense $33,000 for the fair
      value
      of the Warrants.




On
      January 31, 2008, ARS consummated an auto loan with a financing institution
      for
      the purchase of a delivery van in the principal amount of $24,000. The auto
      loan
      is repayable in monthly installments of $755 with the last payment due February
      2011. The auto loan bears interest at the rate of 9.0% and is collateralized
      by
      the van purchased with the proceeds from the loan.




On
      July
      20, 2006, iDNA consummated a Loan and Security Agreement with a lender and
      issued a Promissory Note (the “Note”) in the principal amount of $1.0 million.
      The lender, Seasons Go Round, was an unaffiliated third party lender. Pursuant
      to the terms of the Note, (i) the outstanding principal of the Note was due
      February 15, 2008, (ii) iDNA was required to pay interest only, monthly and
      in
      arrears, during the term and (iii) the Note bore interest at fourteen percent
      (14%) per annum. iDNA prepaid the Note in full without a prepayment penalty
      on
      November 21, 2007 from the net proceeds derived from the Term Loan
      Financing.





As
      a
      consequence of iDNA’s acquisition of OTI effective November 18, 2005, iDNA
      issued to FWA and MeetingNet the OTI Promissory Notes in the aggregate principal
      amount of $1.5 million. The OTI Promissory Notes bear interest at the rate
      of 5%
      per annum and are repayable in quarterly installments according to a formula
      based upon the future cash flows realized from OTI’s operations. iDNA’s
      obligations under the OTI Promissory Notes are secured by the membership
      interests of OTI. At January 31, 2008, iDNA had outstanding principal
      obligations under the terms of the OTI Promissory Notes of $855,000 and an
      accrued interest obligation of $12,000.





54


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      7 – CURRENT AND LONG TERM OBLIGATIONS (CONTINUED)**





As
      a
      consequence of iDNA’s acquisition of the Campus Group effective July 31, 2003,
      iDNA issued to Mr. Campus and certain family trusts promissory notes (the former
      shareholders of the Campus Group) in an aggregate principal amount of $9.9
      million and issued to a family trust a convertible promissory note in the
      principal amount of $2.8 million (collectively, the “Campus Notes”). Of the $9.9
      million in promissory notes issued by iDNA, $6.6 million of the promissory
      notes
      (“Base Notes”) bear interest at 5% per annum and are repayable in quarterly
      installments according to a formula based upon the future cash flows realized
      from The Campus Group over a period not to exceed seven years. The remaining
      $3.3 million in promissory notes (“Trailing Notes”) issued by iDNA bear interest
      at 5% per annum and are repayable in quarterly installments, commencing upon
      the
      retirement of the Base Notes, according to a formula based upon the future
      cash
      flows realized from The Campus Group over a period not to exceed three years
      subsequent to the retirement of the Base Notes. The $2.8 million convertible
      promissory note (“Convertible Note”) (i) bears interest at 5% per annum, payable
      quarterly in cash or accumulating as principal at the election of iDNA, (ii)
      requires principal payments to commence upon the retirement of the Base Notes
      and Trailing Notes and is then repayable in quarterly installments according
      to
      a formula based upon the future cash flows realized from the Campus Group over
      a
      period not to exceed three years and (iii) is convertible at the option of
      the
      holder into shares of iDNA’s Common Stock at a base conversion price of $1.50
      per share. The holder may not convert the convertible promissory note into
      iDNA
      Common Stock prior to repayment of the Base Notes and Trailing Notes. iDNA’s
      obligations under the Campus Notes are secured by the capital stock of the
      companies comprising the Campus Group. At January 31, 2008, iDNA had outstanding
      principal obligations under the terms of the Base Notes, Trailing Notes and
      Convertible Notes of $6.0 million, $3.3 million and $2.8 million, respectively
      and accrued interest obligations of $156,000.





For
      the
      trailing twelve month period ended July 31, 2006, The Campus Group’s financial
      performance had fallen below certain minimum operating cash flow thresholds
      established pursuant to the terms of the Campus Notes. As a consequence, the
      interest expense incurred by iDNA during the twelve month period ended July
      31,
      2006 was abated. As a consequence of the interest abatement, iDNA realized
      a
      gain from the abatement of interest on the Campus Notes of $631,000 during
      the
      second quarter of Fiscal 2007. For the period August 1, 2006 through January
      31,
      2007 and for Fiscal 2008, the Campus Group’s financial performance remained
      below the minimum operating cash flow thresholds. As a consequence no interest
      was incurred on the Campus Notes during the period August 1, 2006 through
      January 31, 2007 or for Fiscal 2008. Prospectively, interest may accrue pursuant
      to the terms of the Campus Notes once the minimum operating cash flow thresholds
      are achieved.





As
      a
      consequence of iDNA’s acquisition of OMI, iDNA assumed a $402,000 loan
      guaranteed by the U.S. Small Business Administration (the “SBA Loan”). At
      January 31, 2008, the remaining balance of the SBA Loan of $299,000 is repayable
      in monthly installments of $3,309 with the last payment due in April 2017.
      The
      loan bears interest at the rate of 4% per annum. OMI’s obligations under the SBA
      Loan are collateralized by substantially all of OMI's assets and the personal
      guarantee of Mr. Dean Thompson, President of OMI.





In
      September 2006, OMI consummated equipment financing in the form of a capital
      lease with a financing institution to acquire $102,000 in various digital media
      production and editing equipment. The capital lease is payable in monthly
      installments with the last payment due in July 2009 and bears an implied
      interest rate of 10%. OMI’s obligations under the capital lease are
      collateralized by the digital media production and editing equipment acquired
      by
      OMI. At January 31, 2008, the remaining balance due under the capital lease
      was
      $53,000 and the accumulated depreciation for the underlying equipment was
      $48,000.




55




**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      7 – CURRENT AND LONG TERM OBLIGATIONS (CONTINUED)**





The
      components of long term obligations and convertible debt at January 31, 2008
      and
      January 31, 2007 are as follows (in thousands):




January 31,2008
            
            2007Auto
                loan
            
            $
            24
            
            $
            -Capital
                leases
            
            
            53
            
            
            85SBA
                loan
            
            
            299
            
            
            329Promissory
                note
            
            
            -
            
            
            1,000OTI
                promissory notes
            
            
            855
            
            
            1,141Term
                loan
            
            
            3,944
            
            
            -Base
                promissory notes
            
            
            6,046
            
            
            6,046Trailing
                promissory notes
            
            
            3,275
            
            
            3,275Convertible
                debt
            
            
            2,825
            
            
            2,82517,321
            
            
            14,701Less
                current maturities
            
            
            (1,123
            )
            
            (805
            )Long-term
                obligations and convertible debt
            
            $
            16,198
            
            $
            13,896





iDNA’s
      long term obligations and convertible debt at January 31, 2008 mature as follows
      (in thousands):




Fiscal Year
            
            Amount2009
            
            $
            1,1272010
            
            
            1,6202011
            
            
            8,5732012
            
            
            5772013
            
            
            1,125Thereafter
            
            
            4,610$
            17,632Less
                - unamortized debt discount
            
            
            (306
            )Less
                - capital lease interest
            
            
            (5
            )$
            17,321





56


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      8 – INCOME TAXES**




The
      components of the provision (benefit) for income taxes, in the consolidated
      statement of operations are as follows (in thousands):




Years Ended January 31,2008
            
            2007
            
            2006CurrentFederal
            
            $
            -
            
            $
            (19
            )
            $
            30Foreign
            
            
            -
            
            
            (7
            )
            
            -State
            
            
            1
            
            
            9
            
            
            451
            
            
            (17
            )
            
            75DeferredFederal
            
            
            -
            
            
            -
            
            
            -Foreign
            
            
            -
            
            
            -
            
            
            -State
            
            
            -
            
            
            -
            
            
            --
            
            
            -
            
            
            -Total
            
            
            1
            
            
            (17
            )
            
            75Allocated
                to discontinued operations
            
            
            -
            
            
            7
            
            
            (5
            )Continuing
                operations
            
            $
            1
            
            $
            (10
            )
            $
            70




As
      of
      January 31, 2008 iDNA has federal net operating loss carryforwards of $91.5
      million of which approximately $24.5 million is estimated to expire due to
      the
      limitations described below. As a consequence, iDNA’s federal net operating loss
      carryforwards of $67.0 million may be used to reduce future taxable income.
      Such
      net operating loss carryforwards will expire: $22.6 million in Fiscal 2019,
      $13.5 million in Fiscal 2020, $7.2 million in Fiscal 2021, $10.6 million in
      Fiscal 2022, $5.3 million in Fiscal 2023, $3.0 million in Fiscal 2024, $607,000
      in Fiscal 2025, $1.4 million in Fiscal 2027 and $2.7 million in Fiscal 2028.
      As
      of January 31, 2008, iDNA has state and local operating loss carryforwards
      of
      $53.6 million which will expire: $5.7 million in Fiscal 2018, $1.1 million
      in
      Fiscal 2019, $14.2 million, in Fiscal 2021, $9.8 million in Fiscal 2022, $9.1
      million in Fiscal 2023, $4.4 million in Fiscal 2024, $525,000 in Fiscal 2025,
      $3.0 million in Fiscal 2027 and $6.0 million in Fiscal 2028. The state and
      local
      net operating loss deductions may also be subject to limitations, as described
      below, however, no reduction has been included in the state and local
      amounts.





57


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      8 – INCOME TAXES (CONTINUED)**





As
      a
      consequence of iDNA’s November 3, 2000 repurchase of shares of its Common Stock,
      iDNA underwent a “change in ownership” as defined for the purposes of Sections
      382 and 383 of the Internal Revenue Code. As a result of the “change in
      ownership” described above, the use of net operating loss carryforwards totaling
      approximately $61.0 million (“Section 382 NOL”) incurred prior to November 3,
      2000 will be subject to significant annual limitation. As of January 31, 2008,
      iDNA has utilized approximately $858,000 of the Section 382 NOL. Furthermore,
      an
      iDNA subsidiary has a Separate Return Loss Year that is also subject to “change
      of ownership” limitations of $2.2 million as of January 31, 2008. The use of the
      net operating loss carryforwards incurred after November 3, 2000, which total
      $28.2 million as of January 31, 2008, are not subject to the Section 382
      limitation.




As
      of
      January 31, 2008, iDNA also has unused low income housing credits (“LIHC”)
      totaling $4.3 million which expire: $569,000 in Fiscal 2013, $820,000 in Fiscal
      2019, $953,000 in Fiscal 2020, $968,000 in Fiscal 2021, $898,000 in Fiscal
      2022
      and additional smaller amounts expiring in Fiscal 2023 through Fiscal 2028.
      Of
      such low income housing credits, $3.4 million were generated prior to November
      3, 2000 and are therefore subject to the Section 383 limitation described above.
      iDNA estimates that the entire LIHC of $3.4 million subject to the Section
      383
      limitation will expire unused.




As
      of
      January 31, 2008, iDNA has $919,000 of minimum tax credits, which may be applied
      against any future regular income taxes which exceed alternative minimum taxes.
      These credits may be carried forward indefinitely and are also subject to the
      Section 383 limitation.





The
      components of the net deferred tax asset (liability) are as follows (in
      thousands):





January 31,2008
            
            2007Deferred
                tax assets:Self-insurance
                claims
            
            $
            60
            
            $
            82Impairment
                charge
            
            
            2,236
            
            
            1,976State
                income taxes
            
            
            98
            
            
            93Accrued
                liabilities
            
            
            221
            
            
            150Stock
                options
            
            
            204
            
            
            125Tax
                credits carryforwards
            
            
            1,809
            
            
            5,213Net
                operating loss carryforwards (federal and state)
            
            
            26,092
            
            
            33,389Other
            
            
            329
            
            
            15Total
                deferred tax assets
            
            
            31,049
            
            
            41,043Deferred
                tax liabilities:Depreciation
            
            
            (211
            )
            
            (89
            )Limited
                partnership investments
            
            
            (1,850
            )
            
            (1,562
            )Total
                deferred tax liabilities
            
            
            (2,061
            )
            
            (1,651
            )Net
                deferred tax asset before valuation allowance
            
            
            28,988
            
            
            39,392Less:
                valuation allowance
            
            
            (28,988
            )
            
            (39,392
            )Net
                deferred tax asset
            
            $
            -
            
            $
            -





58





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      8 – INCOME TAXES (CONTINUED)**





A
      valuation allowance for all of iDNA’s net deferred tax assets has been provided
      as iDNA is unable to determine, at this time, that the generation of future
      taxable income against which the net operating loss and tax credit carryforwards
      could be used can be predicted to be more likely than not. In addition, iDNA
      recorded a reduction of $11.9 million for its deferred tax asset in Fiscal
      2008
      as a consequence of (i) the $8.5 million estimated reduction of the net
      operating loss carryforward of $24.5 million and (ii) the $3.4 million LHHC
      each
      of which are estimated to expire as a consequence of the “change in ownership”
discussed above. Excluding the effect of the limitation adjustment of $11.9
      million, the net change in the valuation allowance for Fiscal 2008, Fiscal
      2007
      and Fiscal 2006 was ($1.5) million, $2.8 million and ($443,000), respectively.





Reconciliations
      of the federal statutory tax rate to the effective tax rate for continuing
      operations are as follows:





Years
                ended January 31,2008
            
            
            2007
            
            
            2006Statutory
                rate
            
            
            (35.0
            )%
            
            (35.0
            )%
            
            (35.0
            )%Permanent
                differences
            
            
            0.5
            
            
            1.2
            
            
            159.8State income taxes (net of federal tax benefit)
            
            
            0.1
            
            
            0.1
            
            
            6.6Deferred
                tax valuation allowance
            
            
            13.1
            
            
            36.7
            
            
            (98.1
            )Tax
                credits
            
            
            -
            
            
            -
            
            
            (4.1
            )Expense
                due to AMT NOL limitation
            
            
            -
            
            
            -
            
            
            5.6Adjustment
                to NOL carryforward
            
            
            0.3
            
            
            (5.2
            )
            
            (20.9
            )Goodwill
                impairment
            
            
            23.8
            
            
            -
            
            
            -NOL and LIHC adjustment Section 382/383
            
            
            101.3
            
            
            -
            
            
            -Deferred
                tax valuation allowance NOL and LIHC
            
            
            (101.3
            )
            
            -
            
            
            -Other
            
            
            0.1
            
            
            2.1
            
            
            1.8Effective
                Tax Rate
            
            
            2.9
            %
            
            (.1
            )%
            
            15.7
            %





iDNA’s
      adoption of FIN No. 48 for the year ended January 31, 2008 resulted in an
      adjustment to retained deficit of $329,000 to reflect potential liabilities
      for
      iDNA’s uncertain tax positions, inclusive of interest and penalties. iDNA
      adjusted its initial estimates developed during the first quarter of Fiscal
      2008
      as iDNA refined its calculations and assessment of its uncertain tax positions.
      iDNA recognizes interest and penalties associated with uncertain tax positions
      as a component of tax expense (benefit).





iDNA
      had
      no unrecognized tax benefits as of January 31, 2007. iDNA classifies liabilities
      for unrecognized tax benefits and related interest and penalties as long-term
      liabilities. Interest expense and penalties related to current year unrecognized
      tax benefits are classified as income tax expense. During Fiscal 2008, iDNA
      did
      not recognize interest expense pertaining to current year unrecognized tax
      benefits; there was, therefore, no after-tax impact.





59





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      8 – INCOME TAXES (CONTINUED)**





The
      following table summarizes the activity related to unrecognized tax benefits
      (in
      thousands):





AmountBalance
                as of February 1, 2007
            
            $
            329Increases
                related to current year tax positions
            
            
            -Increases
                related to prior year tax positions
            
            
            -Decreases
                related to prior year tax positions
            
            
            -Settlements
            
            
            -Lapse
                of statute of limitations
            
            
            -Balance
                as of January 31, 2008
            
            $
            329





None
      of
      the unrecognized tax benefits of approximately $329,000 at January 31, 2008
      would, if recognized, effect iDNA’s annual effective tax rate. IDNA conducts
      business and files tax returns in various jurisdictions and currently has no
      tax
      examinations in progress. The last taxable year under examination by the U.S.
      Internal Revenue Service (“IRS”) was the year ended January 31, 1998. The
      taxable years ended January 31, 2005 through January 31, 2007 remain open to
      examination by the IRS. In other major jurisdictions where iDNA conducts
      business, the remaining open taxable years vary. IDNA does not expect that
      the
      total amount of unrecognized tax benefits will significantly change over the
      next twelve months. IDNA does not expect a significant payment within the next
      twelve months, and is not able to provide a reasonably reliable estimate of
      the
      timing of any future tax payments, relating to uncertain tax positions.





**NOTE
      9 – STOCKHOLDERS’ EQUITY AND PREFERRED STOCK**





*Preferred
      Stock*


iDNA
      is
      authorized to issue up to 5,000,000 shares of preferred stock, in one or more
      series, having such preferences and terms as iDNA’s Board of Directors may
      determine. At January 31, 2008 and 2007, there were no outstanding shares of
      Preferred Stock.





*Warrants
      Issued to Eligible Shareholders*


As
      a
      consequence of the New York Settlement Stipulation (as defined and described
      in
      Note 18), in April 2006 iDNA issued to the class of Eligible Shareholders
      warrants to purchase 100,282 shares of Common Stock. Each warrant issued by
      iDNA
      has a five year term expiring April 2011 and is exercisable for shares of Common
      Stock at a price of $1.55 per share. For Fiscal 2006, iDNA charged other income
      $25,000 for the expense of the fair value of the warrants issued to the Eligible
      Shareholders.




60


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      9 – STOCKHOLDERS’ EQUITY AND PREFERRED STOCK (CONTINUED)**





*Stock
      Grants and Awards*


In
      Fiscal
      2007, iDNA issued 52,000 shares of unregistered treasury stock to two employees
      as a bonus and issued an additional 10,000 shares of unregistered stock to
      an
      unrelated third party for professional services. Such shares issued were
      recorded at their then market value for an aggregate cost of $52,000, or a
      weighted average of $0.83 per share. The restricted shares may not be sold
      or
      otherwise transferred without registration under the Securities Act of 1933,
      as
      amended, and applicable state securities laws or an exemption therefrom. In
      the
      event that iDNA proposes to register any of its securities under the Securities
      Act, whether for its own account or for the account of another shareholder,
      the
      treasury stock issued may be included in such registration.





In
      February 2005, iDNA issued 100,000 shares of unregistered, restricted treasury
      stock as compensation for professional services rendered by an unrelated third
      party. Such shares issued were recorded at their then market value of $0.33
      per
      share for an aggregate cost of $33,000.





During
      Fiscal 2004, iDNA granted 372,000 shares of Common Stock pursuant to the 2003
      Restricted Stock Plan (see Note 10) valued at $119,000 representing the fair
      value of the Common Stock at the time of award. Accordingly, iDNA recorded
      $119,000 of deferred compensation expense in connection with the 2003 Plan
      grant, which was reported as a component of stockholders’ equity, during Fiscal
      2004. The deferred compensation expense is charged to operations over the 5
      year
      vesting period of the stock grant. For Fiscal 2008, 2007 and 2006, iDNA charged
      to operations $23,000, $24,000 and $24,000, respectively, with respect to such
      grant.





*Stockholders’
      Rights Plan*


On
      September 26, 2001, iDNA’s Board of Directors declared a dividend of one
      preferred share purchase right (a “Right”) for each outstanding share of iDNA’s
      Common Stock to stockholders of record at the close of business on October
      8,
      2001 (the “Record Date”). Under certain circumstances, a Right may be exercised
      to purchase from iDNA a unit consisting of one one-hundredth of a share (a
      “Unit”) of Series D Junior Participating Preferred Stock, par value $.05 per
      share (the “Series D Preferred Stock”) at a Purchase Price of $5.00 per Unit,
      subject to adjustment.





The
      Rights become exercisable upon the earlier of (i) ten business days following
      a
      public announcement that a person or group of affiliated or associated persons
      (an “Acquiring Person”) has acquired beneficial ownership of 15% or more of the
      outstanding shares of iDNA Common Stock (the “Stock Acquisition Date”), other
      than as a result of repurchases of stock by iDNA or certain inadvertent actions
      by institutional or certain other stockholders, or (ii) 10 business days (or
      such later date as the Board shall determine) following the commencement of
      a
      tender offer or exchange offer that would result in a person or group becoming
      an Acquiring Person. Once exercisable, and in some circumstances if certain
      additional conditions are met, the rights plan allows iDNA’s shareholders (other
      than the acquirer) to purchase, at a substantial discount, iDNA Common Stock
      or
      common stock of the surviving acquirer in the event of a merger.





The
      Rights will expire on September 26, 2011 and may be redeemed by iDNA for $0.01
      per Right at any time prior to the close of business on the later of (i) the
      tenth business day following the acquisition by a person or group of beneficial
      ownership of 15% or more of iDNA's Common Stock or (ii) the tenth business
      day
      (or such later date as iDNA’s Board of Directors shall determine) following the
      commencement of a tender offer or exchange offer that would result in a person
      or group becoming an Acquiring Person.




61




**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      10 – BENEFITS PLANS**





*Equity
      Compensation Plans*


iDNA's
      2005 Equity Compensation Plan (the “2005 Plan”) and iDNA’s 1993 Equity Incentive
      Plan (the “1993 Plan”, together with the 2005 Plan collectively, the “Stock
      Plans”) each provides for the granting of incentive and non-qualified stock
      options, stock appreciation rights, and common stock and restricted common
      stock
      awards to key employees, advisors and non-employee members of iDNA’s Board of
      Directors. The total number of shares available for options or awards granted
      under the 2005 Plan and the 1993 Plan is 2,000,000 shares and 2,200,000 shares,
      respectively. During Fiscal 2008, iDNA granted options to acquire 300,000 shares
      of Common Stock to certain financial advisors who exercised such options,
      pursuant to the Stock Plans. During Fiscal 2007, iDNA granted options and stock
      awards to acquire an aggregate of 1,605,000 shares of Common Stock to officers,
      non-employee directors, advisors and employees of iDNA pursuant to the Stock
      Plans. Each such stock option is subject to vesting over a specific period
      of
      time and, in certain cases, performance criterion. During Fiscal 2006, iDNA
      granted options to acquire 507,509 shares of Common Stock options pursuant
      to
      the Stock Plans, each such stock option being subject to vesting over a specific
      period of time and, in certain cases, performance criterion.





Options
      to acquire 143,668 and 455,557 shares of Common Stock were cancelled under
      the
      Stock Plan during Fiscal 2008 and Fiscal 2006, respectively. There were no
      stock
      options cancelled under the Stock Plans during Fiscal 2007. At January 31,
      2008,
      there were 405,000 shares and 155,068 shares available for future stock awards
      or option grants under the 2005 Plan and the 1993 Plan,
      respectively.





The
      fair
      value of the stock options at the time of the grant during Fiscal 2008 was
      $195,000. Each of the stock options granted in Fiscal 2007 and Fiscal 2006
      were
      subject to vesting such that the fair value of the stock options granted is
      charged to operations over the vesting period. At January 31, 2008, an aggregate
      of 2,365,170 options had vested pursuant to the terms of the grant under the
      Stock Plans. iDNA has recorded charges to operations for stock-based
      compensation expense for Fiscal 2008 and Fiscal 2007 of $260,000 and $724,000,
      respectively. If iDNA had recorded compensation expense using the fair value
      method of SFAS No. 123(R) for Fiscal 2006, iDNA’s net after tax charge to
      operations would have been $67,000.





The
      weighted average fair value using the Black-Scholes option pricing model of
      the
      options granted during Fiscal 2008, Fiscal 2007 and Fiscal 2006 was $0.65,
      $0.43
      and $0.50, respectively. Based upon iDNA’s limited historical experience, iDNA
      did not estimate any forfeitures for the options granted during Fiscal 2008,
      Fiscal 2007 or Fiscal 2006. The fair value of the stock options at the date
      of
      grant was estimated using the Black-Scholes option pricing model with the
      following weighted average assumptions:





Year Ended January 31,2008
            
            2007
            
            2006Expected
                option life (years)
            
            
            1.0
            
            
            5.6
            
            
            7.3Risk
                free interest rate
            
            
            4.9
            %
            
            4.6
            %
            
            4.6
            %Dividend
                yield
            
            
            0
            %
            
            0
            %
            
            0
            %Expected
                volatility
            
            
            140
            %
            
            129
            %
            
            107
            %





62





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      10 – BENEFITS PLANS (CONTINUED)**





A
      summary
      of all options granted, exercised, and cancelled under the Stock Plans for
      Fiscal 2008, Fiscal 2007 and Fiscal 2006 is as follows:





Years Ended January 31,2008
            
            2007
            
            2006Weighted Average
            
            
            
            Weighted Average
            
            
            
            Weighted AverageShares
            
            Exercise Price
            
            Shares
            
            Exercise Price
            
            Shares
            
            Exercise PriceOptions
                outstanding - beginning of year
            
            
            3,230,682
            
            $
            0.69
            
            
            1,681,932
            
            $
            0.78
            
            
            1,630,000
            
            $
            0.80Granted
            
            
            300,000
            
            $
            0.05
            
            
            1,605,000
            
            $
            0.59
            
            
            507,509
            
            $
            0.59Exercised
            
            
            (356,250
            )
            $
            0.04
            
            
            (56,250
            )
            $
            -
            
            
            -
            
            $
            -Cancelled
            
            
            (143,668
            )
            $
            -
            
            
            -
            
            $
            -
            
            
            (455,577
            )
            $
            0.66Options
                outstanding - end of year
            
            
            3,030,764
            
            $
            0.70
            
            
            3,230,682
            
            $
            0.69
            
            
            1,681,932
            
            $
            0.78Exercisable,
                at end of year
            
            
            2,365,170
            
            
            
            
            
            1,873,651
            
            
            
            
            
            1,285,000Available
                for grant
            
            
            560,068
            
            
            
            
            
            716,400
            
            
            
            
            
            2,321,400Weighted
                average fair value per share of options granted during
                year
            
            $
            0.65
            
            
            
            
            $
            0.43
            
            
            
            
            $
            0.50





The
      outstanding options expire at dates through the year 2014. A summary of stock
      options outstanding and exercisable as of January 31, 2008 is as
      follows:





Options Outstanding
            
            Options ExercisableRange of
            
            
            
            Weighted Average
            
            Weighted Average
            
            
            
            Weighted AveragePer Share
            
            Number
            
            Remaining Contractual
            
            Per Share
            
            Number
            
            Per ShareExercise Prices
            
            Outstanding
            
            Life (years)
            
            Exercise Price
            
            Exercisable
            
            Exercise Price$0.00
                to $0.51
            
            
            462,500
            
            
            3.84
            
            $
            0.37
            
            
            200,000
            
            $
            0.49$0.52
                to $0.92
            
            
            1,943,284
            
            
            4.04
            
            
            0.58
            
            
            1,665,170
            
            
            0.65$1.03
                to $1.15
            
            
            512,500
            
            
            2.65
            
            
            1.05
            
            
            387,500
            
            
            1.05$1.30
            
            
            112,500
            
            
            1.43
            
            
            1.54
            
            
            112,500
            
            
            1.54Total
            
            
            3,030,784
            
            
            
            
            
            
            
            
            2,365,170





*2003
      Restricted Stock Plan*


iDNA
      sponsors a 2003 Restricted Stock Plan (the “2003 Plan”) that provides stock
      grants to all employees. The 2003 Plan authorizes the grant of up to a maximum
      of 400,000 restricted shares of Common Stock to employees of iDNA. No grants
      were made under the 2003 Plan during Fiscal 2008, Fiscal 2007 and Fiscal 2006.
      During Fiscal 2004, there were 372,000 shares of Common Stock granted pursuant
      to the terms of the 2003 Plan at an estimated fair value of $0.32 per share.
      Each share granted is restricted and is not registered for resale. Each award
      under the 2003 Plan vests at the rate of 20% per year over a five year period.
      Shares granted under the 2003 Plan may not be sold, transferred, pledged or
      otherwise disposed until they vest. During the vesting period, unvested shares
      are voted by the manager of each business unit. For Fiscal 2004, iDNA recorded
      $119,000 of deferred compensation expense in connection with the 2003 Plan
      grants, which was recorded as a component of shareholders’ equity. The deferred
      compensation expense is amortized on a straight-line basis over the 5 year
      vesting period of the restricted iDNA Common Stock. For Fiscal 2008, Fiscal
      2007
      and Fiscal 2006, deferred compensation amortization expense was $23,000, $24,000
      and $24,000, respectively.





63





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      10 – BENEFITS PLANS (CONTINUED)**





*401(k)
      Savings and Profit Sharing Plan*


iDNA
      maintained the iDNA 401(k) Savings and Profit Sharing Plan (the “iDNA 401k”), a
      defined contribution benefit program under IRS Code Section 401(k), for Fiscal
      2008, Fiscal 2007 and Fiscal 2006. The iDNA 401k covers substantially all active
      iDNA employees who are at least 21 years of age and have completed 90 days
      of
      service. The iDNA 401k allows eligible employees to contribute up to 50% of
      their compensation on a pre-tax basis. The iDNA 401k provides a safe harbor
      matching contribution of (i) 100% of the first 3% of the employee’s
      contribution, (ii) 50% of the next 2% of the employees’ contribution for a
      maximum of 4% matching contribution and (iii) vesting for the iDNA matching
      contribution is immediate. For Fiscal 2008, Fiscal 2007 and Fiscal 2006, the
      charge to operations for iDNA’s contribution to the iDNA 401k was $200,000,
      $214,000 and $164,000, respectively.





iDNA
      does
      not provide post-retirement or post-employment benefits to its
      employees.





**NOTE
      11 – COMMITMENTS AND CONTINGENCIES**





*Self-Insurance
      Reserves for Property Damage and Personal Injury Claims*


iDNA’s
      wholly-owned subsidiary ARAC is the subject to certain self-insurance claims
      and
      litigation expenses relating to its discontinued automobile rental operations
      (see Note 17). iDNA’s management estimates ARAC’s required self-insurance
      liability based upon specific identification of the known matters subject to
      future claims, the nature of the claim and the estimated costs to be incurred.
      These estimates include, but are not limited to, ARAC’s historical loss
      experience and projected loss factors. The required self-insurance liability
      is
      subject to adjustment in the future based upon changes in the nature of the
      remaining claims or the ultimate cost. As a consequence of iDNA’s sale of its
      automobile rental operations in 1995, iDNA believes that all incurred claims
      have been reported to ARAC and that there are no longer any incurred but not
      yet
      reported claims to be received by ARAC. During Fiscal 2008 and Fiscal 2006,
      ARAC
      paid out $63,000 and $21,000, respectively, for residual self-insurance claims
      previously accrued. iDNA did not incur or pay out residual self-insurance claims
      for Fiscal 2007. iDNA’s self-insurance liability at January 31, 2008 and 2007
      was $172,000 and $235,000, respectively.





Because
      of the uncertainties related to several residual small claims and legal
      proceedings involving iDNA’s former rental operations and self-insurance claims,
      it is difficult to project the ultimate effect the adjudication or settlement
      of
      these matters will have on iDNA. At January 31, 2008, iDNA had accrued $172,000
      to cover all outstanding self-insurance liabilities. As additional information
      regarding iDNA’s potential liabilities becomes available, iDNA will revise the
      estimates as appropriate.




*Other
      Litigation*


In
      the
      normal course of its business, iDNA is named as defendant in legal proceedings.
      It is the policy of iDNA to vigorously defend litigation and/or enter into
      settlements of claims where its management deems appropriate.





64





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      11 – COMMITMENTS AND CONTINGENCIES (CONTINUED)**





*Lease
      Commitments*


iDNA
      leases office and warehouse facilities in Florida, Indiana and New York under
      leases expiring at various dates. In addition to the lease base rents, iDNA
      is
      generally required to pay increases over base period amounts for taxes and
      other
      operating expense. At January 31, 2008, future minimum payments under
      noncancellable operating leases, net of the effects of the sublease, are as
      follows (in thousands):





Fiscal Year
            
            Amount2009
            
            $
            5672010
            
            
            5292011
            
            
            3892012
            
            
            3082013
            
            
            282Thereafter
            
            
            -$
            2,075





*Employment
      Agreement with James J. McNamara*


On
      November 29, 2006, the Board of Directors of iDNA and iDNA consummated, an
      employment agreement with James J. McNamara (the “ Employment
      Agreement ”).
      Under
      the terms of the Employment Agreement, Mr. McNamara shall be employed as the
      Company’s Chief Executive Officer for an initial term of approximately three
      years, until January 31, 2010 (the “ Initial
      Term ”),
      and
      shall receive an initial base salary of $590,000 per year (the “ Base
      Salary ”),
      which
      shall increase annually by $15,000 each January 31 st ,
      beginning January 31, 2008 (each year under the Employment Agreement commencing
      January 31 st ,
      an
“ Employment
      Year ”).
      Mr.
      McNamara is also entitled to receive an annual bonus of $100,000 if, at the
      end
      of a particular Employment Year, the price of iDNA’s Common
      Stock ,
      exceeds
      the previous Employment Year’s price per share by 125%. Furthermore, Mr.
      McNamara is also entitled to incentive compensation of up to $200,000 in the
      event that iDNA achieves certain performance objectives established by iDNA’s
      Board of Directors. The incentive compensation may also be increased by the
      Board of Directors if the Board believes it appropriate to reward the Chief
      Executive Officer’s performance for a given year. For Fiscal 2008, iDNA charged
      operations $200,000 for incentive compensation earned during the
      period.





In
      addition to cash compensation, the Employment Agreement provides Mr. McNamara,
      as a signing bonus, a grant of 500,000 shares of Common Stock. However, in
      the
      event of Mr. McNamara’s resignation or termination for any reason prior to the
      expiration of the Initial Term, iDNA may redeem and repurchase, at the price
      of
      $0.01 per share, (i) 250,000 shares of Common Stock, if such resignation or
      termination occurs after the passage of one Employment Year but prior to the
      completion of the second Employment Year under the Employment Agreement (January
      31, 2009), or (ii) 125,000 shares of Common Stock if such resignation or
      termination follows the completion of two Employment Years but precedes the
      completion of the third Employment Year under the Employment Agreement (January
      31, 2010). As a
      consequence of the grant of stock as a signing bonus, iDNA charged to operations
      $290,000 during Fiscal 2007 for compensation expense for the fair value of
      the
      stock at the time of grant.




65




**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      11 – COMMITMENTS AND CONTINGENCIES (CONTINUED)**





Besides
      the grant of shares of Common Stock, the Employment Agreement also provides
      for
      Mr. McNamara to be granted stock options exercisable for the purchase of 500,000
      shares of Common Stock at
      the
      following exercise prices: (i) 125,000 options at $0.61 per share; (ii) 125,000
      options at $0.73 per share; (iii) 125,000 options at $0.88 per share; and (iv)
      125,000 options at $1.05 per share. The stock options, having a seven year
      term
      from the grant date, were granted (upon approval by iDNA’s Board of Directors)
      pursuant to the terms of iDNA’s
      2005 Equity Compensation Plan .
      Of the
      500,000 options granted, 250,000 options have vested (and are exercisable)
      as of
      January 31, 2008, whereas the remaining 250,000 of the options are subject
      to
      vesting and become exercisable in two equal, annual installments of 125,000
      options each, provided that Mr. McNamara is employed as of November 29, 2008
      and
      2009, respectively. As a
      consequence of the grant of stock options, for Fiscal 2008 and Fiscal 2007
      iDNA
      charged to operations $64,000 and $75,000, respectively, for compensation
      expense for the fair value of the vested portion of the stock options at the
      time of grant.





The
      Employment Agreement also provides for certain payments to Mr. McNamara in
      the
      event of a termination without cause by iDNA or a termination for good reason
      by
      Mr. McNamara, as follows: iDNA will pay to Mr. McNamara, in accordance with
      iDNA’s normal payroll payment practices, the lesser of (i) thirty months of the
      Base Salary or (ii) one dollar ($1) less than the amount that would constitute
      an “excess parachute payment” under Section 280G of the Internal Revenue Code.
      As a result of such termination, iDNA shall also continue to provide Mr.
      McNamara with all employee benefits in which he was participating or which
      he
      was receiving as of the effective date of termination (or, if greater, as of
      the
      end of the prior year) for thirty months following termination. At its own
      election, iDNA may make a lump sum payment of eighteen months of base
      compensation and employee benefits as full termination compensation pursuant
      to
      the terms of the Employment Agreement.




If,
      upon
      a Change in Control (as defined in the Employment Agreement), as a result of
      any
      payment or the vesting of any options pursuant to the terms of the Employment
      Agreement (or pursuant to any other plan, agreement or program) (collectively,
      a
“ Payment ”),
      it is
      determined that Mr. McNamara would be subject to the excise tax imposed by
      Section 4999 of the Internal Revenue Code (the “ Parachute
      Tax ”),
      then
      Mr. McNamara shall be entitled to receive an additional payment or payments
      (a
“ Gross-Up
      Payment ”)
      in an
      amount such that, after payment by Mr. McNamara of all taxes (including any
      Parachute Tax) imposed upon the Gross-Up Payment, Mr. McNamara will retain
      an
      amount of the Gross-Up Payment equal to the Parachute Tax imposed upon the
      Payment.




66


**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      12 – ACQUISITION**





*OTI*


On
      November 18, 2005, iDNA  consummated
      the acquisition of 100% of the membership interests of OTI from Flexner Wheatley
      & Associates (“FWA”) and MeetingNet Interactive, Inc. (“MeetingNet”). OTI is
      an information services and technology company providing interactive software
      and hardware systems and services that facilitate audience interaction,
      participation and polling to collect, exchange and/or analyze data and
      information in real-time for use in live events, training and education
      satellite videoconferencing and corporate or institutional meeting services.
      Prior to the acquisition of OTI, iDNA’s subsidiary Audience Response Systems,
      Inc. (“ARS”), also provided similar services. With the acquisition of OTI, iDNA
      (i) gained access to important new clients, industries and market segments,
      (ii)
      acquired a fully developed and integrated propriety software that is an “add-in”
application module with Microsoft ® Office
      PowerPoint ® which,
      among other attributes, allows clients to develop and self-administrate audience
      interaction and data collection programs at smaller and other venues not then
      currently served by iDNA and (iii) expanded its solutions-based communication
      product offering to meet dynamic demands of current and potential clients.
      The
      significant value in the acquisition lay principally in its (i) industry
      position, (ii) assembled workforce, (iii) proprietary software, (iv) trademarks
      and (iv) client lists and client relations.





In
      exchange for the acquisition of all of the outstanding membership interests
      of
      OTI, iDNA (i) paid $744,000 at closing from iDNA’s available cash balances, (ii)
      issued to FWA and MeetingNet promissory notes in an aggregate principal amount
      of $1.5 million (“OTI Promissory Notes”) and (iii) issued an aggregate of
      496,250 shares of iDNA’s Common Stock to FWA and MeetingNet valued at $258,000,
      representing the fair value of such number of shares of iDNA’s Common Stock at
      the date of acquisition. For financial reporting purposes, the transaction
      was
      treated as a purchase with an effective date of November 18, 2005. The purchase
      price is subject to an upward and downward adjustment not to exceed $412,500
      based upon OTI’s meeting, or failing to meet, certain minimum financial
      performance criterion for Fiscal 2007 and Fiscal 2008. As of January 31, 2008,
      OTI did not meet all of the minimum financial performance criterion and, as
      a
      consequence, iDNA retains an option to reduce the purchase price in amount
      estimated between $206,000 and $412,000. iDNA has not exercised its option
      to
      reduce the purchase price of OTI as of May 14, 2008 and no adjustment to the
      OTI
      Promissory Notes was recorded at January 31, 2008.





In
      connection with the OTI acquisition, Mark Fite, entered into an employment
      agreement with OTI under which he has agreed to serve as President of OTI for
      an
      initial term of three years. Under the terms of the employment agreement, Mr.
      Fite will be entitled to base compensation of $150,000 per year, a grant of
      stock options to acquire 60,000 shares of iDNA Common Stock, subject to vesting
      in three equal annual installments over the term of the employment agreement
      and
      a performance bonus based upon the operating results of OTI. iDNA also granted
      stock options to all active OTI employees to acquire an aggregate of 66,500
      shares of iDNA Common Stock, subject to vesting over a three year period and
      subject to OTI’s meeting certain minimum financial performance criterion for
      Fiscal 2007 and Fiscal 2008. The exercise price for the stock options granted
      to
      Mr. Fite and the OTI employees was set at the fair value of iDNA’s Common Stock
      as of the date of the OTI acquisition, $0.52 per share.




67




**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      12 – ACQUISITION (CONTINUED)**





As
      a
      consequence of the OTI acquisition and in accordance with SFAS No. 141 *Business
      Combinations* ,
      iDNA
      recorded goodwill and other intangible assets of $403,000 and $703,000,
      respectively (see Note 2). iDNA has estimated lives for other intangible assets
      of 5 to 7 years. For Fiscal 2008, Fiscal 2007 and for the period of November
      18,
      2005, the date of acquisition, to January 31, 2006, iDNA charged to operations
      $105,000, $114,000 and $10,000, respectively, for the amortization of these
      intangibles. iDNA engaged the valuation services of an independent third party
      appraisal company to assist iDNA with respect to the final determination of
      the
      fair value of tangible and intangible assets acquired in accordance with SFAS
      No. 141 *Business
      Combinations* .





iDNA
      does
      not expect the amortization or impairment charges related to goodwill or
      other intangibles, if any, to be deductible for income tax
      purposes.





The
      following sets forth the pro forma condensed results of operations of iDNA
      and
      OTI for Fiscal 2006 as if the acquisition was consummated on February 1, 2005.
      Prior to OTI’s acquisition, OTI, used a December 31 year end, and accordingly
      the pro forma results have been prepared by combining the historical results
      for
      iDNA for the year ended January 31 with the historical results of OTI for the
      year ended December 31. These pro forma results have been prepared for
      illustrative purposes only and do not purport to be indicative of what would
      have occurred had the acquisition been in effect for the periods indicated
      or
      the results which may occur in the future. Pro forma revenues, net loss and
      loss
      per share are as follows (in thousands):





Year Ended
              January 31,2006Service
                revenues
            
            $
            18,990Net
                income (loss) from continuing operations
            
            $
            153Income
                (loss) per share from continuing operations
            
            $
            0.02





**NOTE
      13 – SEGMENT INFORMATION**





iDNA’s
      operations are comprised of three principal reportable segments, strategic
      communications services, information services and entertainment. iDNA manages
      each segment separately as a consequence of different marketing, service
      requirements and technology strategies.





*Strategic
      Communication Services*


The
      strategic communications services segment provides content development via
      the
      design, development and production of media, collateral material, logistics,
      support and/or broadcast services for presentations at corporate and
      institutional events, meetings, training seminars and symposiums. The
      presentations may be live at single or multi-site venues and can include video
      conferencing, satellite broadcasting and webcasting, or the presentations may
      be
      provided via on-demand access via internet websites, DVD or video
      tape.




68




**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      13 – SEGMENT INFORMATION (CONTINUED)**





*Information
      Services*


The
      information services segment utilizes custom wireless communication technology
      and proprietary software to facilitate client audience interaction,
      participation and polling to collect, exchange and/or analyze data and
      information in real-time during a meeting or event. The wireless communication
      services are available as a turn-key service provided by iDNA during a scheduled
      meeting or event or alternatively, a client can purchase from iDNA the required
      electronic components and related proprietary software to administer its needs
      independently.





*Entertainment*


As
      of
      consequence of iDNA’s investment in AFC (see Note 4), iDNA operates in the movie
      exhibition and entertainment industry.





iDNA
      evaluates the performance of its segments and allocates resources based on
      revenues and operating income. The table below presents the information about
      iDNA’s reportable segments for its continuing operations used by its chief
      operating decision-makers for Fiscal 2008, Fiscal 2007 and Fiscal 2006. Prior
      fiscal periods have been conformed to the current presentation.





Information
            
            Strategic
              Communications
            
            
            
            Undistributed
              Corporate
            
            IntersegmentServices
            
            Services
            
            Entertainment
            
            Expenses
            
            Elimination
            
            Total**Year
                Ended January 31, 2008**Revenues
            
            $
            8,711
            
            $
            6,052
            
            $
            -
            
            $
            -
            
            $
            (146
            )
            $
            14,617Operating
                income (loss)
            
            
            (7,267
            )
            
            (4,225
            )
            
            630
            
            
            (960
            )
            
            -
            
            
            (11,822
            )Identifiable
                assets
            
            
            2,778
            
            
            208
            
            
            7,129
            
            
            3,438
            
            
            -
            
            
            13,553Depreciation
                and amortization expense
            
            
            874
            
            
            713
            
            
            -
            
            
            49
            
            
            -
            
            
            1,636Impairment
                charge
            
            
            5,940
            
            
            2,093
            
            
            
            
            
            
            
            
            
            
            
            8,033Capital
                expenditures
            
            
            151
            
            
            44
            
            
            -
            
            
            6
            
            
            -
            
            
            201**Year
                Ended January 31, 2007**Revenues
            
            $
            9,478
            
            $
            6,083
            
            $
            -
            
            $
            -
            
            $
            (117
            )
            $
            15,444Operating
                income (loss)
            
            
            (482
            )
            
            (6,807
            )
            
            590
            
            
            (902
            )
            
            -
            
            
            (7,601
            )Identifiable
                assets
            
            
            10,285
            
            
            3,495
            
            
            7,224
            
            
            1,074
            
            
            -
            
            
            22,078Depreciation
                and amortization expense
            
            
            871
            
            
            719
            
            
            -
            
            
            62
            
            
            -
            
            
            1,652Impairment
                charge
            
            
            -
            
            
            4,482
            
            
            -
            
            
            
            
            
            -
            
            
            4,482Capital
                expenditures
            
            
            357
            
            
            144
            
            
            -
            
            
            78
            
            
            -
            
            
            579**Year
                Ended January 31, 2006**Revenues
            
            $
            5,958
            
            $
            8,322
            
            $
            -
            
            $
            -
            
            $
            (190
            )
            $
            14,090Operating
                income (loss)
            
            
            (54
            )
            
            (465
            )
            
            738
            
            
            (664
            )
            
            -
            
            
            (445
            )Identifiable
                assets
            
            
            10,819
            
            
            9,047
            
            
            7,836
            
            
            1,145
            
            
            -
            
            
            28,847Depreciation
                and amortization expense
            
            
            587
            
            
            757
            
            
            -
            
            
            67
            
            
            -
            
            
            1,411Capital
                expenditures
            
            
            222
            
            
            57
            
            
            -
            
            
            6
            
            
            -
            
            
            285





69





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      14 – SIGNIFICANT CLIENTS**





Revenues
      for Fiscal 2008, Fiscal 2007 and Fiscal 2006 were $14.6 million, $15.4 million
      and $14.1 million, respectively. Pfizer Inc. and R&D Strategic Solutions,
      Inc. accounted for 12% and 15%, respectively, of revenues for Fiscal 2008.
      Pfizer, Inc. accounted for 17% of revenues for Fiscal 2007. Pfizer Inc. and
      BearingPoint, Inc. accounted for 21% and 13%, respectively of revenues for
      Fiscal 2006.





iDNA
      is
      subject to account receivable credit concentrations from time-to-time as a
      consequence of the timing, payment pattern and ultimate value of large meeting
      or event schedules with its clients. These concentrations of client meetings
      or
      events may impact iDNA’s overall exposure to credit risk, either positively or
      negatively, in that its clients may be similarly affected by changes in
      economic, regulatory or other conditions that may impact the timing and
      collectability of amounts due to iDNA. At January 31, 2008, two clients
      comprised approximately 12.3% and 11.0%, respectively, of iDNA’s accounts
      receivable. Management believes that the provision for possible losses on
      uncollectible accounts receivable is adequate for iDNA’s credit loss exposure.
      At January 31, 2008 and 2007, the allowance for doubtful accounts was $75,000
      and $82,000, respectively.





**NOTE
      15 – QUARTERLY FINANCIAL DATA (UNAUDITED)**





The
      following table presents unaudited quarterly financial information for Fiscal
      2008 and Fiscal 2007 (in thousands, except per share amounts):





QuarterFirst
            
            Second
            
            Third
            
            Fourth**Fiscal
                2008**Revenues
            
            $
            3,600
            
            $
            2,824
            
            $
            5,070
            
            $
            3,123Gross
                profit
            
            
            1,079
            
            
            779
            
            
            2,569
            
            
            859Income
                (loss) from continuing operations
            
            $
            (1,043
            )
            $
            (1,560
            )
            $
            255
            
            $
            (9,475
            )Discontinued
                operations, net of tax
            
            
            5
            
            
            3
            
            
            -
            
            
            2Net
                income (loss)
            
            $
            (1,038
            )
            $
            (1,557
            )
            $
            255
            
            $
            (9,473
            )Basic
                and diluted income (loss) earnings per share1Continuing
                operations
            
            $
            (.11
            )
            $
            (.16
            )
            $
            .03
            
            $
            (.95
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss) per share
            
            $
            (.11
            )
            $
            (.16
            )
            $
            .03
            
            $
            (.95
            )**Fiscal
                2007**Revenues
            
            $
            3,432
            
            $
            3,538
            
            $
            4,758
            
            $
            3,716Gross
                profit
            
            
            1,098
            
            
            1,497
            
            
            2,204
            
            
            1,498Income
                (loss) from continuing operations
            
            $
            (1,154
            )
            $
            (5,137
            )
            $
            (280
            )
            $
            (1,020
            )Discontinued
                operations, net of tax
            
            
            1
            
            
            1
            
            
            1
            
            
            8Net
                income (loss)
            
            $
            (1,153
            )
            $
            (5,136
            )
            $
            (279
            )
            $
            (1,012
            )Basic
                and diluted income (loss) earnings per share1Continuing
                operations
            
            $
            (.13
            )
            $
            (.56
            )
            $
            (.03
            )
            $
            (.11
            )Discontinued
                operations
            
            
            -
            
            
            -
            
            
            -
            
            
            -Net
                income (loss) per share
            
            $
            (.13
            )
            $
            (.56
            )
            $
            (.03
            )
            $
            (.11
            )





1 The
      sum
      of the quarters do not equal year to date .




70





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**








**NOTE
      16 – RELATED PARTY TRANSACTIONS**





Pursuant
      to the terms of the OTI Membership Purchase Agreement dated November 18, 2005,
      iDNA was obligated to repay the former OTI Members for certain loans and
      advances made by the former OTI Members prior to the OTI acquisition by iDNA.
      iDNA repaid in full the OTI Members loans and advances in periodic installments,
      as required, during Fiscal 2007.





The
      Campus Group leases its corporate headquarters in Tuckahoe, New York and its
      Bohemia, New York warehouse and distribution center from a former The Campus
      Group shareholder. The leases expire in April 2010. The annual lease commitment
      during the term is $175,000 per annum. iDNA charged to operations rent expense
      of $175,000 for each of Fiscal 2008, Fiscal 2007 and Fiscal 2006, respectively.
      At January 31, 2008, iDNA charged to operations and included as a component
      of
      accrued expenses $172,000 for deferred rent and property tax expenses due under
      the terms of the leases. The deferred rental charges are expected to be paid
      by
      the Campus Group during Fiscal 2009.





**NOTE
      17 – DISCONTINUED OPERATIONS**





*Auto
      Rental and Finance Operations*


iDNA,
      under the names Agency Rent-A-Car, Inc. (“ARAC”), Altra Auto Rental and Automate
      Auto Rental, previously engaged in the rental of automobiles on a short-term
      basis, principally to the insurance replacement market. During Fiscal 1996,
      iDNA
      disposed of its rental fleet business through the sale of certain assets and
      through certain leases to a national car rental company. All liabilities related
      to the discontinued rental business, principally self-insurance claims, were
      retained by ARAC.





Prior
      to
      Fiscal 2002, iDNA was engaged in the sub-prime used automobile finance business.
      At that time, iDNA, then known as National Auto Credit, Inc. (“NAC”), invested
      in sub-prime used automobile consumer loans, which took the form of installment
      loans collateralized by the related vehicle. NAC purchased such loans, or
      interests in pools of such loans, from member dealerships, and performed the
      related underwriting and collection functions. NAC formally discontinued its
      automobile finance business effective December 31, 2001.





The
      results of both the auto rental and finance operations are included in the
      results of discontinued operations. For Fiscal 2008, 2007 and 2006, the results
      of the discontinued operations principally represent the effects of the residual
      collection of previously charged off loans, and the settlement of, and changes
      in iDNA’s, provisions for income taxes and reserves for claims against ARAC
      related to the self-insured claims (see Note 11).





71





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      17 – DISCONTINUED OPERATIONS (CONTINUED)**





Summarized
      results of discontinued operations are as follows (in thousands):





Discontinued Operations2008
            
            2007
            
            2006Revenue
            
            $
            10
            
            $
            4
            
            $
            20General
                and administrative expenses
            
            
            
            
            
            
            
            
            1-
            
            
            -
            
            
            1Income
                before income taxes
            
            
            10
            
            
            4
            
            
            19Provision
                (benefit) for income taxes
            
            
            -
            
            
            (7
            )
            
            5Income
                from discontinued operations
            
            $
            10
            
            $
            11
            
            $
            14




**NOTE
      18 – SHAREHOLDER COMPLAINT SETTLEMENT**





*Shareholder
      Complaints*


In
      July
      and August 2001, iDNA received three separate derivative complaints filed with
      the Court of Chancery of Delaware (“Delaware Court”) by each of Academy Capital
      Management, Inc (“Academy Complaint”)., Levy Markovich, (“Markovich Complaint”)
      and Harbor Finance Partners (“Harbor Complaint”), all shareholders of iDNA,
      against James J. McNamara, John A. Gleason, William S. Marshall, Henry Y.L.
      Toh,
      Donald Jasensky, Peter T. Zackaroff, Mallory Factor, and Thomas F. Carney,
      Jr.
      (the “Director Defendants”) and names iDNA as a nominal defendant. By order of
      the Delaware Court on November 12, 2001, the Academy, Markovich and Harbor
      Complaints were consolidated under the title “In re National Auto Credit, Inc.
      Shareholders Litigation,” Civil Action No. 19028 NC (Delaware Court) (“Delaware
      Action”).





The
      Delaware Action principally sought: (i) a declaration that the Director
      Defendants breached their fiduciary duties to iDNA, (ii) a judgment voiding
      an
      employment agreement with James J. McNamara and rescinding a stock exchange
      agreement in which iDNA acquired ZoomLot, (iii) a judgment voiding the grant
      of
      stock options and the award of director fees allegedly related thereto, (iv)
      an
      order directing the Director Defendants to account for alleged damages sustained
      and profits obtained by the Director Defendants as a result of the alleged
      various acts complained of, (v) the imposition of a constructive trust over
      monies or other benefits received by the Director Defendants, (vi) a judgment
      requiring the Director Defendants to promptly schedule an annual meeting of
      shareholders and (vii) an award of costs and expenses.





72





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      18 – SHAREHOLDER COMPLAINT SETTLEMENT (CONTINUED)**





On
      October 12, 2001, iDNA received a derivative complaint filed by Robert Zadra,
      a
      shareholder of iDNA, that had been filed with the Supreme Court of the State
      of
      New York (“New York Court”) on or about October 12, 2001 against James J.
      McNamara, John A. Gleason, William S. Marshall, Henry Y. L. Toh, Donald
      Jasensky, Peter T. Zackaroff, Mallory Factor, Thomas F. Carney, Jr., and iDNA
      as
      Defendants. On or about May 29, 2002 the complaint was amended to include class
      action allegations (the “New York Action”). The New York Action contained
      allegations similar to those in the Delaware Action concerning the Board's
      approval of the employment agreement with James McNamara, option grants and
      past
      and future compensation to the Director Defendants, and the ZoomLot transaction.
      The New York Action sought (i) a declaration that as a result of approving
      these
      transactions the Director Defendants breached their fiduciary duties to iDNA,
      (ii) a judgment enjoining Director Defendants from proceeding with or exercising
      the option agreements, (iii) rescission of the option grants to Director
      Defendants, if exercised, (iv) an order directing the Director Defendants to
      account for alleged profits and losses obtained by the Director Defendants
      as a
      result of the alleged various acts complained of, (v) awarding compensatory
      damages to iDNA and the class, together with prejudgment interest, and (vi)
      an
      award of costs and expenses.





iDNA
      vigorously defended against each of the respective claims made in the Delaware
      Action and New York Action, as it believed that the claims had no merit.





The
      parties in the New York Action thereafter engaged in settlement negotiations
      and, in December 2002, the parties entered into a stipulation of settlement
      which was thereafter amended in November 2004 (the “New York Settlement
      Stipulation”). Under the terms of the New York Settlement Stipulation, iDNA
      agreed (subject to certain terms and conditions) to, among other things, (a)
      adopt or implement certain corporate governance procedures or policies, (b)
      issue to a class of iDNA shareholders who had continuously held iDNA’s Common
      Stock from December 14, 2000 through December 24, 2002 (hereinafter, the
“Eligible Shareholders”) up to one million warrants (one warrant per 8.23 shares
      of Common Stock), with each warrant having a five year term and being
      exercisable for shares of iDNA’s Common Stock at a price of $1.55 per share, (c)
      cancel 50% of certain stock options granted on December 15, 2000, and (d) make
      certain payments for legal fees for counsel to the plaintiffs in the New York
      Action. The New York Settlement Stipulation created for the benefit of iDNA
      a
      settlement fund in the amount of $2.5 million to be funded by an insurance
      policy (the “Settlement Fund”). The New York Court also subsequently approved
      $500,000 for legal fees for counsel to the plaintiffs in the New York Action
      to
      be paid from the proceeds from the Settlement Fund.





In
      order
      to facilitate the settlement and dismissal of the separate Delaware Action
      as
      well as the New York Action, on April 22, 2005, iDNA entered
      into a Stock Purchase Agreement (“Agreement”) with Academy Capital Management,
      Inc., Diamond A. Partners, L.P., Diamond A. Investors, L.P., Ridglea Investor
      Services, Inc. and William S. Banowsky ( hereinafter referred
      to collectively as the “Selling Stockholders”). The
      Selling Stockholders had also raised objections to the settlement of the New
      York Action. The New York Court (a) had rejected the objections raised by the
      Selling Stockholders and (b) had approved as fair and in the best interests
      of
      iDNA and its shareholders the proposed settlement of the New York Action as
      set
      forth in the New York Settlement Stipulation. The Selling Stockholders had
      then
      filed an appeal (the “Appeal”) to such determination by the New York Court.




73





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      18 – SHAREHOLDER COMPLAINT SETTLEMENT (CONTINUED)**





Pursuant
      to the terms of the Agreement, the Selling Stockholders agreed, among other
      things, to do the following:





·
            enter
                into a stipulation (to be filed with the New York Court) pursuant
                to which
                they would (a) irrevocably withdraw, with prejudice, any objections
                they
                had asserted or might have asserted with respect to the settlement
                of the
                New York Action, (b) stipulate to the entry of an order dismissing
                the New
                York Action and (c) agree to the dismissal of the
                Appeal.




·
            enter
                into a stipulation (to be filed with the Appellate Division, First
                Department, of the Supreme Court of the State of New York) providing
                for
                the dismissal of the Appeal.




·
            enter
                into a stipulation (to be filed in the Delaware Court), pursuant
                to which
                they would agree to the dismissal of the Delaware Action with
                prejudice.




The
      Selling Stockholders executed and delivered to iDNA and iDNA
      filed with the applicable New York Court and Delaware Court each of the
      stipulations referred to above. Effective May 5, 2005, the New York Court
      entered a Final Order and Judgment in which it approved the Stipulation of
      Dismissal of Objections, finding the terms set forth therein fair, reasonable
      and adequate, and dismissed the New York Action and the objections to the New
      York Settlement with prejudice. Effective May, 13, 2005, the Appellate
      Division, First Department, of the Supreme Court of the State of New York
      granted the dismissal of the Appeal. Effective May 18, 2005, the Delaware Court
      granted an Order and Judgment Dismissing Action with Prejudice with respect
      to
      the Delaware Action. As a consequence of each of the above actions by the
      respective courts, settlement of the New York Action and the Delaware Action,
      was deemed final in June 2005 and iDNA received net proceeds of $2.0 million
      from iDNA’s insurer from the Settlement Fund for the New York
      Action.





Pursuant
      to the Agreement, iDNA
      agreed (subject to certain terms and conditions set forth in the Agreement)
      to
      purchase from the Selling Stockholders their 1,562,500 shares of iDNA Common
      Stock at a price of $0.6732 per share (or a total purchase price of $1,051,875)
      and to contribute $100,000 to cover a portion of the legal fees incurred by
      the
      Selling Stockholders. Effective June 30, 2005, iDNA purchased 1,562,500 shares
      of iDNA Common Stock from the Selling Stockholders.





As
      a
      consequence of the confirmation of the New York Settlement Stipulation, the
      Dismissing Action with Prejudice of the Delaware Action and the subsequent
      purchase by iDNA
      of
      Common Stock from the Selling Stockholders, for Fiscal 2006, iDNA recorded
      (i) a
      charge to operations of $100,000 for legal fees of the Selling Stockholders,
      (ii) a charge to operations of $208,000 for the excess cost over the market
      value of the iDNA Common Stock acquired as of the date of the Agreement, April
      22, 2005, (iii) a charge to other income of $25,000 for the expense of the
      fair
      value of the warrants to be issued to Eligible Shareholders and (iv) realized
      other income of $2.0 million for the net proceeds received by iDNA from the
      Settlement Fund. The Eligible Shareholders had until December 2005 to submit
      their claim for one warrant for each 8.23 shares of Common Stock owned during
      the eligibility period, with each warrant having a five year term and being
      exercisable for shares of Common Stock at a price of $1.55 per share. Based
      upon
      the final submission of claims by Eligible Shareholders, in April 2006 iDNA
      issued 100,282 warrants to the Eligible Shareholders.




74





**iDNA,
      Inc. and Subsidiaries**


**Notes
      to Consolidated Financial Statements**


**Years
      Ended January 31, 2008, 2007 and 2006**





**NOTE
      18 – SHAREHOLDER COMPLAINT SETTLEMENT (CONTINUED)**





As
      acknowledged by the Selling Stockholders in the Agreement, iDNA
      was
      willing to enter into the Agreement, settle the New York Action and the Delaware
      Action and consummate the other transactions contemplated by the Agreement
      in
      order to terminate prolonged and expensive litigation and iDNA’s entry into the
      Agreement would not constitute or be deemed to constitute or evidence any
      improper or illegal conduct by or on behalf of iDNA (or any of its directors,
      officers, employees and other agents or representatives) or any other wrongdoing
      by iDNA (or any of its directors, officers, employees and other agents or
      representatives). The Agreement was approved by the disinterested and
      independent members of iDNA’s Board of Directors.





75




**FINANCIAL
      STATEMENTS AND REPORT OF**


**INDEPENDENT
      REGISTERED PUBLIC ACCOUNTING FIRM**





**ANGELIKA
      FILM CENTERS, LLC**





At
      December 31, 2007 and December 28, 2006





and





For
      the
      Years Ended December 31, 2007, December 28, 2006 and


December
      29, 2005




76




**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





Board
      of
      Directors


**Angelika
      Film Centers, LLC**





We
      have
      audited the accompanying balance sheets of Angelika Film Centers, LLC (a
      Delaware limited liability company) as of December 31, 2007 and December 28,
      2006, and the related statements of income, members’ equity and cash flows for
      each of the three fiscal years in the period ended December 31, 2007. These
      financial statements are the responsibility of the Company’s management. 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 of America). Those standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatement. The
      Company is not required 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
      also includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the financial statements, 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 Angelika Film Centers, LLC as
      of
      December 31, 2007 and December 28, 2006, and the results of its operations
      and
      its cash flows for each of the three fiscal years in the period ended December
      31, 2007, in conformity with accounting principles generally accepted in the
      United States of America.





/s/
              Grant ThorntonCleveland,
              OhioMay
              14, 2008




77





**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**BALANCE
      SHEETS**


*(dollar
      amounts in thousands)*





December
      28, 2006 and December 29, 2005





**December 31,**
            
            **December 28,****2007**
            
            **2006****ASSETS**Current
                AssetsCash
                and cash equivalents
            
            $
            981
            
            $
            257Trade
                and other receivables
            
            
            184
            
            
            120Concession
                inventories (Note A)
            
            
            16
            
            
            13Prepaid
                expenses and other current assets
            
            
            12
            
            
            8Due
                from affiliates (Note E)
            
            
            44
            
            
            825*Total
                current assets*
            
            
            1,237
            
            
            1,223Property,
                equipment and leasehold improvements, net (Note B)
            
            
            734
            
            
            833Intangible
                with definitive life (Note A)
            
            
            5,117
            
            
            5,707Deposits
            
            
            80
            
            
            80**Total
                Assets**
            
            **$**
            **7,168**
            
            **$**
            **7,843****LIABILITIES
                AND MEMBERS' EQUITY**Current
                Liabilities:Accounts
                payable and accrued liabilities
            
            $
            515
            
            $
            338Deferred
                income and other obligations
            
            
            146
            
            
            142*Total
                current liabilities*
            
            
            661
            
            
            480Deferred
                rental obligation (Note C)
            
            
            2,168
            
            
            2,083*Total
                liabilities*
            
            
            2,829
            
            
            2,563Commitments
                and Contingencies (Note D)
            
            
            -
            
            
            -Members'
                Equity (Note A)
            
            
            4,339
            
            
            5,280**Total
                Liabilities and Members’ Equity**
            
            **$**
            **7,168**
            
            **$**
            **7,843**





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




78




**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**STATEMENTS
      OF INCOME**


*(dollar
      amounts in thousands)*





For
      the
      fiscal years ended December 31, 2007, December 28, 2006 and December 29,
      2005





**December 31,**
            
            **December 28,**
            
            **December 29,****2007**
            
            **2006**
            
            **2005**RevenueTheatre
                income
            
            $
            5,199
            
            $
            5,015
            
            $
            5,222Theatre
                concessions
            
            
            687
            
            
            677
            
            
            666Café
                concession sales
            
            
            425
            
            
            418
            
            
            412Rental
                and other income
            
            
            183
            
            
            218
            
            
            187*Total
                operating income*
            
            
            6,494
            
            
            6,328
            
            
            6,487Operating
                costs and expensesOperating
                costs
            
            
            4,135
            
            
            4,037
            
            
            3,980General
                and administrative expenses
            
            
            229
            
            
            231
            
            
            209Depreciation
                and amortization
            
            
            781
            
            
            775
            
            
            752*Total
                operating costs and expenses*
            
            
            5,145
            
            
            5,043
            
            
            4,941Income
                from operations
            
            
            1,349
            
            
            1,285
            
            
            1,546State
                and local income taxes (Note A)
            
            
            40
            
            
            67
            
            
            59**NET
                INCOME**
            
            **$**
            **1,309**
            
            **$**
            **1,218**
            
            **$**
            **1,487**





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




79





**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**STATEMENTS
      OF MEMBERS' EQUITY**


*(dollar
      amounts in thousands)*





For
      the
      fiscal years ended December 31, 2007, December 28, 2006 and December 29,
      2005





**National**
            
            **Reading****Cinemas,**
            
            **International****Inc.**
            
            **Inc.**
            
            **Total****Balance
                at December 30, 2004**
            
            $
            2,996
            
            $
            3,524
            
            $
            6,520Distribution
                to members
            
            
            (878
            )
            
            (1,403
            )
            
            (2,281
            )Net
                income
            
            
            743
            
            
            744
            
            
            1,487**Balance
                at December 29, 2005**
            
            
            2,861
            
            
            2,865
            
            
            5,726Distribution
                to members
            
            
            (1,209
            )
            
            (455
            )
            
            (1,664
            )Net
                income
            
            
            609
            
            
            609
            
            
            1,218**Balance
                at December 28, 2006**
            
            
            2,261
            
            
            3,019
            
            
            5,280Distribution
                to members
            
            
            (746
            )
            
            (1,504
            )
            
            (2,250
            )Net
                income
            
            
            655
            
            
            654
            
            
            1,309**Balance
                at December 31, 2007**
            
            **$**
            **2,170**
            
            **$**
            **2,169**
            
            **$**
            **4,339**





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




80





**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**STATEMENTS
      OF CASH FLOWS**


*(dollar
      amounts in thousands)*





For
      the
      fiscal years ended December 31, 2007, December 28, 2006 and December 29,
      2005




**December 31,**
            
            **December 28,**
            
            **December 29,****2007**
            
            **2006**
            
            **2005****Cash
                Flows from Operating Activities:**Net
                income
            
            $
            1,309
            
            $
            1,218
            
            $
            1,487Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            781
            
            
            775
            
            
            752Deferred
                rental expense
            
            
            85
            
            
            134
            
            
            170Changes
                in assets and liabilities associated with operating
                activities:Trade
                and other receivables
            
            
            (64
            )
            
            104
            
            
            (163
            )Due
                to (from) affiliates
            
            
            781
            
            
            (1,065
            )
            
            199Concession
                inventories
            
            
            (3
            )
            
            (4
            )
            
            (2
            )Prepaid
                expenses and other current assets
            
            
            (4
            )
            
            5
            
            
            4Accounts
                payable and accrued liabilities
            
            
            177
            
            
            (217
            )
            
            115Deferred
                income and other obligations
            
            
            4
            
            
            60
            
            
            (20
            )Security
                deposit
            
            
            -
            
            
            9
            
            
            -Net
                cash provided by operating activities
            
            
            3,066
            
            
            1,019
            
            
            2,542**Cash
                Flows from Investing Activities:**Purchases
                of property, equipment and leasehold improvements
            
            
            (92
            )
            
            13
            
            
            (42
            )Net
                cash provided by (used in) investing activities
            
            
            (92
            )
            
            13
            
            
            (42
            )**Cash
                Flows from Financing Activities:**Distribution
                to members
            
            
            (2,250
            )
            
            (1,664
            )
            
            (2,281
            )Net
                cash used in investing activities
            
            
            (2,250
            )
            
            (1,664
            )
            
            (2,281
            )**NET
                INCREASE (DECREASE) IN CASH**
            
            
            724
            
            
            (632
            )
            
            219Cash
                at beginning of year
            
            
            257
            
            
            889
            
            
            670Cash
                at end of period
            
            $
            981
            
            $
            257
            
            $
            889*Supplemental
                Disclosures of Cash Flow Information:*Cash
                paid during the year for income taxes
            
            $
            40
            
            $
            67
            
            $
            59





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




81





**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**NOTES
      TO FINANCIAL STATEMENTS**


Fiscal
      Years Ended December 31, 2007, December 28, 2006 and December 29,
      2005





NOTE
      A –
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





***Nature
      of Operations***





Angelika
      Film Centers, LLC (“AFC”) is a Delaware limited liability company, whose
      membership interests at December 31, 2007 are held 50% by Reading International,
      Inc. (“RDI”) and 50% by National Cinemas, Inc. (“NCI”), a wholly-owned
      subsidiary of iDNA, Inc.





AFC
      is
      the owner and operator of the Angelika Film Center, which is a multiplex cinema
      and café complex in the Soho District of Manhattan in New York
      City.





**Fiscal
      Year**





Beginning
      in fiscal 2007, AFC’s changed its fiscal year to end on December 31 st ,
      the
      last day of the calendar year. Previously, AFC had been on a 52-53 week fiscal
      year that ended on the last Thursday closest to the end of the month, December
      28, 2006 and December 29, 2005 for the years presented herein. Unless stated
      otherwise, all references herein are to AFC’s fiscal years.





***Cash
      and Cash Equivalents***





AFC
      considers all highly liquid investments and money market accounts with original
      maturities of three months or less to be cash equivalents.





**Concession
      Inventories**





Inventories
      are comprised of concession goods and are stated at lower of cost (first-in,
      first-out method) or market.




***Property,
      Equipment and Leasehold Improvements***





Property,
      equipment and leasehold improvements are stated at cost. Depreciation is
      computed using the straight-line method over the estimated useful lives of
      the
      assets, which range from 7 to 12 years. Leasehold improvements are amortized
      using the straight-line method over the shorter of the lease term or the
      estimated useful lives of the related improvements.





**Revenue
      Recognition**





Theater
      revenue is recognized when film tickets are purchased at the box office.
      Concession revenue arises from the sale of food and other merchandise and is
      recognized upon delivery. Revenues derived from gift certificates are recognized
      when the certificates are redeemed.




82


**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**NOTES
      TO FINANCIAL STATEMENTS - CONTINUED**


Fiscal
      Years Ended December 31, 2007, December 28, 2006 and December 29,
      2005





**NOTE
      A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**





***Income
      Taxes***





AFC
      is a
      limited liability company; therefore, no federal income taxes have been provided
      for its operations. Any tax liability or benefit arising from the AFC’s income
      or losses is the responsibility of the individual members. AFC provides for
      state and city income taxes, as applicable in accordance with Statement of
      Financial Accounting Standards No. 109, *Accounting
      for Income Taxes* (SFAS 109).





**Intangible
      With Definitive Life**





AFC
      recorded an intangible asset of $11,810,000 based on an independent appraisal
      performed to determine the fair value of assets acquired in an acquisition
      made
      during fiscal year 1996. AFC is amortizing the intangible on a straight-line
      basis over a twenty-year period, which represents the term of the long-term
      lease on the Angelika Film Center complex. Accumulated amortization of the
      intangible is $6,691,000 and $6,101,000 at December 31, 2007 and December 28,
      2006, respectively. The amortization expense is $590,000 for each of the next
      five years.





**Advertising
      Expense**





Advertising
      costs are expensed as incurred. Gross advertising expenses were approximately
      $312,000, $289,000 and $296,000for the years ended December 31, 2007, December
      28, 2006 and December 29, 2005, respectively. Reimbursements received for
      cooperative advertising netted against advertising expenses amounted to
      $231,000, $260,000 and $296,000 for the years ended December 31, 2007, December
      28, 2006 and December 29, 2005, respectively.





**Fair
      Value of Financial Instruments**





AFC
      has
      various financial instruments including cash, trade and other receivables and
      accounts payable and accrued liabilities. These instruments are short-term
      in
      nature and AFC has determined that their carrying values approximate estimated
      fair values.





**Impairment
      of Long-Lived Assets**





AFC
      reviews the carrying value of its long-lived assets whenever events or changes
      in circumstances indicate that its carrying amount may not be recoverable.
      If
      there were such indicators of impairment, AFC would determine whether the
      estimated undiscounted sum of the future cash flows to be derived from such
      assets is less than their carrying amounts. If less, an impairment loss would
      be
      recognized based on the excess of the carrying amounts of such assets over
      their
      respective fair values. AFC would determine the fair values by using quoted
      market prices, if available, for such assets; or if quoted market prices are
      not
      available, AFC would discount the expected estimated future cash flows. No
      impairment was recorded for the periods presented.




83


**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**NOTES
      TO FINANCIAL STATEMENTS - CONTINUED**


Fiscal
      Years Ended December 31, 2007, December 28, 2006 and December 29,
      2005





**NOTE
      A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued**





**Estimates**





The
      preparation of financial statements and the accompanying notes thereto, in
      conformity with generally accepted accounting principles, requires management
      to
      make estimates and assumptions that affect reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and reported amounts of revenues and expenses during
      the respective reporting periods. Actual results could differ from those
      estimates.





**NOTE
      B – PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS**





At
      December 31, 2007 and December 28, 2006, a summary of property, equipment and
      leasehold improvements is as follows (in thousands):




**December 31,**
              **2007**
            
            **December 28,**
              **2006**Leasehold
                improvements
            
            $
            1,353
            
            $
            1,353Furniture,
                fixtures and equipment
            
            
            997
            
            
            9052,350
            
            
            2,258Less
                accumulated depreciation
            
            
            1,616
            
            
            1,425**$**
            **734**
            
            **$**
            **833**





**NOTE
      C – LEASE COMMITMENTS**





AFC
      leases a theater under a non-cancelable operating lease which matures in August
      2026. Rental expense was $827,000 for each fiscal year, including amortization
      of deferred rent expense of $85,000, $134,000 and $170,000 for the years ended
      December 31, 2007, December 28, 2006 and December 29, 2005,
      respectively.




84




**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**NOTES
      TO FINANCIAL STATEMENTS – CONTINUED**


Fiscal
      Years Ended December 31, 2007, December 28, 2006 and December 29,
      2005





**NOTE
      C – LEASE COMMITMENTS - Continued**




At
      December 31, 2007, future minimum rental commitments for the next five years
      were as follows (in thousands):




2008
            
            $
            7412009
            
            
            7412010
            
            
            7412011
              2012
            
            
            795
              871Thereafter
            
            
            13,656**Total
                minimum lease payments**
            
            **$**
            **17,545**





AFC
      has
      scheduled rent increases under the theater lease. The accompanying statement
      of
      operations reflects rent expense on a straight-line basis over the term of
      the
      theater lease. Deferred rental obligations of $2,168,000 and $2,083,000,
      representing the excess of expense recognized to date over the lease payments
      made, are reflected in the accompanying balance sheets as of December 31, 2007
      and December 28, 2006, respectively.





**NOTE
      D – COMMITMENTS AND CONTINGENCIES**





AFC
      has
      been involved in various lawsuits. The ultimate outcome of these lawsuits is
      not
      always determinable; however, in the opinion of management, based in part upon
      advice of counsel, the amount of losses that might be sustained, if any, would
      not materially affect the financial position, results of operations and
      liquidity of AFC.




85


**Angelika
      Film Centers, LLC**


*(A
      Limited Liability Company)*


**NOTES
      TO FINANCIAL STATEMENTS – CONTINUED**


Fiscal
      Years Ended December 31, 2007, December 28, 2006 and December 29,
      2005





**NOTE
      E – RELATED PARTY TRANSACTIONS**





Citadel
      Cinemas, Inc. (“Citadel”), an affiliate of RDI, operates and manages the
      Angelika Film Centers pursuant to a management agreement (the “Agreement”)
      entered into with the AFC in August 1996. This Agreement was assigned to Citadel
      from another affiliate of RDI effective June 1, 2000.




Citadel
      is to be paid an annual base management fee of $152,000 as adjusted by Consumer
      Price Index (“CPI”) adjustments plus a bonus fee contingent on the attainment of
      certain income levels (as defined in the Agreement). The management fee amounted
      to the base fee of $152,000 for each of the years ended December 31, 2007 and
      December 28, 2006 and $208,000 for December 29, 2005. During 2005, a $56,000
      adjustment to the base management fee was made to catch up for CPI increases
      that relate to prior periods.





AFC’s
      leasehold interest in the theater is guaranteed by both the Reading Company,
      an
      affiliate of RDI, and Reading Entertainment, Inc., an affiliate of RDI, through
      the day prior to the 15 th anniversary of the lease commencement.





At
      December 31, 2007 and December 28, 2006, AFC had a net aggregate receivable
      (payable) balance of $44,000 and $825,000, respectively, to Citadel. This amount
      is comprised of monies collected by affiliated entities of Citadel on behalf
      of
      AFC for gift certificates and credit card purchases offset by amounts paid
      by
      Citadel on behalf of AFC.




86


**Item
      9. Changes in and Disagreements With Accountants on Accounting and Financial
      Disclosure.**





None





**Item
      9A(T). Controls and Procedures.**





*Evaluation
      of Disclosure Controls and Procedures*


The
      Company has established and maintain disclosure controls and procedures designed
      to ensure that information required to be disclosed in the reports that it
      files
      or submits under the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), is recorded, processed, summarized and reported within the time period
      specified in the rules and forms of the SEC, and that such information is
      accumulated and communicated to management, including its Chief Executive
      Officer and Chief Financial Officer, as appropriate, to allow timely decisions
      regarding required disclosure.





In
      connection with its Annual Report on Form 10-K for the fiscal year ended January
      31, 2008, as required under Rule 13a-15(b) of the Exchange Act, the Company’s
      management, including its Chief Executive Officer and Chief Financial Officer,
      conducted an evaluation of the effectiveness of the design and operation of
      the
      Company’s disclosure controls and procedures as of the end of the period covered
      by this report. Based on that evaluation, the Company’s Chief Executive Officer
      and Chief Financial Officer concluded that its disclosure controls and
      procedures were effective as of the date of such evaluation to provide
      reasonable assurance that information required to be disclosed by the Company
      in
      the reports that it files or submits under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified by the
      SEC’s rules and forms.





*Management’s
      Report on Internal Control Over Financial Reporting*


iDNA
      management is responsible for establishing and maintaining adequate internal
      control over financial reporting. Internal control over financial reporting
      is
      defined in Securities Exchange Act Riles 13a-15(f) and 15d-15(f) under the
      Exchange Act as a process designed by, or under the supervision of, the
      Company’s principal executive and principal financial officers and effected by
      the Company’s Board of Directors, management and other personnel to provide
      reasonable assurance regarding the reliability of financial reporting and the
      preparation of financial statements for external purposes in accordance with
      generally accepted accounting principals and includes those policies and
      procedures that:





·
            pertain
                to the maintenance of records in reasonable detail that accurately
                and
                fairly reflect the transactions of the
                Company;





·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with generally
                accepted
                accounting principals and that receipts and expenditures of the Company
                are being made only in accordance with authorizations of management
                and
                directors of the Company; and





·
            provide
                reasonable assurance regarding prevention or timely detection unauthorized
                acquisition, use or disposition of the Company’s assets that could have a
                material effect on the Company’s financial
                statements.




87





Because
      of inherent limitations, internal control over financial reporting may not
      prevent or detect misstatements. Projections of any evaluation of effectiveness
      to future periods are subject to the risks that controls may become inadequate
      because of changes in conditions, or that the degree of compliance with policies
      or procedures may deteriorate. However, these inherent limitations are known
      features of the financial reporting process. It is possible to design into
      the
      process safeguards to reduce, though not eliminate, the risk that misstatements
      are not prevented or detected on a timely basis. Management is responsible
      for
      establishing and maintaining adequate internal control over financial reporting
      for the Company.





Management
      assessed the effectiveness of the Company’s internal control over financial
      reporting as of January 31, 2008. In making this assessment, management used
      the
      criteria set forth by the Committee of Sponsoring Organizations of the Treadway
      Commission in Internal Control-Integrated Framework. Based on this assessment,
      management have concluded that as of January 31, 2008, the Company’s internal
      control over financial reporting was effective to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation and
      presentation of financial statements for external purposes in accordance with
      generally accepted accounting principals.





This
      Annual Report on Form 10-K 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 the Company’s registered public accounting firm
      pursuant to temporary rules of the SEC that permit the Company to provide only
      management’s report in this Annual Report on Form 10-K.





*Changes
      in Internal Control Over Financial Reporting.*


In
      connection with the Company’s Annual Report on Form 10-K for the fiscal year
      ended January 31, 2008, as required under Rule 13a-15(d) of the Exchange Act,
      the Company’s management, including its Chief Executive Officer and Chief
      Financial Officer, conducted an evaluation of whether there had been any change
      in the Company’s internal control over financial reporting that occurred during
      the Company’s fiscal quarter ended January 31, 2008. Based on that evaluation,
      the Company’s Chief Executive Officer and Chief Financial Officer concluded that
      there were no changes in the Company’s internal controls over financial
      reporting during such fiscal quarter ended January 31, 2008 that have materially
      affected, or are reasonably likely to materially affect, the Company’s internal
      controls over financial reporting.





**Item
      9B. Other Information.**





None




88





**PART
      III**





**Item
      10. Directors, Executive Officers and Corporate
      Governance.**





The
      information required by this Item is set forth in the following sections of
      the
      Company’s Definitive Proxy Statement for its 2008 Annual Meeting of
      Stockholders: “Proposal No. 1- Election of Directors”, “Executive Officers Who
      Are Not Directors”, “Section 16(a) Beneficial Ownership Reporting Compliance”,
      and “Corporate Governance” (including “Code of Ethics”), each of which is
      incorporated by reference herein.





**Item
      11. Executive Compensation.**





The
      information required by this Item is set forth in the following sections of
      the
      Company’s Definitive Proxy Statement for its 2008 Annual Meeting of
      Stockholders: “Executive Compensation”, “Compensation Discussion and Analysis”,
“Compensation Committee Report”, “Director Compensation” and “Overview of
      Compensation of Directors”, each of which is incorporated by reference
      herein.





**Item
      12. Security Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters.**





The
      information required by this Item is set forth in the following sections of
      the
      Company’s Definitive Proxy Statement for its 2008 Annual Meeting of
      Stockholders: “Security Ownership of Certain Beneficial Owners and Management”
and “Equity Compensation Plan Information”, each of which is incorporated by
      reference herein.





**Item
      13. Certain Relationships and Related Transactions, and Director
      Independence.**





The
      information required by this Item is set forth in the following sections of
      the
      Company’s Definitive Proxy Statement for its 2008 Annual Meeting of
      Stockholders: “Corporate Governance” and “Certain Relationships and Related
      Transactions”, each of which is incorporated by reference herein.





**Item
      14. Principal Accounting Fees and Services.**





The
      information required by this Item is set forth in the following section of
      the
      Company’s Definitive Proxy Statement for its 2008 Annual Meeting of
      Stockholders: “Proposal No. 2- Ratification of Selection of Independent
      Registered Public Accounting Firm”, which is incorporated by reference
      herein.




89





**PART
      IV**





**Item
      15. Exhibits, Financial Statement Schedules.**





(a)(1)
      The following financial statements are included in PART II, Item 8 of this
      Annual Report on Form 10-K:




Financial
      Statements of the Company





Report
      of
      Independent Certified Public Accountants





Financial
      Statements:


Consolidated
      Balance Sheets – as of


January
      31, 2008 and 2007





Consolidated
      Statements of Operations –


Years
      Ended January 31, 2008, 2007 and 2006





Consolidated
      Statements of Stockholders’ Equity and Comprehensive Income (Loss)
      -


Years
      Ended January 31, 2008, 2007 and 2006





Consolidated
      Statements of Cash Flows –


Years
      Ended January 31, 2008, 2007 and 2006





Notes
      to
      Consolidated Financial Statements –


Years
      Ended January 31, 2008, 2007 and 2006





Financial
      Statements of AFC





Report
      of
      Independent Certified Public Accountants





Financial
      Statements:


Balance
      Sheets as of December 31, 2007 and December 28, 2006





Statements
      of Operations for the Years Ended


December
      31, 2007, December 28, 2006 and December 29, 2005





Statements
      of Members’ Equity for the Years Ended


December
      31, 2007 and December 28, 2006





Statements
      of Cash Flows for the Years Ended


December
      31, 2007, December 28, 2006 and December 29, 2005





Notes
      to
      Financial Statements for the Years Ended


December
      31, 2007, December 28, 2006 and December 29, 2005




90


**Item
      15. Exhibits, Financial Statement Schedules (cont.)**





(a)(2)
            The
                following financial statement schedule for the years ended January
                31,
                2008, 2007 and 2006 is submitted
                herewith:





Schedule
      II – Valuation and Qualifying Accounts





All
      other
      schedules are omitted because the required information either is not applicable
      or is shown in the consolidated financial statements or notes.





(a)(3)
      Exhibits





Description3.1
            
            Second
                Amended and Restated Certificate of Incorporation of the Company
                (incorporated by reference to Exhibit 99.1 to the Company’s Current Report
                on Form 8-K filed with the SEC on November 4, 2005, SEC File No.
                1-11601).3.2
            
            Second
                Amended and Restated By-Laws of the Company, dated as of November
                4, 2005
                (incorporated by reference to Exhibit 99.2 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 4, 2005, SEC File No.
                1-11601).4.1
            
            Certificate
                of Designation for the Company’s Series D Junior Participating Preferred
                Stock (incorporated by reference to the Company’s Current Report on Form
                8-K, filed with the SEC on October 9, 2001, SEC File No.
                1-11601).4.2
            
            Specimen
                Stock Certificate of the Company’s Common Stock (incorporated by reference
                to Exhibit 4(c) to the Company’s Annual Report on Form 10-K for the fiscal
                year ended January 31, 1996, filed with the SEC on April 25, 1996,
                SEC
                File No. 1-11601).4.3
            
            Rights
                Agreement, dated as of September 26, 2001, by and between the Company
                and
                American Stock Transfer & Trust Company, including the form of
                Certificate of Designation for the Series D Junior Participating
                Preferred
                Stock attached as Exhibit “A”, the form of Rights Certificate attached as
                Exhibit “B” and the Summary of Rights to Purchase Preferred Stock attached
                as Exhibit “C” (incorporated by reference to the Company’s Current Report
                on Form 8-K, filed with the SEC on October 9, 2001, SEC File No.
                1-11601).10.1*
            
            iDNA,
                Inc. 1993 Equity Incentive Plan (incorporated by reference to the
                exhibits
                to the Company’s Form S-8 Registration Statement, filed with the SEC on
                December 28, 1993, File No. 33-51727).10.2*
            
            iDNA,
                Inc. 401(k) Savings and Retirement Plan and Trust (incorporated by
                reference to the exhibits to the Company’s Form S-8 Registration
                Statement, filed with the SEC on December 28, 1993, File No.
                33-51727).





91




**Item
      15. Exhibits, Financial Statement Schedules (cont.)**





10.3
            
            Purchase
                Agreement dated as of April 5, 2000, by and among the Company, National
                Cinemas, Inc., FA, Inc. and Reading Entertainment, Inc. (incorporated
                by
                reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K,
                filed with the SEC on April 20, 2000, File No.
                1-11601).10.4*
            
            Employment
                Agreement, dated December 31, 2001, by and between the Company and
                Robert
                V. Cuddihy, Jr. (incorporated by reference to Exhibit 10.16 to the
                Company’s Annual Report on Form 10-K for the fiscal year ended January 31,
                2002, filed with the SEC on May 13, 2002, SEC File No.
                1-11601).10.5
            
            Employment
                Agreement and Non-Competition and Non-Solicitation Agreement, dated
                as of
                April 1, 2003, by and between OMI Communications, Inc. and Mr. Dean
                R.
                Thompson (incorporated by reference to Exhibit 10.16 to the Company’s
                Annual Report on Form 10-K for the fiscal year ended January 31,
                2003,
                filed with the SEC on May1, 2003, SEC File No.
                1-11601).10.6
            
            Stock
                Purchase Agreement, dated July 31, 2003, by and among the Company,
                Campus
                Group Companies, Inc., Audience Response Systems, Inc., Interactive
                Conferencing Network, Inc. and Multi-Video Services, Inc. and Steven
                Campus, the Campus Family 2000 Trust and the Trust Established Under
                the
                Will of Nancy Campus (the “Campus Group Shareholders”) (incorporated by
                reference to the exhibits to Current Report on Form 8-K, filed with
                the
                SEC on August 13, 2003, SEC File No. 1-11601).10.7
            
            Lock-up,
                Standstill and Voting Agreement, dated July 31, 2003, by and between
                the
                Company and The Campus Group Shareholders (incorporated by reference
                to
                the exhibits to the Company’s Current Report on Form 8-K, filed with the
                SEC on August 13, 2003, SEC File No. 1-11601).10.8
            
            Registration
                Rights Agreement, dated July 31, 2003, by and between the Company
                and the
                Campus Family 2000 Trust (incorporated by reference to the exhibits
                to the
                Company’s Current Report on Form 8-K, filed with the SEC on August 13,
                2003, SEC File No. 1-11601).10.9*
            
            Employment
                Agreement, Non-Competition and Non-Solicitation Agreement , dated
                July 31,
                2003, by and among the Campus Group Companies, Inc. and Steven Campus
                dated July 31, 2003 (incorporated by reference to the exhibits to
                the
                Company’s Current Report on Form 8-K, filed with the SEC on August 13,
                2003, SEC File No. 1-11601).10.10
            
            Amendment
                to Lease [Tuckahoe Premises] dated July 31, 2003, by and between
                the
                Campus Group Companies, Inc. and the Campus Family 2000 Trust
                (incorporated by reference to the exhibits tothe
                Company’s Current Report onForm
                8-K, filed with the SEC on August 13, 2003, SEC File No.
                1-11601).10.11
            
            Amendment
                to Lease [Bohemia Premises] dated July 31, 2003, by and between the
                Campus
                Group Companies, Inc. and the Campus Family 2002 Trust ( incorporated
                by
                reference to the exhibits to the Company’s Current Report on Form 8-K,
                filed with the SEC on August 13, 2003, SEC File No.
                1-11601).




92




**Item
      15. Exhibits, Financial Statement Schedules (cont.)**





10.12
            
            Surety
                Agreement, dated as of July 31, 2003, by and between The Campus Group
                and
                the Campus Group Shareholders (incorporated by reference to the exhibits
                to the Company’s Current Report on Form 8-K, filed with the SEC on August
                13, 2003, SEC File No. 1-11601).10.13
            
            Security
                Agreement, dated as of July 31, 2003, by and between The Campus Group
                and
                the Campus Group Shareholders (incorporated by reference to the exhibits
                to the Company’s Current Report on Form 8-K, filed with the SEC on August
                13, 2003, SEC File No. 1-11601).10.14
            
            Pledge
                Agreement, dated as of July 31, 2003, by and between The Campus Group
                and
                the Campus Group Shareholders (incorporated by reference to the exhibits
                to the Company’s Current Report on Form 8-K, filed with the SEC on August
                13, 2003, SEC File No. 1-11601).10.15
            
            Non-Negotiable
                Promissory Notes, dated July 31, 2003, issued by the Company to the
                Campus
                Group Shareholders (incorporated by reference to the exhibits to
                the
                Company’s Current Report on Form 8-K, filed with the SEC on August 13,
                2003, SEC File No. 1-11601).10.16
            
            Non-Negotiable
                Convertible Promissory Note, dated July 31, 2003, issued by the Company
                to
                the Campus Family 2000 Trust (incorporated by reference to the exhibits
                to
                the Company’s Current Report on Form 8-K, filed with the SEC on August 13,
                2003, SEC File No. 1-11601).10.17
            
            Membership
                Interest Purchase Agreement, dated as of November 18, 2005, by and
                among
                the Company, Flexner Wheatley & Associates and MeetingNet Interactive,
                Inc.(incorporated by reference to Exhibit 99.1 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.18
            
            Lockup,
                Standstill and Voting Agreement, datedas
                of November 18, 2005, by and among the Company, Flexner Wheatley
&
                Associates and MeetingNet Interactive, Inc.(incorporated by reference to Exhibit 99.2 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.19
            
            Registration
                Rights Agreement, datedas
                of November 18, 2005, by and among the Company, Flexner Wheatley
&
                Associates and MeetingNet Interactive, Inc.(incorporated by reference to Exhibit 99.3 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.20*
            
            Employment
                Agreement, dated November 18, 2005, by and between OTI and Mark A.
                Fite(incorporated by reference to Exhibit 99.4 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.21
            
            Non-Competition
                and Non-Solicitation Agreement, dated as of November 18, 2005, by
                and
                among the Company, OTI, Flexner Wheatley & Associates, MeetingNet
                Interactive, Inc., Mark A. Fite, William A. Flexner, Ray Franklin
                and
                Kimbal Wheatley(incorporated by reference to Exhibit 99.5 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 22, 2005, SEC File No.
                1-11601).





93





**Item
      15. Exhibits, Financial Statement Schedules (cont.)**





10.22
            
            Surety
                Agreement, dated as of November 18, 2005, by and among the Company,
                Flexner Wheatley & Associates and MeetingNet Interactive, Inc.(incorporated
                by reference to Exhibit 99.6 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.23
            
            Security
                Agreement (from OTI), dated as of November 18, 2005, by and among
                OTI,
                Flexner Wheatley & Associates and MeetingNet Interactive, Inc.(incorporated
                by reference to Exhibit 99.7 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.24
            
            Security
                Agreement (from the Company), dated as of November 18, 2005, by and
                among
                the Company, Flexner Wheatley & Associates and MeetingNet Interactive,
                Inc.(incorporated
                by reference to Exhibit 99.8 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.25
            
            Non-Negotiable
                Promissory Note, dated November 18, 2005, issued by the Company to
                Flexner
                Wheatley & Associates Inc.(incorporated
                by reference to Exhibit 99.9 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.26
            
            Non-Negotiable
                Promissory Note, dated November 18, 2005, issued by the Company to
                MeetingNet Interactive, Inc.(incorporated
                by reference to Exhibit 99.10 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 22, 2005, SEC File No.
                1-11601).10.27*
            
            iDNA,
                Inc. 2005 Equity Compensation Plan (incorporated by reference to
                Appendix
                B to the Company’s Definitive Proxy Statement on Schedule 14A, filed with
                the SEC on December 14, 2005, SEC File No. 1-11601).10.28
            
            Loan
                and Security Agreement, dated as of July 20, 2006, by and between
                the
                Company and Seasons Go Round, Inc. (incorporated by reference to
                Exhibit
                99.1 to the Company’s Current Report on Form 8-K, filed with the SEC on
                July 24, 2006, SEC File No. 1-11601).10.29*
            
            Employment
                Agreement, dated as of November 29, 2006, by and between the Company
                and
                James J. McNamara (incorporated by reference to Exhibit 99.1 to the
                Company’s Current Report on Form 8-K, filed with the SEC on December 1,
                2006, SEC File No. 1-11601).10.30
            
            Form
                of Master Loan and Security Agreement, dated as of November 19, 2007,
                by
                and between iDNA Cinema Holdings, Inc., as Borrower, and Silar Advisors,
                L.P., as Lender and Administrative, Payment and Collateral Agent
                (incorporated by reference to Exhibit 10.1 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 27, 2007, SEC File No.
                1-11601).10.31
            
            Form
                of Promissory Note in the principal amount of $4,250,000, dated November
                21, 2007, issued by iDNA Cinema Holdings, Inc. to Silar Advisors,
                L.P.
                (incorporated by reference to Exhibit 10.2 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 27, 2007, SEC File No.
                1-11601).




94




**Item
      15. Exhibits, Financial Statement Schedules (cont.)**





10.32
            
            Form
                of Warrant to purchase 1,500,000 shares of the Company’s Common Stock,
                issued by the Company to Silar Advisors, L.P. on November 21, 2007
                (incorporated by reference to Exhibit 10.3 to the Company’s Current Report
                on Form 8-K, filed with the SEC on November 27, 2007, SEC File No.
                1-11601).10.33
            
            Form
                of Guaranty and Pledge Agreement, dated as of November 19, 2007,
                made by
                the Company in favor of Silar Advisors, L.P. (incorporated by reference
                to
                Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the
                SEC on November 27, 2007, SEC File No. 1-11601).10.34
            
            Form
                of Guaranty and Pledge Agreement, dated as of November 19, 2007,
                made by
                National Cinemas, Inc. in favor of Silar Advisors, L.P. (incorporated
                by
                reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 27, 2007, SEC File No.
                1-11601).10.35
            
            Form
                of Amendatory Agreement, dated as of November 21, 2007, entered into
                by
                the Company, iDNA Cinema Holdings, Inc., National Cinemas, Inc.,
                Silar
                Advisors, L.P. and Reed Smith LLP providing,*inter
                alia*,
                for the re-dating to November 21, 2007 of the foregoing documents
                serving
                as Exhibits 10.30 through 10.34 to this Annual Report on Form 10-K
                that
                were dated as of November 19, 2007 (incorporated by reference to
                Exhibit
                10.6 to the Company’s Current Report on Form 8-K, filed with the SEC on
                November 27, 2007, SEC File No. 1-11601).14.
            
            Code
                of Business Conduct, Ethics and Corporate Governance (incorporated
                by
                reference to Exhibit 99.4 to the Company’s Current Report on Form 8-K,
                filed with the SEC on November 8, 2005, SEC File No.
                1-11601).21
            
            Subsidiaries
                of iDNA, Inc. at January 31, 2008.23
            
            Consent
                of Independent Certified Public Accountants.31.1
            
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 200231.2
            
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a)
                of the
                Securities Exchange Act of 1934, as adopted pursuant to Section 302
                of the
                Sarbanes-Oxley Act of 200232.1
            
            Certification
                of Chief Executive Officer pursuant to Rule 13a-14(b) of the Securities
                Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of 200232.2
            
            Certification
                of Chief Financial Officer pursuant to Rule 13a-14(b) of the Securities
                Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002





Exhibits
      that are above denoted with an asterisk (*) are management contracts or
      compensatory plans or arrangements.




95




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





iDNA,
                Inc.
              RegistrantDate   
                May 14, 2008
            
            By:
            /s/James
                J. McNamaraJames
                J. McNamaraChairman
                of the Board andChief
                Executive Officer





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, this
      report has been signed below by the following persons on behalf of the
      registrant and in the capacities and on the dates indicated.


Principal
                  Executive Officer
              
              Principal
                  Financial and Accounting OfficerBy:
              /s/James
                  J. McNamara
              
              By:
              /s/Robert
                  V. Cuddihy, Jr.James
                  J. McNamara
              
              
              Robert
                  V. Cuddihy, Jr.Chairman
                  of the Board and
              
              
              Chief
                  Financial Officer and TreasurerChief
                  Executive OfficerDate
                May 14, 2008Directors:/s/James
                M. Augur
              
              
              /s/John
                      A. GleasonJames
                M. Augur
              
              
              John
                  A. Gleason/s/Donald
                Shek
              
              
              /s/James
                      J. McNamaraDonald
                Shek
              
              
              James
                  J. McNamara/s/Henry
                Y. L. TohHenry
                Y. L. TohDate May
                14, 2008




96


SCHEDULE
      II





VALUATION
      AND QUALIFYING ACCOUNTS


(In
      Thousands)




Column A
                
                Column B
                
                Column C
                
                Column D
                
                Column EBalance at
                    beginning of
                
                Additions Charged to:
                
                
                
                Balance
                  at end ofDescription
                
                period
                
                Expenses
                
                Other
                
                Deductions
                
                periodYear
                    ended January 31, 2008Allowance
                    for doubtful accounts
                
                $
                82
                
                $
                (1
                )
                $
                -
                
                $
                6
                
                $
                75Self-insurance
                    claims
                
                $
                235
                
                $
                -
                
                $
                -
                
                $
                63
                (a)
                $
                172Year
                    ended January 31, 2007Allowance
                    for doubtful accounts
                
                $
                105
                
                $
                (4
                )
                $
                -
                
                $
                19
                
                $
                82Self-insurance
                    claims
                
                $
                235
                
                $
                -
                
                $
                -
                
                $
                -
                
                $
                235Year
                    ended January 31, 2006Allowance
                    for doubtful accounts
                
                $
                65
                
                $
                5
                
                $
                40
                (b)
                $
                5
                
                $
                105Self-insurance
                    claims
                
                $
                256
                
                $
                -
                
                $
                -
                
                $
                21
                (a)
                $
                235





(a)
      Cash
      disbursements related to self-insured claims.





(b)
      Includes $40,000 provision for doubtful accounts at the date of the OTI
      acquisition during Fiscal 2006.




97