##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended December 31, 2005
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the transition period from  to
 Commission File Number: 000-30874
 CANEUM, INC.
  Nevada
    
    33-0916900State or other jurisdiction of
    
    I.R.S. Employer I.D. No.incorporation or organization
 170 Newport Center Drive, Suite 220, Newport Beach, CA
    
    92660(Address of principal executive offices)
    
    (Zip Code)
 (949) 273-4000
 None
 Common Stock, Par Value $.001
 o
 þ o þ o
 o
 o




---



##### Table of Contents



PagePART I
    
    
    4ITEM 1. DESCRIPTION OF BUSINESS
    
    
    4ITEM 2. DESCRIPTION OF PROPERTY
    
    
    13ITEM 3. LEGAL PROCEEDINGS
    
    
    14ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    14PART II
    
    
    14ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    14ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR
    
    
    15PLAN OF OPERATION
    
    
    15ITEM 7. FINANCIAL STATEMENTS
    
    
    20ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    20ITEM 8A. CONTROLS AND PROCEDURES
    
    
    20ITEM 8B. OTHER INFORMATION
    
    
    21PART III
    
    
    21ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
    
    
    21ITEM 10. EXECUTIVE COMPENSATION
    
    
    27ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    33ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    38ITEM 13. EXHIBITS
    
    
    39ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    41Exhibit 3.1Exhibit 21.1Exhibit 31.1Exhibit 31.2Exhibit 32
 2




---



##### Table of Contents



PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 Background
    Overview
  3




---



##### Table of Contents



Recent Events
 Barron Transaction
  4




---



##### Table of Contents



Tier One Transaction
  5




---



##### Table of Contents



th
  Our Outsourcing Products and Services
 Industry Overview
     6




---



##### Table of Contents



Information technology outsourcing
 Business process outsourcing
 7




---



##### Table of Contents



Enterprise mobility (EM)
 
    
    1-click access from users address book (i.e. e-mail, SMS, IM, etc.)
    
    1-click access to any enterprise application (i.e. SAP, Siebel, custom, etc.)
    
    no client software or user training
    
    no changes to existing enterprise applications
    
    Rapid deployment of multiple applications
  Recent Developments in Our Business
   Risks of Foreign Operations
  8




---



##### Table of Contents




    
    the absence in some jurisdictions, especially those outside of India, of effective laws
to protect our intellectual property rights or any work product produced by off-shore
subcontractors;
    
    multiple and possibly overlapping and conflicting tax laws;
    
    restrictions on the movement of cash;
    
    the burdens of complying with a wide variety of national and local laws;
    
    political instability which could result in expatriation of our intellectual property
without compensation;
    
    currency fluctuations, especially if the U.S. dollar is devalued in the foreign country,
which could result in Caneum having to pay more for the services provided off-shore;
    
    longer payment cycles;
    
    restrictions on the import and export of certain technologies;
    
    price controls or restrictions on exchange of foreign currencies; and
    
    trade barriers which could limit our ability to outsource certain operations to a
foreign country.
 Our Business Acquisition Strategy
 Acquisition Targets
   9




---



##### Table of Contents



Selection Criteria for Acquisition Targets
   Selection Process for Acquisitions
   10




---



##### Table of Contents



Competition
 Outsourcing Services
  
    
    Speed of response to customer requests;
    
    Flexibility and willingness to adapt to customer needs;
    
    Responsiveness to customer demands;
    
    Number and availability of qualified human resources;
    
    Project management capability;
    
    Technical expertise;
    
    Size and reputation;
    
    Brand recognition and geographic presence; and
    
    Price.
   11




---



##### Table of Contents



Acquisition Activities
   Employees
  12




---



##### Table of Contents



ITEM 2. DESCRIPTION OF PROPERTY
  
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM
5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
 Market Information
  Quarter
    
    
    High
    
    
    LowFISCAL YEAR ENDED
DECEMBER 31, 2004
    
    Third
    
    $
    3.00
    
    
    $
    1.90Fourth
    
    $
    2.75
    
    
    $
    2.05FISCAL YEAR ENDED
DECEMBER 31, 2005
    
    First
    
    $
    2.20
    
    
    $
    1.25Second
    
    $
    1.725
    
    
    $
    1.05Third
    
    $
    1.29
    
    
    $
    0.70Fourth
    
    $
    1.00
    
    
    $
    0.65
  13




---



##### Table of Contents



Holders
  Dividend Policy
  Purchases of Equity Securities
  
 ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
  Background
   14




---



##### Table of Contents



15




---



##### Table of Contents



Critical Accounting Policies
    Results of Operations
 Revenue
  Cost of revenue and Gross Profit
  16




---



##### Table of Contents



Operating expenses
      Other income (expense)
  Net loss
  Liquidity and Capital Resources
  17




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
  18




---



##### Table of Contents



Forward-Looking Statements
  
 ITEM 7. FINANCIAL STATEMENTS
  
 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 8A. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
  19




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
   
 ITEM 8B. OTHER INFORMATION
  
 PART III
 
 ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
 Current Management and Significant Employee
  DirectorName
    
    Age
    
    Position(s)
    
    SinceSukhbir Singh Mudan
    
    57
    
    Director, President & Treasurer
    
    2002Alan S. Knitowski
    
    36
    
    Chairman
    
    2003Robert F. Mitro
    
    64
    
    Director
    
    2003Avtar Singh Ranshi
    
    59
    
    Director
    
    2003Luan Dang
    
    34
    
    Director & Vice-Chairman
    
    2005Gary D. Allhusen
    
    44
    
    Executive Vice-President
    
    
 20




---



##### Table of Contents



DirectorName
    
    Age
    
    Position(s)
    
    SinceAndrew Miller
    
    35
    
    Vice-President, Infrastructure Services
    
    Michael A. Willner
    
    51
    
    Senior Vice-President
    
    Robert J. Morris
    
    36
    
    Senior Vice-President
    
    
   Sukhbir Singh Mudan
 Alan S. Knitowski
 21




---



##### Table of Contents



Robert F. Mitro
 22




---



##### Table of Contents



Dr. Avtar Singh Ranshi
 Luan Dang
 23




---



##### Table of Contents



Gary D. Allhusen
  Andrew Miller
 Michael A. Willner
 24




---



##### Table of Contents



Robert J. Morris
 Board Committees and Advisors
 Audit and Compensation Committees
 Advisory Board
 Disclosure Committee
 25




---



##### Table of Contents



Stockholder Communications
  
    
    In writing at 170 Newport Center Drive, Suite 220, Newport Beach, CA 92660;
    
    By e-mail at suki@caneum.com.
  Code of Ethics
  Compliance with Section 16(a) of the Exchange Act
  Number ofTransactions NotNumber of Late
    
    Reported on aName
    
    Reports
    
    Timely Basis
    
    Reports Not FiledGary Allhusen
    
    
    1
    
    
    
    1
    
    
    
    0Luan Dang
    
    
    1
    
    
    
    1
    
    
    
    0Alan Knitowski
    
    
    2
    
    
    
    2
    
    
    
    0Andrew Miller
    
    
    1
    
    
    
    1
    
    
    
    0Robert Mitro
    
    
    5
    
    
    
    6
    
    
    
    0Sukhbir Singh Mudan
    
    
    1
    
    
    
    2
    
    
    
    0Douglas Wadkins
    
    
    1
    
    
    
    2
    
    
    
    0
 26




---



##### Table of Contents



ITEM 10. EXECUTIVE COMPENSATION
 Compensation of Executive Officers
 Summary Compensation Table.
 SUMMARY COMPENSATION TABLELong-Term CompensationAnnual Compensation
    
    
    Awards
    
    
    PayoutsSecuritiesOther Annual
    
    
    Restricted Stock
    
    
    Underlying Options/
    
    
    
    
    
    
    All OtherName & Principal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Compensation
    
    
    Award(s)
    
    
    SARS
    
    
    LTIP Payouts
    
    
    CompensationPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    (#)
    
    
    ($)
    
    
    ($)Sukhibir Singh
    
    
    2005
    
    
    $
    120,000
    
    
    $
    42,000
    (1)
    
    
    15,069
    (2)
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Mudan, President
    
    
    2004
    
    
    $
    120,000
    
    
    $
    32,401
    (3)
    
    $
    12,919
    (2)
    
    
    -0-
    
    
    
    1,000,000
    
    
    
    -0-
    
    
    
    -0-(CEO)
    
    
    2003
    
    
    $
    53,534
    
    
    
    -0-
    
    
    $
    6,468
    (2)
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Gary D. Allhusen,
    
    
    2005
    
    
    $
    120,000
    
    
    $
    42,600
    (4)
    
    
    15,069
    (2)
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Executive
    
    
    2004
    
    
    $
    93,692
    
    
    
    -0-
    
    
    $
    9,689
    (2)
    
    
    -0-
    
    
    
    750,000
    
    
    
    -0-
    
    
    
    -0-Vice-President
    
    
    2003
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-Andrew Miller,
    
    
    2005
    
    
    $
    87,692
    
    
    
    
    
    
    
    7,063
    (2)
    
    
    -0-
    
    
    
    500,000
    
    
    
    -0-
    
    
    
    -0-Vice-President
    
    
    2004
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-2003
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
 
 (1)
    
    At the discretion of the compensation committee, the bonus was issued as 59,155 shares of
common stock with a fair market value of $0.71 per share on the date of issuance.(2)
    
    This figure includes insurance premiums paid by us for medical, dental, and vision
healthcare coverage.(3)
    
    At the discretion of the compensation committee, the bonus was issued as 13,065 shares of
common stock with a fair market value of $2.48 per share on the date of issuance.(4)
    
    At the discretion of the compensation committee, the bonus was issued as 60,000 shares of
common stock with a fair market value of $0.71 per share on the date of issuance. Option Grants Table.
 27




---



##### Table of Contents



Number ofsecurities
    
    
    Percent of totalunderlying options
    
    
    options granted to
    
    
    Exercise or basegranted
    
    
    employees in last
    
    
    priceName
    
    (#)
    
    
    fiscal year
    
    
    ($/Share)
    
    
    Expiration dateSukhibir Singh Mudan
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    n/aGary D. Allhusen
    
    
    -0-
    
    
    
    -0-
    
    
    
    -0-
    
    
    
    n/aAndrew Miller
    
    
    350,000
    
    
    
    70
    %
    
    $
    1.58
    
    
    
    04/11/10150,000
    
    
    
    30
    %
    
    $
    0.71
    
    
    
    11/16/10
 Aggregated Option Exercises and Fiscal Year-End Option Value Table.
 
 Number ofSecuritiesUnderlying
    
    
    Value of UnexercisedUnexercised Options
    
    
    In-The-Money Optionsat Fiscal
    
    
    at FiscalYear-End(#)
    
    
    Year-End($)(1)Shares acquired on
    
    
    
    
    
    
    Exercisable/
    
    
    Exercisable/Name
    
    exercise (#)
    
    
    Value realized ($)
    
    
    Unexercisable
    
    
    UnexercisableSukhbir Singh Mudan
    
    
    -0-
    
    
    
    -0-
    
    
    
    1,000,000/-0-
    
    
    $
    2,250,000/-0-
    (1)Gary D. Allhusen
    
    
    -0-
    
    
    
    -0-
    
    
    
    631,250/118,750
    
    
    $
    1,420,313/$267,188
    (1)Andrew Miller
    
    
    -0-
    
    
    
    -0-
    
    
    
    118,585/381,415
    
    
    $
    266,816/858,184
    (1)
 
 (1)
    
    At December 31, 2005, the fair market value of the shares underlying the unexercised
options was $2.25 per share. Employment and Consulting Contracts
  
    
    Sukhbir Singh Mudan. The initial period of the employment agreement for Mr. Mudan is
three years. Beginning on the expiration date, and on each anniversary thereafter, unless
it is terminated earlier as provided therein or Caneum delivers written notice to Mr. Mudan
of its intention not to extend the Agreement at least ninety days before such anniversary
date, the term of the employment agreement will automatically be extended for one
additional year. He is required to devote not less than 100% of his business time to the
business of Caneum. His base salary is $120,000 per annum. He received options to
purchase 1,000,000 shares at $.55 per share as additional compensation for entering
 28




---



##### Table of Contents



into
the agreement. As of June 30, 2005, all of these options had vested and were available for
exercise. On October 26, 2004, the Compensation Committee granted 13,065 restricted shares
to Mr. Mudan as a performance bonus for 2004. These shares vested on January 2, 2005. On
November 16, 2005, the Compensation Committee granted 59,155 restricted shares to Mr. Mudan
as a performance bonus for 2005. These shares vested on January 2, 2006.
    
    Alan S. Knitowski. The employment agreement with Mr. Knitowski will continue until
terminated by one of the parties as provided therein. Mr. Knitowski is required to devote
his best efforts to performing well all duties that Caneum may reasonably assign to him
from time to time during the term of the agreement, but he will not be required to devote
in excess of 25% of his business time and effort to providing these services. His base
salary is $120,000 per annum. He received options to purchase 1,000,000 shares at $.55 per
share as additional compensation for entering into the agreement. As of June 30, 2005, all
of these options had vested and were available for exercise. On October 26, 2004, the
Compensation Committee granted 14,033 restricted shares to Mr. Knitowski as a performance
bonus for 2004. These shares vested on January 2, 2005. On November 16, 2005, the
Compensation Committee granted 76,056 restricted shares to Mr. Knitowski as a performance
bonus for 2005. These shares vested on January 2, 2006.
  th
 29




---



##### Table of Contents




    
    Each employee, except Messrs Allhusen, Morris, and Willner, is eligible to receive
an annual performance bonus between 25% and 100% of the then applicable base salary
upon achievement of annual performance objectives payable either in cash or stock. For
2004 no specific performance bonuses were established, but bonuses were granted by the
Compensation Committee based on a review of the employees
performance during 2004. Performance bonuses for 2004 were paid in common stock of
Caneum only and no cash bonuses were granted. Performance objectives for subsequent
years will be established by the Chairman, and in the case of performance objectives for
the Chairman, by the compensation committee, for each calendar year beginning with the
year ending December 31, 2005. These performance objectives have not yet been
established.
    
    Each employee, together with his spouse and dependents, is entitled to participate
in any employee benefit plans maintained by the Company of general applicability to
other senior executives, including, without limitation, group medical, dental, vision,
disability, life insurance, flexible-spending account, 401(k) and other plans.
    
    The employee is entitled to four weeks paid vacation per year.
    
    Each agreement contains customary termination provisions. The agreements will be
terminated by Caneum due to the death or disability of the employee, in which event
Caneum shall pay the base salary through the date of termination and all unexercised
options will immediately vest. The agreement may also be terminated by Caneum for
cause, in which event Caneum will pay the base salary through the date of termination,
but all unexercised options shall lapse. Caneum may also terminate the agreements
without cause upon ninety days notice, in which event Caneum will pay the base salary
through the date of termination, and all unexercised options will immediately vest,
except in the case of Messrs Allhusen, Willner, and Morris, for whom only one-half of
the unexercised options will vest. The employee may terminate the employment agreement
at any time, in which event Caneum will pay the base salary through the date of
termination, but all unexercised options shall lapse.
    
    Each agreement also contains certain confidentiality covenants, but does not contain
non-competition or anti-piracy provisions.
    
    Each agreement contains covenants that for a period of twelve months following
termination of employment, the employee will not solicit another employee to leave
Caneum.
 30




---



##### Table of Contents



Compensation of Directors
 Standard Arrangements for Outside Directors
   31




---



##### Table of Contents



Other Arrangements
   
 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Security Ownership of Certain Beneficial Owners and Management
  Amount and NatureName and Address
    
    of Beneficialof Beneficial Owner
    
    Ownership (1)
    
    
    Percent of ClassSukhbir Singh Mudan
    
    
    1,279,155
    (2)
    
    
    17.95
    %13542 Caminito Carmel
Del Mar, CA 92014Alan S. Knitowski
    
    
    1,951,756
    (3)
    
    
    27.64
    %170 Newport Center Drive
Suite 220
Newport Beach, CA 92660
 32




---



##### Table of Contents



Amount and NatureName and Address
    
    of Beneficialof Beneficial Owner
    
    Ownership (1)
    
    
    Percent of ClassRobert F. Mitro
    
    
    1,231,376
    (4)
    
    
    18.19
    %20 East Main Street
Suite 19
Los Gatos, CA 95030Avtar Singh Ranshi
    
    
    237,500
    (5)
    
    
    3.79
    %66 Marshals Drive
St. Albans, Hertfordshire
UK ALI 4RFLuan Dang
    
    
    328,750
    (6)
    
    
    5.2
    %170 Newport Center Drive
Suite 220
Newport Beach, CA 92660Gary D. Allhusen
    
    
    691,250
    (7)
    
    
    10.16
    %170 Newport Center Drive
Suite 220
Newport Beach, CA 92660Andrew Miller
    
    
    143,585
    (8)
    
    
    2.27
    %170 Newport Center Drive
Suite 220
Newport Beach, CA 92660Michael A. Willner
    
    
    62,500
    (9)
    
    
    1
    %65 Enterprise Drive
Aliso Viejo CA 92656Robert J. Morris
    
    
    62,500
    (10)
    
    
    1
    %65 Enterprise Drive
Aliso Viejo CA 92656Executive Officers and
    
    
    5,863,372
    
    
    
    62.17
    %Directors as a Group
(9 Persons)Jason Daggett
    
    
    405,333
    (11)
    
    
    6.51
    %4080 Paradise Rd.
Suite 15-168
Las Vegas, NV 89109Trymetris Capital Fund I, LLC
    
    
    350,333
    (11)
    
    
    5.68
    %170 Newport Center Drive
Suite 220
  31




---



##### Table of Contents



(1)
    
    This table is based upon information supplied by officers, directors and principal
stockholders and Schedules 13D and 13G filed with the Securities and Exchange Commission. Unless
otherwise indicated in the footnotes to this table, and subject to community property laws where
applicable, we believe that each of the stockholders named in this table has sole voting and
investment power with respect to the shares indicated as beneficially owned. Beneficial ownership
is determined in accordance with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities. Beneficial ownership also includes
shares of stock subject to options and warrants currently exercisable or exercisable within 60 days
of the date of this table. Applicable percentages are based on 6,170,898 shares of our common
stock outstanding on March 30, 2006.(2)
    
    Includes 954,546 issuable pursuant to vested options.(3)
    
    Includes 1,060,089 shares held of record by a family trust controlled by Mr. Knitowski.
Also includes 725,000 shares issuable pursuant to vested options and 166,667 shares issuable upon
exercise of warrants.(4)
    
    Includes 631,376 shares held of record by a living trust controlled by Mr. Mitro. Also
includes 600,000 shares issuable pursuant to vested options.(5)
    
    Includes 87,500 shares issuable pursuant to vested options.(6)
    
    Includes 118,750 issuable pursuant to vested options and 33,333 shares issuable upon
exercise of warrants.(7)
    
    Includes 631,250 shares issuable pursuant to vested options.(8)
    
    Includes 143,585 shares issuable pursuant to vested options.(9)
    
    Consists of shares issuable upon exercise of options granted to Mr. Willner.(10)
    
    Consists of shares issuable upon exercise of options granted to Mr. Morris.(11)
    
    Includes 55,000 shares issuable pursuant to vested options. Also includes 350,333
shares held of record by Trymetris Capital Fund I, LLC, a private investment fund. Mr. Daggett and
Alan S. Knitowski, our Chairman, are the managing members of the limited liability company which
manages the fund, although Mr. Knitowski has no power to vote or dispose of the shares of Caneum
owned by the fund and therefore disclaims any beneficial interest in these shares. 2002 Stock Option/Stock Issuance Plan
   34




---



##### Table of Contents



35




---



##### Table of Contents



36




---



##### Table of Contents



Equity Compensation Plan Information
  Number of securities remainingNumber of securities to
    
    
    Weighted-average
    
    
    available for future issuancebe issued upon exercise
    
    
    exercise price of
    
    
    under equity compensationof outstanding options,
    
    
    outstanding options,
    
    
    plans (excluding securitieswarrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a) and (b))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    4,636,250
    (1)
    
    $
    0.81
    
    
    
    2,863,750
    (1)Equity compensation
plans not approved
by security holders
    
    
    100,000
    
    
    $
    1.08
    
    
    
    -0-Total
    
    
    4,736,250
    
    
    $
    0.82
    
    
    
    2,863,750
 
 (1)
    
    On February 28, 2005, our 2002 Stock Option/Stock Issuance Plan was amended to increase
the number of shares authorized under the plan from 3,000,000 to 7,500,000. The foregoing table
reflects this amendment to the plan. 
 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    37




---



##### Table of Contents



ITEM 13. EXHIBITS
  Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith2.1 & 10.14
    
    Stock Purchase Agreement dated
March 28, 2006, with Tier One
Consulting, Inc.
    
    8-K
    
    000-30874
    
    
    2.1
    
    
    3/30/062.2
    
    Merger Agreement dated July 8,
2004, between Caneum and
Pipeline Software, Inc.
    
    8-K
    
    000-30874
    
    
    2.2
    
    
    7/9/ 04
 38




---



##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith2.2(a)
    
    Amendment dated September 21,
2004, to Merger Agreement dated
July 8, 2004, between Caneum
and Pipeline Software, Inc.
    
    8-K
    
    000-30874
    
    
    2.2
    (a)
    
    9/27/ 042.2(b)
    
    Amendment dated October 9,
2004, to Merger Agreement dated
July 8, 2004, between Caneum
and Pipeline Software, Inc.
    
    8-K
    
    000-30874
    
    
    2.2
    (b)
    
    10/14/ 042.2(c)
    
    Amendment dated November 17,
2004, to Merger Agreement dated
July 8, 2004, between Caneum
and Pipeline Software, Inc.
    
    8-K
    
    000-30874
    
    
    2.2
    (c)
    
    11/23/ 042.2(d)
    
    Termination of Merger Agreement
dated July 8, 2004, between
Caneum and Pipeline Software,
Inc.
    
    8-K
    
    000-30874
    
    
    2.2
    (d)
    
    January 5, 20043.1
    
    Articles of Incorporation
    
    
    
    
    
    
    
    
    
    
    
    X3.2
    
    Current Bylaws
    
    8-K
    
    000-30874
    
    
    3.2
    
    
    8/4/ 044.1
    
    Form of Common Stock Certificate
    
    10-SB
    
    000-30874
    
    
    4.1
    
    
    7/21/ 004.2
    
    Amended 2002 Stock Option/Stock
Issuance Plan *
    
    8-K
    
    000-30874
    
    
    4.2
    
    
    2/28/ 054.3 & 10.13
    
    Grant of Stock Option Form used
pursuant to the 2002 Stock
Option/Stock Issuance Plan
    
    10-QSB
    
    000-30874
    
    
    4.3 & 10.18
    
    
    11/14/ 054.4
    
    Certificate of Designations,
Rights and Limitations of
Series A Convertible Preferred
Stock
    
    8-K
    
    000-30874
    
    
    4.1
    
    
    3/30/064.5
    
    Form of Series A Preferred
Stock Certificate
    
    8-K
    
    000-30874
    
    
    4.2
    
    
    3/30/064.6
    
    Form of A Warrant
    
    8-K
    
    000-30874
    
    
    4.3
    
    
    3/30/064.7
    
    Form of B Warrant
    
    8-K
    
    000-30874
    
    
    4.4
    
    
    3/30/064.8
    
    Form of C Warrant
    
    8-K
    
    000-30874
    
    
    4.5
    
    
    3/30/064.9
    
    Registration Rights Agreement
with Barron Partners, LP
    
    8-K
    
    000-30874
    
    
    4.6
    
    
    3/30/0610.1
    
    Employment Agreement dated
October 28, 2003, with Sukhbir
Singh Mudan *
    
    10-QSB
    
    000-30874
    
    
    10.6
    
    
    11/7/ 0310.2
    
    Employment Agreement dated
October 28, 2003, with Alan S.
Knitowski *
    
    10-QSB
    
    000-30874
    
    
    10.7
    
    
    11/7/ 0310.3
    
    Employment Agreement dated
October 28, 2003, with Robert
F. Mitro *
    
    10-QSB
    
    000-30874
    
    
    10.8
    
    
    11/7/ 0310.4
    
    Employment Agreement dated
March 17, 2004, with Gary D.
Allhusen*
    
    10-KSB
    
    000-30874
    
    
    10.9
    
    
    3/30/ 0410.5
    
    Sublease dated July 1, 2004,
with Cygni Capital LLC
    
    10-KSB
    
    000-30874
    
    
    10.10
    
    
    3/31/ 0510.6
    
    Management Services Agreement
dated November 1, 2003, with
Cygni Capital LLC
    
    S-2/A
    
    333-110373
    
    
    10.11
    
    
    12/24/ 0310.7
    
    Employment Agreement dated
effective June 15, 2004, with
Charlie Sundling
    
    8-K
    
    000-30874
    
    
    10.12
    
    
    7/9/ 0410.7(a)
    
    Amendment dated September 21,
2004, to Employment Agreement
dated effective June 15, 2004,
with Charlie Sundling
    
    8-K
    
    000-30874
    
    
    10.12
    (a)
    
    9/27/ 0410.7(b)
    
    Amendment dated October 8,
2004, to Employment Agreement
dated effective June 15, 2004,
with Charlie Sundling
    
    8-K
    
    000-30874
    
    
    10.12
    (b)
    
    10/14/ 04
 39




---



##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    
    
    
    
    
    
    
    
    
    
    FiledNumber
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Filing Date
    
    Herewith10.7(c)
    
    Amendment dated November 17,
2004, to Employment Agreement
dated effective June 15, 2004,
with Charlie Sundling
    
    8-K
    
    000-30874
    
    
    10.12
    (c)
    
    11/23/ 0410.7(d)
    
    Termination of Employment
Agreement dated effective June
15, 2004, with Charlie Sundling
    
    8-K
    
    000-30874
    
    
    10.12
    (d)
    
    1/5/ 0410.8
    
    Employment Agreement dated
effective June 15, 2004, with
Raju Patel
    
    8-K
    
    000-30874
    
    
    10.13
    
    
    7/9/ 0410.8(a)
    
    Amendment dated September 21,
2004, to Employment Agreement
dated effective June 15, 2004,
with Raju Patel
    
    8-K
    
    000-30874
    
    
    10.13
    (a)
    
    9/27/ 0410.8(b)
    
    Amendment dated October 11,
2004, to Employment Agreement
dated effective June 15, 2004,
with Raju Patel
    
    8-K
    
    000-30874
    
    
    10.13
    (b)
    
    10/14/ 0410.8(c)
    
    Amendment dated November 17,
2004, to Employment Agreement
dated effective June 15, 2004,
with Raju Patel
    
    8-K
    
    000-30874
    
    
    10.13
    (c)
    
    11/23/0410.8(d)
    
    Termination of Employment
Agreement dated effective June
15, 2004, with Raju Patel
    
    8-K
    
    000-30874
    
    
    10.13
    (d)
    
    1/5/0410.9
    
    Investment Relations Agreement
dated December 2, 2004, with
The Liquid Group, Inc.
    
    10-KSB
    
    000-30874
    
    
    10.14
    
    
    3/31/0510.10
    
    Settlement Agreement dated
February 23, 2005, with Eric
Bronk
    
    10-KSB
    
    000-30874
    
    
    10.15
    
    
    3/31/0510.11
    
    Warrant Certificate dated
February 23, 2005, for Eric
Bronk
    
    10-KSB
    
    000-30874
    
    
    10.16
    
    
    3/31/0510.12
    
    Consulting Agreement dated
February 4, 2005, with Robert
F. Mitro
    
    10-KSB
    
    000-30874
    
    
    10.17
    
    
    3/31/0510.15
    
    Preferred Stock Purchase
Agreement Dated March 24, 2006,
with Barron Partners, LP
    
    8-K
    
    000-30874
    
    
    99.1
    
    
    3/30/0610.16
    
    Employment Agreement dated
March 28, 2006, with Robert
Morris*
    
    8-K
    
    000-30874
    
    
    99.2
    
    
    3/30/0610.17
    
    Employment Agreement dated
March 28, 2006, with Michael
Willner*
    
    8-K
    
    000-30874
    
    
    99.3
    
    
    3/30/0621.1
    
    List of Subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    X14.1
    
    Code of Ethics
    
    10-KSB
    
    000-30874
    
    
    14.1
    
    
    3/30/0431.1
    
    Rule 13a-14(a) Certification by
Principal Executive Officer
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Rule 13a-14(a) Certification by
Principal Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    X32
    
    Section 1350 Certification of
Principal Executive Officer and
Principal Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    X
 
 *
    
    Management contract, or compensatory plan or arrangement required to be filed as an exhibit. 
 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  40




---



##### Table of Contents



Audit Fees
 Audit-Related Fees
 Tax Fees
 All Other
   
 41




---



##### Table of Contents



Caneum, Inc.Date: March 31, 2006
    
    By:
    
    /s/ Sukhbir Singh MudanSukhbir Singh Mudan, President (Principal Executive Officer)
 In accordance with the Exchange Act, this report has been signed below by the following person
on behalf of the registrant and in the capacities and on the dates indicated.
 Date: March 31, 2006
    
    /s/ Sukhbir Singh MudanSukhbir Singh Mudan, Director and Treasurer
(Principal Financial Officer, and Principal
Accounting Officer)Date: March 31, 2006
    
    /s/ Luan DangLuan Dang, DirectorDate: March 31, 2006
    
    /s/ Avtar Singh RanshiDr. Avtar Singh Ranshi, DirectorDate: March 31, 2006
    
    /s/ Robert F. MitroRobert F. Mitro, DirectorDate: March 31, 2006
    
    /s/ Alan S. KnitowskiAlan S. Knitowski, Director
 42




---



##### Table of Contents



Financial Statements
 CANEUM, INC
 For the years ended December 31, 2005 and 2004




---



##### Table of Contents



CANEUM, INC.
 Table of Contents
 For the years ended December 31, 2005 and 2004
 PageFinancial StatementsReport of Independent Registered Public Accounting Firm
    
    
    F-3Balance Sheet  Assets
    
    
    F-4Balance Sheet  Liabilities and Stockholders Equity
    
    
    F-5Statements of Operations and Comprehensive Loss
    
    
    F-6Statements of Stockholders Equity
    
    
    F-7Statements of Cash Flows
    
    
    F-8Notes to Financial Statements
    
    
    F-9
 F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 F-3




---



##### Table of Contents



CANEUM, INC.
 
 Balance Sheets
 As of December 31, 2005
 ASSETS
 2005CURRENT ASSETSCash and cash equivalents
    
    $
    99,760Accounts receivable, net of allowance for doubtful accounts
of $6,733 and $10,446 in 2005 and 2004, respectively
    
    
    469,074Prepaid assets  related parties (Note 3)
    
    
    68,750Other prepaid expenses and current assets
    
    
    51,099TOTAL CURRENT ASSETS
    
    
    688,683FIXED ASSETSSoftware
    
    
    16,128Less accumulated depreciation
    
    
    (1,571
    )TOTAL FIXED ASSETS
    
    
    14,557TOTAL ASSETS
    
    $
    703,240
  F-4




---



##### Table of Contents



CANEUM, INC.
 Balance Sheets (continued)
 As of December 31, 2005
 
 LIABILITIES AND STOCKHOLDERS EQUITY
 2005CURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    284,656Credit line
    
    
    6,833Accrued payroll and related expenses
    
    
    25,839TOTAL CURRENT LIABILITIES
    
    
    317,328COMMITMENTS AND CONTINGENCIES (Notes 3, 7 and 8)STOCKHOLDERS EQUITY (Notes 5 and 6)Common stock, 100,000,000 shares authorized
at $.001 par value: 5,386,991 and 4,358,271 shares
issued and outstanding, respectively
    
    
    5,386Preferred stock, 20,000,000 shares authorized
at $.001 par value: 0 shares issued and outstanding
    
    
    Additional paid in capital
    
    
    3,434,328Accumulated deficit
    
    
    (3,013,802
    )Deferred compensation
    
    
    (40,000
    )TOTAL STOCKHOLDERS EQUITY
    
    
    385,912TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    703,240
  F-5




---



##### Table of Contents



CANEUM, INC.
 
 Statements of Operations and Comprehensive Loss
 For the years ended December 31, 2005 and 2004
 2005
    
    
    2004REVENUE
    
    $
    2,175,271
    
    
    $
    534,752COST OF REVENUE
    
    
    1,676,112
    
    
    
    385,314GROSS PROFIT
    
    
    499,159
    
    
    
    149,438OPERATING EXPENSES
    
    
    1,775,041
    
    
    
    1,292,027ABANDONED ACQUISITION COSTS
    
    
    
    
    
    
    136,866LOSS FROM OPERATIONS
    
    
    (1,275,882
    )
    
    
    (1,279,455
    )OTHER INCOME (EXPENSE)Other income
    
    
    
    
    
    
    37,834Realized losses from the sales of securities
    
    
    
    
    
    
    (116,973
    )Interest income
    
    
    1,737
    
    
    
    2,714TOTAL OTHER INCOME (EXPENSE)
    
    
    1,737
    
    
    
    (76,425
    )LOSS BEFORE INCOME TAX
    
    
    (1,274,145
    )
    
    
    (1,355,880
    )INCOME TAX EXPENSE
    
    
    (800
    )
    
    
    (800
    )NET LOSS
    
    $
    (1,274,945
    )
    
    $
    (1,356,680
    )LOSS PER COMMON SHARE-Basic and Diluted
    
    $
    (0.27
    )
    
    $
    (0.33
    )SHARES USED IN EARNINGS PER SHARE CALCULATIONSWEIGHTED AVERAGE COMMON SHARES
    
    
    4,670,050
    
    
    
    4,064,720OTHER COMPREHENSIVE INCOME (LOSS)NET LOSS
    
    $
    (1,274,945
    )
    
    $
    (1,356,680
    )OTHER COMPREHENSIVE INCOME (LOSS):Reclassification adjustment, net of tax
    
    
    
    
    
    
    16,784COMPREHENSIVE LOSS
    
    $
    (1,274,945
    )
    
    $
    (1,339,896
    )
  F-6




---



##### Table of Contents



CANEUM, INC.
 
 Statements
of Stockholders Equity
 For the years ended December 31, 2005 and 2004
 Additional
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    other comprehensive
    
    
    Deferred
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    deficit
    
    
    loss
    
    
    Compensation
    
    
    EquityBALANCE, December 31, 2003
    
    
    4,010,000
    
    
    
    4,010
    
    
    
    1,287,665
    
    
    
    (382,217
    )
    
    
    (16,784
    )
    
    
    
    
    
    
    892,674Shares issued for administrative services
    
    
    5,000
    
    
    
    5
    
    
    
    3,745
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,750Shares issued for legal services
    
    
    25,271
    
    
    
    25
    
    
    
    26,847
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,872Shares issued in connection with a
private placement at $2.00 per share
    
    
    318,000
    
    
    
    318
    
    
    
    635,682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    636,000Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    170,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170,551Other comprehensive income for
the year ended December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,784
    
    
    
    
    
    
    
    16,784Net loss for the year ended December 31, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,356,640
    )
    
    
    
    
    
    
    
    
    
    
    (1,356,640
    )BALANCE, December 31, 2004
    
    
    4,358,271
    
    
    $
    4,358
    
    
    $
    2,124,490
    
    
    $
    (1,738,857
    )
    
    $
    
    
    
    
    
    
    
    $
    389,9912004 Executive bonus paid in stock (previously accrued for)
    
    
    33,147
    
    
    
    33
    
    
    
    82,167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,200Shares issued in connection with a
private placement at $2.00 per share
    
    
    20,000
    
    
    
    20
    
    
    
    39,980
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,000Shares issued in connection with a
private placement at $1.25 per share
    
    
    299,181
    
    
    
    299
    
    
    
    374,701
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375,000Shares issued for consulting services at an average of $1.03 per share
    
    
    52,692
    
    
    
    53
    
    
    
    54,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,077Shares issued in connection with asset purchase
    
    
    12,822
    
    
    
    13
    
    
    
    14,987
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000Shares issued in connection with a
private placement at $.75 per share
    
    
    100,667
    
    
    
    101
    
    
    
    75,399
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    75,500Options exercised
    
    
    275,000
    
    
    
    275
    
    
    
    150,975
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    151,250Shares issued for consulting services
    
    
    40,000
    
    
    
    40
    
    
    
    39,960
    
    
    
    
    
    
    
    
    
    
    
    (40,000
    )
    
    
    Stock-based compensation expense
    
    
    
    
    
    
    
    
    
    
    339,239
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339,2392005 Executive bonus paid in stock
    
    
    195,211
    
    
    
    195
    
    
    
    138,405
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138,600Net loss for the year ended December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,274,945
    )
    
    
    
    
    
    
    
    
    
    
    (1,274,945
    )BALANCE, December 31, 2005
    
    
    5,386,991
    
    
    $
    5,386
    
    
    $
    3,434,328
    
    
    $
    (3,013,802
    )
    
    $
    
    
    
    $
    (40,000
    )
    
    $
    385,912
  F-7




---



##### Table of Contents



CANEUM, INC.
 
 Statements of Cash Flows
 For the years ended December 31, 2005 and 2004
 2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIESNet (loss)
    
    $
    (1,274,945
    )
    
    $
    (1,356,640
    )Adjustments to reconcile net loss to net
cash used by operating activities:Stock-based compensation expense
    
    
    339,239
    
    
    
    170,551Depreciation and amortization
    
    
    1,471
    
    
    
    100Expenses paid by stock issuance
    
    
    192,677
    
    
    
    30,622Realized loss on sale of securities
    
    
    
    
    
    
    116,973Increase in provision for doubtful accounts
    
    
    
    
    
    
    10,446Receipt of stock for services
    
    
    
    
    
    
    (32,500
    )Increase in accounts receivable
    
    
    (366,991
    )
    
    
    (72,079
    )Increase in prepaid assets related parties
    
    
    (68,750
    )
    
    
    Increase in prepaid expenses and other assets
    
    
    (21,099
    )
    
    
    Increase accounts payable and accrued liabilities
    
    
    154,317
    
    
    
    109,355Increase in accrued payroll and related expenses
    
    
    4,496
    
    
    
    103,543Decrease in taxes payable
    
    
    
    
    
    
    (800
    )NET CASH FLOWS USED BY OPERATING ACTIVITIES
    
    
    (1,039,585
    )
    
    
    (920,429
    )CASH FLOWS FROM INVESTING ACTIVITIESPurchases of available-for-sale securities
    
    
    
    
    
    
    (266,366
    )Proceeds from sales of available-for-sale securities
    
    
    
    
    
    
    276,198Development of software for internal use
    
    
    (16,028
    )
    
    
    NET CASH FLOWS (USED) PROVIDED BY INVESTING ACTIVITIES
    
    
    (16,028
    )
    
    
    9,832CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock for cash
    
    
    490,500
    
    
    
    636,000Exercise of options
    
    
    151,250
    
    
    
    Increase in credit line
    
    
    6,833
    
    
    
    NET CASH FLOWS PROVIDED BY INVESTING ACTIVITIES
    
    
    648,583
    
    
    
    636,000NET (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (407,030
    )
    
    
    (274,597
    )CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
    
    
    506,790
    
    
    
    781,387CASH AND CASH EQUIVALENTS, END OF THE PERIOD
    
    $
    99,760
    
    
    $
    506,790SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONStock issued to satisfy accrued expenses
    
    $
    82,200
    
    
    $
    Stock issued for asset purchase
    
    $
    15,000
    
    
    $
    Stock issued for executive bonus
    
    $
    138,600
    
    
    $
    Stock issued for services
    
    $
    94,077
    
    
    $
    Cash paid for taxes
    
    $
    800
    
    
    $
    1,600
  F-8




---



##### Table of Contents



CANEUM, INC.
 
 Notes to Financial Statements
 December 31, 2005
 NOTE 1  CORPORATE HISTORY
   NOTE 2 Significant Accounting Policies
 Revenue Recognition
    Cash and Cash Equivalents
  F-9




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
 Stock-Based Compensation
     2005
    
    
    2004Net loss as reported
    
    $
    (1,274,945
    )
    
    $
    (1,356,680
    )Stock based compensation deducted in
arriving at net loss as reported
    
    
    339,239
    
    
    
    170,551(935,706
    )
    
    
    (1,186,129
    )Stock based compensation determined
under the fair value method
    
    
    1,203,045
    
    
    
    642,760Net Loss, pro-forma
    
    $
    (2,138,751
    )
    
    $
    (1,828,889
    )Net loss per share, as reported
    
    $
    (0.27
    )
    
    $
    (0.33
    )Net loss per share, pro forma
    
    $
    (0.46
    )
    
    $
    (0.45
    )
 F-10




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
  2005
    
    2004Volatility
    
    
    35.33
    %
    
    
    146.01
    %Risk free Interest rate
    
    
    4.29
    %
    
    
    4.20
    %Expected life of Options
    

4-5 years


4-5 years
  Fair Value of Financial Instruments
  Accounting for Income Taxes
  Earnings (Loss) Per Share
 F-11




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
  Use of Estimates
  New Accounting Pronouncements
  F-12




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
 SFAS 123(R) SFAS 123(R)
  NOTE 3 Related Party Transactions
  Rent
  F-13




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
 Management Services Agreement
  Consulting Services
  Investor Relations
  Consulting
  Revenue
  F-14




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
  NOTE 4 Income Tax
  Year Ended December 31,2005
    
    
    2004Current:Federal
    
    $
    
    
    
    $
    State
    
    
    800
    
    
    
    800800
    
    
    
    800Deferred:Federal
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Income tax provision
    
    $
    800
    
    
    $
    800
  Year Ended December 31,2005
    
    
    2004Expected income tax expense (benefit)
    
    $
    (433,000
    )
    
    $
    (461,000
    )State tax (benefit) expense, net of Federal benefit
    
    
    800
    
    
    
    800Increase in valuation allowance
    
    
    433,000
    
    
    
    461,000Income tax provision
    
    $
    800
    
    
    $
    800
  12/31/2005Deferred tax assets:NOL carryforwards
    
    $
    865,000Allowances for bad debts
    
    
    2,000Accrued expenses
    
    
    5,000Total deferred tax assets
    
    
    872,000Valuation allowance
    
    
    (872,000
    )Net deferred tax assets
    
    $
    
 F-15




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
    NOTE 5  Common Stock
     F-16




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
      NOTE 6 Stock Plan
     F-17




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
  2005
    
    
    2004Weighted-Average
    
    
    
    
    
    
    Weighted-AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at January 1
    
    
    3,990,000
    
    
    $
    0.67
    
    
    
    3,037,500
    
    
    $
    0.55Granted
    
    
    1,577,500
    
    
    $
    1.69
    
    
    
    2,278,000
    
    
    $
    1.08Cancelled/forfeited
    
    
    (656,250
    )
    
    $
    1.70
    
    
    
    (1,325,500
    )
    
    $
    1.12Exercised
    
    
    (275,000
    )
    
    $
    0.55
    
    
    
    
    
    
    
    Outstanding at December 31,
    
    
    4,636,250
    
    
    $
    0.81
    
    
    
    3,990,000
    
    
    $
    0.67Options exercisable at December 31
    
    
    3,735,668
    
    
    
    
    
    
    
    2,655,208Weighted-average fair value of
options granted during the period
    
    $
    1.33
    
    
    
    
    
    
    $
    0.42
  Options Outstanding
    
    Options ExercisableNumber
    
    Weighted-Average
    
    
    
    
    
    NumberRange of
    
    Outstanding
    
    Remaining
    
    Weighted-Average
    
    Exercisable
    
    Weighted-AverageExercise Prices
    
    December 31, 2005
    
    Contractual Life
    
    Exercise Prices
    
    December 31, 2005
    
    Exercise Price$0.00 - $1.00
    
    
    3,761,250
    
    
    4 years
    
    $
    0.61
    
    
    
    3,442,500
    
    
    $
    0.60$1.00 - $2.00
    
    
    707,500
    
    
    5 years
    
    $
    1.47
    
    
    
    205,668
    
    
    $
    1.48$2.00 - $3.00
    
    
    167,500
    
    
    5 years
    
    $
    2.58
    
    
    
    87,500
    
    
    $
    2.66$0.00 - $3.00
    
    
    4,636,250
    
    
    4 years
    
    $
    0.81
    
    
    
    3,735,668
    
    
    $
    0.70
  F-18




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
 
    
    50,000 warrants for common shares at $0.75 each. These warrants were issued during 2005
and are fully vested at December 31, 2005.
    
    50,000 warrants for common shares at $1.40 each. These warrants were issued to
consultants to the Company and are fully vested.
    
    The Company issued 100,667 shares of common stock in a private placement
with accompanying Common Stock Purchase Warrants at the rate of 50% of the shares
purchased. Accordingly 50,333 warrants are outstanding related to this common stock. The
warrants will be exercisable at $1.00 with certain incentive discounts to the exercise
price available through December 31, 2008.
 NOTE 7  Commitments and Contingencies
 Credit Line
  Employment Contracts
  
    
    Sukhbir Singh Mudan. The initial period of the employment agreement for Mr. Mudan
is three years. Mr. Mudan is required to devote not less than 75% of his business time
to the business of the Company, and his base salary is $120,000 per annum. Mr. Mudan
received options to purchase 1,000,000 shares at $0.55 per share as additional
compensation for entering into the agreement.
    
    Alan S. Knitowski. Mr. Knitowski is required to devote his best efforts to
performing well all duties that the Company may reasonably assign to him from time to
time during the term of the agreement, but he will not be required to devote in excess
of 25% of his business time and effort to providing these services. His base salary is
$120,000 per annum and he received options to purchase 1,000,000 shares at $0.55 per
share as additional compensation for entering into the agreement.
 F-19




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
  NOTE 8  Subsequent Events
 Clarence Kelley
  Barron Transaction
  F-20




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
     Tier One Transaction
 F-21




---



##### Table of Contents



CANEUM, INC.
 Notes to Financial Statements
 December 31, 2005
  th
  Stock Issuances
  F-22