##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the fiscal year ended December 31, 2007
 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 incorporation or 
organization
    
    I.R.S. Employer Identification No.
 3101 West Coast Highway, Suite 400, Newport Beach, CA
    
    92663(Address of principal executive offices)
    
    (Zip Code)
 (949) 273-4000
 None
  o þ
 o
 þ o þ o
 o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller reporting company þ
 o




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##### 



Table of Contents
 PART I
    
    
    4ITEM 1. DESCRIPTION OF BUSINESS
    
    
    4ITEM 1A. RISK FACTORS
    
    
    13ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    13ITEM 2. DESCRIPTION OF PROPERTY
    
    
    13ITEM 3. LEGAL PROCEEDINGS
    
    
    14ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    15PART II
    
    
    15ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
    
    
    15ITEM 6. SELECTED FINANCIAL DATA
    
    
    17ITEM 7. MANAGEMENTS DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    17ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    26ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    27ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    60ITEM 9A. CONTROLS AND PROCEDURES
    
    
    60ITEM 9B. OTHER INFORMATION
    
    
    62PART III
    
    
    62ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    62ITEM 11. EXECUTIVE COMPENSATION
    
    
    66ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
    
    
    72ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    74ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    77PART IV
    
    
    78ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    78Exhibit 10.21Exhibit 10.24Exhibit 10.25Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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Forward Looking Statements
       3




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PART I
 
 ITEM 1. DESCRIPTION OF BUSINESS
 Overview and Development
    Acquisition of Caneum India Private Limited
   4




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5




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Bridge Bank Financing
   6




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
    
    incurring additional indebtedness;
    
    merging or consolidating with or into any other business organization;
    
    acquiring all or substantially all of the capital stock or property of a third
party without the prior consent of the bank;
    
    permitting our asset coverage ratio to be less than certain bench mark
amounts, as set forth in the agreement; and
    
    failing to maintain a rolling three-month performance of a designated
percentage of our annual operating projections.
      7




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Our Outsourcing Products and Services
 Industry Overview
      8




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Risks of Foreign Operations
  Our Business Acquisition Strategy
 Acquisition Targets
    9




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Selection Criteria for Acquisition Targets
   Selection Process for Acquisitions
   10




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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




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Acquisition Activities
    12




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Employees
  
 ITEM 1A. RISK FACTORS
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS
  
 ITEM 2. DESCRIPTION OF PROPERTY
   Square
    
    
    Lease Expiration
    
    
    MonthlyLocation
    
    Footage
    
    
    Date(1)
    
    
    Rent(2)C-22C DLF Super Mart Commercial Complex
    
    
    2,265
    
    
    April 20, 2008
    
    
    $
    2,502C-21B DLF Super Mart Commercial Complex
    
    
    1,316
    
    
    April 20, 2008
    
    
    $
    781C-12B DLF Super Mart Commercial Complex
    
    
    2,329
    
    
    June 3, 2009
    
    
    $
    2,168C-12C DLF Super Mart Commercial Complex
    
    
    1,790
    
    
    June 3, 2009
    
    
    $
    1,667C-71D DLF Super Mart Commercial Complex
    
    
    611
    
    
    Oct. 14, 2010
    
    
    $
    1,284
 (1)
    
    Each lease may be terminated by either party during its term upon three months notice.(2)
    
    Monthly rent is paid in India currency. The amounts set forth in this table are in U.S.
Dollars at the current exchange rate.  13




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ITEM 3. LEGAL PROCEEDINGS
 Innofone Litigation
  Barron Litigation
     14




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Publishing Concepts, L.P. Litigation
  Other Litigation
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
   15




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Quarter
    
    High
    
    
    LowFISCAL YEAR ENDED
DECEMBER 31, 2006
    
    First
    
    $
    1.04
    
    
    $
    0.70Second
    
    $
    0.89
    
    
    $
    0.60Third
    
    $
    0.81
    
    
    $
    0.67Fourth
    
    $
    1.23
    
    
    $
    0.55FISCAL YEAR ENDED
DECEMBER 31, 2007
    
    First
    
    $
    0.75
    
    
    $
    0.47Second
    
    $
    0.68
    
    
    $
    0.48Third
    
    $
    0.65
    
    
    $
    0.42Fourth
    
    $
    0.65
    
    
    $
    0.15
 Holders
  Dividend Policy
   Unregistered Sales of Securities
   16




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Securities Authorized for Issuance under Equity Compensation Plans
  Purchases of Equity Securities
  
 ITEM 6. SELECTED FINANCIAL DATA
  
 ITEM 7. MANAGEMENTS DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Background
  Overview
   17




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
    
    Customer Support, including call centers and web agents for online and
offline technical, customer and product support;
    
    Human Resources, including benefits packages, pre-employment screening,
retained and contingent recruiting and information technology centric
staffing;
    
    Sales and Marketing, including online web agents, lead generation and
distribution channel expansion;
    
    Investor Relations and Public Relations, including audio transcription
and web development, deployment and maintenance for investor
communications; and
    
    Finance and Accounting, including data entry and back office processing.
  Critical Accounting Policies
  Accounts Receivable
   18




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Intangible Assets
  Goodwill
  Stock-Option Compensation
   Expected life in years
    
    4-5Volatility
    
    90 - 97%Risk free rate of return
    
    4.5%
  19




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Revenue Recognition
  Cost of Revenues
  Results of Operations
 Year Ended December 31, 2007, versus the Year Ended December 31, 2006
 Revenue
   20




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Cost of Revenue and Gross Profit
   Operating Expenses
   
    
    Stock-Based Compensation expense and Expenses Paid by Stock Issuance
were $981,507 and $657,062 for the twelve months ended December 31, 2007 and
2006, respectively. This represents an increase of $324,445 and principally
results from the use of stock bonuses for our India subsidiary service
providers, off-set by less use of common stock for services in the United
States.
    
    US Payroll and Related Expenses, (excluding stock based) was
approximately 32% of our operating expenses in 2007 and amounted to $1,519,077
and $1,342,435 for the twelve months ended December 31, 2007 and 2006,
respectively. The increase of $176,642 or 13% resulted from the increase in our
infrastructure to support and expand our business growth.
    
    US Professional Services, including legal, auditing and other
consulting services amounted to $872,395 and $283,649 in 2007 and 2006
respectively. The increase of $588,746 is primarily attributable to the
restatement of our 2006 quarterly filings and the legal costs associated
with litigation against Innofone.com and Barron Partners LP. Partially
offsetting this amount in 2007, we reduced our investor relations expenses by
$177,336 from the prior year period.
  21




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
    
    Most expenses of our wholly-owned India subsidiary are a direct cost of
revenue and are recoded as such. Operating expenses of our India subsidiary,
excluding depreciation and amortization, were $343,391 for the year ended
December 31, 2007. No expenses were recorded for the prior year period as the
acquisition occurred on December 31, 2006.
    
    Our consolidated operating expenses increased as a result of continued
growth in revenues. Additionally, we expect to continue to incur future
non-cash amortization charges as a result of certain intangible assets that we
acquired in connection with the TierOne and Caneum India acquisition.
 Other Income (Expense)
  Net loss
  Liquidity and Capital Resources
     22




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23




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Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an
interpretation of FASB Statement No. 109 Accounting for Income Taxes
  24




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Considering the Effects of Prior Year Misstatements when Quantifying Current Year
Misstatements
 Fair Value Measurements
 Accounting for Registration Payment Arrangements
  The Fair Value Option for Financial Assets and
Financial Liabilities,
  25




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   26




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
     
 
  27




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Report of Independent Registered Public Accounting Firm
 
 Caneum India Private Limited (Formerly known
as Continuum Systems Private Limited)
  Caneum India Private Limited
 M/S Bansal & Co.
 D.S. Rawat
Partner
Membership No-83030
 
    28




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December 31,
    
    
    December 31,2007
    
    
    2006CURRENT ASSETSCash and cash equivalents
    
    $
    46,280
    
    
    $
    335,202Accounts
receivable, net of allowance of $392,157 and $229,626, respectively
    
    
    1,559,352
    
    
    
    1,840,994Accounts
receivable from related parties net of allowance of $133,852
    
    
    111,010Prepaid assets
    
    
    134,764
    
    
    
    57,673Other current assets
    
    
    33,202
    
    
    
    15,000Total current assets
    
    
    1,884,608
    
    
    
    2,248,869LONG TERM ASSETSProperty & equipment, net
    
    
    193,843
    
    
    
    194,373Intangibles, net
    
    
    643,555
    
    
    
    938,587Goodwill
    
    
    1,464,805
    
    
    
    1,464,805Other
    
    
    32,264
    
    
    
    4,592TOTAL ASSETS
    
    $
    4,219,075
    
    
    $
    4,851,226
   29




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December 31,
    
    
    December 31,2007
    
    
    2006CURRENT LIABILITIESAccounts payable
    
    $
    1,552,870
    
    
    $
    830,468Accrued expenses
    
    
    25,975
    
    
    
    67,098Credit lines
    
    
    1,231,694
    
    
    
    159,966Accrued payroll and related expenses
    
    
    248,287
    
    
    
    119,556Deferred revenue
    
    
    22,880
    
    
    
    Notes payable
    
    
    
    
    
    
    61,480Current portion of installment loans
    
    
    734,974
    
    
    
    785,573Other current liabilities
    
    
    90,992
    
    
    
    84,522Total current liabilities
    
    
    3,907,672
    
    
    
    2,108,663LONG TERM LIABILITIESCurrent portion of installment loan reclassifed to non-current (Note 8)
    
    
    200,000
    
    
    
    Installment loans, less current portion
    
    
    17,894
    
    
    
    665,862Other non current liabilities
    
    
    61,058
    
    
    
    51,127Total liabilities
    
    
    4,186,624
    
    
    
    2,825,652Minority Interest
    
    
    
    
    
    
    231,227SHAREHOLDERS EQUITYPreferred stock, $0.001 par value 20,000,000 shares authorized, 3,332,500
and 3,332,500 shares issued and outstanding (Liquidation preference $1,666,250)
    
    
    3,332
    
    
    
    3,332Common stock, $0.001 par value 100,000,000 shares authorized, 8,896,368
and 7,918,921 shares issued and outstanding
    
    
    8,895
    
    
    
    7,917Additional paid-in capital
    
    
    8,708,827
    
    
    
    7,592,702Accumulated other comprehensive income
    
    
    87,416
    
    
    
    Accumulated deficit
    
    
    (8,776,019
    )
    
    
    (5,809,604
    )Total shareholders equity
    
    
    32,451
    
    
    
    1,794,347TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    4,219,075
    
    
    $
    4,851,226
   30




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Years EndedDecember 31,
    
    
    December 31,2007
    
    
    2006Revenue
    
    $
    11,904,857
    
    
    $
    6,988,283Cost of revenue
    
    
    9,681,467
    
    
    
    5,343,193Gross profit
    
    
    2,223,390
    
    
    
    1,645,090Operating expenses
    
    
    4,741,863
    
    
    
    3,570,661Loss from operations
    
    
    (2,518,473
    )
    
    
    (1,925,571
    )Other income (expense)Interest income (expense), net
    
    
    (258,021
    )
    
    
    (113,581
    )Loss on foreign exchange
    
    
    (79,604
    )
    
    
    Other income (loss)
    
    
    (7,512
    )
    
    
    1,266Total other income (expense)
    
    
    (345,137
    )
    
    
    (112,315
    )Minority Interest
    
    
    (80,352
    )
    
    
    Loss before income tax
    
    
    (2,943,962
    )
    
    
    (2,037,886
    )Income tax expense
    
    
    (22,453
    )
    
    
    (2,868
    )Net loss
    
    $
    (2,966,415
    )
    
    $
    (2,040,754
    )Beneficial Conversion Charge upon Issuance of
Preferred Shares
    
    $
    
    
    
    $
    755,048Net Loss Attributable to Common Stockholders
    
    $
    (2,966,415
    )
    
    $
    (2,795,802
    )Basic and diluted net loss per common share
    
    $
    (0.37
    )
    
    $
    (0.44
    )Weighted average number of Common Shares
outstanding used in the calculation
    
    
    8,117,786
    
    
    
    6,332,795Net loss
    
    $
    (2,966,415
    )
    
    $
    (2,040,754
    )Comprehensive Income:Foreign currency translation adjustment (Note 2)
    
    
    87,416
    
    
    
    Comprehensive Loss
    
    $
    (2,878,999
    )
    
    $
    (2,040,754
    )
   31




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AccumulatedPrice per
    
    
    Series A Convertible,
    
    
    
    
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    OtherEquity
    
    
    Preferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    ComprehensiveUnit
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    TotalBalance
at December 31, 2005
    
    
    
    
    
    
    
    
    
    $
    
    
    
    
    5,386,991
    
    
    $
    5,386
    
    
    $
    3,394,328
    
    
    $
    (3,013,802
    )
    
    $
    
    
    
    $
    385,912Preferred Shares issued in a private placement
    
    $
    0.50
    
    
    
    4,000,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    1,996,000
    
    
    
    
    
    
    
    
    
    
    
    2,000,000Offering costs for Preferred Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210,000
    )
    
    
    
    
    
    
    
    
    
    
    (210,000
    )Beneficial conversion charge upon issuance of preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    755,048
    
    
    
    (755048
    )
    
    
    
    
    
    
    Shares issued as direct acquisition cost
    
    $
    0.78
    
    
    
    
    
    
    
    
    
    
    
    26,633
    
    
    
    27
    
    
    
    20,750
    
    
    
    
    
    
    
    
    
    
    
    20,777Shares issued in a private placement
    
    $
    0.75
    
    
    
    
    
    
    
    
    
    
    
    466,671
    
    
    
    467
    
    
    
    349,537
    
    
    
    
    
    
    
    
    
    
    
    350,004Shares issued for services
    
    $
    0.74
    
    
    
    
    
    
    
    
    
    
    
    180,521
    
    
    
    181
    
    
    
    133,267
    
    
    
    
    
    
    
    
    
    
    
    133,448Options exercised
    
    $
    0.55
    
    
    
    
    
    
    
    
    
    
    
    240,454
    
    
    
    240
    
    
    
    132,010
    
    
    
    
    
    
    
    
    
    
    
    132,250Warrants exercised
    
    $
    0.50
    
    
    
    
    
    
    
    
    
    
    
    360,000
    
    
    
    360
    
    
    
    179,640
    
    
    
    
    
    
    
    
    
    
    
    180,000Conversion of Preferred Shares to Common Shares
    
    
    
    
    
    
    (667,500
    )
    
    
    (668
    )
    
    
    667,500
    
    
    
    668
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    523,614
    
    
    
    
    
    
    
    
    
    
    
    523,614Shares issued for acquisition
    
    $
    0.67
    
    
    
    
    
    
    
    
    
    
    
    590,151
    
    
    
    588
    
    
    
    392,908
    
    
    
    
    
    
    
    
    
    
    
    393,496Liquidated damages for failure to maintain effectiveness of
registration statement as of May 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (74,400
    )
    
    
    
    
    
    
    
    
    
    
    (74,400
    )Net loss for the year ended December 31, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,040,754
    )
    
    
    
    
    
    
    (2,040,754
    )Balance
at December 31, 2006
    
    
    
    
    
    
    3,332,500
    
    
    $
    3,332
    
    
    
    7,918,921
    
    
    $
    7,917
    
    
    $
    7,592,702
    
    
    $
    (5,809,604
    )
    
    $
    
    
    
    $
    1,794,347Shares issued for services
    
    $
    0.56
    
    
    
    
    
    
    
    
    
    
    
    54,921
    
    
    
    55
    
    
    
    30,542
    
    
    
    
    
    
    
    
    
    
    
    30,597Shares issued for bonus
    
    $
    0.45
    
    
    
    
    
    
    
    
    
    
    
    661,765
    
    
    
    662
    
    
    
    299,449
    
    
    
    
    
    
    
    
    
    
    
    300,111Shares accrued for bonus
    
    $
    0.45
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125,045
    
    
    
    
    
    
    
    
    
    
    
    125,045Shares issued for acquisition
    
    $
    0.52
    
    
    
    
    
    
    
    
    
    
    
    260,761
    
    
    
    261
    
    
    
    135,335
    
    
    
    
    
    
    
    
    
    
    
    135,596Stock option compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    525,754
    
    
    
    
    
    
    
    
    
    
    
    525,754Net loss through December 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,966,415
    )
    
    
    87,416
    
    
    
    (2,878,999
    )Balance
at December 31, 2007
    
    
    
    
    
    
    3,332,500
    
    
    $
    3,332
    
    
    
    8,896,368
    
    
    $
    8,895
    
    
    $
    8,708,827
    
    
    $
    (8,776,019
    )
    
    $
    87,416
    
    
    $
    32,451
   32




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For the Years EndedDecember 31,
    
    
    December 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (2,966,415
    )
    
    $
    (2,040,754
    )Adjustments to reconcile net loss to net cash used in operating activitiesStock option compensation expense
    
    
    525,754
    
    
    
    523,614Expenses paid by common stock issuances or committed issuances
    
    
    455,753
    
    
    
    133,448Interest accreted to TierOne installment loans
    
    
    75,405
    
    
    
    100,329Depreciation and amortization
    
    
    115,644
    
    
    
    25,774Amortization of acquired intangibles
    
    
    223,768
    
    
    
    202,300Bad debt expense
    
    
    189,886
    
    
    
    351,279Minority interest
    
    
    80,352
    
    
    
    (Increase) decrease inAccounts receivable
    
    
    (61,838
    )
    
    
    (877,169
    )Prepaid assets and other current assets
    
    
    (115,407
    )
    
    
    163,101Increase inAccounts payable and accrued expenses
    
    
    798,726
    
    
    
    286,977Accrued payroll and related expenses
    
    
    133,693
    
    
    
    93,717Deferred revenue
    
    
    22,880
    
    
    
    Other current liabilities
    
    
    8,190
    
    
    
    Net cash used in operating activities
    
    
    (513,609
    )
    
    
    (1,037,384
    )CASH FLOWS FROM INVESTING ACTIVITIESCash paid for acquisition of TierOne Consulting, Inc., net of cash acquired
    
    
    
    
    
    
    (1,338,627
    )Cash acquired in acquisition of Continuum
    
    
    
    
    
    
    125,254Cash paid for acquisition of remaining interest of Continuum
    
    
    (89,286
    )
    
    
    Purchase of property & equipment
    
    
    (99,629
    )
    
    
    (32,641
    )Net cash used in investing activities
    
    
    (188,915
    )
    
    
    (1,246,014
    )CASH FLOWS FROM FINANCING ACTIVITIESIssuance of common stock and warrants for cash
    
    
    
    
    
    
    350,004Issuance of Series A Preferred Shares and warrants for cash, net
    
    
    
    
    
    
    1,790,000Payment of debt
    
    
    (692,276
    )
    
    
    (98,378
    )Addition to debt
    
    
    24,225
    
    
    
    11,480Exercise of options
    
    
    
    
    
    
    132,250Exercise of warrants
    
    
    
    
    
    
    180,000Increase in credit lines
    
    
    1,071,728
    
    
    
    153,484Net cash provided by financing activities
    
    
    403,677
    
    
    
    2,518,840Effect of changes in foreign currency exchange rates on cash
    
    
    9,925
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    (288,922
    )
    
    
    235,442CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    
    
    335,202
    
    
    
    99,760CASH AND CASH EQUIVALENTS, END OF PERIOD
    
    $
    46,280
    
    
    $
    335,202SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATIONInterest paid
    
    $
    174,730
    
    
    $
    26,406Income taxes paid
    
    $
    51,232
    
    
    $
    2,868
   33




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Supplemental disclosure of Non- Cash Investing and Financing Activities:
           34




---



##### Table of Contents



NOTE 1  CORPORATE HISTORY
 Organization
   NOTE 2  SIGNIFICANT ACCOUNTING POLICIES
 Consolidation
   35




---



##### Table of Contents



Revenue Recognition
 Revenue Recognition
 Segment Reporting
  Customer Concentrations
   Accounts Receivable Policy
  Advertising
   36




---



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Cash and Cash Equivalents
  Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees
  Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets,
 Accounting
for the Impairment or Disposal of Long-lived Assets
 Fair Value of Financial Instruments
   37




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Accounting for Income Taxes
 Accounting for Income Taxes
 Long-Lived Assets
  Property & Equipment
   Foreign Currency
    38




---



##### Table of Contents



Per Share Data
 Earnings Per
Share, Computations of Earnings Per Share
    Use of Estimates
  Comprehensive Income
 Reporting
Comprehensive Income
  39




---



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New Accounting Pronouncements
 The Fair Value Option for Financial Assets and
Financial Liabilities,
   NOTE 3  GOING CONCERN UNCERTAINTY
   40




---



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NOTE 4  RELATED PARTY TRANSACTIONS
  Investor Relations
    41




---



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Customer
   NOTE 5  INTANGIBLE ASSETS
     42




---



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AccumulatedAmortizationUseful
    
    
    Gross
    
    
    as of
    
    
    Unamort.Life
    
    
    Cost
    
    

December07
    
    
    BalanceCustomer contracts & relationships
    
    5 Yrs
    
    $
    737,000
    
    
    $
    257,950
    
    
    $
    479,050Employment contracts
    
    2 Yrs
    
    $
    78,000
    
    
    $
    68,250
    
    
    $
    9,750Licenses
    
    1 Yr
    
    $
    75,000
    
    
    $
    75,000
    
    
    $
    Caneum India customer
relationships*
    
    5 Yrs
    
    $
    90,900
    
    
    $
    26,150
    
    
    $
    64,750
 *
    
    Gross cost of the Caneum India customer relationships
includes a decrease of $86,700,
during the year ended December 31, 2007, as a result of the acquisition of the remaining 45%
Minority Interest. Gross cost of the Caneum India intangible is initially recorded in Rupees and
then translated to US Dollars.   Fiscal 2008
    
    
    173,000Fiscal 2009
    
    
    164,000Fiscal 2010
    
    
    164,000Fiscal 2011
    
    
    53,000
  43




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NOTE 6  INCOME TAX
  Year Ended December 31,2007
    
    
    2006Current:Federal
    
    $
    
    
    
    $
    State
    
    
    1,350
    
    
    
    2,868Foreign
    
    
    21,103
    
    
    
    22,453
    
    
    
    2,868Deferred:Federal
    
    
    
    
    
    
    State
    
    
    
    
    
    
    Income tax provision
    
    $
    22,453
    
    
    $
    2,868
  Year Ended December 31,2007
    
    
    2006Expected Federal income tax benefit
    
    $
    (973,600
    )
    
    $
    (694,000
    )Expected State income tax benefit, net
    
    
    (171,800
    )
    
    
    (122,500
    )State tax (benefit) expense, net of Federal benefit
    
    
    1,350
    
    
    
    2,868Foreign tax expense
    
    
    21,103Permanent Differences
    
    
    185,400
    
    
    
    201,500Increase in valuation allowance
    
    
    960,000
    
    
    
    615,000Income tax provision
    
    $
    22,453
    
    
    $
    2,868
  12/31/2007
    
    
    12/31/2006Deferred tax assets:Federal and state net operating loss carryforwards
    
    $
    2,084,000
    
    
    $
    1,258,000Allowances for bad debts
    
    
    168,000
    
    
    
    89,000Stock option compensation
    
    
    140,000
    
    
    
    85,000Capital losses in excess of capital gains
    
    
    55,000
    
    
    
    55,000Total deferred tax assets
    
    
    2,447,000
    
    
    
    1,487,000Valuation allowance
    
    
    (2,447,000
    )
    
    
    (1,487,000
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  44




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U.S. Federal
    
    2003 through the current period;State of
California
    
    2002 through the current period.
   NOTE 7  BARRON FINANCING
   45




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46




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NOTE 8  TIER ONE TRANSACTION
   47




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##### Table of Contents



Allocated to purchase price:
    
    $
    2,971,700Accounts receivable and cash
    
    
    777,800Fixed assets
    
    
    40,200Trademarks
    
    
    90,000Customer contracts & relationships
    
    
    737,000Employment contracts
    
    
    78,000Less liabilities assumed
    
    
    (216,100
    )Total identifiable assets, net
    
    
    1,506,900Remaining balance to goodwill
    
    
    1,464,800
 NOTE 9  CANEUM INDIA TRANSACTION
   48




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49




---



##### Table of Contents



Acquired identifiable assets:Accounts receivable and cash
    
    $
    422,800Fixed assets
    
    $
    132,800Customer relationships
    
    $
    160,900Other
    
    $
    53,900Less liabilities assumed
    
    $
    (95,700
    )Total identifiable assets, net
    
    $
    674,700Minority interest
    
    $
    (231,200
    )Acquisition price
    
    $
    443,500
  Acquisition of Minority Interest:Price paid for 45% Minority Interest
    
    $
    224,900Book Value of Minority interest
    
    $
    (311,600
    )Adjustment to carrying value of customer relationships
    
    $
    (86,700
    )
  United States
    
    $
    10,337,980Foreign
    
    $
    1,566,877Total
    
    $
    11,904,857
  Year 2007
    
    
    Year 2006United States
    
    $
    2,131,269
    
    
    $
    2,308,653Foreign
    
    $
    203,198
    
    
    $
    293,704Total
    
    $
    2,334,467
    
    
    $
    2,602,357
  50




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NOTE 10  COMMON STOCK TRANSACTIONS
              51




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NOTE 11  STOCK PLAN
    2007
    
    2006Volatility
    
    90  97%
    
    
    71-91%Risk free Interest rate
    
    4.5%
    
    
    4.8%Expected life of Options
    
    4-5 years
    
    4-5 yearsExercise price
    
    $0.51  0.67
    
    
    $0.59  0.83Dividend yield
    
    0
    
    
    0
      52




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##### Table of Contents



2007
    
    
    2006Weighted-Average
    
    
    
    
    
    
    Weighted-AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding at January 1
    
    
    7,522,796
    
    
    
    0.77
    
    
    
    4,636,250
    
    
    $
    0.81Granted
    
    
    1,869,000
    
    
    
    0.56
    
    
    
    3,287,000
    
    
    $
    0.77Cancelled/forfeited
    
    
    (1,526,000
    )
    
    
    0.92
    
    
    
    (160,000
    )
    
    $
    2.36Exercised
    
    
    
    
    
    
    
    
    
    
    (240,454
    )
    
    $
    0.54Outstanding at December 31,
    
    
    7,865,796
    
    
    
    0.71
    
    
    
    7,522,796
    
    
    $
    0.77Options exercisable at December 31
    
    
    5,309,398
    
    
    
    0.72
    
    
    
    4,522,420
    
    
    
    0.75Weighted-average fair value of
options granted during the period
    
    $
    0.39
    
    
    
    
    
    
    $
    0.48
  Options Outstanding
    
    
    Options ExercisableNumber
    
    
    Weighted-Average
    
    
    
    
    
    
    NumberRange of
    
    Outstanding
    
    
    Remaining
    
    
    Weighted-Average
    
    
    Exercisable
    
    
    Weighted-AverageExercise Prices
    
    December 31, 2007
    
    
    Contractual Life
    
    
    Exercise Prices
    
    
    December 31, 2007
    
    
    Exercise Price$0.00 - $1.00
    
    
    7,515,796
    
    
    8.4 years
    
    
    0.67
    
    
    
    4,976,065
    
    
    $
    0.66$1.00 - $2.00
    
    
    300,000
    
    
    8.4 years
    
    
    1.37
    
    
    
    283,333
    
    
    $
    1.36$2.00 - $3.00
    
    
    50,000
    
    
    7.6 years
    
    
    2.40
    
    
    
    50,000
    
    
    $
    2.40$0.00 - $3.00
    
    
    7,865,796
    
    
    7.4 years
    
    
    0.71
    
    
    
    5,309,398
    
    
    $
    0.72
   53




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WeightedAverageNumber of
    
    
    Grant DateShares
    
    
    Share ValueBalance at
January 1, 2007
    
    
    1,213,236
    
    
    $
    0.62Granted
    
    
    -0-
    
    
    $
    Vested
    
    
    (661,765
    )
    
    $
    0.62Forfeited
    
    
    -0-
    
    
    $
    Balance at December 31, 2007
    
    
    551,471
    
    
    $
    0.62
   
    
    50,000 warrants for common shares at $0.75 each. These warrants were issued
during 2005 and were fully vested at December 31, 2005. These warrants expire in on
October 28, 2008.
    
    50,000 warrants for common shares at $1.40 each. These warrants were issued to
consultants to the Company and are fully vested. These warrants expire on June 1, 2010.
    
    The Company issued 100,667 shares of common stock in a private placement dated
October 1, 2005, 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 are exercisable at $1.00 with certain incentive discounts
to the exercise price available through December 31, 2009.
    
    The Company issued 466,671 shares of common stock in a private placement dated
January 2, 2006, with accompanying Common Stock Purchase Warrants at the rate of 50% of
the shares purchased. Accordingly 233,336 warrants are outstanding related to this
common stock. The warrants are exercisable at $1.00 with certain incentive discounts
to the exercise price available through March 31, 2010.
  54




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NOTE 12  NOTES PAYABLE
 Credit Lines
    Installment Loans Payable to Tier One Consulting Principals
   55




---



##### Table of Contents



NOTE 13  LITIGATION
 Barron Litigation
    56




---



##### Table of Contents



Innofone Litigation
  Publishing Concepts, L.P.
     2008
    
    $
    177,3932009
    
    $
    181,4472010
    
    $
    138,365
   2008
    
    $
    78,5252009
    
    $
    37,6352010
    
    $
    14,246
  57




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##### Table of Contents



Projected benefit obligation at January 1, 2007
    
    $
    31,863Interest cost
    
    $
    2,576Current service cost
    
    $
    15,520Actuarial (Gain)
    
    $
    (2,674
    )Projected benefit obligation as of December 31, 2007
    
    $
    47,285
  Current service cost
    
    $
    15,520Interest cost
    
    $
    2,576Actuarial
(Gain)
    
    $
    (2,674
    )Net cost recognized in Income statement
    
    $
    15,422
  Jan1, 2007- Mar 31, 2007
    
    
    Mar 31, 2007- Dec 31, 2007Discount rate
    
    
    7.5%
    
    
    
    8.0%Future salary increase
    
    
    5.0%
    
    
    
    5.5%
    58




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##### Table of Contents



59




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##### Table of Contents



CANEUM, INC.
Pro forma Income Statement
 Twelve months endedDecember 31,2006(unaudited)REVENUE
    
    $
    9,503,000COST OF REVENUE
    
    
    6,859,000GROSS PROFIT
    
    
    2,644,000OPERATING EXPENSES
    
    
    4,276,000LOSS FROM OPERATIONS
    
    
    (1,632,000
    )TOTAL OTHER INCOME
    
    
    (140,000
    )NET LOSS
    
    
    (1,772,000
    )LOSS PER COMMON SHARE
    
    $
    (0.26
    )WEIGHTED AVERAGE COMMON SHARES
    
    
    6,929,604
  60




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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
   
 ITEM 9A(T). CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
    61




---



##### Table of Contents



Disclosure Controls and Procedures
  Managements Report on Internal Control over Financial Reporting
      62




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
 
 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 Current Management
  DirectorName
    
    Age
    
    Position(s)
    
    Since
    
    Employment BackgroundSuki Mudan
    
    
    59
    
    
    Director, President
& Treasurer
    
    
    2002
    
    
    Mr. Mudan has served
as our President
since August 2002.
Previously Mr. Mudan
was the COO and
Venture Partner of
IP Capital Partners
in La Jolla,
California. From
1998 to 2001 Mr.
Mudan was a senior
consultant at
Nextera Interactive,
a technology and
management
consulting company a
subsidiary of
Knowledge Universe.
In 1985, he founded
Comwave Inc., a fax
broadcasting company
that was acquired by
a publicly traded
company in 1994.
Prior to that Mr
Mudan was a
consultant with Booz
Allen & Hamilton.Gary D. Allhusen
    
    
    46
    
    
    Executive
Vice-President &
COO
    
    
    
    
    
    Mr. Allhusen has
served as our
Executive
Vice-President since
March 2004, and as
our COO since June
22, 2006. From 2003
until 2004, Mr.
Allhusen was a
Director in the
Communications
Industry Practice
with EDS selling and
delivering large
transformational
consulting and
outsourcing
programs. Mr.
Allhusen also set up
EDS strategic
transformational
outsourcing practice
focused on the
business and
information
technology
transformational
outsourcing market.
From 2000 through
January 2003 Mr.
Allhusen was a
Principal with A. T.
Kearney, a high
value management
consulting firm and
subsidiary of EDS.
  63




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##### Table of Contents



DirectorName
    
    Age
    
    Position(s)
    
    Since
    
    Employment BackgroundAlan S. Knitowski
    
    
    38
    
    
    Chairman
    
    
    2003
    
    
    Mr. Knitowski has
served as our
Chairman since June
2003. He has been
the President of
Alternative
Investments for Curo
Capital, LLC, since
January 2007. From
2000 to 2003 Mr.
Knitowski was
Co-Founder and
Director of Telverse
Communications,
Inc., a
next-generation
advanced services
ASP focused on
wholesale
communications
services for
carriers, service
providers and
value-added
resellers. He has
also been Chairman
of Trycera
Financial, Inc., a
company engaged in
developing,
deploying and
marketing
semi-custom and
customized branded
prepaid and stored
value card
solutions, since
2004. Mr. Knitowski
has also served as
an advisor to
numbers startup
companies.Luan Dang
    
    
    36
    
    
    Director &
Vice-Chairman
    
    
    2005
    
    
    Mr. Dang has served
as our Vice-Chairman
since June 2005. He
has been President
of Strategic
Investments for Curo
Capital LLC since
January 2007, and
has been Co-Manager
of the Curo Capital
Appreciation Fund I
LLC, since January
2007. He has also
been President of
Alternative
Investments for
Trymetris Capital
Management LLC, and
Co-Manager of the
Trymetris Capital
Fund I LLC, since
January 2007. He
has served as Vice
Chairman of Trycera
Financial, Inc. Mr.
Dang was a director
of engineering for
Cisco Systems from
November 2000 until
February 2005.Robert F. Mitro
    
    
    67
    
    
    Director
    
    
    2003
    
    
    Mr. Mitro was
retired from October
2002 through 2005.
In December 2005,
Mr. Mitro was
elected to the board
of directors of STEP
Communications which
is a noise
elimination and
voice separation
acoustics software
technology company.
Since January 2004,
he has also been the
Chairman of the
board for
Windspring, Inc.
(formerly Zentronix
Pty Limited
(Australia)), which
has introduced an
innovative data
miniaturization
software technology
to supersede
traditional
compression
technology for
wireless, digital
mapping and high
speed storage and
search applications.
From February 2005
to March 2007, Mr.
Mitro also assumed
the WindSpring CEO
position.Avtar Singh Ranshi
    
    
    60
    
    
    Director
    
    
    2003
    
    
    Dr. Ranshi has been
a director of
Spotform, PLC, an
English limited
liability company
engaged in the car
and van rental
business, since
1991.Greg Henkel
    
    
    49
    
    
    Vice-President of
Finance &
Accounting
    
    
    
    
    
    Mr. Henkel has
served as our
Vice-President of
Finance and
Accounting since
August 2007. From
August 2006 through
August 2007 he was
employed by Tatum,
LLC, an interim
accounting and
financial solutions
company. From July
2004 through June
2006, Mr. Henkel was
controller for
HiEnergy
Technologies, Inc.,
a government
contracted research
and development
company. From
September 2001 until
June 2004 he was
Vice-President of
Finance for
GetDevice
Technology, Inc.
  64




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##### Table of Contents



DirectorName
    
    Age
    
    Position(s)
    
    Since
    
    Employment BackgroundDarrel Cox
    
    
    42
    
    
    Vice-President of
Strategic Accounts
    
    
    
    
    
    Mr. Cox has served
as our
Vice-President of
Strategic Accounts
since December 2007.
From September 2006
through November
2007 Mr. Cox was
employed as
Vice-President of
Business Development
for JBA LLC, an IT
staff augmentation,
consulting and
offshore development
company. From
January 2006 through
September 2006 he
was CEO and
co-founder of TMV
Inc., a business
consulting firm.
From April 2002
until January 2006
he was employed as a
Senior Program
Director for
Insureworx, a
management and
services delivery
company.Michael A. Willner
    
    
    53
    
    
    Senior
Vice-President
    
    
    
    
    
    Mr. Willner has
served as our Senior
Vice-President since
March 2006. He has
served as President
of Tier One
Consulting, Inc.,
our wholly owned
subsidiary, since
March 2003. From
January 2002 until
January 2003 he was
employed as Senior
Vice-President of
Sertan, a software
company.Robert J. Morris
    
    
    38
    
    
    Senior
Vice-President
    
    
    
    
    
    Mr. Morris has
served as our Senior
Vice-President since
March 2006. He has
served as
Vice-President and
Chief Financial
Officer of Tier One
Consulting, Inc.,
our wholly owned
subsidiary, since
March 2003.Jesper Lindorff
    
    
    36
    
    
    CEO of Caneum India
Pvt Ltd
    
    
    
    
    
    Mr. Lindorff has
served as the chief
executive officer
and a Director of
the Board of Caneum
India Pvt Ltd,
formerly Continuum
Services Pvt Ltd,
since April 2002.Neeraj Sehgal
    
    
    35
    
    
    CTO of Caneum India
Pvt Ltd
    
    
    
    
    
    Mr. Sehgal has
served as the chief
technical officer of
Caneum India Pvt
Ltd, formerly
Continuum Services
Pvt Ltd, since April
2002.
   65




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##### Table of Contents



Section 16(a) Beneficial Ownership Reporting Compliance
  Number ofTransactions NotNumber of Late
    
    
    Reported on a
    
    
    Reports NotName
    
    Reports
    
    
    Timely Basis
    
    
    FiledGreg C. Henkel
    
    
    1
    
    
    
    1
    
    
    
    0Avtar Ranshi
    
    
    1
    
    
    
    1
    
    
    
    0Heather J. Jeanblanc
    
    
    1
    
    
    
    1
    
    
    
    0
 Code of Ethics
  Overview of Director Nominating Process
  
    
    In writing at 3101 West Coast Highway, Suite 400, Newport, Beach, CA 92663-4001;
    
    By e-mail at suki@caneum.com
  Audit Committee Financial Expert
   66




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##### Table of Contents



ITEM 11. EXECUTIVE COMPENSATION
 Executive Compensation Summary
  Summary Compensation Table
 Stock
    
    
    Option
    
    
    All OtherName and
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Compensation
    
    
    TotalPrincipal Position
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)
    
    
    ($)Suki Mudan, CEO
    
    
    2007
    
    
    $
    120,000
    
    
    
    
    
    
    $
    36,668
    
    
    $
    17,278
    
    
    $
    173,9462006
    
    
    $
    120,000
    
    
    
    0
    
    
    $
    9,167
    
    
    $
    17,528
    
    
    $
    146,695Alan S. Knitowski,
    
    
    2007
    
    
    $
    120,000
    
    
    
    
    
    
    $
    36,668
    
    
    $
    17,278
    
    
    $
    173,946Chairman
    
    
    2006
    
    
    $
    120,000
    
    
    
    0
    
    
    $
    9,167
    
    
    $
    17,528
    
    
    $
    146,695Gary D. Allhusen, COO &
    
    
    2007
    
    
    $
    154,846
    
    
    
    
    
    
    $
    29,252
    
    
    $
    17,278
    
    
    $
    166,580Executive Vice-President
    
    
    2006
    
    
    $
    120,000
    
    
    
    0
    
    
    $
    61,375
    
    
    $
    17,528
    
    
    $
    198,903Michael A. Willner, Senior
    
    
    2007
    
    
    $
    120,000
    
    
    
    
    
    
    $
    110,252
    
    
    $
    17,278
    
    
    $
    247,580Vice-President
    
    
    2006
    
    
    $
    108,000
    
    
    
    0
    
    
    $
    110,252
    
    
    $
    12,134
    
    
    $
    230,386Robert J. Morris, Senior
    
    
    2007
    
    
    $
    120,000
    
    
    
    
    
    
    $
    110,252
    
    
    $
    17,278
    
    
    $
    247,580Vice-President
    
    
    2006
    
    
    $
    108,000
    
    
    
    0
    
    
    $
    110,252
    
    
    $
    12,134
    
    
    $
    230,386
   
    
    Suki Mudan. The initial period of the employment agreement for Mr. Mudan
expired on March 31, 2008; thereafter, Mr. Mudan has remained as an at will
employee under the same terms as provided in his expired employment agreement.
Nevertheless, because he notified us in writing prior to March 31, 2008, that he
was willing to negotiate in good faith to enter into a new employment agreement,
we have agreed to pay him a bonus of $60,000, payable in cash or common stock,
pursuant to the terms of his employment agreement. He devotes 100% of his
business time to the business of our company. 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. All
of these options have vested and are 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.
  67




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
    
    Alan S. Knitowski. The initial period of the employment agreement for Mr.
Knitowski expired on March 31, 2008; thereafter, Mr. Knitowski has remained as an
at will employee under the same terms as provided in his expired employment
agreement. Nevertheless, because he notified us in writing prior to March 31,
2008, that he was willing to negotiate in good faith to enter into a new
employment agreement, we have agreed to pay him a bonus of $60,000, payable in
cash or common stock, pursuant to the terms of his employment agreement. Mr.
Knitowski has agreed to devote his best efforts to performing well all duties that
we may reasonably assign to him from time to time during the term of his
employment, 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. All of these options
have vested and are 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
  68




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
    
    Each employee, except Messrs Allhusen, Morris, and Willner, is eligible to
receive an annual performance bonus between nothing 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 our
common stock 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.
    
    Each employee is entitled to four weeks paid vacation per year.
    
    Each employee will be subject to certain confidentiality covenants, but not to
non-competition or anti-piracy provisions.
    
    For a period of twelve months following termination of employment, each employee
will not solicit another employee to leave our company.
  69




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Equity Awards
  Outstanding Equity Awards at Fiscal Year-End
 Number of
    
    
    Number ofSecurities
    
    
    SecuritiesUnderlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    OptionOptions
    
    
    Options
    
    
    Exercise
    
    
    Option(#)
    
    
    (#)
    
    
    Price
    
    
    ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    ($)
    
    
    DateSuki Mudan
    
    
    954,546
    
    
    
    
    
    
    $
    0.55
    
    
    
    8/14/1383,333
    
    
    
    41,667
    
    
    $
    0.70
    
    
    
    9/29/16Alan S. Knitowski
    
    
    725,000
    
    
    
    0
    
    
    $
    0.55
    
    
    
    8/14/1383,333
    
    
    
    41,667
    
    
    $
    0.70
    
    
    
    9/29/16Gary D. Allhusen
    
    
    750,000
    
    
    
    0
    
    
    $
    0.75
    
    
    
    3/17/1493,750
    
    
    
    156,250
    
    
    $
    0.67
    
    
    
    6/22/16Michael A. Willner
    
    
    500,000
    
    
    
    500,000
    
    
    $
    0.83
    
    
    
    3/28/16Robert J. Morris
    
    
    500,000
    
    
    
    500,000
    
    
    $
    0.83
    
    
    
    3/28/16
       70




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71




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Director Compensation
  Director Compensation
 Stock
    
    
    OptionAwards(1)(2)
    
    
    Awards(1)(2)
    
    
    TotalName
    
    ($)
    
    
    ($)
    
    
    ($)Luan Dang
    
    $
    
    
    
    $
    20,635
    
    
    $
    20,635Robert F. Mitro
    
    $
    
    
    
    $
    
    
    
    $Avtar Singh Ranshi
    
    $
    
    
    
    $
    23,463
    
    
    $
    23,463
 (1)
    
    The value of stock and option awards was the 2007 compensation charge dollar amount
recognized for financial statement reporting purposes in accordance with FAS 123R.(2)
    
    As of December 31, 2007, the aggregate number of option awards outstanding for each
director in the table was as follows: Mr. Dang 368,750; Mr. Mitro, 600,000; and Dr. Ranshi, 200,000.   72




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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
 Beneficial Owners of More than Five Percent, Directors, and Management
  Amount and Nature of Beneficial
    
    
    Percentage ofName and Address of Beneficial Owner
    
    Ownership(1)
    
    
    Class(2)Suki Mudan
    
    
    1,404,155
    (3)
    
    
    13.7
    %3101 West
Coast Highway
Suite 400
Newport Beach, CA 92663Gary D. Allhusen
    
    
    1,034,576
    (4)
    
    
    10.2
    %3101 West
Coast Highway,
Suite 400
Newport Beach, CA 92663Alan S. Knitowski
    
    
    2,076,756
    (5)
    
    
    20.4
    %2 San Joaquin
Plaza 
Suite 240
Newport Beach, CA 92660Luan Dang
    
    
    699,174
    (6)
    
    
    7.3
    %2 San Joaquin
Plaza 
Suite 240
Newport Beach, CA 92660Robert F. Mitro
    
    
    1,284,611
    (7)
    
    
    13.1
    %348 Bean Ave. 
Los Gatos, CA 95030Avtar Singh Ranshi
    
    
    350,000
    (8)
    
    
    3.7
    %66 Marshals Drive
St. Albans, Hertfordshire 
UK ALI 4RFMichael A. Willner
    
    
    1,000,000
    (9)
    
    
    9.8
    %3101 West Coast Highway 
Suite 400
Newport Beach, CA 92663Robert J. Morris
    
    
    1,000,000
    (10)
    
    
    9.8
    %3101 West Coast Highway 
Suite 400
Newport Beach, CA 92663
  73




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Amount and Nature of Beneficial
    
    
    Percentage ofName and Address of Beneficial Owner
    
    Ownership(1)
    
    
    Class(2)Greg C. Henkel
    
    
    250,000
    (11)
    
    
    2.7
    %3101 West
Coast Highway 
Suite 400
Newport Beach, CA 92663Darrel Cox
    
    
    678,912
    (12)
    
    
    7.0
    %3101 West Coast Highway 
Suite 400
Newport Beach, CA 92663Executive Officers and
    
    
    9,778,184
    
    
    
    60.3
    %Directors as a Group
(10 Persons)Iain Stuart Allison
    
    
    707,261
    
    
    
    7.7
    %5 Ravenscroft Rd. 
Oxon RG9 2DH 
United KingdomJesper Lindorff
    
    
    754,320
    (13)
    
    
    8.1
    %C/O C-12C Supermart 
1 DLF Phase 
Gurgaon, India 122002Eric Bronk
    
    
    612,933
    (14)
    
    
    6.5
    %3151 Airway Avenue 
Suite P-3
Costa Mesa, CA 92626
 (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. All options granted by the Company are subject to early exercise
provisions and are thus included in this table regardless of the actual vesting schedule associated
with the outstanding options.(2)
    
    Applicable percentages are based on 9,173,293 shares of our common stock outstanding on
March 6, 2008.(3)
    
    Includes 1,079,546 shares issuable upon exercise of common stock purchase options.(4)
    
    Includes 1,000,000 shares issuable upon exercise of common stock purchase options.(5)
    
    Includes 850,000 shares issuable upon exercise of common stock purchase options and
166,667 shares issuable upon exercise of warrants.(6)
    
    Includes 368,750 shares issuable upon exercise of common stock purchase options and
33,333 shares issuable upon exercise of warrants.(7)
    
    Includes 600,000 shares issuable upon exercise of common stock purchase options.(8)
    
    Includes 200,000 shares issuable upon exercise of common stock purchase options.(9)
    
    Consists solely of shares issuable upon exercise of common stock purchase options.(10)
    
    Consists solely of shares issuable upon exercise of common stock purchase options.(11)
    
    Consists of solely of shares issuable upon exercise of common stock purchase options.(12)
    
    Includes 500,000 shares issuable upon exercise of common stock purchase options.(13)
    
    Includes 150,000 shares issuable upon exercise of common stock purchase options.(14)
    
    Includes 212,500 shares issuable upon exercise of common stock purchase options and
50,000 shares issuable upon exercise of warrants.  74




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Equity Compensation Plan Information
  Number ofSecuritiesremaining availablefor future issuanceNumber of
    
    
    
    
    
    
    under equitysecurities to be
    
    
    
    
    
    
    compensationissued upon
    
    
    Weighted-average
    
    
    plansexercise of
    
    
    exercise price of
    
    
    (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions
    
    
    options
    
    
    reflected in columnand warrants
    
    
    and warrants
    
    
    (a) and (b)(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    7,865,796
    
    
    $
    0.71
    
    
    
    4,700,494
    (1)Equity compensation plans not approved by security
holders
    
    
    0
    
    
    
    
    
    
    
    0Total
    
    
    7,865,796
    
    
    $
    0.71
    
    
    
    4,700,494
 (1)
    
    We have a single equity compensation plan designated as the 2002 Stock Option/Stock
Issuance Plan which is authorized to issue up to 15,000,000 shares. As of December 31, 2007,
we had granted 477,456 shares under the plan and 515,454 options had previously been exercised. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 Certain Relationships and Related Transactions
    75




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th
  76




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th th
 th
 Director Independence
   77




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Fees Paid
  Audit Fees
  Audit-Related Fees
  Tax Fees
  All Other Fees
  Audit Committee
   78




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##### Table of Contents



PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Financial Statements
       Exhibits
  Incorporated by Reference
    
    FiledExhibit
    
    
    
    
    
    
    
    
    
    
    
    Filing
    
    Here-Number
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Date
    
    with2.1 & 10.25
    
    Stock Purchase Agreement dated March 28,
2006, with Tier One Consulting, Inc.
    
    8-K
    
    000-30874
    
    
    2.1
    
    
    3/30/062.2 & 10.26
    
    Correcting Amendment dated November 2,
2006, to Stock Purchase Agreement dated
March 28, 2006, with Tier One Consulting,
Inc.
    
    8-K
    
    000-30874
    
    
    2.1
    
    
    11/7/062.3 & 10.27
    
    Amendment dated March 26, 2007, to Stock
Purchase Agreement dated March 28, 2006,
with Tier One Consulting, Inc.
    
    10-KSB
    
    000-30874
    
    
    2.3
    
    
    7/3/072.4
    
    Stock-For-Stock Exchange Agreement dated
December 29, 2006, with Iain Allison
    
    8-K/A-1
    
    000-30874
    
    
    2.1
    
    
    1/8/072.5
    
    Stock Swap Agreement dated February 26,
2007, with Jesper Lindorff
    
    10-KSB
    
    000-30874
    
    
    2.5
    
    
    7/3/072.6
    
    Stock Purchase Agreement dated December 29,
2006, with Neeraj Sehgal
    
    8-K/A-1
    
    000-30874
    
    
    2.3
    
    
    1/8/073.1
    
    Articles of Incorporation
    
    10-KSB
    
    000-30874
    
    
    3.1
    
    
    3/31/063.2
    
    Current Bylaws
    
    8-K
    
    000-30874
    
    
    3.2
    
    
    8/4/044.1
    
    Form of Common Stock Certificate
    
    S-8
    
    333-13124
    
    
    4.1
    
    
    6/19/064.2
    
    Amended 2002 Stock Option/Stock Issuance
Plan *
    
    8-K
    
    000-30874
    
    
    4.2
    
    
    5/14/07
  79




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Incorporated by Reference
    
    FiledExhibit
    
    
    
    
    
    
    
    
    
    
    
    Filing
    
    Here-Number
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    Date
    
    with4.3 & 10.28
    
    Grant of Stock Option Form used pursuant to
the 2002 Stock Option/Stock Issuance Plan
    
    8-K
    
    000-30874
    
    
    4.3 & 10.27
    
    
    5/14/074.4
    
    Certificate of Designations, Rights and
Limitations of Series A 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 Warrants exercisable at $.50
    
    8-K
    
    000-30874
    
    
    4.3
    
    
    3/30/064.7
    
    Form of B Warrants exercisable at $1.00
    
    8-K
    
    000-30874
    
    
    4.4
    
    
    3/30/064.8
    
    Form of C Warrants exercisable at $1.50
    
    8-K
    
    000-30874
    
    
    4.5
    
    
    3/30/064.9
    
    Form of D Warrants exercisable at $.50
    
    10-QSB
    
    000-30874
    
    
    4.1
    
    
    5/15/064.10
    
    Form of E Warrants exercisable at $1.00
    
    10-QSB
    
    000-30874
    
    
    4.2
    
    
    5/15/064.11
    
    Form of F Warrant exercisable at $1.50
    
    10-QSB
    
    000-30874
    
    
    4.3
    
    
    5/15/064.12
    
    Registration Rights Agreement with Barron
Partners, LP
    
    8-K
    
    000-30874
    
    
    4.6
    
    
    3/30/064.13
    
    Form of Warrants issued in 506 offerings
    
    SB-2
    
    333-134963
    
    
    4.14
    
    
    6/13/064.14
    
    Form of Warrants issued to consultants
    
    SB-2
    
    333-134963
    
    
    4.15
    
    
    6/13/0610.1
    
    Employment Agreement dated October 28,
2003, with Sukhbir Singh Mudan *
    
    10-QSB
    
    000-30874
    
    
    10.6
    
    
    11/7/0310.2
    
    Amendment dated September 29, 2006, to
Employment Agreement with Suki Mudan*
    
    10-KSB
    
    000-30874
    
    
    10.2
    
    
    7/3/0710.3
    
    Employment Agreement dated October 28,
2003, with Alan S. Knitowski *
    
    10-QSB
    
    000-30874
    
    
    10.7
    
    
    11/7/0310.4
    
    Amendment dated September 29, 2006, to
Employment Agreement with Alan S.
Knitowski*
    
    10-KSB
    
    000-30874
    
    
    10.4
    
    
    7/3/0710.5
    
    Employment Agreement dated March 17, 2004,
with Gary D. Allhusen*
    
    10-KSB
    
    000-30874
    
    
    10.9
    
    
    3/30/0410.6
    
    Amendment dated June 22, 2006, to
Employment Agreement with Gary D. Allhusen*
    
    10-KSB
    
    000-30874
    
    
    10.6
    
    
    7/3/0710.7
    
    Employment Agreement dated March 28, 2006,
with Robert Morris*
    
    8-K
    
    000-30874
    
    
    99.3
    
    
    3/30/0610.8
    
    Correcting Amendment dated November 2,
2006, to Employment Agreement with Robert
Morris*
    
    8-K
    
    000-30874
    
    
    2.1
    
    
    11/7/0610.9
    
    Employment Agreement dated March 28, 2006,
with Michael Willner*
    
    8-K
    
    000-30874
    
    
    99.2
    
    
    3/30/0610.10
    
    Correcting Amendment dated November 2,
2006, to Employment Agreement with Michael
Willner*
    
    8-K
    
    000-30874
    
    
    2.1
    
    
    11/7/0610.11
    
    Employment Agreement dated July 13, 2007,
with Gregory C. Henkel
    
    8-K
    
    
    
    
    99.1
    
    
    8/22/0710.12
    
    Employment Agreement dated July 2, 2007,
with Michael Woods
    
    8-K
    
    000-30874
    
    
    99.1
    
    
    7/25/0710.13
    
    Preferred Stock Purchase Agreement Dated
March 24, 2006, with Barron Partners, LP
    
    8-K
    
    000-30874
    
    
    99.1
    
    
    3/30/0610.14
    
    Marketing Agreement dated December 31,
2006, with Iain Allison*
    
    8-K/A-1
    
    000-30874
    
    
    99.1
    
    
    1/8/0710.15
    
    Consulting Agreement effective December 31,
2006, with Burdock, Inc.*
    
    10-KSB
    
    000-30874
    
    
    10.16
    
    
    7/3/0710.16
    
    Amendment effective March 20, 2007, to
Consulting Agreement with Burdock, Inc.*
    
    10-KSB
    
    000-30874
    
    
    10.17
    
    
    7/3/07
  80




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##### Table of Contents



Incorporated by Reference
    
    FiledExhibit
    
    
    
    
    
    
    
    
    
    
    
    Filing
    
    Here-Number
    
    Exhibit Description
    
    Form
    
    File No.
    
    Exhibit
    
    
    Date
    
    with10.17
    
    Amendment effective April 23, 2007, to the
Consulting Agreement with Burdock, Inc.*
    
    10-KSB
    
    000-30874
    
    
    10.18
    
    
    7/3/0710.18
    
    Employment Agreement dated December 31,
2006, with Jesper Lindorff
    
    10-KSB
    
    000-30874
    
    
    10.19
    
    
    7/3/0710.19
    
    Amendment dated April 23, 2007, to
Employment Agreement with Jesper Lindorff*
    
    10-KSB
    
    000-30874
    
    
    10.20
    
    
    7/3/0710.20
    
    Financing Agreement dated January 24, 2007,
with Bridge Bank
    
    10-KSB
    
    000-30874
    
    
    10.21
    
    
    7/3/0710.21
    
    Business Financing Modification Agreement
dated August 17, 2007, with Bridge Bank
    
    
    
    
    
    
    
    
    
    
    
    X10.22
    
    Agreement dated January 2, 2007, with Curo
Capital, LLC
    
    10-KSB
    
    000-30874
    
    
    10.22
    
    
    7/3/0710.24
    
    Employment Agreement dated November 7,
2007, with Darrel Cox
    
    
    
    
    
    
    
    
    
    
    
    X10.25
    
    Business Financing Modification
Agreement dated April 9, 2008, with Bridge Bank.
    
    
    
    
    
    
    
    
    
    
    
    X14.1
    
    Code of Ethics
    
    10-KSB
    
    000-30874
    
    
    14.1
    
    
    3/30/0416.1
    
    Letter of Haskell & White LLP dated
December 12, 2006
    
    8-K
    
    000-30874
    
    
    16.1
    
    
    12/13/0621
    
    List of Subsidiaries
    
    10-KSB
    
    000-30874
    
    
    21.1
    
    
    7/3/0723.1
    
    Consent of LevitZacks, independent
registered public accounting firm**
    
    
    
    
    
    
    
    
    
    
    
    X31.1
    
    Rule 13a-14(a) Certification by Principal
Executive Officer
    
    
    
    
    
    
    
    
    
    
    
    X31.2
    
    Rule 13a-14(a) Certification by Principal
Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    X32.1
    
    Section 1350 Certification of Principal
Executive Officer
    
    
    
    
    
    
    
    
    
    
    
    X32.2
    
    Section 1350 Certification of Principal
Financial Officer
    
    
    
    
    
    
    
    
    
    
    
    X
 *
    
    Management contract, or compensatory plan or arrangement required to be filed as an exhibit.**
    
    Included within this report on page 27. Signature Page Follows
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##### Table of Contents



SIGNATURES
  Caneum, Inc.Date:  April 11, 2008
    By:

/s/ Suki MudanSuki Mudan, President  /s/ Suki MudanDate:  April 11, 2008
    
    
    
    Suki Mudan, Director and President (Principal
Executive Officer)/s/ Gary AllhusenDate:  April 11, 2008
    
    
    
    Gary Allhusen, Chief Operating Officer
(Principal Financial and Accounting Officer)/s/ Alan S. KnitowskiDate:  April 11, 2008
    
    
    
    Alan S. Knitowski, Chairman/s/ Luan DangDate:  April 11, 2008
    
    
    
    Luan Dang, Director/s/ Dr. Avtar Singh RanshiDate:  April 11, 2008
    
    
    
    Dr. Avtar Singh Ranshi, Director/s/ Robert F. MitroDate:  April 11, 2008
    
    
    
    Robert F. Mitro, Director
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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Exhibit Description10.21
    
    Business Financing Modification Agreement dated August 17, 2007, with Bridge Bank10.24
    
    Employment Agreement dated November 7, 2007, with Darrel Cox10.25
    
    Business Financing Modification
Agreement dated April 9, 2008, with Bridge Bank.31.1
    
    Rule 13a-14(a) Certification by Principal Executive Officer31.2
    
    Rule 13a-14(a) Certification by Principal Financial Officer32.1
    
    Section 1350 Certification of Principal Executive Officer32.2
    
    Section 1350 Certification of Principal Financial Officer
  83