##### 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 1934For the fiscal year ended
    December 31, 2007ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File number
    000-29129
  INNUITY, INC.
 (Exact name of registrant as
    specified in its charter)
  UTAH

87-0370820(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification Number)8644
    154THAVENUE NE
    REDMOND, WA(Address of principal
    executive offices)

98052(Zip Code)   Registrants Telephone Number, Including Area Code:
 (425) 497-9909
  Securities registered pursuant to Section 12(b) of the
    Act:
 None
  (Title of Class)
      (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
    Large accelerated filer
    o

Accelerated filer
    o

Non-accelerated
    filer o
    (Do not check if a smaller reporting company)

Smaller reporting
    Company þ   rule 12b-2 o þ
    Common Stock:
    DOCUMENTS
    INCORPORATED BY REFERENCE
  The information required by Item 5 of this report and
    the information required by Part III of this report, to the
    extent not set forth herein, is incorporated herein by reference
    from the registrants definitive proxy statement relating
    to the registrants 2008 annual meeting of stockholders.




---



##### 





TABLE OF
    CONTENTS
  INNUITY, INC.
  Form 10-KSB
   
 PagePART IItem 1.


Business


1Item 1A.


Risk factors


14Item 1B.


Unresolved Staff Comments


27Item 2.


Properties


27Item 3.


Legal Proceedings


27Item 4.


Submission of Matters to a Vote of Security
    Holders


28PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder matters and Issuer Purchases of Equity
    Securities


28Item 6.


Selected Financial Data


28Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


28Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


35Item 8.


Financial Statements and Supplementary Data


35Item 9.


Changes in and Disagreements With Accountants on
    Accounting and Financial Disclosure


35Item9A.


Controls and Procedures


35Item 9B.


Other Information


36PART IIIItem 10.


Directors, Executive Officers, Promoters, Control
    Persons and Corporate Governance


36Item 11.


Executive Compensation


36Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


36Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


36Item 14.


Principal Accountant Fees and Services


36PART IVItem 15.


Exhibits, Financial Statement Schedules


37EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2




---



##### Table of Contents



PART I    This Annual Report on
    Form 10-K
    contains forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. We use words such as anticipates,
    believes, estimates, may,
    intends, expects and similar expressions
    to identify forward-looking statements. Discussions containing
    forward-looking statements may be found in the material set
    forth under Description of Business,
    Managements Discussion and Analysis or Plan of
    Operation and in other sections of the report. All
    forward-looking statements are inherently uncertain as they are
    based on our expectations and assumptions concerning future
    events. Any or all of our forward-looking statements in this
    report may turn out to be inaccurate. We have based these
    forward-looking statements largely on our current expectations
    and projections about future events and financial trends that we
    believe may affect our financial condition, results of
    operations, business strategy and financial needs. They may be
    affected by inaccurate assumptions we might make or by known or
    unknown risks and uncertainties, including the risks,
    uncertainties and assumptions described in the section entitled
    Item 1A and elsewhere in this report. In light of these
    risks, uncertainties and assumptions, the forward-looking events
    and circumstances discussed in this report may not occur as
    contemplated, and our actual results could differ materially
    from those anticipated or implied by the forward-looking
    statements. All forward-looking statements in this report are
    made as of the date hereof, based on information available to us
    as of the date hereof, and we assume no obligation to update any
    forward-looking statement.
  Item 1.
    Description
    of Business  Overview
    tm start-up
    Sale of
    In Store Systems Business Line
     1




---



##### Table of Contents



Market
    Overview
            Products &
    Services Overview
         2




---



##### Table of Contents



pay-per-click
        Strategy
    Overview
    
    Expanding our sales, marketing and distribution efforts through
    private label partners, and on a direct basis;
    Focusing on key vertical markets, such as retail, restaurant and
    hospitality;
    Expanding and continuing to integrate the offerings in our two
    divisions (Promotion and Commerce);
    Launching our planned Productivity division;
    Enabling integration of third-party onsite systems and
    applications with our Internet technology platform; and
    Increasing the number of applications and services used by our
    customers.  Marketing &
    Sales Overview
    
    Private Label Partnerships  Private label
    packages are sold under the partners brand to small
    businesses. We enter into strategic partner arrangements with
    well-positioned, market leader companies such as
    Sams Club and Sallie Mae which private label our offerings
    and sell them to their small business customers under their own
    brands. We support our private label partners with an inbound
    and outbound marketing-sales model designed to obtain paying and
    courtesy customers, up-sell those customers and deliver superior
    customer service.
    Direct Sales Model  Based in key large cities,
    Innuity employs direct sales representatives who call on small
    business owners. The sales teams start by offering our local
    search services including premier listings in our Yellow
    Page Guides directory and our LeadConnect Service that
    publishes the key business data to popular search engines such
    as Yahoo and Google. Once an initial relationship with the small
    business is established, the sales representatives will then
    consult with the small business to offer them any additional
    online marketing, website, ecommerce or transaction processing
    solutions to help meet their business goals. 3




---



##### Table of Contents



History
          (801) 705-5128.
      (801) 705-9372
 E-mail:
  Industry
    Background
       4




---



##### Table of Contents



and/or
         5




---



##### Table of Contents



Our
    Solution
    Innuity Velocity Internet Technology
    Platform.
  Internet Technology Solutions.
    Promotion division. pay-per-click
  Commerce division.
  Business
    Strategy
    Expand Our Sales, Marketing and Distribution Efforts, Both
    Through Customer-Acquisition Partners and on a Direct
    Basis.
   6




---



##### Table of Contents



Focus on Key Vertical Markets.
    Expand and Integrate Our Internet Technology Solutions
    Offerings.
    Integrate Legacy Third-Party Onsite Systems and Applications
    with Our Velocity Internet Technology
    Platform.
  Increase the Number of Applications and Services Used by Our
    Customers.
 7




---



##### Table of Contents



Products
    and Services
  brick-and-mortar
  Promotion Division.
  Small Business Online Marketing. pay-per-click
  
    Yellow Page Guides  Local Online Yellow
    Page Directory  Provides enhanced local
    listing on our own local search property www.ypguides.com
    for small businesses to be found online in the Yellow
    Page Guide for their appropriate city.
    LeadConnecttm
    Local Online Business Profiles  Drives top local
    search rankings for our customers in the major search engines.
    This service develops enhanced online local business profiles,
    places customized business profiles in one centralized location
    and automatically distributes these business profiles to major
    search engines and yellow page directories such as Google,
    Yahoo, MSN and YellowPages.com.
    Pay-Per-Click
    Advertising Identify, analyze and select
    high-impact keywords; buy sponsored listings and advertising
    space in places such as Google for identified keywords and
    keyword phrases; and rapidly deliver highly qualified leads.
    Search Engine Optimization Identify, analyze
    and select high-impact keywords, create targeted landing pages
    for each keyword phrase and recruit
    3rd party
    back links to the landing pages with the goal of delivering top
    natural search rankings for the selected keyword phrases.  Optify Optify Optify
  Business and eCommerce Website Services.
 8




---



##### Table of Contents



®
  Commerce Division.
  Merchant Services.
    set-up set-up,
      
    Electronic Check Processing  Allows merchants
    to accept checks from consumers over the Internet or by phone,
    including comprehensive online paperless check processing.
    eCommerce Card Processing  Provides the
    service and functionality needed to accept major credit cards
    online, including Visa, MasterCard, American Express, Discover,
    Diners Club, and JCB.
    Recurring Billing Payment
    Processing  Enables online bill presentment
    and payment, providing the ability to apply payments.  Marketing
    and Sales
   9




---



##### Table of Contents



Competition
  and/or
  
    Small Business Online Marketing Services 
    Companies such as Yahoo Small Business, Microsoft Office Live,
    Website Pros, Go Daddy, Verio, 1&1 and Network Solutions.
    Search Engine Marketing Services  Companies
    such as Yahoo Small Business, Google, Microsoft, R.H.
    Donnellys Local Launch!, Marchex (Traffic Leader) and
    local search engine optimization companies.
    Merchant Services  Companies such as
    Authorize.net, PayPal, Heartland Payment Systems, iPayment,
    CyberSource, Global Payments, The Sage Group, and Peachtree, as
    well as banking competitors such as Bank of America, Chase
    Manhattan Bank, Wells Fargo and small independent sales
    organizations.      Technology
    
    Support millions of small business customers,processing
    billions of dollars in transactions. Our applications, and the
    information residing in them, are accessible and controllable by
    the small business customer. Consumers can find small
    businesses, employees can run any application and owners can
    manage and track information. 10




---



##### Table of Contents




    Centralize service and support.  Our
    centralized service and support capabilities enable our small
    business customers to take advantage of an optimized cost
    structure, while providing them with a high availability of
    resources, redundant systems and highly monitored security
    systems  advantages that previously were available
    only to larger companies with substantial information technology
    budgets.
    Optimize and leverage hardware.  Our hardware
    is optimized with custom software applications that achieve high
    performance with great scalability, giving our small business
    customers the direct cost and performance advantages of our
    centralized hardware/infrastructure. Our platform dynamically
    allocates hardware and other resources to a small business
    customer only when they are utilizing our applications, instead
    of permanently allocating a certain amount of resources,
    independent of application usage.
    Deliver applications services on demand.  Our
    on-demand and monthly subscription model enables small
    businesses to determine what applications services they need,
    when they need them and when it is appropriate for them
    financially. As result, they have better operational control and
    can experience significantly lower costs.    
    Application Architecture.  Our application
    architecture has been designed with some core principles in
    mind. First, applications are reentrant so that multiple
    entities can safely and dependably access our software code
    simultaneously. Applications are also stateless, meaning that
    the states (activities) of the applications reside in a
    database. We have designed the architecture so that speed is
    optimized for each state, and so that for each state there are
    set time parameters to accomplish the related task, with
    immediate shifts to additional hardware resources as needed.
    Additionally, all our applications are designed to use
    databases, and our data architecture is designed to index
    millions of small businesses and, for each small business, its
    pertinent business information. Our applications support XML for
    data integration, and XML is employed to move data between
    applications.
    Network Architecture.  Our network architecture
    keeps track of individual requests, providing session
    information to the application servers. It is designed for high
    security, in order to prevent hackers, as well as prevent denial
    of service attacks and block unauthorized use of the system.
    Designed for high availability and redundancy, the network
    architecture has no single point of failure.
    Platform Architecture.  Our Velocity technology
    platform has been designed to be able to scale to serve millions
    of customers. Our platform consists of Intel-based commodity
    front-end servers utilizing industry standard software operating
    systems, languages and APIs (application program
    interfaces) including Linux, Apache, PHP, SOAP and XML. These
    servers run our proprietary software and are load-balanced with
    F5 Networks BigIP appliances. The front-end server pool is
    easily scalable by adding commodity servers as volume of traffic
    requires. The front-end servers connect to the back-end system
    through Cisco and Extreme Networks switches. Our back-end system
    consists of file and Oracle database servers. Our back-end
    systems are built to scale by both upgrading hardware as
    processor speeds and capacity continue to increase, and
    partitioning any single system to multiple servers.
    Data Center.  Our technology infrastructure is
    located in two data center locations operated by third parties.
    Our information systems are backed up daily, and backups are
    taken offsite monthly. The data center feeds are dual homed and
    BGP routed over multiple backbone connections. The data centers
    have split physical entry points for the feeds and can route
    traffic down either circuit in the event a circuit fails. In the
    case of an electrical power failure, the data centers has an
    uninterruptible power supply (UPS) that is dual sourced from
    public power and a local diesel generator. The generator starts
    automatically in the event of public power failure. Both data
    centers maintain an onsite fuel supply to power the generator
    during short-term disruptions. All equipment for routing,
    switching and data cabinets is also powered from the UPS,
    allowing operation without interruption during a public power
    outage.
    Systems Security.  Our security systems
    continuously monitor the Velocity Internet technology platform
    for possible vulnerabilities, as well as for possible
    intrusions, utilizing a combination of commercially available 11




---



##### Table of Contents



and open source software and services, as well as our own
    internally developed tools. We use industry standard protocols
    and systems for network security. Multiple layers of firewalls
    are designed to prevent unauthorized access externally and
    improper access to confidential information internally. We use
    standard encryption and authentication technology, licensed from
    third parties, designed to provide secure transmission of
    confidential information, such as end-user credit card numbers.
    Our Web servers use application-level security, limiting what
    transactional information is available.  
    Consumer Security.  Through our customers and
    service providers, we collect information from consumers, such
    as consumer names and email aliases that enable us to personally
    identify consumers who visit the websites of our small business
    customers. In addition, consumers provide financial information,
    such as credit card numbers and bank account numbers, when
    purchasing products or services from our small business
    customers. We have security measures in place designed to
    protect the loss, misuse and alteration of the confidential
    information under our control. Only our authorized employees are
    permitted to have access to a consumers personal
    information and such access is limited based upon business need.
    We generally do not share financial information with outside
    parties, except to the extent necessary to provide consumers
    with the product or service they have purchased. We may also
    release specific personal information in order to comply with
    applicable laws and regulations and governmental proceedings,
    such as criminal investigations, search warrants, subpoenas or
    court orders. We take what we believe are reasonable steps,
    including using industry standard encryption technology, in
    order to protect such personal information. However, no data
    transmitted over the Internet or over any wireless network can
    be guaranteed to be absolutely secure. As a result, while we
    strive to protect the personal and financial information of
    consumers, we cannot guarantee the security of any such
    information.
    Customization and Integration.  We have
    developed our business applications and services to require only
    slight, if any, customization in order to be useful to most
    types of small businesses in our target vertical markets. We
    plan to continue to pursue this minimal-customization objective,
    in order to benefit from cross-market efficiencies. In the event
    we acquire rather than develop future applications, we will look
    for similar efficiency opportunities. We also provide a
    developer API for our commerce applications and services so that
    small businesses and their vendors can integrate their custom
    applications with our payment gateway. Integration options
    include: SSL POST with name/value pairs and secure socket
    connection; and for Windows-based applications, a COM object is
    also available to simplify the integration. Sample scripts are
    available (e.g., Perl, C++, Visual Basic, ASP) to shorten the
    learning curve and speed development time.  Customers
     12




---



##### Table of Contents



Intellectual
    Property
    Small is the new
    big
      Government
    Regulation
       13




---



##### Table of Contents



Employees
    Website
  www.innuity.com Form 10-K, Form 10-Q, Form 8-K
  Item 1A.
    Risk
    Factors    We
    have incurred losses since our inception, and we may not achieve
    or maintain profitability.
    If we
    fail to obtain additional funding to support our operations and
    capital expenditures, we may be required to reduce the scope of
    our business.
   14




---



##### Table of Contents



We may
    not be able to meet our obligations under substantial
    indebtedness, some of which is past due and in
    default.
        The
    loss of key customers could negatively affect our revenues and
    profitability.
    We
    face intense and growing competition from larger, more
    established companies, as well as new entrants into our market,
    and we may not be able to compete effectively, which could
    reduce demand for our services.
     15




---



##### Table of Contents



Our
    future revenues may be uncertain because of reliance on third
    parties for marketing and distribution.
    Our
    business will be harmed if we are unable to develop or offer
    additional Internet technology applications and solutions in a
    timely and cost-effective manner.
    Expansion
    in the sales of our Internet technology applications and
    solutions will depend on the continued acceptance of the
    Internet as a communications and commerce platform for small
    businesses.
   16




---



##### Table of Contents



pay-per-click e-commerce
  We may
    find that it is difficult to identify, or license or acquire
    additional Internet technology solutions on favorable terms, or
    to integrate future technology or business acquisitions, which
    could limit our growth, disrupt our business and adversely
    affect our operating results.
      If we
    are unable to expand or appropriately enhance or modify our
    Internet technology solutions offerings quickly and efficiently,
    our business and operating results will be adversely
    affected.
   17




---



##### Table of Contents




    identify and anticipate emerging technological and market trends
    affecting the small business segment in which we do business;
    enhance our current services offerings so as to increase their
    functionality, features and cost-effectiveness;
    develop, license or acquire new applications or services that
    meet emerging customer needs;
    modify our services offerings in response to changing business
    practices and technical requirements of our customers, as well
    as new regulatory requirements;
    integrate our current and future services offerings with
    third-party systems and services; and
    create and maintain interfaces to changing customer and third
    party systems and services.    If we
    are unable to maintain our existing private label distribution
    arrangements or if we are unable to enter into additional
    private label distribution arrangements, our future revenues
    could be significantly reduced and our expenses would
    increase.
      If we
    are unable to sell additional services to our existing
    customers, or if our renewal rates decline for any reason, our
    revenues may decrease and our business will be
    harmed.
   18




---



##### Table of Contents



Our
    systems and our third-party providers systems may fail due
    to factors beyond our control, which could interrupt our
    service, causing us to lose business and increase our
    costs.
    
    loss of revenues;
    loss of customers;
    loss of customers credit card data;
    harm to our business or reputation;
    exposure to fraud losses or other liabilities;
    negative publicity;
    additional operating and development costs; and/or
    diversion of technical and other resources.  Changes
    to credit card association rules or practices could adversely
    impact our business.
    Our
    reliance on suppliers and vendors could adversely affect our
    ability to provide our services and products to our small
    business customers on a timely and cost-efficient basis, which
    could reduce our revenues.
   19




---



##### Table of Contents



We
    have faced, and may in the future face, significant chargeback
    liability if our small business customers refuse or cannot
    reimburse chargebacks resolved in favor of their customers, and
    we may also face potential liability for merchant or customer
    fraud; we may not accurately forecast or protect ourselves
    against these liabilities.
      On
    occasion, we experience increases in interchange costs; if we
    cannot pass these increases along to our small business
    customers, our profit margins will be reduced.
    Our
    ability to effectively improve a websites positioning in
    search rankings depends on our ability to determine and search
    engine algorithms; a significant change in the way these
    algorithms function could negatively affect our
    business.
   20




---



##### Table of Contents




    search engines stop providing critical data used by our
    internally developed tools;
    search engine algorithms arbitrarily prevent new sites from
    obtaining rankings;
    search engine algorithms weigh new factors that are more
    difficult for us to influence;
    search engines implementation of new algorithms; or
    search engines switch to an entirely fee-based system,
    eliminating natural rankings as currently used.  Margins
    on
    pay-per-click
    advertising may become too low to be profitable.
  pay-per-click pay-per-click pay-per-click
  Hackers
    or black-hat search engine optimization companies
    may negatively impact the publics perception of the search
    engine optimization industry, which could impair our ability to
    maintain our current customers and attract new
    customers.
    If we
    fail to manage our growth, our business could
    suffer.
    The
    loss of any members of our senior management could harm our
    current and future operations and prospects.
   21




---



##### Table of Contents



,
  We
    face significant competition for a limited supply of qualified
    software engineers, consultants and sales and marketing
    personnel.
    We may
    be unable to protect our intellectual property adequately or
    cost-effectively, which may cause us to lose market share or
    force us to reduce our prices.
    Our
    Internet technology applications and solutions involve the
    storage and transmission of our small business customers
    proprietary information, as well as the personal information of
    their customers. Our business could be harmed if there is a
    breach of privacy.
    e-commerce,
 22




---



##### Table of Contents



Our
    technical systems are vulnerable to interruption and damage that
    may be costly and time-consuming for us to resolve and may harm
    our business and reputation, and we could be subject to
    liability as a result of service interruptions by
    cyber-terrorists or fraudulent or illegal use of our
    services.
        We
    rely heavily on the reliability, security, and performance of
    our internally developed systems and operations, and any
    difficulties in maintaining these systems may result in service
    interruptions, decreased customer service, or increased
    expenditures.
   23




---



##### Table of Contents



Our
    business may be harmed by errors in our software.
    
    we may suffer a loss of revenues if, due to software errors, we
    are temporarily unable to provide Internet technology
    applications and solutions to our customers;
    we may not be paid for the applications and services provided to
    a customer that contain or result in errors, or we may be liable
    for losses or damages sustained by a customer or its subscribers
    as a result of such errors;
    we may incur additional expenses to correct errors in our
    software, or to fund product development projects that we may
    undertake to minimize the occurrence of such errors in the
    future;
    we may damage our relationships with customers or suffer a loss
    of reputation within our industry;
    we may become subject to litigation or regulatory
    scrutiny; and
    our customers may terminate or fail to renew their agreements
    with us or reduce the services they purchase from us.  If
    economic or other factors negatively affect the small business
    sector, our customers may become unwilling or unable to purchase
    our Internet technology applications and solutions and related
    products, which could cause our revenues to decline and impair
    our ability to operate profitably.
    If we
    are unable to respond to the rapid technological changes that
    are characteristic of our industry, our Internet technology
    applications and solutions may not be competitive.
   24




---



##### Table of Contents



We and
    our small business customers must comply with complex and
    changing laws and regulations.
    Government
    regulation of the Internet may adversely affect our business and
    operating results.
    
    the Digital Millennium Copyright Act and its related safe
    harbors, are intended to reduce the liability of online service
    providers for listing or linking to third-party websites that
    include materials that infringe copyrights or other rights of
    others;
    the Childrens Online Protection Act and the
    Childrens Online Privacy Protection Act are intended to
    restrict the distribution of certain materials deemed harmful to
    children, and impose additional restrictions on the ability of
    online services to collect user information from minors;
    the Protection of Children from Sexual Predators Act of 1998
    requires online service providers to report evidence of
    violations of federal child pornography laws under certain
    circumstances; and
    the CAN-SPAM Act of 2003 and certain state laws are intended to
    regulate interstate commerce by imposing limitations and
    penalties on the transmission of unsolicited commercial
    electronic mail via the Internet.    and/or
 25




---



##### Table of Contents



We may
    be subject to lawsuits for information displayed on our small
    business customers websites, which may affect our
    business.
    State
    and local governments may in the future be permitted to levy
    additional taxes on Internet access and electronic commerce
    transactions, which could result in a decrease in the
    attractiveness of the Internet to our customers and potential
    customers, and could reduce demand for our Internet technology
    applications and solutions.
    Shares
    of our common stock may continue to be subject to price
    volatility and illiquidity because our shares may continue to be
    thinly traded and may never become eligible for trading on
    Nasdaq or a national securities exchange.
     26




---



##### Table of Contents



Our
    stock price may be volatile, and you may lose some or all of
    your investment.
    
    variations in our operating results;
    announcements of technological innovations, new services or
    service enhancements, or significant agreements, by us or by our
    competitors;
    recruitment or departure of key personnel;
    changes in estimates of our operating results, or changes in
    recommendations by any securities analysts that may follow us;
    sales of our common stock, particularly sales by officers,
    directors and significant shareholders; or
    conditions in our industry, the industries of our customers and
    the economy as a whole.  Our
    stock may be subject to regulation as a penny stock,
    which could severely limit the liquidity of your
    securities.
  Rule 15g-9
  Item 1B.
    Unresolved
    Staff Comments(None)  Item 2.
    Description
    of Property    Approximate


Monthly


LeaseLocation

General Usage

Square Feet


Rent


ExpirationOrem, Utah

Operations  Administrative services


7,781


$
6,653


June 2008Los Angeles, California

Operations  Merchant Services business line


3,376


$
8,414


October 2008Redmond, Washington

Operations  Promotions division and executive offices


5,431


$
6,246
(1)

March 2013Bellingham, Washington

Operations  Development office


2,506


$
2,729
(2)

October 2009     (1)
    
    Rent increases to $8,266 per month in April 2008 and escalation
    clause increases rent on anniversary date of lease by 4%
    thereafter. Monthly rent includes facility and property
    maintenance.(2)
    
    Escalation clause increases rent on anniversary date of lease by
    3%.  Item 3.
    Legal
    Proceedings   27




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Securities Holders   PART II  Item 5.
    Market
    for Common Equity and Related Stockholder Matters and Issuer
    Purchases of Equity Securities  Market
    Information 
  mark-up,
  COMMON
    STOCK
  Period  Fiscal Year 2008

High Bid

Low BidFirst Quarter

$
0.46


$
0.20   Period  Fiscal Year 2007

High Bid


Low BidFirst Quarter

$
0.63


$
0.51Second Quarter

$
0.60


$
0.18Third Quarter

$
0.40


$
0.17Fourth Quarter

$
0.46


$
0.18   Period  Fiscal Year 2006

High Bid


Low BidFirst Quarter

$
4.50


$
3.50Second Quarter

$
3.25


$
2.00Third Quarter

$
2.10


$
0.36Fourth Quarter

$
0.64


$
0.48   Holders
    Dividends
    Item 6.
    Selected
    Financial Data:    Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The following discussion should be read in conjunction with
    the audited consolidated financial statements and the notes to
    those statements which appear elsewhere in this Annual Report on
    Form 10-K.
    The following discussion contains forward-looking statements
    within the meaning of Section 27A of the Securities Act of
    1933, as amended, and Section 21E of the Securities
    Exchange Act of 1934, as amended. We use words such as
    anticipates, believes,
    estimates, may, intends,
    expects and similar expressions to identify
    forward-looking
 28




---



##### Table of Contents



Overview
  Form 10-K.
    start-up
      and/or
 29




---



##### Table of Contents



Critical
    Accounting Policies
  Form 10-K.
  Revenue
    Recognition
        Subscriptions, Maintenance Support, and Domain Name
    Sales and/or
  Transaction Processing and Affiliate (Reseller)
    Programs
  Professional Services and/or and/or
 30




---



##### Table of Contents



and/or
  Credit
    Risk
    Long-Lived
    Assets
  Accounting for the impairment or disposal of long-lived
    assets,
  Stock-Based
    Compensation
    Operations
    Review
   31




---



##### Table of Contents



Analysis
    of Consolidated Statements of Operations
  Year Ending December 31,%2007


2006


ChangeRevenuesMerchant services

$
2,963,219


$
2,924,493



1
%Promotion services


3,526,802



3,428,893



3
%Total revenues


6,490,021



6,353,386



2
%Operating expensesCost of merchant services


729,476



783,178



(7
)%Cost of promotion services


946,502



1,622,933



(42
)%General and administrative


2,974,575



5,275,038



(44
)%Selling and marketing


2,280,740



3,172,734



(28
)%Research and development


1,449,684



1,415,841



2
%Royalty expense






1,247,246



*Amortization expense


445,292



400,987



11
%Loss from operations


(2,336,248
)


(7,564,571
)


(69
)%Other income (expense)Gain from settlement of debt


577,434







*Other income






75,313



*Interest expense


(1,245,671
)


(631,679
)


97
%Total other income (expense)


(668,237
)


(556,366
)


20
%Net loss from continuing operations

$
(3,004,485
)

$
(8,120,937
)


(63
)%     *
    
    Calculation is not meaningful    Revenues
    Expenses
  Cost of merchant services.
 32




---



##### Table of Contents



Cost of Promotion services.
  General and administrative.
  
    $648,000 of expenses we recorded in 2006 related to an abandoned
    offering. These costs included the issuance of common stock
    valued at $458,000, cash payments of $140,000 and penalties of
    $50,000 for not registering the common stock issued.
    Our costs for professional services charged to general and
    administrative expenses decreased by $440,000 in 2007 when
    compared to 2006. This decrease was due to a reduction of costs
    relating to financing, merger and acquisition activities.
    We accrued $200,000 in December 2006 relating to potential
    penalties from registration rights associated with common stock
    we issued for our acquisition of CreditDiscovery and Acquirint.
    We registered these shares with the United States Securities and
    Exchange Commission and reversed the accrual of these penalties
    in 2007.
    Our expenses relating salaries and wages charged to general and
    administrative expenses decreased by $429,000 in 2007 compared
    to 2006. This decrease related to a reduction in headcount from
    cost saving initiatives implemented at the end of the first
    quarter of 2007.
    Our costs for stock-based compensation charged to general and
    administrative activities decreased by $207,000 in 2007 when
    compared to 2006.  Selling and marketing.
  Research and development.
  Royalty.
  Amortization.
  Gain on settlement of debt.
 33




---



##### Table of Contents



Interest.
  Liquidity
    and Capital Resources
    and/or
       34




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk    Item 8.
    Financial
    Statements    Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Disclosure
    Controls and Procedures
  Rule 13a-15(e)
  Internal
    Control
  Rules 13a-15 15d-15
  Managements
    Annual Report on Internal Control Over Financial
    Reporting
  Rules 13a-15(f) 15d-5(f)
   35




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors,
    Executive Officers, Promoters, Control Persons and Corporate
    Governance; Compliance with
    Section 16(a)
    of the Exchange Act    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   36




---



##### Table of Contents



PART IV  Item 15.
    Exhibits    Exhibit



Filed



Exhibit


FilingNo.

Description

Herewith

Form

No.


Date3.1


Articles of Incorporation, as amended.



10-KSB


3.1


03/06/20073.2


Articles of Amendment to Articles of Incorporation.



10-KSB


3.2


03/23/20063.3


Amended and Restated Bylaws.



8-K


3.2


11/10/20054.1


15% Senior Secured Note dated May 3, 2007



8-K


4.1


05/09/074.2


15% Senior Secured Note dated May 18, 2007



8-K


4.1


05/24/074.3


Form of Warrant



8-K


4.2


05/09/074.4


Form of Stock Option Agreement.*



8-K


99.3


11/10/20054.5


Innuity, Inc. Amended and Restated 1999 Stock Option Plan



10-QSB


10.1


11/14/200710.1


Employment Agreement dated June 16, 2005, between
    Vista.com, Inc. and Mark LeMay.*



8-K


99.17


11/10/200510.2


Security Purchase Agreement relating to 15% Convertible
    Secured Promissory Notes.



10-QSB


10.2


8/04/200610.3


Form of 15% Convertible Secured Promissory Note



10-QSB


10.3


8/04/200610.4


Form of Common Stock Purchase Warrant



10-QSB


10.5


8/04/200610.5


Lease Agreement dated November 2, 2006, by and between
    Bryan & Mary Lou Chesledon and Innuity, Inc.



10-KSB


10.21


3/06/200710.6


Securities Purchase Agreement, dated as of May 3, 2007,
    between Innuity, Inc. and Imperium Master Fund, Ltd.



8-K


10.1


05/09/0710.7


Additional Note Purchase and Global Amendment Agreement, dated
    as of May 18, 2007, between Innuity, Inc. and Imperium
    Master Fund, Ltd.



8-K


10.1


05/24/0710.8


Domain Name and Trademark Purchase Agreement, by and among
    innuity, Inc., Vista.com, Inc., and VistaPrint Technologies
    Limited, dated November, 7, 2007.



8-K


10.1


11/13/200721.0


Subsidiaries of Innuity, Inc. .



10-KSB


21.0


3/06/200731.1


Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002

X31.2


Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002

X32.1


Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002

X32.2


Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002

X      37




---



##### Table of Contents



SIGNATURES
      By:
    /s/  JOHN
    R. WALL   Chief Executive Officer
 (Principal Executive Officer)
      Signature

Title

Date/s/  JOHN
    R. WALLJohn
    R. Wall

Chief Executive Officer 
    (Principal Executive Officer), 
    Chairman of the Board,
    Treasurer and Secretary

April 15, 2008/s/  LINDEN
    N BARNEYLinden
    N Barney

Chief Financial Officer 
    (Principal Financial and Accounting Officer)

April 15, 2008/s/  KEITH
    A. CANNONKeith
    A. Cannon

Director

April 15, 2008/s/  JOHN
    R. DENNISJohn
    R. Dennis

President, Director

April 15, 2008/s/  HAROLD
    H. KAWAGUCHIHarold
    H. Kawaguchi

Director

April 15, 2008/s/  MARVIN
    A. MALLMarvin
    A. Mall

Chief Operating Officer, Director

April 15, 2008/s/  GREG
    M. STEVENSONGreg
    M. Stevenson

Director

April 15, 2008  38




---



##### 



INNUITY,
    INC. AND SUBSIDIARIES
    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2007 and 2006


F-3Consolidated Statements of Operations for the
    Years Ended December 31, 2007 and 2006


F-4Consolidated Statements of Stockholders
    Deficit for the Years Ended December 31, 2006 and 2007


F-5Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007 and 2006


F-6Notes to Consolidated Financial Statements


F-7   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             HANSEN, BARNETT & MAXWELL, P.C.
    F-2




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    BALANCE SHEETS
  December 31,


December 31,2007


2006ASSETSCurrent AssetsCash and cash equivalents

$
200,877


$
307,483Settlement deposits


361,675



467,078Settlement receivable, net of allowance for doubtful accounts of
    $18,615 and $12,864, respectively


156,817



173,098Trade accounts receivable, net of allowance for doubtful
    accounts of $50,883 and $70,466, respectively


322,131



399,908Current assets relating to discontinued operations


1,252,763



1,484,250Other current assets


132,634



106,242Total Current Assets


2,426,897



2,938,059Property and equipment, net


578,864



717,214Intangible assets, net


412,915



858,207Long-term assets relating to discontinued operations


2,195,993



2,829,699Total Assets

$
5,614,669


$
7,343,179LIABILITIES AND STOCKHOLDERS DEFICITCurrent LiabilitiesTrade accounts payable

$
1,449,062


$
1,308,863Accrued salaries and wages


413,737



397,578Merchant settlement payable


389,993



453,596Accrued liabilities


854,785



1,011,063Deferred revenues


183,093



192,746Line of credit






699,365Related party notes payable, current portion, net of discount of
    $73,754 and $2,700, respectively


684,703



658,105Long-term debt, current portion, net of discount of $99,633 and
    $0 , respectively


1,103,847



1,294,529Capital lease obligations, current portion


195,662



142,972Current liabilities relating to discontinued operations


4,624,111



4,062,991Total Current Liabilities


9,898,993



10,221,808Long-Term LiabilitiesRelated party notes payable, net of current portion, net of
    discount of $0 and $248,357, respectively






330,832Long-term debt, net of current portion


82,821



180,126Capital lease obligations, net of current portion


165,074



190,024Total Long-Term Liabilities


247,895



700,982Total Liabilities


10,146,888



10,922,790Commitments and ContingenciesStockholders DeficitCommon stock; 200,000,000 shares authorized; par value
    $0.00025 per share; 23,595,228 shares and
    20,741,538 shares issued and outstanding, respectively


5,899



5,185Additional paid-in capital


34,905,591



32,897,053Accumulated deficit


(39,443,709
)


(36,481,849
)Total Stockholders Deficit


(4,532,219
)


(3,579,611
)Total Liabilities and Stockholders Deficit

$
5,614,669


$
7,343,179    F-3




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  For the Years EndedDecember 31,2007


2006RevenuesMerchant services

$
2,963,219


$
2,924,493Promotion services


3,526,802



3,428,893Total revenues


6,490,021



6,353,386Operating expensesCost of merchant services


729,476



783,178Cost of promotion services


946,502



1,622,933General and administrative


2,974,575



5,275,038Selling and marketing


2,280,740



3,172,734Research and development


1,449,684



1,415,841Royalty expense






1,247,246Amortization expense


445,292



400,987Loss from operations


(2,336,248
)


(7,564,571
)Other income (expense)Gain from settlement of debt


577,434



Other income






75,313Interest expense, net


(1,245,671
)


(631,679
)Total other income (expense)


(668,237
)


(556,366
)Loss before income taxes


(3,004,485
)


(8,120,937
)Income tax benefit






Loss from continuing operations


(3,004,485
)


(8,120,937
)Income (loss) from discontinued operations


42,625



(352,751
)Net loss

$
(2,961,860
)

$
(8,473,688
)Basic and Diluted Loss from Continuing Operations Per Common
    Share

$
(0.14
)

$
(0.42
)Basic and Diluted Income (Loss) from Discontinued Operations
    Per Common Share

$
0.00


$
(0.02
)Basic and Diluted Loss Per Common Share

$
(0.13
)

$
(0.43
)Basic and Diluted Weighted-Average Common Shares
    Outstanding


22,034,261



19,555,243    F-4




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS DEFICIT
 FOR THE
    YEARS ENDED DECEMBER 31, 2006 AND 2007
  TotalDeferred


Accumu-


Stock-Common Stock


Additional


Compen-


lated


holdersShares


Amount


Paid-In Capital


sation


Deficit


DeficitBalance  December 31, 2005


16,371,289


$
4,093


$
26,430,420


$
(1,013,308
)

$
(28,008,161
)

$
(2,586,956
)Reclassification of deferred compensation to APIC in accordance
    with FAS 123R










(1,013,308
)


1,013,308







Issuance of common stock for conversion of convertible debt,
    $1.50 per share


3,283,295



821



4,923,991











4,924,812Issuance of common stock for a potential acquisition target,
    $3.20 per share


143,000



36



457,564











457,600Issuance of common stock to an employee as part of a severance
    package, $2.00 per share


8,000



2



15,998











16,000Issuance of stock for repurchase of shares related to failed
    acquisition, $0.60 per share


100,000



25



59,975











60,000Issuance of common stock for services related to public
    relations firm, $0.60 per share


125,000



31



74,969











75,000Stock issued for purchase of Credit Discovery, $0.59 per share


454,000



114



267,746











267,860Stock warrants exercised


47,292



12



2,034











2,046Stock options exercised


209,662



51



4,001











4,052Stock warrants issued for extension of Line of Credit










24,142











24,142Discount on convertible note










332,232











332,232Non-cash share based compensation expense on options issued to
    employees










1,317,289











1,317,289Net loss


















(8,473,688
)


(8,473,688
)Balance  December 31, 2006


20,741,538



5,185



32,897,053







(36,481,849
)


(3,579,611
)Issuance of common stock for retirement of related party debt


646,979



162



368,616











368,778Issuance of common stock for services to third parties (valued
    at $0.18 to $0.58 per share)


825,000



206



236,294











236,500Share based compensation


1,271,915



318



1,033,317











1,033,635Stock options exercised


43,644



11



4,020











4,031Stock issued for interest


66,152



17



37,690











37,707Warrants issued and issuable pursuant to debt agreement










328,601











328,601Net loss


















(2,961,860
)


(2,961,860
)Balance  December 31, 2007


23,595,228


$
5,899


$
34,905,591


$



$
(39,443,709
)

$
(4,532,219
)    F-5




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2007


2006Cash flows from operating activitiesNet loss

$
(2,961,860
)

$
(8,473,688
)Adjustments to reconcile net loss to net cash used in operating
    activities:Depreciation and amortization


1,415,976



1,242,664Accretion of discount on notes payable


555,907



360,907Non-cash share based compensation


1,033,635



1,317,289Common stock issued for services


271,565



632,744Bad debt provision


185,623



366,053Gain from retirement of debt


(577,434
)


Expense for prepaid royalties






1,247,246Changes in assets and liabilities, net of acquisitions:Settlement deposits


105,403



62,822Trade accounts receivable


205,014



188,564Settlement receivable


7,281



56,830Inventories


(63,960
)


35,864Other current assets


(34,805
)


24,922Trade accounts payable


494,264



991,955Merchant settlement payable


(63,603
)


(321,379
)Accrued salaries and wages


55,055



206,709Deferred revenues


241,839



683,426Accrued liabilities


(123,234
)


935,937Total adjustments


3,708,526



8,032,553Net cash provided by (used in) operating activities


746,666



(441,135
)Cash flows from investing activitiesPurchase of property and equipment


(13,735
)


(178,496
)Cash paid for purchase of Credit Discovery






(15,053
)Net cash used in investing activities


(13,735
)


(193,549
)Cash flows from financing activitiesProceeds from related party notes payable






345,000Proceeds from issuance of long-term debt


1,825,000



Increase in line of credit






209,850Payments on related party notes payable


(201,131
)


(185,187
)Payments on long-term debt


(1,610,920
)


(30,528
)Payments on capital lease obligations


(157,152
)


(100,062
)Payments on line of credit


(699,365
)


Proceeds from exercise of options and warrants


4,031



6,097Net cash provided by (used in) financing activities


(839,537
)


245,170Net increase (decrease) in cash and cash equivalents


(106,606
)


(389,514
)Cash and cash equivalents at beginning of period


307,483



696,997Cash and cash equivalents at end of period

$
200,877


$
307,483Supplemental disclosure of cash flow informationCash paid during the period for interest

$
627,468


$
85,733Noncash investing and financing activitiesDiscount on notes payable


303,238



332,232Debt converted to common stock


280,405



4,726,085Accrued interest converted to common stock


75,760



198,727Reclassification of deferrred compensation to aditional paid-in
    capital in accordance with SFAS No. 123R






1,013,308Acquistion of property and equipment under terms of capital
    lease agreements


184,892



344,536Conversion of accounts payable to common stock


40,618



Purchase of software with note






290,182Acquisition of Credit Discovery/Acquirint (see
    Note 13)Fair value of assets acquired






282,914Liabilities assumed






15,054Common stock issued






297,968    F-6




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 1 
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  Nature of Operations start-up
      Principles of Consolidation
  Use of Estimates
  Revenue Recognition
      Subscriptions, Maintenance Support and Domain Name
    Sales
 F-7




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  and/or
  Transaction Processing and Affiliate (Reseller)
    Programs
  Professional Services and/or and/or and/or
  Cash and Cash Equivalents
  Settlement Accounts
  Trade Accounts Receivable account-by-account
  Property and Equipment
 F-8




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    EstimatedService Livesin YearsInfrastructure  computer equipment

3-5Other computer equipment

3-5Software

2-5Capital leases

3Furniture and fixtures

2Leasehold Improvements

3   Intangible Assets
  Computer Software Costs 98-1, Accounting for the Costs of Computer Software Developed
    or Obtained for Internal Use
  Advertising costs
  Impairment of Long-Lived Assets
  Discontinued Operations
  Deferred Revenue
  Stock-Based Compensation Share-Based Payment Accounting for Stock-Based
 F-9




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounting for Stock Issued to Employees
  Income Taxes
  Other Comprehensive Income
  Reclassifications
  Business Segments and Related Information Disclosures about Segments of
    an Enterprise and Related Information,
  Concentrations of Risk
  Fair Value of Financial Instruments
  Income (Loss) Per Share
      New Accounting Standards  Fair Value
    Measurements No. 157-2
 F-10




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    The
    Fair Value Option for Financial Assets and Financial
    Liabilities
  Business Combinations Noncontrolling Interests in Consolidated Financial
    Statements.
  Disclosures about Derivative Instruments and Hedging
    Activities. Accounting for Derivative
    Instruments and Hedging Activities
  NOTE 2 
    GOING
    CONCERN    and/or
 F-11




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 3 
    PROPERTY
    AND EQUIPMENT    EstimatedService Lives2007


2006


in YearsInfrastructure  computer equipment

$
533,879


$
729,920


3-5Other computer equipment


62,217



54,212


3-5Software


306,364



306,364


2-5Equipment under capital lease obligations


820,314



433,841


3Furniture and fixtures


36,801



36,802


2Leasehold Improvements


2,613



6,387


31,762,188



1,567,526Less: accumulated depreciation


1,183,324



850,312Property and Equipment, Net

$
578,864


$
717,214     NOTE 4 
    INTANGIBLE
    ASSETS  Intangible Assets
  2007


2006Gross





GrossEstimated


Carrying


Accumulated


Carrying


AccumulatedUseful Lives


Amount


Amortization


Amount


AmortizationAcquired software


3-5 years


$
1,198,813


$
849,165


$
1,198,813


$
549,876Customer contracts and relationships


3 years



438,006



374,739



438,006



228,736Total





$
1,636,819


$
1,223,904


$
1,636,819


$
778,612     Year Ending December 31,2008

$
326,9442009


85,971$
412,915  F-12




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 5 
    ACCRUED
    LIABILITIES    2007


2006Merchant reserves

$
389,700


$
369,023Accrued interest


198,181



187,099Partner payments


79,732



102,021Penalties






267,000Other


187,172



85,920$
854,785


$
1,011,063   NOTE 6 
    LONG-TERM
    DEBT             F-13




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  un-amortized
    2007


2006Non-interest bearing note payable to an unrelated party,
    interest imputed at 8%, settled with cash payment of $522,566

$



$
1,200,000Note payabable to an unrelated party, interest at 15%, net of
    discount of $99,633, matures May 2008


975,367



Note payable to an unrelated party, interest imputed at 2.49%,
    matures October 2008, monthly payments of $8,357


211,301



274,655Total debt

$
1,186,668


$
1,474,655Less current maturities


(1,103,847
)


(1,294,529
)Long-term debt

$
82,821


$
180,126     2007


2006Notes payable to a shareholder, interest at 12%, due on demand,
    in default, unsecured

$
200,000


$
200,000Note payable to former owner of Jadeon, interest at 5%, net of
    discount of $10,587 and $22,944, unsecured


202,870



391,244Note payable to a related party, interest at 8%, Settled by
    issuing shares of common stock in January 2007






280,805Convertible note payable to related parties, interest at 15%,
    matures beginning April 2008, net of discount of $63,167 and
    $228,112, secured


281,833



116,888Total related party notes payable

$
684,703


$
988,937Less current maturities


(684,703
)


(658,105
)Long-term related party notes payable

$



$
330,832       Year Ending December 31,

Non-Related Party


Related Party2008

$
1,103,847


$
684,7032009


82,821



Total

$
1,186,668


$
684,703  F-14




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 7 
    LEASES    Capital


OperatingYear Ending December 31,

Leases


Leases2008

$
221,936


$
208,0402009


124,146



130,2752010


53,526



106,2482011






110,5022012






114,924Thereafter






29,010Total future minimum lease payments

$
399,608


$
698,999Less: amount representing interest


38,872Total capital lease obligations


360,736Less: current portion


195,662Capital lease obligations, net of current portion

$
165,074       NOTE 8 
    RELATED
    PARTY TRANSACTIONS         F-15




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        NOTE 9 
    DISCONTINUED
    OPERATIONS    2007


2006Trade accounts receivable, net of allowance for doubtful
    accounts of $54,871 and $70,466, respectively

$
615,005


$
918,865Inventories, net of allowance for obsolete inventory of $209,962
    and $226,656, respectively


550,696



486,736Other current assets


87,062



78,649Total current assets related to discontinued operations

$
1,252,763


$
1,484,250Property and equipment, net

$
107,455


$
184,103Intangible assets, net


255,318



812,376Goodwill


1,833,220



1,833,220Total long-term assets related to discontinued operations

$
2,195,993


$
2,829,699Trade accounts payable

$
1,591,812


$
1,278,364Accrued salaries and wages


254,063



215,167Accrued liabilities


176,093



218,809Deferred revenues


2,602,143



2,350,651Total current liabilities related to discontinued
    operations

$
4,624,111


$
4,062,991  F-16




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 10 
    INCOME
    TAXES    2007


2006Deferred Tax Assets:Amortization of Intangibles

$
1,709,732


$
608,945Accrued liabilities


202,152



110,741Reserves for bad debt and inventory obsolescence


124,706



132,495Depreciation


66,665



28,814FAS 123R


1,039,823



1,026,437Net operating loss caryforward


8,834,188



9,691,085Total Deferred Income Tax Assets


11,977,266



11,598,517Valuation Allowance


(11,977,266
)


(11,598,517
)Net Deferred Income Tax Assets

$



$
         2007


2006Benefit at statutory rate (34)%

$
(1,007,032
)

$
(2,881,054
)Non-deductible expenses


290,872



188,625Change in valuation allowance


388,080



3,703,723Adjustment due to FAS 123R






(749,970
)Adjustment to net operating loss benefit, depreciation, other


397,590



State tax benefit, net of federal tax benefit


(69,510
)


(261,324
)Net Benefit from Income Taxes

$



$
   NOTE 11 
    STOCKHOLDERS
    EQUITY    Exercise of Stock Options
   F-17




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Common Stock issued for Services 
            paid-in-capital
  NOTE 12 
    SHARE
    BASED PAYMENTS  Stock Plan
   F-18




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          2007


2006Dividend yield


0.0
%


0.0
%Expected Volatility


189
%


169
%Risk-free interest rate


4.5
%


4.6
%Expected term


5.86 years



5.86 years       Weighted


WeightedAverage


Average


AggregateExercise


Remaining


IntrinsicOptions


Price


Contract Term


ValueOutstanding at December 31, 2006


2,159,911


$
0.83Granted


1,929,500


$
0.39Exercised


(45,311
)

$
0.10Forfeited or expired


(410,589
)

$
0.54Cancelled


(15,000
)

$
0.50Outstanding at December 31, 2006


3,618,511


$
0.64



8.46 Years


$
278,317Exercisable at December 31, 2006


1,513,605


$
0.73



7.30 Years


$
81,671      F-19




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2007


2006Cost of services

$
7,219


$
17,291General and administrative expense


327,143



534,215Sales and marketing expense


335,016



435,839Research and development expense


35,782



68,407Total share-based payment expense from continuing operations


705,160



1,055,752Discontinued operations


328,475



261,537Total share-based payment expense

$
1,033,635


$
1,317,289   Warrants
   F-20




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Exercise

Warrants


ExpirationPrice

Outstanding


Date$0.010


200,000


Apr-08$0.010


125,000


Jun-08$0.010


20,000


Jul-08$0.010


18,000


Aug-08$1.000


4,500


Sep-08$0.010


1,128,164


May-10$1.500


15,280


Sep-10$0.010


56,408


Jun-121,567,352   NOTE 13 
    ACQUISITIONS  CreditDiscovery/Acquirint acquisition
          Property and equipment

$
25,000Intangible asset


257,913Total assets acquired


282,913Current liabilities


(15,053
)Total liabilities assumed


(15,053
)Net Assets Acquired

$
267,860  F-21




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 14 
    SEGMENT
    INFORMATION    Promotion pay-per-click
  Commerce
      Promotion


Commerce


TotalRevenue from external customers

$
3,526,802


$
2,963,219


$
6,490,021Depreciation and amortization


510,957



260,512



771,469Interest expense


46,994







46,994Segment income


887,227



16,301



903,528Segment assets


787,870



1,127,507



1,915,377      Promotion


Commerce


TotalRevenue from external customers

$
3,430,446


$
2,922,940


$
6,353,386Depreciation and amortization


402,310



1,418,039



1,820,349Interest expense


19,140







19,140Segment loss


(1,350,105
)


(960,960
)


(2,311,065
)Segment assets


1,279,975



1,427,936



2,707,911  F-22




---



##### Table of Contents



INNUITY,
    INC. AND SUBSIDIARIES
  NOTES TO
    THE CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2007


2006Total Segment income (loss)

$
903,528


$
(2,311,065
)Unallocated items:Share-based payments from continuing operations


(705,160
)


(1,055,752
)Interest expense


(1,217,899
)


(650,819
)Professional services


(808,237
)


(1,346,729
)Costs of abandoned acquisition






(648,000
)Accrual and subsequent reversal of registration rights penalties


200,000



(200,000
)Executive and other


(1,376,717
)


(1,908,572
)Loss from continuing operations

$
(3,004,485
)

$
(8,120,937
)     2007


2006Total segment assets

$
1,915,377


$
2,707,911Cash and cash equivalents


200,877



307,483Current assets related to discontinued operations


1,252,763



1,484,250Long-term assets related to discontinued operations


2,195,993



2,829,699Other assets not allocated to segments


49,659



13,836Total assets

$
5,614,669


$
7,343,178     NOTE 15 
    SUBSEQUENT
    EVENTS   F-23