UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K/A


(Amendment No.
1)




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




For
the fiscal year ended December 31, 2007




or




 ̈
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
the transition period from
to .




Commission
File Number 333-133987





RedRoller
Holdings, Inc.


(Exact
name of Registrant as specified in its charter)




Delaware
            98-0539667(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S
      Employer
              Identification
      No.)





Soundview
Plaza, 1266 East Main St., Stamford, CT 06902-3546


(Address
of principal executive offices, including zip code)




Registrant’s
telephone number, including area code: (203) 286-0200




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




Title
      of Each Class
            
            Name
      of Exchange on Which RegisteredNone.
            
            Not
      applicable.




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




None.





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  Yes   ̈    No  x




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




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




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




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






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




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes   ̈    No  x




Aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the registrant was $0
as of August 31, 2007 based upon the last sale price on the OTC Bulletin
Board reported for such date. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.




There
were 24,842,040 shares of the registrant’s common stock issued and outstanding
as of March 28, 2008 and no shares of the registrant’s preferred stock issued
and outstanding as of March 28, 2008.















EXPLANATORY
NOTE




The
Registrant is filing this Amendment No. 1 on Form 10-K/A to the RedRoller
Holdings, Inc. Annual Report on Form 10-K for the period ending December 31,
2007, which was filed with the Securities and Exchange Commission on March 31,
2008 (the “Original
Form 10-K”) to amend Items 10 through 14 of Part III of the Original Form
10-K to include the information required by such items because the Registrant’s
proxy statement relating to the 2008 annual meeting of stockholders will not be
filed before April 29, 2008 (i.e. within 120 days after the end of the
Registrant’s 2007 fiscal year).  Certain portions of the Registrant's
definitive proxy statement relating to the 2008 annual meeting of stockholders
were initially incorporated by reference in Items 10 through 14 of Part III of
the Original Form 10-K.  In addition, the Registrant’s principal
executive officer and principal financial officer are providing Rule 13a-14
certifications and written statements pursuant to Title 18 United States Code
Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of
2002.
 
 For the convenience of the reader,
this Amendment No. 1 on Form 10-K/A sets forth the Original Form 10-K in its
entirety and includes the changes described above.  Other than the
revisions referred to above, all of the information included in the Original
Form 10-K remains unchanged.  This Amendment No. 1 on Form 10-K/A is
not intended to, nor does it, reflect events occurring after the date of the
filing of the Original Form 10-K, and does not modify or update the disclosures
therein in any way other than as required to reflect the changes described
above.






















TABLE
OF CONTENTS




PART
      IITEM
      1
            BUSINESS
            1ITEM
      1A
            RISK
      FACTORS
            7ITEM
      1B
            UNRESOLVED
      STAFF COMMENTS
            14ITEM
      2
            PROPERTIES
            14ITEM
      3
            LEGAL
      PROCEEDINGS
            14ITEM
      4
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            14PART
      IIITEM
      5
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
            15ITEM
      7
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            16ITEM
      7A
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            23ITEM
      8
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA
            23ITEM
      9
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            58ITEM
      9A
            CONTROLS
      AND PROCEDURES
            58ITEM
      9B
            OTHER
      INFORMATION
            59PART
      IIIITEM
      10
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
            60ITEM
      11
            EXECUTIVE
      COMPENSATION
            63ITEM
      12
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
            68ITEM
      13
            CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE
            70ITEM
      14
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            73PART
      IVITEM
      15
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES
            74







FORWARD-LOOKING
STATEMENTS




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 “believes,” “intends,” “expects,” “anticipates,” “plans,” “may,”
“will” and similar expressions to identify forward-looking statements.
Discussions containing forward-looking statements may be found in the material
set forth under “Business,” “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and in other sections of the report. All
forward-looking statements, including, but not limited to, statements regarding
our future operating results, financial position, and business strategy,
expectations regarding our growth and the growth of the industry in which we
operate, and plans and objectives of management for future operations, 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 Item 1A of this Annual Report on Form 10-K under the caption “Risk Factors”
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 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.




PART
1




ITEM 1.
            BUSINESS.




References herein to “we,” “us” or
“our” refer to RedRoller Holdings, Inc. and its wholly-owned subsidiaries unless
the context specifically states or implies otherwise.




Overview





We were
originally incorporated in the State of Nevada on October 26, 2005 as Aslahan
Enterprises Ltd. for the purpose ofoffering
e-commerce gambling advice and information associated with horse racing via the
Internet.  On November 13, 2007, we completed a reverse merger
transaction (the “Merger”) with RedRoller, Inc., a private Delaware corporation
that was originally incorporated in 2004.  In connection with the
Merger, we changed our state of incorporation to Delaware, changed our name to
RedRoller Holdings, Inc. and began pursuing the business of RedRoller, Inc. as
our sole line of business.  We reported the Merger and the
transactions related thereto on a current report on Form 8-K filed with the
Securities and Exchange Commission on November 13,
2007.





We have developed and are a provider of
an Internet-based, multi-carrier, integrated shipping services and pricing
comparison system (the “RedRoller System”)
that gives its users the ability to compare shipping services and pricing from
multiple parcel carriers and purchase such services over the
Internet.   Our initial software was released in beta format at no
charge to users via www.redroller.com in
June 2006. Based in part on feedback from beta customers, the RedRoller System
is being substantially redesigned and enhanced to support monthly subscriptions
fees from users. We expect to generate revenue from subscription, transaction
and/or other fees to users and third-party companies, including the possible
sale of supplies and advertising and/or commissions on any associated sales made
via click-through marketing.





We believe that the RedRoller System is
unique as no web-based, low-cost multi-carrier computerized shipping system like
it currently exists that communicates with carriers’ computer systems and
completes a full transaction with carriers automatically, prints carrier
authorized labels, including legal postage from the United States Postal Service
(the “USPS”),
and actually deploys carrier’s vehicles (when requested by a user) for package
pick-up.





The RedRoller
System




The RedRoller System is designed to
allow customers to input as little information as necessary yet receive the
maximum number of shipping options and related services available per carrier.
In essence, the RedRoller System is intended to provide a fully transparent
pricing service with demonstrable cost versus benefits value and is designed to
be both highly usable and, importantly, to save our customers time and
money.   Since the RedRoller System will be provided under a
subscription or license-based fee to its customers, we believe that its primary
competition will be the ostensibly “free” systems provided by the major carriers
to their respective customers. While each carrier’s software system provides the
ability to order their specific shipping services, we believe that these sites
inherently favor each respective carrierand are not designed to be integrated
into other third party applications.
  1


In addition to price comparison
functionality, the RedRoller System is designed to incorporate similar
functionality to the major carriers’ software platforms, including reporting,
carrier performance analysis, spend by type of shipment and other value-added
functions.  Once a user enters his/her existing account number of a
specific carrier, that contract rate will be displayed alongside other carriers’
service levels.  For customers without a contractual relationship with
a carrier(s), we expect to be able to establish relationships with carriers of
their choice.  Although we designed the RedRoller System primarily for
the Small and Medium Enterprises (“SME”) market and
other businesses, our management expects that the RedRoller System can be used
by individual users and companies of all sizes.





Traditional multi-carrier computerized
shipping systems were developed for large companies to save money and increase
efficiency by automatically selecting the best carrier for each
shipment.  These enterprise systems are targeted outside of the SME
sector and we believe they are cost justified only through the demonstrable
return on investment they deliver when installed as integral systems to existing
enterprise warehouse and distribution environments. The RedRoller System is
designed to provide similar capabilities to users and businesses of all sizes by
providing many of the value benefits associated with multi-carrier, enterprise
computerized shipping systems at a substantially lower cost.





Package
Delivery Market Overview




According to the 18th Annual
State of Logistics Report, which was sponsored by the Council of Logistics
Management, “logistics costs accounted for 10% of the gross domestic product in
2006.”1 Companies and consumers in the U.S. spent more
than $48 billion shipping parcels in 2006, a category defined by packages
weighing between 2 and 150 pounds.2
The Package Delivery Market is largely serviced by four (4) national
competitors: UPS; FedEx; the USPS; and, over the past several years, DHL. In
addition to these four carriers, there are numerous lesser known carriers
offering regional and coast-to-coast services at highly competitive
prices.
 
 The ground parcel sector grew more
competitive in the mid-1990’s following FedEx’s entry into this marketplace.
FedEx changed its rate structure from a single nationwide rate to a zone rate to
better compete with UPS for shorter-distance ground deliveries. UPS, in turn,
marketed its next-day service to target FedEx’s core strength. FedEx continues
to pursue UPS’s ground shipping business (as evidenced through the purchases of
RPS, Inc. and Roberts Express, Inc.).
 
 In an effort to increase revenue from
small businesses and consumers, FedEx, UPS and DHL now offer branded retail
packaging centers. DHL, owned by Deutsche Post World Net, has retail counters in
Office Max and Walgreens stores; FedEx has its own storefronts and their
recently acquired Kinko’s locations; and UPS has acquired and re-branded Mail
Boxes Etc. stores into UPS stores. These branded locations are part of an
increasing effort by the major carriers to capture higher-profit SME customers
without having to offer discounts. No private provider of package delivery
services provides “universal,” all-encompassing service. Only the USPS delivers
parcels everywhere, every business day.
 
 Due to operating differences, private
carriers provide varying service and price levels for areas where they maintain
a strategic presence. This is the reason that a regional shipping
company/carrier can provide very competitive rates in certain areas versus
others. For example, California Overnight charges $60.51 for delivery of an
overnight 10-pound box within California before 11:00 a.m. the next day. For the
same package, in the same geographic location, a national carrier’s rates start
at $73.65.3 In the aforementioned example, a customer using
the RedRoller System would save $23.04, or 31%, on a single
transaction.
  Internet Comparison
Pricing
 We believe that the eTravel and
eFinance industries have spent substantial amounts educating the public on a
common theme: “When businesses compete, you win.” We intend to modify this
message to our particular application by conveying a similar notion that better
understanding multiple service options benefits consumers.
 
 We believe that the Internet allows
consumers to reduce inefficiencies in markets that have traditionally been
characterized by the presence of large numbers of geographically dispersed
buyers and sellers in purchasing decisions that involve information that is not
readily available or that changes dynamically from day-to-day. We believe that
the parcel shipping industry is a textbook example of a concentrated market
sector that exhibits such characteristics, especially for
SMEs.
 
 
 1Logistics Management, July 1,
2007.
 2Morgan Stanley Research, October
2007.
 3Overnight 10-pound box shipped from Los
Angeles (90210) to San Francisco (94080).




2


Internet
and commercial on-line services continue to emerge as significant ways for
millions of businesses and individuals to share information and conduct business
electronically. We believe a number of important factors have contributed to the
growth of the on-line market and the available services that operate using the
Internet, including:





§
            the
      proliferation and declining cost of personal
  computers;


§
            access
      to high speed broadband making commercial applications faster, easier and
      cheaper;


§
            the
      increased acceptance of the Internet as a means of selling on-line
      services;


§
            the
      adoption of on-demand, also referred to as hosted or remotely-hosted,
      software which can be utilized via the Internet becoming more and more
      widespread; and


§
            consumers
      and small businesses becoming comfortable with on-line credit card
      transactions.





Market
Opportunity





SMEs spend $39.4 billion per year
shipping parcels and mailing letters.4 We believe that businesses that sell products
online are those most likely to utilize an on-line shipping system. According
to International Data Corporation, the number of small businesses that
utilize eCommerce has been steadily increasing, and, as a group, they tend to
spend more money, in general.5
Currently, 22% of small businesses sell products via the Internet, an increase
of 14% in the last 18 months. By comparison, SMEs that maintain an eCommerce
presence spend an average of $724 per month on shipping, as opposed to a
traditional SME that spends only about $407 per month. We estimate that the
average SME could save thousands of dollars annually by using the RedRoller
System. Given the economies of scale associated therewith, we expect that larger
businesses could save even more.





Generally, pricing to ship packages
varies depending on service levels. We believe that this variance in pricing and
service levels creates a major market opportunity for us, as we display the
variances in costs and value for all carriers on one screen. We believe that
most businesses simply do not have an easy and efficient way to compare pricing
for shipping packages, especially on one screen, and are therefore unaware of
the potential savings. For example, depending on the service selected, a shipper
can overpay anywhere from $2.72 to $13.75 to ship the same 10-pound package from
Stamford, Connecticut, to Boston, Massachusetts, as shown below:





Service
      Modes and Rates for a 10 Pound Box Sent From Stamford, CT to Boston, MA
      Residential Delivery.


Overnight
            Overnight
            OvernightCarrier
            Morning
            By
      Noon
            Afternoon
            2
      Days
            1 -
      5 DaysFedEx
      (a)
            $35.61
            —
            $33.58
            $21.51
            $8.01UPS
      (a)
            $37.61
            —
            $33.30
            $21.51
            $10.71DHL
            $31.79
            $31.50
            $27.37
            $16.35
            $7.99USPS
            —
            $45.25
            —
            $8.50Eastern
      Connection
            $27.34
            —
            —
            —
            —Maximum
      Difference
            $10.27
            $13.75
            $6.21
            $13.01
            $2.72%
      Savings
            27%
            30%
            18%
            60%
            25%


Source:
      Carriers. Medium Box: 13” x 11” x 2 1/2”. Shipped March 24,
      2008.
              
              (a)FedEx and UPS are
      included here as examples of savings and are not currently carriers that
      are displayed on www.redroller.com.


4IDC, “Shipping and Mailing in U.S.
Small Businesses,” October 2003.
 5IDC, “Shipping and Mailing in U.S.
Small Businesses,” October 2003.


3


delivery. 
FedEx provides the best value for “Ground.” Due to geographic proximity, the 1-5
day options above for FedEx, UPS and DHL are all guaranteed to arrive by the end
of the next day. This creates an even greater savings opportunity among the next
day delivery options. Users can save as much as $27.29 ($7.52 vs. $34.81) if the
package can arrive by the next afternoon, rather than before 10:30
a.m.





The above table cannot quantify the
value-added aspect of “convenience” to the user of the RedRoller System, and
does not include the time and effort saved using the RedRoller System where all
of the needed information to select the best value and complete a transaction is
available on a single screen and transacted automatically.





Technology Evolution and
Enablement





XML, an Internet-based communications
technology standard, has come of age over the last two years and allows
inter-operability between computer systems. XML effectively allows disparate
computer systems to communicate with each other easily and automatically. As
with many proposed “new standards,” XML took many years to become accepted and
companies have started embracing it as the methodology to inter-communicate with
systems that interact with their customers. Indeed, the RedRoller System could
not have been viable until recently because the carriers themselves did not yet
have the expertise (via XML) to connect efficiently to systems such as the
RedRoller System. We believe that this evolution and recent maturity of the XML
technology and serendipitous timing with DHL’s new competitiveness in the U.S.
market have combined to make our business opportunity more
attractive.





Services-Oriented
Architecture





A Services-Oriented Architecture offers
the ability to allow authorized third-party companies’ programs or applications
to use the RedRoller System’s functionality as part of their own programs or
applications. When functionality from a separate program is accessed via a web
services protocol, authorized companies will be able to access and use the
RedRoller System’s carrier pricing comparison engine and other shipping-oriented
functionality. We believe that this development is material for us as it will
potentially enable us to license the RedRoller System’s capabilities to (i)
other companies with other types of online applications that involve shipping
products and (ii) online retailers as part of their online sales checkout
process to allow customers to select their desired shipping method (and know the
related cost) and allow retailers/sellers to select a specific mark-up on
shipping to reduce the number of ‘shopping cart abandonments’ (typically due to
over-inflated shipping charges displayed at the very end of an online sales
process). We believe that allowing users to select exactly the carrier and
delivery dates desired would also decrease the amount of product support calls
and related returns due to shipping issues.





Computerized Shipping
Systems





Integrated computerized shipping
systems exist for larger businesses with Enterprise Resource Planning (“ERP”) back-end
systems and Warehouse Management Systems (“WMS”). These shipping
systems integrate with a company’s ERP or WMS system and operate on a customer’s
computer system, behind their ‘firewalls.’ Such systems generally range in price
from $15,000 to hundreds of thousands of dollars. The only “free” computerized
shipping systems available today are offered by the major carriers, such as
FedEx and DHL, on their own sites, and those sites only display their owner’s
respective rates. These “free” computerized shipping systems are offered by
major carriers for their own services and often bear considerable hidden costs,
commonly referred to as “accessorial” charges. Importantly, a “free” website
made available by a major carrier typically takes away freedom of choice by
providing only rates and services provided by the major carrier that provided
the software system itself. While web-based rate comparison systems exist, they
do not: (i) integrate with major carriers; (ii) have the ability to enable
actual package shipping, as they are not
designed for that purpose; or (iii) allow the user to print authorized
computerized bar coded package labels directly from their desktop or work
area.




As would be expected, small businesses
and consumers will typically purchase shipping services directly from a major
carrier using their ostensibly “free” systems. The trade-off, however, is that
pricing comparisons are not possible from any “free” carrier-based system. With
the explosion of eCommerce and the reliance on just-in-time delivery of goods,
we believe there is a significant need for an easy-to-use, multi-carrier
integrated pricing comparison shipping system made available with no upfront
costs and a very low monthly subscription fee.
 
 Value
Proposition
 
 We aim to provide value to our
customers through user convenience and a reduction in shipping costs by
providing comparison of a selection of various carriers’ parcel shipping
services and pricing. A poll conducted by the Forrester Group of almost




4


6,000
on-line shoppers revealed that 82% of respondents view “shipping costs” as
important to their buying decision.6 Individual carrier software systems do not
provide multi-carrier capabilities and commercial, third-party computerized
shipping systems are, our management believes, too expensive for SMEs to be
utilized in a typical SME environment. The RedRoller System is designed for
businesses as an on-demand service and only requires a web-browser and printer
to utilize, yet provides many of the value benefits associated with expensive
computerized shipping systems.





We aim to provide added value
through:





Competitive
Services and Pricing Comparisons.  Using the RedRoller System,
customers can view multiple carriers’ services while the RedRoller System
automatically evaluates, compares and displays the customer’s pricing (for that
carrier), specifies service levels, and enables users to select the best
“value,” based upon the user’s delivery time versus cost requirements. We
believe that these comparisons can exhibit significant cost differentials as
each carrier typically has a specific niche service in which it is more
competitive. UPS is known to be competitive on ground shipments, while the USPS
is more competitive on lighter weight and residential packages. FedEx, on the
other hand, is usually more competitive on national overnight shipments, while
DHL offers significant discounts to acquire customers. Depending on the specific
size, weight, delivery region and desired service, any one of the major carriers
or even a regional carrier might have the best price. In Computerized Shipping Systems:
Increasing Profit and Productivity Through Technology, the author (Mark
Taylor, our Chief Logistics Officer), states that “in fact, more than 70% of
shippers overpay anywhere from 20% to 80% by not comparing services and
rates.”7





Competitive
Service Shopping.  Carriers have developed company specific,
often confusing “jargon” that leads the customer to sometimes select an
unnecessary service associated with the actual service level required. We
believe that the RedRoller System will save its customers money through its
method of evaluating and comparing various carriers’ service offerings. Major
carriers’ shipping terms, such as “Next Day,” “Next Day Early Morning,”
“Standard Overnight,” “Priority Overnight,” “First Overnight,” “Next Day Air
Saver,” refer to various carrier services that will generally have a package
delivered within the same small hourly window, if not earlier than a premium
priced service. We believe that this carrier jargon often causes confusion, and
the customer may make a buying decision based upon the term itself, not
necessarily the required level of delivery “urgency.”  The RedRoller
System will enable customers to price and compare a carrier’s service based on a
wide range of parameters, including the day and time of delivery. These choices
include delivery time, day of week and cost – all in common language that is
easy to understand. As a quick comparison, a 15 pound package shipped from New
York City to Los Angeles will display a price range between $56.00 and
$104.478, all of which are next day services. An
unaware customer looking for overnight service could easily have chosen the
premium choice and paid in excess of $50.00 more for a service level that was
unnecessary.





Reporting.  We
provide a consolidated reporting module for retrieval of historical customer
shipment archives, profiles and tracking information, regardless of which
carrier was selected at the time of shipment. This reporting functionality
provides specific information as to type of service selected, time of delivery,
cost of shipment and size and quantity of packages. We believe that this
functionality, which we expect to enhance continuously, is valuable for users to
improve service levels to their customers and provide the basis for carrier
performance auditing.





Reduction of
Carrier Accessorial Charges.  A significant portion of package
shipping costs for businesses, especially SMEs, is what is known in the industry
as “accessorial charges,” which represent an incremental source of revenue for
the carriers but increasing
costs for businesses. These charges are billed to the customer for
“accessories,” of which the customer may not be aware. We believe that charges
for address corrections, residential deliveries, deliveries to remote and rural
areas, invalid account numbers, and other charges, can add substantially to the
price initially quoted. Management believes that many carriers purposefully hide
surcharges, which are added to the total invoice after the fact but are not
included in the base price that was quoted.


We expect
to address this problem by substantially reducing input errors and notifying
consumers of accessorial fees before they commit to the charges. We believe that
this value-added benefit, inherent in the RedRoller System, will significantly
reduce accessorial charges that might otherwise have been unknowingly incurred
by the user.





6Internetnews.com, Jupitermedia Corp.,
“Free Delivery Here to Stay, Research Firm Says,” January 4,
2000.
 7Mark A. Taylor,Computerized
Shipping Systems: Increasing Profit and Productivity Through
Technology, Michigan:
Angelico and Taylor, Inc., 2000, p.86.
 815 pound package shipped from New York
City (10028) to Los Angeles (90012).


5


Sales and Marketing Overview
and Methodology





SMEs, our primary target market,
comprise almost half of the total package delivery market. There are
approximately 7.9 million small businesses that spend approximately $24 billion
on overnight and ground delivery services. According to International Data
Corporation (“IDC”), each SME
spends about $407 per month, of which $240 is ground delivery and $170 is
overnight delivery. SMEs engaged in e-commerce tend to spend considerably more
on shipping. Small firms selling on-line spend an average of $724 per month on
shipping, of which $394 is ground delivery and $330 is overnight.9





Our secondary business market is larger
companies (defined as all businesses that do not have an ‘enterprise’
computerized shipping system), of which we estimate there are more than one
million in the U.S.





The size
of the major international markets (U.S. to the European Union, intra-EU, EU to
Asia and intra-Asia) is substantial and we intend, as soon as is practicable, to
establish ourselves in one or more of these markets, through strategic partners
or directly as necessary, which we believe will minimize the potential emergence
of international competitors.





Our marketing strategy is focused on
building awareness and interest in our company and the RedRoller System through
multi-channel marketing programs targeting SMEs beginning in the first half of
2008. We expect that marketing programs will include public relations outreach,
paid search engine marketing with companies such as Google, Yahoo!, MSN and
other search engines, natural search optimization and co-marketing
alliances with companies that can extend our reach into the SME markets. We
intend to offer a ‘free trial’ subscription offer for site visitors and will
seek to convert trial customers to paid customers during the free trial
period.  Conversion marketing (visitor-to-trial customer and trial
customer-to-paying customer conversion) will play an important role in our
customer acquisition strategy.  We also intend to test direct
marketing, print advertising and telemarketing programs.





We also intend to actively pursue the
formation of strategic partnerships to begin positioning our services to
companies that may benefit from adding value by allowing their customers to
select a desired shipping carrier (and related cost) directly in real time as
part of the online checkout process and to other companies with other types of
online applications that involve shipping products.





With the introduction of international
shipping functionality, we intend to begin to expand our activities
internationally, either through partnerships and/or joint ventures or directly
by international representatives.





Barriers to
Entry




We believe that the introduction of our
subscription-based model will create a “first mover” advantage with substantial
competitive barriers to entry for anyone attempting to provide a similar
service.




The RedRoller
System. We believe that, in order for a competitor to emerge, it must
develop a competitive model and build a complex system based upon underlying
middleware software systems obtained through in-house development, acquisition,
or source code license (of an existing computerized shipping system). Based on
the time, money, experience and effort required, we estimate that it would take
an experienced and focused software team approximately one to two years to build
a multi-carrier software system (obviously excluding any single carrier system),
that prints bar-coded authorized carrier labels. This also assumes a company
could gain approval to print legal postage from the USPS via one of the three
entities authorized by the USPS.  We believe that the barrier to
acquisition of a similar technology would also include the time and expense of
purchasing a computerized shipping system company with a behind–the-firewall
system, converting it to a web-based system and then offering it for far less
than their existing system.





USPS and PSI
Systems, Inc.. The USPS is one of four major competitors in the Package
Delivery Market. Only three companies are authorized to legally print USPS
postage labels: Pitney Bowes, PSI Systems, Inc. (providers of Endicia® Internet
Postage), and Stamps.com. We have a relationship with Endicia dating from our
beginnings, and, under a renewable three-year agreement, Endicia’s system
provides us with USPS shipping labels. In addition, we have met with the
Postmaster General regarding the USPS’s support for our website.




Competition
  At present, we believe that our main
competition is multi-carrier shipping software that is available for sale by
large companies, which typically requires consultants to integrate a
computerized shipping system with a company’s back-end computer
system.
 
 The major carriers offer their own free
Internet systems that display only their pricing. We believe that few customers
realize that these carrier-specific systems inhibit an individual’s ability to
compare rate pricing and service levels.  We believe that virtually





9IDC, “Shipping and Mailing in U.S.
Small Businesses,” October 2003.


6


all
Internet carrier-based ordering systems are designed to entangle the customer
electronically to generate additional margin for the carrier and promote fees
that maximize revenues to the carrier instead of the customer. We believe that
these systems also lack any pricing or value comparison to other carriers’
systems. Based on our feedback from beta customers, we believe that SMEs are
price sensitive and typically do not have the technical expertise to set up a
computerized shipping system that integrates with their back-end computer
system.





The two largest companies offering
computerized shipping systems are Pitney Bowes and Kewill. Both companies claim
to be market leaders, and we currently anticipate that  neither
company would likely change its business model from selling large software
licenses with recurring annual support fees to offering an Internet-based
solution like the RedRoller System.





Intellectual
Property




We have no issued
patents.  As of the date of this prospectus, we have filed for one
patent and we intend to periodically review the RedRoller System and may apply
for additional patents as appropriate.  We have registered trademarks
for “RedRoller”, “Compare, Ship and Save” (pending, published for opposition),
and “Shipping 2.0” (pending, published for opposition).





We rely upon copyrights, trademarks,
trade secrets, confidentiality agreements, proprietary know-how and continuing
technological innovation to remain competitive. We require all employees and
consultants to execute a non-disclosure, non-compete and technology transfer
agreement upon hire.




Employees





We have
20 full-time employees. None of our employees is represented by a labor union
and we believe that our relations with our employees are good. We also utilize a
number of consultants to assist with research and development and
commercialization activities. We believe that our future success will depend in
part on our continued ability to attract, hire and retain qualified
personnel.




ITEM
      1A.
            RISK
      FACTORS.




An
investment in our common stock involves various risks, including those mentioned
below and those that are discussed from time to time in our other periodic
filings with the SEC. Investors should carefully consider these risks, along
with the other information contained in this report, before making an investment
decision regarding our stock. There may be additional risks of which we are
currently unaware, or which we currently consider immaterial. All of these risks
could have a material adverse effect on our financial condition, our results of
operations, and the value of our stock.




Risks
Relating to Liquidity
 
 Our
ability to continue as a going concern is dependent upon our ability to raise
additional working capital.
 
 Our consolidated financial statements
as of December 31, 2007 have been prepared under the assumption that we will
continue as a going concern for 2008. Our independent registered public
accounting firm, Marcum & Kliegman LLC, have issued a report dated March 28,
2008  that includes an explanatory paragraph referring to our
operating losses and conveys substantial doubt in our ability to continue as a
going concern without additional working capital becoming available. Our ability
to continue as a going concern is dependent upon our ability to raise additional
working capital. There is no assurance that additional financing will be
available to us on favorable terms or at all. If funds are not available when
required for working capital needs, our ability to carry out our business plan
could be adversely affected, and we may be required to scale back our operations
to reflect the extent of available funding.


Risks
Relating to Our Company and Business





We
have a limited operating history.





We were founded in August of 2004; to
date, we have recognized minimal revenue from our operations.  Our
business plan is subject to various and multiple risks associated with and
inherent in the establishment of a new business enterprise, potential unexpected
requirements for additional capital, and our limited operating
history.  The results of earlier business enterprises or companies
that we have acquired, or in which the members of our management team have
previously participated, are not indicative of the results that we may
achieve.




7


We
may need additional capital to execute our business plan and fund our operations
and may not be able to obtain such capital on acceptable terms or at
all.


The
likelihood of our success must be considered in light of the expenses,
difficulties and delays that could be encountered and the uncertain business and
regulatory environment in which we do and will operate.  For ongoing
operations and positioning we must, among other things, successfully obtain
sufficient capital to: (a) support the development of highly scaleable and
fully functioning transactional software and hardware systems, which development
includes continuous enhancement of the RedRoller System; (b) negotiate
beneficial relationships with package delivery carriers and service providers;
(c) attract, retain and motivate qualified personnel; (d) ensure that the
appropriate infrastructure is present to support current and future operations;
(e) support marketing, public relations, and other programs necessary to
increase awareness of our business and of the RedRoller System; and (f)
establish a cash reserve for contingencies.





Our
ability to obtain additional capital on acceptable terms or at all is subject to
a variety of uncertainties, including:


§
            Investors’
      perceptions of, and demand for, securities of value-added services
      companies;


§
            Conditions
      of the U.S. and other capital markets in which we may seek to raise
      funds;


§
            Our
      future results of operations, financial condition and cash
      flows;


§
            Economic,
      political and other conditions in the United States and other
      countries.





We may be required to pursue sources of
additional capital through various means, including joint venture projects and
debt or equity financings. There is no assurance that we will be successful in
locating a suitable financing transaction in a timely fashion or at all. In
addition, there is no assurance that we will be successful in obtaining the
capital we require by any other means. Future financings through equity
investments are likely to be dilutive to our existing stockholders. Also, the
terms of securities we may issue in future capital transactions may be more
favorable for our new investors. Newly issued securities may include
preferences, superior voting rights, the issuance of warrants or other
derivative securities, and the issuances of incentive awards under equity
employee incentive plans, which may have additional dilutive effects. Further,
we may incur substantial costs in pursuing future capital and/or financing,
including investment banking fees, legal fees, accounting fees, printing and
distribution expenses and other costs. We may also be required to recognize
non-cash expenses in connection with certain securities we may issue, such as
convertible notes and warrants, which will adversely impact our financial
condition and results of operations.





If we cannot raise additional funds on
favorable terms or at all, we may not be able to carry out all or parts of our
growth strategy and/or achieve our business objectives. If the amount of capital
we are able to raise from financing activities, together with our revenues from
operations, is not sufficient to satisfy our capital needs, even to the extent
that we reduce our operations accordingly, we may be required to cease
operations.





If
we lose our key personnel or are unable to attract and retain qualified
personnel, the quality of our services may decline and our business may be
adversely affected.





We rely heavily on the expertise,
experience and continued services of our senior management, including our
president, chief executive officer, chief information officer and chairman.
The loss of any of our senior management or other key personnel could adversely
impact our ability to achieve our business objectives. We believe our future
success will depend upon our ability to retain these key employees and our
ability to attract and retain other skilled personnel. We cannot guarantee that
any employee will remain employed by us for any definite period of time and the
loss of personnel could have a material adverse effect on our business and
company. Qualified employees periodically are in great demand and may be
unavailable in the time frame required to satisfy our customers’ requirements.
Expansion of our business could require us to employ additional personnel. There
can be no assurance that we will be able to attract and retain sufficient
numbers of highly skilled employees in the future. The loss of personnel or our
inability to hire or retain sufficient personnel at competitive rates could
impair the growth of our business. We do not yet maintain a key man life
insurance policy on any of our employees.





The
future growth of our business will be adversely impacted if end-users are
unwilling to pay a subscription fee to utilize the RedRoller
System.





There can be no assurance that our
end-user customers or third-party companies wishing to utilize our technology
will be willing to pay any fees to use the RedRoller System.  If the
fee or license structures related to use of the RedRoller System are not
accepted by users and/or third-party companies, it would have a material adverse
affect on our operating and financial results.  Further modification
of our business and operating model while operating our business could introduce
a number of additional issues, problems, or other risks for us during our early
operating stages.





We
may be unable to protect our intellectual property, which could reduce the value
of our services and our brand.





Our ability to compete effectively
depends on our ability to protect our proprietary technologies and
processes.  There can be no assurance that our efforts to protect
against infringement of our intellectual property will be sufficient to prevent
competition from




8


emerging.  Similarly,
there is no assurance that competing products or offerings imitating our
business model cannot or will not be developed.  We rely on a
combination of trademark, copyright and trade secret laws to establish and
protect our intellectual property.  We also use technical measures,
confidentiality agreements and non-compete agreements to protect our
intellectual property. Any infringement by third parties on our intellectual
property could have a negative impact on our business and have an adverse effect
on the price of our common stock.





Our
products may infringe upon the intellectual property rights of others and
resulting claims against us could be costly and require us to enter into
disadvantageous license or royalty arrangements.





There can be no assurance that the
intellectual property used in the RedRoller System does not infringe upon that
of another company.  As of the date hereof, we have filed for one
patent and intend to periodically review the RedRoller System and may apply for
additional patents as appropriate.  Although we attempt to avoid
infringing upon known proprietary rights of third parties, there can be no
assurance that competitors or other third parties will not at some future time
allege or claim infringement by us with respect to current or future products,
patents, copyrights or other proprietary rights. Any claims relating to the
infringement of third-party proprietary rights, even if not successful or
meritorious, could result in costly litigation, divert resources and our
management’s attention or require us to enter into royalty or license agreements
which are not advantageous to us. In addition, parties making these claims may
be able to obtain injunctions, which could prevent us from selling our products
and services.  If any such claim is made and adjudicated successfully
against us, it would have a material adverse affect on our operations and
financial position and the price of our common stock.





We
depend on our relationships with various carriers for a significant portion of
our revenues.





Our business strategy is to provide our
customers with the ability to purchase, among other things, shipping services
from various carriers. Accordingly, we are dependent upon secondary and tertiary
service providers to fulfill our obligations to our customers.  We do
not yet have fully-negotiated, binding agreements with various carrier
providers.  Hence, if we are unable to finalize or continue
contractual discussions or arrangements with key carriers, or if such
arrangement(s) expire or are terminated after they are entered into, our
business would be adversely affected. If DHL, FedEx or Endicia should
terminate any agreement with us, our competitive position and financial results
would be materially adversely affected.  Should we establish
relationships with shipping carriers that are not able to provide acceptable
service levels to our customers, our competitive position and financial results
could be adversely affected.





We
may face increasing competition, which could reduce our market share and
materially adversely affect our financial condition and results of
operations.





There exist a number of large,
well-capitalized companies that could compete with us.  The
introduction by others of a similar system either in the United States or
internationally, which provides similar services to the RedRoller System, could
negatively impact us and our financial condition.  If we are unable to
establish our name and brand among our potential customers, our ability to
attract new users may be adversely affected. In addition, other present or
future competitors may develop services, products or technologies that may
achieve greater market acceptance than our service or products.  Many
of our current and potential competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing and other resources than we have available.  These
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements and to devote greater resources to the
development, promotion and sale of their products and services than us, and
there can be no assurance that we will be able to compete successfully against
these larger competitors.





Unexpected
network failures or interruptions, security breaches or computer virus attacks
could impair our ability to provide our services which could damage our
reputation and harm our business operations.





Security breaches relating to the
RedRoller System, by ‘hackers’ or otherwise, could damage our reputation and
cause us to lose customers.  The security of our customers’
confidential transaction data could be jeopardized as a result of the accidental
or intentional acts of Internet users, current and former employees or others,
or computer problems or viruses. Security breaches experienced by other
electronic commerce companies could reduce consumers’ confidence in the
RedRoller System.  The costs required to mitigate or otherwise remedy
a security breach could be substantial and could impair our goodwill and affect
customer retention negatively.





The RedRoller System is hosted by a
major third-party service provider in the Boston area. Interruption,
impaired performance or insufficient capacity of the RedRoller System from a
materially larger-than-expected influx of customers or software systems failures
by carrier’s systems with which the RedRoller System communicates could lead to
interruptions, failure(s) or delays in the provision of our service, loss of
data or our  inability to process orders, which could cause us to lose
customers.





9


We
are currently in the process of redesigning the RedRoller System.  Our
failure to properly and effectively redesign the RedRoller System in a timely
manner could lead to less demand than anticipated for our products and services
and reduce our revenues.





The RedRoller System is being
substantially redesigned and enhanced to support monthly subscription fees from
users.  This is a major product redesign and there can be no assurance
that our redesign and periodic enhancements to the RedRoller System will be
accepted by beta users, will work as expected, or that various versions of the
RedRoller System will be introduced on time or to users at any particular time
or be free from defects or deficiencies at any stage of its introduction or
use.  If the RedRoller System does not work as designed or contains
deficiencies or defects that negatively impact the RedRoller System’s usability
or operability, then our operations and financial condition and/or results could
be adversely affected.





We have outsourced a
significant amount of the work related to the redesign of the RedRoller System
to a subcontractor, who in turn, outsources much of its software development
work to a company located in India.  Outsourcing software development
to other
countries, either directly or through subcontractors, introduces additional risk
into the software development process.  Various factors, including
inefficient communications due to distance and time, can impact the
effectiveness of the resultant output from outsourcing any portion of a software
development process.  Although we maintain periodic communications with our
contracted technical personnel, we could experience problems related to this
outsourcing of technical work which could in turn negatively impact the software
code produced and thereby affect the operational effectiveness of the redesigned
RedRoller System.  In such a case or cases, we may be forced to absorb
additional expenses to rectify any problems caused by or associated with this
subcontracted development work.





If
we are not able to manage our growth, we may never achieve
profitability.





Our
success will depend in part on our ability to expand and manage our operations
and facilities. There can be no assurance that we will be able to manage our
growth, meet the staffing requirements for our business or foradditional collaborative
relationships or successfully assimilate and train new employees. In addition,
to manage our growth effectively, we may be required to expand our management
base and enhance our operating and financial systems. If we continue to grow,
there can be no assurance that the management skills and systems currently in
place will be adequate or that we will be able to manage any additional growth
effectively. Failure to achieve any of these goals could have a material adverse
effect on our business, financial condition or results of
operations.





We
are subject to the reporting requirements of federal securities laws, which can
be expensive.





We are subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended (the
“Exchange
Act”), and other federal and state securities laws. The costs of
preparing and filing annual and quarterly reports, proxy statements and other
information with the SEC and furnishing audited reports to stockholders will
cause our expenses to be higher than they would have been if we were a
privately-held company.  It may be time consuming, difficult and
costly for us to develop and implement the internal controls and reporting
procedures required by the Sarbanes-Oxley Act of 2002. We may need to recruit,
hire, train and retain additional financial reporting, internal controls and
other finance personnel in order to develop and implement appropriate internal
controls and reporting procedures. If we are unable to comply with the internal
controls requirements of Sarbanes-Oxley, we may not be able to obtain the
independent accountant certifications required by Sarbanes-Oxley, which, if
applicable, would have a material adverse effect on us.





We
may not be able to implement Section 404 of the Sarbanes-Oxley Act on a timely
basis.





The SEC, as directed by Section 404 of
the Sarbanes-Oxley Act of 2002, adopted rules generally requiring each public
company to include a report of management on the company's internal controls
over financial reporting in its Annual Report on Form 10-K that contains an
assessment by management of the effectiveness of the company’s internal controls
over financial reporting beginning in the year ended December 31, 2007. In
addition, the company’s independent registered accounting firm must attest to
and report on management’s assessment of the effectiveness of the company's
internal controls over financial reporting. This requirement will first apply to
our Annual Report on Form 10-K for the fiscal year ending December 31, 2008. We
have not yet developed a complete Section 404 implementation plan. We have in
the past discovered, and may in the future discover, areas of our internal
controls that need improvement. How companies should be implementing these new
requirements including internal control reforms to comply with Section 404’s
requirements and how independent auditors will apply these requirements and test
companies’ internal controls, is still reasonably uncertain. We expect that we
may need to hire and/or engage additional personnel and incur incremental costs
in order to complete the work required by Section 404 and cannot guarantee that
we will be able to complete a Section 404 plan on a timely basis. Additionally,
upon completion of a Section 404 plan, we may not be able to conclude that our
internal controls are effective, or in the event that we conclude that our
internal controls are effective, our independent accountants may disagree with
our assessment and may issue a report that is qualified. Any failure to
implement required new or improved controls, or difficulties encountered in
their implementation, could negatively affect our operating results or cause us
to fail to meet our reporting obligations.




10
 
 Public
company compliance may make it more difficult to attract and retain officers and
directors.
 
 The
Sarbanes-Oxley Act of 2002 and new rules subsequently implemented by the SEC
have required changes in the corporate governance practices of public companies.
As a public company, we expect these new rules and regulations to increase our
compliance costs in 2008 and beyond and to make certain activities more time
consuming and costly. As a public company, we also expect that these new rules
and regulations may make it more difficult and expensive for us to obtain and
maintain director and officer liability insurance and we may be required to
accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same
or similar coverage. As a result, it may be more difficult for us to attract and
retain qualified persons to serve on our board of directors or as executive
officers.


We
are a holding company that depends on cash flow from our wholly-owned subsidiary
to meet our obligations.





We are a
holding company with no material assets other than the stock of our wholly-owned
subsidiary, RedRoller, Inc. Accordingly, all our operations will be conducted by
RedRoller, Inc. and its wholly-owned subsidiary Taylor Systems Engineering
Corporation. We currently expect that the earnings and cash flow of our
subsidiary will be retained and used by us in our operations.





Risks
Related to Our Industry





Changes
in government regulation of our industry and the Internet may adversely affect
our business.





We are subject to general business
regulations and laws as well as regulations and laws specifically governing the
Internet and e-commerce. Existing and future laws and regulations may impede the
growth of the Internet or other online services. These regulations and laws may
cover taxation, restrictions on imports and exports, customs, tariffs, user
privacy, data protection, pricing, content, copyrights, distribution, electronic
contracts and other communications, consumer protection, the provision of online
payment services, broadband residential Internet access and the characteristics
and quality of products and services. It is not clear how existing laws
governing issues such as property ownership, sales and other taxes, libel and
personal privacy apply to the Internet and e-commerce as the vast majority of
these laws were adopted prior to the advent of the Internet and do not
contemplate or address the unique issues raised by the Internet or e-commerce.
Those laws that do reference the Internet are only beginning to be interpreted
by the courts and their applicability and reach are therefore
uncertain.





The
growth of our business may be adversely affected due to the public concerns over
the security and privacy of confidential user information.





A significant prerequisite to online
commerce and communications is the secure transmission of confidential
information over public networks. Our failure to prevent security breaches could
damage our reputation and brand and substantially harm our business and results
of operations. For example, a majority of our fees are billed to our customers’
credit card accounts directly and customers log on using their e-mail address.
We rely on encryption and authentication technology licensed from third parties
to effect the secure transmission of confidential information, including credit
card numbers. Advances in computer capabilities, new discoveries in the field of
cryptography or other developments may result in a compromise or breach of the
technology used by us to protect customer transaction data. In addition, any
party who is able to illicitly obtain a user’s password could access the user’s
transaction data or personal information. Any compromise of our security could
damage our reputation and brand and expose us to a risk of loss or litigation
and possible liability which would substantially harm our business and results
of operations. In addition, anyone who is able to circumvent our security
measures could misappropriate proprietary information or cause interruptions in
our operations. We may need to devote significant resources to protect against
security breaches or to address problems caused by breaches.





In addition, under current credit card
practices, we are liable for fraudulent credit card transactions because we do
not obtain a cardholder’s signature. We do not currently carry insurance against
this risk. To date, we have experienced minimal losses from credit card fraud,
but we continue to face the risk of significant losses from this type of fraud.
Our failure to adequately control fraudulent credit card transactions could
damage our reputation and brand and substantially harm our business and results
of operations.





Risks
Relating to Our Common Stock





There
is a limited trading market for our common stock and we cannot ensure that a
deeper market will ever develop or be sustained.




11
 
 To date, there has been a limited
trading market for our common stock. We cannot predict how liquid the market for
our common stock might become. We currently have no research analysts covering
our stock and there can be no assurance that we will be able to secure such
research coverage. At present, our common stock is quoted on the automated
quotation service of the Financial Institution Regulatory Authority (“FINRA”), known as the
OTC Bulletin Board. Although we are not presently eligible, we intend to apply
for listing of our common stock on either the American Stock Exchange, The
Nasdaq Capital Market or another national securities exchange if and when we
meet the requirements for listing. We cannot ensure that we will be able to
satisfy such listing standards or that our common stock will be accepted for
listing on any such exchange. Should we fail to satisfy the initial listing
standards of such exchanges, or our common stock is otherwise rejected for
listing and remains listed on the OTC Bulletin Board or is suspended from the
OTC Bulletin Board for any reason, the trading price of our common stock could
suffer, the trading market for our common stock may become less liquid and our
common stock price may be subject to increased volatility.


If
we fail to maintain an effective system of internal controls we may not be able
to accurately report our financial results or detect fraud. Consequently,
investors could lose confidence in our financial reporting and this may decrease
the trading price of our stock.





We must maintain effective internal
controls to provide reliable financial reports and detect fraud. We are in the
process of evaluating changes to internal controls for our new public company
status, but have not yet implemented significant changes. Failure to implement
changes to our internal controls or any other factors that we identify as
necessary to maintain an effective system of internal controls could harm our
operating results and cause investors to lose confidence in our business,
operations or reported financial information. Any such inability to establish
effective controls or loss of confidence would have an adverse effect on our
company and could adversely affect the trading price of our stock.





Persons
associated with our  securities offerings, including consultants, may
be deemed to be broker dealers, which may expose us to claims for rescission or
damages.





If our securities are offered without
engaging a registered broker-dealer we may face claims for rescission and other
remedies. We may become engaged in costly litigation to defend these claims,
which would lead to increased expenditures for legal fees and divert
managements’ attention from operating the business. If we could not successfully
defend these claims, we may be required to return proceeds of the Private
Placement to investors, which would harm our financial condition.





Mergers
of the type we recently completed are usually heavily scrutinized by the SEC and
we may encounter difficulties or delays in obtaining future regulatory
approvals.





In November of 2007, we entered into a
“reverse merger” transaction with RedRoller, Inc., a privately-held corporation;
prior to this transaction, we were largely an inactive corporation with little
to no operations.  Historically, the SEC and Nasdaq have not generally
favored transactions in which a privately-held company merges into a largely
inactive company with publicly traded stock, and there is a significant risk
that we may encounter difficulties in obtaining the regulatory approvals
necessary to conduct future financing or acquisition transactions, or to
eventually achieve a listing of shares on one of the Nasdaq Stock Markets or on
a national securities exchange. Effective August 22, 2005, the SEC adopted rules
dealing with private company mergers into dormant or inactive public companies.
As a result, it is likely that we will be scrutinized carefully by the SEC and
possibly by FINRA or Nasdaq, which could result in difficulties or delays
in achieving SEC clearance of any future registration statements, including the
registration statement we must file as a result of the Private Placement, or
other SEC filings that we may pursue, in attracting FINRA-member broker-dealers
to serve as market-makers in our stock, or in achieving admission to one of the
Nasdaq Stock Markets or any other national securities market. As a consequence,
our financial condition and the value and liquidity of our shares may be
negatively impacted.





Because
we are not yet required to comply with rules requiring the adoption of certain
corporate governance measures, our stockholders have limited protections against
interested director transactions, conflicts of interest and similar
matters.





The Sarbanes-Oxley Act of 2002, as well
as rule changes proposed and enacted by the SEC, the New York and American Stock
Exchanges and the Nasdaq Stock Market as a result of Sarbanes-Oxley, require the
implementation of various measures relating to corporate governance. These
measures are designed to enhance the integrity of corporate management and the
securities markets and apply to securities which are listed on those exchanges.
Because we are not presently required to comply with many of these corporate
governance provisions, we have not yet adopted these measures. Until we comply
with the corporate governance measures adopted by the national securities
exchanges after the enactment of Sarbanes-Oxley, regardless of whether such
compliance is required, the absence of standards of corporate governance may
leave our stockholders without protections against interested director
transactions, conflicts of interest and similar matters and investors may be
reluctant to provide us with funds in the future if we determine it is necessary
to raise additional capital.








12
 
 Because
we became public by means of a reverse merger, we may not be able to attract the
attention of major brokerage firms.
 
 There may be risks associated with our
becoming public through a “reverse merger” transaction. Securities analysts of
major brokerage firms may not provide coverage of us since there is no financial
incentive to brokerage firms to recommend the purchase of our common stock. No
assurance can be given that brokerage firms will, in the future, want to conduct
any secondary offerings on our behalf or otherwise cover our
company.


Our
stock price may be volatile in response to various factors, some of which are
out of our control.





The market price of our common stock is
likely to be highly volatile and could fluctuate widely in price in response to
various factors, many of which are beyond our control, including the
following:





§
            changes
      in the package shipping industry and
markets;


§
            competitive
      pricing pressures;


§
            our
      ability to obtain working capital
financing;


§
            technological
      innovations or new competitors in our
market;


§
            additions
      or departures of key personnel;


§
            delays
      in introduction of the redesigned, subscription-based RedRoller System or
      versions thereof;


§
            limited
      “public float” in the hands of a relatively small number of persons whose
      sales or lack of sales could result in positive or negative pricing
      pressure on the market price for our common
  stock;


§
            sales
      of our common stock (particularly following effectiveness of the
      registration statement we filed on Form SB-2 in January of
      2008);


§
            our
      ability to execute our business
plan;


§
            operating
      results that fall below
expectations;


§
            loss
      of any strategic relationship;


§
            regulatory
      developments;


§
            economic
      and other external factors; and


§
            period-to-period
      fluctuations in our financial
results.





In
addition, the securities markets from time to time experience significant
price and volume fluctuations that are unrelated to the operating performance of
particular companies. These market fluctuations may also materially and
adversely affect the market price of our common stock.





We
do not anticipate dividends to be paid on our common stock, and investors may
lose the entire amount of their investment.





Cash dividends have never been declared
or paid on our common stock, and we do not anticipate such a declaration or
payment for the foreseeable future. We expect to use future earnings, if any, to
fund business growth. Therefore, stockholders will not receive any funds absent
a sale of their shares. We cannot assure stockholders of a positive return on
their investment when they sell their shares, nor can we assure that
stockholders will not lose the entire amount of their investment.





Our
common stock may be deemed a “penny stock,” which would make it more difficult
for our investors to sell their shares.





Shares of our common stock may be
subject to the “penny stock” rules adopted under Section 15(g) of the Exchange
Act. The penny stock rules apply to companies whose common stock is not listed
on a national securities exchange and trades at less than $5.00 per share or
that have tangible net worth of less than $5,000,000 ($2,000,000 if the company
has been operating for three or more years). These rules require, among other
things, that brokers who trade penny stock to persons other than “established
customers” complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in
the security, including a risk disclosure document and quote information under
certain circumstances. Many brokers have decided not to trade penny stocks
because of the requirements of the penny stock rules and, as a result, the
number of broker-dealers willing to act as market makers in such securities is
limited. If we remain subject to the penny stock rules for any significant
period, it could have an adverse effect on the market, if any, for our
securities. In as much as our securities are subject to the penny stock rules,
investors will find it more difficult to dispose of our securities.





Offers
or availability for sale of a substantial number of shares of our common stock
may cause the price of our common stock to decline.





Sales of significant amounts of our
common stock in the public market at any particular time, either upon the
expiration of any statutory holding period, under Rule 144, upon expiration
of lock-up periods applicable to outstanding shares, upon the exercise of
outstanding stock options or warrants, or otherwise, could create a circumstance
commonly referred to as an “overhang” in





13
 
 anticipation of
which the market price of our common stock could fall. The existence of an
overhang, whether or not sales have occurred or are occurring, also could make
more difficult our ability to raise additional financing through the sale of
equity or equity-related securities in the future at a time and price that we
deem reasonable or appropriate.


Stockholders
may experience dilution of their ownership interests because of the future
issuance of additional shares of our common stock and our preferred
stock.





In the future, we may issue our
authorized but previously unissued equity securities, resulting in the dilution
of the ownership interests of present holders of shares of our common stock. We
are authorized to issue an aggregate of 225,000,000 shares of capital stock
consisting of 200,000,000 shares of common stock, par value $0.001 per share,
and 25,000,000 shares of “blank check” preferred stock, par value $0.001 per
share, with such preferences and rights as may be determined by our board of
directors at the time of issuance. Specifically, our board of directors has the
authority to issue preferred stock without further stockholder approval. As a
result, our board of directors could authorize the issuance of a series of
preferred stock that would grant to holders the preferred right to our assets
upon liquidation, the right to receive dividend payments before dividends are
distributed to the holders of common stock and the right to the redemption of
the shares, together with a premium, prior to the redemption of common stock. In
addition, our board of directors could authorize the issuance of a series of
preferred stock that has greater voting power than our common stock or that is
convertible into common stock, which could decrease the relative voting power of
the common stock or result in dilution to our existing stockholders. We may also
issue additional shares of common stock or other securities that are convertible
into or exercisable for common stock in connection with hiring or retaining
employees, future acquisitions, future sales of our securities for capital
raising purposes, or for other business purposes. The future issuance of any
such additional shares of our common stock may create downward pressure on the
trading price of our common stock. There can be no assurance that we will not be
required to issue additional shares, warrants or other convertible securities in
the future in conjunction with any capital raising efforts, including at a price
(or exercise prices) below the price at which shares of our common stock are
then traded.






ITEM 1B.
            UNRESOLVED
      STAFF COMMENTS.




None.






ITEM 2.
            PROPERTIES.





Our headquarters, located in Stamford,
Connecticut, consists of approximately 6,400 square feet of office space that we
lease at the current rate of $111,000 per annum under a three-year lease
agreement that currently runs through October of 2010.  We also lease
approximately 1,368 square feet of office space in Plymouth, Michigan at the
current rate of $12,000 per annum under a one-year lease agreement that
currently runs through July of 2008, and
approximately 2,032 square feet of office space in Maynard, Massachusetts at the
current rate of $28,448 per annum under an eighteen month lease agreement that
currently runs through August 31, 2009.




We believe that our existing
facilities, together with additional space we believe we can lease at reasonable
market rates, are adequate for our near term business needs.






ITEM 3.
            LEGAL
      PROCEEDINGS.





From time to time we may be named in
claims arising in the ordinary course of business. Currently, no legal
proceedings, government actions, administrative actions, investigations or
claims are pending against us or involve us that, in the opinion of our
management, could reasonably be expected to have a material adverse effect on
our business and financial condition.




We anticipate that we will expend
significant financial and managerial resources to the defense of our
intellectual property rights in the future if we believe that our rights have
been violated.






ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS.





The information required by this item
is incorporated herein by reference to the registrant’s Current Reports on Form
8-K filed with the Securities and Exchange Commission on October 29, 2007,
November 7, 2007 and November 13, 2007.


















14


PART
II




ITEM 5.
            MARKET
      FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES.




Market
Information




The public trading market for our
common stock is limited and sporadic. Our common stock has been traded on the
OTC Bulletin Board under the symbol “RROL.OB” since October
18, 2007.  Prior to that time, our common stock was traded on
the OTC Bulletin Board under the symbol “ASLH.OB.”





The following table sets forth, for the
periods indicated, the high and low bids for our common stock as reported on the
OTC Bulletin Board:




High
            
            LowYear
      ended December 31, 2006First
      Quarter
            —
            
            —Second
      Quarter
            —
            
            —Third
      Quarter
            —
            
            —Fourth
      Quarter
            —
            
            —







High
            
            LowYear
      ended December 31, 2007First
      Quarter
            —
            
            —Second
      Quarter
            —
            
            —Third
      Quarter
            —
            
            —Fourth
      Quarter
            $
      2.00
            
            0.72




The foregoing bid information reflects
inter-dealer prices, without retail mark-up, mark down or commission and may not
necessarily represent actual transactions with respect to our common
stock.




Holders




As of March 28,
2008, there were 24,842,040
shares of common stock outstanding that were held by 183 stockholders of
record.




Dividends




We have never paid cash dividends on
shares of our common stock and do not anticipate doing so in the foreseeable
future. The payment of dividends on shares of our common stock will depend on
earnings, financial condition and other business and economic factors affecting
us at such time as our board of directors may consider relevant.





Securities Authorized for Issuance
Under Equity Compensation Plans




The following table sets forth
information with respect to equity compensation plans (including individual
compensation arrangements) of the registrant as of December 31,
2007:




15




Plan
      Category
            Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
            Weighted-average
      exercise price of outstanding options, warrants and rights
            Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))(a)
            (b)
            (c)Equity
      compensationplans
              approved
      by security
              holders(10)
            3,180,310
            $
      .41
            2,518,513Equity
      compensation plans
              not
      approved by security
              holders
            7,870,674(11)
            $0.61
            —Total
            11,050,894
            $
      0.55
            2,518,513






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. This discussion contains forward-looking
statements. Please see page 1 on this Annual Report on Form 10-K
“Forward-Looking Statements” and Item 1A of this Annual Report on Form 10-K
under the caption “Risk Factors” for a discussion of the risks, uncertainties
and assumptions associated with these statements.







Introduction
and Overview





We designed the RedRoller System to
make shipping packages simple and to save users time and money. The RedRoller
System brings package shipping pricing transparency to businesses
and  provides functionality that is similar to familiar eTravel
systems, such as Travelocity, Expedia and Orbitz where prices and various levels
of available services from multiple vendors are displayed for selection. The
RedRoller System is currently being substantially redesigned to enhance its
capabilities and support a monthly subscription fee from users.





Our on-demand software platform is
accessed via the Internet and designed to allow customers to compare various
carriers’ services and rates and select the best available value that meets
their shipping needs, thereby saving money when shipping packages. Once
registered with RedRoller and selected carriers, a user can complete a package
or overnight letter shipment in just a few clicks of a mouse. The RedRoller
System evaluates numerous shipping parameters and carrier service attributes and
displays dynamic pricing, options for pickup, insurance costs and the
availability (based on geography, time and other factors) of selected carriers’
shipping services. The RedRoller System then allows users to select a shipping
carrier based on cost, balanced with the user’s required delivery day and time,
arrange for package pickup or drop-off (with an optional location map
available), and print authorized bar-coded shipping labels for each listed
carrier, including legal postage for the USPS.  After preparing a
package with the RedRoller System, a user simply attaches the authorized
computerized shipping label to the package to be shipped. If a carrier pick-up
was selected, the carrier will pick up the package from the user’s location or
alternatively, the user drops the package at a local drop-off location for that
carrier. The RedRoller System also provides various value-added functions for
business users, including insurance options, package tracking and shipping
reports.





The RedRoller System was released in
‘beta’ format in June 2006.  Based in part on feedback from such beta
users, we are substantially redesigning and intend to
introduce,  after testing,  a version of the RedRoller
System that is being enhanced to add additional capabilities and support monthly
subscription and other fees from users. Our subscription model version will be
introduced to users for a monthly subscription fee, which will give users
unlimited access to the RedRoller System using their existing contract rates
with carriers while also providing various value add functionality.





We also intend to expand our
capabilities (and our market opportunity) in the future by integrating the
RedRoller System inside third-party applications, such as small business
accounting platforms, thereby allowing customers using those applications to
transparently process shipping transactions using our proprietary technology.
This integration into third-party applications will be offered to third party
companies under a transaction or license-based model and is intended to generate
customers by providing access to large, captive customer bases (that can use the
RedRoller System’s shipping functionality) as an integral part of applications
they already use day-to-day.


10    
In connection with the Merger with RedRoller, Inc., all of the outstanding stock
options under RedRoller, Inc’s 2006 Stock Option and Stock Incentive Plan were
exchanged for options to purchase shares of our common stock pursuant to our
2007 Stock Option and Incentive Plan.
 11    
Consists of (i) five-year warrants to purchase 2,622,382 shares of our
common stock at an exercise price of $1.28/share, (ii) five-year warrants
to purchase 75,000 shares of our common stock at an exercise price of
$1.29/share, and (iii) 5,173,292 options to purchase shares of our common stock
at a weighted average price of $0.26/share that were granted outside of our 2007
Stock Option and Incentive Plan and not in connection with any compensation plan
approved by security holders.





16


Our initial target customers in the
U.S. are businesses, primarily the SME market, which, according to International
Data Corporation, is comprised of more than 7.9 million businesses with less
than 100 employees that do not have an in-house computerized shipping system and
for which we believe shipping is a labor intensive, time consuming and
inefficient process. We intend to subsequently focus our future product
development on larger businesses and on the international
market(s).  Domestically, we intend to address the needs of companies
with shipping requirements that extend beyond warehouse-based product
distribution to mobile workforce and desktop or office-based package services.
We believe these enterprise customers will be receptive to an economical,
desktop based software platform for “front office” employees.





Excluding
the majority of the business of our subsidiary, Taylor Systems Engineering
Corporation (“TSE”), our financial
model is similar to other Internet-based businesses that introduced their basic
product platform to users as a “free” sponsored service and later transitioned
to a subscription-based model. We attribute much of the initial success of such
companies to the fact they did not charge the user for their initial product
platform during beta development.   Our beta stage revenues have
been generated from www.redroller.com,
our beta software platform, which has generated revenues through margin on
certain carriers’ shipping charges, specifically from DHL. Subsequent to the
introduction of subscription services, we expect to generate revenues through
subscription, transaction and/or other fees to third party companies and users.
As usage and traffic on the www.redroller.com
website expand, we anticipate the potential of other revenue generating
opportunities including, but not limited to, advertising and sales agent
commissions on products sold us and by other companies via “click-through”
marketing.




In addition to USPS (via Endicia) and
DHL, which currently interface into the RedRoller System, FedEx approved our
application to become a Custom Solutions Provider (“CSP”) during June
2007. We were subsequently authorized as a CSP on September 28, 2007. Under the
redesigned subscription-based RedRoller System, this certification will enable
us to display a customer’s specific (contracted for) FedEx shipping
rates.


Results
of Operations





The following table sets forth items of
operating results for the years ended December 31, 2007 and 2006:





YEARS
      ENDED DECEMBER 31,2007
            
            
            2006NET
      SALES
            
            $
            1,303,756
            
            
            $
            778,489Gross
      Profit
            
            
            466,801
            
            
            
            349,624Salaries
      and Benefits Expense (including stock-based compensation expense of
      $897,282 and $3,213,615 for the years ended December 31, 2007 and 2006,
      respectively)
            
            
            3,301,840
            
            
            
            5,164,011Research
      and Development Expenses
            
            
            —
            
            
            
            1,379,111Selling;
      General and Administrative Expenses (including stock-based compensation
      expense of $669,678 and $314,637 for the years ended December 31, 2007 and
      2006, respectively)
            
            
            2,844,388
            
            
            
            2,773,969Loss
      from Operations
            
            
            (5,679,427
            )
            
            
            (8,967,467
            )Other
      (Expense) Income
            
            
            (332,948
            )
            
            
            17,953Loss
      before provision for income taxes
            
            
            (6,012,375
            )
            
            
            (8,949,514
            )Provision
      for income taxes
            
            
            92,000
            
            
            
            —Net
      loss
            
            
            (6,104,375
            )
            
            
            (8,949,514
            )Convertible
      Preferred Stock Deemed Dividends
            
            
            (1,297,954
            )
            
            
            —NET
      LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
            
            $
            (7,402,329
            )
            
            $
            (8,949,514
            )Net
      loss per share: basic and diluted
            
            $
            (0.93
            )
            
            $
            (1.98
            )Weighted
      average number of shares outstanding – basic and diluted
            
            
            7,961,843
            
            
            
            4,527,238





17


Year Ended December 31, 2007
Compared to the Year Ended December 31, 2006





Prior to June 2006, we had minimal
operations and incurred substantial research and development expenses in the
development of the RedRoller System. Our results of operations reflect the
release of the RedRoller System in ‘beta’ format in June 2006 and revenues
attributable to TSE of $562,342 for the year ended December 31,
2006.





Net
Sales.





Years
      Ended
              December
      31,2007
            
            
            2006Shipping
      services
            
            $
            598,514
            
            
            $
            214,360Installation
            
            
            382,381
            
            
            
            363,231Maintenance
            
            
            304,690
            
            
            
            162,359Supply
            
            
            14,880
            
            
            
            25,484Other
            
            
            3,291
            
            
            
            13,055Total
            
            $
            1,303,756
            
            
            $
            778,489





Net sales
for the year ended December 31, 2007 increased to $1,303,756 from $778,489 for
the year ended December 31, 2006, an increase of $525,267, or 67%, primarily due
to revenues generated by the introduction of the RedRoller System to ‘beta’
users in June 2006 and revenues earned from sales of software and maintenance
contracts. Sales from the introduction of the RedRoller System amounted to
approximately $598,500 for the year ended December 31, 2007 compared to
approximately $216,100 for the year December 31, 2006. Revenues from software
and maintenance contracts amounted to approximately $304,700 for the year ended
December 31, 2007 compared to approximately $162,300 for the year ended December
31, 2006.





Gross
Profit. Gross profit for the year ended December 31, 2007 increased to
$466,801 from $349,624 for the year ended December 31, 2006, an increase of
$117,177, or 34%. Our gross profit percentage decreased to 36% for the year
ended December 31, 2007 from 45% for the year ended December 31, 2006. The
change in our gross profit is primarily due to lower margin revenues generated
by the introduction of the RedRoller System to ‘beta’ users in June 2006, as
noted above. Our cost of sales is mainly a function of the pricing to ship
packages and varies depending on service levels. Each carrier can exhibit
significant cost differentials as each carrier typically has a specific niche
service in which it is more competitive. Depending on the specific size, weight,
delivery region and desired service, any shipping carrier might have the best
price. As such, the weighted mix of our cost of sales and the mark-up related to
these cost components may vary significantly from service to service based on
the type and scope of the service being provided.


Salaries and
Benefits Expense. Salaries and benefits expense decreased from $5,164,011
for the year ended December 31, 2006 to $3,301,840 for the year ended December
31, 2007, a decrease of $1,862,171 or 36%, primarily due to a decrease in
stock-based compensation expense attributable to employee stock options.
Employee stock-based compensation expense decreased to $897,282 for the year
ended December 31, 2007 from $3,213,615 for the year ended December 31, 2006 a
decrease of $2,316,333, or 72%.  The decrease is primarily due to the
change in the fair market value of the shares of our common stock underlying the
stock options granted during the year ended December 31, 2007 ( $0.24) compared
to the fair market value of the shares of our common stock underlying the stock
options granted during the year ended December 31, 2006 ($1.99). Mainly
contributing to the decrease in the grant date fair value of the options is the
decline in our stock price, which affects the Black-Scholes value utilized to
calculate compensation cost. Under applicable accounting literature, we are
required to estimate and record the fair value of share based payments that we
make to our employees by developing assumptions regarding expected holding
periods of stock options, volatility rates, and expectation of forfeitures and
future vesting that can significantly impact the amount of compensation cost
that we recognize in each reporting period.


Offsetting the decrease in stock-based
compensation expense was an increase in salaries and payroll taxes of
approximately $460,900, or 33%, from $1,379,300 for the year ended December 31,
2006 to $1,840,200 for the year ended December 31, 2007. The increase is
primarily attributable to the hiring of additional personnel to support our
current and anticipated increase in the level of operations to service our
business due to the anticipated launch of the new subscription model during the
second quarter of 2008. In addition, during the planning and development phase
of the RedRoller System, technical salaries of approximately $465,000,
representing salaries for the six months ended June 30, 2006, were classified as
research and development expenses. As a result of the RedRoller System achieving
technological feasibility in June 2006, such expenses are no longer classified
as research and development and are included in salaries and benefits for the
year ended December 31, 2007.





18


Research and
Development Expenses. Research and development expenses for the year
ended December 31, 2007 decreased to $-0- from $1,379,111 for the year ended
December 31, 2006, a decrease of $1,379,111, or 100%. The year ended December
31, 2006 includes costs incurred during the planning and development phase of
the RedRoller System that were charged to research and development which include
personnel expenses, outside services, production software licenses, production
hardware and hosting costs. In June 2006, upon attainment of technological
feasibility of the RedRoller System, such costs were no longer expensed as
research and development expenses, but capitalized as part of direct costs
incurred during the development phase of the RedRoller System.





Selling, General
and Administrative Expenses. Selling, general and administrative expenses
for the year ended December 31, 2007 increased to $2,844,388 from $2,773,969 for
the year ended December 31, 2006, an increase of $70,419, or 3%, primarily due
to increases in stock-based compensation expense to non-employees, legal and
other professional fees, and depreciation and amortization expenses. Offsetting
such increases were lower marketing and technology expenses.





Stock-based compensation expense
attributable to non-employee stock options increased by approximately $355,000,
or 113%, to $669,700 for the year ended December 31, 2007 from $314,600 for the
year ended December 31, 2006.  The increase is primarily due to
consulting expense of approximately $309,000 recognized during the year ended
December 31, 2007 for options granted in the prior year, as well as
approximately $38,000 of consulting expense recognized during the year ended
December 31, 2007 due to the modification of the exercise price and vesting
dates of options outstanding in April 2007. As noted above, under applicable
accounting literature, we are required to estimate and record the fair value of
share based payments that we make to non-employees by developing assumptions
regarding expected holding periods of stock options, volatility rates, and
expectation of forfeitures and future vesting that can significantly impact the
amount of consulting expense that we recognize in each reporting
period.





Legal and other professional fees
increased by approximately $761,600 for the year ended December 31, 2007
compared to the year ended December 31, 2006. The increase was primarily
attributable financial, legal and accounting expenses in relation to the Merger
and related audits and reviews. In addition, the year ended December 31, 2007
includes approximately $153,200 of expense related to the amortization of web
site development costs as compared to $38,300 for the year ended December 31,
2006.





Offsetting such increases, were lower
marketing and technology expenditures of approximately $1,257,800. During the
year ended December 31, 2006, we incurred significant marketing and technology
expenses in anticipation of the introduction of the RedRoller System to ‘beta’
users.





Loss from
Operations. As a result of the above-noted changes, loss from operations
for the year ended December 31, 2007 decreased to $5,679,427 from $8,967,467 for
the year ended December 31, 2006, a decrease of $3,288,040, or 37%.




Other (Expense)
Income. Other expense for the year ended December 31, 2007 amounted to
$332,948 compared to other income of $17,953 for the year ended December 31,
2006. The year ended December 31, 2007 includes amortization of debt discount of
$228,169 and financing expenses of $71,119 incurred in connection with the
issuance and subsequent conversion of $1,250,000 of bridge notes. In addition,
the year ended December 31, 2007 includes $61,720 of interest expense related to
bridge notes, convertible notes and note payable. The year ended December 31,
2007 also includes a gain on the extinguishment of debt related to a note
payable of $8,674. In comparison, the year ended December 31, 2006 includes
interest income of $17,953 earned mainly on our money market and investment
accounts.




Convertible
Preferred Stock Deemed Dividends. Convertible preferred stock deemed
dividends for the year ended December 31, 2007 of $1,297,954 represents the
effect of a change in the conversion option prices embedded in our previously
outstanding shares of Series A Convertible Preferred Stock, par value $0.01 per
share (the “Series A
Preferred Stock”), and Series B(1) Convertible Preferred Stock, par value
$0.01 per share (the “Series B(1) Preferred
Stock”), that were triggered under contractual anti-dilution
provisions.





Net Loss
Attributable to Common Stockholders. As a result of the above, net loss
for the year ended December 31, 2007 decreased to $7,402,329 from $8,949,514,
for the year ended December 31, 2006, a decrease of $1,639,185, or
18%.





Liquidity
and Capital Resources





We
incurred a net loss of $6,104,375 for the year ended December 31, 2007, which
includes an aggregate of $2,269,635 of non-cash charges. Non-cash charges
principally include $1,566,960 of stock-based compensation expense, $391,385 of
depreciation


19
 
 and
amortization and $299,288 of non-cash interest expense. At December 31, 2007,
our accumulated deficit amounted to $19,648,427. We had cash and cash
equivalents of $3,489,116 and working capital of $2,923,410 at December 31,
2007.


We
received total gross proceeds of $3,999,999 (net proceeds of $3,970,893 after
payment of $29,106 in transaction expenses) in a private placement of 1,768,845
shares of Series A Preferred Stock completed during the year ended December 31,
2006. Investors in this transaction deposited $465,000 of proceeds during the
year ended December 31, 2005. During the year ended December 31, 2006, we also
received gross proceeds of $1,603,621 (net proceeds of $1,574,334 after the
payment of $29,287 in transaction expenses) in a private placement of 495,301
shares of Series B(1) Preferred Stock.





During
May and June 2007, we completed a $500,000 convertible note
offering.





In
addition, during the year ended December 31, 2007, we received $1,750,000 of
proceeds from issuances of bridge notes, $298,000 from issuances of notes and
$596,379 from the sale of shares of Series B(1) Preferred Stock.





On
November 13, 2007, we  issued 7,058,824 shares of common stock and
five-year warrants to purchase 1,764,706 shares of common stock in a
private placement transaction for aggregate proceeds of $6,000,000 (net proceeds
of $5,167,663 after the payment of transaction expenses). Future cash flow and
working capital is highly dependent on our ability to acquire customers once its
enhanced subscription-based software is introduced, expected in the second
quarter of 2008.





The
realization of our business plan is dependent upon our ability to raise
additional short-term capital and generate revenue and operating cash flow. We
are currently designing and intend to launch the subscription version of the
RedRoller System during the second quarter of 2008. Our subscription model
version will be introduced to users for a monthly subscription fee, which will
give users unlimited access to the RedRoller System and automatically use each
business’s contract rates with each carrier.





Although
management believes our current level of working capital, as well as the funds
we expect to generate from operations, will enable us to sustain the business
for the near term, we will need to secure additional funding in order to meet
our cash flow needs. There can be no assurance that funding will be available to
us at the time it is needed or in the amount necessary to satisfy our needs
or, that if funds are made available, that they will be available on terms
that are favorable to us. If we are unable to secure financing when needed, our
business may be materially and adversely affected, and we may be required to
curtail our operations, suspend the pursuit of our business plan, reduce our
workforce and/or cut overhead expenses. We cannot provide any assurance that we
will raise additional capital through an alternative funding
source.





Net cash
flows used in operating activities for the year ended December 31, 2007 were
$4,042,020. For the year ended December 31, 2007, our net loss amounted to
$6,104,375, which mainly included non-cash adjustments due to stock-based
compensation expense of $1,566,960, depreciation and amortization of $391,385,
and non-cash interest of $299,288. Changes in assets and liabilities utilized
$299,280 in cash.





Net cash
flows used in investing activities for the year ended December 31, 2007 were
$401,270. For the year ended December 31, 2007, we invested $377,551 in the
capitalization of web site costs and $23,719 in the purchase of property and
equipment.





Net cash
flows provided by financing activities amounted to $7,642,923 for the year ended
December 31, 2007. For the year ended December 31, 2007, we received net
proceeds of $5,167,663 from the Private Placement of shares of our common stock,
a net $1,250,000 from the issuances of convertible bridge notes executed in July
and August 2007, proceeds of $596,379 from the sale of shares of Series B(1)
Preferred Stock, $500,000 from the issuances of convertible notes, and a net of
$200,000 from the issuance of a note. We also paid $71,119 in financing costs
related to the issuance of the convertible bridge notes.





Summary
of Critical Accounting Policies





The
preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to exercise its judgment. We exercise considerable judgment
with respect to establishing sound accounting polices and in making estimates
and assumptions that affect the reported amounts of our assets and liabilities,
our recognition of revenues and expenses, and disclosure of commitments and
contingencies at the date of the financial statements.





On an
ongoing basis, we evaluate our estimates and judgments. Areas in which we
exercise significant judgment include, but are not necessarily limited to, our
valuation of accounts receivable, recoverability of long-lived assets, income
taxes, equity transactions




20
 
 (compensatory
and financing) and contingencies. We have also adopted certain polices with
respect to our recognition of revenue that we believe are consistent with the
guidance provided under SEC Staff Accounting Bulletin No. 104.


We base
our estimates and judgments on a variety of factors including our historical
experience, knowledge of our business and industry, current and expected
economic conditions, the attributes of our services and products, the regulatory
environment, and in certain cases, the results of outside appraisals. We
periodically re-evaluate our estimates and assumptions with respect to these
judgments and modify our approach when circumstances indicate that modifications
are necessary.




While we
believe that the factors we evaluate provide us with a meaningful basis for
establishing and applying sound accounting policies, we cannot guarantee that
the results will always be accurate. Since the determination of these estimates
requires the exercise of judgment, actual results could differ from such
estimates.




A
description of significant accounting polices that require us to make estimates
and assumptions in the preparation of our consolidated financial statements are
as follows:





Revenue
Recognition and Accounts Receivable





We are a
reseller of carrier based shipping services that uses a proprietary
internet-based, multi-carrier, integrated pricing comparison and shipping
services system that is currently available in ‘beta’ form at no charge
to the end-user. Through our basic software platform, customers can compare
pricing established by us from multiple shipping carriers and purchase shipping
services, which are then performed directly by the selected carrier following
our transmittal of a shipping order to the carrier.





We also
install shipping systems software that integrates customers systems with
shipping carriers’ software and also provide maintenance of such
software.





We apply
the revenue recognition principles set forth in SEC Staff Accounting Bulletin,
or SAB, 104 “Revenue Recognition,” with respect to all of our revenues.
Accordingly, we record revenues when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable, and
collectability of the sale is reasonable assured.





We also
evaluate the presentation of revenue on a gross versus net basis through the
application of EITF No. 99-19, “Reporting Revenue Gross as a Principal versus
Net as an Agent” (“EITF 99-19”). We
offer shipping services whereby we act as a reseller in the transaction, passing
shipping requests booked by the customer to the relevant carrier
provider.  We report these revenues gross because, unlike a true
agency relationship, we have substantial latitude in setting price, assume the
credit risk for the entire amount of the sale, and are separately and solely
responsible for the payment of all obligations incurred with the
carriers.





We
require all of our sales to be supported by evidence of a sale transaction that
clearly indicates the selling price to the customer, shipping terms and payment
terms. Evidence of an arrangement generally consists of a contract, purchase
order or order confirmation approved by the customer.





Customers
pay for shipping services prior to the actual shipment of goods, generally when
the shipping services are booked.  Revenues resulting from shipping
services are recognized at the time in which the transaction is no longer
cancelable, which occurs when a computerized label has been ‘scanned’ by a
carrier.





Our
installation revenues are derived principally from contractual agreements with
third parties that provide installation of shipping systems
software.  Revenues from contractual arrangements with third parties
are recognized as the contracted services are delivered to the end
users.  We consider delivery to our customers to have occurred at the
time in which installation work is completed and the customer acknowledges its
acceptance of the work.





We also
provide maintenance contracts on behalf of the manufacturers of the shipping
systems software it sells. We offer these contracts as a separately priced
product. Revenues from maintenance contracts are recognized ratably over the
maintenance period in accordance with the provision of American Institute of
Certified Public Accountants “AICPA” Statement of Position SOP 97-2, “Software
Revenue Recognition.”





Revenues
from the sales of shipping supplies are recognized upon delivery.





A
considerable amount of judgment is required to assess the ultimate realization
of receivables, including assessing the probability of collection and the
current credit worthiness of our clients. Probability of collection is based
upon the assessment of the client’s financial condition through the review of
its current financial statements or credit reports.




21


Goodwill
and Other Intangible Assets





Intangible
assets consist of customer relationships and trade name, both of which are
amortized straight-line over the estimated useful lives of the assets. We review
the carrying value of intangibles and other long-lived assets for impairment at
least annually or whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. With respect to the
valuation of our goodwill, we considered a variety of factors including a
discounted cash flow forecast to determine the enterprise value of our business
using the income approach. Recoverability of long-lived assets is measured by
comparison of its carrying amount to the undiscounted cash flows that the asset
or asset group is expected to generate. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property, if any, exceeds its fair market
value.





Income
Taxes




We are
required to determine the aggregate amount of income tax expense or loss based
upon tax statutes in jurisdictions in which we conduct business. In making these
estimates, we adjust our results determined in accordance with generally
accepted accounting principles for items that are treated differently by the
applicable taxing authorities. Deferred tax assets and liabilities, as a result
of these differences, are reflected on our balance sheet for temporary
differences in loss and credit carryforwards that will reverse in subsequent
years. We also establish a valuation allowance against deferred tax assets when
it is more likely than not that some or all of the deferred tax assets will not
be realized. Valuation allowances are based, in part, on predictions that
management must make as to our results in future periods. The outcome of events
could differ over time which would require that we make changes in our valuation
allowance.





Share
Based Payments and Other Equity Transactions





We apply
SFAS No. 123R “Share Based Payment.” This statement is a revision of SFAS
Statement No. 123, and supersedes APB Opinion No. 25, and its related
implementation guidance. SFAS 123R addresses all forms of share based payment
(“SBP”) awards
including shares issued under employee stock purchase plans, stock options,
restricted stock and stock appreciation rights. Under SFAS 123R, SBP awards
result in a cost that is measured at fair value on the awards’ grant date, based
on the estimated number of awards that are expected to vest. Under this method
of accounting, we are required to estimate the fair value of share based payment
that we make to our employees by developing assumptions regarding expected
holding terms of stock options, volatility rates, and expectation of forfeitures
and future vesting that can significantly impact the amount of compensation cost
that we recognize in each reporting period.





We are
also required to apply complex accounting principles with respect to accounting
for financing transactions that we have consummated in order to finance the
growth of our business. These transactions, which generally consist of
convertible debt and equity instruments, require us to use significant judgment
in order to assess the fair values of these instruments at their dates of
issuance, which is critical to making a reasonable presentation of our financing
costs and how we finance our business.





Formulating
estimates in any of the above areas requires us to exercise significant
judgment.  It is at least reasonably possible that the estimates of the
effect on the financial statements of a condition, situation, or set of
circumstances that existed at the date of the financial statements that we
considered in formulating our estimates could change in the near term due to one
or more future confirming events.  Accordingly, the actual results
regarding estimates of any of the above items as they are presented in the
financial statements could differ materially from our estimates.





Recently
Issued Accounting Pronouncements





In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157
defines fair value, establishes a framework for measuring fair value and expands
disclosure of fair value measurements. SFAS 157 applies under other accounting
pronouncements that require or permit fair value measurements and accordingly,
does not require any new fair value measurements.  SFAS 157 is
effective for financial statements issued for fiscal years beginning after
November 15, 2007.  The adoption of SFAS 157 is not expected to have a
material effect on our consolidated financial position, results of operations or
cash flows.





On
February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS 159”). The
guidance in SFAS 159 “allows” reporting entities to “choose” to measure many
financial instruments and certain other items at fair value.  The
objective underlying the development of this literature is to improve financial
reporting by providing reporting entities with the opportunity to reduce
volatility in reported earnings that results from measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions, using the guidance in SFAS 133, as amended. The provisions of SFAS
159 are applicable to all reporting entities and are effective as of the
beginning of the first fiscal year that begins




22
 
 subsequent to
November 15, 2007. The adoption of SFAS 159 is not expected to have a material
effect on our consolidated financial position, results of operations or cash
flows.


In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS
141R replaces SFAS No. 141, “Business Combinations” (“SFAS 141”). SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141R defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. SFAS 141R retains guidance of SFAS 141 for identifying and
recognizing intangible assets separately from goodwill. SFAS 141R requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions specified in the
Statement. SFAS 141R also requires the acquirer in a business combination
achieved in stages to recognize the identifiable assets and liabilities, as well
as the noncontrolling interest in the acquiree, at the full amounts of their
fair values. SFAS 141R applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Earlier adoption is prohibited.
We do not expect the adoption of this pronouncement to have a material impact on
our financial position or results of operation.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008. Earlier adoption is
prohibited. SFAS 160 shall be applied prospectively as of the beginning of the
fiscal year in which this Statement is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements shall be applied retrospectively for all periods presented. We do
not expect the adoption of this pronouncement to have a material impact on our
financial position or results of operation.


In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161
gives financial statement users better information about the reporting entity’s
hedges by requiring qualitative disclosures about the objectives and strategies
for using derivatives, quantitative data about the fair value of and gains and
losses on derivative contracts, and details of credit-risk-related contingent
features in their hedged positions. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. We are currently assessing the impact of SFAS 161 on its financial
position and results of operation.


Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on our consolidated financial statements
upon adoption.






ITEM 7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Our
exposure to market risk is limited to interest income sensitivity, which is
affected by changes in the general level of U.S. interest rates, particularly
because the majority of our investments are in short-term, money market funds.
We place our investments with high-quality financial institutions and limit the
amount of credit exposure to any one financial institution. During the years
ended December 31, 2007 and 2006, the effects of changes in interest rates
on the fair market value of our investments and our earnings were not material.
Further, we believe that the impact on the fair market value of our investments
and our earnings from a hypothetical 10% change in interest rates would not be
significant. We do not have any material foreign currency or other derivative
financial instruments.






ITEM 8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA.




INDEX
TO FINANCIAL STATEMENTS




PageRedRoller
      Holdings, Inc.Report
      of Independent Registered Public Accounting Firm
            24Consolidated
      Balance Sheets as of December 31, 2007 and 2006
            25Consolidated
      Statements of Operations for the years ended December 31, 2007 and
      2006
            26Consolidated
      Statement of Stockholders’ Equity for the years ended December 31,
      2007 and 2006
            27Consolidated
      Statements of Cash Flows for the years ended December 31, 2007 and
      2006
            29Notes
      to Consolidated Financial Statements
            31




23


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Audit Committee of the
 Board of
Directors and Stockholders


of
RedRoller Holdings, Inc.:




We have
audited the accompanying consolidated balance sheets of RedRoller Holdings, Inc.
and Subsidiaries (the “Company”) as of December 31, 2007 and 2006, and the
related consolidated statements of operations, changes in stockholders’ equity
and cash flows for the years then ended.  These financial statements
are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these financial statements based on our
audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion.  An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position ofRedRoller Holdings, Inc.
and Subsidiaries, as of December 31 2007 and 2006, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles (United States).
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As discussed in Note 2
to the consolidated financial statements, the Company has incurred operating
losses since its inception and has limited capital resources. These factors
raise substantial doubt about the Company’s ability to continue as a going
concern.  Management’s plans regarding those matters are also
described in Note 2.  The consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
 /s/ Marcum & Kliegman
LLP




New York,
New York


March 28,
2008






24


REDROLLER
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2007 AND 2006




2007
            
            
            2006ASSETSCURRENT
      ASSETSCash
      and cash equivalents
            
            $
            3,489,116
            
            
            $
            289,483Accounts
      receivable
            
            
            165,926
            
            
            
            128,987Prepaid
      expenses and other current assets
            
            
            131,406
            
            
            
            124,986Total
      current assets
            
            
            3,786,448
            
            
            
            543,456Goodwill
            
            
            1,769,611
            
            
            
            1,769,611Property
      and equipment, net
            
            
            262,565
            
            
            
            460,040Web
      site development costs, net
            
            
            645,576
            
            
            
            421,182Intangible
      asset, net
            
            
            51,102
            
            
            
            68,136Other
      assets
            
            
            57,300
            
            
            
            56,305TOTAL
      ASSETS
            
            $
            6,572,602
            
            
            $
            3,318,730LIABILITIES AND
      STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIESAccounts
      payable
            
            
            391,444
            
            
            
            651,009Accrued
      expenses and other current liabilities
            
            
            55,066
            
            
            
            106,534Deferred
      revenue
            
            
            225,202
            
            
            
            220,309Note
      payable
            
            
            191,326
            
            
            
            —Total
      current liabilities
            
            
            863,038
            
            
            
            977,852Deferred
      tax liability
            
            
            92,000
            
            
            
            —Deferred
      rent
            
            
            17,447
            
            
            
            —TOTAL
      LIABILITIES
            
            
            972,485
            
            
            
            977,852COMMITMENTS AND
      CONTINGENCIESSTOCKHOLDERS’
      EQUITYPreferred
      stock, $.001 par value; 25,000,000 shares authorized; 0 and 3,036,045
      shares issued and outstanding at December 31, 2007 and 2006,
      respectivelySeries
      A convertible preferred stock, $.001 par value; 2,377,150 shares
      authorized; 0 and 2,377,150 shares issued and outstanding at December 31,
      2007 and 2006, respectively
            
            
            —
            
            
            
            2,377Series
      B(1) convertible preferred stock; $.001 par value; 658,895 shares
      authorized; 0 and 495,301 shares issued and outstanding at December 31,
      2007 and 2006, respectively
            
            
            —
            
            
            
            495Common
      stock, $.001 par value; 200,000,000 shares authorized; 24,842,040 and
      4,541,633 shares issued and outstanding at December 31, 2007 and 2006,
      respectively
            
            
            24,842
            
            
            
            4,542Stock
      subscription receivable
            
            
            —
            
            
            
            (50,152
            )Additional
      paid in capital
            
            
            25,223,702
            
            
            
            14,629,714Accumulated
      deficit
            
            
            (19,648,427
            )
            
            
            (12,246,098
            )TOTAL
      STOCKHOLDERS’ EQUITY
            
            
            5,600,117
            
            
            
            2,340,878TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            6,572,602
            
            
            $
            3,318,730


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




25


REDROLLER
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
  2007
                  
                  
                  2006Net
      sales
                  
                  $
                  1,303,756
                  
                  
                  $
                  778,489Cost
      of sales
                  
                  
                  836,955
                  
                  
                  
                  428,865GROSS
      PROFIT
                  
                  
                  466,801
                  
                  
                  
                  349,624OPERATING
      EXPENSESSalaries
      and benefits
                  
                  
                  3,301,840
                  
                  
                  
                  5,164,011Research
      and development
                  
                  
                  —
                  
                  
                  
                  1,379,111Selling,
      general and administrative
                  
                  
                  2,844,388
                  
                  
                  
                  2,773,969TOTAL
      OPERATING EXPENSES
                  
                  
                  6,146,228
                  
                  
                  
                  9,317,091LOSS
      FROM OPERATIONS
                  
                  
                  (5,679,427
                  )
                  
                  
                  (8,967,467
                  )OTHER (EXPENSE)
      INCOMEInterest
      expense
                  
                  
                  (361,008
                  )
                  
                  
                  —Interest
      income
                  
                  
                  19,386
                  
                  
                  
                  17,953Gain
      on extinguishment of debt
                  
                  
                  8,674
                  
                  
                  
                  —TOTAL
      OTHER (EXPENSE) INCOME
                  
                  
                  (332,948
                  )
                  
                  
                  17,953Loss
      before provision for income taxes
                  
                  
                  (6,012,375
                  )
                  
                  
                  (8,949,514
                  )Provision
      for income taxes
                  
                  
                  92,000
                  
                  
                  
                  —NET
      LOSS
                  
                  
                  (6,104,375
                  )
                  
                  
                  (8,949,514
                  )Convertible
      preferred stock deemed dividends
                  
                  
                  (1,297,954
                  )
                  
                  
                  —NET
      LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
                  
                  $
                  (7,402,329
                  )
                  
                  $
                  (8,949,514
                  )Net
      loss per share: basic and diluted
                  
                  $
                  (0.93
                  )
                  
                  $
                  (1.98
                  )Weighted
      average number of shares outstanding – basic and diluted
                  
                  
                  7,961,843
                  
                  
                  
                  4,527,238


The
accompanying notes are an integral part of these consolidated financial
statements.
 26
 
 REDROLLER
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006
  Series
      A
                      
                      
                      Series
      B(1)Preferred
      Stock
                      
                      
                      Preferred
      StockShares
                      
                      
                      Amount
                      
                      
                      Shares
                      
                      
                      AmountBalance–January 1,
    2006
                      
                      
                      608,305
                      
                      
                      $
                      608
                      
                      
                      
                      —
                      
                      
                      $
                      —Issuance of common stock in
      settlement of accounts payable
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Sale of Series A convertible
      preferred stock, net of offering costs
                      
                      
                      1,768,845
                      
                      
                      
                      1,769
                      
                      
                      
                      —
                      
                      
                      
                      —Sale of Series B(1) convertible
      preferred stock, net of offering costs
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      495,301
                      
                      
                      
                      495Stock-based compensation
      cost
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Net loss
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Balance–December 31,
      2006
                      
                      
                      2,377,150
                      
                      
                      
                      2,377
                      
                      
                      
                      495,301
                      
                      
                      
                      495Sale of Series B(1) convertible
      preferred stock
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      163,594
                      
                      
                      
                      164Warrants issued in connection with
      bridge notes
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Deemed dividends – beneficial conversion
      featurerelated to
      Series A and B(1) convertible preferred stock
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Issuance of common stock in
      connection with conversion of convertible notes
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Issuance of common stock in
      connection with conversion of bridge notes
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Issuance of common stock in
      connection with conversion of Series A convertible preferred
      stock
                      
                      
                      (2,377,150
                      )
                      
                      
                      (2,377
                      )
                      
                      
                      —
                      
                      
                      
                      —Issuance of common stock in
      connection with conversion of Series B(1) convertible preferred
      stock
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      (658,895
                      )
                      
                      
                      (659
                      )Issuance of common stock in
      connection with private placement, net of offering
      costs
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Common stock outstanding from
      share exchange transaction
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Consulting expense recorded in
      connection with warrants issued to placement agent
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Stock-based compensation
      cost
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Net loss
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —
                      
                      
                      
                      —Balance –December 31,
      2007
                      
                      
                      —
                      
                      
                      $
                      —
                      
                      
                      
                      —
                      
                      
                      $
                      —


The
accompanying notes are an integral part of these consolidated financial
statements.
 27
 REDROLLER
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENT OF STOCKHOLDERS’ EQUITY
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006





Stock
            
            
            Additional
            
            
            
            
            
            TotalCommon
      Stock
            
            
            Subscription
            
            
            Paid
      in
            
            
            Accumulated
            
            
            Stockholders'Shares
            
            
            Amount
            
            
            Receivable
            
            
            Capital
            
            
            Deficit
            
            
            EquityBalance
      – January 1, 2006
            
            
            4,524,900
            
            
            $
            4,525
            
            
            $
            —
            
            
            $
            5,452,492
            
            
            $
            (3,296,584
            )
            
            $
            2,161,041Issuance
      of common stock in settlement of accounts payable
            
            
            16,733
            
            
            
            17
            
            
            
            —
            
            
            
            55,855
            
            
            
            —
            
            
            
            55,872Sale
      of Series A convertible preferred stock, net of offering
    costs
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3,969,124
            
            
            
            —
            
            
            
            3,970,893Sale
      of Series B(1) convertible preferred stock, net of offering
      costs
            
            
            —
            
            
            
            —
            
            
            
            (50,152
            )
            
            
            1,623,991
            
            
            
            —
            
            
            
            1,574,334Stock-based
      compensation cost
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3,528,252
            
            
            
            —
            
            
            
            3,528,252Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (8,949,514
            )
            
            
            (8,949,514
            )Balance
      – December 31, 2006
            
            
            4,541,633
            
            
            
            4,542
            
            
            
            (50,152
            )
            
            
            14,629,714
            
            
            
            (12,246,098
            )
            
            
            2,340,878Sale
      of Series B(1) convertible preferred stock
            
            
            —
            
            
            
            —
            
            
            
            50,152
            
            
            
            546,063
            
            
            
            —
            
            
            
            596,379Warrants
      issued in connection with bridge notes
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            228,169
            
            
            
            —
            
            
            
            228,169Deemed
      dividends – beneficial conversion feature related to Series A and B(1)
      convertible preferred stock
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,297,954
            
            
            
            (1,297,954
            )
            
            
            —Issuance
      of common stock in connection with conversion of convertible
      notes
            
            
            2,258,415
            
            
            
            2,258
            
            
            
            —
            
            
            
            511,883
            
            
            
            —
            
            
            
            514,141Issuance
      of common stock in connection with conversion of bridge
    notes
            
            
            2,018,944
            
            
            
            2,019
            
            
            
            —
            
            
            
            1,285,054
            
            
            
            —
            
            
            
            1,287,073Issuance
      of common stock in connection with conversion of Series A convertible
      preferred stock
            
            
            2,683,669
            
            
            
            2,684
            
            
            
            —
            
            
            
            (307
            )
            
            
            —
            
            
            
            —Issuance
      of common stock in connection with conversion of Series B(1) convertible
      preferred stock
            
            
            747,223
            
            
            
            747
            
            
            
            —
            
            
            
            (88
            )
            
            
            —
            
            
            
            —Issuance
      of common stock in connection with private placement, net of offering
      costs
            
            
            7,058,824
            
            
            
            7,059
            
            
            
            —
            
            
            
            5,160,604
            
            
            
            —
            
            
            
            5,167,663Common
      stock outstanding from share exchange transaction
            
            
            5,533,332
            
            
            
            5,533
            
            
            
            —
            
            
            
            (5,533
            )
            
            
            —
            
            
            
            —Consulting
      expense recorded in connection with warrants issued to placement
      agent
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            3,229
            
            
            
            —
            
            
            
            3,229Stock-based
      compensation cost
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            1,566,960
            
            
            
            —
            
            
            
            1,566,960Net
      loss
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            (6,104,375
            )
            
            
            (6,104,375
            )Balance
      – December 31, 2007
            
            
            24,842,040
            
            
            $
            24,842
            
            
            $
            —
            
            
            $
            25,223,702
            
            
            $
            (19,648,427
            )
            
            $
            5,600,117


The
accompanying notes are an integral part of these consolidated financial
statements.
 28
 REDROLLER
HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006





2007
            
            
            2006CASH FLOWS FROM
      OPERATING ACTIVITIESNet
      loss
            
            $
            (6,104,375
            )
            
            $
            (8,949,514
            )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      and amortization
            
            
            391,385
            
            
            
            241,661Deferred
      income taxes
            
            
            92,000
            
            
            
            —Stock-based
      compensation expense
            
            
            1,566,960
            
            
            
            3,528,252Warrant
      consulting expense
            
            
            3,229
            
            
            
            —Deferred
      rent amortization
            
            
            17,447
            
            
            
            —Gain
      on extinguishment of debt
            
            
            (8,674
            )
            
            
            —Non-cash
      interest
            
            
            299,288
            
            
            
            —Changes
      in operating assets and liabilities:Accounts
      receivable
            
            
            (36,939
            )
            
            
            29,524Prepaid
      expenses and other current assets
            
            
            (6,420
            )
            
            
            56,563Security
      deposits
            
            
            (995
            )
            
            
            (51,805
            )Accounts
      payable
            
            
            (259,565
            )
            
            
            503,659Accrued
      expenses and other current liabilities
            
            
            (254
            )
            
            
            43,886Deferred
      revenue
            
            
            4,893
            
            
            
            146,964NET
      CASH USED IN OPERATING ACTIVITIES
            
            
            (4,042,020
            )
            
            
            (4,450,810
            )CASH FLOWS FROM
      INVESTING ACTIVITIESPurchases
      of property and equipment
            
            
            (23,719
            )
            
            
            (562,010
            )Capitalization
      of web site costs
            
            
            (377,551
            )
            
            
            (459,471
            )NET
      CASH USED IN INVESTING ACTIVITIES
            
            
            (401,270
            )
            
            
            (1,021,481
            )CASH FLOWS FROM
      FINANCING ACTIVITIESProceeds
      from the sale of Series B(1) convertible preferred stock, net of offering
      costs
            
            
            596,379
            
            
            
            1,574,334Proceeds
      from the sale of Series A convertible preferred stock, net of offering
      costs
            
            
            —
            
            
            
            3,505,893Proceeds
      from private placement, net of offering costs
            
            
            5,167,663
            
            
            
            —Proceeds
      from issuances of bridge notes
            
            
            1,750,000
            
            
            
            —Proceeds
      from issuances of convertible notes
            
            
            500,000
            
            
            
            —Proceeds
      from issuances of notes
            
            
            298,000
            
            
            
            —Payments
      of bridge notes
            
            
            (500,000
            )
            
            
            —Payment
      of note
            
            
            (98,000
            )
            
            
            —Deferred
      financing costs
            
            
            (71,119
            )
            
            
            —NET
      CASH PROVIDED BY FINANCING ACTIVITIES
            
            
            7,642,923
            
            
            
            5,080,227




29


REDROLLER
HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED
STATEMENTS OF CASH FLOWS


FOR
THE YEARS ENDED DECEMBER 31, 2007 AND 2006





2007
            
            
            2006NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            3,199,633
            
            
            
            (392,064
            )CASH AND CASH
      EQUIVALENTS - BEGINNING OF YEAR
            
            
            289,483
            
            
            
            681,547CASH AND CASH
      EQUIVALENTS - END OF YEAR
            
            $
            3,489,116
            
            
            $
            289,483NON-CASH INVESTING AND
      FINANCING ACTIVITIESDebt
      discount in connection with convertible bridge notes
            
            $
            228,169
            
            
            $
            —Issuance
      of common stock in connection with conversion of convertible
      notes
            
            $
            514,141
            
            
            $
            —Issuance
      of common stock in connection with conversion of bridge
    notes
            
            $
            1,287,073
            
            
            $
            —Issuance
      of Series A convertible preferred stock sold in 2005
            
            $
            —
            
            
            $
            465,000Issuance
      of common stock in settlement of accounts payable
            
            $
            —
            
            
            $
            55,872


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



















30


NOTE
1 – THE COMPANY





Organization and Nature of
Business


RedRoller,
Inc. (“RedRoller”) is an
authorized reseller of carrier based shipping services that uses a proprietary
internet-based, multi-carrier, integrated pricing comparison and shipping
services system that is available at no charge to the end-user. Through
RedRoller’s basic software platform, customers can compare pricing established
by RedRoller from multiple shipping carriers and purchase shipping services,
which are then performed directly by the selected carrier following RedRoller’s
transmittal of a shipping order to the carrier.





Through
its wholly-owned subsidiary, Taylor Systems Engineering Corporation (“TSE”), RedRoller also
installs shipping systems software that integrates customers systems with
shipping carriers’ software and also provides maintenance of such
software.





RedRoller
was originally formed on August 30, 2004 as a limited liability company under
the name nFront, LLC (“nFront”) in the State
of Delaware. On February 23, 2005, nFront was converted to a corporation in the
State of Delaware and concurrently changed its name to RedRoller,
Inc.





On
December 31, 2005, RedRoller acquired the net assets and business of
TSE.





The
consolidated financial statements are those of RedRoller Holdings, Inc. and its
wholly-owned subsidiaries, RedRoller and TSE.  Collectively, they are
referred to as the “Company.”





Merger and Private
Placement


On
November 13, 2007, RedRoller entered into an Agreement and Plan of Merger (the
“Merger
Agreement”) with RedRoller Holdings, Inc. (formerly known as Aslahan
Enterprises Ltd.), a Delaware corporation (“Pubco”) pursuant
to which 15,527,419 issued and outstanding shares of capital stock of
RedRoller and were exchanged at a rate of approximately 0.6589 per share for
10,230,940 shares of common stock of Pubco and, simultaneously therewith,
RedRoller Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Pubco (“Acquisition Sub”),
merged (the “Merger”) with and
into RedRoller with RedRoller as the surviving entity to the Merger and
RedRoller’s shareholders and holders of non-qualified stock options owning a
majority of the issued and outstanding common stock of Pubco. In addition, (i)
all options to purchase shares of RedRoller’s common stock outstanding
immediately prior to the Merger were replaced with corresponding new options to
purchase shares of common stock of Pubco with no other changes in the terms or
conditions of the awards; (ii) the current stockholders of Pubco retained
5,533,332 shares of common stock of Pubco; and (iii) the Acquisition Sub merged
with and into RedRoller with RedRoller surviving the Merger.


Pursuant
to the Merger Agreement, the Company is required to deposit 5% of the issued
shares of the common stock, amounting to 511,550 shares (the “Escrow Shares”), to
be held in escrow for the purpose of securing the indemnification obligations of
certain stockholders as set forth in the Merger Agreement. The Escrow Shares
will be held by the escrow agent for a period of two years from the closing date
of the Merger and will be distributed in accordance with the terms of the escrow
agreement.


Pubco was
originally incorporated in the State of Nevada in 2005 and was subsequently
reincorporated in the State of Delaware on October 22, 2007. Immediately
prior to the Merger, there were 8,000,000 shares of outstanding capital stock of
Pubco, of which the current stockholders of Pubco retained 5,533,332 shares of
Pubco’s common stock and surrendered 2,466,668 shares of Pubco common stock in
connection with the Merger.


Prior to
the Merger, Pubco was a publicly-traded corporation with nominal operations of
its own. Immediately following the Merger, Pubco continued to carry on the
operations of RedRoller. The Merger and the exchange of shares of RedRoller and
Pubco common stock in connection therewith has been accounted for as a reverse
merger and recapitalization transaction in which RedRoller is deemed to be the
accounting acquirer. Accordingly, the accompanying consolidated financial
statements present the historical financial position, results of operations and
cash flows of RedRoller, adjusted to give retroactive effect of the
recapitalization of RedRoller.





On
November 13, 2007, simultaneous with the closing of the Merger, the Company
completed a $6,000,000 private placement offering of 1,764,706 units of Pubco as
more fully described in Note 12  (“Private
Placement”).





NOTE
2 – LIQUIDITY AND FINANCIAL CONDITION





The
Company incurred a net loss of $6,104,375 for the year ended December 31, 2007,
which includes an aggregate of $2,269,635 of non-cash charges. Non-cash charges
principally include $1,566,960 of stock-based compensation expense, $391,385 of
depreciation and amortization and $299,288 of non-cash interest expense. At
December 31, 2007, the Company’s accumulated deficit amounted to $19,648,427.
The Company had cash and cash equivalents of $3,489,116 and working capital of
$2,923,410 at December 31, 2007.





As more
fully described in Note 12, the Company received total gross proceeds of
$3,999,999 (net proceeds of $3,970,893 after payment of $29,106 in transaction
expenses) in a private placement of 1,768,845 shares of Series A Convertible
Preferred Stock (“Series A Preferred”)
completed during the year ended December 31, 2006.  Investors in this
transaction deposited $465,000 of proceeds with the Company during the year
ended December 31, 2005.  During the year




31


ended
December 31, 2006, the Company also received gross proceeds of $1,603,621 (net
proceeds of $1,574,334 after the payment of $29,287 in transaction expenses) in
a private placement of 495,301 shares of Series B(1) Convertible Preferred Stock
(“Series B(1)
Preferred”). The proceeds of these financing transactions were used to
fund and repay existing debts.





During
May and June 2007, the Company completed a $500,000 convertible note
offering.





In
addition, during the year ended December 31, 2007, the Company received
$1,750,000 of proceeds from issuances of bridge notes, $298,000 from issuances
of notes and $596,379 from the sale of Series B(1) Preferred.





On
November 13, 2007, the Company completed the Private Placement pursuant to which
it issued 7,058,824 shares of Pubco common stock and five-year warrants to
purchase 1,764,706 shares of common stock for aggregate proceeds of $6,000,000
(net proceeds of $5,167,663 after the payment of transaction
expenses).





The
Company’s ability to continue its operations is dependent upon its ability to
raise additional capital and generate revenue and operating cash flow through
the execution of its business plan.  The Company currently has
designed and anticipates launching the subscription version of its system in the
second quarter of 2008.  The Company’s subscription model version will
be introduced to users for a monthly subscription fee, which will give users
unlimited access to the Company’s system and automatically use each business’s
contract rates with each carrier.





Management
believes the Company’s current level of working capital, as well as the funds it
expects to generate from operations will enable it to sustain the business for
the near term.  The realization of the Company’s business plan is also
dependent upon its ability to raise capital in the near term.  If the
Company is unable to raise additional capital or encounters unforeseen
circumstances, it will be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, curtailing
its operations, suspending the pursuit of its business plan, reducing its
workforce and cutting overhead expenses.  The Company cannot provide
any assurance that it will raise additional capital as necessary.  The
Company has not secured any commitments for new financing at this time nor can
it provide any assurance that new financing will be available to it on
acceptable terms, if at all. These
matters raise substantial doubt about the Company’s ability to continue as a
going concern. The accompanying consolidated financial statements do not include
any adjustments that may be necessary in the event that the Company is unable to
continue as a going concern.


NOTE
3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles of
Consolidation


The
consolidated financial statements include the accounts of RedRoller Holdings,
Inc. and its wholly-owned subsidiaries, RedRoller and TSE.  All
significant intercompany balances and transactions have been eliminated in
consolidation.





Use of
Estimates


The
preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the dates of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting
period.  Actual results could differ materially from those
estimates.  These estimates and assumptions include revenue
recognition, reserves and write-downs related to accounts receivable, the
recoverability of long-term assets, deferred taxes and related valuation
allowances and the valuation of equity instruments.





Cash and Cash
Equivalents


The
Company considers all highly liquid investments purchased with an original
maturity date of three months or less to be cash equivalents.  Due to
their short-term nature, cash equivalents are carried at cost, which
approximates fair value.





Concentration of Credit
Risk


Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and accounts receivable.  The Company
maintains its cash accounts at high quality financial institutions with
balances, at times, in excess of federally insured limits. As of December 31,
2007 and 2006, the Company had cash balances in excess of federally insured
limits of $3,285,876 and $106,751, respectively. Management believes that the
financial institutions that hold the Company’s deposits are financially sound
and therefore pose minimal credit risk.





32


The
Company grants credit to its business customers, which are primarily located in
the United States.  Collateral is generally not required for trade
receivables.  The Company maintains allowances for potential credit
losses.





Accounts
Receivable


Accounts
receivable are recorded net of allowances for doubtful accounts.  The
Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required
payments.  If the financial condition of the Company’s customers were
to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required, which would increase the Company’s
expenses during the periods in which any such allowances are
made.  The amount recorded as an allowance for doubtful accounts in
each period is based upon an assessment of the likelihood that the Company will
be paid for outstanding accounts receivable, based on customer-specific as well
as general considerations.  To the extent that the Company’s estimates
prove to be too high, and the Company ultimately collects a receivable
previously determined to be impaired, the Company may record a reversal of the
provision in the period of such determination.  Substantially all of
the Company’s accounts receivable balances were collected subsequent to December
31, 2007. Accordingly, the Company deemed it unnecessary to establish an
allowance for doubtful accounts at December 31, 2007 based on its historical
collection rates and low occurrence of credit losses.





Goodwill and Intangible
Assets


The
Company accounts for goodwill and intangible assets in accordance with Statement
of Financial Accounting Standards (“SFAS”) No. 142,
“Goodwill and Other Intangible Assets” (“SASF 142”). SFAS 142
requires that goodwill and other intangibles with indefinite lives be tested for
impairment annually or on an interim basis if events or circumstances indicate
that the fair value of an asset has decreased below its carrying
value.





Goodwill
represents the excess of the purchase price over the fair value of net assets
acquired in the Company’s TSE business combination which occurred in December
2005. SFAS 142 requires that goodwill be tested for impairment at the reporting
unit level (operating segment or one level below an operating segment) on an
annual basis and between annual tests when circumstances indicate that the
recoverability of the carrying amount of goodwill may be in doubt. Application
of the goodwill impairment test requires judgment, including the identification
of reporting units, assigning assets and liabilities to reporting units,
assigning goodwill to reporting units, and determining the fair value. The
Company operates two reporting units. Significant judgments required to estimate
the fair value of reporting units include estimating future cash flows,
determining appropriate discount rates and other assumptions. Changes in these
estimates and assumptions or the occurrence of one or more confirming events in
future periods could cause the actual results or outcomes to materially differ
from such estimates and could also affect the determination of fair value and/or
goodwill impairment at future reporting dates.





The
Company’s amortizable intangible assets include customer relationships and its
trade name. These costs are being amortized using the straight-line method over
their estimated useful life of five years.





In
accordance with SFAS No. 144, “Long-Lived Assets” (“SFAS 144”), the
Company reviews the carrying value of intangibles and other long-lived assets
for impairment at least annually or whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be
recoverable.





Recoverability
of long-lived assets is measured by comparison of its carrying amount to the
undiscounted cash flows that the asset or asset group is expected to generate.
If such assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the property, if any,
exceeds its fair market value.





Property and
Equipment


Property
and equipment are stated at cost less accumulated depreciation.  The
costs of additions and betterments are capitalized and expenditures for repairs
and maintenance are expensed in the period incurred.  When items of
property and equipment are sold or retired, the related costs and accumulated
depreciation are removed from the accounts and any gain or loss is included in
income.  Depreciation is provided for under the straight-line method
based upon the estimated useful lives of the respective
assets.  Leasehold improvements are depreciated under the
straight-line method over the lesser of the term of the related lease or the
estimated useful lives of the assets. Estimated useful lives by classification
are as follows:





YearsFurniture
      and fixtures
            
            7Machinery
      and equipment
            
            5Computer
      equipment
            
            3Leasehold
      improvements
            
            Shorter
      of 1 year or life of asset





33


Web Site Development
Costs


The
Company accounts for web site development costs in accordance with Emerging
Issues Task Force (“EITF”) 00-2, “Accounting for
Website Development Costs” and accordingly,
costs related to the planning and post implementation phases of the Company’s
web site development efforts are recorded as an operating
expense.  Direct costs incurred in the development phase are
capitalized and amortized over the web site’s estimated useful life of three
years as charges to operating expense.





Deferred Financing
Costs


The
Company incurred $71,119 in financing costs, which includes placement fees and
professional fees, in connection with its entering into certain bridge notes
during the year ended December 31, 2007. The Company was amortizing these
financing costs over the life of the notes.  As a result of the
Merger, the notes were converted into common stock of the Company. Accordingly,
at the date of conversion, the remaining unamortized balance of $47,086 was
charged to interest expense in the accompanying statement of operations for the
year ended December 31, 2007.





Deferred
Rent


Deferred
rent consists of the excess of the allocable straight line rent expense to date
as compared to the total amount of rent due and payable through such period.
Deferred rent is amortized to rent expense over the term of the
lease.





Convertible
Instruments


The
Company evaluates and accounts for conversion options embedded in its
convertible instruments in accordance with SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS 133”) and EITF
00-19, “Accounting for Derivative Financial Instruments Indexed to, and
Potentially Settled in, a Company’s Own Stock” (“EITF
00-19”).




SFAS 133
generally provides three criteria that, if met, require companies to bifurcate
conversion options from their host instruments and account for them as free
standing derivative financial instruments in accordance with EITF 00-19. These
three criteria include circumstances in which (a) the economic characteristics
and risks of the embedded derivative instrument are not clearly and closely
related to the economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative instrument and the
host contract is not remeasured at fair value under otherwise applicable
generally accepted accounting principles with changes in fair value reported in
earnings as they occur and (c) a separate instrument with the same terms as the
embedded derivative instrument would be considered a derivative instrument
subject to the requirements of SFAS 133. SFAS 133 and EITF 00-19 also provide an
exception to this rule when the host instrument is deemed to be conventional (as
that term is described in the implementation guidance to SFAS 133 and further
clarified in EITF 05-2, “The Meaning of “Conventional Convertible Debt
Instrument” in Issue No. 00-19”).




The
Company accounts for convertible instruments (when it has determined that the
embedded conversion options should not be bifurcated from their host
instruments) in accordance with the provisions of EITF 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features” (“EITF 98-5”) and EITF
00-27, “Application of EITF 98-5 to Certain Convertible Instruments” (“EITF 00-27”).
Accordingly, the Company records when necessary discounts to convertible notes
for the intrinsic value of conversion options embedded in debt instruments based
upon the differences between the fair value of the underlying common stock at
the commitment date of the note transaction and the effective conversion price
embedded in the note.  Debt discounts under these arrangements are
amortized over the term of the related debt to their earliest date of
redemption.  The Company also records when necessary deemed dividends
for the intrinsic value of conversion options embedded in preferred shares based
upon the differences between the fair value of the underlying common stock at
the commitment date of the financing transaction and the effective conversion
price embedded in the preferred shares.




The
Company evaluated the conversion options embedded in its convertible instruments
during each of the reporting periods presented.





The
characteristics of common stock that were issuable upon a holder’s exercise of
conversion options embedded in RedRoller’s preferred shares were considered
clearly and closely related to the characteristics of the preferred shares (as
that term is clarified in paragraph 61(l) of the implementation guidance
included in Appendix A of SFAS 133). Accordingly, the Company determined that
the conversion options embedded in its preferred shares did not require
bifurcation and were therefore being accounted for as embedded derivatives in
accordance with EITF 98-5 and EITF 00-27.  Additionally, EITF 98-5
states that if a conversion feature is reset upon the occurrence of a future
event based upon a contractual provision existing at the commitment date of the
financing transaction, that the conversion option should be evaluated on the
date of the reset and measured using the commitment date fair value of the stock
as the basis for computing intrinsic value at the date of the
reset.  The convertible preferred shares
featured  anti-dilution provisions to adjust the number of shares
issuable upon conversion in the event of a stock spilt, stock dividend or
similar recapitalization event or to reduce the exercise price of the conversion
option using a contractual formula in the event of a subsequent sale of equity
securities or convertible instruments
  34
 at a
price or conversion prices more favorable than those in effect in the
outstanding preferred shares. As described in Notes 9 and 12, RedRoller issued
convertible notes with a conversion option that featured an exercise price lower
than the exercise price featured in RedRoller’s outstanding preferred shares.
Accordingly, the Company recorded $1,297,954 of deemed dividends during the year
ended December 31, 2007 as a result of a change in the conversion option prices
embedded in its shares of Series A Preferred and Series B(1) Preferred that were
triggered under contractual anti-dilution provisions.





The
conversion option included in the Company’s Series B(2) Convertible Notes (the
“B(2) Notes”)
that were issued during the year ended December 31, 2007, featured certain
characteristics in which it was assumed that a cash settlement of the conversion
option was within the control of the note holders as of December 31, 2007 (Note
9). Accordingly, the B(2) Notes were not considered a conventional instrument as
defined in EITF 05-2 and therefore did meet the scope exception under SFAS 133
that would permit the Company to account for these conversion options as
embedded derivatives.  As a result, the Company accounted for the
conversion options included in the B(2) Notes as free standing derivative
financial instruments in accordance with SFAS 133 and EITF 00-19 as of December
31, 2007.





Preferred
Stock


The
Company applies the guidance enumerated in SFAS No. 150, “Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity”
(“SFAS 150”),
and EITF Topic D-98, “Classification and Measurement of Redeemable Securities”
(“Topic D-98”),
when determining the classification and measurement of preferred stock.
Preferred shares subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value in accordance with SFAS
150.  All other issuances of preferred stock are subject to the
classification and measurement principles of Topic D-98.  Accordingly,
the Company classifies conditionally redeemable preferred shares (if any), which
includes preferred shares that feature redemption rights that are either within
the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within the Company’s control, as temporary
equity.  At all other times, the Company classifies its preferred
stock in stockholders’ equity.


The
Company’s preferred shares that were outstanding prior to the completion of the
Private Placement and the Merger described in Note 1 did not feature any
redemption rights within the holders control or conditional redemption features
not solely within the Company’s control as of December 31,
2007.  Accordingly, all issuances of preferred stock were presented as
a component of stockholders’ equity prior to their conversion into common stock,
which occurred as of the completion of the Merger and Private Placement
described in Note 1.


Common Stock Purchase
Warrants and Derivative Financial Instruments




The
Company accounts for the issuance of common stock purchase warrants and other
free standing derivative financial instruments in accordance with the provisions
of EITF 00-19. Based on the provisions of EITF 00-19, the Company classifies as
equity any contracts that (i) require physical settlement or net-share
settlement or (ii) gives the Company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement). The
Company classifies as assets or liabilities any contracts that (i) require
net-cash settlement (including a requirement to net cash settle the contract if
an event occurs and if that event is outside the control of the Company) or (ii)
gives the counterparty a choice of net-cash settlement or settlement in shares
(physical settlement or net-share settlement). The Company assesses
classification of its common stock purchase warrants and other free standing
derivatives at each reporting date to determine whether a change in
classification between assets and liabilities is required.





The
Company’s free standing derivatives consist of warrants to purchase common stock
in connection with the bridge notes described in Note 9 and the Private
Placement described in Note 12, and fully vested stock options and warrants
issued to non-employees for services.  The Company evaluated these
free standing derivatives to assess their proper classification in the
consolidated balance sheet as of December 31, 2007 and 2006 using the applicable
classification criteria enumerated in EITF 00-19. The Company determined that
the common stock purchase warrants and the fully vested stock options and
warrants issued to non-employees for services do not feature any characteristics
permitting net cash settlement by the holders. Accordingly, these instruments
have been classified in stockholders’ equity in the accompanying consolidated
balance sheet as of December 31, 2007.
  Revenue
Recognition
 
 The
Company follows the guidance of the Securities and Exchange Commission’s (“SEC”) Staff
Accounting Bulletin (“SAB”) 104 for revenue
recognition. In general, the Company records revenue when persuasive evidence of
an arrangement exists, services have been rendered or product delivery has
occurred, the selling price to the customer is fixed or determinable, and
collectability is reasonably assured.


35


The
Company also evaluates the presentation of revenue on a gross versus net basis
through the application of EITF No. 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent” (“EITF
99-19”).  The Company offers shipping services whereby it acts
as a reseller in the transaction, passing shipping requests booked by the
customer to the relevant carrier provider.  The Company,
however, reports these revenues gross because, unlike a true agency
relationship, the Company maintains responsibility for the fulfillment of the
services to the customer, has substantial latitude in setting price, assumes the
credit risk for the entire amount of the sale, and is separately and solely
responsible for the payment of all obligations incurred with the
carriers.





The
Company requires all of its sales to be supported by evidence of a sale
transaction that clearly indicates the selling price to the customer, shipping
terms and payment terms. Evidence of an arrangement generally consists of a
contract, purchase order or order confirmation approved by the
customer.





Customers
pay for shipping services prior to the actual shipment of goods, generally when
the shipping services are booked.  Customers have twenty four hours
from the point of reservation to cancel a shipment.  Revenues
resulting from shipping services are recognized at the time in which the
transaction is no longer cancelable.





The
Company’s installation revenues are derived principally from contractual
agreements with third parties that provide installation of shipping systems
software.  Revenues from contractual arrangements with third parties
are recognized as the contracted services are delivered to the end
users.  The Company considers delivery to its customers to have
occurred at the time in which installation work is completed and the customer
acknowledges its acceptance of the work.





The
Company also provides maintenance contracts on behalf of the manufacturers of
the shipping systems software it sells. The Company offers these contracts as a
separately priced product. Revenues from maintenance contracts are recognized
ratably over the maintenance period in accordance with the provision of American
Institute of Certified Public Accountants “AICPA” Statement of Position SOP
97-2, “Software Revenue Recognition.”





Revenues
from the sales of shipping supplies are recognized upon delivery.





A summary
of the Company’s revenue by category is as follows:





Year
      Ended
              December
      31,2007
            
            
            2006Shipping
      services
            
            $
            598,514
            
            
            $
            214,360Installation
            
            
            382,381
            
            
            
            363,231Maintenance
            
            
            304,690
            
            
            
            162,359Supply
            
            
            14,880
            
            
            
            25,484Other
            
            
            3,291
            
            
            
            13,055Total
            
            $
            1,303,756
            
            
            $
            778,489





The
Company currently provides substantially all shipping services to its customers
as an authorized reseller under a Domestic and International Shipping Services
Agreement it has with DHL Worldwide Express, Inc. (“DHL”).  This
agreement has been extended to August 1, 2008. There is no assurance that this
agreement will be renewed past August 1, 2008 and that the historical revenue
presented above will recur in future periods.





Net Loss Per
Share


The Company computes net loss per share
in accordance with SFAS No. 128 “Earnings Per Share” and has applied the
guidance enumerated in Staff Accounting Bulletin No. 98 (“SAB Topic 4D”) with
respect to evaluating its issuances of equity securities during all periods
presented.




Under SFAS No. 128, basic net loss per
share is computed by dividing net loss per share available to common
stockholders by the weighted average number of shares outstanding for the period
and excludes the effects of any potentially dilutive
securities.  Diluted earnings per share, if presented, would include
the dilution that would occur upon the exercise or conversion of all potentially
dilutive securities into common stock using the “treasury stock” and/or “if
converted” methods as applicable.  The computation of basic loss per
share for the years ended December 31, 2007 and 2006, excludes potentially
dilutive securities because their inclusion would be anti-dilutive.
Anti-dilutive securities excluded from the computation of basic and diluted net
loss per share are as follows:


36


Year
      EndedDecember
      31,2007
            
            
            2006Options
      to purchase common stock
            
            
            8,353,602
            
            
            
            3,924,663Warrants
      to purchase common stock
            
            
            2,697,382
            
            
            
            —Convertible
      preferred stock (as if converted)
            
            
            —
            
            
            
            2,872,45111,050,984
            
            
            
            6,797,114





Stock-Based
Compensation


Effective
January 1, 2006, the Company adopted SFAS 123R, “Share-Based Payments” (“SFAS 123R”). This
statement is a revision of SFAS 123, and supersedes APB Opinion No. 25, and its
related implementation guidance. SFAS 123R addresses all forms of share-based
payment (“SBP”)
awards including shares issued under employee stock purchase plans, stock
options, restricted stock and stock appreciation rights. Under SFAS 123R, SBP
awards result in a cost that is measured at fair value on the awards’ grant
date, based on the estimated number of awards that are expected to vest and will
result in a charge to operations. As the Company did not issue any employee
share-based payments prior to January 1, 2006, there was no unrecognized
compensation cost in any prior periods.





Non-Employee Stock-Based
Compensation


The
Company accounts for equity instruments issued to non-employees in accordance
with the provisions of SFAS 123R and EITF Issue No. 96-18, “Accounting for
Equity Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods, or Services,” (“EITF 96-18”) which
requires that such equity instruments are recorded at their fair value on the
measurement date.  The measurement of stock-based compensation is
subject to periodic adjustment as the underlying equity instruments
vest.  Non-employee stock-based compensation charges are being
amortized over their respective vesting periods.





A summary
of employee and non-employee stock based compensation expense is as
follows:





Year
      Ended
              December
      31,2007
            
            
            2006Employee
            
            $
            897,282
            
            
            $
            3,213,615Non-employee
            
            
            669,678
            
            
            
            314,637Total
            
            $
            1,566,960
            
            
            $
            3,528,252





Research and
Development


Research
and development expense is charged to operations as incurred and consists
primarily of personnel expenses, outside services, production software licenses,
production hardware and hosting costs. The Company incurred research and
development costs during the planning and development phase of its web site,
which was completed as of June 30, 2006. For the years ended December 31, 2007
and 2006, research and development expense amounted to $0 and $1,379,111,
respectively.





Advertising
Costs


Costs
related to advertising, promotions of products and services and participation in
trade shows and other marketing events are expensed as incurred. Advertising
expense amounted to $169,626 and $885,425 for the years ended December 31, 2007
and 2006, respectively. These expenses are included in selling, general and
administrative expenses in the accompanying consolidated statements of
operations.




Income
Taxes
 The
Company accounts for income taxes under SFAS No. 109, “Accounting for Income
Taxes” (“SFAS
109”). SFAS 109 requires the recognition of deferred tax assets and
liabilities for both the expected impact of differences between the financial
statements and tax basis of assets and liabilities and for the expected future
tax benefit to be derived from tax loss and tax credit carry forwards. SFAS 109
additionally requires a valuation allowance to be established when it is more
likely than not that all or a portion of deferred tax assets will not be
realized. Furthermore, SFAS 109 provides that it is difficult to conclude that a
valuation allowance is not needed when there is negative evidence such as
cumulative losses in recent years. Therefore, cumulative losses weigh heavily in
the overall assessment. Accordingly the Company has recorded a full valuation
allowance against its net deferred tax assets. In addition, the Company expects
to provide a full valuation allowance on future


37


tax
benefits until it can sustain a level of profitability that demonstrates its
ability to utilize the assets, or other significant positive evidence arises
that suggests its ability to utilize such assets. The future realization of a
portion of the reserved deferred tax assets related to tax benefits associated
with the exercise of stock options, if and when realized, will not result in a
tax benefit in the consolidated statement of operations, but rather will result
in an increase in additional paid in capital. The Company will continue to
re-assess its reserves on deferred income tax assets in future periods on a
quarterly basis.





Effective
January 1, 2007, the Company adopted Financial Accounting Standards Board
Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”) – an
interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48
addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. Under
FIN 48, the Company may recognize the tax benefit from an uncertain tax position
only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the
position. The tax benefits recognized in the financial statements from such a
position should be measured based on the largest benefit that has a greater than
50% likelihood of being realized upon ultimate settlement. FIN 48 also provides
guidance on derecognition, classification, interest and penalties on income
taxes, accounting in interim periods and requires increased disclosures. At the
date of adoption, and as of December 31, 2007, the Company does not have a
liability for unrecognized tax benefits.





The
Company files income tax returns in the U.S. federal jurisdiction and various
states. The Company is subject to U.S. federal or state income tax examinations
by tax authorities for years after 2002. During the periods open to examination,
the Company has net operating losses (“NOLs”) and tax credit
carry forwards for U.S. federal and state tax purposes that have attributes from
closed periods. Since these NOLs and tax credit carry forwards may be utilized
in future periods, they remain subject to examination.





The
Company’s policy is to record interest and penalties on uncertain tax provisions
as income tax expense. As of December 31, 2007, the Company has no accrued
interest or penalties related to uncertain tax positions.





Fair Value of Financial
Instruments


The
carrying amounts reported in the consolidated financial statements for cash,
accounts receivable, prepaid expenses and other current assets, accounts payable
and accrued expenses and other current liabilities approximate fair value based
on the short-term maturity of these instruments. The carrying amount of the
Company’s note payable approximates fair value because the effective yield of
such instrument, which includes the effects of contractual interest rates taken
together with any discounts, is consistent with current market rates of interest
for instruments of comparable credit risk.





Registration Rights
Agreements


The
Company accounts for registration rights agreements in accordance with FSP EITF
00-19-2 “Accounting for Registration Payment Arrangements” (“FSP EITF 00-19-2”).
FSP EITF 00-19-2 specifies that the contingent obligation to make future
payments or otherwise transfer consideration under a registration payment
arrangement, whether issued as a separate agreement or included as a provision
of a financial instrument, should be separately recognized and accounted for as
a contingency in accordance with SFAS No. 5 “Accounting for
Contingencies.”





The
Company is currently in compliance with its registration rights agreement (Note
12) and has therefore not accrued any estimated penalties.




Recent Accounting
Pronouncements
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
157”).  SFAS 157 defines fair value, establishes a framework
for measuring fair value and expands disclosure of fair value
measurements.  SFAS 157 applies under other accounting pronouncements
that require or permit fair value measurements and accordingly, does not require
any new fair value measurements.  SFAS 157 is effective for financial
statements issued for fiscal years beginning after November 15,
2007.  The adoption of SFAS 157 is not expected to have a material
effect on the Company’s consolidated financial position, results of operations
or cash flows.
 
 On
February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS
159”).  The guidance in SFAS 159 “allows” reporting entities to
“choose” to measure many financial instruments and certain other items at fair
value.  The objective underlying the development of this literature is
to improve financial reporting by providing reporting entities with the
opportunity to reduce volatility in reported earnings that results from
measuring related assets and liabilities differently without having to apply
complex hedge accounting provisions, using the guidance in SFAS 133, as amended.
The provisions of SFAS 159 are applicable to all reporting entities and are
effective


38


as of the
beginning of the first fiscal year that begins subsequent to November 15,
2007.  The adoption of SFAS 159 is not expected to have a material
effect on the Company’s consolidated financial position, results of operations
or cash flows.





In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS 141R”). SFAS
141R replaces SFAS No. 141, “Business Combinations” (“SFAS 141”). SFAS 141R
retains the fundamental requirements in SFAS 141 that the acquisition method of
accounting be used for all business combinations and for an acquirer to be
identified for each business combination. SFAS 141R defines the acquirer as the
entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. SFAS 141R retains guidance of SFAS 141 for identifying and
recognizing intangible assets separately from goodwill. SFAS 141R requires an
acquirer to recognize the assets acquired, the liabilities assumed, and any
noncontrolling interest in the acquiree at the acquisition date, measured at
their fair values as of that date, with limited exceptions specified in the
Statement. SFAS 141R also requires the acquirer in a business combination
achieved in stages to recognize the identifiable assets and liabilities, as well
as the noncontrolling interest in the acquiree, at the full amounts of their
fair values. SFAS 141R applies prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. Earlier adoption is prohibited.
The Company does not expect the adoption of this pronouncement to have a
material impact on its financial position or results of operation.





In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements” (“SFAS 160”). SFAS 160
amends ARB 51 to establish accounting and reporting standards for the
noncontrolling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2008. Earlier adoption is
prohibited. SFAS 160 shall be applied prospectively as of the beginning of the
fiscal year in which this Statement is initially applied, except for the
presentation and disclosure requirements. The presentation and disclosure
requirements shall be applied retrospectively for all periods presented. The
Company is currently assessing the impact of SFAS 160 on its financial position
and results of operation.




In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities—an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161
gives financial statement users better information about the reporting entity’s
hedges by requiring qualitative disclosures about the objectives and strategies
for using derivatives, quantitative data about the fair value of and gains and
losses on derivative contracts, and details of credit-risk-related contingent
features in their hedged positions. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. The Company is currently assessing the impact of SFAS 161 on its
financial position and results of operation.


Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date are
not expected to have a material impact on the Company’s consolidated financial
statements upon adoption.





Reclassifications


Certain
amounts as previously reported have been reclassified to conform to current year
classifications.





NOTE
4 – PREPAID EXPENSES





Prepaid
expenses consist of the following as of December 31, 2007 and 2006:





2007
            
            
            2006Software
      and other licenses
            
            $
            92,445
            
            
            $
            100,145Maintenance
      agreements, insurance and other
            
            
            29,934
            
            
            
            11,890Prepaid
      rent
            
            
            9,027
            
            
            
            12,951$
            131,406
            
            
            $
            124,986




NOTE
5 – PROPERTY AND EQUIPMENT
 
 Property
and equipment consists of the following as of December 31, 2007 and
2006:
 
 2007
              
              
              2006Computer
      equipment
              
              $
              633,370
              
              
              $
              609,651Machinery
      and equipment
              
              
              30,466
              
              
              
              30,466Leasehold
      improvements
              
              
              13,000
              
              
              
              13,000Furniture
      and fixtures
              
              
              5,945
              
              
              
              5,945682,781
              
              
              
              659,062Less:
      accumulated depreciation
              
              
              (420,216
              )
              
              
              (199,022
              )Property
      and equipment, net
              
              $
              262,565
              
              
              $
              460,040
 
 Depreciation
expense for the years ended December 31, 2007 and 2006 amounted to $221,194 and
$186,338, respectively.


39


NOTE
6 – WEB SITE DEVELOPMENT COSTS





Web site
development costs consist of the following as of December 31, 2007 and
2006:





2007
            
            
            2006Consulting
      fees
            
            $
            478,391
            
            
            $
            252,215Salaries
            
            
            358,631
            
            
            
            207,256837,022
            
            
            
            459,471Less:
      accumulated amortization
            
            
            (191,446
            )
            
            
            (38,289
            )Web
      site development costs, net
            
            $
            645,576
            
            
            $
            421,182





The
Company has capitalized $226,176 and $151,375 of consulting fees and salaries,
respectively, during the year ended December 31, 2007 related to the cost of
enhancing its existing web site. The Company expects to launch the enhanced
version of its website during the second quarter of 2008. The Company estimates
that the total dollar amount of the expected upgrades and enhancements will
amount to approximately $1,058,000
and that the enhanced version of the website will have a useful life of
approximately three years.





Amortization
expense for the years ended December 31, 2007 and 2006 amounted to $153,157 and
$38,289, respectively. Amortization expense subsequent to the year ended
December 31, 2007, including the prospective effects of any changes in
accounting estimates that will occur upon the completion of this project , is as
follows:





Years ending December 31,2008
            
            $
            216,0822009
            
            
            240,7182010
            
            
            125,8512011
            
            
            62,925$
            645,576





Due to
the inherent uncertainty of developing technological products, the above noted
estimate is subject to change and it is at least reasonably possible that such
changes could be significant upon the occurrence or outcome of future
events.




NOTE 7– GOODWILL AND AMORTIZABLE INTANGIBLE
ASSETS





At
December 31, 2007 and 2006, goodwill and other intangible assets consist of the
following:





2007
            
            
            2006Goodwill
            
            $
            1,769,611
            
            
            $
            1,769,611Amortizable
      intangible assets:Customer
      relationships
            
            $
            80,000
            
            
            $
            80,000Trade name
            
            
            5,170
            
            
            
            5,170Less: accumulated
      amortization
            
            
            (34,068
            )
            
            
            (17,034
            )Intangible assets,
      net
            
            $
            51,102
            
            
            $
            68,136




The
Company, as of December 31, 2007, evaluated the carrying amount of its goodwill
in accordance with SFAS 142 to determine whether circumstances indicate that the
carrying amount of the goodwill exceeds its net realizable value. The Company
determined that the fair value of the reporting unit exceeds its net carrying
amount as of December 31, 2007 and that no impairment charge is necessary for
the year ended December 31, 2007. In performing this evaluation, the Company
considered a variety of factors including a discounted cash flow forecast to
determine the enterprise value of the business using the income approach. Making
estimates about the carrying values of intangible assets requires management to
exercise significant judgment. It is at least reasonably possible that the
estimate of the effect on the financial statements of a condition, situation, or
set of circumstances that existed at the date of the financial statements, which
management considered in formulating its estimate could change in the near term
due to one or more future confirming events. Accordingly, the actual results
regarding estimates of the carrying value of these intangibles could differ
materially from the Company’s estimates.
 
 The
Company also evaluated the carrying amounts of its other intangible assets in
accordance with SFAS 144. Under SFAS 144, a long-lived asset is deemed to have
been impaired when the carrying amount of the asset exceeds its undiscounted
future cash flows and the fair value of the asset is less than the carrying
amount. The Company, in performing its evaluation of the carrying amounts of
these assets included all future cash inflows less those cash outflows
specifically related to the use of the asset over the remaining useful lives of
the assets. The Company, based on this evaluation


40


determined
that the net future cash flows over the remaining useful lives of these assets
exceed their carrying amounts at December 31, 2007. Accordingly, no impairment
charge is considered necessary for the year ended December 31,
2007.





Amortization
expense with respect to the customer relationships and trade name amounted to
$17,034 for each of the years ended December 31, 2007 and 2006. Amortization
expense subsequent to the year ended December 31, 2007 is as
follows:





Years ending December 31,2008
            
            $
            17,0342009
            
            
            17,0342010
            
            
            17,034$
            51,102





NOTE
8 – ACCURED EXPENSES AND OTHER CURRENT LIABILITIES





Accrued expenses and other current
liabilities consist of the following as of December 31, 2007 and
2006:





2007
            
            
            2006Payroll
      and payroll taxes
            
            $
            38,192
            
            
            $
            —Professional
      and consulting fees
            
            
            —
            
            
            
            51,774Property
      and equipment purchases
            
            
            —
            
            
            
            39,335Other
            
            
            16,874
            
            
            
            15,425$
            55,066
            
            
            $
            106,534







NOTE 9– NOTES PAYABLE





Series B(2) Convertible
Notes Payable


In May
and June 2007, the Company issued $500,000 of B(2)
Notes to various investors bearing interest at the rate of 7% per annum,
maturing on the first anniversary of their dates of issuance. The Company’s
issuance of the B(2) Notes represented approximately 15% of the voting interest
of the Company on an if-converted basis at the time of the transaction. The B(2)
Notes included $27,866 of such notes issued to certain stockholders and
employees of the Company.





The B(2)
Notes were automatically convertible following the completion of a subsequent
financing transaction at a conversion price equal to $0.23 per share, which has
been determined to be equal to the fair market value of the Company’s common
stock at the time of this financing transaction. If the subsequent financing did
not occur by the maturity date, then the B(2)
Notes were convertible at the option of the holders at a conversion price of
$0.23 per share. The Company deemed the optional conversion right to be in
effect at all times because the completion of a subsequent financing transaction
was not deemed to be within its control.


At the
time the B(2) Notes were issued, the Board of Directors authorized the Company
to proceed with filing the appropriate certificates of designation to
memorialize a new class of Series B(2) Convertible Preferred Stock (“Series B(2)
Preferred”). The Series B(2) Preferred was intended to be convertible
into common stock on a 1 for 1 basis. The Company did not complete this action
and therefore did not have the authorized share capital available to satisfy
either the mandatory conversion or optional conversion rights described above.
Accordingly, the Company determined, in accordance with EITF 00-19, paragraphs
19 through 23, that it would be appropriate to assume that cash settlement of
the conversion option was in the control of the note holders and bifurcate the
conversion option from the notes to account for them as a free standing
derivative.  The fair value of the conversion option was calculated
using the Black-Scholes option pricing model with the following assumptions:
risk-free interest rate of 4.92%; expected dividend yield of zero percent;
expected option life of one year; and current volatility of
111.86%.  The aggregate commitment date fair value of the conversion
option amounted to $152,456.
 
 On
October 4, 2007, the Company entered into a Notice of Exercise, Waiver and
Release Agreement with each of the B(2) note holders pursuant to which the B(2)
note holders agreed to permanently waive their rights to the conversion to B(2)
Preferred shares and agreed to convert the B(2) Notes directly into common
shares in anticipation of the Merger described in Note 1.  On October
30, 2007, the outstanding principal and accrued interest payable, in the
aggregate amount of $514,141, was converted into 2,258,415 shares of the
Company’s common stock. The Company did not consider it necessary to recognize
any gain or loss with respect to this conversion since the number of common
shares issued to the B(2) noteholders


41


was equal
to the number of common shares that were intended to be issued upon the
conversion of the B(2) Preferred shares (had such class of shares been
memorialized).





The
issuance of the B(2) Notes also required the Company to reevaluate the
conversion features embedded in the Series A Preferred and Series B(1) Preferred
shares using the re-measurement principles enumerated in EITF 98-5 and EITF
00-27 due to anti-dilution provisions that trigger reductions in conversion
prices for subsequent dilutive issuances. Accordingly, the Company recorded
$1,297,954 of deemed preferred dividends during the year ended December 31, 2007
as a result of the adjustment to the conversion option prices of its Series A
and Series B(1) Preferred shares (see Note 12).





Interest
expense related to the B(2) Notes amounted to $14,141 for the year ended
December 31, 2007.





Bridge
Notes


On July
5, 2007, the Company issued $750,000 of bridge notes to two investors bearing
interest at the rate of .83% per month.





On August
1, 2007, the Company issued $500,000 of bridge notes to two investors bearing
interest at .83% per month. The notes were fully paid on August 28, 2007,
including accrued interest of $4,150.





On August
27, 2007, the Company issued $500,000 of bridge notes to various investors
bearing interest at .83% per month.





The
$1,250,000 remaining bridge notes (the “Remaining Bridge
Notes”) had an original maturity date of December 31, 2007. The Remaining
Bridge Notes were contingently convertible at the option of the holder following
the completion of a subsequent financing transaction at a conversion price equal
to 75% of the per share price offered in such a transaction, if
consummated.





The
Remaining Bridge Notes were subject to automatic conversion upon the occurrence
of certain events as defined, including (i) immediately prior to any
consolidation or merger of the Company with or into any Public Company (as that
term was defined in the Remaining Bridge Notes), at a price per share equal to a
25% discount to the offering price of such common stock offered by the Company
in conjunction with the merger or consolidation with the Company; (ii) in the
event that the Remaining Bridge Notes are not paid in full within 90 days
following their maturity dates, the principal and accrued interest will convert
into shares of common stock of the Company as determined by multiplying (a) the
number of shares of capital stock of the Company that is equal to 50.1% of the
total number of issued and outstanding shares of capital stock of the Company as
of the maturity date by the result of (b) the principal amount of the individual
notes divided by the principal amount of all Remaining Bridge
Notes.




In
connection with the issuance of the Remaining Bridge Notes, the Company issued
warrants to purchase shares of its common stock (the “Warrants”). The
Warrants allow the holders to purchase up to 504,735 shares of the Company’s
common stock at an exercise price of $1.28 per share. The Warrants expire on
November 13, 2012.
 
 In
accordance with APB 14, the Company allocated $1,021,831 of the proceeds to the
Remaining Bridge Notes and $228,169 of the proceeds to the Warrants based on the
relative fair values of these financial instruments. The fair value of the
Warrants was calculated using the Black-Scholes option pricing model with the
following assumptions: fair value of common stock of $0.85; risk-free interest
rate of 4.23%; expected dividend yield of zero percent; contractual life of five
years; and current volatility of 89.50%.  The difference between the
carrying amount of the Remaining Bridge Notes and their contractual redemption
amount was being accreted as interest expense through December 31, 2007, their
maturity date.
 
 On
November 13, 2007, the Company completed the Merger with Acquisition Sub. As a
result, the Remaining Bridge Notes, were automatically converted into shares of
the Company’s common stock at a conversion price of $0.6375 per share (75% of
the offering price of the shares issued in the Private
Placement).  The Company determined that there was no beneficial
conversion feature to record at the date this contingency was settled because
the fair value of the common stock at the commitment date which was $0.23 per
share was less than the conversion price of $0.6375 embedded in this
obligation.
 
 In
addition, as a result of the conversion, the remaining unamortized discount
recorded in connection with the warrants was charged as interest expense in the
accompanying statement of operations for the year ended December 31,
2007.
 
 The
outstanding principal and accrued interest payable at the time of the Merger
amounting to an aggregate of $1,287,073, was converted into 2,018,944 shares of
the Company’s common stock.
 
 Interest
expense related to the Remaining Bridge Notes amounted to $41,223 for the year
ended December 31, 2007.


42


Note
Payable


On March
30, 2007, the Company issued a $200,000 convertible note (the “Original Note”) to an
investor bearing interest at 7% per annum, maturing on March 30,
2008.  The Original Note was automatically convertible into 527,116
shares of the Company’s Series B(2) Convertible Preferred stock upon maturity at
$0.38. The amount of the
derivative liability with respect to the conversion option was insignificant to
the Company’s consolidated financial statements.





On June
18, 2007, the Company and the holder of the Original Note agreed to amend the
Original Note (the “Amended Note”) to
bear interest at 3% per annum and extend the maturity of the note to September
30, 2008. In addition, the conversion feature of the Original Note was
eliminated and all principal and accrued interest thereon is payable solely in
cash on the maturity date of the Amended Note. The Company accounted for the
amendment to the Original Note in accordance with the guidelines enumerated in
EITF Issue No. 96-19, “Debtor’s Accounting for a Modification or Exchange of
Debt Instruments” (“EITF 96-19”) and EITF
06-6. EITF 96-19 provides that a substantial modification of terms in an
existing debt instrument should be accounted for like, and reported in the same
manner as, an extinguishment of debt. EITF 96-19 further provides that the
modification of a debt instrument by a debtor and a creditor in a non-troubled
debt situation is deemed to have been accomplished with debt instruments that
are substantially different if (a) the present value of the cash flows under the
terms of the new debt instrument is at least ten percent different from the
present value of the remaining cash flows under the terms of the original
instrument at the date of the modification or (b) a modification or an exchange
of debt instruments adds a substantive conversion option or eliminates a
conversion option that was substantive at the date of the modification or
exchange.  EITF 06-6 generally provides that the elimination of a
substantive conversion feature in connection with the modification of a debt
instrument under EITF 96-19 results in a substantial modification that
extinguishes the previous debt instrument.





The
Company evaluated its issuance of the Amended Note to determine whether the
modification in the conversion feature, change in the interest rate and change
in the maturity date resulted in the issuance of a substantially different debt
instrument. The Company determined after giving effect to the changes in these
features, including the elimination of the conversion feature of the instrument
that the Company had issued a substantially different debt instrument, which
resulted in a constructive extinguishment of the original debt instrument.
Accordingly, the Company recorded the Amended Note at fair value and used that
amount to determine the debt extinguishment gain to be recognized and the
effective rate of the new instrument.





The
Company computed the fair value of the Amended Note of $191,326 by discounting
all future cash flows under such note at the rate of 26.76%. The Company
believes that the discount rate of 26.76% results in a fair and reasonable
estimation of the
fair value of the Amended Note in the circumstances. The gain on extinguishment
of $8,674 resulting from the modification includes the effects of derecognizing
the carrying value of the Original Note prior to its modification and
establishing the fair value of the Amended Note at its modification date. The
gain on extinguishment is included in the accompanying statement of operations
for the year ended December 31, 2007.


During
the year ended December 31, 2007, the Company made $7,500 of interest payments
to the note holder of which $1,144 is included in prepaid expenses and other
current assets in the accompanying consolidated balance sheet as of December 31,
2007 and $6,356 is included in interest expense in the accompanying consolidated
statements of operations for the year ended December 31, 2007.
 
 On April
6, 2007, the Company issued a note payable (the “Note”) to an investor
in the amount of $98,000 bearing interest at 10% annum. The Note was
collateralized by the total assets of the Company. The Company repaid the Note
on May 21, 2007, including $1,808 of accrued interest.
  NOTE
10 – COMMITMENTS AND CONTINGENCIES
 
 Operating
Leases
 The
Company has non-cancelable operating leases for its office spaces in Plymouth,
Michigan and Stamford, Connecticut. Future non-cancelable minimum lease payments
as of December 31, 2007 are as follows:
 
 Year ending December 31,2008
              
              $
              167,6312009
              
              
              171,8002010
              
              
              131,617Total
      minimum lease payments
              
              $
              471,048


43


Rent
expense for the years ended December 31, 2007 and 2006 amounted to $148,338 and
$97,819, respectively.  Rent expense includes $17,447 and $0 for the
effects of recording expense on a straight line basis over the term of the lease
during the years ended December 31, 2007 and 2006, respectively.





In August
2007, the Company extended the operating lease on its Plymouth, MI facility.
This lease was extended through July 2008 with rental payments of $1,000 per
month. In addition, in August 2007, the Company entered into an operating lease
in connection with the move of its headquarters to Stamford, CT. The lease
commenced on October 1, 2007 and has a three year term with escalating rental
payments beginning at $9,231 per month. In October 2007, the Company leased
additional office space in its Stamford, CT headquarters. The lease commences on
January 1, 2008 and has a 34 month term with escalating rental payments
beginning at $2,902 per month. In addition, in October 2007, the Company also
extended its lease on the current office space in Stamford, CT by one additional
month.




In March
2008, the Company entered into a lease agreement for 2,032 square feet of office
space in Maynard, Massachusetts (see Note 16).


Employment
Agreements


On
December 31, 2005 and in July and August 2007, the Company entered into
employment agreements with six of its executives for initial terms of three
years, which will be renewed for an additional one to two years thereafter,
unless written notice is provided by the respective parties. The agreements
provide, among other things, for the payment of aggregate annual base salaries
of approximately $1,135,000, as well as such incentive compensation and
discretionary bonuses as the Board of Directors may determine and to which they
may become entitled to pursuant to a bonus program. In addition, the employment
agreements provide for up to thirty nine months of severance compensation for
terminations under certain circumstances. Aggregate potential severance
compensation amounted to $2,105,000 at December 31, 2007.





Domestic and International
Transportation Services Agreement


On March
7, 2005, the Company entered into a Domestic and International
Transportation  Services Agreement with DHL in which DHL has agreed to
provide the Company (as an authorized reseller of such services), with certain
wholesale transportation services for a period of two years. This agreement has
been extended to August 1, 2008.





Pursuant
to the terms of the agreement, DHL is providing the Company with certain
discounted prices on domestic and international shipments with respect to
shipping ordersforwarded to
DHL by the Company which the Company originates from customers visiting its
website.  The prices specified in the contract are subject to periodic
review by DHL and may be changed by DHL, in their sole discretion, under certain
circumstances including (but not necessarily limited to) the Company’s
inability to maintain a minimum order volume of at least $1,000,000 annually
during the term of the agreement.  The Company has not yet attained
this level of volume since the origination of the agreement in March 2005 and
cannot provide any assurance that DHL will not materially increase prices or
that any price increases will not have a material effect on the Company’s
operations.  The agreement may also be cancelled by either the Company
or DHL upon 30 days written notice or by DHL in its sole discretion in the event
of the Company’s inability to maintain a minimum order volume of at least
$1,000,000 annually during the term of the agreement.


Federal Express Compatible
Solutions Program
 On
September 28, 2007, the Company was approved by FedEx Corporate Services, Inc.
(“FedEx”) to be
a certified and authorized Custom Solutions Provider (“CSP”) for FedEx.
Pursuant to the terms of the agreement, FedEx is granting the Company a
non-exclusive, non-transferable, royalty-free, revocable, limited license to use
the FedEx software (the “Application”), within
the United States, for the purposes of (i) integrating the Application with the
Company’s shipping related system and services; (ii) hosting and maintaining the
product; and (iii) allowing end users to access remotely, through a web browser
and via the Company’s web site, the product in order to request FedEx services.
The initial term of the agreement expires on May 10, 2008. Thereafter, the
agreement will automatically renew for successive one year terms unless either
party provides 90 day written notice.  Upon termination or expiration
of the agreement, all licenses granted will terminate.
 
 Consulting
Agreement
 On
September 10, 2007, the Company entered into a consulting agreement with ADA
Software Group, Inc. (“ADA”), whereby ADA is
assisting the Company in developing its subscription services model by providing
technology and quality assurance services. ADA is developing certain software
code related to the Company’s subscription services model and enhancing the
Company’s existing system functionality, related materials application and
documentation. The term of the agreement is for 36 months requiring the
following monthly payments:
  September
      2007 – August 2008
                
                $
                27,500September
      2008 – August 2009
                
                $
                30,000September
      2009 – August 2010
                
                $
                32,500


44


Either
party may terminate the agreement if the other (a) breaches any material
provision of the agreement and fails to cure the same; (b) files or has filed
against it a petition in bankruptcy; (c) has a receiver appointed to handle its
assets or affairs; (d) makes or attempts to make an assignment for benefit of
creditors. In the event that the Company terminates the agreement for any reason
other than cause, as that term is defined in the agreement, then the Company
must pay ADA an early termination fee equal to four times the then effective
monthly payment.





As
described in Note 6, the Company capitalized consulting fees related to the
enhancement and upgrading of its existing web site. Included in the capitalized
amounts is $120,000 of consulting fees incurred in connection with the ADA
consulting agreement. Such amount includes $10,000 for the effect of recording
the aggregate payments on a straight line basis over the term of the agreement
during the year ended December 31, 2007.





Financial Advisory and
Placement Agent Agreement


On
November 28, 2007, the Company entered into an eighteen month financial advisory
and placement agent agreement with Burnam Hill Partners (“BHP”) whereby BHP
will act as the Company’s financial advisor in connection with a strategic
transaction and as exclusive placement agent in connection with any equity or
debt financing. Pursuant to the agreement, the Company will pay BHP a
transaction fee based upon the percentage of the total aggregate consideration,
calculated as follows:




Aggregate
      Consideration
              PercentageUp
      to $50,000,000
              3%
      of such amount; plusBetween
      $50,000,000 and $100,000,000
              2%
      of such amount; plusGreater
      than $100,000,000
              1
      1⁄2% of such amount





In
connection with the closing of a financing, the Company will pay BHP (i) a fee
equal to 7% of the gross proceeds received by the Company in an equity or equity
linked financing; and (ii) a fee equal to 4.5% of the gross proceeds received by
the Company in any non-convertible debt financing. In addition, the Company will
issue 5-year warrants equal to 7% of the number of shares issued (or, in the
case of convertible securities, the number of shares issuable on an as converted
basis) in such financing. The warrants will be exercisable at 110% of the
purchase price of the common stock issued in such financing.




In
connection with BHP’s engagement under this agreement for services to be
rendered relating to ongoing strategic corporate advice, BHP was issued 75,000
common stock purchase warrants, exercisable at $1.27 (110% of the closing stock
price on November 27, 2007). Such warrants have a five year term, are
exercisable through a cashless exercise provision, are non-redeemable and have
piggyback registration rights. The fair value of the warrants was calculated
using the Black-Scholes option pricing model with the following assumptions:
fair value of common stock of $1.15; risk-free interest rate of 3.50%; expected
dividend yield of zero percent; expected life of five years; and current
volatility of 85.42%. The fair value of the warrants, which amounted to $58,099,
is being recorded as consulting expense over the term of the agreement.
Consulting expense amounted to $3,229 for the year ended December 31,
2007.
 
 Public Relations Service
Agreement
 On
November 27, 2007, the Company entered into a twelve month public relations
service agreement with SHIFT Communications, LLC (“Shift”) whereby Shift
will provide monthly public relations services and counsel on behalf of the
Company. The term of the agreement commences on December 3, 2007 and ends on
December 2, 2008, and is automatically renewable for successive one-year
periods. Pursuant to the agreement, the Company will pay Shift a monthly fixed
fee of $17,680. The Company recorded $17,680 of public relations expense in the
accompanying statement of operations for the year ended December 31,
2007.
  NOTE
11 – SIGNIFICANT CUSTOMERS AND VENDORS
 
 The
Company had two customers which comprised 17% and 11%, respectively, of accounts
receivable at December 31, 2007. The Company had two vendors which comprised 12%
and 11%, respectively, of accounts payable at December 31, 2007. The Company had
no customers which comprised greater than 10% of accounts receivable at December
31, 2006. The Company had three vendors which comprised 12%, 36% and 16%,
respectively, of accounts payable at December 31, 2006.
  NOTE
12 – STOCKHOLDERS’ EQUITY
 
 Private Placement
Offering
 On
November 13, 2007, simultaneous with the Merger, the Company completed the
Private Placement pursuant to which it sold 1,764,706 units of Pubco. Each such
unit was sold at $3.40 and consists of four shares of common stock of Pubco, par


45


value
$0.001 per share, and one five-year warrant to purchase one share of common
stock of Pubco at an exercise price of $1.28 per share, for aggregate gross
proceeds of $6,000,000 (net proceeds of $5,167,663).





In
connection with the closing of the Private Placement, the Company paid the
placement agent cash commissions of $291,891 and granted five-year warrants
to purchase an aggregate of 352,942 shares of the Company’s common stock. The
warrants are exercisable at a purchase price of $1.28 per share.





Common
Stock


The
Company is authorized to issue up to 200,000,000 shares of common stock, par
value $0.001.  Each share of common stock has the right to one
vote.  The holders of common stock are entitled to dividends when
declared by the Board of Directors, subject to the prior rights and preferences
of the preferred stock shareholders.  In addition, in the event of a
voluntary or involuntary liquidation, dissolution, distribution of assets or
other winding up of the Company, after distribution in full of preferential
amounts to be distributed to the holders of the preferred stock, the holders of
the common stock will be entitled to the remaining assets of the
Company.





On
November 11, 2006, the Company issued 16,733 shares of common stock to certain
consultants in settlement of a $55,872 liability for services provided to the
Company previous to the settlement of this debt.





On
October 30, 2007, the Company issued 2,258,415 shares of common stock to the
B(2) noteholders based on the conversion of $514,141 of the B(2) Notes and
related accrued interest  into common stock at a conversion price of
$0.23 per share (see Note 9).




On
November 13, 2007, the Company issued 2,018,944 shares of common stock at a
conversion price of $0.6375, or $1,287,073, based on the conversion of the
Remaining Bridge Notes and related accrued interest (see Note 9).
 
 On
November 13, 2007, the Company issued 2,683,669 shares of common stock in
connection with the conversion of 2,683,669 shares of Series A
Preferred.
 
 On
November 13, 2007, the Company issued 747,223 shares of common stock in
connection with the conversion of 747,223 shares of Series B(1)
Preferred.
 
 On
November 13, 2007, the Company issued 7,058,824 shares of common stock in
connection with the Private Placement, for gross proceeds of $6,000,000 (net
proceeds of $5,167,663).
 
 Pursuant
to the terms of the Merger Agreement, the stockholders of Pubco prior to the
Merger retained 5,533,332 shares of common stock of the Company upon the closing
of the Merger.
 
 Convertible Preferred
Stock
 On
November 13, 2007, the Company completed a share exchange transaction whereby
100% of the shares of capital stock of RedRoller were exchanged for 10,230,940
shares of common stock of Pubco.  In order to facilitate the share
exchange transaction, the preferred stockholders converted their shares of
preferred stock into shares of common stock immediately prior to the Merger.
Immediately following the conversion, the outstanding shares of common stock
issued to the preferred stock shareholders were exchanged for shares of common
stock of Pubco.  As such, as of the effective date of the Merger, all
shares of preferred stock were converted into shares of common
stock.
 
 The
Company has authorized 25,000,000 shares of Preferred Stock (“Preferred Stock”),
par value $0.001 per share.  The Company is authorized, subject to any
limitations prescribed by law, without further vote or action by the Company’s
stockholders, to issue from time to time such shares of Preferred Stock in one
or more series.  Each series of Preferred Stock will have such number
of shares, designations, preferences, voting powers, qualifications and special
or relative rights or privileges as determined by the board of directors, which
may include, among others, dividend rights, voting rights, liquidation
preferences, conversion rights and preemptive rights.  Prior to the
recapitalization, the Company’s Preferred Stock was designated into the
following various classifications, as specified in the Certificates of
Designation (the “Certificates”):


46


Type
            
            AuthorizedSeries
      A
            
            2,377,150Series
      B(1)
            
            658,895





Issuances of Convertible
Preferred Stock


During
the period of January 4, 2006 through June 20, 2006, the Company issued
1,768,845 shares of Series A Preferred at a price of $2.26 per share for net
proceeds of $3,970,893 (gross proceeds of $3,999,999 less offering costs of
$29,106). As part of this issuance, the Company issued 205,629 shares of Series
A Preferred to unrelated investors on January 4, 2006 for which proceeds of
$465,000 were remitted to the Company in December 2005. Accordingly, the Company
recorded investor deposits in the amount of $465,000 at December 31,
2005.





The
Company also issued an aggregate of 658,895 shares of Series B(1) Preferred at a
price of $3.34 per share for net proceeds of $2,170,713 (gross proceeds of
$2,200,000 less offering costs of $29,287), including (i) 495,301 shares issued
during the period of October 12, 2006 through December 18, 2006 for net proceeds
of $1,574,334 and (ii) 163,594 shares issued during February 2007 for net
proceeds of $596,379.





The
Series A Preferred and Series B(1) Preferred were convertible into common stock
at any time, at the option of the holder at an adjustable conversion ratio of
1.13 common shares for each preferred share.  The adjusted conversion
price gives effect to a contractual antidilution adjustment made on April 11,
2007 which is more fully described below.





Each
share of preferred stock was convertible at the option of the holder and
automatically upon the occurrence of certain events, as defined in the
Certificates, into shares of the Company’s common stock at the specified
conversion rate and had a liquidation preference.  The conversion rate
and the liquidation preference were subject to adjustment as specified in the
Certificates.  Each share of preferred stock was entitled to votes
equal to the number of shares of common stock into which it was convertible at
the time of the voting.




The
conversion rates of the preferred stock prior to the Merger were subject to
adjustment for stock splits, stock dividends, recapitalizations, dilutive
issuances and other anti-dilution provisions, including instances in which the
Company, at its discretion, issued equity securities or convertible instruments
that featured prices lower than the conversion prices specified in the preferred
stock. The preferred stock was also automatically convertible into shares of the
Company’s common stock, at the then applicable conversion price, upon the
earlier of (i) closing of the sale of shares of common stock in an underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1993, as amended, or (ii) a date specified by vote or written
consent of the holders of at least a majority of the then outstanding shares of
the preferred stock.
 
 The
issuance of the B(2) Notes described in Note 9 required the Company to
reevaluate the conversion features embedded in the Series A Preferred and Series
B(1) Preferred shares using the re-measurement principles enumerated in EITF
98-5 and EITF 00-27 due to anti-dilution provisions that trigger reductions in
conversion prices for subsequent dilutive issuances. Accordingly, the Company
recorded $1,297,954 of deemed preferred dividends during the year ended December
31, 2007 as a result of the adjustment to the conversion option prices of its
Series A and Series B(1) Preferred shares. The conversion rates of the Series A
Preferred and Series B(1) Preferred were adjusted, in accordance with the
provisions of the Certificates, so that at the time of the conversion, an
additional 306,519 shares of common stock related to Series A Preferred
conversions and an additional 88,328 shares of common stock related to Series
B(1) Preferred conversions were issued when such shares were
converted.
 
 Liquidation
events included (i) a final dissolution or winding up of the Company’s affairs
requiring a liquidation of all classes of stock, (ii) a merger, consolidation or
similar event resulting in a more than 50% change in control, (iii) the sale of
all or substantially all of the Company’s assets and (iv) the effectuation (at
the Company’s election) of any transaction or series of transactions resulting
in a more than 50% change in control.
 
 As
described in Note 3, the Company applied the classification and measurement
principles enumerated in EITF Topic D-98 with respect to accounting for its
issuances of preferred stock. The Company was required, under Delaware law, to
obtain the approval of its Board of Directors in order to effectuate a merger,
consolidation or similar event resulting in a more than 50% change in control or
a sale of all or substantially all of its assets. The Board of Directors was
then required to submit proposals to enter into these types of transactions to
the Company’s stockholders for their approval by majority vote. The Company’s
preferred stockholders did not (i) have control of the Company’s Board of
Directors and (ii) did not have sufficient voting rights to control redemption
of these shares by either of these events. In addition, the effectuation of any
transaction or series of transactions resulting in a more than 50% change in
control of the Company could be made only by


47


the
Company at its own election. Based on these provisions, the Company classified
its Series A Preferred and Series B(1) Preferred in stockholders’ equity in the
accompanying consolidated balance sheet because the liquidation events were
deemed to be within the Company’s control in accordance with the provisions of
Topic D-98.





Also as
described in Note 3, the Company evaluated the conversion options embedded in
the Series A Preferred and Series B(1) Preferred to determine (in accordance
with SFAS 133 and EITF 00-19) whether they should be bifurcated from their host
instruments and accounted for as separate derivative financial instruments. The
Company determined, in accordance with SFAS 133, that the risks and rewards of
the common shares underlying the conversion feature were clearly and closely
related to those of the host instruments. Accordingly, the conversion features,
which were not deemed to be beneficial at the commitment dates of these
financing transactions, were accounted for as embedded conversion options in
accordance with EITF 98-5 and EITF 00-27.  As discussed above, the
remeasurement that was triggered under the contractual antidilution provision
was beneficial and resulted in the recognition of $1,297,954 in deemed preferred
dividends.





The
Company evaluated the Series A Preferred and Series B(1) Preferred at each
reporting date for appropriate balance sheet classification.





Registration
Rights


Pursuant
to the terms of the registration rights agreement entered into on November 13,
2007, the Company agreed to file with the SEC within 60 days of the closing of
the Merger, a registration statement (the “Registration
Statement”) registering for resale (i) the shares of the Company’s common
stock included in the units sold in the Private Placement (the “Units”) and (ii) the
shares of the Company’s common stock issuable upon the exercise of the warrants
issued in the Private Placement and issued to the placement agent. The Company
agreed to use its commercially reasonable best efforts to have such “resale”
Registration Statement declared effective by the SEC as soon as possible and, in
any event, within 180 days after the closing of the Merger (210 days in the
event of SEC review of the registration statement).




In
addition, the Company agreed to maintain the effectiveness of the Registration
Statement from the effective date until the earlier of (i) 24 months from the
effective date of the Registration Statement or (ii) the date on which all
securities registered under the Registration Statement (a) have been sold, or
(b) are otherwise able to be sold pursuant to Rule 144, at which time exempt
sales may be permitted for purchasers of the units, subject to the Company’s
right to suspend or defer the use of the Registration Statement in certain
events.
 
 If the
Registration Statement is not filed within 60 days after the closing of the
Merger, then the Company is obligated to issue to each purchaser of units in the
Private Placement that number of shares of the Company’s common stock equal to
1% of the number of shares purchased in the Private Placement up to a maximum of
10% of the aggregate purchase price of the units, for each 30 day period the
Company is late in filing the Registration Statement or the Registration
Statement is late in being declared effective.
 
 The
Company filed a Registration Statement on Form SB-2 with the SEC on January 14,
2008 and is currently addressing comments thereto from the SEC. The Company
expects to have the Registration Statement declared effective by the SEC within
210 days from the Merger and therefore, no penalty has been accrued as of
December 31, 2007.
  At the
closing of the Merger, the Company determined that it was not probable that it
will be required to remit any payments to the investors for failing to obtain an
effective registration or failing to maintain its effectiveness. Therefore, the
Company has not recorded a contingent liability for amounts that may be due
pursuant to the terms of the registration rights
agreement.
 
 Non-Employee Stock-Based
Compensation
 On April
7, 2006, the Company granted options to purchase 56,665 shares of the Company’s
common stock with an exercise price of $2.26 per share to certain consultants.
The fair value of the underlying common stock at the date of grant was $2.26 per
share based upon the Company’s most recent equity financing.  The
options originally vested over a period of one to three years. On April 11,
2007, due to a modification of the terms of the options, all outstanding options
became fully exercisable on that date with a modified exercise price of $0.23
per share. Assumptions relating to the estimated fair value of these stock
options on their date of grant, which the Company estimated using the
Black-Scholes option pricing model are as follows: risk-free interest rate of
4.97%; expected dividend yield of zero percent; option life of ten years;
and current volatility of 127.18%.  The aggregate grant date fair
value of the award amounted to $123,548.  The Company recorded $3,546
and $113,868 of consulting expense during the years ended December 31, 2007 and
2006, respectively, with respect to these awards.


48


On April
30, 2006, the Company granted options to purchase 72,478 shares of the Company’s
common stock with an exercise price of $2.26 per share to a certain consultant.
The fair value of the underlying common stock at the date of grant was $2.26 per
share based upon the Company’s most recent equity financing. The options
originally vested over a period of four months. On April 11, 2007, these options
were modified to reduce their exercise price to $0.23 per share. Assumptions
relating to the estimated fair value of these stock options on their date of
grant, which the Company estimated using the Black-Scholes option pricing model
are as follows: risk-free interest rate of 5.14%; expected dividend yield of
zero percent; option life of ten years; and current volatility of 127.18%.
The aggregate grant date fair value of the award amounted to
$158,081.  The Company recorded $41,445 and $105,387 of consulting
expense during the years ended December 31, 2007 and 2006, respectively, with
respect to these awards.





On August
29, 2006, the Company granted options to purchase 158,135 shares of the
Company’s common stock with an exercise price of $3.34 per share to a certain
consultant. The fair value of the underlying common stock at the date of grant
was $3.34 per share based upon the Company’s most recent equity financing. The
options originally vested on August 29, 2008. The shares were issued in
connection with a consulting agreement whereby the consultant was required to
provide services for the period from August 29, 2006 through August 29, 2008. On
May 8, 2007 and February 5, 2007, the agreement was further modified such that
52,712 options were canceled and the remaining 105,423 options outstanding
became fully exercisable at a modified exercise price of $0.23 per share. On
April 11, 2007, due to a modification of the terms of the options, all
outstanding options became fully exercisable on that date with a modified
exercise price of $0.23 per share. Assumptions relating to the estimated fair
value of these stock options on their date of grant, which the Company estimated
using the Black-Scholes option pricing model are as follows: risk-free interest
rate of 4.79%; expected dividend yield of zero percent; option life of ten
years; and current volatility of 122.95%.  The aggregate grant date
fair value of the award amounted to $505,776.  The Company recorded
$256,376 and $84,296 of consulting expense during the years ended December 31,
2007 and 2006, respectively, with respect to these awards.





On
November 22, 2006, the Company granted options to purchase 28,332 shares of the
Company’s common stock with an exercise price of $3.34 per share to a
consultant. The fair value of the underlying common stock at the date of grant
was $3.34 per share based upon the Company’s most recent equity financing. The
options originally vested over a period of one to three years. On April 11,
2007, due to a modification of the terms of the options, all outstanding options
became fully exercisable
on that date with a modified exercise price of $0.23 per share. Assumptions
relating to the estimated fair value of these stock options on their date of
grant, which the Company estimated using the Black-Scholes option pricing model
are as follows: risk-free interest rate of 4.57%; expected dividend yield of
zero percent; option life of ten years; and current volatility of
115.82%.  The aggregate grant date fair value of the award amounted to
$89,380.  The Company recorded $15,488 and $11,086 of consulting
expense during the years ended December 31, 2007 and 2006, respectively, with
respect to these awards.
 On April
11, 2007, due to the decrease in the fair market value of the Company’s common
stock, the Board of Directors approved a modification to the exercise price and
vesting dates for all options outstanding to non-employees. On April 11, 2007,
the exercise price of all options outstanding was decreased to $0.23 per share
and all outstanding options became fully exercisable on such date. The fair
market value of the Company’s common stock on the date of modification was $0.23
per share. The weighted-average grant date fair value of the modified options
utilizing the original exercise prices was $0.20 per share. The weighted-average
grant date fair value of the modified options utilizing the modified exercise
price was $0.21 per share. Assumptions relating to the estimated fair value of
these stock options on the date of modification, which the Company estimated
using the Black-Scholes option pricing model are as follows: risk-free interest
rate of 4.93%; expected dividend yield of zero percent; option life of ten
years; and current volatility of 111.86%. The Company recorded $38,059 as
consulting expense during the year ended December 31, 2007 related to the
incremental fair value and additional acceleration charge due to the
modifications.
  On July
11, 2007, the Company granted options to purchase 329,447 shares of the
Company’s common stock with an exercise price of $0.23 per share to various
consultants. The fair value of the underlying common stock at the date of grant
was $0.23 per share based upon the Company’s most recent equity financing. The
options vested immediately. Assumptions relating to the estimated fair value of
these stock options on their date of grant, which the Company estimated using
the Black-Scholes option pricing model are as follows: risk-free interest rate
of 5.09%; expected dividend yield of zero percent; option life of ten
years; and current volatility of 106.47%.  The aggregate grant date
fair value of the award amounted to $69,658.  The Company recorded
$69,658 of consulting expense during the year ended December 31, 2007 with
respect to these awards.
 
 On August
1, 2007, the Company granted options to purchase 1,186,011 shares of the
Company’s common stock with an exercise price of $0.23 per share to various
consultants. The fair value of the underlying common stock at the date of grant
was $0.23 per share based upon the Company’s most recent equity financing. The
options vested immediately. Assumptions
 49
 relating
to the estimated fair value of these stock options on their date of grant, which
the Company estimated using the Black-Scholes option pricing model are as
follows: risk-free interest rate of 5.16%; expected dividend yield of zero
percent; option life of ten years; and current volatility of
106.47%.  The aggregate grant date fair value of the award amounted to
$250,838.  The Company recorded $250,838 of consulting expense during
the year ended December 31, 2007 with respect to these
awards.





On August
1, 2007, the Company granted options to purchase 3,294 shares of the Company’s
common stock with an exercise price of $0.23 per share to a consultant. The fair
value of the underlying common stock at the date of grant was $0.23 per share
based upon the Company’s most recent equity financing. The options vest over a
period of one year. Assumptions relating to the estimated fair value of these
stock options on their date of grant, which the Company estimated using the
Black-Scholes option pricing model are as follows: risk-free interest rate of
5.16%; expected dividend yield of zero percent; option life of ten years;
and current volatility of 106.47%.  The aggregate grant date fair
value of the award amounted to $697.  The Company recorded $697 of
consulting expense during the year ended December 31, 2007 with respect to these
awards.




On August
4, 2007, the Company granted options to purchase 32,945 shares of the Company’s
common stock with an exercise price of $0.23 per share to a consultant. The fair
value of the underlying common stock at the date of grant was $0.23 per share
based upon the Company’s most recent equity financing. The options vest over a
period of four years. Assumptions relating to the estimated fair value of these
stock options on their date of grant, which the Company estimated using the
Black-Scholes option pricing model are as follows: risk-free interest rate of
4.71%; expected dividend yield of zero percent; option life of ten years;
and current volatility of 89.50%.  The aggregate grant date fair value
of the award amounted to $6,575.  The Company recorded $1,427 of
consulting expense during the year ended December 31, 2007 with respect to these
awards.





The
Company accounts for its issuances of stock-based compensation to non-employees
for services using the measurement date guidelines enumerated in SFAS 123R and
EITF 96-18. Accordingly, the value of any awards that were vested
and non forfeitable at their date of issuance were measured based on the fair
value of the equity instruments at the date of issuance. The non-vested portion
of awards that are subject to the future performance of the counterparty are
adjusted at each reporting date to their fair values based upon the then current
market value of the Company’s stock and other assumptions that management
believes are reasonable. The Company believes that the fair value of the stock
options issued to non-employees is more reliably measurable than the fair value
of the services rendered. The fair value of the stock options granted was
calculated using the Black-Scholes option pricing model as prescribed by SFAS
123R.


The term
of the stock options represents the contractual period of the stock options.
The stock price volatility for the Company’s stock options was determined
by examining the historical volatilities for industry peers and using an average
of the historical volatilities of the Company’s industry peers as the Company
did not have any trading history for its common stock. The Company will continue
to analyze the historical stock price volatility as more historical data for the
Company’s common stock becomes available. The risk-free interest rate assumption
is based on the U.S. Treasury instruments whose term was consistent with the
expected term of the Company’s stock options. The expected dividend assumption
is based on the Company’s history and expectation of dividend
payouts.
 
 Total
compensations expense recognized for the years ended December 31, 2007 and 2006
amounted to $669,678 and $314,637, respectively.  The stock-based
compensation expense will fluctuate as the fair market value of the common stock
fluctuates. The weighted-average grant date fair value of options granted during
the years ended December 31, 2007 and 2006 amounted to $0.21 and $2.26 per
share, respectively. Total unamortized compensation expense related to unvested
stock options at December 31, 2007 amounted to $5,148 and is expected to be
recognized over a weighted average period of 1.96 years.
 
 A summary
of non-employee stock option activity, for the years ended December 31, 2007 and
2006 is as follows:
 
 Number
      of
                Options
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Weighted
                Average
                Remaining
                Contractual
                Term
              
              
              Aggregate
                Intrinsic
                ValueBalance
      at January 1, 2006
              
              
              1,480,846
              
              
              $
              1.52Granted
              
              
              315,610
              
              
              
              2.90Balance
      at December 31, 2006
              
              
              1,796,456
              
              
              
              1.76Granted
              
              
              1,551,697
              
              
              
              0.23Forfeited
              
              
              (52,712
              )
              
              
              3.34Balance
      at December 31, 2007
              
              
              3,295,441
              
              
              $
              0.23
              
              
              
              8.46
              
              
              $
              2,215,679Exercisable
      at December 31, 2007
              
              
              3,259,205
              
              
              $
              0.23
              
              
              
              8.44
              
              
              $
              2,193,527


50


As
described above, on April 11, 2007 the exercise prices for all options
outstanding to non-employees were modified to $0.23 per share.





The
aggregate intrinsic value is calculated as the difference between the exercise
price of the underlying stock options and the fair value of the Company’s common
stock at the time ($0.90) for stock options that are in-the-money as of December
31, 2007.





The
Company issues new shares of common stock upon exercise of stock
options.





NOTE
13 – SHARE-BASED PAYMENTS





2007 Stock Option and Stock
Incentive Plan


On
October 22, 2007, the Company adopted the 2007 Stock Option and Stock Incentive
Plan (the “2007
Plan”). The purpose of the 2007 Plan is to promote the future success and
growth of the Company by providing stock options and other equity interests in
the Company to employees, officers, directors, consultants and advisors of the
Company. The 2007 Plan provides for the issuance of both incentive stock options
(“ISO’s”) and
non-qualified stock options (“NQO’s”). ISO’s may be
granted only to officers and employees of the Company and NQO’s may be granted
to directors, officers, employees, consultants and advisors of the Company. At
December 31, 2007, the Company had reserved 5,698,823 shares of common stock for
issuance under the 2007 Plan. As of December 31, 2007, options to purchase an
aggregate of 3,180,310 have been granted under the Plan, leaving an aggregate of
2,518,513 shares available for future issuance.


In
connection with the Merger, all options to purchase shares of RedRoller’s common
stock outstanding immediately prior to the Merger were replaced with
corresponding new options to purchase shares of common stock in the Company with
no other changes in the terms or conditions of the awards;
 
 2006 Stock Option and
Incentive Plan
 The 2006
Stock Option and Stock Incentive Plan (the “Plan”) became
effective March 17, 2006. The purpose of the Company’s stock compensation plan
was to enable the Company to attract, retain and motivate key employees,
directors, consultants and advisors.  The Plan provided for the
issuance of both incentive stock options and non-qualified stock options. In
connection with the Merger, all options issued and outstanding pursuant to the
Plan were replaced by corresponding new options to purchase shares of common
stock in the Company.
 
 In
accordance with the 2007 Plan, the stated exercise price shall not be less than
100% of the estimated fair market value of the common stock at the date of
grant.
 
 Options
under the Plan are exercisable at such times and subject to such terms and
conditions as the Board of Directors may specify in the applicable option
agreement.  As of December 31, 2007, options issued under the Plan
have a ten-year term.
 
 The
Company issues new shares of common stock upon exercise of stock
options.
 
 Stock Option
Grants
 On April
7, 2006, the Company granted options to purchase 809,781 shares of its common
stock at an exercise price of $2.26 per share to certain employees. The fair
value of the underlying common stock at the date of grant was $2.26 per share
based upon the Company’s most recent equity financing. The options originally
vested over a period of one to three years. On April 11, 2007, due to a
modification of the terms of the options, all outstanding options became fully
exercisable on that date with a modified exercise price of $0.23 per share.
Assumptions relating to the estimated fair value of these stock options on their
date of grant, which the Company estimated using the Black-Scholes option
pricing model are as follows: risk-free interest rate of 4.90%; expected
dividend yield of zero percent; expected option life of six years; and current
volatility of 127.18%.  The aggregate grant date fair value of the
award amounted to $1,638,011. The Company recorded $360,018 and $1,063,254 of
compensation expense during the years ended December 31, 2007 and 2006,
respectively, with respect to these awards.


51


On April
7, 2006, the Company granted options to purchase 996,908 shares of its common
stock at an exercise price of $2.26 per share to certain employees. The fair
value of the underlying common stock at the date of grant was $2.26 per share
based upon the Company’s most recent equity financing. The options vested over a
period of one year. On April 11, 2007, due to a modification of the terms of the
options, all outstanding options became fully exercisable on that date with a
modified exercise price of $0.23 per share.  Assumptions relating to
the estimated fair value of these stock options on their date of grant, which
the Company estimated using the Black-Scholes option pricing model are as
follows: risk-free interest rate of 4.89%; expected dividend yield of zero
percent; expected option life of five years; and current volatility of
127.18%.  The aggregate grant date fair value of the award amounted to
$1,941,179.  The Company recorded $291,782 and $1,710,239 of
compensation expense during the years ended December 31, 2007 and 2006,
respectively, with respect to these awards.





On June
6, 2006, the Company granted options to purchase 140,345 shares of its common
stock at an exercise price of $2.26 per share to an employee. The fair value of
the underlying common stock at the date of grant was $2.26 per share based upon
the Company’s most recent equity financing. The options originally vested over a
period of one year. On April 11, 2007, due to a modification of the terms of the
options, all outstanding options became fully exercisable on that date with a
modified exercise price of $0.23 per share. Assumptions relating to the
estimated fair value of these stock options on their date of grant, which the
Company estimated using the Black-Scholes option pricing model are as follows:
risk-free interest rate of 4.95%; expected dividend yield of zero percent;
expected option life of five years; and current volatility of
124.54%.  The aggregate grant date fair value of the award amounted to
$270,404.  The Company recorded $61,360 and $184,183 of compensation
expense during the years ended December 31, 2007 and 2006, respectively, with
respect to these awards.





On July
11, 2006, the Company granted options to purchase 54,360 shares of its common
stock at an exercise price of $3.34 per share to certain
employees.  The fair value of the underlying common stock at the date
of grant was $3.34 per share based
upon the Company’s most recent equity financing. The options originally vested
over a period of one to three years. On April 11, 2007, due to a modification of
the terms of the options, all outstanding options became fully exercisable on
that date with a modified exercise price of $0.23 per share. Assumptions
relating to the estimated fair value of these stock options on their date of
grant, which the Company estimated using the Black-Scholes option pricing model
are as follows: risk-free interest rate of 5.08%; expected dividend yield of
zero percent; expected option life of six years; and current volatility of
122.95%.  The aggregate grant date fair value of the award amounted to
$160,698.  The Company recorded $45,938 of compensation expense during
the year ended December 31, 2006.
 On
September 18, 2006, the Company granted options to purchase 32,944 shares of its
common stock at an exercise price of $3.34 per share to an
employee.  The fair value of the underlying common stock at the date
of grant was $3.34 per share based upon the Company’s most recent equity
financing. The options originally vested over a period of three months to one
year. On April 11, 2007, due to a modification of the terms of the options, all
outstanding options became fully exercisable on that date with a modified
exercise price of $0.23 per share. Assumptions relating to the estimated fair
value of these stock options on their date of grant, which the Company estimated
using the Black-Scholes option pricing model are as follows: risk-free interest
rate of 4.78%; expected dividend yield of zero percent; expected option life of
six years; and current volatility of 118.48%.  The aggregate grant
date fair value of the award amounted to $95,735.  The Company
recorded $11,967 and $49,862 of compensation expense during the years ended
December 31, 2007 and 2006, respectively.
 
 On
November 22, 2006, the Company granted options to purchase 42,169 shares of its
common stock at an exercise price of $3.34 per share to certain employees. The
fair value of the underlying common stock at the date of grant was $3.34 per
share based upon the Company’s most recent equity financing. The options
originally vested over a period of one to three years. On April 11, 2007, due to
a modification of the terms of the options, all outstanding options became fully
exercisable on that date with a modified exercise price of $.23 per share.
Assumptions relating to the estimated fair value of these stock options on their
date of grant, which the Company estimated using the Black-Scholes option
pricing model are as follows: risk-free interest rate of 4.57%; expected
dividend yield of zero percent; expected option life of six years; and current
volatility of 115.82%. The aggregate grant date fair value of the award amounted
to $121,178.  The Company recorded $17,434 and $18,103 of compensation
expense during the years ended December 31, 2007 and 2006,
respectively.
 
 On
November 22, 2006, the Company granted options to purchase 51,700 shares of its
common stock at an exercise price of $3.34 per share to certain employees. The
fair value of the underlying common stock at the date of grant was $3.34 per
share based upon the Company’s most recent equity financing. The options were
fully exercisable on the date of grant. Assumptions relating to the estimated
fair value of these stock options on their date of grant, which the Company
estimated using the Black-Scholes option pricing model are as follows: risk-free
interest rate of 4.57%; expected dividend yield of zero percent; expected option
life of five years; and current volatility of 118.48%. The aggregate grant date
fair value of the award amounted to $142,036. The Company recorded $4,237 and
$142,036 of compensation expense during the years ended December 31, 2007 and
2006, respectively.
 52


On April
11, 2007, due to the decrease in the fair market value of the Company’s common
stock, the Board of Directors approved a modification to the exercise price and
vesting dates for all options outstanding to employees. On April 11, 2007, the
exercise price of all options outstanding was decreased to $0.23 per share and
all outstanding options became fully exercisable on such date. The fair market
value of the Company’s common stock on the date of modification was $0.23 per
share. The weighted-average grant date fair value of the modified options
utilizing the original exercise prices was $0.12 per share. The weighted-average
grant date fair value of the modified options utilizing the modified exercise
price was $0.18 per share. Assumptions relating to the estimated fair value of
these stock options on the date of modification, which the Company estimated
using the Black-Scholes option pricing model are as follows: risk-free interest
rate of 4.66%; expected dividend yield of zero percent; expected option life of
five and one-half years; and current volatility of 111.86%. The Company recorded
$125,399 as compensation expense during the year ended December 31, 2007 related
to the incremental fair value and additional acceleration charge due to the
modifications.





On August
1, 2007, the Company granted options to purchase 1,610,995 shares of its common
stock at an exercise price of $0.23 per share to certain employees. The fair
value of the underlying common stock at the date of grant was $0.23 per share
based upon the Company’s most recent equity financing. The options vest over a
period of two to four years. Assumptions relating to the estimated fair value of
these stock options on their date of grant, which the Company estimated using
the Black-Scholes option pricing model are as follows: risk-free interest rate
of 4.58%; expected dividend yield of zero percent; expected option life of six
years; and current volatility of 106.47%. The aggregate grant date fair value of
the award amounted to $305,397.  The Company recorded $99,951 of
compensation expense during the year ended December 31, 2007.





On August
4, 2007, the Company granted options to purchase 312,978 shares of its common
stock at an exercise price of $0.23 per share to certain employees. The fair
value of the underlying common stock at the date of grant was $0.23 per share
based upon the Company’s most recent equity financing. The options vest over a
period of three to four years. Assumptions relating to the estimated fair value
of these stock options on their date of grant, which the Company estimated using
the Black-Scholes option pricing model are as follows: risk-free interest rate
of 4.72%; expected dividend yield of zero percent; expected option life of six
years; and current volatility of 89.50%. The aggregate grant date fair value of
the award amounted to $54,412.  The Company recorded $12,733 of
compensation expense during the year ended December 31, 2007.





On August
16, 2007, the Company granted options to purchase 131,780 shares of its common
stock at an exercise price of $0.76 per share to an employee. The fair value of
the underlying common stock at the date of grant was $0.23 per share based upon
the Company’s most recent equity financing. The options vest over a period of
three years. Assumptions relating to the estimated fair value of these stock
options on their date of grant, which the Company estimated using the
Black-Scholes option pricing model are as follows: risk-free interest rate of
4.54%; expected dividend yield of zero percent; expected option life of six
years; and current volatility of 89.50%. The aggregate grant date fair value of
the award amounted to $17,571.  The Company recorded $3,807 of
compensation expense during the year ended December 31, 2007.





On August
29, 2007, the Company granted options to purchase 667,130 shares of its common
stock at an exercise price of $0.76 per share to certain employees. The fair
value of the underlying common stock at the date of grant was $0.23 per share
based upon the Company’s most recent equity financing. The options vest over a
period of two to three years. Assumptions relating to the estimated fair value
of these stock options on their date of grant, which the Company estimated using
the Black-Scholes option pricing model are as follows: risk-free interest rate
of 4.36%; expected dividend yield of zero percent; expected option life of six
years; and current volatility of 89.50%. The aggregate grant date fair value of
the award amounted to $88,691.  The Company recorded $19,093 of
compensation expense during the year ended December 31, 2007.





On
December 5, 2007, the Company granted options to purchase 296,503 shares of its
common stock at an exercise price of $1.09 per share to a director. The fair
value of the underlying common stock at the date of grant was $1.10 per share
based upon the Company’s share price on the date of grant. The options vest over
a period of two years. Assumptions relating to the estimated fair value of these
stock options on their date of grant, which the Company estimated using the
Black-Scholes option pricing model are as follows: risk-free interest rate of
3.42%; expected dividend yield of zero percent; expected option life of six
years; and current volatility of 84.61%. The aggregate grant date fair value of
the award amounted to $238,398.  The Company recorded $14,900 of
compensation expense during the year ended December 31, 2007.





On
December 30, 2007, the Company granted options to purchase 100,000 shares of its
common stock at an exercise price of $0.75 per share to a director. The fair
value of the underlying common stock at the date of grant was $0.75 per share
based upon the Company’s share price on the date of grant. The options vest over
a period of two years. Assumptions relating to the estimated fair value of these
stock options on their date of grant, which the Company estimated using the
Black-Scholes option pricing model are as follows: risk-free interest rate of
3.65%; expected dividend yield of zero percent;
  53
 expected
option life of six years; and current volatility of 84.61%. The aggregate grant
date fair value of the award amounted to $54,868.  The Company did not
record any compensation expense during the year ended December 31,
2007.





As of
December 31, 2007, there were 189,432 options forfeited due to employee
terminations.





Stock-Based
Compensation


On
January 1, 2006, the Company adopted SFAS 123R. SFAS 123R requires companies to
estimate the fair value of share-based payment awards on the date of
grant.  The value of stock options granted to employees and directors
is estimated using an option-pricing model.  The value of the portion
of the award that is ultimately expected to vest is recognized as expense over
the requisite service periods.  The Company has selected the
Black-Scholes option pricing model as its method of valuing share-based payments
under SFAS 123R, which requires that compensation cost be recorded, as earned,
for all unvested stock options outstanding as the beginning of the first quarter
of adoption of SFAS 123R.  As the Company did not issue any employee
share-based payments prior to January 1, 2006, there was no unrecognized
compensation costs in any prior periods. Compensation expense is generally
recognized on a straight-line basis over the remaining service period after the
adoption date based on the options’ original estimate of fair
values.





Stock-based
compensation expense recognized in the Company’s consolidated statements of
operations for the years ended December 31, 2007 and 2006 includes compensation
expense for the share-based payment awards granted subsequent to December 31,
2005, based upon the grant date fair value estimated in accordance with the
provisions of SFAS 123R.  The Company
recognizes compensation expense for stock option awards on a straight-line basis
over the requisite service period of the award.  As stock-based
compensation expense recognized in the years ended December 31, 2007 and 2006 is
based upon awards ultimately expected to vest, it has been reduced for estimated
forfeitures.  SFAS 123R requires forfeitures to be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates.





A
substantial majority of the stock options still subject to vesting as of
December 31, 2007 have been granted to certain officers and key employees that
are expected to fully vest. The remaining stock options granted to employees are
expected to vest at approximately 90%.
However, the compensation expense with respect to these options is insignificant
to the Company’s financial statements.




The
expected term of stock options represents the average period the stock options
are expected to remain outstanding and is based on the expected term calculated
using the approach prescribed by SAB 107 for “plain vanilla” options. The
Company used this approach as it did not have sufficient historical information
to develop reasonable expectations about future exercise patterns and
post-vesting employment termination behavior. The expected stock price
volatility for the Company’s stock options for the years ended December 31, 2007
and 2006 was determined by examining the historical volatilities for industry
peers for periods that meet or exceed the expected term of the options, using an
average of the historical volatilities of the Company’s industry peers as the
Company did not have any trading history for the Company’s common stock. The
Company will continue to analyze the historical stock price volatility and
expected term assumption as more historical data for the Company’s common stock
becomes available. The risk-free interest rate assumption is based on the U.S.
Treasury instruments whose term was consistent with the expected term of the
Company’s stock options. The expected dividend assumption is based on the
Company’s history and expectation of dividend payouts.





A summary
of employee stock option activity for the years ended December 31, 2007 and 2006
is as follows:





Number
      of Options
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Contractual Term
            
            
            Aggregate
      Intrinsic ValueBalance
      at January 1, 2006
            
            
            —
            
            
            $
            —Granted
            
            
            2,128,207
            
            
            
            2.35Balance
      at December 31, 2006
            
            
            2,128,207
            
            
            
            2.35Granted
            
            
            3,119,386
            
            
            
            0.46Forfeited
            
            
            (189,432
            )
            
            
            2.76Balance
      at December 31, 2007
            
            
            5,058,161
            
            
            $
            0.37
            
            
            
            9.14
            
            
            $
            2,724,870Exercisable
      at December 31, 2007
            
            
            1,938,774
            
            
            $
            0.23
            
            
            
            8.32
            
            
            $
            1,303,533





As
described above, on April 11, 2007 the exercise prices for all options
outstanding to employees were modified to $0.23 per share.





54


The
aggregate intrinsic value is calculated as the difference between the exercise
price of the underlying stock options and the fair value of the Company’s common
stock at the time ($0.90) for stock options that are in-the-money as of December
31, 2007.





The
weighted-average grant date fair value of options granted during the years ended
December 31, 2007 and 2006 amounted to $0.19 and $1.99 per share, respectively.
The weighted-average contractual term gives effect to employee terminations
which, under the provisions of the Plan reduces the remaining life of such
options to a period of 180 days following the respective dates of such
terminations. Total compensation cost recognized for stock options granted to
employees for the years ended December 31, 2007 and 2006 amounted to $897,282
and $3,213,615, respectively. Total unamortized compensation expense related to
unvested stock options at December 31, 2007 amounted to $608,853 and is expected
to be recognized over a weighted average period of 1.54 years.




During
the year ended December 31, 2006, the Company did not modify any stock options
granted to employees under share based arrangements. In addition, the Company
did not capitalize the cost associated with stock based compensation awards nor
have employees exercised any options during the years ended December 31, 2007
and 2006.




NOTE
14 – INCOME TAXES





Prior to
the share exchange transaction discussed in Note 1, Pubco was a publicly-traded
C corporation for federal income tax purposes and under similar provisions for
state income tax purposes. Immediately following the share exchange transaction,
Pubco continued to carry on the operations of RedRoller. The share exchange
transaction has been accounted for as a reverse merger and recapitalization
transaction in which RedRoller is deemed to be the accounting
acquirer.





The
Company has the following net deferred tax assets at December 31, 2007 and
2006:





2007
            
            
            2006Deferred
      tax assetNet operating loss
      carryforward
            
            $
            4,327,900
            
            
            $
            2,482,200Stock-based
      compensation
            
            
            1,316,500
            
            
            
            1,006,100Depreciation
            
            
            24,900
            
            
            
            16,900Intangible
      assets
            
            
            8,900
            
            
            
            —Deferred rent
            
            
            6,800
            
            
            
            —Total
      deferred tax assets
            
            
            5,685,000
            
            
            
            3,505,200Deferred
      tax liabilityOther
            
            
            (50,200
            )
            
            
            —Total
      deferred tax liabilities
            
            
            (50,200
            )
            
            
            —Net deferred tax
      asset
            
            
            5,634,800
            
            
            
            3,505,200Less valuation
      allowance
            
            
            (5,634,800
            )
            
            
            (3,505,200
            )Total net deferred tax
      asset
            
            $
            —
            
            
            $
            —Deferred
      tax liability – Goodwill
            
            $
            (92,000
            )
            
            $
            —





The
Company’s recorded income tax provision (benefit), net of the change in the
valuation allowance, for each of the presented years is as follows:





Years
      Ended
              December
      31,2007
            
            
            2006Income
      tax benefit
            
            $
            (2,129,600
            )
            
            $
            (2,220,200
            )Change
      in valuation allowance
            
            
            2,129,600
            
            
            
            2,220,200—
            
            
            
            —Deferred
      income tax expense
            
            
            92,000
            
            
            
            —Net
      income tax provision
            
            $
            92,000
            
            
            $
            —





55


A
reconciliation of the statutory federal income tax rate to the Company’s
effective tax rate for the years ended December 31, 2007 and 2006 is as
follows:





Years
      Ended
              December
      31,2007
            
            2006Tax
      benefit at statutory rate
            
            (34.00%)
            
            (34.00%)State
      income taxes, net of federal benefit
            
            (5.00%)
            
            (5.00%)Stock–based
      compensation
            
            5.02%
            
            14.00%Other
      permanent differences
            
            0.09%
            
            0.19%(33.89%)
            
            (24.81%)Change
      in valuation allowance
            
            35.42%
            
            24.81%Effective
      income tax rate
            
            1.53%
            
            0.00%





The
Company and its subsidiaries will file consolidated federal and various state
income tax returns (principally Connecticut and Michigan) in which the initial
period of tax reporting for these entities will occur on December 31, 2007. As
of December 31, 2007, the Company had net operating loss carryforwards of
approximately $11,000,000 for tax purposes that will expire beginning
2025.





As
described in Note 3, the Company adopted FIN 48 effective January 1, 2007. FIN
48 requires companies to recognize in their financial statements, the impact of
a tax position, if that position is more likely than not of being sustained on
audit, based on the technical merits of the position. FIN 48 prescribes a
recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, and
disclosure.





Other
than described below, management does not believe that the Company has any
material uncertain tax position requiring recognition or measurement in
accordance with the provisions of FIN 48. Accordingly, the adoption of FIN 48
did not have a material effect on the Company’s financial statements. The
Company’s policy is to classify penalties and interest associated with uncertain
tax positions, if required as a component of its income tax
provision.





Utilization
of the NOL carryforwards may be subject to a substantial annual limitation due
to ownership change limitations that have occurred as provided in Section 382 of
the Internal Revenue Code of 1986, as well as similar state and foreign
provisions. These ownership changes may limit the amount of NOL carryforwards
that can be utilized annually to offset future taxable income and tax,
respectively. In general, an ownership change, as defined by Section 382,
results from transactions increasing the ownership of certain shareholders or
public groups in the stock of a corporation by more than fifty percentage points
over a three-year period. Since its formation, the Company has raised capital
through the issuance of convertible debt, preferred stock and capital stock
which, combined with the purchasing stockholders’ subsequent disposition of
those shares, may have resulted in a change of control, as defined by Section
382, or could result in a change of control in the future upon subsequent
disposition.





The
Company has initiated a study to assess whether a change in control has occurred
or whether there have been multiple changes of control since the Company’s
formation. If the Company has experienced a change of control at any time since
its formation, utilization of NOL carryforwards would be subject to an annual
limitation under Section 382. This annual limitation is determined by first
multiplying the value of the Company’s stock at the time of the ownership change
by the applicable long-term tax-exempt rate, and could then be subject to
additional adjustments, as required. Any limitation may result in expiration of
a portion of the NOL carryforwards before utilization. Until the study is
completed and any limitation known, no amounts are being presented as an
uncertain tax position and all deferred tax assets have been reserved. Interest
and penalties related to uncertain tax positions will be reflected in income tax
expense. As of December 31, 2007, the Company had not recorded any tax penalties
or interest in its consolidated financial statements. All tax years since the
Company’s inception remain subject to future examination by the major tax
jurisdictions in which it is subject to tax.





NOTE
15 – DEFINED CONTRIBUTION PLAN





The
Company has a savings plan available to substantially all salaried employees
which is intended to qualify as a deferred compensation plan under Section
401(k) of the Internal Revenue Code (the “401(k) Plan”).  Pursuant to
the 401(k)





56
 
 Plan, employees
may contribute up to maximum amount allowed by law. The Company at its sole
discretion may from time to time make discretionary matching contributions and
profit-sharing contributions as it deems advisable. For the years ended December
31, 2007 and 2006, the Company made discretionary contributions of $48,776 and
$31,713, respectively. The Company did not make any profit-sharing contributions
during the years ended December 31, 2007 and 2006.


NOTE
16 – SUBSEQUENT EVENTS





Investor Relations
Agreement


On
January 14, 2008, the Company entered into a twelve month investor relations
service agreement with an investor relations firm (“IRF”) whereby the IRF
will manage and communicate the Company’s profile within the investment
community; draft press releases and other necessary written materials from the
Company targeted at the investment community; consult with the Company in
preparation for, and manage all administrative aspects of, and scripts for
quarterly earnings calls; and provide such other financial and investment
relations advice and consulting as the Company may reasonably request from time
to time. The IRF will also provide consulting services with respect to any
Crisis (as that term is defined in the agreement) for an additional fee to be
determined by the parties.
 
 The
Company will pay the IRF an aggregate consideration of $84,000 payable in cash
and non-qualified options to purchase 32,500 shares of the Company’s common
stock, at an exercise price of $0.76 per share. The options vest at a rate of
6,500 shares per month from January 14, 2008 through May 14, 2008.
 
 Provided
that the Company is current in all of its obligations, the Company may terminate
the agreement by providing written notice and remitting a payment to the IRF of
an amount equal to the next two month’s compensation.





Appointment of Chief
Executive Officer
 On March
17, 2008, Michael Tribolet was appointed as the Chief Executive Officer by the
Board of Directors of the Company.
 
 Mr.
Tribolet’s employment agreement is effective as of March 17, 2008 and, unless
earlier terminated, will expire on March 17, 2011. The agreement provides for an
initial base salary of $275,000 per year, which may be increased from time to
time by the Board of Directors, in its sole discretion. Mr. Tribolet will also
be eligible to receive an annual bonus of up to $140,000, based upon meeting
certain performance goals determined by the Board and is eligible to participate
in all Company employee benefit plans.
 
 In
connection with Mr. Tribolet’s appointment as the Chief Executive Officer of the
Company, the Board approved the grant of (i) a stock option (the “First Option”) to Mr.
Tribolet to purchase 175,000 shares of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), under the Company’s 2007 Plan, effective
March 17, 2008 (the “Grant Date”), and
(ii) a stock option (the “Second Option” and,
together with the First Option, the “Options”) to Mr.
Tribolet to purchase 1,500,000 shares of common stock, under the 2007 Plan,
effective the Grant Date. The Options will have an exercise price equal to the
closing price of the common stock on the OTC Bulletin Board on the Grant Date.
The First Option will vest in full 90 days after the Grant Date with accelerated
vesting upon certain events as set forth in the underlying stock option
agreement, assuming continued employment with the Company on the applicable
vesting dates. The Second Option will vest in equal 1/3 increments annually
until fully vested with accelerated vesting upon certain events as set forth in
the underlying stock option agreement, assuming continued employment with the
Company on the applicable vesting dates.
 
 If Mr.
Tribolet is terminated without “cause” (as such term is defined in his
employment agreement with the Company) during the first 90 days of the term of
his employment with the Company, the Company shall pay Mr. Tribolet his base
salary and accrued and unused vacation earned through the effective date of his
termination. In addition, 175,000 of the stock options granted to Mr. Tribolet
that are not then exercisable shall become fully vested and, for a period of six
months after the date of termination, Mr. Tribolet will be entitled to receive
health benefits coverage under the same plan(s) or arrangement(s) in effect at
the time of his termination.
 
 57
 If Mr.
Tribolet is terminated without “cause” after the first 90 days of the term of
his employment with the Company but during the first year of his employment with
the Company, the Company will pay Mr. Tribolet a separation payment equal to (i)
his base salary and accrued and unused vacation earned through the effective
date of his termination and continuing for a period of six months after the
termination date; and (ii) any earned but unpaid bonuses. In addition, 500,000
of the stock options granted to Mr. Tribolet that are not then exercisable shall
become fully vested and, for a period of one year after the date of termination,
Mr. Tribolet will be entitled to receive health benefits coverage under the same
plan(s) or arrangement(s) in effect at the time of his termination.
 
 If Mr.
Tribolet is terminated without “cause” during the second year of his employment
with the Company, the Company will pay Mr. Tribolet a separation payment equal
to (i) his base salary and accrued and unused vacation earned through the
effective date of his termination and continuing for a period of ninemonths after the termination date; and (ii) any earned
but unpaid bonuses. In addition, 500,000 of the stock options granted to Mr.
Tribolet that are not then exercisable shall become fully vested and, for a
period of one year after the date of termination, Mr. Tribolet will be entitled
to receive health benefits coverage under the same plan(s) or arrangement(s) in
effect at the time of his termination.
 
 If Mr.
Tribolet is terminated without “cause” during the third year of his employment
with the Company, the Company will pay Mr. Tribolet a separation payment equal
to (i) his base salary and accrued and unused vacation earned through the
effective date of his termination; (ii) the greater of (A) the portion of his
then applicable base salary otherwise payable for the remainder of the third
year of the term of his employment with the Company or (B) six months of his
then applicable base salary; and (iii) any earned but unpaid bonuses. In
addition, 325,000 of the stock options granted to Mr. Tribolet that are not then
exercisable shall become fully vested and, for a period of one year after the
date of termination, Mr. Tribolet will be entitled to receive health benefits
coverage under the same plan(s) or arrangement(s) in effect at the time of his
termination.
 
 If Mr.
Tribolet is terminated for “good reason” (as such term is defined in his
employment agreement with the Company), the Company will pay Mr. Tribolet a
separation payment equal to his base salary and accrued and unused vacation
earned through the effective date of his termination and continuing for a period
of six months after the termination date. In addition, the Company shall grant
Mr. Tribolet a fully-vested stock option to purchase 500,000 shares of Common
Stock.
 
 Stock Option
Grants
 On
February 19, 2008, the Company granted incentive stock options to purchase
277,500 shares of the Company’s common stock with an exercise price of $0.60 per
share to certain employees of the Company.
  Operating
Lease
 On March
12, 2008, the Company entered into a lease agreement for 2,032 square feet of
office space in Maynard, Massachusetts. The office space is intended to be used
by the Company’s marketing department. The term of the lease is for
approximately 18 months, commencing on March 15, 2008 and terminating on August
31, 2009. The lease calls for monthly rental payments of $2,371, with such
amount being prorated for March 2008.






ITEM 9.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE.




None.






ITEM 9A.
            CONTROLS
      AND PROCEDURES.




Evaluation
of Disclosure Controls and Procedures




As of the end of the period covered by
this Annual Report, we carried out an evaluation, under the supervision and with
the participation of our Chief Executive Officer and Principal Financial
Officer, of the effectiveness of our “disclosure controls and procedures” (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934) as of December 31, 2007. Based on this evaluation, our Chief Executive
Officer and our Principal Financial Officer have concluded that, as of the date
of the evaluation, our disclosure controls and procedures were not
effective to ensure that the information required to be disclosed in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the SEC.





Disclosure controls and procedures are
controls and other procedures that are designed with the objective of ensuring
that information required to be disclosed in our reports filed under the
Exchange Act, as amended, such as this Annual Report, is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms. Disclosure controls and procedures are also designed with the objective
of ensuring that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Principal Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. Internal controls are procedures which are designed with the
objective of providing reasonable assurance that our transactions are properly
authorized, recorded and reported and


58
 
 our assets are
safeguarded against unauthorized or improper use, to permit the preparation of
our financial statements in conformity with generally accepted accounting
principles. 
 The weaknesses that we identified
related to the fact that that there was a lack of segregation of duties at the
Company due to the small number of employees dealing with general,
administrative and financial matters, our overall financial reporting structure
and current staffing levels were not sufficient to support our financial
reporting requirements, and we lacked the internal expertise required to apply
complex accounting principles relating to specialized accounting issues.


To mitigate these risks, the Chairman
of our Board of Directors, along with our Chief Executive Officer, President,
and Executive Vice President, were assigned to perform duties related to our
financial reporting obligations, specifically in relation to reviewing and
approving all material contracts, transactions and complex accounting issues.
These individuals are also responsible for reviewing and approving periodic
financials and the information required to be disclosed by the Company in all
reports we have and will file under the Exchange Act. Furthermore, during the
third quarter of 2007, under the direction of our Board of Directors and our
Chief Executive Officer, we engaged the services of a consulting firm to address
the need to support the complexity of our financial reporting requirements and
application of complex accounting principles.





Although the improvements we have made
in our financial reporting processes have enabled us to (a) record, process and
summarize transactions within the timeframes required to timely file our reports
under the SEC's rules, and (b) better plan transactions that involve the
application of complex accounting principles, additional time is still required
to test and document our internal and disclosure control processes to ensure
their operating effectiveness.





We believe that the changes we have
made in our financial reporting procedures have enabled us to substantially
reduce previous financial reporting risks that existed as a result of our
limited resources. We are continuing to evaluate our risks and resources. We
intend to make additional changes in our financial reporting systems and
procedures wherever necessary and appropriate to ensure their effectiveness and
will make appropriate disclosures regarding any observations and changes as
required in future periods.





Our management, including our Chief
Executive Officer and Principal Financial Officer, do not expect that our
disclosure controls or our internal controls over financial reporting will
prevent or detect all errors and all fraud. A control system, no matter how well
designed and operated, can provide only reasonable, not absolute, assurance that
the control system’s objectives will be met. The design of a control system must
reflect the fact that there are resource constraints, and the benefits of
controls must be considered relative to their costs. Further, because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that misstatements due to error or fraud will not
occur or that all control issues and instances of fraud, if any, within the
company have been detected. These inherent limitations include the realities
that judgments in decision-making can be faulty and that breakdowns can occur
because of simple error or mistake. Controls can also be circumvented by the
individual acts of some persons, by collusion of two or more people, or by
management override of the controls. The design of any system of controls is
based in part on certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Projections of any evaluation of
controls effectiveness to future periods are subject to risks.




Attestation
Report of the Registered Public Accounting Firm/Management’s Report on Internal
Control Over Financial Reporting




This Annual Report does not include a
report of management's assessment regarding internal control over financial
reporting or an attestation report of the Company's independent registered
public accounting firm with respect to our internal controls due to a
transition period established by rules of the SEC for newly public companies.
The Company completed a merger with RedRoller, Inc., a privately-held company,
on November 13, 2007 in a transaction accounted for as a reverse merger with
RedRoller, Inc. deemed to be the company’s “acquirer” for accounting and
financial reporting purposes. For the purposes of applying the requirements of
Item 308 of Regulation S-K, RedRoller, Inc. as the Company’s “acquirer,” will
provide these reports beginning with the year ending December 31,
2008.






ITEM 9B.
            OTHER
      INFORMATION.




None.




59


PART
III




ITEM 10.
            DIRECTORS,
      EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE.




Directors
and Executive Officers
 
 Name
              
              Age
              
              PositionMichael
      T. Tribolet
              
              39
              
              Chief
      Executive OfficerWilliam
      J. Van Wyck
              
              41
              
              President
      and DirectorRobert
      J. Crowell
              
              56
              
              Chairman
      of the Board of DirectorsTerrance
      Quinn
              
              50
              
              DirectorRonald
      V. Rose
              
              57
              
              DirectorT.
      Kendall Hunt
              
              64
              
              DirectorJohn
      P. Pavia
              
              44
              
              DirectorJason
      T. Ordway
              
              34
              
              Chief
      Information Officer and SecretaryRichard
      Turcott, Jr.
              
              40
              
              Chief
      Marketing OfficerMark
      A. Taylor
              
              51
              
              Chief
      Logistics OfficerC.
      Andrew Brooks
              
              34
              
              Executive
      Vice President, Assistant Secretary and Treasurer
 
 Our
directors hold office for one-year terms and until their successors have been
elected and qualified. Our officers are elected by the board of directors and
serve at the discretion of the board.  There are no family
relationships between any of our directors or officers.
 
 Biographies
 
 Michael T.
Tribolet, Chief
Executive Officer.  Mr. Tribolet was appointed as Chief
Executive Officer of RedRoller Holdings, Inc. in March of 2008.  Prior
to this time, Mr. Tribolet served as President of Vonage America Inc., a
subsidiary of Vonage Holdings Corp. (NYSE: VG), a leading provider of VoIP
services. During his tenure at Vonage, from 2003 to 2007, Tribolet was
instrumental in growing the company’s customer base from 10,000 to over
2,000,000 subscribers and annual revenue from $2,000,000 to more than
$650,000,000.  From 2000 to 2003, Mr. Tribolet was Vice President of
Operations for Dialpad Communications, a pioneer in VoIP communications later
acquired by Yahoo!, Inc. (NASDAQ: YHOO). Mr. Tribolet holds a Bachelor of Arts
degree in Communication from Arizona State University.
 
 William J. Van
Wyck,President,
Director.  Mr. Van Wyck has served as the President, Chief
Executive Officer and Director of RedRoller, Inc. since its inception and was
appointed as the President and a Director of RedRoller Holdings, Inc. in
November 2007 in connection with the Merger. Mr. Van Wyck also served as the
Chief Executive Officer of RedRoller Holdings, Inc. prior to Michael Tribolet’s
appointment to that position in March of 2008. Prior to founding RedRoller,
Inc., Mr. Van Wyck co-founded Computer Specialties, Inc. (“CSI”), a
Northeast-based computer and network systems integrator, in 1990. CSI was
profitable from inception through the time it was acquired by Elcom
International, Inc. (“Elcom”) in October
1994. Mr. Van Wyck retired from Elcom in 1996 to complete a global
circumnavigation on his sailboat while being tracked by his companion website
www.outofbounds.com, which followed his journey virtually over the
Internet.  From 1999




60


through
spring of 2003, Mr. Van Wyck was President and CEO of the Hearth Kitchen Company
(“HKC”), where
he introduced a patented kitchen oven device in the kitchen products industry.
Mr. Van Wyck expanded HKC from concept through several financing rounds and
implemented national marketing and distribution. During 2003, Mr. Van Wyck
positioned new management and resigned from HKC to develop the RedRoller
concept.
  Robert J.
Crowell, Chairman of
the Board of Directors.  Mr. Crowell has served as Chairman of
the Board Directors of RedRoller, Inc. since March 2005, and was appointed as
the Chairman of the Board of Directors of RedRoller Holdings, Inc. in connection
with the closing of the Merger. Mr. Crowell is also the founder of Elcom
International, Inc., a Massachusetts-based eCommerce company which became
publicly-held in 1995. He served as the Chairman of the Board of Directors and
Chief Executive Officer of Elcom since its inception in 1992. Mr. Crowell
stepped down as CEO of Elcom on December 20, 2005 and resigned as Chairman of
Elcom in April 2006, which allowed him to devote significantly more of his time
to RedRoller, Inc. Since 1977 and prior to Elcom, Mr. Crowell founded and
managed several companies in the PC and technology industries. From May 1990 to
April 1992, Mr. Crowell was the Chairman, and, from May 1990 to January 1992, he
was also Chief Executive Officer of JWP Information Services, Inc., a subsidiary
of JWP INC. (“JWP”), which, with
three foreign subsidiaries, generated approximately $1.4 billion in 1992
revenues.  From 1983 to 1990, Mr. Crowell was the Chairman and Chief
Executive Officer of NEECO, Inc. (“NEECO”), a publicly
held national PC remarketer, which was acquired by JWP (forming JWP Information
Services, Inc.) in May 1990 for approximately $100 million.  From 1977
to 1983, Mr. Crowell founded and managed New England Electronics Co., Inc.
(which was renamed NEECO and became a public company in 1986) and Microamerica
Distributing Co., Inc. (“Microamerica”), a PC
products distributor which Mr. Crowell founded in 1979 as a subsidiary of NEECO.
Microamerica was sold to AGS Software, which in turn was purchased by NYNEX.
Microamerica was spun off and subsequently merged with Softsel to form Merisel,
a PC products distributor. In 1980, Mr. Crowell also founded Professional
Software, Inc., a PC-based word processing and database software company which
was sold in 1986.  Mr. Crowell holds a Magna Cum Laude Bachelor of
Science degree in Accounting from the University of Massachusetts and is a
Vietnam veteran.
 
 Jason T.
Ordway, Chief
Information Officer and Secretary.  Mr. Ordway has served as
the Chief Information Officer and Secretary of RedRoller, Inc. since March, 2005
and was appointed as the Chief Information Officer and Secretary of RedRoller
Holdings, Inc. in connection with the closing of the Merger.  Mr.
Ordway previously worked for JPMorgan Chase & Co., where he managed the
merger integration technology team. Mr. Ordway was also previously the Vice
President of Technology for Weightwatchers.com, where he built a global weight
loss program online for the Weight Watchers brand. During his tenure, Mr. Ordway
created and operated the premier destination for a subscription-based weight
loss site, including management responsibility for a staff of 42 technology
resources for building and supporting the effort. Mr. Ordway also built the
website and IT infrastructure for Outpost.com. Other technology management
positions held by Mr. Ordway include CNN Financial News (cnnfn.com),
Outpost.com, and Y&R New York, where Mr. Ordway consulted for 7up.com, Dr.
Pepper.com, CBS.com, Healthfront.net and GoArmy.com. Mr. Ordway holds a Bachelor
of Arts degree in Communications from Loyola College in Baltimore,
MD.
 
 Richard
Turcott, Chief
Marketing Officer. Mr. Turcott  has served as the Chief
Marketing Officer of RedRoller, Inc. since August, 2007 and was appointed as the
Chief Marketing Officer of RedRoller Holdings, Inc. in connection with the
closing of the Merger.  Mr. Turcott is responsible for our overall
marketing strategy including customer acquisition, customer retention and brand
development.  Mr. Turcott’s last major position was as the Chief Marketing
Officer of Constant Contact, the world’s leading e-mail marketing company. In
this position, he created the marketing strategy, programs and team that grew
the company from 25,000 to 95,000 small business customers in less than two
years. In 1997, Mr. Turcott was hired as an original member of the Lycos, Inc.
product marketing team, and later became Director of Direct Marketing, Loyalty
& Retention Programs.  He designed and launched the "Lycos Rewards"
program that attracted over 40,000 subscribers in 12 months. Mr. Turcott has
also held Vice President of Marketing positions at Genesys Conferencing and M/C
Communications, LLC. Mr. Turcott holds a Bachelor of Arts degree in Business
Management from Assumption College and an MBA from Northeastern
University.
 
 Mark A.
Taylor, Chief Logistics
Officer. Mr. Taylor has served as the Chief Logistics Officer for
RedRoller, Inc. since 2005 and was appointed as the Chief Logistics Officer of
RedRoller Holdings, Inc. in connection with the closing of the
Merger.  Mr. Taylor is one of the nation’s leading authorities on
utilizing technology to increase productivity in shipping and mailroom
operations, with three decades of experience consulting for hundreds of
organizations. Mr. Taylor is the founder of Taylor Systems Engineering
Corporation and the author of two books on the subject of computerized shipping
systems. Mr. Taylor is also a frequent contributor to numerous industry
publications. Mr. Taylor is often a speaker at major industry events, including
Frontline Solutions, Parcel Shipping and Distribution Expo, the National
Conference on Operations &
  61
 Fulfillment,
the National Postal Forum, Council of Logistics Management and the Parcel
Logistics Expo. Mr. Taylor writes a monthly column for Parcel Shipping &
Distribution magazine and has input to certain news media vehicles,
including the New York
Times and ABC News, where he was featured as a ‘shipping authority’
informing viewers on the best way to ship packages. In December 2005, Mr. Taylor
was named a Distinguished Logistics Professional by the American Society of
Transportation and Logistics. Mr. Taylor is a member of the International
Council on Systems Engineering, the Council of Logistics Management and The
Executive Committee. Mr. Taylor holds a Bachelor of Science degree in Management
and Computers from William James College and received his MBA from the
University of Phoenix. Mr. Taylor is also a part-time professor at Rushmore
University.
  C. Andrew
Brooks, Executive Vice
President, Treasurer and  Assistant Secretary. Mr. Brooks has
served as the Executive Vice President, Assistant Secretary and Treasurer of
RedRoller, Inc. since October, 2005 and was appointed as the Executive Vice
President, Assistant Secretary and Treasurer of RedRoller Holdings, Inc. in
connection with the closing of the Merger. Mr. Brooks is responsible for
operations and strategic and affiliate partner relationships for our business.
Mr. Brooks joined the Company from The Nasdaq Stock Market, Inc., where he
worked as a Managing Director in the business development group and built
NASDAQ’s program for outreach to the venture capital and private equity
investment communities. Prior to NASDAQ, Mr. Brooks spent five years as an
Associate with Crescendo Venture Management, LLC in Palo Alto, CA. Mr. Brooks
began his career as a financial reporter for Bloomberg News and later as a
research associate on J.P. Morgan’s communications equipment equity research
team. Mr. Brooks holds a Bachelor of Arts degree in English literature from
Columbia University.
 Terrance
Quinn, Director.
Mr. Quinn has served as a Director of RedRoller, Inc. since August, 2005 and was
appointed as a member of our Board of Directors in connection with the closing
of the Merger.  Mr. Quinn has more than 25 years of experience in
developing operations and sales capabilities for companies. Mr. Quinn operates
his own consulting firm and was previously the Executive Vice President of
F&S Oil Company where from 2004 to March 2008, he oversaw operations and
sales. In conjunction with F&S Oil Company, Mr. Quinn co-founded CT Bio
Energy a producer of Biodiesel, in February 2007.  In 1990, Mr. Quinn
founded CSI with Mr. Van Wyck. From 1990 to 1994 and from 1994 to 1998, he
managed direct sales of over $1 billion of personal computers and related
services for CSI and then Elcom.  After retiring from Elcom in 1998,
he co-founded Connecticut Sports Institute, LLC, a baseball training facility
and in 2000 founded QS Consulting, Inc., a business consulting
firm.  Mr. Quinn holds a Bachelor of Arts degree in Economics from
Eastern Connecticut State University.
  Ronald V.
Rose, Director.
Mr. Rose was appointed as a member of our Board of Directors in connection with
the closing of the Merger.  Mr. Rose serves as the Chief Information
Officer of priceline.com. Prior to joining priceline.com in March of 1999, he
was Chief Technology Officer for Standard & Poor’s (“S&P”) Retail
Markets and led the development of many of that company’s
Internet initiatives, including Xpresso, which is the leading JAVA
financial desktop application. Before joining S&P, Mr. Rose led two
successful technology startups that focused on telecommunications and technology
consulting. Mr. Rose has also been a technology consultant and began his career
with Delta Air Lines focusing on transaction systems. Mr. Rose holds a Bachelor
of Science degree from Tulane University and the University of Aberdeen
Scotland. He received a Master’s of Science in Information Technology from the
Georgia Institute of Technology.
 
 T. Kendall
Hunt, Director.
Mr. Hunt was appointed to our Board of Directors in December 2007. Ken is
Founder, Chairman of the Board and Chief Executive Officer of VASCO Data
Security International, Inc. (Nasdaq: vdsi).   VASCO is an
international organization, doing business in over 110 countries that develops
and sells strong authentication products used to protect users doing on-line
transactions over the Internet.  VASCO’s most significant market is
banking and finance with over 950 of the world’s leading financial institutions
as customers.  Total customer count, including healthcare, businesses
of all types, government, Internet commerce and others, exceeds
6,000.  He is also affiliated with several high-tech early-stage
companies, serving as a member of their Board of Directors.  Ken is
President of the Belgian Business Club of Chicago, and a member of The Economic
Club of Chicago.  Additionally, he is on the Advisory Board for the
Posse Foundation, an organization dedicated to providing full college
scholarships to urban minority youth leaders through its partnerships with elite
universities across the U. S.  He holds an MBA from Pepperdine
University, Malibu, California, and a BBA from the University of Miami,
Florida.
 
 John P.
Pavia, Director.  Mr.
Pavia was appointed to our Board of Directors in December 2007. Mr. Pavia most
recently was Vice President, Deputy General Counsel and Assistant Secretary for
R.R. Donnelley & Sons Company.  Prior to that position he was the
Senior Vice President of The Innovation Group/Huon Corporation where he served
as the senior executive for operations and chief legal
officer.  Before that assignment, Mr. Pavia was a principal with Levy
& Droney, P.C., a legal firm focusing on mid-sized businesses where he was
responsible for providing clients with legal advocacy on
  62
 corporate
and commercial matters. Prior to that position, he was the Assistant District
Attorney for the King’s County District Attorney’s office in Brooklyn, New
York.  Before that position, Mr. Pavia was an associate with Kelley
Drye & Warren, where he provided legal services to the firm’s clients. Mr.
Pavia is an Adjunct Professor of Law at Quinnipiac University School of Law and
holds Juris Doctor Degree from the American University School of Law in
Washington D.C. and a Bachelor’s Degree in history from Duquesne
University.
  Code of
Ethics
 
 We
have adopted a Code of Ethics applicable to each of our officers, directors and
employees, including our Chief Executive Officer and Principal Financial and
Accounting Officer.  A copy of our Code of Ethics is included as an
exhibit to this Annual Report on Form 10-K.  We believe that the Code
of Ethics is reasonably designed to deter wrongdoing and promote honest and
ethical conduct; provide full, fair, accurate, timely and understandable
disclosure in public reports; comply with applicable laws; ensure prompt
internal reporting of code violations; and provide accountability for adherence
to the Code.
  Audit Committee of Board of
Directors
  The
Audit Committee of our Board of Directors was formed by the Board subsequent to
the closing of the Merger.  The Audit Committee is currently comprised
of Messrs. Quinn, Pavia and Crowell.
  ITEM 11.
              EXECUTIVE
      COMPENSATION.
  Summary
Compensation Table(1)(2)
  The
following table sets forth information regarding the compensation paid to Tina
Sangha, the Company’s President and Chief Executive Officer prior to the closing
of the Merger, William Van Wyck, the Company’s President and Chief Executive
Officer subsequent to the closing of the Merger, as well as to our four most
highly paid executive officers during our last two completed fiscal
years.  We refer to these individuals as the named executive officers
or “NEOs.” Each of the NEOs, except for Ms. Sangha, is entitled to certain
payments in connection with resignation, termination, and/or a change in control
as described more fully below under the heading “Employment Agreements with
Named Executive Officers.”
  Name and
                Principal Position
              Year
              Annual Salary
                ($)
              Bonus
                ($)
              Option Awards(a)
                ($)
              Total
      ($)Tina
      Sangha
                President
      and Chief Executive Officer(3)
              2006
                2007
              —
                —
              —
                —
              —
                —
              —
                —William
      Van Wyck
                President
      and Chief Executive Officer(4)
              2006
                2007
              $253,710
                $223,508
              —
                $30,000
              —
                $106,171
              $253,710(5)
                $359,679Robert
      J. Crowell
                Chairman
      of the
                Board
      of Directors
              2006
                2007
              $147,000
                $140,889
              —
                $30,000
              —
                $53,085
              $147,000
                $223,974Mark
      Taylor
                Chief
      Logistics
                Officer
              2006
                2007
              $248,797
                $244,004
              —
                —
              $8,327
                $28,638
              $257,124
                $252,642C.
      Andrew Brooks
                Executive
      Vice
                President,
      Assistant
                Secretary and
                Treasurer
              2006
                2007
              $157,753
                $188,130
              —
                $20,000
              $433,160
                $84,312
              $590,913
                $292,442Jason
      Ordway
                Chief
      Information
                Officer
              2006
                2007
              $152,100
                $185,738
              —
                $20,000
              $705,650
                $56,208
              $857,750
                $291,946
 63
 (a)
              On
      January 1, 2006, we adopted SFAS 123R. SFAS 123R requires companies to
      estimate the fair value of share-based payment awards on the date of
      grant.  The value of stock options granted to employees and
      directors is estimated using an option-pricing model.  The value
      of the portion of the award that is ultimately expected to vest is
      recognized as expense over the requisite service periods.  We
      have selected the Black-Scholes option pricing model as its method of
      valuing share-based payments under SFAS 123R, which requires that
      compensation cost be recorded, as earned, for all unvested stock options
      outstanding as the beginning of the first quarter of adoption of SFAS
      123R.  As we did not issue any employee share-based payments
      prior to January 1, 2006, there was no unrecognized compensation costs in
      any prior periods. Compensation expense is generally recognized on a
      straight-line basis over the remaining service period after the adoption
      date based on the options’ original estimate of fair
      values.
 
 (1)
              Includes
      only those columns relating to compensation awarded
      to, earned by or paid to the NEOs in 2006 and 2007.  All other
      columns have been omitted.
 (2)
              The
      total value of all perquisites and personal benefits of each NEO falls
      below the reportable amount for disclosure within this
      table.
 (3)
              Ms.
      Sangha resigned as our President and Chief Executive Officer in connection
      with the closing of the Merger.
 (4)
              Mr.
      Van Wyck was appointed as our Chief Executive Officer in connection
      with the closing of the Merger and, thereafter, served in such position
      for the remainder of the fiscal year ended December 31, 2007 and until
      March 17, 2008 when Michael Tribolet was appointed to such position. Mr.
      Van Wyck continues to serve as our
  President.
 (5)
              Includes
      $60,000 payment for accrued salary balance as of December 31,
      2005.
 
 The
compensation information for Messrs. Van Wyck, Crowell, Taylor, Brooks and
Ordway set forth in the table above includes compensation paid to these
individuals in their capacities as employees of RedRoller, Inc. prior to the
closing of the Merger in November 2007.  In connection with the
closing of the Merger, all of the stock options issued and outstanding by
RedRoller, Inc. to Messrs. Van Wyck, Crowell, Taylor, Brooks and Ordway were
exchanged for options to purchase shares of our common stock in accordance with
the terms of the Merger.
 
 Employment Agreements with
Named Executive Officers
 
 The
Company has entered into employment agreements with each of our NEOs except for
Ms. Sangha.
 
 William
Van Wyck
  We are
party to an employment agreement, dated July 11, 2007, with William Van Wyck to
serve as our President, pursuant to which Mr. Van Wyck is entitled to receive an
annual base salary of $220,000.  The agreement’s initial term expires
on July 11, 2010 and shall then automatically renew for additional two-year
periods unless we notify Mr. Van Wyck in writing within 30 days after the date
which is one year prior to the then current employment period that we do not
wish to renew Mr. Van Wyck’s contract.  On an annual basis, during the
first 120 days of the fiscal year (following the preparation of our annual
financial statements), our board of directors (with Mr. Van Wyck abstaining)
will review and may increase, but not decrease, Mr. Van Wyck’s base salary and
benefits based upon Mr. Van Wyck’s performance, the results of our operations
and other relevant or associated factors.  The agreement contains
covenants not to compete during the term of Mr. Van Wyck’s employment and
generally for five years thereafter.  The agreement also provides for
a quarterly bonus of $15,000 based on written performance objectives defined by
our board of directors or a committee thereof.  In the event that Mr.
Van Wyck’s employment is terminated by us without cause (as defined in the
agreement) or Mr. Van Wyck resigns his employment for good reason upon a change
of control (as such terms are defined in the agreement), (i) Mr. Van Wyck will
receive a severance payment equal to three times his then annual base salary
with 50% of such severance payment being paid promptly in a lump sum and the
remaining 50% of such severance payment being payable in 12 equal monthly
installments, without interest, (ii) all stock options to purchase shares of our
common stock owned by Mr. Van Wyck shall become immediately vested and
exercisable for up to the longer of five years after the termination of Mr. Van
Wyck’s employment or the remainder of the stock option period provided for in
the 2007 Plan, and (iii) for a five year period after the termination of Mr. Van
Wyck’s employment, Mr. Van Wyck shall be entitled to insurance benefits
continuation.
 
 Robert
J. Crowell
  We are
a party to an employment agreement, dated July 11, 2007, with Robert J. Crowell
to serve as the Chairman of our Board of Directors, pursuant to which Mr.
Crowell is entitled to receive an annual salary of $140,000.  The
agreement’s initial term expires on July 11, 2010 and shall then automatically
renew for additional two-year periods unless we notify Mr. Crowell in writing
within 30 days after the date which is one year prior to the then current
employment period that we do not
 64
 wish
to renew Mr. Crowell’s contract.  On an annual basis, during the first
120 days of the fiscal year (following the preparation of our annual financial
statements), our board of directors (with Mr. Crowell abstaining) will review
and may increase, but not decrease, Mr. Crowell’s base salary and benefits based
upon Mr. Crowell’s performance, the results of our operations and other relevant
or associated factors.  The agreement contains covenants not to
compete during the term of Mr. Crowell’s employment and generally for five years
thereafter.  In the event that Mr. Crowell’s employment is terminated
by us without cause (as defined in the agreement) or Mr. Crowell resigns his
employment for good reason upon a change of control (as such terms are defined
in the agreement), (i) Mr. Crowell will receive a severance payment equal to
three times his then annual base salary with 50% of such severance payment being
paid promptly in a lump sum and the remaining 50% of such severance payment
being payable in 12 equal monthly installments, without interest, (ii) all stock
options to purchase shares of our common stock owned by Mr. Crowell shall become
immediately vested and exercisable for up to the longer of five years after the
termination of Mr. Crowell’s employment or the remainder of the stock option
period provided for in the 2007 Plan, and (iii) for a five year period after the
termination of Mr. Crowell’s employment, Mr. Crowell shall be entitled to
insurance benefits continuation.
  C.
Andrew Brooks
  We are
a party to an employment agreement, dated August 1, 2007, with C. Andrew Brooks
to serve as our Executive Vice President, pursuant to which Mr. Brooks is
entitled to receive an annual salary of $180,000.  The agreement’s
initial term expires on August 1, 2010 and shall then automatically renew for
additional one-year periods unless we notify Mr. Brooks in writing within 30
days after the date which is one year prior to the then current employment
period that we do not wish to renew Mr. Brooks’s contract.  On an
annual basis, during the first 120 days of the fiscal year (following the
preparation of our annual financial statements), our board of directors will
review and may increase, but not decrease, Mr. Brooks’s base salary and benefits
based upon Mr. Brooks’s performance, the results of our operations and other
relevant or associated factors.  The agreement contains covenants not
to compete during the term of Mr. Brooks’s employment and generally for two
years thereafter.  The agreement also provides for a minimum quarterly
bonus of $10,000 based on written performance objectives defined by our Board of
Directors or a committee thereof.  In the event that Mr. Brooks’s
employment is terminated by us without cause (as defined in the agreement) or
Mr. Brooks resigns his employment for good reason upon a change of control (as
such terms are defined in the agreement), (i) Mr. Brooks will receive a
severance payment equal to two times his then annual base salary with 50% of
such severance payment being paid promptly in a lump sum and the remaining 50%
of such severance payment being payable in 12 equal monthly installments,
without interest, (ii) all stock options to purchase shares of our common stock
owned by Mr. Brooks shall become immediately vested and exercisable for up to
the longer of five years after the termination of Mr. Brooks’s employment or the
remainder of the stock option period provided for in the 2007 Plan, and (iii)
for a five year period after the termination of Mr. Brooks’s employment, Mr.
Brooks shall be entitled to insurance benefits continuation.
 
 Jason
Ordway
  We are
a party to an employment agreement, dated July 11, 2007, with Jason Ordway to
serve as our Chief Information Officer, pursuant to which Mr. Ordway is entitled
to receive an annual salary of $180,000.  The agreement’s initial term
expires on July 11, 2010 and shall then automatically renew for additional
one-year periods unless we notify Mr. Ordway in writing within 30 days after the
date which is one year prior to the then current employment period that we do
not wish to renew Mr. Ordway’s contract.  On an annual basis, during
the first 120 days of the fiscal year (following the preparation of our annual
financial statements), our board of directors will review and may increase, but
not decrease, Mr. Ordway’s base salary and benefits based upon Mr. Ordway’s
performance, the results of our operations and other relevant or associated
factors.  The agreement contains covenants not to compete during the
term of Mr. Ordway’s employment and generally for three years
thereafter.  The agreement also provides for a quarterly bonus of
$10,000 based on written performance objectives defined by our board of
directors or a committee thereof.  In the event that Mr. Ordway’s
employment is terminated by us without cause (as defined in the agreement) or
Mr. Ordway resigns his employment for good reason upon a change of control (as
such terms are defined in the agreement), (i) Mr. Ordway will receive a
severance payment equal to two times his then annual base salary with 50% of
such severance payment being paid promptly in a lump sum and the remaining 50%
of such severance payment being payable in 12 equal monthly installments,
without interest, (ii) all stock options to purchase shares of our common stock
owned by Mr. Ordway shall become immediately vested and exercisable for up to
the longer of five years after the termination of Mr. Ordway’s employment or the
remainder of the stock option period provided for in the 2007 Plan, and (iii)
for a five year period after the termination of Mr. Ordway’s employment, Mr.
Ordway shall be entitled to insurance benefits
continuation.
 65
 Mark
Taylor
  We are
a party to an employment agreement, dated December 31, 2005, with Mark Taylor to
serve as our Chief Logistics Officer and as President of Taylor Systems
Engineering Corporation, our wholly-owned subsidiary, pursuant to which Mr.
Taylor is entitled to receive an annual salary of $250,000.  The
agreement’s initial term expires on December 31, 2008.  On an annual
basis, during the first 120 days of the fiscal year, our board of directors will
review and may increase, but not decrease, Mr. Taylor’s base salary and benefits
based upon Mr. Taylor’s performance, the results of our operations and other
relevant or associated factors.  The agreement contains covenants not
to compete during the term of Mr. Taylor’s employment and generally for 18
months thereafter.  In the event that Mr. Taylor’s employment is
terminated by us without cause (as defined in the agreement), (i) Mr. Taylor
will receive a severance payment equal to the greater of (A) one year’s base
salary or (B) the amount of base salary then yet to be paid to Mr. Taylor for
the remainder of the term of his employment agreement, provided that in no event
shall the amount of such severance payment exceed an amount equal to two years’
base salary, (ii) all stock options to purchase shares of our common stock owned
by Mr. Taylor shall become immediately vested and exercisable for up to the
longer of three years after the termination of Mr. Taylor’s employment or the
remainder of the stock option period provided for in the 2007 Plan, and (iii)
for a one year period after the termination of Mr. Taylor’s employment, Mr.
Taylor shall be entitled to insurance benefits continuation.  In the
event that Mr. Taylor resigns his employment for good reason upon a change of
control (as such terms are defined in the agreement), (i) Mr. Taylor will
receive a severance payment equal to two times his annual base salary with 50%
of such severance payment being paid promptly in a lump sum and the remaining
50% of such severance payment being payable in 12 equal monthly installments,
without interest, (ii) all stock options to purchase shares of our common stock
owned by Mr. Taylor shall become immediately vested and exercisable for up to
the longer of three years after the termination of Mr. Taylor’s employment or
the remainder of the stock option period provided for in the 2007 Plan, and
(iii) for a two year period after the termination of Mr. Taylor’s employment,
Mr. Taylor shall be entitled to insurance benefits
continuation.
 
 Equity
Compensation
 
 General
 
 All of
our employees and directors are eligible to receive stock options and/or shares
of restricted stock under our 2007 Stock Option and Stock Incentive
Plan.  We have historically granted only stock options under the 2007
Plan.  We have granted stock options to purchase shares of common
stock to each of our NEOs except for Ms. Sangha.  A summary of the
material terms of these stock options is included in the footnotes to the table
included below in the section entitled “Outstanding Equity Awards at 2007 Fiscal
Year-End.”
  Modifications
to Outstanding Equity Compensation Awards
 
 On
April 11, 2007, the Board of Directors of RedRoller, Inc. approved a
modification to the exercise price and vesting dates for all stock options
issued and outstanding to employees, directors and consultants of RedRoller,
Inc.  As a result of this modification, the exercise price of all such
stock options was decreased to $0.23 per share and the vesting of all such stock
options was accelerated such that the stock options became fully exercisable on
such date.  In connection with the closing of the Merger, all such
stock options were exchanged for options to purchase shares of our common stock
in accordance with the terms of the Merger.
  Outstanding
Equity Awards at 2007 Fiscal Year-End(1)
  The
following table sets forth certain information with respect to the value of all
unexercised options and unvested stock awards previously awarded to our NEOs
as of December 31, 2007.  Certain option and stock awards provide
for accelerated vesting in full upon a corporate change in
control.  For more
information on these acceleration provisions, please refer tothe footnotes to the table below.
  
 66
   Option
      AwardsName
              
              Number
      of Securities Underlying Unexercised Options (#) Exercisable
              
              Number
      of Securities Underlying Unexercised Options
      (#) Unexercisable
              
              Option Exercise Price
      ($)
              
              Option Expiration
    DateTina
      Sangha(2)
              
              —
              
              —
              
              —
              
              —William
      Van Wyck(3)
              
              —
              
              560,061(4)
              
              $0.23
              
              August
      1, 2017Robert
      J. Crowell
              
              1,044,348
              
              280,030(5)
              
              $0.23
                
                $0.23
              
              March
      28, 2015
                
                August
      1, 2017Mark
      Taylor
              
              52,034
                
                22,073
                
                3,031
              
              
              
              $023
                
                $0.23
                
                $0.23
              
              June
      30, 2015
                
                December
      15, 2015
                
                November
      22, 2016164,724(6)
              
              $0.23
              
              August
      4, 2017C.
      Andrew Brooks
              
              214,141
              
              444,754(7)
              
              $0.23
                
                $0.23
              
              April
      7, 2016
                
                August
      1, 2017Jason
      Ordway
              
              362,292
              
              296,503(8)
              
              $0.23
                
                $0.23
              
              April
      7, 2016
                
                August
      1, 2017
 
 (1)
              Includes
      only those columns for which there are outstanding equity awards at
      December 31, 2007. All other columns have been
  omitted.
 (2)
              Ms. Sangha resigned as our
      President and Chief Executive Officer in connection with the closing of
      the Merger.
 (3)
              Mr.
      Van Wyck was appointed as our Chief Executive Officer in connection with
      the closing of the Merger and, thereafter, served in such position for the
      remainder of the fiscal year ended 2007 and until March 17, 2008 when
      Michael Tribolet was appointed to such position.  Mr. Van Wyck
      continues to serve as our
President.
 (4)
                Remaining shares subject to
      option vest in two equal increments on August 1, 2008 and
      2009.  All remaining shares subject to option become immediately
      exercisable in full upon a corporate change in
      control.
 (5)
                Remaining shares subject to
      option vest in two equal increments on August 1, 2008 and
      2009.  All remaining shares subject to option become immediately
      exercisable in full upon a corporate change in
      control.
 (6)
                Remaining shares subject to
      option vest in four equal increments on August 4, 2008, 2009, 2010 and
      2011.  All remaining shares subject to option become immediately
      exercisable in full upon a corporate change in
      control.
 (7)
                Remaining shares subject to
      option vest as follows: 115,306 – August 1, 2008, 115,306 – August 1,
      2009, 115,306 – August 1, 2010 and 98,836 – August 1, 2011.  All
      remaining shares subject to option become immediately exercisable in full
      upon a corporate change in
control.
 (8)
                Remaining shares subject to
      option vest as follows: 98,836 – August 1, 2008, 65,889 – August 1, 2009,
      65,889 – August 1, 2010 and 65,889 – August 1, 2011.  All
      remaining shares subject to option become immediately exercisable in full
      upon a corporate change in
control.
     Compensation of
Directors
  The
Compensation Committee of our Board of Directors is responsible for periodically
reviewing and recommending to the Board of Directors the compensation of our
independent directors. The following table summarizes compensation earned by or
awarded to our independent directors who served on our Board of Directors in
2007.
 
 2007 Director
Compensation(1)(2)
 
 Name
              
              Option
                Awards
                ($)(3)
              
              Total
                ($)Terrance
      Quinn
              
              $0
              
              $0T.
      Kendall Hunt
              
              $14,900
              
              $14,900Ronald
      V. Rose
              
              $9,854
              
              $9,854Jonathan
      P. Pavia
              
              $0
              
              $0
 
 (1)
              Includes
      only those columns relating to compensation awarded to, earned by, or paid
      to non-executive officer directors for their services in
      2007.  All other columns have been
  omitted.
  (2)
                The
      total value of all perquisites and personal benefits of each director
      falls below the reportable amount for disclosure within this
      table.
  (3)
              On
      January 1, 2006, we adopted SFAS 123R. SFAS 123R requires companies to
      estimate the fair value of share-based payment awards on the date of
      grant.  The value of stock options granted to employees and
      directors is estimated using an option-pricing model.  The value
      of the portion of the award that is ultimately expected to vest is
      recognized as expense over the requisite service periods.  We
      have selected the Black-Scholes option pricing model as its method of
      valuing share-based payments under SFAS 123R, which requires that
      compensation cost be recorded, as earned, for all unvested stock options
      outstanding as the beginning of the first quarter of adoption of SFAS
      123R.  As we did not issue any employee share-based payments
      prior to January 1, 2006, there was no unrecognized compensation costs in
      any prior periods. Compensation expense is generally recognized on a
      straight-line basis over the remaining service period after the adoption
      date based on the options’ original estimate of fair
      values.
  67
 The
director compensation disclosed above for Mr. Quinn includes compensation paid
in connection with his service as a member of the Board of Directors of
RedRoller, Inc. prior to the closing of the Merger.  In connection
with the closing of the Merger, all of the stock options issued and outstanding
by RedRoller, Inc. to Mr. Quinn were exchanged for options to purchase shares of
our common stock in accordance with the terms of the
Merger.
 
 Our directors
currently do not receive cash compensation for their services as members of our
Board of Directors. Directors are, however, reimbursed for the reasonable
out-of-pocket expenses they incur in attending meetings of the Board of
Directors or Committees thereof.
   ITEM 12.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS.
  Securities Authorized for
Issuance under Equity Compensation Plans
 
 The
following table sets forth certain information regarding our common stock that
may be issued upon exercise of options, warrants and other rights under our
existing equity compensation plans as of December 31,
2007.
  Plan Category
              
              Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                (a)
              
              Weighted-average
      exercise price of outstanding options, warrants and
rights
                (b)
              
              Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))
                (c)Equity
      compensation plans approved by security holders
              
              3,180,310(1)
              
              $0.41
              
              2,518,513Equity
      compensation plans not approved by security holders
              
              7,870,674(2)
              
              $
      0.61
              
              –Total
              
              11,050,984
              
              $0.55
              
              2,518,,513
 
 (1)
              Includes
      options to purchase 2,783,807 shares of our common stock which were issued
      to former stockholders of RedRoller, Inc. in connection with the Merger in
      exchange for such stockholders’ options to purchase shares of RedRoller,
      Inc.
 (2)
              Consists
      of (i) five-year warrants to purchase 2,622,382 shares of our common stock
      at an exercise price of $1.28/share, (ii) five-year warrants to purchase
      75,000 shares of our common stock at an exercise price of $1.29/share, and
      (iii) 5,173,292 options to purchase shares of our common stock at a
      weighted average price of $0.26/share that were granted outside of our
      2007 Stock Option and Incentive Plan and not in connection with any
      compensation plan approved by security holders.  Additional
      information related to these warrants and options may found in Notes 12
      and 13 to the financial statements included in this Annual Report on Form
      10-K.
 
 Security Ownership of
Certain Beneficial Owners and Management
  To the
best of our knowledge, the following table sets forth information regarding the
beneficial ownership of our common stock as of March28,
2008 by:
  •
              each
      person (or group of affiliated persons) who is known by us to own
      beneficially more than 5% of the outstanding shares of our common
      stock;
  •
              each
      of our directors and nominees for
director;
  •
              each
      of our NEOs; and
  •
              all
      of our directors, nominees for director and executive officers as a
      group.
  68
 Except
as otherwise noted below, the address for each beneficial owner listed below is
c/o RedRoller Holdings, Inc., Soundview Plaza, 1266 East Main Street, Stamford,
Connecticut, 06902-3546.
  We
have determined beneficial ownership in accordance with the rules of the
SEC.  Except as indicated by the footnotes below, we believe, based on
the information furnished to us, that the persons and entities named in the
table below have sole voting and investment power with respect to all shares of
common stock that they beneficially own, subject to applicable community
property laws.
  Percentage
of beneficial ownership is based on 24,842,040 shares of common stock
outstanding as of March 28,
2008. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of common stock subject to
warrants, options or rights held by that person that are currently exercisable
or exercisable within 60 days of March 28,
2008, are deemed outstanding. These shares are not, however, deemed
outstanding for the purposes of computing the percentage ownership of any other
person.
 
 Shares Beneficially
      OwnedName and, as
      appropriate,
                Address of Beneficial
      Owner
              
              Number of Shares of
      Common
                Stock Beneficially
    Owned
              
              % of Common
      Stock
                Outstanding(a)
              
              %
      Total
                Voting Power(a)5%
      Security OwnersIroquois Master Fund
      Ltd.(1)
                641
      Lexington Avenue
                26th
      Floor
                New
      York, NY 10022
              
              1,808,090
              
              7.28%
              
              7.28%Haywood
      Securities Inc.
                Suite
      2000 - Commerce Place 400 Burrard Street Vancouver, BC V6C3A6
      Canada
              
              1,567,444
              
              6.31%
              
              6.31%Richard
      Genovese
                3537
      Osler Street, Vancouver, BC V6H 2W2
              
              1,421,156
              
              5.72%
              
              5.72%Vicis
      Capital Master Fund(2)
                Tower
      56, Suite 700, 126 East 56th Street, New York, NY
10005
              
              1,350,600
              
              5.44%
              
              5.44%Named
      Executive Officers and DirectorsC.
      Andrew Brooks(3)
              
              240,389
              
              0.97%
              
              *Robert
      J. Crowell(4)
              
              1,128,522
              
              4.54%
              
              4.54%T.
      Kendall Hunt(5)
              
              294,116
              
              1.18%
              
              1.18%Jason
      Ordway(6)
              
              448,003
              
              1.80%
              
              1.80%John
      Pavia
              
              32,500
              
              0.13%
              
              *Ronald
      Rose
              
              —
              
              —
              
              —Mark
      A. Taylor(7)
              
              1,150,063
              
              4.63%
              
              4.63%William
      Van Wyck(8)
              
              2,062,786
              
              8.30%
              
              8.30%Terrance
      Quinn(9)
              
              359,660
              
              1.45%
              
              1.45%Tina
      Sangha
              
              —
              
              —
              
              —Directors
      and Executive Officers as a Group
                (9
      persons)(10)
              
              5,716,039
              
              23.01%
              
              23.01%
 
 69
 Except
as indicated in the footnotes below and except as subject to community property
laws where applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
 
 *      Beneficial
ownership or total voting power, as the case may be, representing less than one
percent.
 
 (a)
              Based
      on 24,842,040 issued and outstanding shares of common
      stock.  Each holder of common stock shall be entitled to one
      vote per share of common stock on all matters submitted to a vote of
      stockholders, except as may otherwise be required by
    law.
 
 (1)
              Includes warrants to acquire
      294,118 shares of common stock.  Joshua Silverman has the power
      to vote and dispose of the shares held of record by Iroquois Master Fund
      Ltd.  Mr. Silverman disclaims beneficial ownership of these
      shares except to the extent of his pecuniary interest
      therein.
 (2)
              Includes
      warrants to acquire 296,000 shares of common stock.  Jason
      Adelman and Michael Liss have the power to vote and dispose of the shares
      held of record by Vicis Capital Master Fund.  Messrs. Adelman
      and Liss disclaim beneficial ownership of these shares except to the
      extent of their pecuniary interest
therein.
 (3)
              Includes
      214,141 shares of common stock eligible to be acquired within 60 days
      through the exercise of stock options and 26,248 shares of common stock
      held record jointly by Mr. Brooks and his wife, Margaret A.
      Brooks.
 (4)
              Includes
      1,044,348 shares of common stock eligible to be acquired within 60 days
      through the exercise of stock
options.
 (5)
              Includes
      294,116 shares of common stock held of record by the T. Kendall Hunt Trust
      of which Mr. Hunt serves as trustee.  Mr. Hunt disclaims
      beneficial ownership of these shares except to the extent of his pecuniary
      interest therein.
 (6)
              Includes
      362,392 shares of common stock eligible to be acquired within 60 days
      through the exercise of stock
options.
 (7)
              Includes
      77,138 shares of common stock eligible to be acquired within 60 days
      through the exercise of stock
options.
 (8)
              Includes
      560,061 shares of common stock eligible to be acquired within 60 days
      through the exercise of stock options.  Mr. Van Wyck served as
      our principal executive officer until March 17, 2008, the date on which
      Michael Tribolet was appointed as our principal executive
      officer.
 (9)
              Includes
      359,660 shares of common stock held of record jointly by Mr. Quinn and his
      wife, Michelle A. Quinn.
 (10)
              Footnotes
      (3) – (9) are incorporated
herein.
 
  ITEM 13.
              CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.
 
 Transactions with Related
Persons
 
 Split-Off
Transaction
 
 Immediately
prior to the closing of the Merger, we transferred all of our operating assets
and liabilities to our wholly-owned subsidiary, Aslahan Web Services, Inc., a
Nevada corporation (“AWS”).  Thereafter,
in connection with the closing of the Merger, we transferred all of the issued
and outstanding shares of capital stock of AWS to Tina Sangha, our majority
stockholder and our sole director at the time, pursuant to a split-off agreement
in exchange for the cancellation of 8,000,000 shares of our common stock held of
record by Ms. Sangha, which such shares represented approximately 58% of the
then outstanding shares of our common stock and all of the shares of our common
stock held of record by Ms. Sangha.  This transaction was approved by
both our stockholders and our Board of Directors.
 
 Employment
Agreements
 
 We
have entered into employment agreements with Messrs. Van Wyck, Crowell, Brooks,
Ordway and Taylor as well as Mr. Michael Tribolet, our Chief Executive Officer,
and Richard Turcott, our Chief Marketing Officer.  Summaries of the
terms of the employment agreements with Messrs. Van Wyck, Crowell, Brooks,
Ordway and Taylor may be found above in the section entitled “Employment
Agreements with Named Executive Officers.”  Summaries of the terms of
the employment agreements with Messrs. Tribolet and Turcott are included
below.
 
 70
 Michael
Tribolet
 
 We are
party to an employment agreement, dated March 17, 2008, with Michael Tribolet to
serve as our Chief Executive Officer, pursuant to which Mr. Tribolet is entitled
to receive an initial annual base salary of $275,000; Mr. Tribolet’s annual base
salary shall increase to $370,000 upon the closing of a corporate financing
transaction resulting in gross proceeds to RedRoller Holdings, Inc. of not less
than $2,500,000.  The agreement’s initial term expires on March 17,
2011.  On an annual basis, during the first 150 days of the fiscal
year (following the preparation of our annual financial statements), our board
of directors (with Mr. Tribolet abstaining if he is then a member of our board
of directors) will review and may increase, but not decrease, Mr. Tribolet’s
base salary and benefits based upon Mr. Tribolet’s performance, the results of
our operations and other relevant or associated factors.  The
agreement contains covenants not to compete during the term of Mr. Tribolet’s
employment and generally for three years thereafter.  The agreement
also provides for an annual bonus of $140,000 based on written performance
objectives defined by our board of directors or a committee thereof.  
If Mr. Tribolet is terminated without “cause” (as such term is defined in his
employment agreement) during the first 90 days of the term of his employment, we
shall pay Mr. Tribolet his base salary and accrued and unused vacation earned
through the effective date of his termination. In addition, 175,000 of the stock
options granted to Mr. Tribolet that are not then exercisable shall become fully
vested and, for a period of six months after the date of termination, Mr.
Tribolet will be entitled to receive health benefits coverage under the same
plan(s) or arrangement(s) in effect at the time of his
termination.  If Mr. Tribolet is terminated without “cause” after the
first 90 days of the term of his employment but during the first year of his
employment, we will pay Mr. Tribolet a separation payment equal to (i) his base
salary and accrued and unused vacation earned through the effective date of his
termination and continuing for a period of six months after the termination
date; and (ii) any earned but unpaid bonuses. In addition, 500,000 of the stock
options granted to Mr. Tribolet that are not then exercisable shall become fully
vested and, for a period of one year after the date of termination, Mr. Tribolet
will be entitled to receive health benefits coverage under the same plan(s) or
arrangement(s) in effect at the time of his termination.  If Mr.
Tribolet is terminated without “cause” during the second year of his employment,
we will pay Mr. Tribolet a separation payment equal to (i) his base salary and
accrued and unused vacation earned through the effective date of his termination
and continuing for a period of nine months after the termination date; and (ii)
any earned but unpaid bonuses. In addition, 500,000 of the stock options granted
to Mr. Tribolet that are not then exercisable shall become fully vested and, for
a period of one year after the date of termination, Mr. Tribolet will be
entitled to receive health benefits coverage under the same plan(s) or
arrangement(s) in effect at the time of his termination.  If Mr.
Tribolet is terminated without “cause” during the third year of his employment,
we will pay Mr. Tribolet a separation payment equal to (i) his base salary and
accrued and unused vacation earned through the effective date of his
termination; (ii) the greater of (A) the portion of his then applicable base
salary otherwise payable for the remainder of the third year of the term of his
employment or (B) six months of his then applicable base salary; and (iii) any
earned but unpaid bonuses. In addition, 325,000 of the stock options granted to
Mr. Tribolet that are not then exercisable shall become fully vested and, for a
period of one year after the date of termination, Mr. Tribolet will be entitled
to receive health benefits coverage under the same plan(s) or arrangement(s) in
effect at the time of his termination.
 If Mr.
Tribolet’s employment terminates for “good reason” (as such term is defined in
his employment agreement), we will pay Mr. Tribolet a separation payment equal
to his base salary and accrued and unused vacation earned through the
effective date of his termination and continuing for a period of six months
after the termination date. In addition, we shall grant Mr. Tribolet a
fully-vested stock option to purchase 500,000 shares of our common
stock.
  Richard
Turcott
 
 We are
a party to an employment agreement, dated August 29, 2007, with Richard Turcott
to serve as our Chief Marketing Officer, pursuant to which Mr. Turcott is
entitled to receive an annual salary of $165,000.  The agreement’s
initial term expires on August 29, 2010 and shall then automatically renew for
additional one-year periods unless we notify Mr. Turcott in writing within 30
days after the date which is one year prior to the then current employment
period that we do not wish to renew Mr. Turcott’s contract.  On an
annual basis, during the first 120 days of the fiscal year (following the
preparation of our annual financial statements), our board of directors will
review and may increase, but not decrease, Mr. Turcott’s base salary and
benefits based upon Mr. Turcott’s performance, the results of our operations and
other relevant or associated factors.  The agreement contains
covenants not to compete during the term of Mr. Turcott’s employment and
generally for five years thereafter.  The agreement also provides for
a quarterly bonus of $18,750 based on written performance objectives defined by
our
  71
 board
of directors or a committee thereof.  In the event that Mr.
Turcott’s employment is terminated by us without cause (as defined in the
agreement) or Mr. Turcott resigns his employment for good reason upon a change
of control (as such terms are defined in the agreement), (i) Mr. Turcott will
receive a severance payment equal to four months of his then annual base salary
in a lump sum, (ii) all stock options to purchase shares of our common stock
owned by Mr. Turcott shall become immediately vested and exercisable for up to
the longer of five years after the termination of Mr. Turcott’s employment or
the remainder of the stock option period provided for in the 2007 Plan, and
(iii) for a five year period after the termination of Mr. Turcott’s employment,
Mr. Turcott shall be entitled to insurance benefits
continuation.
 
 Transactions
with Advisors
  Joseph
Gunnar & Co., LLC
 
 Contemporaneous
with the closing of the Merger, we issued 7,058,824 shares of our common stock
and five-year warrants to purchase 1,764,706 shares of our common stock to
investors in a private offering exempt from registration under Section 4(2) of
the Securities Act and Rule 506 of Regulation D as promulgated by the SEC for
gross aggregate cash consideration to us of $6,000,000 (the “Private
Placement”).  In connection with the closing of the Private
Placement, we paid cash commissions totaling $291,891 and granted five-year
warrants to purchase an aggregate of 352,942 shares of our common stock to
Joseph Gunnar & Go. LLC (“JGUN”), the placement
agent for the Private Placement.  Each of the warrants are exercisable
at a purchase price of $1.28 per share of common stock.
 
 Pursuant
to a letter agreement with JGUN dated November 21, 2007, we are obligated to pay
JGUN a fee equal to (i) 2% of the gross proceeds raised by us in equity or
equity linked financings and (ii) 1% of gross proceeds raised by us in
non-convertible debt financings.  This obligation terminates on
November 13, 2008.
 
 Burnham
Hill Partners
 
 Pursuant
to a letter agreement dated November 28, 2007, we engaged Burnham Hill Partners
(“BHP”), a
division of Pali Capital, Inc., to act (i) as our exclusive financial advisor in
connection with a strategic transaction involving us, which may include a merger
or acquisition, partnership or strategic alliance (a “Strategic
Transaction”), and (ii) as our exclusive placement agent in connection
with any equity or debt financing transaction, or a registered direct offering
pursuant to an effective registration statement filed with the SEC (each, a
“Financing
Transaction”).  In connection with our engagement of BHP, we
are obligated to pay BHP (i) a transaction fee based upon a percentage of the
total aggregate consideration paid to us in connection with a Strategic
Transaction as follows: (A) three percent (3%) of up to $50,000,000 of aggregate
consideration, (B) two percent (2%) of between $50,000,000 and $100,000,000 of
aggregate consideration and (C) one and one-half percent (1.5%) of aggregate
consideration in excess of $100,000,000; (ii) seven percent (7.0%) of the gross
proceeds paid to us in an equity or equity linked financing; and (iii) four and
one half percent (4.5%) of the gross proceeds paid to us in any non-convertible
debt financing.  In connection with the closing of a Financing
Transaction, we are also obligated to issue BHP five-year warrants to purchase
the number of shares of our common stock equal to seven percent (7%) of the
number of shares issued by us in such Financing Transaction, which such warrants
shall be exercisable at 110% of the purchase price of the common stock issued in
such Financing Transaction, or, in the case of convertible securities being
issued, 110% of the conversion price of the securities issued in such Financing
Transaction.  In addition, in connection with our engagement of BHP,
we issued BHP a five-year warrant to purchase 75,000 shares of our common stock
at an exercise price of $1.27 which is equal to 110% of the closing price of our
common stock on November 27, 2007.  The term of our engagement with
BHP is 18 months (the “Term”).  During
the 12 months following the expiration of our engagement with BHP, BHP shall
continue to be entitled to receive the fees provided for in the letter agreement
in the event that we enter into a Strategic Transaction or a Financing
Transaction with a party with whom BHP had significant discussions regarding a
Strategic Transaction or a Financing Transaction during the
Term.
  In
connection with the Private Placement, entities affiliated with BHP purchased
1,590,600 shares of our common stock and were issued warrants to purchase
356,000 shares of our common stock.
 
 Director
Independence
 
 Our
common stock is listed on the OTC Bulletin Board inter-dealer quotation system,
which does not have director independence requirements.  For purposes
of determining director independence, we have applied the definitions set out in
the Marketplace Rules of the NASDAQ Stock Market.  Under NASDAQ Rule
4200(a)(15), a director is not considered to be
  72
 independent
if he or she is also an executive officer or employee of the
corporation.  Accordingly, our Board of Directors has determined that
each of our directors, except for Messrs. Van Wyck and Crowell, is an
“independent director” for the purposes of NASDAQ Rule 4200(a)(15) and has
no relationship which, in the opinion of the our Board of Directors, would
interfere with the exercise of independent judgment in carrying out the
responsibilities of a director.
  ITEM 14.
              PRINCIPAL
      ACCOUNTANT FEES AND SERVICES.
 
 Accounting
Fees and Services(1)
  During
the fiscal years ended February 28, 2007 and December 31, 2007, we paid our
independent public accountant to provide professional services in the following
categories and amounts:
 
 Fee
      Category
              
              Fiscal Year  ended,
      February 28, 2007(2)
              
              Fiscal Year  ended,
      December 31, 2007(3)Audit
      Fees
              
              $5,500
              
              $274,577Audit-Related
      Fees(4)
              
              $0
              
              $0Tax
      Fees(5)
              
              $0
              
              $0All
      Other Fees
              
              $0
              
              $0Total
      All Fees
              
              $5,500
              
              $274,577
  
 (1)
              Prior
      to the closing of the Merger, our fiscal year ended on February 28 of each
      calendar year.  Subsequent to the closing of the Merger, our
      Board of Directors changed our fiscal year to end on December 31 of each
      calendar year in accordance with our
  By-laws.
 (2)
              Represents
      payments by the Company to Fazzari + Partners
  LLP.
 (3)
              Represents
      payments by the Company to Marcum & Kliegman
  LLC.
 (4)
              “Audit-related fees”
      consist of fees for assurance and related services that are reasonably
      related to the performance of the audit or review of the Company’s
      financial statements.
 (5)
              “Tax fees” consist of
      fees for professional services for tax compliance, tax advice and tax
      planning.
 Pre-approval
Policies and
Procedures
 
 Our
audit committee’s policy is to pre-approve all audit and permissible non-audit
services provided by our independent auditor. These services may include audit
services, audit-related services, tax services, and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
the specific service or category of service and is generally subject to a
specific budget. The independent auditor and management are required to
periodically communicate to our Audit Committee regarding the extent of services
provided by the independent auditor in accordance with this pre-approval, and
the fees for the services performed to date. Our Audit Committee may also
pre-approve particular services on a case-by-case
basis.


73


PART
IV




ITEM 15.
            EXHIBITS,
      FINANCIAL STATEMENT SCHEDULES.




1.
            We
      have filed, or incorporated into this Form 10-K by reference, the exhibits
      listed on the accompanying Exhibit Index immediately following the
      signature page of this Form 10-K.






































































74


SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized in the City of Stamford, State of
Connecticut on April 29 , 2008.




REDROLLER
      HOLDINGS, INC.By:
              /s/ 
      Michael T. TriboletMichael T.
      TriboletChief Executive
      Officer(Principal
      Executive Officer)


POWER
OF ATTORNEY




KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Michael T. Tribolet and C. Andrew Brooks,
jointly and severally, as his or her attorneys-in-fact, each with the full power
of substitution, for him or her, in any and all capacities, to sign any
amendment to this Annual Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting to said attorneys-in-fact, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact or any of them, or their or his
or her substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.




Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


Signature
            
            Date/S/ Michael T.
      Tribolet
            
            March
      ­­28, 2008Michael
      T. Tribolet
              Chief
      Executive Officer
              (Principal
      Executive Officer)/S/ C. Andrew
      Brooks
            
            March
      ­­28, 2008C.
      Andrew Brooks
              Executive
      Vice President, Treasurer and Assistant Secretary
              (Principal
      Financial and Accounting Officer)/S/ William Van
      Wyck
            
            March
      ­­28, 2008William
      Van Wyck
              President
      and Director/S/ Robert J.
      Crowell
            
            March
      ­­28, 2008Robert
      J. Crowell
              Chairman
      of the Board of Directors/S/ Ronald
      Rose
            
            March
      ­­28, 2008Ronald
      Rose
              Director/S/ T. Kendall
      Hunt
            
            March
      ­­28, 2008T.
      Kendal l Hunt
              Director/S/ John P. Pavia
      III
            
            March
      ­­28, 2008John
      P. Pavia III
              Director/S/ Terrance
      Quinn
            
            March
      ­­28, 2008Terrance
      Quinn
              Director


75


EXHIBIT
INDEX




Exhibit
                Number
              
              Description
      of Document2.1*
              
              Merger
      Agreement by and among Mark A. Taylor, Taylor Systems Engineering
      Corporation, Red Roller, Inc. and RedRoller Merger Sub, Inc., dated as of
      March 11, 2005 (the “TSE Merger
      Agreement”).2.2*
              
              Amendment
      No. 1 to TSE Merger Agreement, dated as of November __,
      2005.2.3
              
              Agreement
      and Plan of Merger, dated October 22, 2007, by and between RedRoller Corp.
      and RedRoller Holdings Inc. (incorporated herein by reference to Exhibit
      2.1 to the Company’s Current Report on Form 8-K filed October 29,
      2007).2.4
              
              Agreement
      and Plan of Merger and Reorganization, dated as of November 13,
      2007, among RedRoller Holdings, Inc., RedRoller, Inc. and RedRoller
      Acquisition Corp. (incorporated herein by reference to Exhibit 2.2 to the
      Company’s Current Report on Form 8-K filed November 13,
    2007).3.1
              
              Certificate
      of Amendment to Articles of Incorporation of Aslahan Enterprises Ltd.
      (incorporated herein by reference to Exhibit 3.1 to the Company’s Current
      Report on Form 8-K filed October 29, 2007).3.2
              
              Certificate
      of Incorporation of RedRoller Holdings, Inc. (incorporated herein by
      reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed
      October 29, 2007).3.3
              
              Certificate
      of Amendment to Certificate of Incorporation of RedRoller Holdings, Inc.
      (incorporated herein by reference to Exhibit 3.1 to the Company’s Current
      Report on Form 8-K filed November 7, 2007).3.4
              
              By-laws
      of RedRoller Holdings, Inc. (incorporated herein by reference to Exhibit
      3.3 to the Company’s Current Report on Form 8-K filed October 29,
      2007)10.1
              
              Form
      of Warrant of RedRoller Holdings, Inc., dated as of November 13, 2007
      (incorporated herein by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K/A filed November 20, 2007).10.2
              
              Form
      of Lock-Up Agreement, dated as of November 13, 2007 (incorporated herein
      by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed November 13, 2007).10.3
              
              Split-Off
      Agreement, dated as of November 13, 2007 by and among RedRoller holdings,
      Inc., Tina Sangha and Aslahan Web Services, Inc. (incorporated herein by
      reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K
      filed November 13, 2007).10.4
              
              Registration
      Rights Agreement, dated as of November 13, 2007 (incorporated herein by
      reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K/A
      filed November 20, 2007).10.5
              
              Form
      of Director and Executive Officer Indemnification Agreement, dated as of
      November 13, 2007 (incorporated herein by reference to Exhibit 10.6 to the
      Company’s Current Report on Form 8-K filed November 13,
    2007).
  76
 Exhibit
                Number
              
              Description
      of Document
 10.6
              
              Employment
      Agreement effective as of July 11, 2007 by and between William Van Wyck
      and RedRoller, Inc. (incorporated herein by reference to Exhibit 10.7 to
      the Company’s Current Report on Form 8-K filed November 13,
      2007).10.7
              
              Employment
      Agreement effective as of  July 11, 2007 by and between Robert
      J. Crowell and RedRoller, Inc. (incorporated herein by reference to
      Exhibit 10.8 to the Company’s Current Report on Form 8-K filed November
      13, 2007).10.8
              
              Employment
      Agreement effective as of August 1, 2007 by and between C. Andrew Brooks
      and RedRoller, Inc. (incorporated herein by reference to Exhibit 10.9 to
      the Company’s Current Report on Form 8-K filed November 13,
      2007).10.9
              
              Employment
      Agreement effective as of July 11, 2007 by and between Jason T. Ordway and
      RedRoller, Inc. (incorporated herein by reference to Exhibit 10.10 to the
      Company’s Current Report on Form 8-K filed November 13,
    2007).10.10
              
              Employment
      Agreement effective as of August 29, 2007 by and between Richard Turcott
      and RedRoller, Inc. (incorporated herein by reference to Exhibit 10.11 to
      the Company’s Current Report on Form 8-K filed November 13,
      2007).10.11
              
              Employment
      Agreement effective as of December 31, 2005 by and between Mark A. Taylor
      and RedRoller, Inc. (incorporated herein by reference to Exhibit 10.12 to
      the Company’s Current Report on Form 8-K filed November 13,
      2007).10.12*
              
              Employment
      Agreement effective as of March 17, 2008 by and between Michael T.
      Tribolet and RedRoller Holdings, Inc.10.13
              
              2007
      Stock Option and Stock Incentive Plan of RedRoller Holdings, Inc.
      (incorporated herein by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed October 29, 2007).10.14
              
              Placement
      Agent Agreement, dated as of October 17, 2007 by and between RedRoller
      Holdings, Inc., RedRoller, Inc. and Joseph Gunnar & Co., LLC
      (incorporated herein by reference to Exhibit 10.14 to the Company’s
      Current Report on Form 8-K filed November 13, 2007).10.15*
              
              LetterAgreement
      dated as of November 28,
      2007by
      and betweenBurnam Hill
      Partners and RedRoller Holdings, Inc.10.16
              
              Form
      of Institutional Investor Subscription Agreement, dated as of November 13,
      2007 (incorporated herein by reference to Exhibit 10.3 to the Company’s
      Current Report on Form 8-K/A filed November 20, 2007).10.17
              
              Form
      of Retail Investor Subscription Agreement, dated as of November 13, 2007
      (incorporated herein by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed November 13,
2007).
  77
 Exhibit
                Number
              
              Description
      of Document
 14
              
              Code
      of Ethics of RedRoller Holdings, Inc. (incorporated herein by reference to
      Exhibit 14 to the Company’s Current Report on Form 8-K filed November 13,
      2007).21.1*
              
              Subsidiaries
      of the Registrant.24.1
              
              Power
      of Attorney (incorporated herein by reference to the signature page of
      this Annual Report on Form 10-K).


31.1*
              
              Certification
      of the Chief Executive Officer, as required by Rule 13a-14(a) of the
      Securities Exchange Act of 1934.31.2*
              
              Certification
      of the Chief Financial Officer, as required by Rule 13a-14(a) of the
      Securities Exchange Act of 1934.32.1*
              
              Certification
      of the Chief Executive Officer provided pursuant to 18 U.S.C.
      Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.31.2*
              
              Certification
      of the Chief Financial Officer provided pursuant to 18 U.S.C.
      Section 1350 as adopted pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.*
              
              Filed
      herewith.






























78