**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-KSB**




(Mark
      One)




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




For
      the
      fiscal year ended December 31, 2006




o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF
                1934




For
      the
      transition period from ________________to________________




Commission
      file number: 000-52023




**PURE
      VANILLA EXCHANGE, INC.**


(Name
      of
      small business issuer in its charter)




**Nevada**
            
            **98-0442839**(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer identification No.)




**805
      Third Avenue, 15** **th** **Floor,
      New York, NY 10022**


(Address
      of principal executive offices) (Zip Code)




Issuer’s
      telephone number: **(212)
      972-1600**




Securities
      registered under Section 12(b) of the Exchange Act: none




Securities
      registered under Section 12(g) of the Exchange Act: common stock, par value
      $0.001 per share




Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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. x Yes  **o** No




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. x




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      1
      2b-2 of the Exchange Act) Yes **o** **** No x




State
      issuer’s revenue for its most recent fiscal year: $77,568.




State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days: $4,710,393 (computed by reference to
      the
      closing sale price of the registrant’s common stock on April 13, 2007 as
      reported on the OTC Bulletin Board).




As
      of
      April 13, 2007 there were 70,826,542 shares of the registrant’s common stock
      outstanding.




Transitional
      Small Business Disclosure Format (Check one): Yes  **o** No
x









**PART
      I**




**FORWARD-LOOKING
      STATEMENTS**




*This
      annual report contains forward-looking statements that involve a number of
      risks
      and uncertainties. Although our forward-looking statements reflect the good
      faith judgment of our management, these statements can only be based on facts
      and factors currently known by us. Consequently, forward-looking statements
      are
      inherently subject to risks and uncertainties, and actual results and outcomes
      may differ materially from results and outcomes discussed in the forward-looking
      statements.*




*Forward-looking
      statements may be identified by the use of forward-looking words such as “may,”
“will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,”
“could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative
      of these terms or other similar expressions. These statements include but are
      not limited to statements under the captions “Risk Factors,” “Management’s
      Discussion and Analysis or Plan of Operation” and “Description of Business” as
      well as other sections in this annual report. The occurrence of any of the
      events discussed under the heading “Risk Factors” could materially adversely
      affect our business, results of operations and financial condition and, if
      any
      of these events occurs, the market price of our common stock could decline
      and
      holders of our common stock could lose all or part of their investment in our
      common stock.*




*The
      cautionary statements made in this annual report are intended to be applicable
      to all related forward-looking statements wherever they may appear in this
      annual report. Undue reliance should not be placed on these forward-looking
      statements, which speak only as of the date of this report. We undertake no
      obligation to publicly update any forward looking-statements, whether as a
      result of new information, future events or otherwise.*




**ITEM
      1. DESCRIPTION OF BUSINESS.**




**The
      Company**




Pure
      Vanilla eXchange, Inc. is an electronic payment processing facilitator that
      provides products and services that enable customers to pay for, and merchants
      to receive payment for, goods and services. We provide our products and services
      utilizing both our own proprietary network and other networks owned and operated
      by third parties. Except as the context otherwise requires, when we refer in
      this annual report to our company and operations, we are including those of
      both
      Pure Vanilla eXchange and our wholly owned subsidiary, Nimble Group,
      Inc.




Our
      principal executive office is located at 805 Third Avenue, 15th Floor, New
      York,
      New York and our telephone number is (212) 972-1600.




**Our
      Corporate History**




We
      were
      incorporated in the State of Nevada under the name Princeton Power Corporation
      on August 11, 2004. On November 29, 2004, we changed our name
      to NVS Entertainment, Inc.




On
      August
      30, 2005, the principals of Nimble Group, Inc., a Delaware corporation,
      organized a Nevada corporation under the name Pure Vanilla eXchange, Inc.
      Throughout this annual report we refer to Nimble Group, Inc. as “Nimble” and to
      the Nevada corporation organized by Nimble’s principals as “Old Pure Vanilla”.
      In October 2005, Old Pure Vanilla offered each Nimble shareholder the right
      to
      acquire shares of Old Pure Vanilla at a nominal price in amounts pro rata to
      their share ownership in Nimble, with rights of over-subscription. Old Pure
      Vanilla also issued shares to its management at a nominal price.




On
      March
      13, 2006, our wholly-owned subsidiary, NVS Acquisition Corp., a Nevada
      corporation, merged with and into Old Pure Vanilla. Old Pure Vanilla survived
      the merger as our wholly-owned subsidiary. In consideration of the merger,
      we
      issued the shareholders of Old Pure Vanilla shares of our common stock and
      the
      shareholders of Old Pure Vanilla became the holders of approximately 80% of
      our
      issued and outstanding common stock. On April 12, 2006, Old Pure Vanilla was
      merged into us and we changed our name to Pure Vanilla eXchange, Inc.




2




On
      December 31, 2006, PVNX Acquisition Corp., a Delaware corporation and our
      wholly-owned subsidiary, merged with and into Nimble. Nimble survived
      the merger as our wholly-owned subsidiary. In consideration of the merger,
      each
      outstanding share of Nimble common stock was converted into shares of our common
      stock and each security convertible into or exercisable for shares of Nimble
      common stock became convertible into or exercisable for shares of our common
      stock. As a result of the merger, the former holders of Nimble common stock
      and
      securities convertible into or exercisable for shares of Nimble common stock
      held approximately 40% of our common stock on a fully-diluted
      basis.




**Business
      History**




Under
      the
      name NVS Entertainment, we conducted the business of film acquisition,
      completion and distribution. We discontinued our film business, which had only
      nominal revenues and expenses, in connection with our acquisition of Old Pure
      Vanilla in March 2006.




Since
      March 2006, we have been engaged in the electronic payments services business.
      We provide
      card programs and electronic payment services that enable consumers to pay
      anonymously for the products and services they buy via the Internet and to
      pay
      taxes and other fees to government agencies electronically, in person, online
      and over the telephone. Early adopters of our products and services have
      included consumers who wanted to protect their identity and credit card data
      in
      the purchase of online adult content.




W e
      provide
      our electronic payment services through our proprietary,
      defined-access, closed-loop network of physical and virtual terminals. At the
      core of our network is our proprietary NimBill TM technology .
      Our
      NimBill technology allows our network
      to process and facilitate varied forms of electronic payment such as
      person-to-person, credit/debit/stored value/prepaid cards and electronic
      check/ACH . Our
      NimBill technology was developed by our subsidiary, Nimble, which has been
      engaged in the electronics payment business since 1994.




From
      March 2006 until our acquisition of Nimble in December 2006, we licensed our
      NimBill technology from Nimble and obtained the services of certain Nimble
      employees, including senior management, and office space and support services
      from Nimble pursuant to a license and service agreement that was entered into
      in
      connection with the organization of Old Pure Vanilla. We paid Nimble for those
      services on a fee-for-service basis that we believe was fair to both parties,
      but which was not negotiated on an arms-length basis because the same people
      were in control of both companies. Since our acquisition of Nimble, we have
      combined our operations with Nimble’s and we now share office space and the
      services of our employees. We report Nimble’s financial results on a
      consolidated basis with our own.




**Industry
      Overview**




Payment
      processing service providers offer high-volume electronic transaction payment
      processing and support services directly to merchants and their customers,
      government agencies, and others. Generally, the payment processing market
      continues to transition from traditional financial institution providers to
      independent entities that provide specific solutions to their customers. We
      believe merchants are seeking more efficient distribution channels, as well
      as
      increased technological capabilities required for the rapid and efficient
      creation, processing, handling, storage, and retrieval of information and that
      we can provide such products and services.




3




Our
      products and services employ technologies that enable merchants to accept
      payments from a diverse consumer base using a wide variety of payment methods.
      Cash, credit cards, debit cards, stored value cards, prepaid cards, Automated
      Clearing House (ACH) payments, ATM, check and wire transfer are examples of
      methods by which consumers can pay for the goods and services that they
      purchase. They can do so using any type of currency. Each of these payment
      methods serves multiple constituencies and represents a different value to
      a
      merchant. Examples of the payment methods now available include:




·
            Prepaid
                cards and accounts, which a customer funds and then uses to pay for
                goods
                and services, in much the same manner as a debit card. The volume
                of
                transactions made using such cards is expected to surpass $100 billion
                annually by 2007 according to a report published by the Tower Group
                in
                January 2006.




·
            ACH,
                which provides inter-bank clearing of electronic payments for ACH
                participating depository financial institutions. According to NACHA-The
                Electronic Payments Association, 14 billion ACH transactions were
                completed in 2005, representing an increase of 16.2% over 2004. The
                dollar
                value of those transactions was approximately $3.2
                trillion.




·
            Stored
                value cash cards and accounts, which can be used to provide branded,
                highly personalized or anonymous retail and e-tail marketing programs.
                Stored-value cash cards and accounts are funded by the consumer and
                may be
                reloaded with additional funds multiple times. Stored-value cash
                cards are
                now being used instead of paper gift certificates at an increasing
                rate.




·
            Payroll
                cards, which are increasingly being used by employers to pay their
                employees. Value is electronically “loaded” by the employer onto the
                employee’s card and the card can then be used by the employee to purchase
                goods and services, typically through existing debit card networks.




·
            Online
                transactions in which the purchaser’s identity is
                protected.




There
      are
      also untapped markets that provide opportunities for the introduction of payment
      technologies. Large numbers of merchants are seeking access to the growing
      number of persons who are “un-banked” (that is, without banking relationships),
      including some members of the Hispanic community and the youth population.
      These
      consumers currently have limited access to credit cards or payment methods
      other
      than cash. Vendors of goods and services marketed to these demographics are
      actively seeking suppliers of cashless payment mechanisms for distribution
      to
      and use by those markets. Products such as our stored value cards are ideally
      suited to those markets.




Today,
      the networks for processing electronic payments are disparate. Each type of
      payment has different processing requirements. However, the increasing size
      of
      the electronic payments market is creating a growing demand for integrated
      processing solutions. In addition to being able to process a variety of payment
      types, a successful integrated processing network must be secure, quick and
      capable of providing vendors with business-enhancing information, such as
      information useful in loyalty and incentive programs. Our plan is to provide
      integrated solutions that will meet all these needs and we currently provide
      products and services that satisfy some of them.




**Our
      Business**




We
      are
      developing a suite of payment products and services that are intended to address
      the needs of both large established markets and rapidly emerging markets. To
      date,
      three of our products and services are commercially available.The
      payment products and services we currently offer and those we are developing
      are
      each intended to serve as both a stand-alone revenue-generating solution to
      an
      existing market need and as part of a synergistic business model. To date,
      we
      have focused our efforts on specific segments of the payment market and intend
      to continue to grow our business on a segment-by-segment basis. We have
      identified and focused our efforts on entering three key, strategic segments
      of
      the electronic payments market: payment gateways, stored value and proprietary
      networks. We expect our foothold in these market segments to provide a basis
      for
      expansion of our business into additional markets.




*Payment
      Gateway* ****




We
      have
      created patent pending proprietary software which enables integration directly
      into the payment processing system of many leading processors, including Global
      Payments, Inc., one of the largest payment processors for merchant services,
      to
      serve as a payment gateway for processing credit and debit cards. The creation
      of this payment gateway allows us to be an integrated payment processor in
      markets such as government (state and local) as well as fast food or quick
      service restaurants (QSRs) where we currently have existing products and
      services deployed.




4




Through
      our NimBill Government division we provide state and local government agencies
      the ability to accept credit and debit cards as a form of payment for taxes
      and
      fees, at no cost to the agency, in person, online and by phone. NimBill
      Government generates revenues by charging the cardholder a convenience/service
      fee based in part upon the amount of the payment transaction. Charging a fee
      to
      the cardholder rather than the government agency (merchant) is not ordinarily
      permitted by card issuers and we do so, with respect to some card issuers,
      after
      obtaining the consent of the card issuer on an agency by agency basis and,
      with
      respect to other card issuers, in
      connection with pilot programs maintained by those issuers We
      are
      currently actively processing credit and debit card transactions for government
      agencies in New York, Kentucky, Montana, Arizona and Wyoming. We expect to
      expand NimBill Government’s operations to additional state and municipal
      agencies and offices.




We
      also
      facilitate payments for credit and debit card transactions for various QSRs
      through our BreezeOne product which allows us to completely integrate with
      certain point of sale (POS) terminals operated by PAR Technologies, Inc. and
      act
      as a payment gateway. PAR Technologies is the leading operator of POS terminals
      in the QSR industry. In this business, we integrate with a restaurant’s POS
      terminal and route the transactions through a direct link into Global Payments’
backend. We generate a fee from each transaction we process.




*Stored
      Value*




We
      have
      created one of the first secure stored value card/payment systems to facilitate
      the online purchases of products and services discreetly. This solution is
      specifically designed to tackle the issues of credit card fraud and identity
      theft. Through our patent-pending technology, consumers are able to purchase
      content and products online by either funding an online account (a Pure Vanilla
      Account) or by purchasing a card (a Pure Vanilla Card) online in a safe and
      secure environment without compromising their identity or credit. Early adopters
      of our products and services have included consumers who wanted to protect
      their
      identity and credit card data in the purchase of online adult content.




The
      anonymous payment transactions made possible by our stored value products
      eliminate the merchant’s exposure to charge-backs, reduce processing fees and
      significantly accelerate cash flow. Through our stored value products we support
      recurring and “pay per use” billing and provide dynamic reporting to the
      merchants. We also address current challenges that consumers face, such as
      user
      anonymity and credit card fraud.




Our
      revenue model has three components: loading fees, account management fees and
      processing fees.




·
            We
                charge a $4.00 loading fee to each consumer who purchases a Pure
                Vanilla
                Card in a store or who funds a Pure Vanilla Account online. We pay
                a
                percentage of the loading fees attributable to Pure Vanilla Cards
                to our
                retail distributors but is not shared in online funding
                transactions.




·
            We
                charge online merchants a processing fee equal to a percentage of
                the
                revenue they receive from transactions that involve the use of Pure
                Vanilla Cards and Pure Vanilla Accounts. We currently do not charge
                merchants a set-up fee or require a cash reserve, although we may
                do so in
                the future. We intend to evaluate the sufficiency of our fee structure
                on
                an ongoing basis in light of our
                experience.




·
            We
                may charge an account management fee to card and accountholders if
                there is no transaction activity on the relevant Pure Vanilla Card
                or in
                the relevant Pure Vanilla account where permitted by
                law.




*Proprietary
      Network*




We
      have
      created a proprietary network in which we can process transactions for stored
      value cards and accounts and person-to-person payments. This network allows
      for
      the distribution, activation and processing of such cards and accounts without
      using any third party processing (rail) networks, which eliminates costs,
      increases speed and most importantly protect the authenticity of transactions
      to
      mitigate security risks. By owning this network, we are able to offer true
      loyalty programs since the entire transaction process flow goes through a single
      network thereby allowing for greater customer data which merchants can use
      to
      provide increased value to a customer.




5




We
      intend
      to provide our electronic payment service directly to consumers via our websites www.purevanilla.com , www.nimblegroup.com,  www.nimbill.com and www.breezeone.com and to
      distribute our stored value cards through retail outlets that will sell and
      load
      monetary value onto our cards. These retail stores could include convenience
      stores, bodegas, gasoline service stations and retailers that sell adult
      material. Consumers will be able to either go to those retailers and purchase
      and store monetary value on a stored value card or go to our website and fund
      an
      online account. They will then be able to purchase goods or content at our
      participating websites up to the value stored on their cards or in their
      accounts.




**Competition**




The
      market for electronic payment products and services is highly competitive.
      Our
      primary competitors include other independent processors and electronic money
      transmitters, as well as certain major national and regional banks, financial
      institutions and independent sales organizations. In the government payments
      market our competitors include Link2Gov, a subsidiary of Metavante Corporation,
      and Official Payments, a subsidiary of Tier Technologies.  In
      the
      stored value market our competitors include InComm and NFinanSe . Please
      see the information below under the caption “Risk Factors -
      Our
      competitors are larger and have greater financial and operational resources
      than
      we do, which may give them advantages in our market.”




Our
      primary strategy to distinguish ourselves from our competitors focuses on
      offering a variety of electronic transaction payment processing solutions to
      merchants and their customers in specific under-served market segments. Our
      solutions include vertical market functionality, anonymity where desired by
      the
      customer, and sophisticated reporting features that add value to the information
      obtained from our payment processing databases. We also believe that our
      knowledge of under-served market segments enables us to offer specific,
      integrated solutions to our customers.




**Marketing**




We
      believe that significant opportunities exist for continued growth in the
      application of electronic transaction payment processing. Large numbers of
      merchants are seeking access to the growing number of persons who are
“un-banked” (that is, without banking relationships), including some members of
      the Hispanic community and the youth population. These consumers currently
      have
      limited access to credit cards or payment methods other than cash. Vendors
      of
      goods and services marketed to these demographics are actively seeking suppliers
      of cashless payment mechanisms for distribution to and use by those markets.
      We
      believe that products such as our stored value cards are ideally suited to
      those
      markets and accordingly we have focused our marketing efforts on those markets.




In
      March
      2006, *The
      Nilson Report* (a
      leading source of news and information on consumer payments systems) reported
      that worldwide annual Visa and MasterCard purchase volume increased 15% to
      over
      $3.8 trillion in 2005. In February 2006, *The
      Nilson Report* estimated that more than $1.7 trillion of annual consumer spending is charged
      using Visa and MasterCard cards in the United States, a $0.2 trillion, or 13%,
      increase from its comparable February 2005 estimate of $1.5 trillion.




**Intellectual
      Property; Research and Development**




We
      currently rely on a combination of patent, trade secret, copyright and trademark
      law, as well as non-disclosure agreements and invention assignment agreements,
      to protect our technology and other proprietary information. We
      have
      filed two United States patent applications relating to our business processes.
      Our applications currently remain pending. In the future we may file foreign
      patent applications. We intend to continue to
      rely
      on patent, trademark, service mark, copyright and trade secret laws, as
      applicable, and on restrictions on disclosure and transfer of title and other
      methods.




Despite
      these precautions, it may be possible for a third party to copy or otherwise
      obtain and use our proprietary information without authorization or to develop
      similar technology independently. Please see the information below under the
      caption “Risk Factors - Our
      business employs proprietary technology and information which may be difficult
      to protect and may infringe on the intellectual property rights of third
      parties.”




During
      our 2006 and 2005 fiscal years, we incurred approximately $ 863,000
      and $622,000 of software development costs in connection with the development
      of
      our NimBill technology .




6




**Regulation**




Various
      aspects of our business and planned businesses are subject to U.S. federal,
      state and local regulation. Our failure to comply with applicable regulations
      may result in the suspension or revocation of licenses or registrations, the
      limitation, suspension or termination of service, and/or the imposition of
      civil
      and criminal penalties, including fines. Certain of our services and planned
      services also are subject, indirectly through our relationship with a payment
      processing provider, to rules promulgated by various payment networks such
      as
      Visa and MasterCard and others may become subject to such rules in the future,
      as more fully described below.




*Regulation
      of Internet Transactions*




Because
      we are engaged in financial transactions involving the transfer of money,
      including transfers over the Internet, new laws and regulations that will affect
      us may be adopted. Such laws and regulations may cover issues such as: user
      privacy, pricing, content, copyrights, distribution, and characteristics and
      quality of products and services that could be applicable to our business.
      In
      addition, the growth of the Internet and electronic commerce, coupled with
      publicity regarding Internet fraud, may lead to the enactment of more stringent
      consumer protection laws. These laws may impose additional burdens on our
      business. Congress is considering laws regarding Internet taxation. In addition,
      various states are considering legislation directed to electronic commerce
      which
      if enacted could affect our business. The applicability of many of these laws
      to
      our business is uncertain and could expose us to substantial liability. Any
      new
      legislation or regulation, or the application of existing laws and regulations
      to our business, could materially and adversely affect us. If we were alleged
      to
      violate federal, state or foreign, civil or criminal law, even if we could
      successfully defend such claims, it could materially and adversely affect
      us.




*Money
      Transmitter Regulation*




The
      laws
      of a number of states require that persons engaged in the business of
      transmitting money register or become licensed. We are not currently engaged
      in
      that business in any jurisdiction, and therefore have not filed any registration
      or licensing applications. However, the business in which we intend to become
      engaged is likely to be classified and subject to licensure as a money
      transmittal business under the laws of some states. We intend to apply for
      and
      to become licensed in each jurisdiction in which we are transacting business
      and
      in which the business that we transact requires such licensure. We are not
      aware
      of any factors relating to our business, our officers and directors or our
      principal shareholders that would prevent us from becoming so licensed where
      necessary. We do not expect any licensing requirements to have any material
      effect on our business or operations.




*Inactivity
      Fees*




One
      of
      the components of our income is a fee that we charge consumers if a Pure Vanilla
      Card or Pure Vanilla Account is inactive for more than 90 days. Some states
      have
      enacted, or are considering enacting, laws that will preclude us from charging,
      collecting or retaining such fees. If we transact business or are subject to
      regulation in states that have such laws or regulations, there could be an
      adverse effect on our income. That effect could be material.




*Patriot
      Act*




The
      Patriot Act was enacted into law in 2001. Among other things, the Patriot
      Act requires
      certain persons (including businesses which are involved in cash transactions
      involving more than $10,000) to file suspicious activity reports, to take
      certain special measures and satisfy certain due diligence requirements to
      combat foreign money laundering. The Patriot Act also establishes minimum new
      customer identification standards and recordkeeping requirements and contains
      certain recommended methods for verification of the identity of foreign
      customers. Certain information is required to be shared with law enforcement
      agencies. Covered businesses are required to have certain training programs
      and
      internal policies, procedures and controls in place. It is possible that certain
      of our activities will require compliance with the Patriot Act, and we intend
      to
      so comply.




7





*Privacy
      and Information Security Regulations*





We
      provide services that may be subject to various state and Federal privacy laws
      and regulations. Relevant Federal privacy laws include the Gramm-Leach-Bliley
      Act, which applies directly to a broad range of financial institutions and
      indirectly to companies that provide services to financial institutions. Federal
      privacy laws restrict the collection, processing, storage, use and disclosure
      of
      personal information, require notice to individuals of privacy practices and
      provide individuals with certain rights to prevent use and disclosure of
      protected information. These laws also impose requirements for safeguarding
      personal information through the issuance of data security standards or
      guidelines. Certain state laws impose similar privacy obligations, as well
      as,
      in certain circumstances, obligations to provide notification to affected
      individuals, state officers and consumer reporting agencies, as well as
      businesses and governmental agencies that own data, of security breaches of
      computer databases that contain personal information.





We
      comply
      with standards such as the PCI Data Security Standard and in January 2007,
      we
      received Level 1 CISP (Cardholder Information Security Program) certification.
      The PCI Data Security Standard represents a common set of industry tools and
      measurements to help ensure the safe handling of sensitive information.
      Initially created by aligning Visa’s Account Information Security
      (AIS)/Cardholder Information Security (CISP) programs with MasterCard’s Site
      Data Protection (SDP) program, the standard provides an actionable framework
      for
      developing a robust account data security process - including preventing,
      detecting and reacting to security incidents. Participation in this program
      is
      often a prerequisite for participating in payment processing programs of Visa
      and MasterCard. As part of the program, our systems must be monitored internally
      and are subject to periodic compliance audits.





*Association
      and Network Rules*





We
      are
      not currently directly subject to network and association rules, but must remain
      compliant with the PCI Data Security Standard described above to process certain
      payment transaction through third party payment processors such as Global
      Payments, Inc. In addition we plan to participate in the Visa Tax Payment Pilot
      Program and the MasterCard Convenience Fee Program in connection with the
      services we offer to government agencies. Participation in these programs will
      require us to comply with the program rules, as well as remaining compliant
      with
      these data security standards. The failure to comply could prevent us from
      entering the programs or subject us to program fines and fees.





**Employees**





We
      had 14
      employees as of April 13, 2007, all
      but
      one of whom are employed full time. None of these employees is covered by
      a collective bargaining agreement, and our management believes that our
      relations with our employees are good.





**AVAILABLE
      INFORMATION**




Our
      Internet website is located at http:// www.purevanilla .com.
      The
      reference to our Internet website does not constitute incorporation by reference
      of the information contained on or hyperlinked from our Internet website and
      should not be considered part of this document.




The
      public may read and copy any materials we file with the Securities and Exchange
      Commission (“SEC”) at the SEC’s Public Reference Room at 100 F Street, N.E.,
      Washington, D.C. 20549. The public may obtain information on the operation
      of
      the Public Reference Rooms by calling the SEC at 1-800-SEC-0330. The SEC also
      maintains an Internet website that contains reports, proxy and information
      statements and other information regarding issuers that file electronically
      with
      the SEC. The SEC’s Internet website is located at http://www.sec.gov. You may
      also request a copy of our filings at no cost by writing us at: Pure Vanilla
      eXchange, Inc., 805 Third Avenue, 15th **** Floor,
      New York, NY 10022, Attention: Mr. John Cook, Corporate Secretary, or
      telephoning us at: (212) 972-1600.




**RISK
      FACTORS**




*In
      addition to the other information included in this annual report, the following
      factors should be carefully considered in evaluating our business, financial
      position and future prospects. Any of the following risks, either alone or
      taken
      together, could materially and adversely affect our business, financial position
      or future prospects. If one or more of these or other risks or uncertainties
      materialize, or if our underlying assumptions prove to be incorrect, our actual
      results may vary materially from what we have projected. There may be additional
      risks that we do not presently know or that we currently believe are immaterial
      which could also materially adversely affect our business, financial position
      or
      future prospects.*




8




**RISKS
      RELATED TO OUR BUSINESS** **AND INDUSTRY**




***Our
      need for additional financing is acute and failure to obtain adequate financing
      could lead to the financial failure of our company in the
      future.***




Our
      existing cash resources are insufficient to enable us to maintain operations
      as
      presently conducted and meet our obligations as they come due. We require
      additional funds to repay our loans upon their scheduled maturity, continue
      to
      meet our liquidity needs, maintain operations and realize our business plan.
      We
      currently anticipate that we will be able to satisfy our operating requirements
      and current liabilities solely through raising additional funds from third
      party
      investors. Management is seeking to raise capital that will provide the funds
      needed to continue our business operations and realize our business plans.
      Presently, we do not have any commitment from any person regarding any
      additional capital and there can be no assurance that additional capital will
      be
      available to us on commercially acceptable terms or at all. If we are unable
      to
      raise funds on an immediate basis, we will need to further curtail expenses,
      reduce planned sales and marketing and research and development efforts, forego
      business opportunities and cease operations. Additional equity financings are
      likely to be dilutive to holders of our common stock and debt financing, if
      available, and may involve significant payment obligations and covenants that
      restrict how we operate our business.




We
      also
      may be required to seek additional financing in the future to respond to
      increased expenses or shortfalls in anticipated revenues, accelerate product
      development and deployment, respond to competitive pressures, develop new or
      enhanced products, or take advantage of unanticipated acquisition opportunities.
      We cannot be certain we will be able to find such additional financing on
      commercially reasonable terms, or at all. If we are unable to obtain additional
      financing when needed, we could be required to modify our business plan in
      accordance with the extent of available financing.




Our
      independent registered public accounting firm’s report accompanying our
      consolidated financial statements for the year ended December 31, 2006 includes
      an explanatory paragraph relating to the uncertainty of our ability to continue
      as a going concern. This qualification may make it more difficult for us to
      raise additional capital when needed. We believe that there are conditions
      that
      raise substantial doubt about our ability to continue as a going concern. The
      accompanying consolidated financial statements do not include any adjustments
      relating to the recoverability of reported assets or satisfaction of liabilities
      should we be unable to continue as a going concern.




***We
      have a history of losses and we expect these losses to continue for the
      foreseeable future.***




To
      date
      we have incurred significant net losses. We incurred net losses applicable
      to
      common stockholders of $14,119,692 and $3,328,860 for the years ended December
      31, 2006 and 2005, respectively. As of December 31, 2006, we had an accumulated
      deficit of $31,070,026. We expect to continue to incur net losses for the
      foreseeable future as we continue to develop our products and services. We
      have
      been funding our operations through the sale of our securities and expect to
      continue doing so for the foreseeable future. Our ability to generate and
      sustain significant additional revenues or achieve profitability will depend
      upon the factors discussed elsewhere in this “Risk Factors” section. We cannot
      assure you that we will achieve or sustain profitability or that our operating
      losses will not increase in the future. If we do achieve profitability, we
      cannot be certain that we can sustain or increase profitability on a quarterly
      or annual basis in the future. We expect to increase expenses for research
      and
      development, sales and marketing, administration as continue to execute our
      business plan.




***A
      default by us under our senior secured promissory note would enable the note
      holder to take control of all of our assets.***




On
      December 22, 2006, we entered into a securities purchase agreement with an
      institutional investor, pursuant to which we issued and sold to the investor
      a
      senior secured convertible promissory note in the principal amount of $1,500,000
      and a warrant to purchase 450,000 shares of our common stock at an exercise
      price of $2.48782 (subject to adjustment). The aggregate purchase price paid
      by
      the investor for the note and the warrant was $1,424,500. Interest on the note
      accrues at the annual rate of 10.0% and is payable, in cash, monthly in arrears
      beginning on February 1, 2007 and on the first day of each calendar month
      thereafter until the maturity date of the note. Upon the occurrence and during
      the continuation of an event of default, interest on the note shall accrue
      at
      the annual rate of 15.0%. The principal amount of the note is due and payable
      in
      monthly installments of $250,000 beginning on July 1, 2007 and on the first
      day
      of each calendar month thereafter until paid in full.  The note is
      scheduled to mature on December 26, 2007.




9




To
      secure
      our obligations under the note, we granted the investor a security interest
      in
      all of our assets (including, without limitation, those of Nimble) pursuant
      to
      the terms and conditions of a security agreement. The security interest
      terminates upon payment or satisfaction of all of our obligations under the
      note. We believe that we will be able to satisfy these obligations when due
      only
      by raising funds from the sale of our debt or equity securities. We currently
      have no commitment for such funds. A default by us under the note would enable
      the investor to foreclose on all of our assets. The investor has no operating
      experience in our line of business and any foreclosure could force us to
      substantially curtail or cease our operations.




***Our
      current operations have a limited operating history, which make us a speculative
      investment.***




Although
      we launched PureVanilla.com in August 2006 and NimBill Government and BreezeOne
      in September 2005 and March 2003, respectively, prior to our acquisition of
      Nimble in December 2006, we devoted substantially all our efforts to
      establishing a new business and had not generated any significant
      revenues and
      were
      therefore regarded for financial reporting purposes as a “development stage
      company”. Accordingly, we are subject to all of the risks inherent in the
      establishment of a new business enterprise in a nascent and evolving field.
      Our
      limited operating history makes it difficult to evaluate our financial
      performance and prospects. No assurance can be made at this time that we will
      operate profitably or that we will have adequate working capital to meet our
      obligations as they become due.




***Our
      business employs proprietary technology and information which may be difficult
      to protect and may infringe on the intellectual property rights of third
      parties.***




Our
      success depends, in part, on our ability to adequately protect our proprietary
      rights and to operate without infringing on the proprietary rights of third
      parties. We currently have United States patent applications pending and in
      the
      process of being filed and in the future we may file foreign patent
      applications. There can be no assurance that the patents of others will not
      have
      an adverse effect on our ability to conduct our business, that any of our
      pending patent applications will be approved, that we will develop additional
      proprietary technology that is patentable or that any patents issued to us
      will
      provide us with competitive advantages or will not be challenged by third
      parties. Further, there can be no assurance that others will not independently
      develop similar or superior technologies, duplicate elements of our payment
      processing technology or design around it.




It
      is
      possible that we may need to acquire licenses to, or to contest the validity
      of,
      issued or pending patents or claims of third parties. There can be no assurance
      that any license acquired under such patents would be made available to us
      on
      acceptable terms, if at all, or that we would prevail in any such contest.
      In
      addition, we could incur substantial costs in defending ourselves in suits
      brought against us for alleged infringement of another party’s patents or in
      defending the validity or enforceability of our patents, or in bringing patent
      infringement suits against other parties based on our patents.




In
      addition to patent protection, we also rely on trade secrets, proprietary
      know-how and technology that we seek to protect, in part, by confidentiality
      agreements with our prospective joint venture partners, employees and
      consultants. There can be no assurance that these agreements will not be
      breached, that we will have adequate remedies for any breach, or that our trade
      secrets and proprietary know-how will not otherwise become known or be
      independently discovered by others.




***Our
      competitors are larger and have greater financial and operational resources
      than
      we do, which may give them advantages in our market.***




Our
      competitors and potential competitors include other independent processors
      and
      electronic money transmitters, as well as certain major national and regional
      banks, financial institutions and independent sales organizations. In the
      government payments market our competitors include Link2Gov, a subsidiary of
      Metavante Corporation, and Official Payments, a subsidiary of Tier
      Technologies.  In
      the
      stored value market our competitors include Incomm and NFinanSe .
      These
      and our other competitors and potential competitors are larger than we are
      and
      have access to significantly greater financial, technical, sales and marketing
      and operational resources than we have. As a result, our competitors may devote
      greater resources to the development, promotion, sale and support of their
      products and services. Many of our competitors also have large market
      capitalizations or cash reserves and may be able to acquire new technologies
      or
      products through acquisitions or licensing arrangements. In addition, our
      competitors may have much greater brand name recognition, more extensive
      customer bases, more developed distribution channels and broader product
      offerings than we do. Many of our competitors already have products and services
      that are well established in the markets in which we compete. All of these
      advantages may permit our competitors to develop and market products and
      services that are more secure, less expensive or more widely accepted than
      our
      products and services. There can be no assurance that our current products
      and
      services or those we may develop will be able to compete successfully with
      our
      competitors’ existing products and services or those they may develop.




10




***In
      order to remain competitive and to increase our revenues and earnings, we must
      continually update our products and services, a process which could result
      in
      increased research and development costs in excess of historical levels and
      the
      loss of revenues, earnings and customers if the new products and services do
      not
      perform as intended or are not accepted in the marketplace.***




The
      electronic payments market in which we compete includes a wide range of products
      and services including electronic transaction payment processing, consumer
      money
      transfer, transaction reporting and other customer support services. This market
      is characterized by technological change, new product introductions, evolving
      industry standards and changing customer needs. In order to remain competitive,
      we are continually involved in a number of research and development projects
      including the development of a new front-end platform for electronic payments
      processing. These projects carry the risks associated with any research and
      development effort, including cost overruns, delays in delivery and performance
      problems. In the electronic payment market these risks are even more acute.
      Our
      market is constantly experiencing rapid technological change. Any delay in
      the
      delivery of new products or services could render them less desirable to our
      customers, or possibly even obsolete. In addition, the products and services
      we
      deliver to the electronic payments market are designed to process very complex
      transactions and deliver reports and other information on those transactions,
      all at very high volumes and processing speeds. Any performance issue that
      arises with a new product or service could result in significant processing
      or
      reporting errors. As a result of these factors, our research and development
      efforts could result in increased expenses, a loss of revenue if promised new
      products are not timely delivered to our customers, or a loss of revenue or
      possible claims for damages if new products and services do not perform as
      anticipated.




***We
      depend on third parties to provide our products and services and any failure
      by
      these third parties to perform their obligations satisfactorily could hurt
      our
      reputation, operating results and competitiveness.***





We
      rely
      on third parties to provide our products and services. We have an agreement
      with
      a merchant account provider to provide payment processing services to us. Our
      merchant account provider in turn relies on a third party payment processor
      to
      complete payment transactions. We have no contractual relationship with the
      payment processor. We also rely on a third-party co-location facility for our
      primary data center. The failure of any of these third parties to meet their
      contractual obligations, our inability to obtain favorable contract terms,
      failures or defects attributable to these third parties or their products,
      or
      the discontinuation of the services of a key subcontractor or vendor could
      result in significant cost and liability, diminished operating results and
      damage to our reputation and competitive position.




***Security
      breaches or system failures could harm our reputation and adversely affect
      future operating results.***




We
      collect personal consumer data, such as names, credit and debit account numbers,
      checking account numbers, and payment history records. We process that data,
      and
      deliver our products and services, by utilizing computer systems and
      telecommunications networks operated both by us and by third party service
      providers. Although plans and procedures are in place to protect this sensitive
      data and to prevent failure of, and to provide backup for, our systems, we
      cannot be certain that our measures will be successful. A security breach or
      other misuse of such data, or failures of key operating systems and their
      back-ups, could harm our reputation and deter customers from using our products
      and services, increase our operating expenses in order to correct the breaches
      or failures, expose us to unbudgeted or uninsured liability, increase our risk
      of regulatory scrutiny including the imposition of penalties and fines under
      state, federal and foreign laws, and adversely affect our continued Visa and
      MasterCard certification and financial institution sponsorship.




11




***Reduced
      levels of consumer spending can adversely affect our revenues and earnings.***




Significant
      portions of our revenue are derived from fees from processing consumer credit
      card and debit card transactions. Any recession or economic downturn could
      negatively impact consumer spending and adversely affect our revenues and
      earnings.




***In
      order for us to grow and achieve profitability, we must continue to expand
      our
      share of the existing electronic payments market and also expand into new
      markets.***




Our
      future growth and profitability depend upon our expansion within the market
      in
      which we currently operate, the further expansion of this market, the emergence
      of other markets for electronic transaction payment processing, including
      Internet payment systems, and our ability to penetrate these markets. As part
      of
      our strategy to achieve this expansion, we are continually looking for
      acquisition opportunities, investments and alliance relationships with other
      businesses that will allow us to increase our market penetration, technological
      capabilities, product offerings and distribution capabilities. We may not be
      able to successfully identify suitable acquisition, investment and alliance
      candidates in the future, and if we do, they may not provide us with the
      benefits we anticipated. Once completed, investments and alliances may not
      realize the value that we expect.




Our
      expansion into new markets is also dependent upon our ability to apply our
      existing technology or to develop new applications to meet the particular
      service needs of each new market. We may not have adequate financial or
      technological resources to develop products and distribution channels that
      will
      satisfy the demands of these new markets. If we fail to expand into new and
      existing electronic payments and money transfer markets, we may not be able
      to
      continue to grow our revenues and earnings.




***Increases
      in credit card association fees may result in the loss of customers or a
      reduction in our profit margin.***




From
      time
      to time, Visa and MasterCard increase the fees (interchange and assessment
      fees)
      that they charge our processor, which they may pass along to us. We could
      attempt to pass these increases along to our customers, but this might result
      in
      the loss of those customers to our competitors who do not pass along the
      increases. If competitive practices prevent our passing along such increased
      fees to our customers in the future, we may have to absorb all or a portion
      of
      such increases thereby increasing our operating costs and reducing our profit
      margin.




***Current
      or future card association rules and practices could adversely affect our
      business***




Our
      failure to comply with card association rules could prevent our participation
      in
      programs for the utilization of our services and adversely affect our ability
      to
      offer services to potential customers. The failure to comply with such rules
      may
      also subject us to fines and penalties.




***Utility
      and system interruptions or processing errors could adversely affect our
      operations.***




In
      order
      to process transactions promptly, our computer equipment and network servers
      must be functional on a 24-hour basis, which requires access to
      telecommunications facilities and the availability of electricity. Furthermore,
      with respect to certain processing services, we are dependent on the systems
      and
      services of third party vendors. Telecommunications services and the electricity
      supply are susceptible to disruption. Computer system interruptions and other
      processing errors, whether involving our own systems or the systems operated
      by
      our third party vendors, may result from such disruption or from human error
      or
      other unrelated causes. Any extensive or long-term disruptions in our processing
      services could cause us to incur substantial additional expense and the loss
      of
      customers, which could have an adverse effect on our operations and financial
      condition.




12




***If
      we lose key personnel or are unable to attract additional qualified personnel
      as
      we grow, our business could be adversely affected.***




We
      are
      dependent upon the ability and experience of a number of our key personnel
      who
      have substantial experience with our operation, the rapidly changing transaction
      processing and money transfer industries, and the selected markets in which
      we
      offer our services. One of our executive officers serves on a part-time basis.
      It is possible that the loss of the services of one or a combination of our
      key
      personnel would have an adverse effect on our operations. Our success also
      depends on our ability to continue to attract, manage, and retain additional
      qualified management and technical personnel as we grow. We cannot guarantee
      that we will continue to attract or retain such personnel.




***We
      may become subject to additional U.S., state or foreign taxes that cannot be
      passed through to our customers, in which case our profitability could be
      adversely affected.***




Payment
      processing companies like us may be subject to taxation by various jurisdictions
      on our net income or certain portions of our fees charged to customers for
      our
      services. Application of these taxes is an emerging issue in our industry and
      the taxing authorities have not yet all adopted uniform regulations on this
      topic. If we are required to pay such taxes and are not able to pass the tax
      expense through to our customers, our costs will increase, reducing our net
      income.




***Material
      breaches in our security systems may have a significant effect on our business.***




The
      uninterrupted operation of our information systems and the confidentiality
      of
      the customer/consumer information that resides on such systems are critical
      to
      the successful operation of our business. We have security, backup and recovery
      systems in place, as well as a business continuity plan to ensure the system
      will not be inoperable. We also have what we deem sufficient security around
      the
      system to prevent unauthorized access to the system. An information breach
      in
      the system and loss of confidential information such as credit card numbers
      and
      related information could have a longer and more significant impact on the
      business operations than a hardware failure. The loss of confidential
      information could result in losing the customers’ confidence and thus the loss
      of their business.




***Changes
      in the laws, regulations, credit card association rules or other industry
      standards affecting our business may require significant product redevelopment
      efforts or may reduce the market for or value of our
      products.***




There
      may
      be changes in the laws, regulations, credit card association rules or other
      industry standards that affect our operating environment in substantial and
      unpredictable ways. Changes to statutes, regulations or industry standards,
      including interpretation and implementation of statutes, regulations or
      standards, could increase or decrease the cost of doing business or affect
      the
      competitive balance. We cannot predict whether any of this potential legislation
      will be enacted or whether any credit card association rule or other industry
      standard will change, and if enacted or changed, the effect that it would have
      on our financial position or results of operations. These changes may require
      us
      to incur significant expenses to redevelop our products, but there is no
      guarantee that we would be successful or that there would be a market for or
      value of our products. Also, if we do not comply with laws, regulations,
      policies or standards, we could receive regulatory sanctions and damage to
      our
      reputation.




**RISKS
      CONCERNING OUR CAPITAL STRUCTURE**




***Future
      sales of common stock or other dilutive events may adversely affect prevailing
      market prices for our common stock.***




As
      of
      April 13 2007, we were authorized to issue 500,000,000 shares of common stock,
      of which 70,826,542 shares were issued and outstanding and 36,617,945 shares
      were reserved for issuance upon conversion of outstanding promissory notes
      and
      upon exercise of outstanding options and warrants to purchase common stock.
      As
      of that date, an additional 14,720,000 shares of our common stock have been
      reserved and remain available for issuance under our 2007 Incentive Plan. Many
      of the convertible promissory notes, options and warrants referred to above
      include provisions that would require us to issue greater numbers of shares
      of
      our common stock upon conversion or exercise in the event of stock splits,
      redemptions, mergers or other transactions. The occurrence of any such event
      or
      the conversion or exercise of any of the convertible promissory notes, options
      or warrants referred to above would dilute the interest in our company
      represented by each share of our common stock and may adversely affect the
      prevailing market price of our common stock.




13




Our
      board
      of directors has the authority, without further action or vote of our
      stockholders, to issue all or any part of the 377,935,513 shares of our common
      stock that are authorized for issuance and neither issued nor reserved for
      issuance. Such issuances may be made at a price that reflects a discount from
      the then-current trading price of our common stock. Any such issuances would
      dilute the interest in our company represented by each share of our common
      stock
      and may adversely affect the prevailing market price of our common
      stock.




We
      currently anticipate that we will be able to satisfy our operating requirements
      and current liabilities solely through raising additional funds from third
      party
      investors. In order to raise capital that we need at the current market price
      of
      our common stock, we would likely need to issue securities that are convertible
      into or exercisable for a significant number of shares of our common stock.
      Any
      such issuances would dilute the interest in our company represented by each
      share of our common stock and may adversely affect the prevailing market price
      of our common stock.




***The
      market price of our common stock has fluctuated considerably and stockholders
      may not be able to resell their shares at or above the price at which such
      shares were purchased.***




Because
      the number of shares of our common stock held by persons not affiliated with
      us
      is relatively small, the market price of our common stock is subject to
      considerable fluctuations that are not necessarily related to developments
      in
      our business or our industry. Within the last twelve months, the closing sale
      price of our common stock has been as high as $5.05 and as low as $0.17. The
      market price has also changed dramatically over short periods, including changes
      of over 50% percent in a single day. We anticipate that the market price of
      our
      common stock will continue to be subject to such volatility for the foreseeable
      future. Consequently, the holders of our common stock face a significant risk
      of
      not being able to resell their shares at or above the price at which such shares
      were purchased.




***Because
      we became public by means of a reverse merger, we may not be able to attract
      the
      attention of major brokerage firms for research and
      support.***




Additional
      risks may exist since we became public through a “reverse merger.” Securities
      analysts of major brokerage firms may not provide us with coverage since there
      is no incentive to brokerage firms to recommend the purchase of our common
      stock. We cannot assure you that brokerage firms will want to conduct any
      secondary offerings on our behalf in the future.




***A
      significant number of our shares are eligible for resale, and their sale could
      depress the market price of our common stock.***




Sales
      of
      a significant number of shares of our common stock in the public market could
      harm the market price of our common stock. Up to 53,900,031 shares of our common
      stock, including 43,731,397 shares of common stock issued in March 2006 in
      connection with our acquisition of Old Pure Vanilla, may be offered from time
      to
      time in the open market pursuant to Rule 144. In general, a person who has
      held
      restricted shares for a period of one year may, upon filing with the SEC a
      notification on Form 144, sell into the market common stock in an amount equal
      to the greater of 1% of the outstanding shares or the average weekly number
      of
      shares sold in the last four weeks prior to such sale. Such sales may be
      repeated once each three months, and any of the restricted shares may be sold
      by
      a non-affiliate without regard to those volume restrictions after they have
      been
      held two years.




14




***Our
      principal stockholders have significant voting power and may take actions that
      may not be in the best interest of all other
      stockholders.***




Our
      officers, directors and principal stockholders beneficially own approximately
      69% of our outstanding common stock and Jed Schutz, a member of our board of
      directors and our single largest stockholder, beneficially owns approximately
      47% of our outstanding common stock. These stockholders acting together or
      Mr.
      Schutz individually may be able to exert significant control over our management
      and affairs, including matters requiring approval of our stockholders, such
      as
      the election of directors and the sale of our company. Such a concentration
      of
      ownership may also have the effect of delaying or preventing a change in control
      of our company, including transactions in which our stockholders might otherwise
      receive a premium for their shares over then current market price. Any of these
      facts could decrease the market price of our common stock.




***Failure
      to achieve and maintain effective internal controls in accordance with Section
      404 of the Sarbanes-Oxley*** ** ***Act
      of 2002 could have a material adverse effect on our business and operating
      results. In addition, current and potential stockholders could lose confidence
      in our financial reporting, which could have an adverse effect on our stock
      price.***




Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      effectively prevent fraud. If we cannot provide reliable financial reports
      or
      prevent fraud, our operating results could be harmed.




Beginning
      with our annual report for the year ended December 31, 2007, we will be required
      to document and test our internal control procedures in order to satisfy the
      requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires
      annual management assessments of the effectiveness of our internal controls
      over
      financial reporting and a report by our independent registered public accounting
      firm addressing these assessments.




During
      the course of our testing, we may identify deficiencies which we may not be
      able
      to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act
      for
      compliance with the requirements of Section 404. In addition, if we fail to
      maintain the adequacy of our internal accounting controls, as such standards
      are
      modified, supplemented or amended from time to time, we may not be able to
      ensure that we can conclude on an ongoing basis that we have effective internal
      controls over financial reporting in accordance with Section 404. Failure to
      achieve and maintain an effective internal control environment could cause
      us to
      face regulatory action and also cause investors to lose confidence in our
      reported financial information, either of which could have an adverse effect
      on
      our stock price.




***Additional
      burdens imposed upon broker-dealers by the application of the “penny stock”
rules to our common stock may limit the market for our common
      stock.***




Broker-dealer
      practices in connection with transactions in “penny stocks” are regulated by
      certain rules adopted by the Securities and Exchange Commission. Penny stocks
      generally are equity securities with a price of less than $5.00 (other than
      securities registered on certain national securities exchanges, provided that
      current prices and volume information with respect to transactions in such
      securities are provided by the exchange). If our common stock continues to
      be
      offered at a market price less than $5.00 per share, and does not qualify for
      any exemption from the penny stock regulations, our common stock will continue
      to be subject to these additional regulations relating to low-priced
      stocks.




The
      penny
      stock rules require a broker-dealer, prior to a transaction in a penny stock
      not
      otherwise exempt from the rules, to deliver a standardized risk disclosure
      document that provides information about penny stocks and the risks in the
      penny
      stock market. The broker-dealer also must provide the customer with current
      bid
      and offer quotations for the penny stock, the compensation of the broker-dealer
      and its salesperson in the transaction, and monthly account statements showing
      the market value of each penny stock held in the customer’s account. In
      addition, the penny stock rules generally require that prior to a transaction
      in
      a penny stock the broker-dealer make a special written determination that the
      penny stock is a suitable investment for the purchaser and receive the
      purchaser’s written agreement to the transaction. These requirements have
      historically resulted in reducing the level of trading activity in securities
      that become subject to the penny stock rules.




15




The
      additional burdens imposed upon broker-dealers by these penny stock requirements
      may discourage broker-dealers from effecting transactions in our common stock,
      which could severely limit the liquidity of the market for our common stock
      and
      our shareholders’ ability to sell our common stock in the secondary
      market.




**ITEM
      2. DESCRIPTION OF PROPERTY**




Our
      primary office is located in New York, NY. We lease our primary office space
      from a non-affiliated entity. Our lease expires on January 30, 2010. We pay
      monthly lease payments of $26,865 and other charges subject to adjustment.
      We
      believe that the space that we lease adequately meets our requirements for
      the
      present and the near future, but our requirements may change.




**ITEM
      3. LEGAL PROCEEDINGS.**




We
      are
      not currently a party to any legal proceedings.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER** **S**.




None.




**PART
      II**




**ITEM
      5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.**




**Market
      Information**




Our
      common stock was traded on the Pink Sheets from January 10, 2006 through
      December 14, 2006 under the symbol PVNX.PK. On December 15, 2006 our common
      stock began trading on the OTC Bulletin Board under the symbol PVNX.OB. There
      is
      no active public market for our common stock, which has traded an average of
      31,673 shares per day since the date of the merger of Old Pure Vanilla into
      NVS
      Entertainment, Inc. on April 12, 2006. We cannot assure you that an active
      market will develop for our common stock. Investors
      should not rely on historical stock price performance as an indication of future
      price performance.




The
      following table shows the high and low bid prices for our common stock during
      the periods indicated from the date of our acquisition of Old Pure Vanilla
      (March 13, 2006) through December 31, 2006, as reported on the OTC Bulletin
      Board. The prices represent quotations by dealers without adjustments for retail
      mark-ups, mark-downs or commission and may not represent actual transactions.
      The closing sale price of our common stock on April 13, 2007 as reported on
      the
      OTC Bulletin Board was $0.18 per share.




**Period**
            
            **High**
            
            **Low**March
                13, 2006 through March 31, 2006
            
            
            1.00
            
            
            0.51April
                1, 2006 through June 30, 2006
            
            
            7.00
            
            
            0.85July
                1, 2006 through September 30, 2006
            
            
            4.05
            
            
            0.50October
                1, 2006 through December 31, 2006
            
            
            3.60
            
            
            1.15




As
      of
      April 13, 2007, there were approximately 385 holders of record of our common
      stock. We
      believe that a significant number of shares of our Common Stock are held in
      either nominee name or street name brokerage accounts and, consequently, we
      are
      unable to determine the number of beneficial owners of our stock.




We
      have
      not declared any dividends on our common stock nor do we have any present
      intention of declaring dividends on our common stock in the future.




**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.**




**Overview**




Old
      Pure
      Vanilla was formed on August 30, 2005. On March 13, 2006, our wholly-owned
      subsidiary, NVS Acquisition Corp., a Nevada corporation, merged with and into
      Old Pure Vanilla. Old Pure Vanilla survived the merger as our wholly-owned
      subsidiary. Prior to the merger, under the name NVS Entertainment, we conducted
      the business of film acquisition, completion and distribution. We discontinued
      our film business, which had only nominal revenues and expenses, in connection
      with our acquisition of Old Pure Vanilla. Since March 2006, we have been engaged
      in the electronic payments services business.




16




On
      December 31, 2006, PVNX Acquisition Corp., a Delaware corporation and our
      wholly-owned subsidiary, merged with and into Nimble. Nimble survived
      the merger as our wholly-owned subsidiary. In consideration of the merger,
      each
      outstanding share of Nimble common stock was converted into shares of our common
      stock and each security convertible into or exercisable for shares of Nimble
      common stock became convertible into or exercisable for shares of our common
      stock. As a result of the merger, the former holders of Nimble common stock
      and
      securities convertible into or exercisable for shares of Nimble common stock
      held approximately 40% of our common stock on a fully-diluted
      basis.




Our
      historical financial statements included in this annual report have been revised
      to reflect the effects of our acquisition of Nimble. In accordance with
      generally accepted accounting principles, assets transferred between entities
      under common control are accounted for at historical cost similar to a pooling
      of interests, and the financial statements of previously separate companies
      for
      periods prior to the merger are restated on a combined basis.




**Plan
      of Operation**




We provide
      card programs and electronic payment services that enable consumers to pay
      anonymously for the products and services they buy via the Internet and to
      pay
      taxes and other fees to government agencies electronically, in person, online
      and over the telephone. Early adopters of our products and services have
      included consumers who wanted to protect their identity and credit card data
      in
      the purchase of online adult content.




W e
      provide
      our electronic payment services through our proprietary,
      defined-access, closed-loop network of physical and virtual terminals. At the
      core of our network is our proprietary NimBill TM technology .
      Our
      NimBill technology allows our network
      to process and facilitate varied forms of electronic payment such as
      person-to-person, credit/debit/stored value/prepaid cards and electronic
      check/ACH .




Using
      our
      patent-pending technology and other technologies, consumers are able to purchase
      goods and services by using either a Pure Vanilla Account or a Pure Vanilla
      Card. Currently, monetary value can be stored online in Pure Vanilla Accounts
      and on Pure Vanilla Cards. We also intend to establish a network of retail
      outlets throughout the United States at which consumers could store value on
      Pure Vanilla Cards. The use of Pure Vanilla Accounts and/or Pure Vanilla Cards
      permits consumers to purchase products and services in a safe and secure
      environment without compromising their identity or credit.




Our
      anonymous cash transactions will eliminate the merchant’s exposure to
      charge-backs, reduce processing fees and significantly accelerate cash flow.
      We
      will support recurring and “pay per minute” billing and provide dynamic
      reporting to the merchants. We will also address current challenges that
      consumers face, such as user anonymity, credit card charge-backs and fraud.




Our
      revenue model has three components: loading fees, account management fees and
      processing fees.




·
            We
                charge a $4.00 loading fee to each consumer who purchases a Pure
                Vanilla
                Card or funds a Pure Vanilla Account online. We intend to pay a percentage
                of the loading fees attributable to Pure Vanilla Cards to our retail
                distributors.




·
            We
                charge online merchants a processing fee equal to a percentage of
                the
                revenue they receive from transactions that involve the use of Pure
                Vanilla Cards and Pure Vanilla Accounts. We currently do not charge
                merchants a set-up fee or require a cash reserve, although we may
                do so in
                the future. We intend to evaluate the sufficiency of our fee structure
                on
                an ongoing basis in light of our
                experience.




·
            We
                may charge an account management fee to card and accountholders if
                there is no transaction activity on the relevant Pure Vanilla Card
                or in
                the relevant Pure Vanilla account where permitted by
                law.




17




The
      execution of our plan of operation is dependent upon several factors, including
      raising sufficient capital to allow us to implement our plans and the successful
      development of our online and stored value card services. There can be no
      assurance that we will be successful in doing so. We generated $77,568 and
      $10,485 of revenues in the years ended December 31, 2006 and 2005, respectively.
      For the years ended December 31, 2006 and 2005 we incurred net losses of
      approximately $14,120,000 and $3,329,000, respectively, and a total negative
      cash flow from operations of approximately $6,747,000 **.** Our
      continued existence is dependent upon several factors, including raising
      significant capital, the successful development of our online and stored value
      card services and our ability to achieve profitability from the sale of our
      products and services. These matters raise substantial doubt about our ability
      to continue as a going concern. Our financial statements do not include any
      adjustments that might result from the outcome of this uncertainty.




In
      order
      to continue providing our products and services as currently conducted and
      to
      execute our business plan we must raise capital on an immediate basis. There
      can
      be no assurance that additional financing will be available, or if available,
      that such financing will be on favorable terms. Any failure to secure additional
      financing will impair our ability to continue to operate as a going concern
      and
      to successfully execute our business strategy. Even if we are successful in
      raising capital, there can be no assurance that we will have sufficient funds
      to
      successfully execute our business strategy to the extent that would have a
      positive effect on our results of operations or financial condition. Our ability
      to execute our business strategy is contingent upon our having sufficient
      capital as well as other factors, including our ability to increase consumer
      awareness and adoption of our products and services, our ability to sign up
      merchants and websites that accept our products as a form of payment, general
      economic and industry conditions, our ability to recruit, train and retain
      a
      qualified sales, marketing and customer service staff, and other factors beyond
      our control. Even if our revenues and earnings grow rapidly, that growth may
      significantly strain our management and our operational and technical resources.
      If we are successful in obtaining greater market penetration with our products
      and services, we will be required to manage an increasing volume of transactions
      on a timely basis at a reasonable cost to us. No assurance can be given that
      we
      can meet increased demand or that we will be able to manage our transactions
      on
      a timely and cost-effective basis.




**Critical
      Accounting Policies**




Our
      consolidated financial statements and accompanying notes included in this annual
      report have been prepared in accordance with accounting principles generally
      accepted in the United States. The preparation of these consolidated financial
      statements requires that we make estimates, judgments and assumptions that
      affect the reported amounts of assets, liabilities, revenues and expenses.
      Management continually evaluates the accounting policies and estimates it uses
      to prepare our consolidated financial statements. We base our estimates on
      historical experience and assumptions believed to be reasonable under current
      facts and circumstances. Significant estimates include the valuation of shares,
      stock options and warrants issued. Actual amounts and results could differ
      from
      these estimates made by management.




**Results
      of Operations**




**Year
      ended December 31, 2006 compared to the year ended December 31,
      2005.**




**Net
      Loss.** We
      had a
      net loss of approximately $14,120,000 for the year ended December 31, 2006
      compared to a net loss of approximately $3,329,000 for the year ended December
      31 2005. This increase of approximately $10,791,000 or 324% was due to increases
      of approximately $7,351,000 in operating expenses, approximately $2,489,000
      in
      interest expense and approximately $1,018,000 in organizational costs which
      were
      partially offset by an increase of approximately $67,000 of sales. Increased
      sales in 2006 were primarily due to the role out of our Pure Vanilla Card and
      Account services in September 2006 and an increase in the number of our
      government agency customers. Interest expense increased in 2006 compared to
      2005
      as a result of increased borrowings and the amortization of deferred costs
      for
      warrants issued in connection with the borrowings. We incurred organizational
      costs in 2006 as a result of the reverse merger through which we acquired Old
      Pure Vanilla on March 13, 2006.




18




**Operating
      Expenses.** Operating expenses were approximately $9,377,000 for the year ended December
      31,
      2006 compared to approximately $2,026,000 for the year ended December 31,
      2005.Operating expenses consist of expenses of our corporate office, including
      stock compensation expense (non-cash payments), investment banking consulting
      fees, salaries and wages, marketing and advertising expense, software
      development costs, legal and accounting fees, consulting fees and other
      expenses.




Included
      in operating expenses for the year ended December 31, 2006 are approximately
      $2,428,000 of stock compensation expense (non-cash payments), $1,594,000 for
      investment banking fees, $1,316,000 of salaries and wages, $965,000 of marketing
      and advertising expense, $863,000 of software development costs, $754,000 of
      legal and accounting fees, and $392,000 of consultants expense. Other items
      included in operating expenses in 2006 are approximately $187,000 of insurance
      costs, $180,000 of travel and entertainment expenses, occupancy expenses such
      as
      rent, telephone and general supplies of $401,000, hosting costs of $93,000
      and
      other expenses of $204,000.




Included
      in operating expenses for the year ended December 31, 2005 are approximately
      $622,000 of software development costs, $558,000 of salaries and wages, $198,000
      of legal and accounting fees, $198,000 of consulting fees, **** $29,000
      of stock compensation expense (non-cash payments), $20,000 for investment
      banking fees, and **** $12,000
      of marketing and advertising expense. Other items included in operating expenses
      are approximately $50,000 of insurance costs, $22,000 of travel and
      entertainment expenses, occupancy expenses such as rent, telephone and general
      supplies of $88,000, hosting costs of $72,000 and other expenses of
      $157,000.




Stock
      compensation expense increased in 2006 compared to 2005 primarily due to the
      increased issuance of stock options to our personnel. Investment banking fees
      increased in 2006 compared to 2005 due to an agreement to issue warrants to
      purchase 892,891 shares of common stock to a third party in exchange for
      providing investment banking and financing strategy. The balance of the
      operating expenses increased in 2006 as a result of our transition from a
      development stage to an operating company.




**Organizational
      Costs** .
      In
      connection with the reverse merger in March 2006, we paid $225,000 to the former
      Chief Executive Office and largest shareholder of NVS Entertainment, Inc. to
      repurchase 39,927,452 shares of our common stock which were then cancelled
      at
      the closing of the reverse merger. Also included in organizational costs are
      non-cash expenses of $792,647 related to the issuance of shares of common stock
      for services provided by placement agents and other advisers in connection
      with
      the reverse merger.




**Interest
      Expense** .
      Interest expense was approximately $3,802,000 for the year ended December 31,
      2006 compared to approximately $1,314,000 for the year ended December 31, 2005.
      Interest expense for the year ended December 31, 2006 consisted of approximately
      $1,648,000 of costs for warrants issued in connection with loans, $1,174,000
      of
      interest on shareholder loans, $857,000 of amortization of loan costs and other
      financing costs of $123,000. Interest expense for the year ended December 31,
      2005 consisted of approximately $1,005,000 of costs for warrants issued in
      connection with loans, $294,000 of interest on shareholder loans and other
      financing costs of $15,000. The cost of the warrants issued in connection with
      loans pertains to the fair value of the warrants granted at the grant date
      using
      the Black-Scholes option pricing model and recorded as expense over the
      respective life of the debt, guarantee or services rendered.




**Off-Balance
      Sheet Arrangements** .
      We have
      not entered into any transactions with unconsolidated entities in which we
      have
      financial guarantees, subordinated retained interests, derivative instruments
      or
      other contingent arrangements that expose us to material continuing risks,
      contingent liabilities or any other obligations under a variable interest in
      an
      unconsolidated entity that provides us with financing, liquidity, market risk
      or
      credit risk support.




**Liquidity
      and Capital Resources**




Cash
      balances totaled approximately $869,000 at December 31, 2006 and approximately
      $365,000 at March 31, 2007.




Net
      cash
      used during the year ended December 31, 2006 consisted of operating activities
      of approximately $5,214,000 and the purchase of property and equipment of
      approximately $39,000 (investing activities).




19




Cash
      provided by financing activities during the year ended December 31, 2006 was
      approximately $5,966,000. Net cash provided by financing activities during
      the
      year ended December 31, 2006 was the result of proceeds from the issuance of
      common stock for cash amounting to approximately $330,000 and proceeds from
      notes payable of approximately $5,636,000.




Throughout
      2006 we financed our operations principally through the sale of our securities.
      Below is a summary of our recent financings.




*2006
      Bridge Loans*




During
      the year ended December 31, 2006, we completed transactions with several private
      investors to provide short-term debt financing in the aggregate amount of
      $4,211,000, including $611,000 from Jed Schutz, one of our principal
      shareholders and a member of our board of directors, and $100,000 from Tucker
      Taylor, then a then a consultant and member of our non-paid board of advisors
      and currently our Chief Operating Officer. We used the proceeds of the
      financings to fund start-up activities, including the promotion of and the
      launch of our web site and our stored value card, and related working capital
      requirements, and to pay legal and other professional fees.




We
      issued
      promissory notes to each of the investors that provided us with the short-term
      debt financing. Interest on the notes accrues at a rate of 15% per year. The
      principal amount of each note, together with all accrued and unpaid interest,
      was originally due and payable on the earlier of a date between February 1,
      2007
      through November 1, 2007 (representing between nine months and one year after
      the date of issuance) or upon the first underwritten public offering of our
      common stock. As described below, in February 2007 some of the notes were
      amended to extend the original maturity dates. The notes provide for an interest
      rate of 18% in the event of a default.




Loans
      in
      the amount of $2,140,000 are convertible into shares
      of
      our common stock, at any time in whole or in part, at the option of the holder
      at the conversion prices ranging from $1.72 to $2.00 per share. As a result
      of
      this beneficial conversion feature $350,000 of interest expense was recorded
      during the year ended December 31, 2006.




Our
      obligations under $1,475,000 in principal amount of the notes are personally
      guaranteed by Jed Schutz. In consideration of this guarantee, we issued to
      Mr.
      Schutz warrants to purchase 147,500 shares of common stock at an exercise price
      of $2.00 per share.




As
      of
      December 31, 2006 we accrued approximately $291,000 of interest payable on
      the
      notes. The holder of certain notes on which interest is more than ten days
      past
      due have the right, upon notice to us, to declare the entire principal amount
      of
      the note and all interest thereon immediately due and payable. As of December
      31, 2006, interest in the amount of $154,000 payable on $1,836,000 in principal
      amount of these notes was more than ten days past due and has not been paid.
      As
      of December 31, 2006, we had not received any such notice from a note holder.
      In
      February 2007, we entered into waiver and amendment agreements with the holders
      of $1,721,000 in principal amount of these notes under which the note holders
      waived our failure to pay interest on the notes  and
      agreed to extend the due date of their notes until May 15, 2007 or, in the
      case
      of the holder of one note in principal amount of $250,000, until April 1, 2007.
      We did not pay the note due on April 1, 2007 when due. On April 11, 2007, the
      holder of that note demanded payment and the note was in full on April 13,
      2007
      by Jed Schutz, our principal shareholder and a member of our board of directors.




*Gottbetter
      Bridge Loan*




On
      December 22, 2006, we entered into a securities purchase agreement with an
      institutional investor, pursuant to which we issued and sold to the investor
      a
      senior secured convertible promissory note in the principal amount of $1,500,000
      and a warrant to purchase 450,000 shares of our common stock. The fair value
      of
      the warrant was estimated to be $716,265 and recorded as loan discount which
      is
      being amortized over the life of the loan. The warrant was originally
      exercisable at an exercise price of $2.48782 (subject to adjustment). The
      aggregate purchase price paid by the investor for the note and the warrant
      was
      $1,424,500. The net proceeds to us from the sale of the note and the warrant
      after payment of offering related fees and expenses were $1,387,500. Our
      obligations under the note, the securities purchase agreement and the other
      documents relating to the transaction are guaranteed by Nimble. We used the
      proceeds from the sale of the note and the warrant for working capital purposes.
      The number of shares of common stock issuable upon exercise and the exercise
      price of the warrant were adjusted from 450,000 shares to 1,399,399 shares
      and
      from $2.48782 per share to $0.80 per share, respectively, as a result of our
      grant of stock options to our officers, directors and certain consultants in
      February 2007 and our issuance of warrants to certain note holders pursuant
      to
      certain of the waiver and amendment agreements we entered into in February
      2007
      as described below.




20




Interest
      on the note accrues at the annual rate of 10.0% and is payable, in cash, monthly
      in arrears beginning on February 1, 2007 and on the first day of each calendar
      month thereafter until the maturity date of the note. Upon the occurrence and
      during the continuation of an event of default, interest on the note shall
      accrue at the annual rate of 15.0%. The principal amount of the note is due
      and
      payable in monthly installments of $250,000 beginning on July 1, 2007 and on
      the
      first day of each calendar month thereafter until paid in full.  The note
      is scheduled to mature on December 26, 2007.




The
      note
      is convertible into shares of our common stock, at any time in whole or in
      part,
      at the option of the holder at the initial conversion price of $2.48782 per
      share, which is equal to the volume weighted average closing price of our common
      stock for the five trading days ending on the trading day immediately prior
      to
      the closing of the securities purchase agreement. As a result of this beneficial
      conversion feature, we incurred $158,078 of interest expense. The conversion
      price of the note is subject to “full ratchet” adjustment in the event that,
      subject to certain exceptions, we issue shares of our common stock at a purchase
      price per share, or securities convertible into or exercisable for shares of
      common stock at an conversion or exercise price per share, less than the
      conversion price then in effect.




We
      were
      obligated to redeem the entire principal amount of the note then outstanding
      (plus accrued and unpaid interest) if we consummated a financing transaction
      that resulted in proceeds to us of at least $1,100,000 on or before February
      28,
      2007. We may, at our option, redeem all or any portion of the principal amount
      of the note then outstanding at any time after February 28, 2007 upon three
      business days notice to the holder. Any redemption shall be made at the
      redemption price equal to the greater of (i) 120% of the principal amount to
      be
      redeemed plus accrued and unpaid interest and (ii) the product of (x) the
      principal amount to be redeemed divided by the conversion price then in effect
      (or $1.00 if the conversion price then in effect is less than $1.00) and (y)
      the
      closing sale price of our common stock on the trading day immediately prior
      to
      redemption.




The
      holder may, at its option, require us to redeem all or any portion of the
      principal amount of the note then outstanding upon the occurrence of specified
      events of default. Any
      redemption upon an event of default shall be made at the redemption price equal
      to the greater of (i) 125% of the principal amount to be redeemed and (ii)
      the
      product of (A) the number of shares of common stock issuable upon conversion
      in
      full of the principal amount to be redeemed at the conversion price then in
      effect and (B) the closing sale price of our common stock on the trading day
      immediately prior to redemption.




The
      holder may also, at its option, require us to redeem all or any portion of
      the
      principal amount of the note then outstanding upon the consummation of any
      transaction that would constitute a change in control. Any redemption upon
      a
      change of control shall be made at the redemption price equal to the greater of
      (i)
      130% (or 120% in the event of a change of control in which the per share
      consideration paid to holders common stock is greater than 200% of the initial
      conversion price (as adjusted for stock splits, stock dividends, reverse stock
      splits or similar transactions)) and the product of (x) the sum of the principal
      amount to be redeemed and any accrued and unpaid interest and (y) the quotient
      determined by dividing (A) the closing sale price of our common stock on the
      trading day immediately following the public announcement of the change of
      control by (B) the conversion price then in effect and (ii) 150% of the sum
      of
      the principal amount to be redeemed and any accrued and unpaid
      interest.




To
      secure
      our obligations under the note, we granted the investor a security interest
      in
      all of our assets and all the assets of Nimble on the terms and conditions
      of a
      security agreement dated as of December 26, 2006. The security interest granted
      to the investor is senior and prior to any other security interests granted
      by
      us (except for any permitted liens described in the note). The security interest
      granted to the bridge lender under the security agreement will terminate upon
      the payment in full of all of our obligations under the note, the securities
      purchase agreement or the other documents relating to the transaction.




21




*2007
      Bridge Loans*




During
      the period from February 14, 2007 to March 30, 2007, Jed Schutz, our principal
      shareholder and a member of our board of directors, loaned us $1,110,000, and
      George W. Benedict and Thomas J. Fanning, members of our board of directors,
      loaned us $90,000 each. As of March 30, 2007, we issued these lenders promissory
      notes relating to these obligations. The notes bear interest at a rate of 9.9%
      per annum and are due on the earlier of April 5, 2008 or two business days
      after
      we raise $20.0 million, provided our obligations to our bridge lender have
      then
      been repaid in full. In connection with the notes, we issued the lenders
      warrants to purchase 403,125 shares of common stock at $0.80 per share. The
      warrants expire on March 31, 2012. As of March 31, 2007, there are $1,290,000
      of
      loans and warrants to purchase 403,125 shares of common stock outstanding under
      these agreements.




On
      April
      13, 2007, Mr. Schutz paid in full our obligations under a promissory note that
      had become due and payable on April 1, 2007. In consideration of that payment,
      we issued Mr. Schutz a promissory note in the principal amount of $287,721,
      which is equal to the principal amount of and accrued and unpaid interest on
      the
      past due note. The note bears interest at a rate of 9.9% per annum and is due
      on
      the earlier of April 5, 2008 or two business days after we raise $20.0 million,
      provided our obligations to our bridge lender have then been repaid in full.




Our
      existing cash resources are insufficient to enable us to maintain operations
      as
      presently conducted and meet our obligations as they come due. We require
      additional funds to repay our bridge loan and short-term loans upon their
      scheduled maturity, continue to meet our liquidity needs, maintain operations
      and realize our business plan. We currently anticipate that we will be able
      to
      satisfy our operating requirements and current liabilities solely through
      raising additional funds from third party investors. Management is aggressively
      seeking to raise capital that will provide the funds needed to continue our
      business operations and realize our business plans. Presently, we do not have
      any commitment from any person regarding any additional capital and there can
      be
      no assurance that additional capital will be available to us on commercially
      acceptable terms or at all. If we are unable to raise funds on an immediate
      basis, we will need to further curtail expenses, reduce planned research and
      development and sales and marketing efforts, forego business opportunities
      and
      cease operations.




Additional
      equity financings are likely to be dilutive to holders of our common stock
      and
      debt financing, if available, and may involve significant payment obligations
      and covenants that restrict how we operate our business.




Our
      independent registered public accounting firm’s report accompanying our
      consolidated financial statements for the year ended December 31, 2006 includes
      an explanatory paragraph relating to the uncertainty of our ability to continue
      as a going concern. This qualification may make it more difficult for us to
      raise additional capital when needed. We believe that there are conditions
      that
      raise substantial doubt about our ability to continue as a going concern. The
      accompanying consolidated financial statements do not include any adjustments
      relating to the recoverability of reported assets or satisfaction of liabilities
      should we be unable to continue as a going concern.




Furthermore,
      it is anticipated that any successful financing will have a significant dilutive
      effect on existing stockholders. The inability to obtain such financing will
      have a material adverse effect on our financial condition and
      prospects.




**Recently
      Issued Accounting Standards**




In
      July
      2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
      Income Taxes, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
      income taxes recognized in an enterprise’s financial statements in accordance
      with FASB Statement No.109, Accounting for Income Taxes. FIN 48 is effective
      for
      fiscal years beginning after December 15, 2006. The Company expects to implement
      FIN 48 beginning on January 1, 2007. We are evaluating the impact that adopting
      FIN 48 will have on our financial position and results of
      operations.




22




In
      September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements
      (“SFAS 157”), which clarifies that fair value is the amount that would be
      exchanged to sell an asset or transfer a liability in an orderly transaction
      between market participants. Further, the standard establishes a framework
      for
      measuring fair value in generally accepted accounting principles and expands
      certain disclosures about fair value measurements. SFAS 157 is effective for
      fiscal years beginning after November 15, 2007. We do not expect the adoption
      of
      SFAS 157 to have a material impact on its consolidated financial position,
      results of operations or cash flows.




In
      September 2006, the Securities and Exchange Commission issued Staff Accounting
      Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
      Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB
      108 provides guidance on how prior year misstatements should be taken into
      consideration when quantifying misstatements in current year financial
      statements for purposes of determining whether the current year’s financial
      statements are materially misstated. SAB 108 is effective for fiscal years
      ending after November 15, 2006. We do not expect the provisions of SAB 108
      to
      have a material impact on its financial position, results of operations or
      cash
      flows.




**ITEM
      7. FINANCIAL STATEMENTS**




Our
      financial statements are filed as part of this annual report on the pages
      indicated.




23


**Pure
        Vanilla eXchange, Inc. and Subsidiary**
  **Consolidated
        Financial Statements**
  **Years
        Ended December 31, 2006 and 2005**
  **Contents**
  Report
                  of Independent Registered Public Accounting Firm
              
              F-1Consolidated
                  Financial StatementsConsolidated
                  Balance Sheet
              
              F-2Consolidated
                  Statements of Operations
              
              F-3Consolidated
                  Statements of Changes in Stockholders’ Deficit
              
              F-4Consolidated
                  Statements of Cash Flows
              
              F-5Notes
                  to Consolidated Financial Statements
              
              F-6
  
  **Report
        of Independent Registered Public Accounting Firm**
 
 To
        the
        Board of Directors and Stockholders of
 Pure
        Vanilla eXchange, Inc. and Subsidiary
  We
        have
        audited the accompanying consolidated balance sheet of Pure Vanilla eXchange,
        Inc. and Subsidiary (the “Company”) as of December 31, 2006 and the related
        consolidated statements of operations, stockholders’ deficit, and cash flows for
        the years ended December 31, 2006 and 2005. These consolidated financial
        statements are the responsibility of the Company’s management. Our
        responsibility is to express an opinion on these consolidated 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
        consolidated 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 purposes
        of expressing an opinion on the effectiveness of the Company’s internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as, evaluating the overall consolidated financial statement
        presentation. We believe that our audits provide a reasonable basis for our
        opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of the Company as of December
        31, 2006, and the results of its operations and its cash flows for the years
        ended December 31, 2006 and 2005 in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        the
        Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has incurred net losses and
        negative cash flows from operations. These matters raise substantial doubt
        about
        the Company’s ability to continue as a going concern. The consolidated financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 /s/
        Imowitz Koenig & Co., LLP
 
 New
        York,
        New York
 April
        4,
        2007
  F-1
  **PURE
        VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        BALANCE SHEET**
 **December
        31, 2006**
 
 **ASSETS**Current
                  Assets:Cash
              
              $
              869,232Customer
                  deposits
              
              
              12,426Accounts
                  receivable
              
              
              58,510Prepaid
                  expenses and other current assets
              
              
              371,581Deferred
                  costs, net
              
              
              531,467Total
                  Current Assets
              
              
              1,843,216Property
                  and equipment, net
              
              
              124,255Deferred
                  costs and other assets
              
              
              419,207**TOTAL
                  ASSETS**
              
              $
              2,386,678**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Current
                  Liabilities:Accounts
                  payable
              
              $
              892,565Short-term
                  loans and accrued interest payable, net
              
              
              5,689,715Other
                  current liabilities
              
              
              2,671,119Total
                  Current Liabilities
              
              
              9,253,399Non-current
                  Liabilities:Long-term
                  loans and accrued interest payable
              
              
              731,839CommitmentStockholders'
                  Deficit:Common
                  Stock, $0.001 par value;
              
              
              70,709Authorized
                  shares - 500,000,000; Issued and outstanding shares
                  70,708,542Additional
                  paid-in-capital
              
              
              23,400,757Accumulated
                  deficit
              
              
              (31,070,026
              )Total
                  Stockholders' Deficit
              
              
              (7,598,560
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT**
              
              $
              2,386,678
  ***See
        notes to consolidated financial statements***
 
 F-2
  **PURE
        VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 
 **Years
                  Ended****December
                  31,****2006**
              
              **2005**Sales
              
              $
              77,568
              
              $
              10,485Operating
                  expenses:Processing
                  fees
              
              
              (49,984
              )
              
              (12,783
              )Other
                  operating expenses
              
              
              (9,327,268
              )
              
              (2,012,722
              )Loss
                  from operations before other expenses
              
              
              (9,299,684
              )
              
              (2,015,020
              )Other
                  expenses:Organizational
                  costs
              
              
              (1,017,647
              )
              
              -Interest
                  expense
              
              
              (3,802,361
              )
              
              (1,313,840
              )Total
                  other expenses
              
              
              (4,820,008
              )
              
              (1,313,840
              )Net
                  Loss
              
              $
              (14,119,692
              )
              $
              (3,328,860
              )Basic
                  and diluted net loss per share
              
              $
              (0.23
              )
              $
              (0.20
              )Weighted
                  average number of shares outstanding
              
              
              62,526,232
              
              
              16,892,472
  ***See
        notes to consolidated financial statements***
 
 F-3
  **PURE
        VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT**
 **Years
        Ended December 31, 2006 and 2005**
 **Additional****Common
                    Stock**
                
                **Paid-in**
                
                **Accumulated****Shares**
                
                **Amount**
                
                **Capital**
                
                **Deficit**
                
                **Total**Balance
                    at January 1, 2005
                
                
                10,850,743
                
                $
                10,851
                
                $
                11,925,357
                
                $
                (13,621,474
                )
                $
                (1,685,266
                )August
                      30, 2005 (Date of Inception of Pure Vanilla)
                
                
                10,568,634
                
                
                10,569
                
                
                (10,569
                )
                
                -
                
                
                -Shares
                    issued for cash
                
                
                26,483,492
                
                
                26,483
                
                
                101,017
                
                
                -
                
                
                127,500Stock
                    options granted under 2005 Incentive Compensation Plan
                
                
                
                
                
                
                
                
                29,486
                
                
                
                
                
                29,486Warrants
                    issued with loans
                
                
                
                
                
                
                
                
                1,423,424
                
                
                
                
                
                1,423,424Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                (3,328,860
                )
                
                (3,328,860
                )Balance
                    at December 31, 2005
                
                
                47,902,869
                
                
                47,903
                
                
                13,468,715
                
                
                (16,950,334
                )
                
                (3,433,716
                )Shares
                    issued for cash
                
                
                754,228
                
                
                754
                
                
                328,992
                
                
                -
                
                
                329,746Shares
                    issued for services
                
                
                15,036,814
                
                
                15,037
                
                
                713
                
                
                -
                
                
                15,750Shares
                    issued for services inconnection
                    with the reverse merger
                
                
                1,056,863
                
                
                1,057
                
                
                791,590
                
                
                -
                
                
                792,647Exercise
                    of stock options
                
                
                18,284
                
                
                18
                
                
                332
                
                
                
                
                
                350Exercise
                    of warrants
                
                
                2,761,028
                
                
                2,761
                
                
                (2,760
                )
                
                
                
                
                1Stock
                    options granted under stock option plans
                
                
                -
                
                
                -
                
                
                2,428,267
                
                
                -
                
                
                2,428,267Warrants
                    issued in connection with guarantee of lease
                
                
                -
                
                
                -
                
                
                421,696
                
                
                -
                
                
                421,696Warrants
                    issued with loans and loan guarantees
                
                
                -
                
                
                -
                
                
                3,125,345
                
                
                -
                
                
                3,125,345Charge
                    for beneficial conversion feature
                
                
                -
                
                
                -
                
                
                158,078
                
                
                -
                
                
                158,078Modification
                    of warrants in connection with loan conversion rate
                
                
                -
                
                
                -
                
                
                405,556
                
                
                -
                
                
                405,556Conversion
                    of short-term loans to common stock
                
                
                3,178,456
                
                
                3,179
                
                
                1,996,864
                
                
                -
                
                
                2,000,043Warrants
                    issued in connection with conversion of loans
                
                
                -
                
                
                -
                
                
                277,369
                
                
                -
                
                
                277,369Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                (14,119,692
                )
                
                (14,119,692
                )Balance
                    at December 31, 2006
                
                
                70,708,542
                
                $
                70,709
                
                $
                23,400,757
                
                $
                (31,070,026
                )
                $
                (7,598,560
                )
 
 ***See
        notes to consolidated financial statements***
  F-4
  **PURE
        VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **STATEMENTS
        OF CASH FLOWS**
 **Years
        Ended December 31, 2006 and 2005**
 **December
                    31,****2006**
                
                **2005****Cash
                    flows from operating activities**Net
                    loss
                
                $
                (14,119,692
                )
                $
                (3,328,860
                )Adjustments
                    to reconcile net loss to net cash used in operating
                    activities:Depreciation
                    and amortization
                
                
                2,217,186
                
                
                1,006,294Issuance
                    of shares and stock options for services
                
                
                3,236,664
                
                
                29,486Modification
                    of warrants in connection with loan conversion rate
                
                
                405,556
                
                
                -Issuance
                    of warrant in connection with conversion of loans
                
                
                277,369
                
                
                -Issuance
                    of warrants for services
                
                
                1,580,024
                
                
                -Charge
                    for beneficial conversion feature
                
                
                158,078
                
                
                -Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (56,032
                )
                
                (2,478
                )Prepaid
                    expenses and other current assets
                
                
                (121,665
                )
                
                (79,702
                )Other
                    assets
                
                
                (191,689
                )
                
                3,400Accounts
                    payable
                
                
                400,441
                
                
                417,213Other
                    current liabilities and accrued interest payable
                
                
                999,656
                
                
                421,475Net
                    cash used in operating activities
                
                
                (5,214,104
                )
                
                (1,533,172
                )**Cash
                    flows from investing activities**Purchase
                    of property and equipment
                
                
                (38,840
                )
                
                (144,774
                )Cash
                    used in investing activities
                
                
                (38,840
                )
                
                (144,774
                )**Cash
                    flows from financing activities**Cash
                    received for common stock
                
                
                330,097
                
                
                127,500Proceeds
                    from short-term loans payable
                
                
                5,635,500
                
                
                1,685,055Cash
                    provided by financing activities
                
                
                5,965,597
                
                
                1,812,555**Net
                    increase in cash**
                
                
                712,653
                
                
                134,609**Cash
                    at beginning of year**
                
                
                156,579
                
                
                21,970**Cash
                    at end of year**
                
                $
                869,232
                
                $
                156,579**Supplemental
                    Disclosures**Income
                    taxes paid
                
                $
                2,481
                
                $
                1,944Interest
                    paid
                
                
                17,043
                
                
                12,505**Non-cash
                    financing activities**Warrants
                    issued for lease guarantee
                
                $
                421,696
                
                $
                -Warrants
                    issued with short-term loans and loan guarantees
                
                
                3,125,345
                
                
                1,423,424Premium
                    on secured loan issuance
                
                
                150,000
                
                
                -Conversion
                    of notes payable to common stock
                
                
                2,000,043
                
                
                -Conversion
                    of accrued interest payable into notes payable
                
                
                723,786
                
                
                -
 
 ***See
        notes to consolidated financial statements***
  F-5
  **PURE
        VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **DECEMBER
        31, 2006 AND 2005**
  **NOTE
        1 -** **DESCRIPTION
        OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN**
 
 ***General***
 
 Pure
        Vanilla eXchange, Inc. (the “Company”) was incorporated in the State of Nevada
        under the name Princeton Power Corporation on August 11, 2004. On November
        29,
        2004, the Company changed its name to NVS Entertainment, Inc (“NVS”). The
        Company is the successor to the business of Pure Vanilla eXchange, Inc. (“Old
        Pure Vanilla”), a corporation organized under laws of the State of Nevada on
        August 30, 2005.
 
 On
        March
        13, 2006, the Company completed a recapitalization in the form of a “reverse
        merger” transaction with Old Pure Vanilla. In the reverse merger, Old Pure
        Vanilla merged into a wholly owned subsidiary of the Company. The Company
        acquired all the outstanding capital stock of Old Pure Vanilla and, in
        consideration, issued 39,927,452 shares of its common stock to Old Pure
        Vanilla’s shareholders. The Company retired all of its prior existing shares of
        common stock except for 10,568,634 shares of common stock retained by the
        original shareholders of NVS.
 
 Placement
        agents and other advisors received an additional 1,056,863 shares of common
        stock valued at $792,647 for services rendered in connection with the reverse
        merger, which is included in organizational costs. After the closing of the
        reverse merger, there were 53,900,031 shares of common stock of the Company
        issued and outstanding.
 
 For
        financial reporting purposes, Old Pure Vanilla is deemed to be the acquirer
        in
        the reverse merger transaction. Consequently, the assets and liabilities
        and the
        historical operations reflected in the financial statements are those of
        Old
        Pure Vanilla, and are recorded at the historical cost basis of Old Pure
        Vanilla.
 
 On
        December 31, 2006, the Company completed the acquisition of Nimble Group,
        Inc.
        (“Nimble”) pursuant to the Agreement and Plan of Merger dated as of December 15,
        2006 (the “Merger Agreement”), by and among the Company, PVNX Acquisition Corp.,
        a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger
        Sub”), and Nimble. Under the Merger Agreement, the Merger Sub was merged (the
        “Merger”) with and into Nimble and Nimble survived the Merger as a wholly-owned
        subsidiary of the Company.
 
 F-6
  **PURE
          VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**
  At
        the
        effective time of the Merger, each share of Nimble’s common stock issued and
        outstanding immediately prior to the effective time of the Merger, was converted
        into 1.306 shares of the Company’s common stock. As a result of the foregoing,
        16,808,728 shares of the Company’s common stock were issued to the former Nimble
        stockholders.
 
 Immediately
        after the acquisition of Nimble, there were 70,708,542 shares of the Company’s
        common stock issued and outstanding.
 
 As
        of
        September 30, 2006 the Company had devoted most of its activities to
        establishing its business lines. Accordingly, the Company's financial statements
        were presented as a development stage company as defined in Statement of
        Financial Accounting Standards No. 7. During the fourth quarter of 2006,
        the
        Company began operations. In addition, the Company acquired Nimble, which
        is an
        operating entity. Accordingly, the accompanying consolidated financial
        statements are not presented as a development stage company.
 
 The
        Company is engaged in the electronic payments services business. The Company
        provides card programs and electronic payment services that enable consumers
        to
        pay anonymously for the products and services they buy via the Internet and
        to
        pay taxes and other fees to government agencies.
 
 ***Restatement
        for the Nimble Merger***
 
 The
        Company’s historical financial statements herein have been revised to reflect
        the effects of the acquisition of Nimble. In accordance with generally accepted
        accounting principles, assets transferred between entities under common control
        are accounted for at historical cost similar to a pooling of interests, and
        the
        financial statements of previously separate companies for periods prior to
        the
        merger are restated on a combined basis.
 
 ***Going
        Concern and Basis of Presentation***
 
 For
        the
        year ended December 31, 2006, the Company recorded a net loss of $14,119,692
        and
        incurred negative cash flows from operations of $5,214,104. As of December
        31,
        2006, the Company had an accumulated deficit of $31,070,026. The Company’s
        continued existence is dependent upon several factors, including the ability
        to
        generate sales, achieve profitability from the sale of the Company’s products
        and obtaining financing. Accordingly, if the Company fails to obtain additional
        financing, it will not be able to continue as a going concern.
 
 The
        accompanying consolidated financial statements have been prepared on the
        basis
        that the Company will continue as a going concern, which assumes the realization
        of assets and satisfaction of liabilities in the normal course of business.
        The
        uncertainties regarding the availability of continued financing and commencement
        of adequate commercial revenues raise substantial doubt about the Company’s
        ability to continue as a going concern. The consolidated financial statements
        do
        not include any adjustments that might result from the outcome of this
        uncertainty.
 
 F-7
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
 **NOTE
        2 -** **SUMMARY
        OF SIGNIFICANT ACCOUNTING POLICIES**
 
 ***Consolidation***
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        wholly-owned subsidiary. All significant intercompany balances and transactions
        have been eliminated in consolidation.
 
 ***Net
        Loss per Share***
 
 Loss
        per
        share (“EPS”) is computed based on the weighted average number of common shares
        outstanding and excludes any potential dilution. Diluted EPS reflects the
        potential dilution that could occur if stock options or warrants and convertible
        notes, to issue common stock, were exercised into common stock, which would
        then
        share in the earnings of the Company.
  In
        computing basic and diluted net loss per share for the years ended December
        31,
        2006, and 2005, the Company used a weighted average number of common shares
        outstanding of 62,526,232 and 16,892,472, respectively.
 
 The
        shares that would be issued upon the exercise of stock options, warrants
        or
        convertible notes, totaling 19,476,484 and 7,654,379 for 2006 and 2005,
        respectively, are excluded from the calculation of net loss per share as
        their
        effect would be anti-dilutive.
 
 ***Revenue
        Recognition***
 
 The
        Company earns revenue from three sources. The Company charges a fee when
        a
        consumer funds one of the Company’s stored value cards or an online account
        maintained by the Company and when that consumer subsequently uses that card
        or
        account to purchase goods and services. The Company refers to those revenues
        as
        load fees and processing fees, respectively. Load fees and processing fees
        are
        recognized as sales in the period the item is processed. The Company earns
        and
        recognizes revenue when consumers use their credit or debit cards to pay
        government tax bills which the Company classifies as fee revenue. These fees
        are
        recognized as sales in the period the item is processed.
 
 ***Stock-based
        Awards and Options***
 
 Effective
        January 1, 2005, the Company adopted Statement of Financial Accounting Standards
        No. 123 (revised 2004), Share-based Payments (“SFAS 123R”). SFAS 123R
        amends SFAS 123, and its related interpretations. The Company elected to
        adopt
        the modified prospective transition method and therefore has not restated
        prior
        periods. Under this transition method, stock based compensation expense includes
        compensation expense for all options granted prior to, but not yet vested
        as of
        the effective date, based on the grant date fair value estimated in accordance
        with the original provision of SFAS No. 123, Accounting for Stock-Based
        Compensation (“SFAS 123”). Stock-based compensation expense for all stock-based
        compensation awards granted after the effective date is based on the grant
        date
        fair value estimated in accordance with SFAS 123R.
  F-8
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**
 Prior
        to
        its adoption of SFAS 123R, the Company measured compensation expense for
        stock-based compensation using the intrinsic value method prescribed by
        Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
        Employees and related interpretations. The Company uses the Black-Scholes
        valuation model to calculate the fair value of share-based awards.
 
 ***Investments***
 
 In
        January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation
        46, Consolidation of Variable Interest Entities, an Interpretation of
        Accounting Research
        Bulletin No. 51 ("FIN 46"). In December 2003, the FASB modified FIN 46 to
        make
        certain technical corrections and to address certain implementation issues
        that
        had arisen. A variable interest entity ("VIE") is a corporation, partnership,
        trust, or any other legal structure used for business purposes that does
        not
        have equity investors with voting rights or has equity investors that do
        not
        provide sufficient financial resources for the entity to support its activities.
        FIN 46 requires a VIE to be consolidated by a company if that company is
        the
        primary beneficiary of the VIE. The primary beneficiary of a VIE is an entity
        that is subject to a majority of the risk of loss from the VIE's activities
        or
        entitled to receive a majority of the entity's residual returns, or both.
        As of
        December 31, 2006, the Company is not a primary beneficiary of any
        VIE's.
 
 ***Accounting
        Estimates***
 
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities at the date of the consolidated financial statements and the
        reported amounts of revenue and expenses during the reporting period. Actual
        results could differ from those estimates. Significant estimates include
        the
        valuation of shares and stock options issued for services and the valuation
        of
        warrants issued in connection with loans and guarantees.
 
 ***Income
        Taxes***
 
 Deferred
        tax assets and liabilities are computed based on the difference between the
        book
        and income tax bases of assets and liabilities using the enacted marginal
        tax
        rate. Deferred income tax expenses or credits are based on changes in the
        assets
        and liabilities from period to period. These differences arise primarily
        from
        the Company's net operating loss. Valuation allowances are established when
        necessary to reduce deferred tax assets to the amount expected to be
        realized.
 
 ***Fair
        Value of Financial Instruments***
 
 The
        carrying amount of cash, accounts receivable, accounts payable and loans
        payable
        approximate their fair value because of the short-term nature of these
        instruments.
  F-9
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  ***Concentration
        of Credit Risk***
 
 The
        Company's financial instruments that are exposed to concentrations of credit
        risk consist primarily of cash. The Company places its cash with high credit
        quality financial institutions. At times, such amounts may be in excess of
        federally insured limits.
 
 ***Accounts
        Receivable***
 
 The
        Company has accounts receivable with major payment processors which are settled
        electronically. No provision for doubtful accounts was considered necessary
        based upon the Company’s evaluation of the collectability of these
        amounts.
 
 ***Property
        and Equipment***
 
 Property
        and equipment are stated at historical cost, net of accumulated depreciation.
        Depreciation is computed using the straight-line method over the estimated
        useful lives of assets which range from three to five years.
 
 ***Deferred
        Costs***
 
 Costs
        incurred in connection with borrowings are capitalized. These costs are
        amortized on a straight-line basis over the life of the borrowing as an
        adjustment to interest expense. Costs incurred in connection with the guarantee
        of the lease, pertaining to our corporate office space, are capitalized.
        These
        costs are amortized on a straight-line basis over the lease term.
 
 ***Software
        Development Costs***
 
 The
        Company accounts for research and development costs in accordance with several
        accounting pronouncements, including Statement of Financial Accounting Standards
        (“SFAS”) No. 2, “Accounting for Research and Development Costs,” and SFAS No.
        86, “Accounting for the Costs of Computer Software to be Sold, Leased or
        Otherwise Marketed.” SFAS No. 86 specifies that costs incurred internally in
        creating a computer software product should be charged to expense when incurred
        as research and development until technological feasibility has been established
        for the product. Once technological feasibility has been established, all
        software costs should be capitalized until the product is available for general
        release to customers. Judgment is required in determining when the technological
        feasibility of a product is established. The Company has determined that
        technological feasibility for its products is reached very shortly before
        the
        products are released. Costs incurred after technological feasibility is
        established are not material, and, accordingly, the Company expenses research
        and development costs when incurred.
 
 The
        Company accounts for costs incurred to develop software for internal use
        in
        accordance with Statement of Position 98-1, “Accounting for the Costs of
        Computer Software Development or Obtained for Internal Use,” which requires such
        costs be capitalized and amortized over the estimated useful life of the
        software. Costs related to design or maintenance of internal-use software
        are
        expensed as incurred.
  F-10
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  Software
        development costs were $862,855 and $621,695 for the years ended December
        31,
        2006 and 2005, respectively.
 
 ***Advertising
        Costs***
 
 Advertising
        costs are expensed as incurred. Advertising costs were $858,246 and $1,824
        for
        the years ended December 31, 2006 and 2005, respectively.
 
 ***Segment
        Reporting***
 
 The
        Company operates as a single segment.
 
 ***Recently
        Issued Accounting Standards***
 
 In
        July
        2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in
        Income Taxes, (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in
        income taxes recognized in an enterprise’s financial statements in accordance
        with FASB Statement No.109, Accounting for Income Taxes. FIN 48 is effective
        for
        fiscal years beginning after December 15, 2006. The Company expects to implement
        FIN 48 beginning on January 1, 2007. The Company is evaluating the impact
        that
        adopting FIN 48 will have on our financial position and results of
        operations.
 
 In
        September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements
        (“SFAS 157”), which clarifies that fair value is the amount that would be
        exchanged to sell an asset or transfer a liability in an orderly transaction
        between market participants. Further, the standard establishes a framework
        for
        measuring fair value in generally accepted accounting principles and expands
        certain disclosures about fair value measurements. SFAS 157 is effective
        for
        fiscal years beginning after November 15, 2007. The Company does not expect
        the
        adoption of SFAS 157 to have a material impact on its consolidated financial
        position, results of operations or cash flows.
 
 In
        September 2006, the Securities and Exchange Commission issued Staff Accounting
        Bulletin No. 108, Considering the Effects of Prior Year Misstatements when
        Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB
        108 provides guidance on how prior year misstatements should be taken into
        consideration when quantifying misstatements in current year financial
        statements for purposes of determining whether the current year’s financial
        statements are materially misstated. SAB 108 is effective for fiscal years
        ending after November 15, 2006. The Company does not expect the provisions
        of
        SAB 108 to have a material impact on its financial position, results of
        operations or cash flows.
 
 **NOTE
        3 - RELATED PARTY TRANSACTIONS**
 
 On
        February 21, 2006, in consideration of services rendered, Old Pure Vanilla
        issued 1,575,000 shares of its common stock to its officers and consultants,
        including 700,000 shares to its Chief Executive Officer and 125,000 shares
        to
        its former President, pursuant to a Board of Directors resolution dated December
        5, 2005. In connection with these issuances the Company recorded $15,750
        of
        compensation expense for the year ended December 31, 2005.
  F-11
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  The
        Company has entered into various agreements and transactions with Jed Schutz,
        a
        principal shareholder and director of the Company, which are summarized as
        follows:
 
 i.
              During
                  2006, Mr. Schutz loaned the Company $611,000. In connection with
                  these
                  loans, Mr. Schutz was issued 76,375 warrants with an exercise price
                  of
                  $2.00. The fair value of these warrants was estimated to be $158,921
                  and
                  was recorded as a loan discount which is being amortized over the
                  life of
                  the loan.
 
 ii.
              During
                  2006, Mr. Schutz converted $1,034,436 of outstanding loans into
                  1,643,921
                  shares of common stock at a conversion price of $0.6292 per share.
                  The
                  loans were amended to reflect a new principal balance of $375,134
                  relating
                  to unpaid accrued interest on the converted loans. In connection
                  with this
                  conversion, Mr. Schutz was issued 122,816 warrants with an exercise
                  price
                  of $2.11. The fair value of these warrants was estimated to be
                  $143,456
                  and was recorded as interest
                  expense.
 
 iii.
              During
                  2006, Mr. Schutz guaranteed $1,475,000 of loans to the Company.
                  In
                  connection with these guarantees, Mr. Schutz was issued 147,500
                  warrants
                  with an exercise price of $2.00 per share. The fair value of these
                  warrants was estimated to be $361,225 and was recorded as deferred
                  loan
                  costs which is being amortized over the life of the
                  loans.
 
 iv.
              During
                  2006, Mr. Schutz guaranteed the Company’s obligations relating to the
                  lease of office space in New York City. In consideration of his
                  guarantee
                  of the Company’s lease obligation, Mr. Schutz was issued 176,250 warrants
                  with an exercise price of $2.00. The fair value of these warrants
                  was
                  estimated to be $421,696 and was recorded as deferred lease costs
                  which is
                  being amortized over the life of the
                  lease.
 
 v.
              During
                  2005, Mr. Schutz loaned the Company $1,083,000. In connection with
                  these
                  loans, Mr. Schutz was issued 3,480,780 warrants with exercise prices
                  ranging from $0.63 to $0.67 per share. The fair value of the warrants
                  was
                  estimated to be $1,217,524 and was recorded as a loan discount
                  which is
                  being amortized over the life of the
                  loans.
 
 vi.
              During
                  2005 Mr. Schutz satisfied a liability which arose from a judgment
                  against
                  the Company’s subsidiary for $64,001. This liability is non-interest
                  bearing, due on demand, and is included in other current liabilities
                  at
                  December 31, 2006.
  F-12
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  vii.
              At
                  December 31, 2006, included in other current liabilities is $66,751
                  of
                  interest payable on loans previously converted to common stock
                  by Mr.
                  Schutz.
 
 viii.
              In
                  December 2006, Mr. Schutz exercised a warrant to purchase 2,103,050
                  shares
                  of Nimble common stock, which were converted into 2,746,583 shares
                  of the
                  common stock of the Company upon the acquisition of Nimble. Mr.
                  Schutz did
                  not pay the $2,103 aggregate exercise price payable upon exercise
                  of this
                  warrant until April 2007. See Note 12 - Subsequent Events. Nimble
                  issued
                  this warrant to Mr. Schutz on April 30, 2004 pursuant to a stock
                  purchase
                  agreement dated as of April 8, 2004 between Nimble and Mr. Schutz.
                  Under
                  the stock purchase agreement, Mr. Schutz agreed to convert $4,040,199
                  of
                  outstanding loans into shares of a series of preferred stock to
                  be newly
                  designated. The series of preferred stock was never designated
                  and the
                  shares were never issued. In December 2006, Mr. Schutz agreed to
                  terminate
                  the stock purchase agreement and in consideration Nimble issued
                  to him
                  4,916,280 shares of Nimble common stock which were converted into
                  6,420,662 shares of common stock of the Company upon the acquisition
                  of
                  Nimble.
 
 ix.
              As
                  of December 31, 2006, Mr. Schutz owns 30,254,394 shares of common
                  stock of
                  the Company and warrants to purchase 4,993,499 shares of common
                  stock with
                  exercise prices ranging from $0.63 to $2.87. Also as of December
                  31, 2006,
                  the Company has loans payable and accrued interest due to Mr. Schutz
                  of
                  $1,586,134 and $202,885, respectively. Of these loans payable,
                  $115,000
                  are convertible into 57,500 shares of common stock at a conversion
                  price
                  of $2.00. During 2006 and 2005, total warrants issued to Mr. Schutz
                  were
                  522,941 and 3,480,780, respectively. The fair value of the warrant
                  grants
                  made in 2006 and 2005 were $1,085,298 and 1,217,524,
                  respectively.
 
 In
        January 2007, the Company appointed Tucker Taylor as Chief Operating Officer
        of
        the Company. Mr. Taylor provided consulting services to Nimble from July
        1, 2006
        to December 31, 2006. His aggregate compensation for consulting services
        during
        that period was $59,088. On December 6, 2006, Mr. Tucker loaned Nimble $100,000
        and was issued a 15% convertible note due December 6, 2007, together 47,491
        five-year warrants to purchase shares of Nimble common stock with an exercise
        price of $1.72. The fair value of the warrants was estimated to be $55,228
        and
        recorded as loan discount which is being amortized over the life of the
        loan.
 
 On
        December 15, 2006, Mr. Benedict, a newly elected director as of February
        6,
        2007, and Nimble entered into an agreement pursuant to which $609,500 in
        loans
        made by Mr. Benedict to Nimble from January 2003 through April 2006 were
        converted into 968,614 shares of Nimble common stock. In connection with
        this
        conversion, the Company issued five-year warrants to purchase 72,364 shares
        of
        common stock at an exercise price of $2.11 per share. The fair value of these
        warrants was estimated to be $84,526 and was recorded as interest expense.
        Each
        promissory note issued by Nimble to Mr. Benedict in evidence of a converted
        loan
        was amended and restated to provide that Nimble’s only obligation under the note
        will be to pay the interest accrued and unpaid as of the date of the agreement,
        together with interest on such amount at the annual rate of 15.0%, from the
        date
        of the agreement until the date on which the note is paid in full, and to
        extend
        the maturity date of such note through December 15, 2008, subject to earlier
        prepayment at Nimble’s option at any time without premium or
        penalty.
  F-13
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  On
        December 15, 2006, Mr. Fanning, a newly elected director as of February 6,
        2007,
        and Nimble entered into an agreement pursuant to which $179,106 in loans
        made by
        Mr. Fanning to Nimble from December 2002 through April 2006 were converted
        into
        284,635 shares of Nimble common stock. In connection with this conversion,
        the
        Company issued five-year warrants to purchase 21,266 shares of common stock
        at
        an exercise price of $2.11 per share. The fair value of these warrants was
        estimated to be $24,840 and was recorded as interest expense. Each promissory
        note issued by Nimble to Mr. Fanning in evidence of a converted loan was
        amended
        and restated to provide that Nimble’s only obligation under the note will be to
        pay the interest accrued and unpaid as of the date of the agreement, together
        with interest on such amount at the annual rate of 15.0%, from the date of
        the
        agreement until the date on which the note is paid in full, and to extend
        the
        maturity date of such note through December 5, 2008, subject to earlier
        prepayment at Nimble’s option at any time without premium or
        penalty.
 
 On
        January 1, 2006, Old Pure Vanilla entered into a consulting agreement with
        NG
        Outsourcing, Inc., a corporation wholly-owned by Florian Schuhbauer, who
        then
        served as Old Pure Vanilla’s President and a member of its board of directors.
        Under that agreement, NG Outsourcing provided, through its employee, the
        Company’s President, such services as would ordinarily be rendered by a
        corporate president. The Company recorded $80,000 of fees related to this
        agreement, $40,000 of which remain payable at December 31, 2006. The consulting
        agreement expired on June 30, 2006.
 
 F-14
  **PURE
          VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS -
          (Continued)**
  **NOTE
        4 - SHORT AND LONG-TERM FINANCING**
 
 The
        following table is a summary of the Company’s short-term loans and accrued
        interest payable at December 31, 2006:
  **Loan
                  Description**
              
              **Principal****Amount**
              
              **Accrued
                  Interest****Payable**
              
              **Total****Amount****Non-Affiliate
                  Loans:**Short-term
                  loan, due September 25, 2007, bearing interest at a rate of
                  6.62%
              
              $
              199,172
              
              $
              0
              
              $
              199,172Short-term
                  loan, due April 30, 2007, bearing interest at a rate of 10%
                  (a)
              
              
              250,000
              
              
              26,971
              
              
              276,971Senior
                  secured loan, due December 22, 2007, bearing interest at a rate
                  of 10%
                  (b)
              
              
              1,650,000
              
              
              3,333
              
              
              1,653,333Short-term
                  loans, due from March 31, 2007 through December 11, 2007, bearing
                  interest
                  at a rate of 15% (c)
              
              
              3,400,000
              
              
              221,868
              
              
              3,621,868**Sub
                  Total**
              
              
              **5,499,172**
              
              
              **252,172**
              
              
              **5,751,344****Related
                  Party Loans:**Short-term
                  loans, due from May 15, 2007 through December 6, 2007, bearing
                  interest at
                  a rate of 15% (c)
              
              
              711,000
              
              
              69,373
              
              
              780,373Short-term
                  loans, due on demand, bearing interest at a rate of 16%
                  (c)
              
              
              600,000
              
              
              129,116
              
              
              729,116**Sub-Total**
              
              
              **1,311,000**
              
              
              **198,489**
              
              
              **1,509,489****Total
                  Loans and Accrued Interest Payable**
              
              **$**
              **6,810,172**
              
              **$**
              **450,661**
              
              
              **7,260,833**Less:
                  loan discount
              
              
              
              
              
              
              
              
              (1,571,118
              )**Total
                  Loans and Accrued Interest Payable, net**
              
              
              
              
              
              
              
              **$**
              **5,689,715**
 
 The
        following table is a summary of the Company’s long-term loans and accrued
        interest payable at December 31, 2006:
 
 **Loan
                  Description**
              
              **Principal****Amount**
              
              **Accrued
                  Interest****Payable**
              
              **Total****Amount****Non-Affiliate
                  Loans:**Long-term
                  loans, due December 23, 2008, bearing interest at a rate of 15%
                  (c)
              
              
              79,415
              
              
              588
              
              
              80,003**Related
                  Party Loans:**Long-term
                  loans, due December 23, 2008, bearing interest at a rate of 15%
                  (c)
              
              
              644,371
              
              
              7,465
              
              
              651,836**Total
                  Loans and Accrued Interest Payable**
              
              **$**
              **723,786**
              
              **$**
              **8,053**
              
              **$**
              **731,839**
 
 F-15
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
 (a)
        The
        loan is convertible into shares
        of
        the Company’s common stock, at any time in whole or in part, at the option of
        the holder at a conversion price of $1.72 per share. As a result of this
        beneficial conversion feature at time of issuance, $55,556 of interest expense
        was recorded during the year ended December 31, 2006. In connection with
        the
        issuance of this loan, the Company issued warrants to purchase 273,073 shares
        of
        common stock at an exercise price of $2.11 per share. The fair value of the
        warrants was estimated to be $319,569 and was recorded as loan discount which
        is
        being amortized over the life of the loan.
 
 (b)
        On
        December 22, 2006, the Company entered into a “Securities Purchase Agreement”
with an institutional investor (the “Bridge Lender”), pursuant to which the
        Company issued to the Bridge Lender a $1,500,000 senior secured convertible
        promissory note and five year warrants to purchase 450,000 shares of the
        Company’s common stock. The fair value of the warrants was estimated to be
        $716,265 and recorded as loan discount which is being amortized over the
        life of
        the loan. The warrants were exercisable at an exercise price of $2.48782,
        subject to adjustment (see Note 12). The aggregate purchase price paid by
        the
        Bridge Lender for the note and the warrants was $1,424,500. The net proceeds
        to
        the Company from the issuance of the note and the warrant after payment of
        related fees and expenses was $1,387,500. The Company’s obligations under the
        Securities Purchase Agreement and the other documents relating to the
        transaction have been guaranteed by Nimble.
  Interest
        on the note is payable monthly in arrears beginning on February 1, 2007.
        The
        principal amount of the note is payable in monthly installments of $250,000
        beginning on July 1, 2007 until paid in full.   Upon the occurrence and
        during the continuation of an event of default, interest on the note shall
        accrue at the annual rate of 15.0%. The note is scheduled to mature on December
        26, 2007.
  The
        note
        is convertible into shares of the Company’s common stock, at any time in whole
        or in part, at the option of the holder at the initial conversion price of
        $2.48782 per share, which is equal to the volume weighted average closing
        price
        of the Company’s common stock for the five trading days ending on the trading
        day immediately prior to the closing of the Securities Purchase Agreement.
        As a
        result of this beneficial conversion feature, the Company recorded $158,078
        of
        interest expense for the year ended December 31, 2006. The conversion price
        of
        the note is subject to “full ratchet” adjustment in the event that, subject to
        certain exceptions, the Company issues any shares of common stock at a purchase
        price per share, or securities convertible into or exercisable for shares
        of
        common stock at a conversion or exercise price per share, less than the
        conversion price then in effect.
 
 The
        Company may, at its option, redeem all or any portion of the principal amount
        of
        the note then outstanding at any time after February 28, 2007 upon three
        business days notice to the holder. Any redemption, whether upon the
        consummation of a financing transaction or at the option of the Company,
        shall
        be made at the redemption price equal to the greater of (i) 120% of the
        principal amount to be redeemed plus accrued and unpaid interest and (ii)
        the
        product of (x) the principal amount to be redeemed divided by the conversion
        price then in effect (or $1.00 if the conversion price then in effect is
        less
        than $1.00) and (y) the closing sale price of the Company’s common stock on the
        trading day immediately prior to redemption.
 F-16
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)**
 The
        holder may, at its option, require the Company to redeem all or any portion
        of
        the principal amount of the note then outstanding upon the occurrence of
        certain
        specified events of default. Any
        redemption upon an event of default shall be made at the redemption price
        equal
        to the greater of (i) 125% of the principal amount to be redeemed and (ii)
        the
        product of (a) the number of shares of common stock issuable upon conversion
        in
        full of the principal amount to be redeemed at the conversion price then
        in
        effect and (b) the closing sale price of the Company’s common stock on the
        trading day immediately prior toredemption.
  The
        holder may also, at its option, require the Company to redeem all or any
        portion
        of the principal amount of the note then outstanding upon the consummation
        of
        any transaction that would constitute a change in control of the Company.
        Any
        redemption upon a change of control shall be made at the redemption price
        equal
        to the greater of
        (i)
        130% (or 120% in the event of a change of control in which the per share
        consideration paid to holders common stock is greater than 200% of the initial
        conversion price (as adjusted for stock splits, stock dividends, reverse
        stock
        splits or similar transactions)) and the product of (x) the sum of the principal
        amount to be redeemed and any accrued and unpaid interest and (y) the quotient
        determined by dividing (a) the closing sale price of the Company’s common stock
        on the trading day immediately following the public announcement of the change
        of control by (b) the conversion price then in effect and (ii) 150% of the
        sum
        of the principal amount to be redeemed and any accrued and unpaid
        interest.
  The
        Company’s obligations under the note are secured by a security interest in all
        of the assets of the Company and Nimble. The security interest granted to
        the
        Bridge Lender is senior and prior to any other security interests granted
        by the
        Company or Nimble (except for any permitted liens described in the note).
        The
        security interest granted to the Bridge Lender will terminate upon the payment
        in full of all of the Company’s obligations under the Securities Purchase
        Agreement or the other documents relating to the transaction.
 
 As
        of
        December 31, 2006, the outstanding balance on the above loan is $1,650,000
        which
        includes a $150,000 redemption premium.
 
 (c)
        In
        connection with the issuance of these loans, the Company issued warrants
        to
        purchase 5,217,423 shares of common stock, at exercise prices ranging from
        $0.63
        to $1.72. The
        fair
        value of the warrants was estimated to be $3,102,202 and recorded as loan
        discount which is being amortized over the life of the loan. Loans in the
        amount
        of $2,140,000
        are convertible into shares
        of
        the Company’s common stock, at any time in whole or in part, at the option of
        the holder at conversion prices ranging from $1.72 to $2.00. As a result
        of this
        beneficial conversion feature at the time of issuance, $350,000 of interest
        expense was recorded during the year ended December 31, 2006. The
        notes provide for an interest rate of 18% in the event of a default.  Each
        holder of certain notes on which interest is more than ten days past due
        has the
        right, upon notice to the Company, to declare the entire principal amount
        of the
        note and all interest thereon immediately due and payable. As of December
        31,
        2006, interest in the amount of $154,152 payable on $1,836,000 in principal
        amount of these notes was more than ten days past due and has not been paid.
        As
        of December 31, 2006, the Company had not received any such notice from a
        note
        holder. In February 2007, the Company entered into waiver and amendment
        agreements with the note holders under which the note holders waived the
        Company’s failure to pay interest on the notes (See Note 12)
  F-17
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  The
        Company’s obligations under $1,475,000 of the loans are personally guaranteed by
        Jed Schutz. In consideration of this guarantee, the Company issued to Mr.
        Schutz
        warrants to purchase 147,500 shares of common stock at an exercise price
        of
        $2.00 per share.
 
 On
        December 22, 2006, $2,000,043 of outstanding loans were converted into shares
        of
        common stock of the Company at the rate of $0.6292 resulting in the issuance
        of
        3,178,456 shares of common stock. In addition, warrants to purchase 237,460
        shares of common stock of the Company were issued upon conversion at an exercise
        price of $2.11. The
        fair
        value of the warrants was estimated to be $277,369 and was recorded as interest
        expense during 2006. Also
        upon
        conversion, the loans were amended and restated to reflect the unpaid associated
        accrued interest in the amount of $723,786 related to the loans, including $375,134 from Jed Schutz, $221,519 from George Benedict, and $47,717
        from Tom Fanning, as new loans.
 
 **NOTE
        5 - OPERATING LEASE**
 
 On
        April
        25, 2006, the Company entered into a lease for 7,863 square feet of office
        space
        in New York City. Under the terms of the lease, the Company is responsible
        for
        its share of common area and operating expenses. The term of the lease started
        on May 15, 2006 and ends on January 30, 2010. Rent expense was $199,643 for
        the
        year ended December 31, 2006. As of December 31, 2006, the Company’s minimum
        lease commitments under the lease are as follows:
 
 2007
              
              $
              322,3832008
              
              
              322,3832009
              
              
              322,3832010
              
              
              26,865Total
                  minimum lease commitments
              
              $
              994,014
  The
        Company’s obligations under the lease agreement are personally guaranteed by Jed
        Schutz, a principal shareholder and director of the Company. In consideration
        of
        this guarantee, the Company issued to Mr. Schutz a warrant to purchase 176,250
        shares of common stock at an exercise price of $2.00 per share. The
        fair
        value of these warrants was estimated to be $421,696 and was recorded as
        deferred lease costs which is being amortized over the life of the
        lease.
  **NOTE
        6 - SHARE BASED COMPENSATION AWARDS AND OPTIONS**
 
 On
        February 20, 2006, the Company adopted its 2006 Stock Option Plan. The plan
        provides for grants of stock options, which may be either incentive stock
        options within the meaning of Section 422 of the Internal Revenue Code of
        1986,
        as amended or stock options which are not incentive stock options. Because
        the
        plan was not approved by the Company’s stockholders within one year of the date
        of adoption by the board, none of the options granted under the plan may
        qualify
        as incentive stock options. Under the plan, the total number of shares of
        com mon
        stock
        that may be subject to the granting of awards under the plan shall be equal
        to
        7,500,000 shares. Stock
        options are granted at not less than 100% of fair market value on the date
        of
        grant and have a maximum term of ten years. Generally, stock options granted
        under the plan vest from one to three years after the date of grant. The
        plan
        provides for accelerated vesting under certain conditions, including a change
        in
        control.
  F-18
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  In
        June
        2006, Nimble adopted its 2006 Stock Option Plan. The plan provides for grants
        of
        stock options, which may be either incentive stock options within the meaning
        of
        Section 422 of the Internal Revenue Code of 1986, as amended or stock options
        which are not incentive stock options. Under the plan, the total number of
        shares of com mon
        stock
        that may be subject to the granting of awards under the plan shall be equal
        to 3,500,000 shares. Stock
        options are granted at not less than 100% of fair market value on the date
        of
        grant and have a maximum term of ten years. Generally, stock options granted
        under the plan vest upon issue or from two to three years after the date
        of
        grant. The plan provides for accelerated vesting under certain conditions,
        including a change in control. Upon the Company’s acquisition of Nimble, all of
        the options granted under the plan became fully vested and exercisable for
        1.306
        shares of the Company’s common stock for each share of Nimble common stock
        issuable upon exercise thereof prior to the acquisition.
 
 The
        fair
        value of the options granted during the years ended December 31, 2006 and
        2005
        were estimated at the grant date using the Black-Scholes option pricing model
        and recorded as expense over the vesting periods of the options. Significant
        assumptions used in the Black-Scholes model are the current rate of the U.S.
        Treasury security that corresponds with the maturity of each option, i.e.
        the
        risk free rate and 60% for volatility. The risk-free rate used in the model
        ranged from 3.37% to 6.42%. The expected lives ranged from 5 to 10 years. For
        all
        share-based awards granted after January 1, 2005, compensation expense is
        recognized on a straight-line basis over the vesting period.
 
 During
        the years ended December 31, 2006 and 2005, 7,528,100 and 91,204, respectively,
        of stock options to purchase shares of common stock were granted under the
        plans.
 
 The
        total
        share-based compensation cost related to the plans for the years ended December
        31, 2006 and 2005 was $2,428,267 and $29,486, respectively.
  As
        of
        December 31, 2006, the Company had $1,397,496 of total unrecognized
        compensation cost related to unvested awards, which it expects to recognize
        over
        a weighted average period of 1.8 years. The weighted-average remaining
        contractual life for all options outstanding is 5.9 years.
  F-19
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  The
        following table summarizes share option activity in our stock option plans
        for
        the years ended December 31, 2006 and 2005:
  **Options**
              
              **Weighted**
                **average**
                **exercise**
                **price**
              
              **Weighted**
                **average**
                **grant-date**
                **fair
                  value**
              
              **Aggregate**
                **Intrinsic**
                **Value**
                **(in
                  thousands)****2005**Outstanding
                  at January 1, 2005
              
              
              452,916
              
              $
              0.29
              
              $
              0.18Granted
              
              
              91,204
              
              
              1.14
              
              
              0.02Forfeited,
                  cancelled or expired
              
              
              (26,120
              )
              
              3.81
              
              
              0.12Exercised
              
              
              (—
              )
              
              —
              
              
              —Outstanding
                  at December 31, 2005
              
              
              **518,000**
              
              **$**
              **0.26**
              
              **$**
              **0.16**
              
              **$**
              **321**Exercisable
                  at December 31, 2005
              
              
              **518,000**
              
              **$**
              **0.26**
              
              **$**
              **0.16**
              
              **$**
              **321****2006**Outstanding
                  at January 1, 2006
              
              
              **518,000**
              (1)
              **$**
              **0.26**
              
              **$**
              **0.16**Granted
              
              
              7,528,100
              (2)
              
              0.84
              
              
              0.61Forfeited,
                  cancelled or expired
              
              
              (7,836
              )
              
              2.87
              
              
              0.01Exercised
              
              
              (18,284
              )
              
              0.02
              
              
              0.22Outstanding
                  at December 31, 2006
              
              
              **8,019,980**
              
              **$**
              **0.80**
              
              **$**
              **0.58**
              
              $
              **15,663**Exercisable
                  at December 31, 2006
              
              
              **5,619,980**
              (3)
              **$**
              **0.92**
              
              **$**
              **0.58**
              
              $
              **10,263**Shares
                  available for futureGrant
              
              
              **5,000,000**
              (4)
 
 (1)
        Represents non-plan options granted by Nimble, as converted upon the Company’s
        acquisition of Nimble.
 
 (2)
        Represents (i) options to purchase 2,500,000 shares granted under the Company’s
        2006 Stock Option Plan; (ii) options to purchase 4,571,000 shares granted
        under
        the Nimble 2006 Stock Option Plan, as converted upon the Company’s acquisition
        of Nimble; and (iii) non-plan options to purchase 457,100 shares granted
        by
        Nimble, as converted upon the Company’s acquisition of Nimble.
 
 (3)
        Represents (i) non-plan options to purchase 948,980 shares granted by Nimble,
        as
        converted upon the Company’s acquisition of Nimble; (ii) options to purchase
        4,571,000 shares granted under the Nimble 2006 Stock Option Plan, as converted
        upon the Company’s acquisition of Nimble and (iii) options to purchase 100,000
        shares granted under the Company’s 2006 Stock Option Plan. All options granted
        by Nimble not fully vested at the time of the Company’s acquisition of Nimble
        became fully vested upon the consummation of the acquisition.
 
 (4)
        Represents shares of common stock available for future grant under the Company’s
        2006 Stock Option Plan.
  F-20
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
 **OPTIONS
        OUTSTANDING AT DECEMBER 31, 2006**
 **REMAINING**
                **AVERAGE**
                **CONTRACT**
                **LIFE
                  IN YEARS****WEIGHTED**
                **AVERAGE**
                **EXERCISE
                  PRICE**
              
              **AGGREGATE**
                **INTRINSIC**
                **VALUE****RANGE**
              
              **NUMBER
                  OF OPTIONS**$0.08-$0.50
              
              
              2,916,107
              
              $
              0.43
              
              $
              6,764,945
              
              
              8.6$0.63-$0.77
              
              
              4,296,390
              
              $
              0.75
              
              
              8,613,421
              
              
              4.2$2.11-$2.44
              
              
              783,600
              
              $
              2.39
              
              
              284,900
              
              
              4.9$2.87-$4.21
              
              
              23,883
              
              $
              2.88
              
              
              -
              
              
              8.1**8,019,980**
              
              
              
              
              **$**
              **15,663,266**
 
 **EXERCISABLE
        AT DECEMBER 31, 2006**
 **RANGE**
                
                **NUMBER
                    OF OPTIONS**
                
                **WEIGHTED**
                  **AVERAGE**
                  **EXERCISE
                    PRICE**
                
                **AGGREGATE**
                  **INTRINSIC**
                  **VALUE**
                
                **REMAINING**
                  **AVERAGE**
                  **CONTRACT**
                  **LIFE
                    IN YEARS**$0.08-$0.50
                
                
                516,107
                
                $
                0.11
                
                $
                1,364,945
                
                
                5.8$0.63-$0.77
                
                
                4,296,390
                
                $
                0.75
                
                
                8,613,421
                
                
                4.2$2.11-$2.44
                
                
                783,600
                
                $
                2.39
                
                
                284,900
                
                
                4.9$2.87-$4.21
                
                
                23,883
                
                $
                2.88
                
                
                -
                
                
                8.1**5,619,980**
                
                
                
                
                **$**
                **10,263,266**
  **NOTE
        7 - WARRANTS**
 
 During
        the years ended December 31, 2006 and 2005, respectively, the Company issued
        warrants to purchase 1,450,001 and 4,040,495 shares of common stock in
        connection with short-term financings. The fair value of the warrants was
        estimated to be $1,998,347 and $1,423,424, respectively, and was recorded
        as
        loan discount. Loan discount is amortized over the life of the loan.
 
 The
        Company’s obligations under $1,475,000 in principal amount of its short term
        financings are personally guaranteed by Jed Schutz, a principal shareholder
        and
        director. In consideration of this guarantee, the Company issued to Mr. Schutz
        warrants to purchase 147,500 shares of common stock at an exercise price
        of
        $2.00 per share. The fair value of the warrants was estimated to be $361,225
        and
        recorded as deferred loan costs. Deferred loan costs are amortized over the
        life
        of the loans.
 
 As
        a
        result of the December 22, 2006 conversion of $2,000,043 of convertible notes,
        warrants to purchase 237,460 shares of the Company’s common stock were issued.
        The fair value of the warrants was estimated to be $277,369 and was recorded
        as
        interest expense during 2006.
  F-21
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  During
        the year ended December 31, 2006, the Company issued warrants to purchase
        20,000
        shares of common stock to two advisors as finder’s fees. The fair value of the
        warrants was estimated to be $49,506 and was recorded as deferred loan costs.
        Deferred loan costs are amortized over the life of the loan.
  During
        the year ended December 31, 2006, the Company issued warrants to purchase
        176,250 shares of common stock in connection with the guarantee of the Company’s
        obligations under its lease. The fair value of the warrants was estimated
        to be
        $421,696 and was recorded as deferred lease costs. Deferred lease costs are
        amortized over the term of the lease.
 
 On
        December 26, 2006, the Company, pursuant to the Securities Purchase Agreement,
        issued to the Bridge Lender a warrant to purchase 450,000 shares of the
        Company’s common stock. The fair value of the warrant was estimated to be $
        716,265 and was
        recorded as loan discount. Loan discount is amortized over the life of the
        loan.
 
 On December
        29, 2006, the Company incurred an obligation to an advisor in connection
        with
        investment banking services for warrants to purchase 892,921 shares of the
        Company’s common stock at an exercise price equal to the offering price per
        share associated with a future financing as described in the agreement between
        the Company and the advisor. The advisor has the right to put the warrants
        to
        the Company at any time after the earlier of one year from the date of issuance
        or at such time as any portion of the Company is sold or its debt refinanced.
        The fair value of these warrants was estimated to be $1,580,024 and was
        recorded in operating expenses and other current liabilities in the year
        ended
        December 31, 2006.
  The
        fair
        value of the warrants granted were estimated at the grant date using the
        Black-Scholes option pricing model and recorded as expense over the respective
        life of the debt, guarantee or services rendered. Significant assumptions
        used
        in the Black-Scholes model are the current rate of the U.S. Treasury security
        that corresponds with the maturity of each warrant, i.e. the risk free rate
        and
        60% for volatility. The risk-free rates used in the model ranged from 4.58%
        to
        5.25%.
  During
        the years ended December 31, 2006 and 2005, amortization expense related
        to the
        deferred loan costs and loan discount was $2,074,569 and $1,004,882,
        respectively. During the year ended December 31, 2006 amortization expense
        related to deferred lease costs was $76,672.
 
 At
        December 31, 2006, there were warrants to purchase 9,511,755 shares of common
        stock outstanding.
  F-22
  **PURE
          VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS -
          (Continued)**
 **NOTE
        8 - INCOME TAXES**
  At
        December 31, 2006, the Company had unused net operating loss carryforwards
        approximating $18,200,000 which may be applied against future taxable income
        subject to IRS Code Section 182 limitations. The net operating loss
        carryforwards expire between 2012 and 2026. At December 31, 2006 deferred
        tax
        assets (representing the potential future tax savings) related to the
        carryforwards were as follows:
  **2006**Deferred
                  tax asset
              
              $
              7,280,000Less:
                  Valuation allowance
              
              
              (7,280,000
              )Net
                  Deferred tax asset
              
              $
              -
                  0 -
  As
        a
        result of the uncertainty that the net operating loss carryforward will be
        utilized in the foreseeable future, a 100% valuation allowance had been
        provided.
 
 **NOTE
        9 - PROPERTY AND EQUIPMENT**
  **December
                  31,****2006**Property
                  and equipment consists of:Computer
                  equipment
              
              $
              175,905Furniture
                  and fixtures
              
              
              3,600Other
              
              
              1,552Sub
                  total
              
              
              181,057Less:
                  Accumulated depreciation
              
              
              (56,802
              )**Total**
              
              **$**
              **124,255**
  **NOTE
        10 - DEFERRED COSTS AND OTHER ASSETS**
  **December
                  31,****2006**Deferred
                  costs and other assets consists of:Current:Deferred
                  lease costs
              
              $
              191,680Deferred
                  loan costs
              
              
              735,733Sub
                  total
              
              
              927,413Less:
                  Accumulated amortization
              
              
              (395,946
              )**Total
                  current**
              
              **$**
              **531,467**Non-current:Security
                  deposits
              
              $
              189,191Deferred
                  lease costs
              
              
              230,016**Total
                  non-current**
              
              **$**
              **419,207**
 
 F-23
  **PURE
          VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS -
          (Continued)**
 **NOTE
        11 - UNAUDITED QUARTERLY DATA**
  The
        following table sets forth selected unaudited quarterly data for the years
        ended
        December 31, 2006 and 2005 (in thousands, except per share data).
  **Three
          months ended (in $000’s except per share amounts)
          (1)**
 **March
                      31,**
                  
                  **June
                      30,**
                  
                  **September
                      30,**
                  
                  **December
                      31,****2006**
                  
                  **2005**
                  
                  **2006**
                  
                  **2005**
                  
                  **2006**
                  
                  **2005**
                  
                  **2006**
                  
                  **2005****(Restated)**
                  
                  **(Restated)**Sales
                  
                  $
                  10.8
                  
                  $
                  0.5
                  
                  $
                  15.8
                  
                  $
                  0.7
                  
                  $
                  19.7
                  
                  $
                  1.3
                  
                  $
                  31.3
                  
                  $
                  8.0Operating
                      loss
                  
                  
                  (1,225.8
                  )
                  
                  (574.8
                  )
                  
                  (1,656.2
                  )
                  
                  (217.2
                  )
                  
                  (1,749.0
                  )
                  
                  (575.4
                  )
                  
                  (4,668.7
                  )
                  
                  (647.7
                  )Interest
                      expense
                  
                  
                  386.8
                  
                  
                  198.9
                  
                  
                  554.2
                  
                  
                  271.8
                  
                  
                  875.9
                  
                  
                  387.8
                  
                  
                  1,985.5
                  
                  
                  455.3Net
                      loss
                  
                  $
                  (2,630.2
                  )
                  $
                  (773.7
                  )
                  $
                  (2,210.4
                  )
                  $
                  (489.0
                  )
                  $
                  (2,624.9
                  )
                  $
                  (963.2
                  )
                  $
                  (6,654.2
                  )
                  $
                  (1,103.0
                  )Basic
                      and diluted net loss per share
                  
                  $
                  (.05
                  )
                  $
                  (.07
                  )
                  $
                  (.03
                  )
                  $
                  (.05
                  )
                  $
                  (.04
                  )
                  $
                  (.07
                  )
                  $
                  (.10
                  )
                  $
                  (.04
                  )Weighted
                      average number of shares outstanding
                  
                  
                  54,909,141
                  
                  
                  10,850,743
                  
                  
                  64,769,057
                  
                  
                  10,850,743
                  
                  
                  64,769,057
                  
                  
                  14,411,913
                  
                  
                  65,516,462
                  
                  
                  31,144,599
 
 (1)
              Net
                  loss is computed separately for each period and, therefore, the
                  sum of
                  each quarterly per share amounts may differ from the total for
                  the
                  year.
 
 **NOTE
        12 - SUBSEQUENT EVENTS**
  ***2007
        Incentive Plan***
  On
        February 6, 2007, the Company adopted the Pure
        Vanilla eXchange, Inc. 2007 Incentive Plan. The plan became effective upon
        adoption by our board of directors and the Company will submit the plan to
        its
        stockholders for their approval at the Company’s next meeting of
        stockholders.
  Under
        the
        plan, during the first quarter of 2007, the Company granted 14,720,000 options
        to employees and consultants to purchase common stock at an exercise price
        of
        $1.00 per share.
  ***Short
        Term Loans***
 
 During
        the period from February 14, 2007 to March 30, 2007, Jed Schutz loaned the
        Company $1,110,000, and Tom Fanning and George Benedict each loaned the Company
        $90,000. As of March 30, 2007 the Company issued new notes relating to these
        obligations. The notes bear interest at a rate of 9.9% per annum and are
        due the
        earlier of April 5, 2008 or two business days after the Company raises $20
        million, provided the Bridge Lender’s note is paid in full. In connection with
        the notes the Company issued 403,125 warrants to the lenders to purchase
        shares
        of the Company’s common stock at $0.80 per share. The warrants expire on March
        31, 2012. As of March 31, 2007, there are $1,290,000 of loans and 403,125
        warrants outstanding under these agreements.
  F-24
 **PURE
            VANILLA EXCHANGE, INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS -
            (Continued)**
  As
        a
        result of issuing warrants at an exercise price of $0.80 to Mr. Schutz, Mr.
        Benedict and Mr. Fanning, the 450,000 warrants issued to the Bridge Lender
        with
        an exercise price of $2.48782 were adjusted to 1,399,399 warrants with an
        exercise price of $0.80.
 
 ***Waiver
        and Amendment Agreements with Note Holders and Loan
        Default***
  In
        February and March, 2007 the Company entered into agreements with various
        lenders to extend the maturity date of notes issued by the Company and by
        Nimble. The holder of $250,000 principal amount of 10% notes issued by Nimble
        due December 26, 2006 agreed to extend the due date of the note to April
        30,
        2007. The holders of 15% notes issued by the Company in the aggregate principal
        amount of $1,721,000 due February 2007 agreed to extend the due date of the
        notes to May 15, 2007. The Company issued three year warrants to purchase
        200,000 shares of the Company’s common stock at an exercise price of $0.80 per
        share to non-affiliated holders of $1,000,000 of these notes in exchange
        for
        their agreement to extend the due date. The holder of an additional $250,000
        principal amount note issued by the Company due in February agreed to extend
        the
        due date of the note to April 1. As of April 4, 2007, the principal amount
        of
        the note was past due.
  ***Payment
        of Warrant Exercise Price***
  In
        April
        2007, the Company agreed to offset the interest payable to Mr. Schutz on
        his
        loans to the Company by $2,103 in payment of the aggregate exercise price
        payable upon exercise of the warrant to purchase Nimble common stock exercised
        by Mr. Schutz in December 2006 as described in Note 3 - Related
        Party Transactions.
  F-25




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




None.




**ITEM
      8A. CONTROLS AND PROCEDURES**




Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), is recorded, processed, summarized and reported, within the
      time periods specified in the U.S. Securities and Exchange Commission’s rules
      and forms. Disclosure controls and procedures include, without limitation,
      controls and procedures designed to ensure that information required to be
      disclosed by us in the reports that we file under the Exchange Act is
      accumulated and communicated to our management, including principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.




Our
      Chief
      Executive Officer and Principal Accounting Officer have evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of the end of the period covered by this report. Based upon our
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, our Chief Executive Officer and Principal Accounting
      Officer have concluded that as of the end of the period covered by this report,
      our disclosure controls and procedures were effective.




There
      has
      been no change in our internal controls over financial reporting during the
      fiscal quarter ended December 31, 2006 that has materially affected, or is
      reasonably likely to materially affect, our internal controls over financial
      reporting.




**8B.
      OTHER INFORMATION**




None.




**PART
      III**





**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
      GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
      ACT.**





**Directors
      and Executive Officers**





The
      following sets forth information concerning our executive officers and
      directors, including their ages, present principal occupations, other business
      experience during the last five years, memberships on committees of the board
      of
      directors and directorships in other publicly-held companies.





**Name**
            
            **Age**
            
            **Position**Steven
                Yevoli
            
            36
            
            Chief
                Executive Officer and Chairman of the BoardPaul
                Corvino
            
            51
            
            PresidentTucker
                Taylor
            
            68
            
            Chief
                Operating OfficerJohn
                Cook
            
            43
            
            Controller,
                Corporate SecretaryGeorge
                W. Benedict
            
            69
            
            DirectorThomas
                J. Fanning
            
            51
            
            DirectorJed
                Schutz
            
            48
            
            Director





**Steven
      Yevoli,** has
      served as our Chief Executive Officer since December 31, 2006 and as Chairman
      of
      our board of directors since March 9, 2006. T he
      founder of Old Pure Vanilla, Mr. Yevoli served as President and Chief Executive
      Officer of that company from August 2005 through March 2006. Mr. Yevoli
      has served as President and Chief Executive Officer of Nimble since January
      2005. From 2004 until 2005, Mr. Yevoli served as Executive Vice President
      of CMS Logistics, a global logistics leader. From 2001 through 2002, Mr.
      Yevoli served as Executive Vice President of FreshDirect. Prior to joining
      FreshDirect, he was the President of PNV, Inc., helping to take that company
      public in 2000. From 1995 through 1999 Mr. Yevoli held various management
      positions with Cablevision, Inc., where his responsibilities included launching
      a number of products and brands. Mr.
      Yevoli received his B.A. in business from Ithaca College in 1992.




24




**Paul
      Corvino** has
      served as our President since December 31, 2006. He has been a principal of
      RCN
      Holdings, LLC, a company that owns and invests in media/entertainment companies
      owns and manages residential, commercial and hotel properties, since November
      2001. Mr. Corvino served as Senior Vice President and General Manager,
      Interactive Sales, for America Online from March 1998 through November 2001.
      From May 1995 through March 1998, Mr. Corvino served as Vice President of Sales
      for Cablevision, Inc. From March 1981 through May 1995, Mr. Corvino held various
      positions in the Advertising Sales Department at *The
      New York Times* ,
      including Managing Director of Advertising Sales.





**Tucker
      Taylor** has
      served as of Chief Operating Officer since January 24, 2007 and currently serves
      in that capacity on a part-time basis. Mr. Taylor served as an operations and
      management consultant to Nimble from July 2006 until his appointment as our
      COO.
      From 1982 through July 2006, Mr. Taylor held senior management positions in
      marketing and process improvement at Medical Care America and Columbia/HCA
      Healthcare Corporation. At Medical Care America, he led a quality improvement
      program that resulted in a successful application for the Malcolm Baldrige
      Award. From 1973 to 1982, Mr. Taylor held management positions with Federal
      Express, retiring as Senior Vice President and General Manager of the Eastern
      Division. He served on the Board of Directors of Cornell Companies from 1995
      to
      2005 and currently serves on the Board of Directors of American Medical and
      Life
      Insurance Company, a privately held, New York domiciled Specialty A & H
      insurer. Mr. Taylor graduated from Yale University in 1967 after serving five
      years as a carrier pilot in the U. S. Navy.





**John
      Cook** has
      served as our Controller and Corporate Secretary since March 9, 2006. He
      previously served as
      Controller of Old Pure Vanilla August 2005 through March 2006 .
      Mr.
      Cook served as Chief Financial Officer of CMS Complete Management Inc. from
      2004
      to 2005 and also as Chief Financial Officer of Zoologic, Inc. from 2001 to
      2004.
      Mr. Cook received his
      B.A.
      in Accounting from George Mason University in 1985, is a registered CPA in
      the
      State of New Jersey and is a member of NJCPA and AICPA.





**George
      W. Benedict** **** has
      served as a member of our board of directors since February 5, 2007. Mr.
      Benedict ,
      a
      leading authority in the area of family intervention, is the founder and
      Chairman of the Board of Seafield Center Inc., an alcohol and chemical
      dependency rehabilitation center located in Westhampton Beach, New York with
      seven outpatient facilities and 27 not-for-profit halfway houses located
      throughout Long Island. Since 1992, Mr. Benedict has been a Special Deputy
      to
      the Suffolk County Sheriff's Department. He is also the President of the New
      York Diagnostic, a Department of Health approved medical outpatient clinic
      with
      multiple locations throughout New York.





**Thomas
      J. Fanning** has
      served as a member of our board of directors since February 5, 2006. Mr. Fanning
      is a partner at Arnone, Lowth, Fanning, Wilson & Lebowitz, LLC, a boutique
      financial services firm, headquartered in Melville, NY. He also serves as
      President of T.J.F. Planning, Inc., and is a member of several private
      investment funds. He currently serves on the Boards of Continental Can Company,
      Inc., HD Sheldon & Co., Inc. and a number of charitable boards.




**Jed
      Schutz** has
      served as a member of our board of directors since March 9, 2006.  He
      served as a director of Nimble from October 2000 through December 2006. He
      is
      currently Chief Executive Officer and a director of Metamorphix Global, Inc.,
      a
      technology centric innovator of concrete based building products. He has been
      a
      private investor and advisor to emerging technology companies, as well as a
      real
      estate developer, since 1983. He is a member of the boards of directors of
      Advanced Biophotonics, Inc. and dotMENU, Inc. Mr. Schutz received his B.S.
      in
      Biology from Duke University in 1981 and a Graduate Certificate in Business
      from
      New York University in 1983.




**Section
      16(a) Beneficial Ownership Reporting Compliance**




Section
      16(a) of the Exchange Act, requires our officers and directors and persons
      who
      own more than 10% of our outstanding common stock, to file initial statements
      of
      beneficial ownership (Form 3), and statements of changes in beneficial ownership
      (Forms 4 or 5), of common stock with the SEC. Our officers and directors and
      beneficially owners of more than 10% of our common stock are required by SEC
      regulation to furnish us with copies of all such forms they file.




25




Based
      solely on review of the copies of such forms we received or written
      representations from certain reporting persons, we believe that all filing
      requirements applicable to our officers and directors and persons who
      beneficially own more than 10% of our outstanding common stock during 2006
      have
      been complied with.




**Corporate
      Governance**




*Code
      of Ethics*




In
      February 2007, our board of directors adopted a code of ethics applicable to
      our
      officers, including the principal executive and financial officer and principal
      accounting officer , directors
      and employees. A copy of this code is filed as an exhibit to this annual
      report.




*Nominating
      Committee*




Our
      b oard
      of
      directors does not have a standing nominations committee. The identification,
      evaluation and selection of nominees for election to our board of directors
      are
      performed on an informal basis by the members of the board who are considered
      “independent” within the meaning of Rule 10A-3(b)(1)(ii) under the Exchange Act.
      The board believes this is appropriate because it permits all independent
      directors to actively participate in the nominating process.




Although
      we have not established a standing nominating committee, in February 2006 our
      board of directors adopted a written charter for our independent directors
      to
      follow in their identification, evaluation and recommendation of director
      nominees. The charter provides that, as minimum qualifications, nominees to
      the
      board (including incumbent directors) will enhance the board’s management,
      finance and/or technical expertise, will not have a conflict of interest and
      will have high ethical standards and, with respect to new members of the board,
      a willingness to serve at least an initial three year term. A director nominee’s
      knowledge and/or experience in areas such as, but not limited to, the electronic
      payment business, equity and debt capital markets and financial accounting
      are
      likely to be considered both in relation to the individual’s qualification to
      serve on our board and the needs of the board as a whole. Other characteristics,
      including but not limited to, the director nominee’s material relationships with
      our company, time availability, service on other boards of directors and their
      committees, or any other characteristics which may prove relevant at any given
      time as determined by the independent directors shall be reviewed for purposes
      of determining a director nominee’s qualification.




Candidates
      for director nominees are evaluated by the independent directors in the context
      of the current composition of the board, our operating requirements and the
      long-term interests of our stockholders. In the case of new director candidates,
      the independent directors also determine whether the nominee would be considered
      “independent” within the meaning of Rule 10A-3(b)(1)(ii) under the Exchange Act.
      The independent directors then use their networks of contacts to compile a
      list
      of potential candidates, but may also engage, if it deems appropriate, a
      professional search firm. The independent directors conduct any appropriate
      and
      necessary inquiries into the backgrounds and qualifications of possible
      candidates after considering the function and needs of the board. In the case
      of
      incumbent directors whose terms of office are set to expire, the board reviews
      such directors’ overall service to our company during their term, including the
      number of meetings attended, level of participation, quality of performance,
      and
      any other relationships and transactions that might impair such directors’
independence. The independent directors meet to discuss and consider such
      candidates’ qualifications and then select a nominee for recommendation to the
      board by majority vote. The independent directors do not intend to alter the
      manner in which they evaluate candidates, including the minimum criteria set
      forth above, based on whether the candidate was recommended by a stockholder
      or
      not. To date, we have not paid a fee to any third party to assist in the process
      of identifying or evaluating director candidates.




Our
      board
      of directors does not impose term limits or a mandatory retirement age for
      directors. While it is believed that a director’s knowledge and/or experience
      can continue to provide benefit to the board following a director’s retirement
      from his or her primary work affiliation, it is recognized that a director’s
      knowledge of and involvement in ever changing business environments can weaken,
      and therefore his or her ability to continue to be an active contributor to
      the
      board shall be reviewed. Upon a director’s change in employment status, he or
      she is required to notify the Chairman of the Board of such change and to offer
      his or her resignation for review.




26




It
      is our
      policy to review and consider all candidates for nomination and election as
      directors who may be suggested by any of our directors or executive officers.
      Our policy is also to refer to the board for consideration any director
      candidate recommended by any stockholder if made in accordance with the bylaws
      and applicable law. To be considered, a recommendation for director nomination
      should be submitted in writing to Pure Vanilla eXchange, Inc., 805 Third Avenue,
      15th Floor, New York, New York 10022; Attn: John Cook, Corporate Secretary.




**ITEM
      10. EXECUTIVE COMPENSATION**





**Summary
      Compensation Table**





This
      table shows certain information regarding all compensation awarded to, earned
      by
      or paid to each person who served as our principal executive officer during
      2006
      and our only other executive officer whose total compensation equaled at least
      $100,000 during 2006 (our “Named Executive Officers”).




**Summary
        Compensation Table**


**Name
                and Principal Position**
            
            **Year**
            
            **Salary**
              ($)
            
            **Bonus**
              ($)
            
            **Stock
                Award(s)**
              ($)(1)
            
            **Option
                Award(s)**
              ($)(1)
            
            **All
                Other Compensation**
              ($)
            
            **Total**
              ($)Steven
                Yevoli (2)
              Chairman
                and CEO
            
            
            2006
            
            
            300,000
            (3)
            
            6,000
            (3)
            
            
            
            
            1,553,258
            
            
            —
            
            
            1,859,258Harry
                Jose (4)
              Former
                President and CEO
            
            
            2006
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            265,000
            (5)
            
            265,000Florian
                Schuhbauer (6)
              Former
                President
            
            
            2006
            
            
            —
            
            
            —
            
            
            1,250
            
            
            —
            
            
            80,000
            (7)
            
            81,250John
                Cook (8)
              Corporate
                Secretary and Controller
            
            
            2006
            
            
            170,000
            (3)
            
            4,000
            (3)
            
            
            
            
            71,129
            
            
            —
            
            
            247,601





(1)
            Represents
                the compensation cost recognized in our consolidated financial statements
                for 2006 for awards granted to the named executive officer in 2006
                and
                prior years calculated in accordance with Statement of Financial
                Accounting Standards No. 123R“Share-Based
                Payment,” except that the compensation cost does not include an estimate
                of forfeitures related to service-based vesting conditions.Please refer to Note 6 to our consolidated financial statements for
                2006
                included in this annual report for a description of the assumptions
                used
                in these calculations.





(2)
            Mr.
                Yevoli became our Chief Executive Officer on December 31,
                2006.





(3)
            Represents
                a payment of salary or bonus to the Named Executive Officer by
                Nimble.





(4)
            Mr.
                Jose resigned as our President and Chief Executive Officer on March
                9,
                2006.





(5)
            Represents
                (i) consulting fees of $40,000 paid to CDJP Holdings Corp., a corporation
                wholly-owned by Mr. Jose, pursuant to consulting agreement dated
                as of
                March 9, 2006 between us and CDJP Holdings Corp. and (ii) $225,000
                paid to
                Mr. Jose pursuant to a Stock Purchase Agreement dated as of March
                9, 2006
                between us and Mr. Jose.





(6)
            Mr.
                Schuhbauer served as our President from March 9, 2006 until his
                resignation on December 31, 2006 pursuant to aconsulting
                agreement between us and NG Outsourcing, Inc., a company wholly-owned
                by
                Mr. Schuhbauer.





(7)
            Represents
                consulting fees paid toNG
                Outsourcing, Inc. pursuant to the agreement referred to in footnote
                7
                above.





(8)
            Mr.
                Cook became our Controller and Corporate Secretary on March 9,
                2006.





**Narrative
      Description of our 2006 Compensation**





*Salary
      and Bonus*





Prior
      to
      our acquisition of Old Pure Vanilla on March 9, 2006, Harry Jose served as
      our
      President and Chief Executive Officer without compensation. Thereafter, the
      services of our executive officers were provided through other companies under
      consulting and services agreements. Florian Schuhbauer served as our President
      from March 13, 2006 until December 31, 2006 under our consulting agreement
      with NG
      Outsourcing, Inc., a company wholly-owned by Mr. Schuhbauer. Beginning on March
      13,
      2006, Steven
      Yevoli served as our Chairman and John Cook served as our Controller and
      Corporate Secretary under our services agreement with Nimble. Mr. Yevoli and
      Mr.
      Cook also served as President and Chief Executive Officer and Controller,
      respectively, of Nimble throughout that time and were each paid a salary and
      bonus by Nimble.




27




*Employment
      Agreements*





We
      have
      no employment agreements with any of our employees.





*Stock
      Awards*





We
      granted 125,000 shares of our common stock to Florian Schuhbauer pursuant to
      a
      stock grant and restriction agreement dated as of February 21, 2006. That
      agreement was entered into pursuant to our consulting agreement with NG
      Outsourcing, Inc., a company wholly-owned by Mr. Schuhbauer. The stock grant
      and
      restriction agreement prohibits Mr. Schuhbauer for selling or otherwise
      transferring the shares until we have concluded an initial offering of our
      common stock to the public pursuant to a registration statement filed with
      and
      declared effective by the SEC.





*Option
      Awards*





The
      option awards granted to our Named Executive Officers in 2006 were granted
      under
      our 2006 Stock Option Plan. The plan was approved by our board of directors
      on
      March 13, 2006. The plan provides for the grant of options intended to qualify
      as i ncentive
      stock options within the meaning of Section 422 of the Internal Revenue Code
      of
      1986 and for non-qualified stock options (i.e., stock options which are not
      incentive stock options). Because the plan was not approved by our stockholders
      within one year of adoption, none of the options granted under the plan will
      qualify as incentive stock options. If the Named Executive Officer’s employment
      is terminated for cause, his options will terminate immediately, regardless
      of
      the extent the options are then vested. If the Named Executive Officer’s
      employment is terminated without cause, his options may be exercised to the
      extent then vested for three months after the date of termination. If the Named
      Executive Officer’s employment is terminated upon his death, his estate may
      exercise his option to the extent then vested for one year after the date of
      death.




28


**Outstanding
      Equity Awards at Fiscal Year-End**





The
      following table sets forth certain information concerning equity-based awards
      held by our Named Executive Officers at year end 2006.


**Outstanding
        Equity Awards at Fiscal Year-End**


**Option
                  Awards**
              
              **Stock
                  Awards**Name
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Exercisable
              
              Number
                  of Securities Underlying Unexercised Options
                (#)
                Unexercisable
              
              Incentive
                  Plan Awards:
                Number
                  of Securities Underlying Unexercised
                Unearned
                Options
                (#)
              
              Option
                Exercise
                Price
                ($)
              
              Option
                Expiration
                Date
              
              Number
                  of Shares or Units
                Of
                  Stock
                That
                Have
                Not
                Vested
                (#)
              
              Market
                Value
                  of
                Shares
                  or Units
                Of
                  Stock
                That
                  Have
                Not
                  Vested
                (#)
              
              Equity
                Incentive
                  Plan Awards:
                Number
                  of Unearned
                Shares,
                  Units or Other Rights
                That
                  Have Not Vested
                (#)
              
              Equity
                Incentive
                  Plan Awards:
                Value
                  of
                Unearned
                Shares,
                  Units or Other Rights
                That
                  Have Not Vested
                (#)Steven
                  Yevoli
              
              
              
              
              
              2,000,000
              (1)
              
              
              
              
              0.50
              
              
              3/13/16
              
              
              2,000,000
              
              
              5,500,000
              
              
              —
              
              
              —881,550
              (2)
              
              
              
              
              
              
              
              0.67
              
              
              3/15/111,763,100
              (3)
              
              
              
              
              
              
              
              0.77
              
              
              3/15/11881,550
              (4)
              
              
              
              
              
              
              
              0.77
              
              
              3/15/11163,250
              (5)
              
              
              
              
              
              
              
              2.44
              
              
              12/13/11Harry
                  Jose (6)
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Florian
                Schuhbauer
                  (7)
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —John
                  Cook
              
              
              
              
              
              200,000
              (2)
              
              —
              
              
              0.50
              
              
              3/13/16
              
              
              200,000
              
              
              550,000
              
              
              —
              
              
              —261,200
              (8)
              
              
              
              
              
              
              
              0.77
              
              
              3/15/11





(1)
            The
                option was granted on March 13, 2006 and vests in two equal installments
                on the first and second anniversaries of the date of
                grant.





(2)
            Represents
                an option originally granted by Nimble on March 15, 2006 to purchase
                675,000 shares of Nimble common stock at an exercise price of $0.88
                per
                share which was converted and became fully vested upon our acquisition
                of
                Nimble.





(3)
            Represents
                an option originally granted by Nimble on March 15, 2006 to purchase
                1,350,000 shares of Nimble common stock at an exercise price of $1.00
                per
                share which was converted and became fully vested upon our acquisition
                of
                Nimble.





(4)
            Represents
                an option originally granted by Nimble on March 15, 2006 to purchase
                675,000 shares of Nimble common stock at an exercise price of $1.00
                per
                share which was converted and became fully vested upon our acquisition
                of
                Nimble.





(5)
            Represents
                an option originally granted by Nimble on December 13, 2006 to purchase
                125,000 shares of Nimble common stock at an exercise price of $3.19
                per
                share which was converted and became fully vested upon our acquisition
                of
                Nimble.





(6)
            Mr.
                Jose resigned as our President and Chief Executive Officer on March
                6,
                2006.





(7)
            Mr.
                Schuhbauer served as our President from March 6, 2006 until his
                resignation on December 31, 2006.





(8)
            Represents
                an option originally granted by Nimble on March 15, 2006 to purchase
                200,000 shares of Nimble common stock at an exercise price of $1.00
                per
                share which was converted and became fully vested upon our acquisition
                of
                Nimble.





**Director
      Compensation**





No
      member
      of our board of directors received any compensation for his service as a
      director during 2006.




29


**ITEM
      11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





The
      table
      below sets forth certain information, as of April 13, 2007, with respect to
      the
      beneficial ownership of our common stock by each person who is known to us
      to
      beneficially own, as of that date, more than 5% of our common stock, each of
      our
      directors and Named Executive Officers individually, and all of our directors
      and executive officers as a group.





**Name
                of Beneficial Owner (1)**
            
            **Number
                of Shares**
              **Beneficially
                Owned (2)**
            
            **Percent
                of**
              **Common
                Stock (2)**Steven
                Yevoli, Chairman and CEO
            
            
            11,372,480
            (3)
            
            15.06
            %John
                Cook, Controller and Corporate Secretary
            
            
            1,315,919
            (5)
            
            1.85
            %Paul
                Corvino, President
            
            
            1,450,000
            (6)
            
            2.01
            %George
                W. Benedict, Director
            
            
            6,216,086
            (7)
            
            8.62
            %Thomas
                J. Fanning, Director
            
            
            2,467,872
            (8)
            
            3.45
            %Jed
                Schutz, Director
            
            
            35,696,806
            (9)
            
            46.83
            %Harry
                Jose,Former
                President and CEO
            
            
            280,000
            
            
            *Florian
                Schuhbauer,Former
                President
            
            
            1,193,398
            
            
            1.68
            %Officers
                and directors as a group (7 persons)
            
            
            59,224,700
            (10)
            
            69.36
            %




* Indicates less than 1%.




(1)
            Unless
                otherwise indicated, the address of each person listed is c/o Pure
                Vanilla
                eXchange, Inc., 805 Third Avenue, 15th Floor, New York, New York
                10022.





(2)
            Beneficial
                ownership is determined in accordance with the rules of the Securities
                and
                Exchange Commission (the “SEC”) and generally includes voting or
                investment power with respect to securities. In accordance with SEC
                rules,
                shares of common stock issuable upon the exercise of options or warrants
                which are currently exercisable or which become exercisable within
                60 days
                following the date of the information in this table are deemed to
                be
                beneficially owned by, and outstanding with respect to, the holder
                of such
                options or warrants. Except as indicated by footnote, and subject
                to
                community property laws where applicable, to our knowledge, each
                person is
                believed to have sole voting and investment power with respect to
                all
                shares of common stock beneficially owned by such person. Except
                as
                indicated by footnote, each person is believed not to have pledged
                as
                security any of the shares of common stock beneficially owned by
                such
                person. We have calculated the percentages of shares beneficially
                owned
                based on 70,826,542 shares of our common stock outstanding at April
                13,
                2007.





(3)
            Includes
                4,689,450 shares issuable upon exercise of stock
                options.





(4)
            Represents
                shares issuable upon exercise of stock
                options.





(5)
            Includes
                361,200 shares issuable upon exercise of stock
                options.





(6)
            Includes
                1,450,000 shares issuable upon exercise of stock
                options.





(7)
            Includes
                1,108,571 shares issuable upon exercise of stock purchase warrants
                and
                163,250 shares issuable upon exercise of stock
                options.





(8)
            Includes
                527,879 shares issuable upon exercise of stock purchase warrants
                and
                163,250 shares upon exercise of stock
                options.





(9)
            Includes
                57,500 shares issuable upon conversion of convertible loans, 5,340,374
                shares issuable upon exercise of stock purchase warrants and 44,540
                shares
                held by Mr. Schutz’s mother. Mr. Schutz disclaims beneficial ownership of
                the shares of common stock held by his
                mother.





(10)
            Includes
                115,544 shares issuable upon conversion of convertible loans, 7,024,315
                shares issuable upon exercise of stock purchase warrants and 7,427,150
                shares issuable upon exercise of stock
                options.





30


**Equity
      Compensation Plan Information**





**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**
            
            
            —
            
            
            —
            
            
            —**Equity
                compensation plans not previously approved by security
                holders**
            
            
            8,019,980
                (1
            )
            $
            0.80
            
            
            5,000,000
            (2)**Totals**
            
            
            8,019,980
            
            $
            0.80
            
            
            5,000,000





(1)
            Represents
                (a) options to purchase 2,500,000 shares granted under our 2006 Stock
                Option Plan and (b) options to purchase 4,571,000 shares granted
                under the
                Nimble 2006 Stock Option Plan and non-options to purchase 948,980
                shares
                of common stock, in each case as converted upon our acquisition of
                Nimble.


(2)
            Represents
                shares available for future issuance under our 2006 Stock Option
                Plan.





Our
      2006
      Stock Option Plan was approved by our board of directors on March 13, 2006.
      Our officers,
      directors, advisory board members, consultants and key employees are eligible
      for awards under the plan. The
      plan
      provides for the grant of options intended to qualify as i ncentive
      stock options within the meaning of Section 422 of the Internal Revenue Code
      of
      1986 and for non-qualified stock options (i.e., stock options which are not
      incentive stock options). Because the plan was not approved by our stockholders
      within one year of adoption, none of the options granted under the plan will
      qualify as incentive stock options. The plan provides that if an optionee’s
      employment or other relationship with us is terminated for cause, his or her
      options will terminate immediately, regardless of the extent the options are
      then vested. If an optionee’s employment or other relationship with us is
      terminated without cause, his or her options may be exercised to the extent
      then
      vested for three months after the date of termination. If an optionee’s
      employment or other relationship with us is terminated by the optionee’s death,
      the estate may exercise his or her options to the extent then vested for one
      year after the date of death.





Nimble’s
      2006 Stock Option Plan was approved by its board of directors and stockholders
      in June 2006. Nimble’s officers,
      directors, advisory board members, consultants and key employees are eligible
      for awards under the plan. The
      plan
      provides for the grant of options intended to qualify as i ncentive
      stock options within the meaning of Section 422 of the Internal Revenue Code
      of
      1986 and for non-qualified stock options (i.e., stock options which are not
      incentive stock options). The plan provides that if an optionee’s employment or
      other relationship with us is terminated for cause, his or her options will
      terminate immediately, regardless of the extent the options are then vested.
      If
      an optionee’s employment or other relationship with us is terminated without
      cause, his or her options may be exercised to the extent then vested for three
      months after the date of termination. If an optionee’s employment or other
      relationship with us is terminated by the optionee’s death, the estate may
      exercise his or her options to the extent then vested for one year after the
      date of death. All of the options granted under the plan became fully vested
      upon our acquisition of Nimble.





**ITEM
      12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
      INDEPENDENCE.**





On
      February 21, 2006, in consideration of services rendered Old Pure Vanilla issued
      1,575,000 shares of its common stock to its officers and consultants, including
      700,000 shares to its Chief Executive Officer and 125,000 shares to its former
      President, pursuant to a resolution of its board of directors dated December
      5,
      2005. In connection with these issuances we recorded $15,750 of compensation
      expense for the year ended December 31, 2005.




31




We
      have
      entered into various agreement and transactions with Jed Schutz, our principal
      shareholder and member of our board of directors, which are summarized as
      follows:





i.
            During
                2006, Mr. Schutz loaned us $611,000. In connection with these loans,
                we
                issued Mr. Schutz warrants to purchase 76,375 shares of common stock
                at an
                exercise price of $2.00 per share. The fair value of these warrants
                was
                estimated to be $158,921 and was recorded as a loan discount which
                is
                being amortized over the life of the
                loan.





ii.
            During
                2006, Mr. Schutz converted $1,034,436 of outstanding loans into 1,258,744
                shares of common stock at a conversion price of $0.6292 per share.
                The
                loans were amended to reflect a new principal balance of $375,134
                relating
                to unpaid accrued interest on the converted loans. In connection
                with this
                conversion, Mr. Schutz was issued 122,816 warrants with an exercise
                price
                of $2.11. The fair value of these warrants was estimated to be $143,456
                and was recorded as interest
                expense.





iii.
            During
                2006, Mr. Schutz guaranteed $1,475,000 of loans to us. In connection
                with
                these guaranties, we issued Mr. Schutz warrants to purchase 147,500
                shares
                of common stock at an exercise price of $2.00 per share. The fair
                value of
                these warrants was estimated to be $361,225 and was recorded as deferred
                loan costs, which is being amortized over the life of the
                loan.





iv.
            During
                2006, Mr. Schutz guaranteed our obligations under our lease of office
                space in New York City. In consideration of his guarantee of our
                lease
                obligations, we issued Mr. Schutz warrants to purchase 176,250 shares
                of
                common stock at an exercise price of $2.00 per share. The fair value
                of
                these warrants was estimated to be $421,696 and was recorded as deferred
                lease costs, which is being amortized over the life of the
                lease.





v.
            During
                2005, Mr. Schutz loaned Old Pure Vanilla $1,083,000. In connection
                with
                these loans, Old Pure Vanilla issued Mr. Schutz warrants to purchase
                3,480,780 shares of Old Pure Vanilla common stock with exercise prices
                ranging from $0.63 to $0.67 per share. The fair value of the warrants
                was
                estimated to be $1,217,524 and was recorded as a loan discount which
                is
                being amortized over the life of the
                loan.





vi.
            On
                September 29, 2005, Mr. Schutz satisfied a liability which arose
                from a
                judgment against our subsidiary for $64,001. The liability is non-interest
                bearing, due on demand, and remains on our balance sheet as an other
                current liability at face value as of December 31,
                2006.





vii.
            At
                December 31, 2006, included in other current liabilities is a balance
                due
                of $66,751 of interest payable on loans previously
                converted.





viii.
            In
                December 2006, Mr. Schutz exercised a warrant to purchase 2,103,050
                shares
                of common stock of Nimble, which were converted into 2,746,583 shares
                of
                our common stock upon our acquisition of Nimble. Mr. Schutz did not
                pay us
                the $2,103 aggregate exercise price payable upon exercise of this
                warrant
                until April 2007, when we agreed to offset the interest payable to
                him on
                his loans to us by that amount. We issued this warrant to Mr. Schutz
                on
                April 30, 2004 pursuant to a stock purchase agreement dated as of
                April 8,
                2004between
                us and Mr. Schutz. Under the stock purchase agreement, Mr. Schutz
                agreed
                to convert $4,040,199 of outstanding loans into shares of a newly
                designated series of preferred stock. The series of preferred stock
                was
                never designated and the shares were never issued. In December 2006,
                Mr.
                Schutz agreed to terminate the stock purchase agreement and in
                consideration we issued to him 4,916,280 shares of Nimble common
                stock
                which were converted into 6,420,662 shares of our common stock upon
                our
                acquisition of Nimble.





ix.
            As
                of December 31, 2006, Mr. Schutz owns 30,254,394 shares of common
                stock
                and warrants to purchase 4,993,499 shares of common stock with exercise
                prices ranging from $0.63 to $2.87. Also as of December 31, 2006,
                we have
                loans payable and accrued interest due to Mr. Schutz of $1,586,134
                and
                $202,885, respectively. Of these loans payable, $115,000 in principal
                amount are convertible into 57,500 shares of common stock at a conversion
                price of $2.00 per share. During 2006 and 2005, we issued to Mr.
                Schutz
                total warrants to purchase a total of 522,941 and 3,480,780, respectively.
                The fair values of the warrants issued in 2006 and 2005 were $1,085,298
                and $1,217,524, respectively.





In
      January 2007, Tucker Taylor was appointed our Chief Operating Officer. Mr.
      Taylor provided consulting services to Nimble from board July 1, 2006 to
      December 31, 2006. His compensation for consulting services during that period
      was $59,088. On December 6, 2006, Mr. Tucker loaned Nimble $100,000 and was
      issued a 15% convertible note due December 6, 2007, together five-year warrants
      to purchase 47,491 shares of Nimble common stock at an exercise price of
      $1.72.




32




On
      December 15, 2006, Mr. George W. Benedict, who was elected to our board of
      directors on February 6, 2007, and Nimble entered into an agreement pursuant
      to
      which $609,500 in loans made by Mr. Benedict to Nimble from January 2003 through
      April 2006 were converted into 968,614 shares of Nimble common stock. In
      connection with this conversion, we issued five-year warrants to purchase 72,364
      shares of common stock at an exercise price of $2.11 per share. Each promissory
      note issued by Nimble to Mr. Benedict in evidence of a converted loan was
      amended and restated to provide that Nimble’s only obligation under the note
      will be to pay the interest accrued and unpaid as of the date of the agreement,
      together with interest on such amount at the annual rate of 15.0%, from the
      date
      of the agreement until the date on which the note is paid in full, and to extend
      the maturity date of such note through December 15, 2008, subject to earlier
      prepayment at Nimble’s option at any time without premium or
      penalty.





On
      December 15, 2006, Mr. Thomas J. Fanning, who was elected to our board of
      directors on February 6, 2007, and Nimble entered into an agreement pursuant
      to
      which $179,106 in loans made by Mr. Fanning to Nimble from December 2002 through
      April 2006 were converted into 217,944 shares of Nimble common stock. In
      connection with this conversion, we issued five-year warrants to purchase 21,264
      shares of common stock at an exercise price of $2.11 per share. Each promissory
      note issued by Nimble to Mr. Fanning in evidence of a converted loan was amended
      and restated to provide that Nimble’s only obligation under the note will be to
      pay the interest accrued and unpaid as of the date of the agreement, together
      with interest on such amount at the annual rate of 15.0%, from the date of
      the
      agreement until the date on which the note is paid in full, and to extend the
      maturity date of such note through December 5, 2008, subject to earlier
      prepayment at Nimble’s option at any time without premium or
      penalty.





On
      January 1, 2006, Old Pure Vanilla entered into a consulting agreement with
      NG
      Outsourcing, Inc., a corporation wholly-owned by Florian Schuhbauer, who then
      served as Old Pure Vanilla’s President and a member of its board of directors.
      Under that agreement, NG Outsourcing provided, through its employee, our
      President, such services as would ordinarily be rendered by a corporate
      president. We recorded $80,000 of fees related to this agreement, $40,000 of
      which remain payable at December 31, 2006. We also agreed to issue 125,000
      shares of common stock at a purchase price of $0.01 per share to Mr. Schuhbauer.
      The consulting agreement expired on June 30, 2006.




**ITEM
      13. EXHIBITS**




The
      following documents are filed as exhibits to this annual report:





**Exhibit**
              **Number**
            
            **Description**2.1
            
            Agreement
                and Plan of Merger among Pure Vanilla eXchange, Inc. (“Old Pure Vanilla”),
                NVS Entertainment, Inc. and NVS Acquisition Corp. (1)2.2
            
            Plan
                of Merger of Pure Vanilla eXchange, Inc. into NVS Entertainment,
                Inc.
                (1)2.3
            
            Agreement
                and Plan of Merger, dated as of December 15, 2006, by and among Pure
                Vanilla eXchange, Inc., PVNX Acquisition Corp. and Nimble Group,
                Inc.
                (2)3.1
            
            Articles
                of Incorporation of Pure Vanilla eXchange, Inc. (formerly known as
                Princeton Power Corporation) filed August 11, 2004 and Certificate
                of
                Amendment as filed November 29, 2004 (1)3.2
            
            Articles
                of Merger among Pure Vanilla eXchange, Inc. and NVS Acquisition Corp.
                as
                filed and effective March 13, 2006.
                (1)




33




3.3
            
            Articles
                of Merger 2006 between Pure Vanilla eXchange, Inc. and NVS Entertainment,
                Inc. as filed and effective April 12, 2006. (1)3.4
            
            Amended
                and Restated By-Laws of Pure Vanilla eXchange, Inc. (5)4.1
            
            Form
                of Promissory Note issued by Pure Vanilla eXchange, Inc. (3)4.2
            
            Form
                of Common Stock Purchase Warrant (3)4.3
            
            Senior
                Secured Convertible Promissory Note dated as of December 26, 2006issued by Pure Vanilla eXchange, Inc. to Gottbetter Capital Master,
                Ltd.(4)4.4
            
            Common
                Stock Purchase Warrant dated as of December 26, 2006 issued by Pure
                Vanilla eXchange, Inc. to Gottbetter Capital Master, Ltd.
                (4)4.5
            
            2%
                Promissory Note dated as of February 14, 2007 issued by Pure Vanilla
                eXchange, Inc. to Jed Schutz. (6)4.6
            
            2%
                Promissory Note dated as of February 16, 2007 issued by Pure Vanilla
                eXchange, Inc. to Jed Schutz. (6)4.7
            
            2%
                Promissory Note dated as of February 27, 2007 issued by Pure Vanilla
                eXchange, Inc. to Jed Schutz. (7)4.8
            
            Form
                of Common Stock Purchase Warrant issued by Pure Vanilla eXchange,
                Inc. to
                certain note holders pursuant to Waiver and Amendment Agreements.
                (7)4.9
            
            Form
                of Promissory Notes issued by Pure Vanilla eXchange, Inc. pursuant
                to Loan
                Agreements dated March 30, 2007. (8)4.10
            
            Form
                of Five Year Common Stock Purchase Warrant issued by Pure Vanilla
                eXchange, Inc. pursuant to Loan Agreements dated March 30,
                2007.
                (8)10.1
            
            Consulting
                Agreement by and between Pure Vanilla eXchange, Inc. and CDJP Holdings
                Corp. (1)10.2
            
            Services
                Agreement between Nimble Group, Inc. and Pure Vanilla eXchange, Inc.
                (1)10.3
            
            Software
                License and Services Agreement between Nimble Group, Inc. and Pure
                Vanilla
                eXchange, Inc. (1)10.4
            
            Consulting
                Agreement by and between Pure Vanilla eXchange, Inc. and NG Outsourcing,
                Inc. (1)10.5
            
            Securities
                Purchase Agreement dated December 26, 2006 by and between Pure Vanilla
                eXchange, Inc. and Gottbetter Capital Master, Ltd. (4)10.6
            
            Security
                Agreement dated December 26, 2006 by and among Pure Vanilla eXchange,
                Inc., PVNX Acquisition Corp. and Gottbetter Capital Master, Ltd.
                (4)10.7
            
            Guaranty
                dated as of December 26, 2006 made by Nimble Group, Inc. (as successor
                to
                PVNX Acquisition Corp.) in favor of Gottbetter Capital Master, Ltd.
                (4)10.8
            
            Pure
                Vanilla eXchange, Inc. 2007 Incentive Plan. (5)*10.9
            
            Loan
                Agreement dated February 28, 2007 by and between Pure Vanilla eXchange,
                Inc. and Jed Schutz. (7)




34




10.10
            
            Form
                of Waiver and Amendment Agreement by and between Pure Vanilla eXchange,
                Inc. and Note Holders. (7)10.11
            
            Form
                of Waiver and Amendment Agreement by and between Pure Vanilla eXchange,
                Inc. and Note Holders. (7)10.12
            
            Waiver
                and Amendment Agreement dated as of February 23, 2007 by and between
                Nimble Group, Inc. and Jed Schutz. (7)10.13
            
            Loan
                Agreement dated March 30, 2007 by and between Pure Vanilla eXchange,
                Inc.
                and Jed Schutz.
                (8)10.14
            
            Loan
                Agreement dated March 30, 2007 by and between Pure Vanilla eXchange,
                Inc.
                and Thomas J. Fanning, Sr. (8)10.15
            
            Loan
                Agreement dated March 30, 2007 by and between Pure Vanilla eXchange,
                Inc.
                and George Benedict. (8)10.16
            
            Multi-Location
                Primary Merchant Agreement between US Merchant Systems, LLC and Nimble
                Group, Inc.






*
            Management
                contract orcompensation
                plan or arrangement in which directors or executive officers are
                eligible
                to participate.





(1)
            Filed
                as an exhibit to the Registration Statement on Form 10-SB filed on
                May 26,
                2006 and incorporated herein by
                reference.


(2)
            Filed
                as an exhibit to the Current Report on Form 8-K filed on December
                19, 2006
                and incorporated herein by reference.


(3)
            Filed
                as an exhibit to the Quarterly Report on Form 10-QSB for the three
                months
                ended June 30, 2006 filed on August 14, 2006 and incorporated herein
                by
                reference.


(4)
            Filed
                as an exhibit to the Current Report on Form 8-K filed on January
                3, 2007
                and incorporated herein by reference.


(5)
            Filed
                as an exhibit to the Current Report on Form 8-K filed on February
                12, 2007
                and incorporated herein by
                reference.


(6)
            Filed
                as an exhibit to the Current Report on Form 8-K filed on February
                23, 2007
                and incorporated herein by reference.


(7)
            Filed
                as an exhibit to the Current Report on Form 8-K filed on March 5,
                2007 and
                incorporated herein by reference.


(8)
            Filed
                as an exhibit to the Current Report on Form 8-K filed on April 6,
                2007 and
                incorporated herein by reference.




**ITEM
      14A. PRINCIPAL ACCOUNTANT FEES AND SERVICES**




The
      following table summarizes fees for professional services rendered by Imowitz
      Koenig & Co., LLP for
      the
      audit of our consolidated annual financial statements for 2006 and our annual
      financial statements for 2005 and fees billed for other services rendered by
      Imowitz Koenig during 2006 and 2005 :




**2006**
            
            **2005**Audit
                fees (1)
            
            $
            201,781
            
            $
            35,439Audit
                related fees (2)
            
            
            —
            
            
            —Tax
                services (3)
            
            
            121,190
            
            
            —All
                other fees (4)
            
            
            —
            
            
            —




(1)
      Consists of fees for professional services rendered for the audit of our
      consolidated financial statements included in this annual report and the review
      of the interim financial statements included in our quarterly reports, and
      for
      the services that are normally provided in connection with regulatory filings
      or
      engagements.




35




(2)
      Includes fees billed for associated with assurance and related services that
      are
      reasonably related to the performance of the audit or review of our financial
      statements. This category includes fees related to consultation regarding
      generally accepted accounting principles.




(3)
      Consists of fees billed for tax compliance, tax advice and tax
      planning.




(4)
      Consists of fees billed for products and services not included in the above
      categories.




Our
      board
      of directors reviewed the non-audit services rendered for fiscal 2006 and fiscal
      2005 as set forth in the above table and concluded that such services were
      compatible with maintaining the accountants’ independence. Our board’s policy is
      to pre-approve all audit services and all non-audit services that our
      independent auditor is permitted to perform under applicable federal securities
      regulations. As permitted by the applicable regulations, the board’s policy
      utilizes a combination of specific pre-approval on a case-by-case basis of
      individual engagements of the independent auditor and general pre-approval
      of
      certain categories of engagements up to predetermined dollar thresholds that
      are
      reviewed annually by the board. Specific pre-approval is mandatory for the
      annual financial statement audit engagement, among others.




36


**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.




**PURE
                VANILLA EXCHANGE, INC.**Date:
                April 17, 2007
            By:
            /s/
                Steven YevoliSteven
                YevoliChief
                Executive Officer and Chairman of the Board of Directors
              (principal
                executive officer)


Date:
                    April 17, 2007
              By:
              /s/
                    John CookJohn
                    Cook,Controller
                    (principal accounting and financial
                    officer)
  37


**POWER
      OF ATTORNEY**





KNOW
      ALL
      MEN BY THESE PRESENTS, that each director and officer whose signature appears
      below constitutes and appoints each of Steven Yevoli and John Cook, either
      of
      them signing individually, as his true and lawful attorney-in-fact and agent,
      with full powers of substitution and resubstitution, for him and in his name,
      place and stead, to sign in any and all capacities any and all amendments to
      this annual report on Form 10-KSB and to file the same, with all exhibits
      thereto and all other documents in connection therewith, with the Securities
      and
      Exchange Commission, granting unto said attorneys-in-fact and agents, and each
      of them, full power and authority to do and perform each and every act and
      thing
      requisite and necessary to be done, as fully to all intents and purposes as
      he
      might or could do in person, hereby ratifying and confirming all that such
      attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
      done by virtue hereof.





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





**Signature**
            
            **Title**
            
            **Date**/s/
                Steven Yevoli
            
            Chief
                Executive Officer and Chairman of the Board of Directors
            
            April
                17, 2007Steven
                Yevoli/s/
                John Cook
            
            Controller
            
            April
                17, 2007John
                Cook/s/
                George W. Benedict
            
            Director
            
            April
                17, 2007George
                W. Benedict/s/
                Thomas J. Fanning
            
            Director
            
            April
                17, 2007Thomas
                J. Fanning, Sr,/s/
                Jed Schutz
            
            Director
            
            April
                17, 2007Jed
                Schutz




38