**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-KSB**




xANNUAL
      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 EXCHANGE ACT OF 1934




For
      the
      transition period from ___________ to ____________




Commission
      File No.:  333-118799




**FOLDERA,
      INC.**


(Name
      of
      small business issuer in its charter)




**Nevada**
              **20-0375035**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              (I.R.S.
                  Employer Identification
                  No.)


**17011
                  Beach Boulevard, Suite 1500**
                **Huntington
                  Beach, California**
              **92647**(Address
                  of principal executive
                  offices)
              (Zip
                  Code)


Issuer’s
      telephone number **** **(714)
      766-8700**




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





Securities
      registered under Section 12(g) of the Exchange Act: Common
      Stock 0.001 par value





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act o




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 Issuer'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
      12b-2 of the Exchange Act).


Yes
o
      No x


The
      issuer’s revenues for its fiscal year ended December 31, 2006, were
      $0.




The
      aggregate market value of the voting and non-voting stock held by non-affiliates
      of the issuer was approximately $42,974,118, based on the closing price of
      $0.76
      per share on March 31, 2007, as quoted by the OTC Bulletin Board.




As
      of
      March 31, 2007, 113,049,548 shares of the issuer's common stock were
      outstanding.




Transitional
      Small Business Disclosure Format (check one)  Yes
o
      No x




**Documents
      Incorporated by Reference:**  None










**FOLDERA,
      INC.**




**2006
      FORM 10-KSB ANNUAL REPORT**




**TABLE
      OF CONTENTS**





**Page****PART
                  I****ITEM
                  1.**
              
              **DESCRIPTION
                  OF BUSINESS**
              
              **1****ITEM
                  2.**
              
              **DESCRIPTION
                  OF PROPERTY**
              
              **9****ITEM
                  3.**
              
              **LEGAL
                  PROCEEDINGS**
              
              **9****ITEM
                  4.**
              
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS**
              
              **9****PART
                  II****ITEM
                  5.**
              
              **MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
                  ISSUER PURCHASE OF EQUITY SECURITY**
              
              **9****ITEM
                  6.**
              
              **MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.**
              
              **17****ITEM
                  7.**
              
              **FINANCIAL
                  STATEMENTS**
              
              **28****ITEM
                  8.**
              
              **CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE.**
              
              **29****ITEM
                  8A.**
              
              **CONTROLS
                  AND PROCEDURES**
              
              **29****ITEM
                  8B.**
              
              **OTHER
                  INFORMATION**
              
              **29****PART
                  III****ITEM
                  9.**
              
              **DIRECTORS****,****EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE;
                  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT**
              
              **17****ITEM
                  10.**
              
              **EXECUTIVE
                  COMPENSATION**
              
              **34****ITEM
                  11.**
              
              **SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDER MATTERS.**
              
              **37****ITEM
                  12.**
              
              **CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                  INDEPENDENCE**
              
              **39****ITEM
                  13.**
              
              **EXHIBITS**
              
              **40****ITEM
                  14.**
              
              **PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES**
              
              **41**


**PART
      I**




**ITEM
      1.****DESCRIPTION
      OF BUSINESS****.**




**Overview**




Our
      company, Foldera, Inc., has designed and developed FolderaTM, our free, secure
      and easy-to-use software service that instantly and automatically organizes
      workflow. Foldera combines web-based e-mail, document manager, task manager,
      calendar, contact manager and sharable folders into a unified productivity
      suite, available with a single login from any web browser. Foldera has the
      unique ability to instantly sort and file a user’s sent and incoming e-mail,
      documents, tasks and events into folders, on a project-by-project basis,
      chronologically and in real-time. We offer our standard version Foldera service
      for free to individuals within small and mid-sized businesses and departments
      within an enterprise. It is expected that these individuals will in turn
      introduce Foldera to their colleagues in a viral fashion, and to their friends
      and families in order to better organize their day-to-day lives.




After
      more than four years in development, testing and feature refinement, we launched
      our sign-up page in mid-February 2006. Since that time, more than 16,000
      businesses have expressed interest in creating over two million user seats
      on
      the free Foldera service. On June 19, 2006, we officially launched a limited
      beta version of our service, rolling it out to a select number of users, and
      have begun the process of systematically activating additional accounts to
      further expand our beta user group.




We
      intend
      to target small to mid-sized businesses and departments within an enterprise.
      We
      believe that our service will be especially useful to business teams that work
      in remote locations, away from a central office, and that collaborate on
      multiple projects and activities, often with people outside their business.
      We
      believe that up until now this highly desirable user group has been shut out
      of
      the market due to the high price of competing solutions.




**Product
      Overview**




We
      utilize our own proprietary technology to enable Foldera to do sorting and
      filing, not our members. And, we do it while our members perform their work
      activities, not afterwards, as they do now.




We
      accomplish this by placing project specific Activity Folders at the center
      of a
      collaboration effort, not an unfiltered email inbox. With Foldera, our members
      still use email, but now they access their email application, and other
      applications, from within shared Activity Folders, with each Activity Folder
      dedicated to a distinct project. This unique feature enables our members to
      communicate and share information with others within the context of a specific
      project or activity, while automatically sorting and filing their information
      as
      they work.




For
      example, each Activity Folder groups together, in chronological order, all
      of
      the email (sent and received), comments, tasks, documents and calendar events
      related to that specific project or activity. These records are live files
      that
      can be opened, edited, shared and then saved again.




New
      information is instantly organized and available to all entitled members in
      one
      centralized location on the Internet. With Foldera, communications are more
      efficient and effective, and information sharing is faster, easier and more
      reliable than when using disconnected, single-purpose applications and
      traditional email without Foldera. By using Foldera’s organization, messaging
      and collaboration system, business teams are always kept up to date and working
      more productively on a parallel basis, saving time and potential confusion
      within the business.




Businesses
      can be up and running and fully coordinated on Foldera in minutes, with our
      easy-to-use web interface. Foldera also enables businesses to add additional
      team members and to sign up for additional data storage should the need arise.
      From a member’s perspective, there is no hardware to buy, there are no
      downloads, no patches, no upgrade cycles, no IT resource involvement for set
      up
      or maintenance, no long-term contracts and the basic service is free. Because
      the Foldera product offering is browser-based, we anticipate that members will
      require very modest training in order to effectively utilize our
      product.




1




**Market
      Research**




According
      to a recent study by Grant Thornton, a leading accounting and consulting firm,
      the average business person spends an hour and a half each day processing
      e-mail. Further, a Palo Alto research study by Bellotti and Ducheneaut indicated
      that employees spend 10% of their time filing messages and about 8% of their
      time searching to find the messages they need to do their jobs. Based on these
      studies, the typical business person wastes two hours each week searching,
      sorting and filing information.




The
      messaging/collaboration segment of the global software market is large, rapidly
      growing and undergoing a shift away from “on premises” providers to “hosted
      providers” like Foldera. In 2004, according to the Radicati Group, a consulting
      group that provides market research on the messaging and collaboration market,
      “revenue in the corporate Messaging and Collaboration Software segment expanded
      by nearly 10% to roughly $2.85 billion.” Additionally, “during 2004, the number
      of e-mail users increased by over 22%, to 1.1 billion global mailboxes,”
according to the Radicati Group.




**Industry
      Overview**




We
      intend
      to participate in two large industry segments: the messaging and collaboration
      portion of the software market and the search-based advertising
      market.




**The
      Messaging and Collaboration Software Market.** The
      Radicati Group is forecasting that the fastest growing segment of the Messaging
      and Collaboration software market will be for “hosted services.” This is
      expected to lead to a flat to declining market for the “on premise” portion of
      the market, with a continuation of the trend toward outsourced and hosted email
      solutions. The Radicati Group projects that the total number of hosted email
      mailboxes will increase from 1 billion mailboxes in 2006, to nearly 2 billion
      mailboxes in 2010. Foldera is a hosting service provider.




The
      Gartner Group estimates that $6 billion was invested in enterprise collaboration
      software licenses in 2005. Gartner predicts this will increase to more than
      $9
      billion by 2009.




In
      September of 2006, The Gartner Group released a report entitled, “Enterprise
      Social Software to Boost Efficacy of Non-Routine Work.” In this report, Gartner
      states that “the next big wave of productivity gains will come from improving
      the efficiency of non-routine, creative work, particularly that which results
      from the key activities by which workers create value - discovering, innovating,
      collaborating, leading and learning.”  According to Gartner, “Enterprise
      social software will expand the options available for augmenting key behaviors
      that rely on social interactions such as discovering, innovating, collaborating,
      leading and learning. The challenge is to adapt and adopt different ways to
      stimulate and channel the creativity of high impact workers toward developing
      new ideas, collaborating across organizational boundaries, and establishing
      more
      effective virtual teams.” Vendors will also target small businesses with hosted
      collaboration services. **** Vendors
      have dozens of hosted collaboration services in the market, used by millions
      of
      small-business employees. Some vendors offer just asynchronous collaboration
      features (e.g., discussion threads, document repository and workflow). Others
      also offer real-time collaboration (e.g., Web conferencing and instant
      messaging). Hosted collaboration service providers increasingly offer these
      capabilities as part of a broader set of business applications (e.g., contact
      management, customer management and project management).




**The
      Search-Based Advertising Market.** A
      growing
      trend on the Internet is the proliferation of free services that utilize
      advertising revenues as their primary source of income. For example, numerous
      companies such as Google.com, Ask.com, Myway.com, Technorati.com, Weather.com,
      AOL.com, Yahoo.com, MSN.com, and Blogger.com utilize similar ad supported
      models.




We
      intend
      to integrate a paid search feature into each page of our online service and
      we
      expect to derive a substantial portion of our revenue from this feature. We
      have
      selected Google’s “AdSense for Search” program to capitalize on Google’s
      popularity with Internet searchers. Google leads the U.S. Internet search
      industry with a 49.6% share of all queries, according to NielsenNetRatings,
      followed by Yahoo at 23.9% and MSN-Microsoft at 8.8%. An average of 3.8 billion
      searches were conducted monthly during 2004, according to ComScore Networks,
      with each searcher entering an average of 33.2 searches per month.




2




U.S.
      Internet advertising revenues totaled $12.5 billion in 2005, exceeding 2004
      levels by 30%, according to the Interactive Advertising Bureau and
      PricewaterhouseCoopers. According to eMarketer, an Internet research company,
      paid search ad spending in the United States will top the $23 billion mark
      in
      2008. Foldera believes paid search will continue to be the dominant form of
      online advertising, at around a 40% share of the overall market, with less
      than
      2% of businesses in the United States having ever participated.




**Target
      Audience - The SMB Market**




We
      intend
      to target the small-to-mid-sized business, or SMB, marketplace for Foldera.
      According to the Small Business Administration, there are approximately 22.9
      million small businesses in the United States alone. Small businesses provide
      approximately 75% of the new jobs added to the economy and employ 50.1% of
      the
      private sector’s workforce. According to The Gartner Group, worldwide business
      spending on IT exceeded $2 Trillion in 2005. Foldera believes the complexity
      and
      high cost of ownership of messaging and collaboration software has prevented
      small businesses from deploying this type of software in the past.




**Revenue
      Model**




We
      anticipate generating revenue from two primary sources: the up-selling of
      Premium Services and Paid Search Advertising. Premium Service revenue is derived
      from the sale of extra storage, vanity email domain hosting, custom branding
      and
      technical support by phone. Paid search revenue is derived each time a Foldera
      member uses the embedded Google search box and then clicks on the ad of an
      advertiser in the Google network.




**Sales
      of Premium Storage.** Our
      basic
      account will include 1 gigabyte (GB) of free storage. We expect to up-sell
      a
      small portion of our basic accounts to our premium storage package. We project
      that storage revenue will increase over time as members store more information
      each year.




**MX
      Record E-mail Hosting.** Each
      basic Foldera account will include a standard Foldera email domain, for example: jdoe@yourcompanyname.Foldera.com .
      We will
      also offer to host a vanity email domain name for each account. Vanity email
      domains, such as jdoe@yourcompanyname.com, are available for an additional
      one-time charge of $100. We anticipate that a small portion of our accounts
      will
      upgrade to a vanity e-mail domain name.




**Custom
      Branding.** Foldera
      enables its users to easily upload their logos and to select a color scheme
      that
      matches the look and feel of their marketing website. Branding assistance will
      be available for a one-time charge of $100 and we project that a small portion
      of our accounts will ask for assistance in customizing the branding of their
      Foldera.




**Premium
      Tech Support.** Foldera
      has a free and easy to use help trail embedded throughout its application.
      We
      project that a small portion of our accounts will require additional technical
      support. Technical phone support will be available for $30 per incident. We
      intend to outsource our technical support operation.




**Paid
      Search Revenue.** Google
      has a recognized and well established program for publishers like Foldera,
      which
      seek to monetize their traffic and web content. The program is called AdSense
      for Search. We intend to integrate this Google search feature into each page
      of
      our online application. Google AdSense combines Google’s search technology with
      thousands of keyword advertisers to deliver targeted text-based ads to search
      result pages. People find these ads useful and click on them and, when they
      do,
      Google shares a portion of the revenue with the web publisher.




According
      to Majestic Research, searchers click on ads 17% of the time they search, or
      one
      for every six searches, and the average revenue generated per click is $0.54.




**Rollout
      Strategy and Timetable**




Following
      over four years of system development, we launched a limited pre-release beta
      service in the second quarter of 2006. At the end of the end of the first
      quarter of 2007, we expanded our beta service and we expect to begin generating
      revenue during the second quarter of 2007.




3




**Network
      Marketing and Distribution Strategy.** To
      quickly and cost-effectively introduce Foldera to the global marketplace, we
      intend to give Foldera away for free and utilize a grassroots network marketing
      approach modeled after several other successful web-based technology product
      launches. For example, Hotmail (and others, including Myway, Skype, Firefox,
      MySpace, Friendster, Flickr, Facebook, Orkut and Linkedin) used this Marketing
      and Distribution strategy successfully, obtaining millions of members in a
      short
      period of time.




Foldera
      believes that when people discover a remarkable online service, they like to
      tell their friends and business associates about it, who, in turn, tell others
      through word-of-mouth or email communications. This network marketing approach
      served as the foundation for the roll out of Hotmail. While Foldera’s roll out
      will be modeled after Hotmail’s, we can offer no assurances that the market will
      similarly receive our product.




Foldera
      believes that the money that would have otherwise been spent on advertising
      our
      product will be better used in making our application as feature rich and user
      friendly as possible. We believe that satisfied members are more apt to tell
      their friends and spread the word about Foldera, giving us free network-enhanced
      word-of-mouth advertising. In effect, we anticipate that our customers will
      become our advertising advocates. For example, MySpace, which was launched
      in
      late 2003, gave musicians free web sites on which to post their songs and
      allowed fans to build their own web pages in order to connect with like-minded
      enthusiasts. “MySpace never spent money on advertising and now has 22.5 million
      users,” according to an August 1, 2005 Newsweek article. No assurances can be
      given, however, that our experience in this regard will be similar to that
      of
      MySpace.




Our
      free
      and frictionless self service sign-up model is expected to remove the pricing
      barrier that has prevented most small-to-medium sized businesses from owning
      similar software in the past. We believe this pricing strategy will help us
      gain
      market share faster than if we charged a higher price for our software and
      spent
      more on sales and marketing initiatives.




Initially,
      during the second quarter of 2007, we anticipate courting the interest of
      bloggers and technology enthusiasts in the rollout of our software product,
      both
      through direct contact and the use of consultants. This will be accomplished
      by
      providing advance editions of our product to the individual bloggers and
      technology enthusiasts we have identified who have considerable influence in
      the
      collaboration software market and to solicit their reaction to our software
      product. Additionally, we plan to target selective media outlets (i.e.
      newspapers, magazines, radio and television) to gain publicity for our product.
      Finally, we plan to engage with key industry analysts to receive product
      evaluation reviews from these key influence purveyors. As such, these
      technologists are typically the first customers for anything that is truly
      brand
      new in the technology marketplace. From a marketing point of view, technologists
      exercise great influence over, and act as gatekeepers of, the rest of the
      technology product life cycle. If they reject a product, no one else will give
      the product a second chance. An additional benefit to courting this group is
      that they are typically very vocal and active in assisting technology companies
      in shaping their products and in disseminating product information and
      attributes to the broader market.




Because
      of our limited ability, at least initially, to meet the expected demand for
      Foldera accounts, we intend to limit the number of accounts an existing Foldera
      account can refer to others but we will not restrict the number of members
      that
      can be signed up within an existing account. The purpose of this strategy is
      twofold. First, it enables us to meet demand and scale the application in a
      responsible way. Second, by making prospective early adopters line up for access
      and having them wait before they are granted membership, we will further enhance
      the sense of entitlement and community members will feel when they have been
      admitted. For example, this strategy was utilized effectively when Google
      launched its email product called Gmail.




**Ongoing
      Improvements - Foldera’s Technology Roadmap**




Our
      mission is to create the best web-based Organizer and Messaging/Collaboration
      service in the world. In pursuit of that mission, we intend to rapidly respond
      to ongoing customer feedback and feature requests. Here are just a few items
      on
      our product roadmap:




**Offline
      Content Synchronization.** This
      feature will enable members to work within their Foldera application when an
      Internet connection is unavailable. This is possible using our proprietary
      web
      folder technology that establishes a local version of Foldera on a member’s
      local personal computer. All of a member’s offline information will then be
      uploaded and synced up to the online information the next time the member logs
      into his or her Foldera over the Internet.




4




**Wireless
      Access.** This
      feature will enable our members to access their Foldera from any wireless
      device. For example, if a member is away from the office, the member will be
      able to remotely access, check and respond to email, obtain the phone numbers
      of
      their contacts and review, edit and share documents.




**Enterprise
      Server Solution.** Foldera’s
      primary focus will be on small-to-midsized businesses, but we anticipate that
      some large enterprises will want their own, on-premises version of the Foldera
      application. For this reason, we intend to create a Foldera enterprise server
      solution which will include a preconfigured Dell server(s) with a private
      version of the Foldera application to be hosted in the enterprise’s
      infrastructure, rather than on our servers.




**The
      Foldera Software Development Kit (SDK).** This
      tool
      will enable outside developers to expose their applications from within the
      Foldera framework. For example, a real estate company may want to expose
      Multiple Listing Service (MLS) home listing data into the Foldera being used
      by
      their real estate agents. The Foldera SDK will make this possible by allowing
      outside developers to customize the application to suit their particular
      purpose.




**The
      Foldera API.** We
      intend
      to enable other software developers to expose Foldera within their applications.
      These experiments, often referred to as “mashups,” have yielded significant
      product extensions for Google, Flickr and numerous other technology
      companies.




**Audio
      and Video Conferencing.** These
      features will enable our members to conduct voice and video conferences from
      within the shared Activity Folder framework. We envision that these services
      will be sold on a monthly subscription basis.




**Expansion
      of the Integrated Toolset.** We
      intend
      to add voice over Internet protocol (VOIP) telephony, fax service and a photo
      organizer into our shared Activity Folder framework.




**Expanding
      Verticals.** In
      the
      future, we intend to customize the application for specific vertical industries.
      For example, we plan to create a version suited to contractors, engineers,
      consultants, architects, developers, project managers, students and many other
      potential operations.




**Patents
      and Intellectual Property**




We
      regard
      our organizer and messaging/collaboration software solution as proprietary
      and
      rely primarily on a combination of copyright, trademark and trade secret laws
      of
      general applicability, employee confidentiality and other intellectual property
      protection methods to safeguard our technology, processes and system. There
      can
      be no assurance that these protections will be adequate to prevent our
      competitors from misappropriating our technology or that our competitors will
      not independently develop technologies that are substantially equivalent or
      superior to our technology.




We
      filed
      a U.S. Provisional Patent Application Serial No. 60/517,271, with the U.S.
      Patent and Trademark Office on November 4, 2003. The following is an abstract
      taken from the application. “Taskport is a scalable and reliable collaborative
      software application that provides an information hub that serves as a single
      portal to using applications in an aggregated, collaborative manner, thereby
      eliminating the need for constant transmission / reception of information to
      achieve collaboration, is presented. The present invention creates a portal
      for
      all entities, and enables access, storage, sharing, and response to related
      information from anywhere at anytime on any access unit in a collaborative
      and
      collective methodology. The present invention also provides object-based
      security and object-based threaded discussion sessions for all objects generated
      by the various applications.” There can be no assurance that our patent
      application will result in any patent being issued to us or, if issued, that
      any
      patent claims will be of sufficient scope or strength to provide any meaningful
      competitive advantage to us. In addition, any patent may be challenged,
      invalidated or circumvented and any right granted thereunder may not provide
      meaningful protection to us. The patent is estimated to be active for twenty
      years from the November 2003 filing date, subject to review and grant of an
      issued patent and subsequent payment of maintenance fees.




Our
      intellectual property also includes the copyrighted source code for the Foldera
      application. A copyright exists upon the creation of the work, and for corporate
      works made for hire, the term would be the shorter of 95 years from the date
      of
      publication, or, if unpublished, 120 years from the date of creation. We
      estimate that the copyright was created in 2001 and that the term would
      therefore be at least 95 years from that date.




5




We
      also
      own the registered trademark for the Foldera system name. Additionally, we
      own
      the following service marks:




Group
      Information Manager;




Group
      Information Organizer; and




Group
      Information Collaborator.




We
      also
      own the word mark - Foldera. U.S. trademark rights can potentially be unlimited
      in duration if the mark is used continually in commerce, but trademark
      registrations must be maintained by filing an affidavit of use between the
      fifth
      and sixth years of registration, a renewal between years nine and ten after
      registration, and thereafter a renewal every ten years. We filed applications
      for all of our marks on an intent-to-use basis, all applications have been
      published and a notice of allowance has been received for each mark. We plan
      to
      continue to renew our registration of each mark in accordance with the above
      described renewal requirements.




We
      rely
      upon our efforts to design and implement improvements to our Foldera system
      to
      maintain a competitive position in the marketplace.




**Competition**




The
      messaging and collaboration software industry is highly competitive and we
      expect this competition to intensify in the future. The industry is
      characterized by rapidly changing technologies and customer demands for newer
      and better software applications and product functionality. Our competitors
      could develop products and technologies that could render our products and
      technologies obsolete. Many of our competitors have considerably greater
      resources, including financial and software development personnel, marketing
      and
      sales capacity, established distribution networks, significant goodwill and
      global name recognition. As a result, these competitors may be in a better
      position than the Company to respond quickly to, or significantly influence,
      rapid technological change and changes in consumer demand. If the Company is
      unable to compete effectively in the messaging and collaboration software
      industry, the Company may not increase revenues or achieve
      profitability.




Competition
      in the messaging and collaboration software industry is characterized by several
      key factors, including the following:





1.
            Rapid
                changes in technology and customer requirements. New opportunities
                for
                existing and new competitors can quickly render existing technologies
                and
                products obsolete or less valuable.




2.
            Relatively
                low barriers to entry. Startup capital requirements for software
                companies
                can be very small and software distribution over the Internet is
                inexpensive and easily outsourced.




3.
            Significant
                price competition. Direct distribution of competing products, particularly
                over the Internet, may cause prices and margins to decrease in traditional
                sales channels.




4.
            Consolidations
                and mergers. Software companies and their individual products have
                a high
                rate of mergers, product line sales and other transfers and
                consolidations. As a consequence, there is a tendency to have a higher
                concentration of able competitors within the
                industry.




Other
      key
      factors that may influence competition about which we are currently unaware
      could arise in the future.




In
      addition to the foregoing, a slowdown affecting the general growth in demand
      for
      messaging and collaboration software and related products and services could
      harm the Company’s revenue and prospects for achieving profitability. The
      markets for the Company’s products and services depend on economic conditions
      that affect the broader software and technology related markets. Downturns
      in
      any of these markets may cause end users to delay adoption of the Company’s
      products and services. Customers may experience financial difficulties, cease
      or
      scale back operations or reverse prior decisions to adopt the Company’s products
      and services. As a result, the Company could experience longer product sales
      cycles and pressure from the market to reduce prices. A reduction in prices
      could cause the Company to realize lower revenues and margins.




6




Continuing
      changes in technology and industry standards could render the Company’s software
      products unmarketable or obsolete. The markets for the Company’s products change
      rapidly because of technological innovation, changes in customer requirements,
      declining prices and evolving industry standards. New products and technologies
      often render existing technology oriented products, services or infrastructure
      obsolete, too costly or otherwise unmarketable. The Company’s success depends on
      its ability to introduce innovations in its products, integrate new technologies
      into its application on a timely basis. There is no guarantee that the Company
      will be successful in achieving these goals or that it will do so in a manner
      that is sufficiently timely to ensure that the Company is able to successfully
      compete for customers and market share. Additionally, if the Company fails
      to
      incorporate the features, performance criteria and security standards in its
      product and services that customers require, market acceptance of its products
      may not materialize or may be significantly delayed and the Company’s revenues
      may level off or decline as a consequence.




Technological
      advances also require the Company, on a continuing basis, to commit substantial
      resources to acquiring and applying new technologies for use in its products
      and
      services. Product development for Software as a Service (SaaS) products requires
      substantial lead time for development and testing. If the Company does not
      commit resources to developing and selling products incorporating new
      technologies at the rate demanded by the Company’s markets, its products and
      services may be rendered obsolete, revenues could suffer and the Company may
      not
      achieve profitability. Even if the Company does develop new or enhanced products
      and services, the Company cannot guarantee that these products will gain
      acceptance in the marketplace. Failure of any of these products and services
      could adversely affect revenues and prevent the Company from achieving
      profitability.




The
      Company believes that the distinctive features of its products differentiate
      it
      from competing products, thereby enabling it to remain competitive. The
      Company’s policy is to develop its own core software, while hardware and other
      software application are outsourced from third-party vendors. The Company
      believes this policy enables it to adopt new products and application features
      sets and to develop and integrate new solutions expediently into the
      marketplace.




The
      competitive factors described above may have a material adverse effect on the
      Company’s future operating results, including reduced profit margins and loss of
      market share. Accordingly, there can be no assurance that the Company will
      be
      successful in its ability to enhance current products and develop and introduce
      future product attributes that will achieve market acceptance. The Company’s
      future is largely dependent o the development of new product feature sets for
      its messaging and collaboration software offering. Because the Company is a
      development-stage company, these products and services are still in varying
      stages of development and there can be no assurance that the development of
      the
      products and services will be successfully launched or completed on a timely
      basis.




We
      face
      competition from other messaging and collaboration service providers, including
      companies that are not yet known to our management. We compete with Internet
      companies, particularly in the areas of email and instant messaging, and we
      may
      also compete with companies that sell products and services online because
      these
      companies are attempting to attract users to their web sites to search for
      information about products and services. Many of our competitors have more
      employees and cash reserves than we have. Many of our competitors also have
      longer operating histories and more established relationships with customers
      and
      can use their experience and resources in a variety of competitive ways against
      us, including by making acquisitions, investing more aggressively in research
      and development and competing more aggressively for advertisers and web sites.
      Some of our competitors may have a greater ability to attract and retain users
      than we do due to their broader range of content, products and services. If
      our
      competitors are successful in providing a similar or better messaging and
      collaboration application compared to our application or are able to leverage
      their platforms to make their services easier to access, we could experience
      a
      significant decline in user traffic. Any such decline in traffic could
      materially and adversely affect revenues and prevent the Company from achieving
      profitability.




We
      also compete with destination web sites that seek to increase their
      search-related traffic. These destination web sites may include those operated
      by Internet access providers, such as cable and DSL service providers. Because
      our users will need to access our services through Internet access providers,
      our users will have direct relationships with these providers. If an access
      provider or a computer/computing device manufacturer offers online services
      that
      compete with our services, the user may find it more convenient to use the
      services of the access provider or manufacturer than those of the Company.
      Additionally, the access provider or manufacturer may make it difficult to
      access our services by not listing them in the access provider’s or
      manufacturer’s own menu of offerings. Also, because the access provider gathers
      information from the user in connection with the establishment of a billing
      relationship, the access provider may be more effective than us in tailoring
      services and advertisements to the specific tastes of the user.




7




Finally,
      there has been a trend toward industry consolidation among our competitors,
      and
      smaller competitors today may become larger competitors in the future. If our
      competitors are more successful than we are at generating traffic, any resulting
      decline in traffic could materially and adversely affect our revenues and
      profitability.




**Governmental
      Regulation**




We
      are
      subject to the same federal, state and local laws as other companies conducting
      business in the software field. Our products are subject to copyright laws.
      We
      may become the subject of infringement claims or legal proceedings by third
      parties with respect to our current or future products. In addition, we may
      initiate claims or litigation against third parties for infringement of our
      proprietary rights, or to establish the validity of our proprietary rights.
      Any
      such claims could be time-consuming, divert management from our daily
      operations, result in litigation, cause product shipment delays or lead us
      to
      enter into royalty or licensing agreements rather than disputing the merits
      of
      such claims. Moreover, an adverse outcome in litigation or a similar adversarial
      proceedings could subject us to significant liabilities to third parties,
      require the expenditure of significant resources to develop non-infringing
      products, require disputed rights to be licensed from others or require us
      to
      cease the marketing or use of certain products, any of which could have a
      material adverse effect on our business and operating results.




**Research
      and Development**




Software
      development costs incurred in conjunction with product development are charged
      to expense until technological feasibility is established in accordance with
      Statement of Financial Accounting Standards No. 86, *Accounting
      for the Cost of Computer Software to be Sold, Leased, or Otherwise
      Marketed* ,
      or ** SFAS
      86.
      Thereafter, all software product development costs are capitalized and reported
      at the lower of unamortized cost or net realizable value. The establishment
      of
      technological feasibility and the ongoing assessment of the recoverability
      of
      costs require considerable judgment by us with respect to certain external
      factors, including, but not limited to, anticipated future gross product
      revenues and estimated economic life and changes in software and hardware
      technology. We do not have any capitalized software product development costs
      as
      of December 31, 2006. Research and product development expenditures were
      approximately $709,666 and $1,892,559 in the years ended December 31, 2005
      and
      2006, respectively.




**Employees**




At
      December 31, 2006, we had 60 employees and one contractor in the United States.
      We believe that our employee relations are good. None of our employees are
      represented by a collective bargaining unit. All employees sign standard
      employment agreements that specify they are all “at will”
employees.




**Corporate
      Information and Organizational History**




We
      were
      founded in December 2001 by Richard Lusk, our Chairman, President and Chief
      Executive Officer. Mr. Lusk has been the visionary force behind several software
      companies and was a founding shareholder of Predictive Technologies, Platform
      Technologies and Oanda.com. In February 2006, we completed a reverse merger
      into
      a publicly held holding company, Expert Systems, Inc., and concurrently changed
      our corporate name from Taskport, Inc. to Foldera, Inc., and raised $10.6
      million in two private financing transactions completed in the first quarter
      of
      2006 and the third quarter of 2005. In May 2006, we effected a 4-for-1 forward
      stock split of our outstanding shares of common stock. All share amounts
      contained herein reflect the 4-for-1 forward stock split.




Since
      our
      business is that of Foldera only, and the former Taskport stockholders control
      the merged companies, the information contained herein for periods prior to
      the
      fiscal year ended December 31, 2006 is that of Taskport as if Taskport had
      been
      the registrant for all the periods presented in this report. The section
“Management’s Discussion and Analysis or Plan of Operation” and the audited
      consolidated financial statements presented in this report are those of Taskport
      prior to the reverse merger, as these provide the most relevant information
      about us on a continuing basis.




8




Our
      principal executive offices are located at 17011 Beach Boulevard, Suite 1500,
      Huntington Beach, California 92647, and our telephone number at that address
      is
      (714) 766-8700. We maintain a corporate website at www.foldera.com .
      The
      contents of our website are not part of this prospectus and should not be relied
      upon with respect to the prospectus.





To
      date,
      we have spent a significant amount of time and money developing our
      collaboration software product and no revenue has been generated from
      operations. We anticipate this will change since we released a more robust
      version of our product at the end of the first quarter of 2007, with
      commensurate revenue anticipated to be generated during the second quarter
      of
      2007 (primarily, at least initially, through paid search). We anticipate being
      in a continuous beta version upgrade cycle of our product as time goes on as
      we
      receive feedback from our user base and incorporate that feedback into future
      versions of our software offering.




**ITEM
      2.****DESCRIPTION
      OF PROPERTY.**




In
      September 2005, we entered into an agreement to lease 15,154 square feet of
      office space in Huntington Beach, California to house our administrative,
      marketing, system development and technical support operations. We pay
      approximately $29,550 per month in rent under this lease, which expires in
      September 2010.




According
      to the terms of the agreement, we provided a $63,647 secured certificate of
      deposit to the landlord. The secured certificate of deposit will be credited
      to
      us at the beginning of month 37 of the lease term against the then scheduled
      base rent due to the landlord.




**ITEM
      3.**  **LEGAL
      PROCEEDINGS** **.**




In
      the
      ordinary course of business, we may become a party to legal or regulatory
      proceedings resulting from litigation, claims or other disputes. There can
      be no
      assurance that one or more future actions, if they occur, would not have a
      material adverse effect on the business. We are not currently party to any
      pending or, to our knowledge, threatened legal proceedings.




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




We
      did
      not submit any matters to a vote of security holders in the fourth quarter
      of
      the fiscal year ended December 31, 2006.







**PART
      II**




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




**Market
      Information**




Our shares of
      common stock are
      quoted and listed for trading on the OTC Bulletin Board under the symbol
“FDRA. OB.” Trading
      in our shares began in August 2005 under the symbol EXM.OB, and related only
      to
      Expert Systems, Inc. prior to our reverse merger transaction on February 13,
      2006.




The
      following table sets forth, for the periods indicated, quotations for the high
      and low bid prices for our common stock for each quarter within the last two
      fiscal years, as reported by the OTC Bulletin Board:




**Closing
                Bid****High**
            
            **Low**January
                1, 2005 - December 31, 2005Third
                Quarter (August 23, 2005 - October 31, 2005)
            
            $
            .01
            
            $
            .01Fourth
                Quarter
            
            
            .03
            
            
            .01January
                1, 2006 - December 31, 2006First
                Quarter (January 1, 2006 - February 13, 2006)
            
            $
            .03
            
            $
            .03First
                Quarter (February 14, 2006 - March 31, 2006)
            
            
            2.66
            
            
            .62Second
                Quarter
            
            
            3.75
            
            
            1.81Third
                Quarter
            
            
            2.50
            
            
            1.10Fourth
                Quarter
            
            
            1.75
            
            
            0.87January
                1, 2007 - December 31, 2007First
                Quarter
            
            $
            1.07
            
            $
            0.55Second
                Quarter (through April 11, 2007)
            
            
            0.82
            
            $
            0.62





9


These
      bid
      prices represent prices quoted by broker-dealers on the OTC Bulletin Board.
      The
      quotations reflect inter-dealer prices, without retail mark-up, mark-down or
      commissions, and may not represent actual transactions.




**Holders**




As
      of
      March 31, 2007, there were 113,049,548 shares of our common stock outstanding,
      owned by approximately 494 holders of record.




**Dividend
      Policy**




We
      do not
      expect to pay a dividend on our common stock in the foreseeable future.
 The payment of dividends on our common stock is within the discretion of
      our board of directors ,
      subject
      to our certificate of incorporation .
      We
      intend to retain any earnings for use in our operations and the expansion of
      our
      business. Payment of dividends in the future will depend on our future earnings,
      future capital needs and our operating and financial condition, among other
      factors.




**Recent
      Sales of Unregistered Securities**




There
      were no sales of unregistered securities other than as reported in prior reports
      on Form 10-KSB, 10-QSB or 8-K. In addition, see Item 6, Management’s Discussion
      and Analysis or Plan of Operation - Recent Developments, for information
      concerning our recent financing transactions.




We
      did
      not repurchase any shares of our common stock during 2006.




**RISK
      FACTORS**




**Risks
      Related to Our Business and Industry**




**We
      are in an early stage of development, have a limited operating history and
      have
      not generated any revenue to date; accordingly, investors in our common stock
      may lose their entire investment.**




We
      are in
      the early stage of development and have only a limited operating history on
      which to base an evaluation of our business and prospects. In addition, our
      operations and development are subject to all of the risks inherent in the
      growth of an early stage company, including a limited operating history. We
      may
      not succeed given the technological, marketing, strategic and competitive
      challenges we will face. The likelihood of our success must be considered in
      light of the expenses, difficulties, complications, problems, delays and
      inherent risks frequently encountered in connection with the growth of a new
      business, the continuing development of new technology and the competitive
      environment in which we operate. Such risks include acceptance by users in
      an
      evolving and unpredictable business environment, the lack of a well developed
      brand identity and the ability to bring our product to market on a timely basis.
      We have not generated any revenues to date, and there can be no assurance that
      we will be able to successfully develop our web-based messaging and
      collaboration product and penetrate our target market. We sustained net losses
      of $3,081,878 and $11,117,316 for the years ended December 31, 2005 and 2006,
      respectively. Further, we may incur significant losses through 2007 and beyond,
      as we further develop and commercialize our web-based messaging and
      collaboration product. We cannot assure you that we will ever generate
      significant revenue or have profits.




10




**Due
      to our continual dependence upon outside financing, there is substantial doubt
      as to whether we can continue as a going concern beyond December 2007 without
      additional funding; in which event, we may have to curtail our operations,
      sell
      some of our assets or take actions that may dilute your financial
      interest.**




We
      had an
      accumulated deficit of $19,354,094 at December 31, 2006. Through December 2006,
      we have been continually dependent upon equity injections raised through private
      stock offerings from non-related parties and equipment leases provided by
      non-related parties to finance our business operations.




We
      are
      currently seeking additional financing to meet our short-term and long-term
      liquidity requirements, although there can be no assurances that such financing
      will be available, or if available, that it will be on terms acceptable to
      us.
      The accompanying financial statements have been prepared on the basis that
      we
      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 our ability to
      continue as a going concern, which contemplates the realization of assets and
      satisfaction of liabilities in the normal course of business.




**We
      have not yet launched our Foldera product into the general marketplace and
      there
      can be no assurance that our product will be accepted by the marketplace; thus,
      the future or our business is uncertain.**




While
      we
      have launched a limited beta version of our Foldera product, we have not
      launched our Foldera product into the general marketplace and there can be
      no
      assurance that our product will be accepted by the marketplace. If the
      marketplace finds any or all of Foldera’s product undesirable, we will be
      required to make potentially time-consuming and costly changes to our
      application, which may further delay the general rollout of the product. Such
      delays would deplete our financial resources and would have a material adverse
      effect on our business, results of operations and financial
      condition.




**We
      face competition from other Internet companies, including web-search providers,
      Internet advertising companies and destination websites that may also bundle
      their services with Internet access. Because we are smaller and have fewer
      financial resources than many of these companies, we may not be able to
      successfully compete in this very competitive industry.**




We
      face
      competition from other messaging and collaboration service providers, including
      companies that are not yet known to our management. We compete with Internet
      companies, particularly in the area of email and we may also compete with
      companies that sell products and services online because these companies are
      attempting to attract users to their web sites to search for information about
      products and services. Many of our competitors have more employees and cash
      reserves than we have. Many of our competitors also have longer operating
      histories and more established relationships with customers and can use their
      experience and resources in a variety of competitive ways against us, including
      by making acquisitions, investing more aggressively in research and development
      and competing more aggressively for advertisers and web sites. Some of our
      competitors may have a greater ability to attract and retain users than we
      do
      due to their broader range of content, products and services. If our competitors
      are successful in providing a similar or better messaging and collaboration
      application compared to our application or are able to leverage their platforms
      to make their services easier to access, we could experience a significant
      decline in user traffic. Any such decline in traffic could materially and
      adversely affect our revenues and potential profitability.




We
      also compete with destination web sites that seek to increase their
      search-related traffic. These destination web sites may include those operated
      by Internet access providers, such as cable and DSL service providers. Because
      our users will need to access our services through Internet access providers,
      our users will have direct relationships with these providers. If an access
      provider or a computer/computing device manufacturer offers online services
      that
      compete with our services, the user may find it more convenient to use the
      services of the access provider or manufacturer than those of Foldera.
      Additionally, the access provider or manufacturer may make it difficult to
      access our services by not listing them in the access provider’s or
      manufacturer’s own menu of offerings. Also, because the access provider gathers
      information from the user in connection with the establishment of a billing
      relationship, the access provider may be more effective than us in tailoring
      services and advertisements to the specific tastes of the user.




11




Finally,
      there has been a trend toward industry consolidation among our competitors,
      and
      smaller competitors today may become larger competitors in the future. If our
      competitors are more successful than we are at generating traffic, any resulting
      decline in traffic could materially and adversely affect our revenues and
      profitability.




**Due
      to the rapidly changing technology and frequent introduction of new
      Internet-based services in our industry, if we do not continue to innovate
      and
      enhance our products and services in a way that is desirable to users, we will
      likely lose users of our Foldera service, as well as advertisers, and experience
      further losses in the future.**




Our
      future success depends on providing products and services that people use for
      a
      high quality Internet experience. Our competitors are constantly developing
      innovations in messaging, collaboration and online advertising. As a result,
      we
      must continue to invest significant resources in research and development in
      order to enhance our messaging and collaboration technology and our existing
      products and services. Additionally, we will have to consistently introduce
      new
      high quality products and services that people can easily and effectively use.
      If we are unable to ensure that users and customers have a high quality
      experience with our products and services, then these customers may become
      dissatisfied and move to competitors’ products. Moreover, if we are unable to
      predict user preferences or industry changes, or if we are unable to modify
      our
      products and services on a timely basis, we may lose users, with any resulting
      decline in traffic potentially having a material and adverse affect on our
      revenues and profitability.




Our
      future operating results may also suffer if innovations are not responsive
      to
      the needs of our users, are not appropriately timed with market opportunity
      or
      are not effectively brought to market. As messaging and collaboration technology
      continues to develop, our competitors may be able to offer results that are,
      or
      that are perceived to be, substantially similar or better than those generated
      by our services. This may force us to expend significant resources in order
      to
      remain competitive.




**We
      expect to generate a significant portion of our revenue from advertising and
      any
      reduction in advertising spending by advertisers (and resulting loss of
      advertising revenue to us) could seriously harm our business prospects.**




We
      expect
      to generate a substantial portion of our revenues from Google’s “AdSense for
      Search” integrated search advertising. Google’s advertisers can generally
      terminate their contracts at any time. Google’s advertisers will not continue to
      do business with Google or us if their investment in advertising does not
      generate sales leads and, ultimately, customers.




We
      anticipate relying on our participation in Google’s AdSense Program, which can
      be easily joined using Google’s automated sign-up process, for a significant
      portion of our revenues. If we were to lose this relationship with Google,
      it
      could have a material and adverse affect on our revenues and profitability.




**Our
      business prospects depend on our ability to develop a strong brand image and
      identity to attract users; if we do not do so, users will seek alternative
      providers of our services and our growth, if any, will be limited.**




We
      believe that the creation of a brand identity will significantly contribute
      to
      the success of our business. We also believe that maintaining and enhancing
      the
“Foldera” brand are critical to expanding our base of members. Maintaining and
      enhancing the brand may require us to make substantial investments, and these
      investments may not be successful. If we are unsuccessful in our efforts to
      initially obtain, then promote and maintain the “Foldera” brand, or if we incur
      excessive expenses in this effort, our business, operating results and financial
      condition may be materially and adversely affected. We anticipate that, as
      the
      web-based market for collaborative systems becomes increasingly competitive,
      initiating, maintaining and enhancing, our brand may become increasingly
      difficult and expensive. Initiating, then maintaining and enhancing our brand
      will depend largely on our ability to be a technology leader and to continue
      to
      provide high quality products and services, which we may not do successfully.
      To
      date, we have not engaged in any direct brand promotion activities, and this
      enhances the risk that we may not be able to successfully implement brand
      enhancement efforts in the future.




12




**We
      intend to outsource critical billing functions to a third-party provider and,
      if
      this is not successfully accomplished, our operations could be disrupted and
      we
      will need to add this emphasis internally, which would divert our efforts and
      resources from other functions.**




We
      intend to sell our members additional features and services at a nominal charge.
      We intend to enter into an arrangement to outsource our worldwide billing and
      collection functions to a third-party service provider, and we are currently
      in
      the process of implementing this arrangement; however, there can be no assurance
      that the arrangement will be successfully completed and implemented.




If
      we do
      not successfully implement this project, our business, reputation and operating
      results could be harmed because we have no experience managing and implementing
      this type of large-scale, cross-functional, international infrastructure
      project. We also may not be able to integrate our systems and processes with
      those of the third-party service provider on a timely basis, or at all. Even
      if
      this integration is completed on a timely basis, the service provider may not
      perform to agreed upon service levels. Failure of the service provider to
      perform satisfactorily could result in customer dissatisfaction, disrupt our
      operations and adversely affect operating results. If we need to find an
      alternative source for performing these functions, we may have to expend
      significant resources to accomplish this, which could have a material adverse
      affect on our operating results.




**Our
      intellectual property rights are valuable and any inability by us, for any
      reason, to protect them could reduce the value of our products, services and
      brand.**




Our
      trademarks, trade secrets, copyrights and other intellectual property rights
      are
      important assets of our company. We also have a patent pending for a method
      and
      system for collaboration. We cannot assure you that our patent application
      will
      result in any patent being issued or, if issued, that any patent claims will
      be
      of sufficient scope or strength to provide any meaningful protection or any
      competitive advantage to us. There can be no assurance that these protections
      will be adequate to prevent our competitors from misappropriating our technology
      or that our competitors will not independently develop technologies that are
      substantially equivalent or superior to our technology. There are events that
      are outside of our control that could pose a threat to our intellectual property
      rights. For example, effective intellectual property protection may not be
      available in every country in which our products and services are distributed
      or
      made available through the Internet. Also, the efforts we have undertaken to
      protect our proprietary rights may not be sufficient or effective. Any
      significant impairment of our intellectual property rights could harm our
      business or our ability to successfully compete. Additionally, protecting our
      intellectual property rights is costly and time consuming. Any increase in
      the
      unauthorized use of our intellectual property could make it more expensive
      to do
      business and harm our operating results.




**Our
      proprietary information and technology could become subject to intellectual
      property rights claims by third parties in the future, which may be costly
      to
      defend, could require the payment of damages and could limit our ability to
      use
      certain technology in the future.**




Companies
      in the Internet, technology and media industries own large numbers of patents,
      copyrights, trademarks and trade secrets and frequently enter into litigation
      based on allegations of infringement or other violations of intellectual
      property rights. As we face increasing competition, the possibility of
      intellectual property rights claims increases. Our technologies may not be
      able
      to withstand any third-party claims or rights against their use. Any
      intellectual property claims, with or without merit, could be time consuming,
      expensive to litigate or settle and could divert management resources and
      attention. An adverse determination also could prevent us from offering our
      products and services to others and may require that we procure substitute
      products or services for these members.




With
      respect to any intellectual property rights claim, we may have to pay damages
      or
      stop using technology found to be in violation of a third party’s rights. We may
      have to seek a license for the technology, which may not be available on
      reasonable terms and may significantly increase our operating expenses. The
      technology also may not be available for license to us at all. As a result,
      we
      may also be required to develop alternative non-infringing technology, which
      could require significant effort and expense. If we cannot license or develop
      technology for the infringing aspects of our business, we may be forced to
      limit
      our product and service offerings and may be unable to compete effectively.
      Any
      of these results could harm our brand and operating results.




13




**If
      Google, our provider for integrated search, fails to detect click-through fraud,
      Google could potentially lose the confidence of its advertisers, thereby causing
      our business to suffer since we anticipate a significant proportion of our
      revenue will be generated through Google.**




We
      are exposed to the risk of fraudulent clicks on ads by persons seeking to
      increase the advertising fees paid to Google Network members. Google has
      refunded revenue that their advertisers have paid to them and that was later
      attributed to click-through fraud, and we anticipate it will continue to do
      so
      in the future.




Click-through
      fraud occurs when a person clicks on a Google AdWord ad displayed on a web
      site
      in order to generate the revenue share payment to the Google Network member
      rather than to view the underlying content. If Google is unable to stop this
      fraudulent activity, these refunds may increase. If Google finds new evidence
      of
      past fraudulent clicks, it may have to issue refunds retroactively of amounts
      previously paid to Google Network members. This could negatively affect our
      profitability and these types of fraudulent activities could hurt our brand.
      If
      fraudulent clicks are not detected, the affected advertisers may experience
      a
      reduced return on their investment in Google’s programs because the fraudulent
      clicks will not lead to potential revenue for the advertisers. This could lead
      the advertisers to become dissatisfied with Google’s advertising programs, which
      could lead to loss of advertisers and revenue.




**We
      may not be able to retain our key personnel that we need to succeed, and new
      qualified personnel may be extremely difficult to attract, especially as we
      seek
      to grow.**




We
      believe that our continued success will depend to a significant extent upon
      the
      efforts and abilities of Richard Lusk, our Chief Executive Officer, and certain
      key employees and consultants, including Reid Dabney, David Madison, Daniel
      O’Shea and Oliver Starr. We have not entered into employment agreements with
      our
      key personnel and our failure to retain Messrs. Lusk, Dabney, Madison, O’Shea
      and Starr in particular, or to attract and retain additional qualified
      personnel, could adversely affect our business, financial condition and results
      of operations. We have recently secured a $1,000,000 life insurance policy
      on
      Mr. Lusk for our benefit. We do not carry key-man life insurance on any of
      our
      other officers.




To
      manage
      the expected growth of our operations, we will be required to improve existing
      or implement new operational and financial systems and procedures and to expand,
      train and mange our employee base. We will also need to expand our finance,
      administrative and operations staff. There can be no assurance that our current
      and planned personnel, systems, procedures and controls will be adequate to
      support our future operations or that management will be able to hire, train,
      retain, motivate and manage required personnel. ****




**We
      may have difficulty scaling and adapting our infrastructure to accommodate
      increased traffic and technology advances or changing business requirements,
      which could lead to the loss of users if our system fails and cause us to
      implement costly infrastructure changes.**




To
      be
      successful, our network infrastructure has to perform well and be reliable.
      The
      greater the user traffic and the greater the complexity of our products and
      services, the more computing power we will need. We expect to spend substantial
      amounts to purchase and/or lease data centers and equipment and to upgrade
      our
      technology and network infrastructure to handle traffic and to roll out new
      products and services. If this expansion is not successfully implemented, or
      if
      we experience inefficiencies and operational failures during the implementation,
      the quality of our products and services and our users’ experience could
      decline. Resulting cost increases, loss of traffic and/or failure to accommodate
      new technologies or changing business requirements could have a material adverse
      effect on our operating results and financial condition.




**We
      rely on bandwidth providers, data centers and other third parties for key
      elements of providing users with our products and services and any failure
      or
      interruption in the services and products provided by these third parties could
      harm our ability to operate our business and damage our reputation.**




We
      rely
      on third-party vendors, including data center and bandwidth providers. Any
      disruption in the network access or co-location services provided by these
      third-party providers or any failure of these third-party providers to handle
      current or higher volumes of use could adversely impact our business. Any
      errors, failures, interruptions or delays experienced in connection with these
      third-party technologies and information services could negatively impact our
      relationship with users and adversely affect our business operations and could
      expose us to liabilities to third parties.




14




**We
      are dependent upon maintaining and expanding our information technology and
      communications systems. Failure to do so could result in interruption and
      failures of our services which would make our services less attractive to users,
      and therefore subject us to lost revenue as a result of a possible loss of
      users
      and advertisers.**




Interruption
      or failure of our information technology and communications systems could impair
      our ability to effectively provide our products and services. Any damage to
      or
      failure of our systems could result in interruptions in service. Interruptions
      in service could reduce our revenues and profits, and our brand could be
      damaged. Our systems are vulnerable to damage or interruption from earthquakes,
      terrorist attacks, floods, fires, power loss, telecommunications failures,
      computer viruses, computer denial of service attacks and similar events. Our
      data center is located in an area with a high risk of major earthquakes. Our
      data center is also subject to break-ins, sabotage and intentional acts of
      vandalism and to potential disruptions if the operators of these facilities
      have
      financial difficulties. Some of our systems are not fully redundant and our
      disaster recovery planning cannot account for all eventualities. The occurrence
      of a natural disaster, a decision to close a facility we are using without
      adequate notice or other unanticipated problems at our data centers could result
      in lengthy interruptions in our service.




**More
      individuals are using non-PC devices to access the Internet, and versions of
      our
      messaging and collaboration technology developed for these devices are still
      in
      their early stages of development and may not be widely adopted by users of
      these devices.**




The
      number of people who access the Internet through devices other than personal
      computers, including mobile telephones, hand-held calendaring and email
      assistants and television set-top devices, has increased dramatically in the
      past few years. The lower resolution, functionality and memory associated with
      alternative devices make the use of our products and services through such
      devices difficult. If we are unable to attract and retain a substantial number
      of alternative device users to our messaging and collaboration services or
      if we
      are slow to develop products and technologies that are more compatible with
      non-PC communications devices, we may fail to capture a significant share of
      an
      increasingly important portion of the market for online services.




**We
      may utilize insurance to mitigate certain risks and, to the extent the cost
      of
      insurance increases and/or changes in coverages occur, our insurance may not
      be
      adequate in a catastrophic situation.**




We
      may utilize insurance to cover certain potential risks and liabilities. In
      the
      current environment, insurance companies are increasingly specific about what
      they will and will not insure. It is possible that we may not be able to secure
      sufficient insurance to meet our needs, may have to pay higher than anticipated
      prices for the coverage or we may not be able to acquire any insurance for
      certain types of business risk. Additionally, we may elect to decline insurance
      coverage in certain instances and this could leave us exposed to potential
      claims. If we were found liable for a significant claim in the future, our
      operating results could be negatively impacted.




**Our
      business depends on increasing use of the Internet by users searching for
      information and by advertisers marketing products and services; otherwise,
      our
      business will be stagnant.**




Our
      future success is partially dependent on the continued growth and maintenance
      of
      the Internet infrastructure. This includes maintenance of a reliable network
      backbone with the necessary speed, data capacity and security for providing
      reliable Internet services. Internet infrastructure may be unable to support
      the
      demands placed on it if the number of Internet users continues to increase
      or if
      existing or future Internet users access the Internet more often or increase
      their bandwidth requirements. In addition, viruses, worms and similar programs
      may harm the performance of the Internet. The Internet has experienced a variety
      of outages and other delays as a result of damage to portions of its
      infrastructure, and it could face outages and delays in the future. These
      outages and delays could reduce the level of Internet usage as well as our
      ability to provide our products and services.




15




**Risks
      Related to Our Common Stock**




**Our
      common stock is quoted on the OTC Bulletin Board and considered a “penny stock,”
making it difficult to sell when desired.**




The
      SEC
      has adopted regulations which generally define “penny stock” to be an equity
      security that has a market price of less than $5.00 per share or an exercise
      price of less than $5.00 per share, subject to specific exemptions. The market
      price of our common stock is less than $5.00 per share and therefore may be
      designated as a “penny stock” according to rules of the SEC. This designation
      requires any broker or dealer selling these securities to disclose certain
      information concerning the transaction, obtain a written agreement from the
      purchaser and determine that the purchaser is reasonably suitable to purchase
      the securities. These rules may restrict the ability of brokers or dealers
      to
      sell our common stock and may affect the ability of our stockholders to sell
      their shares. In addition, since our common stock is currently quoted on the
      OTC
      Bulletin Board, stockholders may find it difficult to obtain accurate quotations
      of our common stock, and may experience a lack of buyers to purchase such stock
      or a lack of market makers to support the stock price.




**Our
      founder, president, chief executive officer and chairman owns a substantial
      amount of our stock, has significant voting power and is capable of influencing
      actions that may not be in the best interest of other
      shareholders.**




Richard
      Lusk, our founder, president, chief executive officer and chairman, currently
      beneficially owns approximately 47.8% of our common stock. He will have the
      ability to exert substantial influence over all matters requiring approval
      by
      our stockholders, including the election and removal of directors and any
      proposed merger, consolidation or sale of all or substantially all of our
      assets. In addition, Mr. Lusk could dictate the management of our business
      and
      affairs. This concentration of ownership could have the affect of delaying,
      deferring or preventing a change in control, or impeding a merger or
      consolidation, takeover or other business combination that could be favorable
      to
      you. This significant concentration of share ownership may also adversely affect
      the trading price for our common stock because investors may perceive
      disadvantages in owning stock in a company with a controlling
      stockholder.




**Investors
      should not anticipate receiving cash dividends on our common
      stock.**




We
      have
      never declared or paid any cash dividends or distributions on our common stock.
      We intend to retain our future earnings to support operations and to finance
      expansion, and therefore, we do not anticipate paying any dividends on our
      common stock in the foreseeable future.




**Our
      common stock price has fluctuated considerably and may not appreciate in
      value.**




The
      market price of shares of our common stock has fluctuated substantially since
      our reverse merger transaction in February 2006 and is likely to fluctuate
      significantly from its current level. In 2006, for example, the closing market
      price of our shares ranged from a low of $0.62 per share to a high of $3.75
      per
      share. Future announcements concerning the introduction of new products,
      services or technologies or changes in product pricing policies by us or our
      competitors or changes in earnings estimates by analysts, among other factors,
      could cause the market price of our common stock to fluctuate substantially.
      Also, stock markets have experienced extreme price and volume volatility in
      the
      last year. This volatility has had a substantial effect on the market prices
      of
      securities of many smaller public companies for reasons frequently unrelated
      to
      the operating performance of the specific companies. These broad market
      fluctuations may also cause declines in the market price of our common stock.
      Investors seeking short-term liquidity should be aware that we cannot assure
      you
      that the stock price will appreciate in value or, as noted above, that cash
      dividends will be paid.




**Future
      sales of shares of our common stock or the issuance of securities senior to
      our
      common stock could adversely affect the trading price of our common stock and
      our ability to raise funds in new equity offerings.**




We
      are
      not restricted from issuing additional common stock, preferred stock or
      securities convertible into or exchangeable for common stock. Future sales
      of a
      substantial number of our shares of common stock or equity-related securities
      in
      the public market or privately, or the perception that such sales could occur,
      could adversely affect prevailing trading prices of our common stock, and could
      impair our ability to raise capital through future offerings of equity or
      equity-related securities. No prediction can be made as to the effect, if any,
      that future sales of shares of common stock or the availability of shares of
      common stock for future sale, will have on the trading price of our common
      stock.




16




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




**Overview**





We
      are a
      public company whose common stock is quoted on the OTC Bulletin Board under
      the
      symbol “FDRA.OB.” On February 6, 2006, Expert Systems, Inc., a Nevada
      corporation, entered into an Agreement and Plan of Merger with Taskport, Inc.,
      a
      California corporation, principally engaged in the development of a proprietary,
      web-based software system which is a free and easy-to-use online service that
      combines email, shared folders, document management, calendar, contacts and
      task
      management applications into one seamless interface. Immediately prior to the
      merger, Expert Systems, Inc. had 100,000,000 shares of common stock authorized
      and 8,559,600 shares issued and outstanding. Pursuant to the merger, all of
      the
      91,313,720 outstanding shares of Taskport, Inc. were exchanged for shares of
      the
      Expert Systems, Inc. on a 1-for-1 basis for a total of 99,873,320 shares of
      common stock issued and outstanding. Immediately after the merger, all then
      existing officers and directors of Expert Systems, Inc. resigned, and the
      directors and officers of Taskport, Inc. were elected and appointed to such
      positions, thereby effecting a change of control. Although Taskport, Inc. became
      Expert Systems, Inc.’s wholly-owned subsidiary following the transaction,
      because the transaction resulted in a change of control, the transaction was
      recorded as a “reverse merger,” whereby Taskport, Inc. was considered to be
      Expert Systems, Inc.’s accounting acquirer. Concurrently with the merger, the
      name of Expert Systems, Inc. was changed to Foldera, Inc. On May 16, 2006,
      we
      declared a 4-for-1 forward stock split.




We
      have
      not generated any revenues as of December 31, 2006 and so are considered a
      development stage company. We ended 2006 with $5.77 million of cash on our
      balance sheet. Given our current cash usage rate and our expectations to begin
      generating revenue at the beginning of the second quarter of 2007, a risk exists
      that our available cash on hand and the cash we anticipate generating from
      operating activities will be insufficient to sustain or operations. We are,
      therefore, actively seeking additional debt or equity financing until we become
      cash flow positive.




To
      date,
      we have spent a significant amount of time and money developing our
      collaboration software product and no revenue has been generated from
      operations. We anticipate this will change as we released a more robust version
      of our product late in the first quarter of 2007 with commensurate revenue
      being
      generated at that time (primarily, at least initially, through paid search).
      We
      anticipate being in a continuous beta version upgrade cycle of our product
      as
      time goes on as we receive feedback from our user base and incorporate that
      feedback into future versions of our software product.




Due
      to
      the ongoing cost of operations and the uncertainty of generating enough revenues
      to cover those operating expenses, there is a probability that the Company
      will
      not remain a going concern without additional funding. See Note 2, regarding
      going concern.




The
      following discussion of our financial condition and results of operations should
      be read in conjunction with our financial statements and related notes included
      under Item 7 of this report.




**Application
      of Critical Accounting Policies**





Critical
      accounting policies are those that are most important to the portrayal of the
      financial condition and results of operations, and require our management’s
      significant judgments and estimates. The application of such critical accounting
      policies fairly depicts the financial condition and results of operations for
      all periods presented.




**Use
      of Estimates.** The
      preparation of consolidated financial statements in conformity with generally
      accepted accounting principles requires our management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the consolidated
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those
      estimates.




**Revenue
      Recognition.** Our
      revenue recognition policies are in compliance with Staff Accounting Bulletin
      (SAB) 104. Revenue is recognized when a formal arrangement exists, the price
      is
      fixed or determinable, all obligations have been performed pursuant to the
      terms
      of the formal arrangement and collectibility is reasonably assured. We
      anticipate generating revenue from two primary sources: from the up-selling
      of
      Premium Services and from Paid Search.




17




We
      anticipate deriving Premium Service revenue from the sale of extra data storage,
      vanity email, domain hosting, custom branding and technical support, which
      will
      be recorded when the service has been provided to clients or, in the case of
      extra storage, on an accrual basis, after monthly fees have been billed to
      clients.




Another
      anticipated revenue source is Paid Search. We anticipate that each time a user
      uses the embedded search box and clicks on an ad of an advertiser in the search
      network, revenue will be generated. Revenue will be recognized on a daily basis,
      based upon reported revenue from the selected search company.




**Depreciation
      and Amortization.** Property
      and equipment are depreciated on the straight-line basis over estimated useful
      lives.




Included
      in property and equipment is approximately $404,981 of assets, which are leased
      under non-cancelable leases, and accounted for as capital leases, which expire
      through November 2011. The accumulated depreciation included in the property
      and
      equipment for these leases is approximately $157,201.




We
      capitalize expenditures that materially increase asset lives and charges
      ordinary repairs and maintenance to operations as incurred. When assets are
      sold
      or otherwise disposed of, the cost and related depreciation or amortization
      is
      removed from the accounts and any resulting gain or loss is included in other
      income (expense) in the accompanying statements of operations.




**Cash
      and Cash Equivalents.** Cash
      and
      cash equivalents include cash on hand and cash in banks in demand and time
      deposit accounts with maturities of 90 days or less. We also have restricted
      cash of $67,059 held at a bank, which is shown as a certificate of deposit.




**Concentrations
      of Credit Risk.** Financial
      instruments, which potentially subject us to concentrations of credit risk,
      consist principally of cash, cash equivalents and trade receivables. We maintain
      cash and cash equivalents with high-credit quality financial institutions.
      At
      December 31, 2006, the cash balances held at financial institutions were either
      in excess of federally insured limits or not subject to the federal insurance
      system.




Credit
      is
      generally extended based upon an evaluation of each client’s financial
      condition, with terms consistent in the industry and no collateral required.
      We
      determine an allowance for collectibility on a periodic basis. Amounts are
      written off against the allowance in the period we determine that the receivable
      is uncollectible.




**Fair
      Value of Financial Instruments.** We
      consider our financial instruments, which are carried at cost, to approximate
      fair value due to their near-term maturities.




**Long-Lived
      Assets.** Property
      and equipment is stated at cost and depreciation is provided for by the
      straight-line method over the related assets' estimated economic lives ranging
      from three to five years. Amortization of leasehold improvements is provided
      for
      by the straight-line method over the lesser of the estimated economic useful
      lives or the lease term. Property under capital leases is amortized over the
      lease terms and included in depreciation and amortization expense.





The
      Company also adopted FAS 142, “Goodwill and Other Intangible Assets” which
      recognizes impairment testing for those long-lived assets that are not subject
      to amortization. The Company currently does not have any long-lived assets
      that
      are not amortized. However, the Company does perform periodic impairment tests
      of all long-lived assets.





**Income
      Taxes** .
      We
      follow Statement of Financial Accounting Standards No. 109, “Accounting for
      Income Taxes,” which requires recognition of deferred tax assets and liabilities
      for the expected future tax consequences of events that have been included
      in
      the financial statements or tax returns. Under this method, deferred tax assets
      and liabilities are based on the differences between the financial statement
      and
      tax bases of assets and liabilities using enacted tax rates in effect for the
      year in which the differences are expected to reverse.




18





**Accounting
      for Stock-Based Compensation.** Effective
      January 1, 2006, we adopted Statement of Financial Accounting Standards
      No. 123-R, “Share-Based Payment,” ** or
      SFAS
      123-R, which requires the measurement and recognition of compensation expense
      for all share-based payment awards made to employees and directors, including
      stock options based on their fair values. SFAS 123-R supersedes Accounting
      Principles Board Opinion No. 25 *,* “Accounting
      for Stock Issued to Employees,” or APB 25, which we previously followed in
      accounting for stock-based awards. In March 2005, the SEC issued Staff
      Accounting Bulletin No. 107, ** or SAB
      107,
      to provide guidance on SFAS 123-R. We have applied SAB 107 in our adoption
      of
      SFAS 123-R.




We
      adopted SFAS 123-R using the modified prospective transition method as of
      January 1, 2006. In accordance with the modified prospective transition method,
      our financial statements for prior periods have not been restated to reflect,
      and do not include, the impact of SFAS 123-R. Share-based compensation expense
      recognized is based on the value of the portion of share-based payment awards
      that is ultimately expected to vest. Share-based compensation expense recognized
      in our Consolidated Statement of Operations during the year ended December
      31,
      2006 includes compensation expense for share-based payment awards granted prior
      to, but not yet vested as of, December 31, 2005 based on the grant date fair
      value estimated in accordance with the pro forma provisions of SFAS 123. There
      were no stock options outstanding as of December 31, 2005.




Please
      refer to Note 2, for additional Critical Accounting Policies.




**Results
      of Operations**




**Comparison
      of the Years ended December 31, 2006 and December 31, 2005**




The
      Company is a development stage company and has not yet generated any revenue
      and
      consequently has also not generated any gross profit.




**Operating
      Expenses.** Total
      operating expenses for the year ended December 31, 2006 increased to $11,265,937
      or $(0.11) per share from $3,087,118 or $(0.05) per share, for the year ended
      December 31, 2005. The overall increase in expenses, for the year ended December
      31, 2006 as compared to the year ended December 31, 2005, of $8,178,819, or
      approximately 265% over the prior period, is due to the following increases
      in:




in
      payroll by $2,436,355 or 168% in 2006 to $3,887,268 as compared to $1,450,913
      in
      2005,




equity-based
      compensation paid to consultants by $1,159,595 in 2006 or 835% to $1,298,444
      as
      compared to $138,849 in 2005,




registration
      rights penalties by $776,657 in 2006 to $776,657 as compared to zero in 2005,




investor
      relations expense by $569,698 to $569,698 in 2006 as compared to zero in 2005,




employee
      options expense by $545,273 in 2006 to $545,273 as compared to zero in 2005,




legal
      and
      accounting by $481,873 or 132% in 2006 to $845,555 as compared to $363,682
      in
      2005,




technical
      outsourcing by $440,921 in 2006 to 440,921 as compared to zero in 2005,




depreciation
      by $405,033 or 350% to $520,906 in 2006 as compared to $115,873 in 2005,




consulting/outside
      services by $301,798 to $310,763 in 2006 as compared to $8,965 in 2005,




rent
      by
      $268,969 or 244% in 2006 to $379,397 as compared to $110,428 in 2005,




travel
      expenses by $217,531 or 693% in 2006 to $248,917 as compared to $31,386 in
      2005,




transaction
      costs related to acquisition of Expert Systems by $173,890 to $173,890 as
      compared to zero in 2005,




19




employee
      benefits by $142,384 to $154,520 in 2006 as compared to $12,136 in 2005,




hosting
      costs by $110,450 in 2006 to $110,450 compared to zero in 2005,




recruiting
      costs by $106,987 or 619% in 2006 to $124,267 as compared to $17,280 in 2005,




marketing
      and promotion by $53,005 to $63,007 or 530% as compared to $10,002 in 2005.




The
      above
      increases are a result of the following factors:




·
            We
                added additional staff as we focused on accelerating the writing
                of our
                software code, increasing the testing of our application and to support
                the process of signing up additional users for our beta releases.
                Additional staff was also added to support the regulatory and business
                requirements of becoming a public company. These higher staffing
                levels
                resulted in a substantial increase in payroll expenses as the total
                number
                of employees increased from 31 in December 2005 to 60 in December
                2006.




·
            The
                equity-based compensation to consultants increased as we sought advice
                from experts in the technology, business management and investor
                relations
                areas. We also granted warrants to other outside legal, accounting
                investor relations consultants.




·
            Registration
                rights penalty expense increased as we were unable to get the SB-2
                registration statement declared effective per the terms of the
                registration rights agreement. We have accrued the maximum penalties
                allowed under the agreements related to the private placements closed
                in
                August and October 2006 which began accruing on February 16, 2007.




·
            Investor
                relations expenses increased substantially as we traveled to attract
                the
                interest of additional retail and institutional shareholders, both
                domestically and in overseas markets.




·
            After
                the adoption of FAS 123-R in January 2006, the Company began to expense
                its stock option grants to employees. Employee stock options were
                granted
                to reward and to retain all employees, which increased stock-based
                compensation expense, See “Stock Compensation
                Expense.”




·
            Depreciation
                expense increased as we purchased additional computer equipment and
                furniture for our new employees and also acquired servers and other
                computer hardware and software to set up our data center and create
                redundancy.




·
            We
                increased our legal and accounting expenses to meet our reporting
                and
                regulatory requirements as a public company.




·
            To
                shorten our software development cycle we outsourced some of the
                software
                coding, which increased technical outsourcing
                expense.




·
            We
                consulted with experts in software engineering and investor relations
                as
                well as establishing a short-term consulting agreement with our former
                Chief Technology Officer, thus increasing consulting expenses.




·
            We
                moved into a larger office facility to accommodate our expanded headcount
                level and to ensure there was sufficient room available to expand,
                if
                required.




·
            As
                a result of expanded business meeting commitments, travel expenses
                increased on a year-over-year
                basis.




·
            Transaction
                costs paid to Expert Systems, Inc. as part of our reverse acquisition
                were
                expensed in 2006.




20




·
            Our
                recruiting and employee benefits costs increased as a result of our
                expanded staffing levels.




·
            Hosting
                costs increased as a result of expanded band-width requirements at
                our
                data center to accommodate an increased number of
                users.




·
            Marketing
                and promotion expenses increased as we expanded public relations
                expenditures to increase the awareness of Foldera, Inc. and the product
                offering in the messaging and collaboration software
                marketplace.




**Stock
      Compensation Expense**





We
      adopted SFAS No. 123-R effective January 1, 2006 using the modified
      prospective method. Under this transition method, stock compensation expense
      recognized during the year ended 2006 includes compensation expense for all
      stock-based compensation awards granted on or after January 1, 2006, based
      on the grant-date fair value estimated in accordance with the provisions of
      SFAS
      No. 123-R. There were no stock-based awards outstanding as of December 31,
      2005.





Prior
      to
      January 1, 2006, we measured stock compensation expense using the intrinsic
      value method of accounting in accordance with Accounting Principles Board
      (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and
      related interpretations (“APB No. 25”). Thus, expense was generally not
      recognized for the Company’s employee stock option and purchase plans.





Stock
      compensation expense measured in accordance with SFAS No. 123-R totaled
      approximately $545,273, or $(0.01) per basic and fully diluted share for the
      year ended December 31, 2006. The adoption of SFAS No. 123-R resulted in
      increased expense of approximately $545,273 as compared to the stock
      compensation expense that would have been recorded pursuant to APB No. 25.
      During the year ended December 31 2005, no expense was recorded as we did not
      have any stock options awarded during that period.




21




**Net
      Loss.** Our
      net
      loss for the year ended December 31, 2006 increased to $11,117,316 or $(0.11)
      per share, from $3,081,878 or $(0.05) per share, for the year ended December
      31,
      2005. The overall increase in net loss of $8,035,438, or approximately 261%
      over
      the prior year period, is primarily due to increases in payroll, equity-based
      compensation to consultants, registration rights penalties, employee options
      expense, investor relations, depreciation, legal, technical outsourcing, rent,
      travel expenses, recruiting, hosting and insurance expenses.




**Assets.** Assets
      increased by $2,086,211 to $7,859,093 as of December 31, 2006, or approximately
      36%, from $5,772,882 as of December 31, 2005. This increase was due primarily
      to
      the increase in cash and cash equivalents by $941,311 to $5,767,356 from
      $4,826,045 or up 20% as we completed three rounds of private placement
      offerings, the $897,861 increase in fixed assets to $1,691,606 or up 113% from
      $793,745 as we purchased additional computer equipment and furniture for our
      new
      employees and also acquired servers and other computer hardware and software
      to
      set up our data center and to create redundancy and the $241,910 increase in
      prepaid expenses and other current assets to $298,745 or up 426% from $56,835
      as
      we paid rent, equipment leases, investor relations in advance.




**Liabilities.** Total
      liabilities increased by $1,207,406 to $1,872,201 as of December 31, 2006,
      or
      approximately 182%, from $664,795 as of December 31, 2005. The increase was
      due
      primarily to an increase of $431,215 to $886,397 or 95% from $455,215 as of
      December 31, 2005 in accounts payable, accrued expenses and payroll-related
      expenses as we expanded our operations, registration rights penalties increased
      by $450,000 to $450,000 during 2006 as compared to zero in 2005 and shares
      to be
      issued to penalty shares increased by $326,657 to $326,657 during 2006 as
      compared to zero in 2005.




**Stockholders’
      Equity.** Stockholders’
      equity increased by $878,805 to $5,986,892 as of December 31, 2006, or
      approximately 17% from $5,108,087 as of December 31, 2005. The increase was
      due
      primarily to increased financing activity that more than offset a net loss
      during the year ended December 31, 2006.




**Liquidity
      and Capital Resources**




**General.** Overall,
      we had an increase in cash flows of $941,311 for the year ended December 31,
      2006 resulting from $7,455,868 cash used in operating activities, $1,296,485
      of
      cash used in investing activities, offset by $9,693,664 of cash provided by
      our
      financing activities. At December 31, 2006 our cash balance was $5,767,356
      as
      compared to $4,826,045 for the prior year, an increase of $941,311 or 20%.
      The
      cash provided from our financing activities was primarily due to the $9,787,730,
      net of offering cost, raised from three private placement offerings during
      2006.





**Cash
      Flows from Operating Activities.** Net
      cash
      used in operating activities of $7,455,868 for the year ended December 31,
      2006
      was primarily attributable to a net loss of $11,117,316, the adjustments to
      reconcile the net loss to net cash, including depreciation and amortization
      expense of $520,906, the issuance of warrants, stock options and stock for
      services of $1,634,440, employee options expense of $545,273, registration
      rights penalties of $450,000 and an increase in accounts payable and accrued
      expenses of $431,211 offset by an increase in prepaid expenses of $241,910
      and
      deposits of $5,129.





**Cash
      Flows from Investing Activities.** Net
      cash
      used in investing activities of $1,296,485 for the year ended December 31,
      2006
      was primarily attributable to an investment in fixed assets.




**Cash
      Flows from Financing Activities.** Net
      cash
      of $9,693,664 generated in financing activities in the year ended December
      31,
      2006 was primarily due to the issuance of shares for cash of $9,787,730 and
      receipts from exercise of warrants of $554,646, offset by $524,858 paid for
      raising capital, the $121,854 payment for leased equipment and a $2,000 payment
      made to a related party.




**Financing.** In
      the
      year ended December 31, 2006, we had no revenue to fund our daily operations.
      Therefore, we may be required to seek additional funds either through debt
      or
      equity financing to fund our operating activities. Failure to raise additional
      funds could have a material adverse effect on our long-term operations and
      viability.





**Internal
      Sources of Liquidity.** There
      is
      no assurance that funds from our operations, if and when they commence, will
      meet the requirements of our daily operations in the future. In the event that
      funds from our operations are insufficient to meet our operating requirements,
      we will need to seek other sources of financing to maintain liquidity.




22


**External
      Sources of Liquidity.** We
      will
      actively pursue all potential financing options as we look to secure additional
      funds to both stabilize and grow our business operations. Our management will
      review any financing options at their disposal and will judge each potential
      source of funds on its individual merits. We cannot assure you that we will
      be
      able to secure additional funds from debt or equity financing, as and when
      we
      need to or if we can, that the terms of such financing will be favorable to
      us
      or our existing shareholders.





During
      the year ended December 31, 2006, we issued 23,517,476 shares and 424,567 are
      to
      be issued as compared to zero shares were issued or were to be issued during
      the
      year ended December 31, 2005, respectively.





As
      of
      December 31, 2006, we had entered into thirteen capital leases with various
      equipment suppliers in the amount of $404,981, of which $209,148 was outstanding
      as of December 31, 2006.





**Inflation.** Our
      management believes that inflation has not had a material effect on our results
      of operations, and does not expect that it will in fiscal year 2007, except
      that
      rising oil and gas prices may materially and adversely impact the economy
      generally.





**Off-Balance
      Sheet Arrangements.** We
      do not
      have any off-balance sheet arrangements.





**Recent
      Developments**





We
      sold
      4,328,000 shares of our common stock to accredited investors in the second
      private placement offering, and Brookstreet Securities Corporation acted as
      placement agent. The cash proceeds for the issuance of shares, net of offering
      costs of $289,181, amounted to $1,874,819 in the second private placement.
      Following the closing of our second private placement offering in February
      2006,
      we issued five-year warrants to the placement agent to purchase 1,228,860 shares
      of our common stock at a price of $0.25 per share and 2,551,424 shares of our
      common stock at a price of $0.50 per share. The proceeds from the issuance
      of
      the 4,328,000 shares were recorded net of the fair value of the warrants and
      the
      placement agent’s commission and expenses. The
      fair
      value of the warrants was calculated using the Black-Scholes option pricing
      model using the following assumptions: risk free rate of return of 4.5%,
      volatility of 0.001%, dividend yield of 0% and expected life of five
      years.





On
      February 13, 2006, the Company issued 300,000 shares to CFO911 as part of its
      reverse merger and according to the terms of agreement with CFO911, as referred
      to in note 5. These shares have been recorded at fair value of $150,000, which
      is based on the price of shares issued close to the date of services rendered
      and charged to operations.





On
      February 13, 2006, the Company issued 8,559,600 shares of its common stock
      and
      paid transaction costs of $175,000 in cash to Expert Systems Inc., as a result
      of the recapitalization. These shares were recorded at the carrying value of
      net
      assets acquired.





On
      February 13, 2006, the Company issued 3,020,000 warrants at the exercise price
      of $0.50 with a five-year term to two outside service providers for investor
      relations and marketing services. The fair value of the warrants was calculated
      using the Black-Scholes option pricing model using the following assumptions:
      risk free rate of return of 5.0%, volatility of 0.001%, dividend yield of 0%
      and
      expected life of five years. The fair value of the warrants of $330,966 was
      amortized over the life of the service contract. As of December 31, 2006 the
      Company had expensed a total of $198,654 and deferred $132,312.





On
      February 15, 2006, the Company issued 340,000 warrants at the exercise price
      of
      $0.50 with a five-year term to St. George & Carnegie, an outside provider of
      legal services. The fair value of the warrants was calculated using the
      Black-Scholes option pricing model using the following assumptions: risk free
      rate of return of 5.0%, volatility of 0.001%, dividend yield of 0% and expected
      life of five years. The fair value of the warrants of $186,011 has been expensed
      in the year ended December 31, 2006.





On
      May
      30, 2006, Day and Campbell, an outside provider of legal services, exercised
      40,000 warrants at an exercise price of $0.25 per share.




23





On
      June
      19, 2006, the Company issued 300,000 shares of common stock to our Chief
      Technology Evangelist and consultant for achieving an agreed upon milestone,
      as
      referred to in note 5. These shares were recorded at the fair market value
      of
      $882,000, which is based on the price of our stock on the date, June 15, the
      milestone was achieved and charged to operations.





On
      June
      30, 2006, the Company issued 40,000 shares of common stock to Joseph McCann,
      an
      outside business advisor, as compensation for service provided. These shares
      were recorded at the fair market value of $85,600, which is based on the price
      of our stock on the date of services were rendered and charged to
      operations.





On
      August
      8, 2006, the Company issued 4,000 shares to Ms. M. Garcia. Funds from Ms. Garcia
      had previously been received by the Company.





On
      August
      16, 2006, we completed the initial closing of a private placement to accredited
      investors of approximately 1,235,144 shares of our common stock, at a purchase
      price of $2.25 per share, for gross proceeds of $2,779,074.25. As part of the
      private placement, the investors were issued three-year warrants to purchase
      up
      to an aggregate of 617,572 shares of our common stock, at an initial exercise
      price of $2.25. As an inducement to the investors to complete the initial
      closing of the private placement, on or about August 14, 2006, we entered into
      an oral agreement with Brookstreet Securities Corporation (“Brookstreet”), the
      exclusive placement agent for the private placement, to provide to the investors
      price-protection for any equity issuances within three months of the final
      closing of the private placement. Pursuant to this price-protection commitment,
      we agreed that if we issued any additional equity securities for less than
      $2.25
      per share (an “Additional Issuance”) within three months of the final closing of
      the private placement, the investors would receive additional shares of our
      common stock and additional warrants to purchase shares of our common stock,
      and
      the exercise price of the investors’ outstanding warrants to purchase shares of
      our common stock would be reduced, as if such investors had originally
      participated in such Additional Issuance.





Subsequent
      closings of this private placement (the “August 2006 private placement”)
      occurred on August 25, 2006 and August 29, 2006. In the August 2006 private
      placement, we issued an aggregate of 1,957,917 shares of our common stock at
      a
      purchase price of $2.25 per share, for gross proceeds of $4,405,315.25, and
      three-year warrants to purchase up to a maximum of 978,959 shares of our common
      stock at an exercise price of $2.25 per share. The net proceeds from the August
      2006 private placement, following the payment of offering-related expenses,
      will
      be used by us for our capital expenditure requirements and for working capital
      and other general corporate purposes. At the closing of the August 2006 private
      placement, we paid Brookstreet cash compensation of 13% of the gross proceeds
      of
      the August 2006 private placement or $572,690 and a three-year warrant to
      purchase 293,687 shares of our common stock at an initial exercise price of
      $2.25 per share. The proceeds from the issuance of the 1,957,917 shares were
      recorded net of the fair value of the warrants and the placement agent’s
      commission and expenses. The fair value of the warrants was calculated using
      the
      Black-Scholes option pricing model using the following assumptions: risk free
      rate of return of 4.75%, volatility of 73.1% dividend yield of 0% and expected
      life of three years.





On
      October 19, 2006, we completed a private placement to two institutional
      accredited investors of 4,166,667 shares of our common stock at a purchase
      price
      of $1.08 per share, for gross proceeds of $4,500,000, and five-year warrants
      to
      purchase up to an aggregate of 2,083,334 shares of our common stock at an
      initial exercise price of $1.75 per share.





The
      October 2006 private placement constituted an Additional Issuance for purposes
      of our price-protection commitment to the investors who participated in the
      August 2006 private placement. Accordingly, in November 2006 we issued to those
      investors an aggregate of 2,121,079 additional shares of our common stock and
      warrants to purchase an additional 1,060,536 shares of our common stock at
      an
      exercise price of $1.75. We issued 2,121,079 additional shares of our common
      stock because such investors would have received an aggregate of 4,078,996
      shares if the purchase price in the August 2006 private placement was reduced
      from $2.25 per share to $1.08 per share, and we issued warrants to purchase
      an
      additional 1,060,536 shares of our common stock to provide such investors with
      fifty percent (50%) warrant coverage based on the as-adjusted total number
      of
      shares issued in the August 2006 private placement. In addition, we reset the
      exercise price of the outstanding warrants held by those investors from $2.25
      per share to $1.75 per share.





As
      a
      result of the issuance of additional shares of our common stock to the investors
      who participated in the August 2006 private placement at an effective purchase
      price of $1.08 per share, we issued to Brookstreet in November 2006 warrants
      to
      purchase an additional 318,162 shares of our common stock at an exercise price
      of $1.08 per share, and reset the exercise price of the outstanding warrants
      held by Brookstreet from $2.25 per share to $1.08 per share, as required by
      the
      terms of our placement agency agreement with Brookstreet. Pursuant to this
      placement agency agreement, Brookstreet was entitled to receive warrants to
      purchase an aggregate of fifteen percent (15%) of the total number of shares
      issued in the August 2006 private placement at a per share exercise price equal
      to the price per share paid for our shares of common stock in the August 2006
      private placement.




24





The
      proceeds from the issuance of the 4,078,996 shares are recorded net of the
      fair
      value of the warrants and the placement agent’s commission and
      expenses.





On
      August
      24, 2006, Mr. Schmitt, an affiliate of Trilogy Capital Partners, an outside
      investor relations consultant, exercised 25,000 warrants at an exercise price
      of
      $0.50 per share.





On
      September 12, 2006, the Equity Performance Group, an outside investor relations
      consultant, exercised 90,000 warrants at an exercise price of $0.50 per
      share.





On
      October 9, 2006, Mr. Frost, an affiliate of Brookstreet, an outside investor
      relations consultant, exercised 12,600 warrants at an exercise price of $0.50
      per share.





On
      October 13, 2006, Trilogy Capital Partners, an outside investor relations
      consultant, exercised 10,000 warrants at an exercise price of $0.50 per
      share.





On
      October 13, 2006, Mr. Olson, an affiliate of Trilogy Capital Partners, an
      outside investor relations consultant, exercised 70,000 warrants at an exercise
      price of $0.50 per share.





On
      October 13, 2006, Corporate Communications Network, an outside investor
      relations consultant, exercised 30,000 warrants at an exercise price of $0.50
      per share.





On
      October 19, 2006, we completed a private placement to two institutional
      accredited investors of 4,166,667 shares of our common stock, at a purchase
      price of $1.08 per share, for gross proceeds of $4,500,000. The investors were
      Vision Opportunity Master Fund Ltd., which purchased 3,703,704 shares of our
      common stock, and Crescent International Ltd., which purchased 462,963 shares
      of
      our common stock. As part of the private placement, the investors were issued
      five-year series A warrants to purchase up to an aggregate of 2,083,334 shares
      of our common stock, at an initial exercise price of $1.75. As lead investor,
      Vision Opportunity Master Fund Ltd. was also issued two additional warrants:
      (1)
      a six-month series B warrant to purchase up to 3,703,704 shares of our common
      stock, at an initial exercise price of $1.25, and (2) a five-year series C
      warrant to purchase up to 1,851,852 shares of our common stock, at an initial
      exercise price of $2.00.





For
      each
      of the five-year warrants, the holder will be able to exercise the warrant
      on a
      so-called cashless basis at any time following the one-year anniversary of
      the
      closing of the private placement that a registration statement covering the
      shares of our common stock underlying such warrants is not effective. For the
      six-month warrant, the holder will be able to exercise the warrant on a cashless
      basis at any time within the 30-day period prior to the expiration of such
      warrant that a registration statement covering the shares of our common stock
      underlying such warrants is not effective.





The
      net
      proceeds from the private placement, following the payment of offering-related
      expenses, will be used by us for our capital expenditure requirements and for
      working capital and other general corporate purposes. At the closing of the
      private placement, we paid HPC Capital Management Corp., the exclusive placement
      agent for the private placement, cash compensation of 8% of the gross proceeds
      of the private placement and a five-year warrant to purchase up to 416,667
      shares of our common stock, at an initial exercise price of $1.08. At the
      closing of the private placement, we also paid Brookstreet Securities
      Corporation cash compensation of 5% of the gross proceeds of the private
      placement and a five-year warrant to purchase up to 208,334 shares of our common
      stock, at an initial exercise price of $1.08, as required by the terms of our
      placement agency agreement, as amended, with Brookstreet Securities
      Corporation.





Following
      is the summary of warrants issued as part of the October 19, 2006 private
      placement:





**Issued
                to**
            
            **Description**
            
            **Number
                of warrants**
            
            **Exercise 
**Price****Investors
            
            
            Series
              A warrants
            
            
            2,083,333
            
            $
            1.75/shareInvestors
            
            
            Series
              B warrants
            
            
            3,703,704
            
            $
            1.25/shareInvestors
            
            
            Series
              C warrants
            
            
            1,851,852
            
            $
            2.00/shareHPC
            
            
            Agent
              warrants
            
            
            416,667
            
            $
            1.08/shareBrookstreet
              Securities
            
            
            Agent
              warrants
            
            
            208,334
            
            $
            1.08/share





The
      cash
      proceeds for the issuance of shares, net of offering cost of $595,000 amounted
      to $3,905,000 in this private placement round. The proceeds from the issuance
      of
      the 4,166,667 shares were recorded net of the fair value of the warrants and
      the
      placement agent’s commission and expenses. The fair value of the warrants was
      calculated using the Black-Scholes option pricing model using the following
      assumptions:




A
              
              B
              
              CRisk
                free rate of return
              
              
              4.5
              %
              
              4.88
              %
              
              4.5
              %Volatility
              
              
              116
              %
              
              116
              %
              
              116
              %Dividend
                yield
              
              
              0
              %
              
              0
              %
              
              0
              %Expected
                life in years
              
              
              5
              
              
              0.5
              
              
              5




The
      fair
      value of the warrants issued to agents was calculated using the Black-Scholes
      option pricing model using the following assumptions: risk free rate of return
      of 4.5%, volatility of 116% dividend yield of 0% and expected life of five
      years.




On
      October 27, 2006, we issued 80,000 shares of our common stock to the Ibis
      Consulting Group in connection with an investor relations consulting agreement.
      These shares have been recorded at fair value of $118,900, based on the price
      of
      our stock on October 1, 2006, as per the agreement and charged to
      operations.





On
      October 27, 2006, we issued 7,500 shares of our common stock to George Mottel
      as
      a bonus for meeting performance goals. These shares have been recorded at fair
      value of $8,700, which is based on the price of our stock on the date the shares
      were issued and charged to operations.





On
      November 7, 2006, Corporate Communications Network, an outside investor
      relations consultant, exercised 300,000 warrants at an exercise price of $0.50
      per share.





On
      November 9, 2006, a Brookstreet broker requested a cashless exercise of 387,620
      warrants at an exercise price of $0.50 per share. Based on the formula included
      in the agreement the broker received a total of 320,789 shares.





On
      November 10, 2006, Trilogy Capital Partners, an outside investor relations
      consultant, exercised 30,000 warrants at an exercise price of $0.50 per
      share.





On
      November 10, 2006, Mr. Cruz, an affiliate of Trilogy Capital Partners, an
      outside investor relations consultant, exercised 28,000 warrants at an exercise
      price of $0.50 per share.





On
      November 30, 2006, Newport Capital, an affiliate of Corporate Communications
      Network, an outside investor relations consultant, exercised 100,000 warrants
      at
      an exercise price of $0.50 per share.





On
      November 30, 2006, Trilogy Capital Partners, an outside investor relations
      consultant, exercised 70,000 warrants at an exercise price of $0.50 per
      share.





On
      November 30, 2006, Mr. Briggs, an affiliate of Trilogy Capital Partners, an
      outside investor relations consultant, exercised 50,000 warrants at an exercise
      price of $0.50 per share.





On
      December 5, 2006, MBA Holdings, an affiliate of Trilogy Capital Partners, an
      outside investor relations consultant, exercised 25,000 warrants at an exercise
      price of $0.50 per share.





On
      December 12, 2006, a Brookstreet broker exercised 41,704 warrants at an exercise
      price of $0.50 per share.




25





**Recently
      Issued Accounting Pronouncements**




Management
      does not believe that any recently issued, but not yet effective, accounting
      standards, if currently adopted, would have a material effect on the
      accompanying financial statements.




In
      February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
      years beginning after November 15, 2007. Early adoption is permitted subject
      to
      specific requirements outlined in the new Statement. Therefore, calendar-year
      companies may be able to adopt FAS 159 for their first quarter 2007 financial
      statements.





The
      new
      Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. FAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities.





In
      September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit
      Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87,
      88, 106, and 132(R)’ This Statement improves financial reporting by requiring an
      employer to recognize the over funded or under funded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity or changes in unrestricted net assets of a
      not-for-profit organization. This Statement also improves financial reporting
      by
      requiring an employer to measure the funded status of a plan as of the date
      of
      its year-end statement of financial position, with limited exceptions. An
      employer with publicly traded equity securities is required to initially
      recognize the funded status of a defined benefit postretirement plan and to
      provide the required disclosures as of the end of the fiscal year ending after
      December 15, 2006. An employer without publicly traded equity securities is
      required to recognize the funded status of a defined benefit postretirement
      plan
      and to provide the required disclosures as of the end of the fiscal year ending
      after June 15, 2007. However, an employer without publicly traded equity
      securities is required to disclose the following information in the notes to
      financial statements for a fiscal year ending after December 15, 2006, but
      before June 16, 2007, unless it has applied the recognition provisions of this
      Statement in preparing those financial statements:




(a)  A
      brief
      description of the provisions of this Statement




(b)  The
      date
      that adoption is required




(c)  The
      date
      the employer plans to adopt the recognition provisions of this Statement, if
      earlier.




The
      requirement to measure plan assets and benefit obligations as of the date of
      the
      employer’s fiscal yearend statement of financial position is effective for
      fiscal years ending after December 15, 2008. We are currently evaluating the
      effect of this pronouncement on financial statements.





In
      September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP), and expands disclosures about
      fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. We are currently evaluating
      the
      effect of this pronouncement on financial statements.





In
      March
      2006 FASB issued SFAS 156 “Accounting for Servicing of Financial Assets.” This
      Statement amends FASB Statement No. 140, “ Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities,” ** with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. This statement:





(1)
            Requires
                an entity to recognize a servicing asset or servicing liability each
                time
                it undertakes an obligation to service a financial asset by entering
                into
                a servicing contract.




26




(2)
            Requires
                all separately recognized servicing assets and servicing liabilities
                to be
                initially measured at fair value, if practicable.(3)
            Permits
                an entity to choose “Amortization method” or “Fair value measurement
                method” for each class of separately recognized servicing assets and
                servicing liabilities.(4)
            At
                its initial adoption, permits a one-time reclassification of
                available-for-sale securities to trading securities by entities with
                recognized servicing rights, without calling into question the treatment
                of other available-for-sale securities under Statement 115, provided
                that
                the available-for-sale securities are identified in some manner as
                offsetting the entity’s exposure to changes in fair value of servicing
                assets or servicing liabilities that a servicer elects to subsequently
                measure at fair value.(5)
            Requires
                separate presentation of servicing assets and servicing liabilities
                subsequently measured at fair value in the statement of financial
                position
                and additional disclosures for all separately recognized servicing
                assets
                and servicing liabilities.





This
      statement is effective as of the beginning of our first fiscal year that begins
      after September 15, 2006. we believe that this statement will not have a
      significant impact on the financial statements.





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments.” SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities,” and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities.” SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. This statement is effective for all financial instruments acquired
      or issued after the beginning of our first fiscal year that begins after
      September 15, 2006. We believe that this statement will not have a significant
      impact on the financial statements.





In
      July
      2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty
      in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN
      48
      clarifies the accounting and reporting for uncertainties in income tax law.
      This
      interpretation prescribes a comprehensive model for the financial statement
      recognition, measurement, presentation and disclosure of uncertain tax positions
      taken or expected to be taken in income tax returns. This statement is effective
      for fiscal years beginning after December 15, 2006. We are currently in the
      process of evaluating the expected effect of FIN 48 on our results of operations
      and financial position.





**Cautionary
      Language Regarding Forward-Looking Statements and Industry
      Data**




This
      report contains “forward-looking statements” within the meaning of the Private
      Securities Litigation Reform Act of 1995 that involve risks and uncertainties,
      many of which are beyond our control. Our actual results could differ materially
      and adversely from those anticipated in such forward-looking statements as
      a
      result of certain factors, including those set forth in this report. Important
      factors that may cause actual results to differ from projections include, but
      are not limited to, for example:




·
            adverse
                economic conditions,




·
            inability
                to raise sufficient additional capital to operate our
                business,




·
            unexpected
                costs, lower than expected sales and revenues, and operating
                defects,




·
            adverse
                results of any legal proceedings,




·
            the
                volatility of our operating results and financial
                condition,




27




·
            inability
                to attract or retain qualified senior management personnel,
                and




·
            other
                specific risks that may be referred to in this
                report.




All
      statements, other than statements of historical facts, included in this report
      regarding our strategy, future operations, financial position, estimated revenue
      or losses, projected costs, prospects and plans and objectives of management
      are
      forward-looking statements. When used in this report, the words “will,” “may,”
“believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “plan” and
      similar expressions are intended to identify forward-looking statements,
      although not all forward-looking statements contain such identifying words.
      All
      forward-looking statements speak only as of the date of this report. We
      undertake no obligation to update any forward-looking statements or other
      information contained herein. Stockholders and potential investors should not
      place undue reliance on these forward-looking statements. Although we believe
      that our plans, intentions and expectations reflected in or suggested by the
      forward-looking statements in this report are reasonable, we cannot assure
      stockholders and potential investors that these plans, intentions or
      expectations will be achieved. We disclose important factors that could cause
      our actual results to differ materially from our expectations under “Risk
      Factors” and elsewhere in this report. These cautionary statements qualify all
      forward-looking statements attributable to us or persons acting on our
      behalf.




Information
      regarding market and industry statistics contained in this report is included
      based on information available to us that we believe is accurate. It is
      generally based on academic and other publications that are not produced for
      purposes of securities offerings or economic analysis. Forecasts and other
      forward-looking information obtained from these sources are subject to the
      same
      qualifications and the additional uncertainties accompanying any estimates
      of
      future market size, revenue and market acceptance of products and services.
      We
      have no obligation to update forward-looking information to reflect actual
      results or changes in assumptions or other factors that could affect those
      statements. See “Risk Factors” for a more detailed discussion of uncertainties
      and risks that may have an impact on our future results.




We
      undertake no obligation to publicly update forward-looking statements. You
      are
      advised to carefully read the “Risk Factors” set forth above in this report and
      any further disclosures we make in our Form 10-QSB and 8-K reports to the SEC,
      and our press releases. You should understand that it is not possible to predict
      or identify all factors that may affect future results. Consequently, you should
      not consider the “Risk Factors” set forth in Part II of this 2006 Form 10-KSB to
      be a complete discussion of all potential risks or uncertainties *.*




**ITEM
      7.**  **FINANCIAL
      STATEMENTS** **.**




Our
      audited financial statements for the year ended December 31, 2006, are included
      as a separate section of this Annual Report beginning on page F-1.




28




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




We
      have
      had no disagreements on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope or procedures with any of
      our
      accountants for the years ended December 31, 2006 and 2005. Effective February
      13, 2006, Bagell, Josephs, Levine & Company, L.L.C. was dismissed as our
      independent auditor. Together with the dismissal of Bagell, Josephs, Levine
      & Company, L.L.C., our board of directors approved the engagement of Kabani
& Company, Inc. as our independent registered public accounting firm for the
      fiscal year ended December 31, 2006, effective February 13, 2006.




**ITEM
      8A.**  **CONTROLS
      AND PROCEDURES** **.**




As
      of
      December 31, 2006, and within 90 days prior to the date of this Annual Report,
      we evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures (as defined in Exchange Act Rule 13a-14(c)), under
      the supervision and with the participation of our management, including our
      chief executive officer and chief financial officer. Based upon this evaluation,
      our chief executive officer and our chief financial officer concluded that
      there
      was no reasonably apparent deficiency in our disclosure controls and procedures
      such that the controls and procedures should not be expected to operate
      effectively. We are not aware of any significant changes in our internal
      controls or in other factors that could significantly affect those controls
      subsequent to the date of the most recent evaluation of such controls by
      us.




**ITEM
      8B.**  **OTHER
      INFORMATION.**




None.




29


**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 table shows the positions held by our board of directors and executive
      officers, and their ages as of March 31, 2007:




**Name**
            
            **Age**
            
            **Position**Richard
                Lusk
            
            51
            
            Chief
                Executive Officer, President and DirectorSuyen
                Castellon
            
            33
            
            Secretary
                and DirectorReid
                Dabney
            
            55
            
            Senior
                Vice President and Chief Financial OfficerDaniel
                O’Shea
            
            24
            
            Senior
                Vice President and Chief Technology OfficerOliver
                Starr
            
            38
            
            Senior
                Vice President and Chief Mobility OfficerDavid
                Madison
            
            49
            
            Senior
                Vice President - Product StrategyJ.
                Michael Arrington
            
            36
            
            DirectorSimon
                J. Aspinall
            
            39
            
            DirectorDanilo
                Cacciamatta
            
            61
            
            Director








The
      principal occupations for the past five years (and, in some instances, for
      prior
      years) of each of our directors and executive officers are as
      follows:




**Richard
      Lusk** became a
      member of our board in February 2006. He
      founded Foldera in December 2001 with a vision to create an on-demand
      Information Organizer that would replace traditional enterprise software
      technology like Outlook and Lotus Notes. Mr. Lusk is now regarded as the leader
      of what he has termed “Organization 2.0,” the growing belief that your work
      should be organized automatically while you work. Under Mr. Lusk’s direction, we
      have grown from a ground-breaking idea into a publicly-traded company that
      is
      among the technology leaders in on-demand information management. Mr. Lusk
      is
      internationally recognized as one of the preeminent thinkers in information
      organization technology. Prior to founding Foldera, Mr. Lusk was a founding
      shareholder of Predictive Technologies and Oanda.com, the leading foreign
      exchange rate website which services 13,000 customers, including AOL, AMEX,
      Microsoft, FedEx and Travelocity. Before Oanda.com, he was a founding
      shareholder of Platform Technologies, a leading developer of online trading
      solutions. Mr. Lusk is a frequent speaker at industry conferences including
      ETech and the Collaborative Technology Conference.




**Suyen
      Castellon**  became
      a
      member of our board in February 2006. She
      was a
      director and secretary of Taskport since its inception in 2001. Prior to
      Taskport, Ms. Castellon was an administrative assistant to the Chief Executive
      Officer at Custom Branded Networks, from January 1996 to April 2001. Suyen
      Castellon is married to Richard Lusk, our Chief Executive Officer, President
      and
      Director.




**Reid
      Dabney** ****** became
      our Senior Vice President and Chief Executive Officer in February 2006. Mr.
      Dabney was Taskport’s Chief Financial Officer since March 2005. Since July 2003,
      Mr. Dabney has been engaged by CFO911 as a business and financial consultant.
      During the same period, Mr. Dabney also served as Vice President of National
      Securities, a broker-dealer firm specializing in raising equity for private
      operating businesses that have agreed to become a public company through a
      reverse merger transaction with a publicly traded shell company. From June
      2002
      to January 2003, Mr. Dabney was the chief financial officer of House Ear
      Institute in Los Angeles, California, from March 2001 to June 2002, he was
      senior vice president of Gerard Klauer Mattison, a New York based broker-dealer
      firm and from January 2000 to March 2001, he was the senior vice president
      of
      Ladenburg Thalmann, a broker-dealer firm. Mr. Dabney received a B.A. degree
      from
      Claremont McKenna College and an M.B.A. in Finance from the University of
      Pennsylvania’s Wharton School.




30




**Daniel
      O’Shea**  became
      our Senior Vice President and Chief Technology Officer in February 2006. He
      was
      Taskport’s Chief Information Architect and the Senior Engineer of GUI
      Development since joining Taskport in December 2001. As a founding member,
      Mr.
      O’Shea was the first developer to join our development team, bringing his
      expertise in Human-Computer Interaction and Application Usability Engineering.
      From our inception, he has been an instrumental contributor in the design,
      architecture and implementation of the Foldera application. Mr. O’Shea has also
      played a key role in the development of corporate policy and procedure, making
      application development far more efficient. As an independent technology
      consultant, he worked with large clients such as Mercedes-Benz, as well as
      a
      variety of small and medium-sized businesses. Mr. O’Shea also provides practical
      experience in effective web application development, as well as essential skills
      in building and managing software development teams.




**Oliver
      Starr** became
      our Senior Vice President, Chief Mobility Officer and Corporate Blogger in
      February 2006. From December 2005 to the present Mr. Starr has been the editor
      of MobileCrunch, a TechCrunch Network blog, or online journal, that is devoted
      to mobility and mobile applications, and is generally accepted to be the largest
      blog in the world, by readership, that is focused on mobile applications.
      TechCrunch Networks is comprised of a number of technology-oriented blogs.
      From
      1995 to the present, Mr. Starr has also served as the Chief Executive Officer
      of
      Supplement Facts, Inc., a company he founded, that provides product development
      and regulatory consulting services to the dietary supplement industry. Mr.
      Starr
      also founded and served as the Chief Technology Officer for Hello, Inc., a
      value-added reseller of telecommunications services and provider of management
      services, from May 2003 to December 2006. From June 2005 to December 2005 Mr.
      Starr was an Executive in Residence with Angel Strategies, LLC, a boutique
      investment capital organization with $300 million under management. From July
      1,
      2002 to July 1, 2005 he was the Chief Executive Officer and Chief Information
      Officer of Avastar, Inc, a marketing/distribution company.




**David
      Madison** became
      our Senior Vice President of Product Strategy in August 2006. For the past
      14
      years, Mr. Madison has held increasingly senior positions at Microsoft
      Corporation, most recently operating as Senior Product Manager for the company’s
      Information Worker Collaboration Team, which was responsible for the analysis
      of
      several competitor’s collaboration products. Prior to this position, Mr. Madison
      was the Lead Program Manager for Microsoft’s Exchange Customer Experience Team.
      Mr. Madison also held Product Manager and Senior Support Engineer positions
      earlier in his tenure at Microsoft.




**J.
      Michael Arrington** became a
      Director in June 2006. Mr. Arrington is the author of a popular and influential
      Web 2.0 Technology Blog called TechCrunch, which he has operated since June
      11,
      2005. Prior to his involvement with TechCrunch, from July 2004 to June 2005,
      Mr.
      Arrington was a consultant for a number of companies, including Verisign, Inc.,
      Fatlens and SnapNames. Prior to that, from December 2003 to July 2004, Mr.
      Arrington was the Chief Executive Officer of Pool.com, Inc., a company that
      arranges the buying and selling of web domains. Prior to that, from September
      2002 to December 2003, he served as Chief Operating Officer of RazorGator,
      Inc.,
      a leading secondary ticketing distributor. Prior to that, Mr. Arrington was
      an
      independent consultant from December 2001 to September 2002, and, from June
      2001
      to December 2001 he served as Vice President, Operations for London-based Global
      Name Registry Ltd., with responsibility for the sales, marketing, business
      development, product and legal groups. Mr. Arrington received a B.A. degree
      from
      Claremont McKenna College and a J.D. degree from Stanford Law
      School.




**Simon
      J. Aspinall**  became
      a
      Director in December 2006. Mr. Aspinall has been employed by Cisco Systems,
      Inc.
      for more than the past five years. He is currently the Senior Director of the
      Cisco Internet Business Solutions Group (IBSG) Mobile organization worldwide,
      where he leads a team that is responsible for driving, identifying and
      developing new business opportunities with mobile operators, linking the mobile,
      service provider and business sectors. Since its inception, the IBSG Mobile
      team
      has built relationships with 80 percent of the leading operators in the U.S.,
      Europe, and Asia-Pacific. Mr. Aspinall has held a number of senior management
      roles at Cisco, leading the European field operations team with responsibility
      for new business solutions, Cisco Powered Networks marketing, service
      consulting, business consulting and market intelligence for the European
      telecommunications business. Before Cisco, Mr. Aspinall spent eight years at
      Mercer Management Consulting, a firm providing management, financial and
      marketing consultancy to the worldwide telecommunications sector. He was also
      the founder and non-executive director of an Internet incubator with operations
      in five countries. He holds an M.B.A. (Insead) and a master’s degree in
      engineering and computing science from Oxford University.




**Danilo
      Cacciamatta** became a
      director in December 2006. Mr. Cacciamatta has been the Chief Executive Officer
      of Cacciamatta Accountancy Corporation, a Public Company Accounting Oversight
      Board registered firm, for more than the past five years. Prior to forming
      that
      firm, Mr. Cacciamatta was employed by KPMG Peat Marwick from 1972 to 1988 in
      a
      variety of positions, including audit partner from 1980 to 1988. Mr. Cacciamatta
      has served as a Director of California First National Bancorp since June 2001
      and is a member of the American Institute of Certified Public Accountants and
      the California Society of Certified Public Accountants. Mr. Cacciamatta received
      a B.A. degree from Pomona College and an M.B.A. degree from the University
      of
      California at Riverside.




31




There
      are
      no family relationships among our directors and executive officers, except
      that
      Richard Lusk and Suyen Castellon are husband and wife. No director or executive
      officer has been a director or executive officer of any business which has
      filed
      a bankruptcy petition or had a bankruptcy petition filed against it. No director
      or executive officer has been convicted of a criminal offense or is
      the subject of a pending criminal proceeding. No director or executive officer
      has been the subject of any order, judgment or decree of any court permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities. No
      director or officer has been found by a court to have violated a federal or
      state securities or commodities law.




Each
      director holds office until our next annual meeting of stockholders or until
      his
      death, resignation or removal, if earlier.




**Committees
      of the Board**




**Audit
      Committee** .
      We
      established an audit committee in December 2006, comprised of Danilo Cacciamatta
      (chairman) and Simon J. Aspinall, as specified in Section 3(a)(58)(B) of the
      Securities Exchange Act. Each of Messrs. Cacciamatta and Aspinall are
“independent” under the rules of the Nasdaq Stock Market and Rule 10A-3(b)(1)
      under the Securities Exchange Act, and Mr. Cacciamatta qualifies as an “audit
      committee financial expert” under the requirements of the SEC. The audit
      committee functions pursuant to a written charter adopted by the board or
      directors. The audit committee has such powers as may be assigned to it by
      the
      board of directors from time to time. The audit committee is charged with,
      among
      other things:




·
            recommending
                to the board of directors the engagement or discharge of our independent
                public accountants, including pre-approving all audit and non-audit
                related services;




·
            the
                appointment, compensation, retention and oversight of the work of
                the
                independent auditor engaged by us for the purpose of preparing or
                issuing
                an audit report or performing other audit review or attest services
                for
                us;




·
            establishing
                procedures for the receipt, retention and treatment of complaints
                received
                by us regarding accounting, internal accounting controls or auditing
                matters and for the confidential, anonymous submission by our employees
                of
                concerns regarding questionable accounting or auditing matters;




·
            approving
                the scope of the financial audit;




·
            requiring
                the rotation of the lead audit partner;




·
            consulting
                regarding the completeness of our financial statements;




·
            reviewing
                changes in accounting principles;




·
            reviewing
                the audit plan and results of the auditing engagement with our independent
                auditors and with our officers;




·
            reviewing
                with our officers, the scope and nature and adequacy of our internal
                accounting and other internal controls over financial reporting and
                disclosure controls and procedures;




·
            reviewing
                the adequacy of the audit committee charter at least annually;




32


·
            meeting
                with our internal auditor on a regular basis;




·
            performing
                an internal evaluation of the audit committee on an annual basis;
                and




·
            reporting
                to the board of directors on the audit committee's activities, conclusions
                and recommendations.




**Compensation
      Committee.** We
      established a compensation committee in December 2006, comprised of Simon J.
      Aspinall (chairman), J. Michael Arrington and Danilo Cacciamatta. The
      compensation committee functions pursuant to a written charter adopted by the
      board of directors. The compensation committee has such powers as may be
      assigned to it by the board of directors from time to time. It is charged with,
      among other things, assisting the board of directors in:




·
            approving
                and evaluating the compensation of directors and executive officers;




·
            establishing
                strategies and compensation policies and programs for employees to
                provide
                incentives for delivery of value to our shareholders;




·
            establishing
                policies to hire and retain senior executives, with the objective
                of
                aligning the compensation of senior management with our business
                and the
                interests of our shareholders;




·
            together
                with management, surveying the amount and types of executive compensation
                paid by comparable companies, and engaging consultants as necessary
                to
                assist them;




·
            periodically
                reviewing corporate goals and objectives relevant to executive
                compensation and making recommendations to the board of directors
                for
                changes;




·
            assisting
                management in evaluating each executive officer's performance in
                light of
                corporate goals and objectives, and recommending to the board of
                directors
                (for approval by the independent directors) the executive officers'
                compensation levels based on this evaluation;




·
            overseeing
                our stock option plan or other stock-based plans with respect to
                our
                executive officers and employee board members, who are subject to
                the
                short-swing profit restrictions of Section 16 of the Securities Exchange
                Act of 1934, as amended;




·
            reviewing
                the overall performance of our employee benefit plans and making
                recommendations to the board regarding incentive-compensation plans
                and
                equity-based plans;




·
            together
                with the full board of directors, reviewing and making recommendations
                to
                the independent directors of the board regarding the form and amount
                of
                director compensation;




·
            ensuring
                that our compensation policies meet or exceed all legal and regulatory
                requirements and any other requirements imposed on us by the board;
                and




·
            producing
                an annual report on executive compensation for inclusion in our proxy
                statement.




In
      general, the compensation committee will formulate and recommend compensation
      policies for board approval, oversee and implement these board-approved
      policies, and keep the board apprised of its activities on a regular basis.
      In
      addition, the compensation committee, together with the full board, will develop
      criteria to assist the board's assessment of the Chief Executive Officer's
      leadership of our company.




**Nominations
      and Corporate Governance Committee.** We
      established a nominations and corporate governance committee in December 2006,
      comprised of J. Michael Arrington, chairman and sole member. The nominations
      and
      corporate governance committee functions pursuant to a written charter adopted
      by the board of directors. The nominations and corporate governance committee
      has such powers as may be assigned to it by the board of directors from time
      to
      time. It is charged with, among other things, assisting the board of directors
      in:  ·
              establishing
                  criteria for the selection of new
                  directors;




33




·
            establishing
                criteria for the selection of new
                directors;




·
            considering
                stockholder proposals of director
                nominations;




·
            committee
                selection and composition;




·
            considering
                the adequacy of our corporate
                governance;




·
            overseeing
                and approving management continuity planning processes;
                and




·
            reporting
                regularly to the board with respect to the committee’s
                duties.




**Director
      Independence**





Each
      of
      J. Michael Arrington, Simon J. Aspinall and Danilo Cacciamatta is an
“independent” director, under the rules of the Nasdaq Stock Market and Rule
      10A-3(b)(1) under the Securities Exchange Act of 1934. Commencing December
      2006,
      Mr. Cacciamatta has served as the chairman of the board’s audit committee and a
      member of the compensation committee, Mr. Aspinall has served as the chairman
      of
      the compensation committee and a member of the audit committee, and Mr.
      Arrington has served as the chairman of the nominations and corporate governance
      committee and a member of the compensation committee. The board of directors
      did
      not consider any transaction, relationship or arrangement not otherwise
      disclosed above in this Item 12 under the heading Related Transactions in
      determining the independence of Messrs. Arrington, Aspinall or
      Cacciamatta.




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




We
      do not
      have securities registered under Section 12 of the Exchange Act and,
      accordingly, our directors, executive officers and affiliates are not required
      to file reports under Section 16(a) of the Exchange Act.





**Code
      of Ethics**




Our
      board
      of directors has adopted a code of ethics, which applies to all our directors,
      officers and employees. Our code of ethics is intended to comply with the
      requirements of Item 406 of Regulation S-B.





Our
      code
      of ethics is posted on our Internet website at www.foldera.com. We will provide
      our code of ethics in print without charge to any stockholder who makes a
      written request to: Chief Financial Officer, Foldera, Inc., 17011 Beach
      Boulevard, Suite 1500, Huntington Beach, California 92647. Any waivers of the
      application, and any amendments to, our code of ethics must be made by our
      board
      of directors. Any waivers of, and any amendments to, our code of ethics will
      be
      disclosed promptly on our Internet website, www.foldera.com.




**ITEM
      10. EXECUTIVE COMPENSATION.**




The
      following table sets forth, for the most recent fiscal year, all cash
      compensation paid, distributed or accrued for services, including salary and
      bonus amounts, rendered to us by our Chief Executive Officer and two other
      executive officers in such year who received or are entitled to receive
      remuneration in excess of $100,000 during the stated period and any individuals
      for whom disclosure would have been made in this table but for the fact that
      the
      individual was not serving as an executive officer as at December 31,
      2006:




34





**Summary
      Compensation Table**







Name
                and Principal Position
            
            Year
            
            Salary
              ($)
            
            Bonus
              ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensa-tion ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compen-sation ($)
            
            Total
                ($)Richard
                Lusk, CEO
            
            
            2006
            
            
            254,819
            
            
            0
            
            
            0
            
            
            77,084
            
            
            0
            
            
            0
            
            
            0
            
            
            331,903Daniel
                O’Shea, SVP
            
            
            2006
            
            
            151,745
            
            
            0
            
            
            0
            
            
            108,460
            
            
            0
            
            
            0
            
            
            0
            
            
            260,205Reid
                Dabney, CFO
            
            
            2006
            
            
            146,845
            
            
            0
            
            
            0
            
            
            40,673
            
            
            0
            
            
            0
            
            
            0
            
            
            187,518Jean-Pierre
                Poveda
            
            
            2006
            
            
            88,858
            
            
            0
            
            
            0
            
            
            68,501
            
            
            0
            
            
            0
            
            
            87,500
            
            
            244,859







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




Option
                Awards
            
            Stock
                AwardsName
            
            Number
              of
              Securities
                Underlying Unexercised Options
              (#)
              Exercisable
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              Unexercisable
            
            Equity
                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: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              ($)Richard
                Lusk, CEO
            
            
            844,441
            
            
            755,559
            
            
            0
            
            
            0.55
            
            
            2/12/2016
            
            
            0
            
            
            0
            
            
            0
            
            
            0Daniel
                O’Shea, SVP
            
            
            844,441
            
            
            755,559
            
            
            0
            
            
            0.50
            
            
            2/12/2016
            
            
            0
            
            
            0
            
            
            0
            
            
            0Reid
                Dabney, CFO
            
            
            316,669
            
            
            283,331
            
            
            0
            
            
            0.50
            
            
            2/12/2016
            
            
            0
            
            
            0
            
            
            0
            
            
            0Jean-Pierre
                Poveda
            
            
            533,333
            
            
            0
            
            
            0
            
            
            0.50
            
            
            N/A
            
            
            0
            
            
            0
            
            
            0
            
            
            0





**Employment
      Agreements**




There
      are
      no employment agreements for any of the named executive officers.




35




**2005
      Stock Option Plan**




Our
      2005
      Stock Option Plan was approved by a written consent of the holders of a majority
      of our outstanding common stock. In connection with our 2006 reverse merger
      transaction, Expert Systems adopted and assumed all of Taskport’s obligations
      under its 2005 Stock Option Plan. As of December 31, 2006, there were
      outstanding stock options to purchase 7,741,668 shares of our common stock.





We
      adopted and our stockholders approved our 2005 Stock Option Plan prior to the
      2006 reverse merger transaction to become effective on September 1, 2005. The
      2005 Plan provides that our Board of Directors, or a Committee thereof, may
      grant incentive stock options (“ISOs”) and non-qualified stock options (“NQSOs”)
      to selected employees, directors and consultants of the Company, its parents
      or
      subsidiaries to purchase our common stock.





**Share
      Reserve.** The
      aggregate number of shares of common stock that may be issued pursuant to
      options granted under the 2005 Plan is 12,000,000 shares. As of the date hereof,
      8,900,000 shares of common stock have been issued under the 2005 Plan, 7,741,668
      shares of common stock are covered by outstanding awards and 4,258,332 are
      available for issuance and not covered by outstanding awards.





**Administration.** Our
      Board of Directors will administer the 2005 Plan. The Board of Directors may
      delegate authority to administer the 2005 Plan to a committee. Subject to the
      terms of the 2005 Plan, the plan administrator determines the persons to receive
      option grants, the grant dates, the numbers and the types of options to be
      granted and the terms and conditions of the options, including the period of
      their exercisability and vesting. Subject to the limitations set forth below,
      the plan administrator will also determine the exercise price of options granted
      and have the ability to modify and amend each option and the 2005 Plan. The
      plan
      administrator shall also construe and interpret the terms of the 2005 Plan.





**Exercisability
      of Option Grants.** All
      stock options are evidenced by a stock option agreement. The plan administrator
      determines the exercise price for a NQSO, provided that such options cannot
      have
      an exercise price below 85% of the fair market value of our common stock on
      the
      date such options are granted. An ISO granted under the 2005 Plan cannot have
      an
      exercise price below the fair market value of our common stock on the grant
      date
      of the option. However, when an optionee holds more than 10% of the voting
      power
      of all classes of our stock or any parent or subsidiary stock, the exercise
      price of NQSOs and ISOs cannot be less than 110% of the fair market value of
      our
      common stock on the date of grant.





**Exercise
      Price of Options.** Generally, NQSOs and ISOs granted under the 2005 Plan become exercisable at
      a
      rate no less than 20% per year over five years from the date of grant and the
      term of the option can be no more than ten years from the date of grant.
      However, option grants to officers, directors and consultants can become
      exercisable at a slower rate. Additionally, when an optionee holds more than
      10%
      of the voting power of all classes of our stock or any parent or subsidiary
      stock, ISOs granted under the 2005 Plan to the optionee cannot be exercised
      later than the fifth anniversary date of the date of grant. ISOs granted under
      the 2005 Plan to any optionee which become exercisable for the first time in
      any
      one calendar year with an aggregate fair market value, as of the respective
      date
      or dates of grant, of more than $100,000, shall be treated as
      NQSOs.





**Post-Termination
      Exercise Period.** The plan
      administrator determines the term of NQSOs and ISOs granted under the 2005
      Plan.
      If an optionee’s service relationship with us, or any parent or subsidiary of
      ours, ceases due to disability or death, the optionee, or his or her
      beneficiary, may exercise any vested options for 12 months in the event of
      disability or death, after the date such service relationship ends, unless
      the
      terms of an optionee’s option agreement provides for a shorter or longer period
      (though the exercise period may not be less than six months). If an optionee’s
      relationship with us, or any affiliate of ours, ceases for any reason other
      than
      disability or death, the optionee may exercise any vested options for 3 months
      from cessation of service, unless the terms of the stock option agreement
      provide for earlier or later termination (though the exercise period may not
      be
      less than thirty days). Notwithstanding the foregoing, an option cannot be
      exercised at a date later than the expiration of the term of such option, as
      set
      forth in the option agreement.




**Consideration.** Acceptable consideration for the purchase of common stock issued upon the
      exercise of an option will be determined by the plan administrator and may
      include cash, check, a promissory note, other shares, consideration received
      by
      us under a cashless exercise program, a reduction in the amount of any Company
      liability to the optionee, any combination of the foregoing methods of payment,
      or such other consideration and method of payment for the issuance of shares
      to
      the extent permitted by law.




36





**Not
      Transferable** .
      Generally, an optionee may not transfer an option other than by will or the
      laws
      of descent and distribution unless the plan administrator provides otherwise.
      However, an optionee may designate a beneficiary who may exercise the option
      following the optionee’s death.





**Changes
      to Capital Structure.** In the
      event we undergo certain changes in our capital structure, such as a stock
      split, the number of shares reserved under the plan and the number of shares
      and
      exercise price or strike price, if applicable, of all outstanding awards will
      be
      appropriately adjusted.





**Changes
      in Control.** In the
      event we merge with or into another corporation or a sale of all or
      substantially all of our assets, all outstanding options under the 2005 Plan
      either will be assumed or substituted for by any surviving or acquiring entity.
      If the surviving or acquiring entity elects not to assume or substitute for
      such
      options, the option will be accelerated so that it is fully vested and
      exercisable and such options will be terminated if not exercised prior to the
      effective date of such corporate transaction.




**Other
      Terms and Conditions of Options.** The plan
      administrator may at any time buy out any and all options previously granted
      for
      cash or shares, based on such terms and conditions as the plan administrator
      may
      establish.




**Compensation
      of Directors**





We
      reimburse our directors for travel and other out-of-pocket expenses incurred
      in
      attending Board meetings. We do not pay cash compensation to our employee
      directors. Our non-employee directors have historically received annual cash
      compensation of $30,000 and have been eligible to receive stock options under
      our 2005 Stock Option Plan. Beginning in January 2007, our independent directors
      have agreed to forego receiving ongoing cash compensation.





The
      table
      below summarizes the compensation that we paid to non-employee directors for
      the
      fiscal year ended December 31, 2006.


**Director
      Compensation**




Name
              (a)
            
            Fees
                Earned or Paid in Cash
              ($)
              (b)
            
            Stock
                Awards
              ($)
              (c)
            
            Option
                Awards
              ($)
              (d)
            
            Non-Equity
                Incentive Plan Compensation
              ($)
              (e)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
              (f)
            
            All
                Other Compensation
              ($)
              (g)
            
            Total
                ($)
              (h)J.
                Michael Arrington
            
            $
            20,000
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            20,000Simon
                J. Aspinall
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Danilo
                Cacciamatta
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -




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




The
      following table sets forth information regarding the number of shares of our
      common stock beneficially owned on March 31, 2007, by:





·
            each
                person who is known by us to beneficially own 5% or more of the
                outstanding shares of our common stock,




37


·
            each
                of our directors and executive officers named in the Summary Compensation
                Table appearing on page 14, and




·
            all
                of our directors and executive officers as a group.




Beneficial
      ownership is determined in accordance with the rules of the SEC and generally
      includes voting or investment power with respect to securities.  Shares of
      our common stock which may be acquired upon exercise of stock options or
      warrants which are currently exercisable or which become exercisable within
      60
      days after the date indicated in the table are deemed beneficially owned by
      the
      optionees.  Subject to any applicable community property laws, the persons
      or entities named in the table above have sole voting and investment power
      with
      respect to all shares indicated as beneficially owned by them.





The
      address of each of the persons listed below is c/o Foldera, Inc., 17011 Beach
      Blvd., Suite 1500, Huntington Beach, California 92647.





**Name
                and Address of Beneficial Owner**
            
            **Number
                of Shares Beneficially Owned**
            
            **Percentage
                of Shares**
              **Beneficially**
              **Owned
                (1)**Richard
                Lusk
            
            
            55,238,210
            
            
            47.8
            %Suyen
                Castellon
            
            
            55,238,210
            
            
            47.8
            %Reid
                Dabney
            
            
            500,003
            
            
            *Daniel
                O’Shea
            
            
            3,158,101
            
            
            2.7
            %Oliver
                Starr
            
            
            144,444
            
            
            *J.
                Michael Arrington
            
            
            —
            
            
            *David
                Madison
            
            
            —
            
            
            *Simon
                Aspinall
            
            
            —
            
            
            *Danilo
                Cacciamatta
            
            
            —
            
            
            *All
                directors and executive officers as a group (6 persons)
            
            
            59,040,758
            
            
            51.0
            %





*  Less
      than
      1% of outstanding shares.




(1)  Based
      upon 113,049,548 shares of common stock outstanding on March 31, 2007, as
      calculated in accordance with Rule 13d-3 under the Securities Exchange Act
      of
      1934 and 2,536,102 officer and director stock options vested and in the money
      as
      of February 1, 2007. Unless otherwise indicated, includes shares owned by a
      spouse, minor children, by relatives sharing the same home, and entities owned
      or controlled by the named person. Also includes shares if the named person
      has
      the right to acquire such shares within 60 days of the date of this prospectus
      by the exercise of any right or option. Unless otherwise noted, shares are
      owned
      of record and beneficially by the named person.




**Change
      in Control**




There
      are
      no arrangements currently in effect which may result in our “change in control,”
as that term is defined by the provisions of Item 403(c) of Regulation
      S-B.






38




Equity
      Compensation Plan
      Information




Our
      2005
      Stock Option Plan was approved by a written consent of the holders of a majority
      of our outstanding common stock prior to the reverse merger. In connection
      with
      our reverse merger transaction, Expert Systems adopted and assumed all of
      Taskport’s obligations under its 2005 Stock Option Plan.





As
      of
      December 31, 2006, 12,000,000 shares of common stock are authorized for
      issuance, 7,741,668 of such options shares have been granted with a weighted
      average exercise price of $0.51 per shares and 4,258,332 stock options for
      shares of common stock are available for issuance of stock options available
      for
      future grants under our 2005 Stock Option Plan.





The
      following table provides information as of December 31, 2006, with respect
      to
      the shares of common stock that may be issued under our existing equity
      compensation plan.





**Equity
      Compensation Plan Information**


**Plan
                Category**
            
            **Number
                of shares of common stock to be issued upon exercise of outstanding
                options, warrants and rights**
            
            **Weighted-average
                exercise price of outstanding options, warrants and
                rights**
            
            **Number
                of securities remaining available for future issuance under equity
                compensation plans (excluding securities reflected in the second
                column)**Equity
                compensation plans approved by security holders
            
            
            7,741,668
            
            $
            0.51
            
            
            4,258,332Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            7,741,668
            
            $
            0.51
            
            
            4,258,332




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




**Related
      Transactions**




Taskport
      issued a total of 3,250,000 shares of common stock to Richard Lusk as
      compensation in lieu of cash for his services through December 31, 2005.





In
      March
      2004, Taskport entered into a consulting agreement with Jnan Dash, TI’s Chief
      Technology Evangelist, pursuant to which TI agreed to pay him a fee of $10,000
      per month commencing upon receipt by TI of at least $3,000,000 of financing,
      and
      as part of the agreement issued to Mr. Dash 200,000 shares of common stock
      upon
      commencement of service in 2004, and 200,000 shares upon the beta launch of
      our
      product in November 2004, 300,000 shares upon TI’s receipt of at least
      $3,000,000 of financing in October 2005 and agreed to issue up to an additional
      500,000 shares in increments upon achievement by TI of certain milestones
      pertaining to the successful production launch of the TI service and the receipt
      of subscriptions from 1,000,000 users of the TI service. The agreement may
      be
      terminated at any time by either party. During the year ended December 31,
      2006,
      the Company paid $120,000 to Jnan Dash pursuant to the above agreement and
      on
      June 19, 2006, the Company issued 300,000 shares of common stock upon the
      production launch of our product, as referred to in note 5. These shares were
      recorded at the fair market value of $882,000, which is based on the price
      of
      shares on the date, June 15, 2006, the milestone was achieved.




39





We
      ceased
      paying Mr. Dash the monthly fee as of February 2006 but will issue 200,000
      shares when we reach the final milestone as per the agreement.





In
      March
      2005, Taskport entered into an engagement agreement with CFO911 pursuant to
      which CFO911 agreed to provide services to Taskport including assistance in
      completing Taskport’s business plan and performing due diligence on Taskport’s
      financial projections for reasonableness and accuracy from a financial
      investor’s perspective. We agreed to pay CFO911 a total of $10,000 for these
      services. We also engaged CFO911 to perform other services, including assistance
      in connection with our proposed reverse merger with a company whose shares
      trade
      on the OTC Bulletin Board, for which CFO911 was compensated in cash and received
      300,000 shares of Taskport’s common stock. These shares have been recorded at
      fair value of $150,000, which is based on the price of shares issued close
      to
      the date of services rendered. Reid Dabney, Foldera’s Chief Financial Officer,
      is associated with CFO911.





Reid
      Dabney is the brother of Neil Dabney, who is associated with Brookstreet
      Securities Corporation, the placement agent of our August 2005, February 2006
      and August 2006 private placements. Reid Dabney received no fees or other
      compensation whatsoever in connection with that private placement.





We
      entered into an indemnification agreement with each of our directors and
      officers. The indemnification agreements and our certificate of incorporation
      and bylaws require us to indemnify our directors and officers to the fullest
      extent permitted by Nevada law.





We
      believe that all of the above transactions and arrangements were advantageous
      to
      us and were on terms no less favorable to us than could have been obtained
      from
      unaffiliated third parties. There can be no assurance, however, that future
      transactions or arrangements between us and our affiliates will be advantageous,
      that conflicts of interest will not arise with respect to these transactions
      or
      arrangements, or that if conflicts do arise, they will be resolved in a manner
      favorable to us. Any future transactions will be approved by a majority of
      the
      independent and disinterested members of our board of directors, outside the
      presence of any interested director and, to the extent deemed necessary or
      appropriate by the board of directors, we will obtain fairness opinions or
      stockholder approval in connection with any such transaction.




**ITEM
      13.**  **EXHIBITS** **.** ****




(a)**Exhibits.**




The
      exhibits listed in the following Exhibit Index are filed as part of this Annual
      Report.





**Exhibit****Number**
            
            **Description**2.1
            
            Agreement
                and Plan of Merger, dated February 6, 2006, by and among Expert Systems,
                Inc., EXSI Acquisition Corp and Taskport, Inc. (2)3.1
            
            Certificate
                of Incorporation of Expert Systems, Inc. as filed with the Nevada
                Secretary of State on April 16, 2002 (1)3.2
            
            Certificate
                of Amendment to the Certificate of Incorporation of Expert Systems,
                Inc.
                changing its name to Foldera, Inc. filed with the Nevada Secretary
                of
                State on February 13, 2006 (2)3.3
            
            Certificate
                of Amendment to the Certificate of Incorporation of Foldera, Inc.
                filed
                with the Nevada Secretary of State (3)3.4
            
            By-Laws(1)3.5
            
            Amendment
                to Bylaws (4)4.1
            
            Registration
                Rights Agreement, dated August 15, 2005 (2)4.2
            
            Form
                of Warrant Agreement with Brookstreet Securities Corporation
                (2)4.3
            
            Trilogy
                Capital Warrant Agreement, dated February 13, 2006 (5)4.4
            
            Form
                of Equity Performance Group Warrant, dated February 13, 2006
                (6)4.5
            
            Form
                of Warrant issued to St. George and Carnegie, dated May 31, 2005
                (6)


4.6
            Day
                and Campbell Warrant dated June 2005
                (6)




40




4.7
            Form
                of Warrant (7)10.1
            Form
                of Subscription Agreement (7)10.2
            Form
                of Indemnification Agreement, dated as of April 1, 2006
                (6)10.3
            2005
                Stock Option Plan (4)10.4
            Dash
                Consulting Agreement, dated March 24, 2004 (6)10.5
            CFO911
                Agreement, dated March 7, 2005 (6)14.1
            Code
                of Business Conduct and Ethics (6)14.2
            Code
                of Ethics for CEO and Senior Financial Officers*21.1
            Subsidiaries
                of Foldera, Inc.*31.1
            Certification
                of C.E.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002*31.2
            Certification
                of C.F.O. Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002*32.1
            Certificate
                Pursuant to 18 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley
                Act
                of 2002*99.1
            Audit
                Committee Charter (8)99.2
            Compensation
                Committee Charter (8)99.3
            Nominations
                and Corporate Governance Charter
                (8)





*Filed
      herewith.





(1)  Incorporated
      herein by reference to
      registrant’s (predecessor) filing on Form SB-2 Registration Statement filed on
      September 2, 2004.




(2)  Incorporated
      herein by reference to registrant’s Form 8-K filed on February 13,
      2006.




(3)  Incorporated
      herein by reference to registrant’s Form 8-K filed on May 16, 2006.




(4)  Incorporated
      herein by reference to registrant’s Post-Effective Amendment No. 1 to Form SB-2
      filed on May 10, 2006.




(5)  Incorporated
      herein by reference to registrant’s Form 8-K filed on March 7,
      2006.




(6)  Incorporated
      herein by reference to registrant’s Form 8-K/A filed on April 10,
      2006.




(7)  Incorporated
      herein by reference to registrant’s From 8-K filed on August 22,
      2006.




(8)  Incorporated
      herein by reference to registrant’s Form 8-K filed on December 12,
      2006.






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




**Audit
      Fees**





For
      the
      years ended December 31, 2006 and 2005, we incurred audit fees totaling $57,000
      and $30,000,  respectively,
      payable to Kabani
      & Company, Inc., our
      auditors.




**Audit
        Related Fees**
 
 None
 
 **Tax
        Fees**
 
 For
        the
        years ended December 31, 2006 and 2005, we incurred tax fees totaling $10,000
        (includes tax returns for five years) and zero, respectively, payable to
        Kabani
& Company, Inc.


41








**All
      Other Fees**





For
      the
      years ended December 31, 2006 and 2005, we incurred other fees totaling $21,000
      and zero, respectively, payable to Kabani & Company, Inc., our
      auditors.





**Pre-Approval
      Policy and Procedures**





The
      audit
      committee has adopted policies for the pre-approval of audit and non-audit
      services for the purpose of maintaining the independence of our independent
      auditors. We may not engage our independent auditors to render any audit or
      non-audit service unless either the service is approved in advance by the Audit
      Committee or the engagement to render the service is entered into pursuant
      to
      the Audit Committee’s pre-approval policies and procedures.




42





**SIGNATURES**




In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      the
      Registrant caused this Report to be signed on its behalf by the undersigned,
      thereunto duly authorized.


Dated:
              April 13, 2007
            FOLDERA,
              INCBy:
            /s/ Richard
              LuskRichard
                Lusk
              President,
                Chief Executive Officer and Director
              (principal
                executive officer) By:
            /s/ Reid DabneyReid
                Dabney
              Senior
                Vice President and Chief Financial Officer
              (principal
                financial and accounting officer)





In
      accordance with the Exchange Act, this Report has been signed below by the
      following persons on behalf of the Registrant and in the capacities and on
      the
      dates indicated.









Signature
              
              Title
              
              Date/s/
                  Richard Lusk
                
                Richard
                  Lusk
              
              President,
                  Chief Executive Officer and Director
              
              April
                  13, 2007/s/
                  Suyen Castellon
                
                Suyen
                  Castellon
              
              Secretary
                  and Director
              
              April
                  13, 2007/s/
                  Reid Dabney
                Reid
                  Dabney
              
              Senior
                  Vice President and Chief Financial Officer (principal financial
                  and
                  accounting officer)
              
              April
                  13, 2007/s/
                  J. Michael Arrington
                J.
                  Michael Arrington
              
              Director
              
              April
                  13, 2007/s/
                  Simon J. Aspinall
                Simon
                  J. Aspinall
              
              Director
              
              April
                  13, 2007/s/
                  Danilo Cacciamatta
                Danilo
                  Cacciamatta
              
              Director
              
              April
                  13, 2007


43






Report
      of
      Independent Registered Public Accounting Firm







Board
      of
      Directors and Stockholders of


Foldera
      Inc.


Huntington
      Beach, California





We
      have
      audited the accompanying consolidated balance sheet of Foldera, Inc. as of
      December 31, 2006, and the statements of operations, stockholders' equity
      (deficit), and cash flows for each of the years in the two year period ended
      December 31, 2006 and for the period from December 3, 2001 (inception) to
      December 31, 2006. These financial statements are the responsibility of the
      Company's management. Our responsibility is to express an opinion on these
      financial statements based on our audits.





We
      conducted our audits in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether the financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes assessing the accounting principles used
      and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation. We believe that our audits provide a
      reasonable basis for our opinion.





In
      our
      opinion, the financial statements referred to above present fairly, in all
      material respects, the financial position of Foldera Inc. as of December 31,
      2006, and the results of its operations and its cash flows for each of the
      years
      in the two year period ended December 31, 2006 and for the period from December
      3, 2001 (inception) to December 31, 2006, in conformity with accounting
      principles generally accepted in the United States of America.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company has incurred a significant loss for the year ended
      December 31, 2006 and at December 31, 2005 and for the period from December
      3,
      2001 (inception) to December 31, 2006. Management's plans in regard to these
      matters are also described in Note 2. The financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty.








/s/
      Kabani & Company, Inc.


Certified
      Public Accountants





Los
      Angeles, California


March
      30,
      2007




F-1


**FOLDERA,
                INC.****(A
                Development Stage Company)****Consolidated
                Balance Sheet****As
                of December 31, 2006**




**ASSETS****CURRENT
                ASSETS:**Cash
                & cash equivalents
            
            $
            5,767,356Prepaid
                expenses and other current assets
            
            
            298,745**TOTAL
                CURRENT ASSETS**
            
            
            6,066,101CERTIFICATE
                OF DEPOSIT - RESTRICTED
            
            
            67,059PROPERTY
                AND EQUIPMENT
            
            
            1,691,606SECURITY
                DEPOSIT
            
            
            34,327$
            7,859,093**LIABILITIES
                AND STOCKHOLDERS' EQUITY****CURRENT
                LIABILITIES:**Accounts
                payable and accrued expenses
            
            $
            886,397Registration
                rights liability
            
            
            450,000Shares
                to be issued as penalty shares
            
            
            326,657Current
                portion of capital lease obligations
            
            
            86,680**TOTAL
                CURRENT LIABILITIES**
            
            
            1,749,734CAPITAL
                LEASE OBLIGATIONS, net
            
            
            122,467COMMITMENTS
            
            
            -**STOCKHOLDERS'
                EQUITY:**Common
                stock, $0.001 par value, 250,000,000 shares authorized,110,803,196
                shares issued and outstanding
            
            
            110,803Additional
                paid in capital
            
            
            25,979,161Shares
                to be issued for cash
            
            
            8,334Deferred
                expense - warrants
            
            
            (132,312
            )Deficit
                accumulated during development stage
            
            
            (19,979,094
            )**TOTAL
                STOCKHOLDERS' EQUITY**
            
            
            5,986,892$
            7,859,093




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


F-2




**FOLDERA,
                INC****(A
                Development Stage Company)****Consolidated
                Statements of Operations**






**Cumulative
                from****December
                3, 2001****For
                the Years Ended December 31**
            
            **(inception)****2006**
            
            **2005**
            
            **to
                December**
              **31,
                2006**NET
                SALES
            
            $
            -
            
            $
            -
            
            $
            -**OPERATING
                EXPENSES**General
                and administrative
            
            
            11,265,937
            
            
            3,087,118
            
            
            19,503,463OPERATING
                LOSS
            
            
            (11,265,937
            )
            
            (3,087,118
            )
            
            (19,503,463
            )**OTHER
                INCOME/EXPENSE**Other
                Income
            
            
            (7,158
            )
            
            -
            
            
            (2,666
            )Interest
                income
            
            
            (141,463
            )
            
            (5,240
            )
            
            (146,703
            )TOTAL
                OTHER INCOME
            
            
            (148,621
            )
            
            (5,240
            )
            
            (149,369
            )NET
                LOSS
            
            $
            (11,117,316
            )
            $
            (3,081,878
            )
            $
            (19,354,094
            )NET
                LOSS PER SHARE - BASIC AND DILUTED
            
            $
            (0.11
            )
            $
            (0.05
            )BASIC
                & DILUTED WEIGHTED AVERAGENUMBER
                OF SHARES OUTSTANDING
            
            
            101,257,688
            
            
            65,091,552




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





F-3




**FOLDERA,
                  INC.****(A
                  Development Stage Company)****Consolidated
                  Statements of Stockholders' Equity (Deficit)****For
                  the Period from December 3, 2001 (inception) to December 31,
                  2006**
  Common
                  stock
              
              Additionalpaid
                    in
              
              Sharesto
                    be
              
              Deferred
              
              Deficit
                      accumulated during the development
              
              Total
                      stockholder's equity/Shares
              
              Amount
              
              capital
              
              issued
              
              expenses
              
              stage
              
              (deficit)Balance
                  at inception (December 3, 2001)
              
              
              -
              
              
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -Issuance
                  of founder's share
              
              
              40,480,000
              
              
              40,480
              
              
              (39,468
              )
              
              -
              
              
              -
              
              
              -
              
              
              1,012Issuance
                  of shares for cash
              
              
              1,398,176
              
              
              1,398
              
              
              348,146
              
              
              -
              
              
              -
              
              
              -
              
              
              349,544Issuance
                  of shares to shareholder for acquisition of software
              
              
              2,500,000
              
              
              2,500
              
              
              622,500
              
              
              -
              
              
              -
              
              
              (625,000
              )
              
              -Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (32,120
              )
              
              (32,120
              )Balance
                  at December 31, 2001
              
              
              44,378,176
              
              
              44,378
              
              
              931,178
              
              
              -
              
              
              -
              
              
              (657,120
              )
              
              318,436Issuance
                  of shares for cash
              
              
              2,857,388
              
              
              2,857
              
              
              711,490
              
              
              -
              
              
              -
              
              
              -
              
              
              714,347Issuance
                  of shares for compensation
              
              
              1,000,000
              
              
              1,000
              
              
              249,000
              
              
              -
              
              
              -
              
              
              -
              
              
              250,000Shares
                  to be issued
              
              
              -
              
              
              -
              
              
              -
              
              
              101,212
              
              
              
              
              
              -
              
              
              101,212Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,397,155
              )
              
              (1,397,155
              )Balance
                  at December 31, 2002
              
              
              48,235,564
              
              
              48,236
              
              
              1,891,667
              
              
              101,212
              
              
              -
              
              
              (2,054,275
              )
              
              (13,160
              )Issuance
                  of shares for cash
              
              
              1,615,800
              
              
              1,616
              
              
              402,334
              
              
              -
              
              
              -
              
              
              -
              
              
              403,950Issuance
                  of shares for compensation
              
              
              2,892,896
              
              
              2,893
              
              
              720,331
              
              
              (101,212
              )
              
              
              
              
              -
              
              
              622,012Issuance
                  of shares for services
              
              
              155,400
              
              
              155
              
              
              38,695
              
              
              -
              
              
              -
              
              
              -
              
              
              38,850Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,134,387
              )
              
              (1,134,387
              )Balance
                  at December 31, 2003
              
              
              52,899,660
              
              
              52,900
              
              
              3,053,027
              
              
              -
              
              
              -
              
              
              (3,188,662
              )
              
              (82,735
              )Issuance
                  of shares for cash
              
              
              3,286,400
              
              
              3,286
              
              
              818,314
              
              
              -
              
              
              -
              
              
              -
              
              
              821,600Issuance
                  of shares for compensation
              
              
              3,129,672
              
              
              3,130
              
              
              779,288
              
              
              -
              
              
              -
              
              
              -
              
              
              782,418Issuance
                  of shares for services
              
              
              3,423,224
              
              
              3,423
              
              
              852,383
              
              
              -
              
              
              -
              
              
              -
              
              
              855,806Shares
                  to be issued
              
              
              -
              
              
              -
              
              
              -
              
              
              11,151
              
              
              
              
              
              -
              
              
              11,151Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (2,591,238
              )
              
              (2,591,238
              )Balance
                  at December 31, 2004
              
              
              62,738,956
              
              
              62,739
              
              
              5,503,012
              
              
              11,151
              
              
              -
              
              
              (5,779,900
              )
              
              (202,998
              )Issuance
                  of shares for cash
              
              
              22,549,840
              
              
              22,550
              
              
              7,392,353
              
              
              -
              
              
              -
              
              
              -
              
              
              7,414,903Issuance
                  of shares for compensation
              
              
              1,684,124
              
              
              1,684
              
              
              419,347
              
              
              -
              
              
              -
              
              
              -
              
              
              421,031Issuance
                  of shares for services
              
              
              312,800
              
              
              313
              
              
              152,887
              
              
              -
              
              
              -
              
              
              -
              
              
              153,200Issuance
                  of warrants for legal expenses
              
              
              -
              
              
              -
              
              
              414,980
              
              
              -
              
              
              -
              
              
              -
              
              
              414,980Reduction
                  of accrual relating to shares to be issued
              
              
              -
              
              
              -
              
              
              -
              
              
              (11,151
              )
              
              
              
              
              -
              
              
              (11,151
              )Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,081,878
              )
              
              (3,081,878
              )Balance
                  at December 31, 2005
              
              
              87,285,720
              
              
              87,286
              
              
              13,882,580
              
              
              -
              
              
              -
              
              
              (8,861,778
              )
              
              5,108,087Issuance
                  of shares for cash
              
              
              12,577,663
              
              
              12,578
              
              
              9,766,818
              
              
              8,334
              
              
              
              
              
              -
              
              
              9,787,730Changes
                  due to recapitalization
              
              
              8,559,600
              
              
              8,560
              
              
              (9,670
              )
              
              -
              
              
              -
              
              
              -
              
              
              (1,110
              )Issuance
                  of shares for services
              
              
              727,500
              
              
              728
              
              
              1,244,758
              
              
              -
              
              
              -
              
              
              -
              
              
              1,245,485Issuance
                  of warrants for services
              
              
              -
              
              
              -
              
              
              516,977
              
              
              -
              
              
              (132,312
              )
              
              -
              
              
              384,665Issuance
                  of stock options for services
              
              
              -
              
              
              -
              
              
              4,290
              
              
              -
              
              
              -
              
              
              -
              
              
              4,290Cost
                  of raising capital
              
              
              -
              
              
              -
              
              
              (524,858
              )
              
              -
              
              
              -
              
              
              -
              
              
              (524,858
              )Issuance
                  of stock options for compensation
              
              
              -
              
              
              -
              
              
              545,273
              
              
              -
              
              
              -
              
              
              -
              
              
              545,273Exercise
                  of warrants
              
              
              1,652,713
              
              
              1,653
              
              
              552,993
              
              
              -
              
              
              -
              
              
              -
              
              
              554,646Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (11,117,316
              )
              
              (11,117,316
              )Balance
                  at December 31, 2006
              
              
              110,803,196
              
              
              110,803
              
              $
              25,979,161
              
              $
              8,334
              
              $
              (132,312
              )
              $
              (19,979,094
              )
              $
              5,986,892
  **The
        accompanying notes are an integral part of these consolidated financial
        statements**
 
 F-4
  **FOLDERA,
                    INC****(A
                    Development Stage Company)****Consolidated
                    Statements of Cash Flows**
  **Cumulative
                    from****December
                    3, 2001****For
                    the Years Ended December 31,**
                
                **(inception)
                    to December 31,****2006**
                
                **2005**
                
                **2006**CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (11,117,316
                )
                $
                (3,081,878
                )
                $
                (19,354,094
                )Adjustments
                    to reconcile net loss tonet
                    cash used in operating activities:Depreciation
                
                
                520,906
                
                
                115,873
                
                
                652,799Loss
                    on settlement of debt
                
                
                -
                
                
                64,022
                
                
                64,022Impairment
                    of property & equipment
                
                
                -
                
                
                9,533
                
                
                9,533Issuance
                    of employee stock options for compensation
                
                
                545,273
                
                
                421,029
                
                
                2,721,944Issuance
                    of shares for services
                
                
                1,245,485
                
                
                568,180
                
                
                3,272,993Issuance
                    of warrants for services
                
                
                384,665
                
                
                -
                
                
                384,665Issuance
                    of stock options for services
                
                
                4,290
                
                
                -
                
                
                4,290Shares
                    to be issued as penalty shares
                
                
                326,657
                
                
                (11,151
                )
                
                326,657Changes
                    in assets and liabilities:Prepaid
                    expenses and other current assets
                
                
                (241,910
                )
                
                (56,835
                )
                
                (298,745
                )Deposits
                
                
                (5,129
                )
                
                (96,257
                )
                
                (101,386
                )Accounts
                    payable, accrued expenses and other liabilities
                
                
                431,211
                
                
                87,851
                
                
                764,929Registration
                    rights liability
                
                
                450,000
                
                
                -
                
                
                450,000Total
                    adjustments
                
                
                3,661,448
                
                
                1,102,245
                
                
                8,251,701NET
                    CASH USED IN OPERATING ACTIVITIES
                
                
                (7,455,868
                )
                
                (1,979,633
                )
                
                (11,102,393
                )CASH
                    FLOWS FROM INVESTING ACTIVITIESPurchase
                    of property and equipment
                
                
                (1,295,375
                )
                
                (517,309
                )
                
                (1,861,077
                )Cash
                    received as part of merger
                
                
                (1,110
                )
                
                -
                
                
                (1,110
                )NET
                    CASH USED IN INVESTING ACTIVITIES
                
                
                (1,296,485
                )
                
                (517,309
                )
                
                (1,862,187
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Proceeds
                    from issuance of shares for cash, net
                
                
                9,787,730
                
                
                7,414,905
                
                
                18,928,416Cost
                    of raising capital
                
                
                (524,858
                )
                
                
                
                
                (524,858
                )Receipts
                    from exercise of warrants
                
                
                554,646
                
                
                -
                
                
                554,646Payments
                    to related parties
                
                
                (2,000
                )
                
                -
                
                
                -Payments
                    for leased equipment
                
                
                (121,854
                )
                
                (102,518
                )
                
                (226,268
                )NET
                    CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                9,693,664
                
                
                7,312,387
                
                
                18,731,936NET
                    INCREASE IN CASH & CASH EQUIVALENT
                
                
                941,311
                
                
                4,815,445
                
                
                5,767,356CASH
                    & CASH EQUIVALENT- BEGINNING OF PERIOD
                
                
                4,826,045
                
                
                10,600
                
                
                -CASH
                    & CASH EQUIVALENT- END OF PERIOD
                
                $
                5,767,356
                
                $
                4,826,045
                
                $
                5,767,356SUPPLEMENTAL
                    INFORMATION:Taxes
                
                $
                800
                
                $
                800Interest
                    expense
                
                $
                15,552
                
                $
                294
 NON-CASH
            INVESTING & FINANCING ACTIVITIES:
  The
            Company issued 8,559,600 shares as part of the recapitalization effected
            on
            February 13, 2006
 **The
          accompanying notes are an integral part of these consolidated financial
          statements**
 F-5





FOLDERA,
      INC.


(A
      Development Stage Company)




Notes
      to
      Audited Consolidated Financial Statements





**Note
      1. Description of Business and Basis of Presentation**





Taskport,
      Inc. (“TI”), a California corporation, was incorporated in 2001 to develop a
      proprietary, web-based software system that enables users to work
      collaboratively in a highly organized fashion within a shared electronic
      workspace.





On
      February 13, 2006, TI entered into a merger agreement with Expert Systems,
      Inc.,
      a Nevada corporation, whereby, Expert Systems, Inc. issued 91,313,720 shares
      to
      acquire 100% of TI’s stock. Expert Systems, Inc. had 8,559,600 shares
      outstanding immediately prior to the merger. As a result of the merger, the
      stockholders of TI owned approximately 92% of the combined entity. Accordingly,
      the merger was accounted for as a reverse acquisition of Expert Systems, Inc.
      by
      TI and resulted in a recapitalization of TI in a manner similar to the pooling
      of interest method. No pro forma financial information is disclosed as the
      amounts involved are immaterial. Concurrent with the merger, the name of Expert
      Systems, Inc. was changed to Foldera, Inc.





The
      accompanying consolidated financial statements include the accounts of Foldera,
      Inc. and its wholly owned subsidiary, TI (collectively, the “Company”). All
      significant inter-company accounts and transactions have been eliminated in
      consolidation. The historical results for the year ended December 31, 2006
      include both Foldera, Inc. (from the acquisition date) and TI (for the full
      period), while the historical results for the period ended December 31, 2005
      only include TI. Additionally, all historical share count and per share
      information has been adjusted for the Company’s 4-for-1 forward stock split that
      became effective on May 16, 2006.





The
      Company is a development stage company as defined in Statement of Financial
      Accounting Standards (“SFAS”) No. 7, “Accounting and Reporting by Development
      Stage Enterprises.” The Company is devoting substantially all of its present
      efforts to establishing its new business, and its planned principal operations
      have not yet commenced. All losses accumulated since inception has been
      considered as part of the Company’s development stage activities.





The
      audited consolidated financial statements have been prepared by the Company,
      pursuant to the rules and regulations of the Securities and Exchange Commission.
      The information furnished herein reflects all adjustments (consisting of normal
      recurring accruals and adjustments) which are, in the opinion of management,
      necessary to fairly present the operating results for the respective periods.
      Certain information and footnote disclosures normally present in annual
      consolidated financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been omitted
      pursuant to such rules and regulations.




**Note
      2. Summary of Significant Accounting Policies**





**Use
      of Estimates**





The
      preparation of consolidated financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the consolidated
      financial statements and the reported amounts of revenues and expenses during
      the reporting period. Actual results could differ from those
      estimates.




F-6




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements





**Revenue
      Recognition**





The
      Company’s revenue recognition policies are in compliance with Staff Accounting
      Bulletin (SAB) 104. Revenue is recognized when a formal arrangement exists,
      the
      price is fixed or determinable, all obligations have been performed pursuant
      to
      the terms of the formal arrangement and collectibility is reasonably assured.
      The Company anticipates generating revenue from two primary sources: the
      up-selling of Premium Services and Paid Search.





The
      Company anticipates deriving Premium Service revenue from the sale of extra
      data
      storage, vanity email, domain hosting, custom branding and technical support,
      which will be recorded when the service has been provided to clients or, in
      the
      case of extra storage, on an accrual basis, after monthly fees have been billed
      to clients.





Another
      anticipated revenue source is Paid Search. The Company anticipates that each
      time a user uses the Company’s embedded search box and clicks on an ad of an
      advertiser in the search network, revenue will be generated. Revenue will be
      recognized on a daily basis, based upon reported revenue from the selected
      search company.





**Earnings
      Per Share**




Statement
      of Financial Accounting Standards No. 128, “Earnings per share” requires the
      presentation of basic earnings per share and diluted earnings per share. 
The basic and diluted earnings per share computations presented by the Company
      conform to the standard and are based on the weighted average number of shares
      of Common Stock outstanding during the period.




Basic
      earnings per share is computed by dividing net income or loss by the weighted
      average number of shares outstanding for the period.  “Diluted” earnings
      per share is computed by dividing net income or loss by the total of the
      weighted average number of shares outstanding, and the dilutive effect of
      outstanding stock options and warrants (applying the treasury stock
      method).




The
      Company had 22,352,396 granted stock options and warrants that were exercisable
      as of December 31, 2006 and 2,089,280 of granted stock warrants exercisable
      at
      December 31, 2005.




These
      securities have been excluded from the computation of diluted net loss per
      share
      for the year ended December 31, 2006 and 2005 because the effect would have
      been
      anti-dilutive.





**Depreciation
      and Amortization**





Property
      and equipment are being depreciated on the straight-line basis over the
      following estimated useful lives:





Machinery
                & equipment
            
            
            2-5
                yearsLeasehold
                improvements
            
            
            10
                yearsFurniture
                & fixture
            
            
            5-7
                years




Included
      in property and equipment is approximately $404,981 of assets, which are leased
      under non-cancelable leases and accounted for as capital leases, which expire
      through November 2011. The accumulated depreciation included in the property
      and
      equipment for these leases is approximately $157,201.





Depreciation
      and amortization expense for the year ended December 31, 2006 and 2005 was
      $520,906 and $115,873, respectively.


F-7




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements





The
      Company capitalizes expenditures that materially increase asset lives and
      charges ordinary repairs and maintenance to operations as incurred. When assets
      are sold or otherwise disposed of, the cost and related depreciation or
      amortization is removed from the accounts and any resulting gain or loss is
      included in other income (expense) in the accompanying statements of
      operations.





Property
      and equipment consisted of the following as of December 31, 2006:




Computer
                & equipment
            
            $
            2,126,097Furniture
                & fixtures
            
            
            159,217Software
            
            
            59,091Accumulated
                depreciation
            
            
            (652,799
            )**Net
                fixed assets**
            
            $
            1,691,606





**Cash
      and Cash Equivalents**





Cash
      and
      cash equivalents include cash on hand and cash in banks in demand and time
      deposit accounts with maturities of 90 days or less.





**Concentrations
      of Credit Risk**





Financial
      instruments, which potentially subject the Company to concentrations of credit
      risk, consist principally of cash, and cash equivalents and trade receivables.
      The Company maintains cash and cash equivalents with high-credit quality
      financial institutions. At December 31, 2006, the cash balances held at
      financial institutions were either in excess of federally insured limits or
      not
      subject to the federal insurance system.





Credit
      is
      generally extended based upon an evaluation of each customer’s financial
      condition, with terms consistent in the industry and no collateral required.
      The
      Company determines an allowance for collectibility on a periodic basis. Amounts
      are written off against the allowance in the period the Company determines
      that
      the receivable is uncollectible.





**Fair
      Value of Financial Instruments**





The
      Company considers its financial instruments, which are carried at cost, to
      approximate fair value due to their near-term maturities.





**Long-Lived
      Assets**





Property
      and equipment is stated at cost and depreciation is provided for by the
      straight-line method over the related assets' estimated economic lives ranging
      from three to five years. Amortization of leasehold improvements is provided
      for
      by the straight-line method over the lesser of the estimated economic useful
      lives or the lease term. Property under capital leases is amortized over the
      lease terms and included in depreciation and amortization expense.





The
      Company also adopted FAS 142, “Goodwill and Other Intangible Assets” which
      recognizes impairment testing for those long-lived assets that are not subject
      to amortization. The Company currently does not have any long-lived assets
      that
      are not amortized. However, the Company does perform periodic impairment tests
      of all long-lived assets.




F-8




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements





**Income
      Taxes**





Deferred
      income tax assets and liabilities are computed annually for differences between
      the financial statements and tax basis of assets and liabilities that will
      result in taxable or deductible amounts in the future based on enacted laws
      and
      rates applicable to the periods in which the differences are expected to affect
      taxable income (loss). A valuation allowance is established when necessary
      to
      reduce deferred tax assets to the amount expected to be realized.





**Earnings
      Per Share**





The
      Company uses SFAS No. 128, Earnings Per Share, for calculating the basic
      and diluted income (loss) per share. Basic income (loss) per share is
      computed by dividing net income (loss) by the weighted average number of
      common shares outstanding during the period. Diluted income (loss) per
      share is computed in a similar manner to basic income (loss) per share,
      except that all potentially dilutive shares are excluded from the calculation
      in
      a (loss) situation. All potentially dilutive shares as of December 31, 2006
      and 2005 have been excluded from diluted loss per share, as their effect would
      be anti-dilutive for the year then ended.





Basic
      and
      diluted (loss) income per common share is computed as follows:




**Years
                Ended December 31,****2006**
            
            **2005****Per**
            
            
            
            
            
            **Per****Loss**
            
            **Shares**
            
            **Share**
            
            **Income**
            
            **Shares**
            
            **Share****(Numerator)**
            
            **(Denominator)**
            
            **Amount**
            
            **(Numerator)**
            
            **(Denominator)**
            
            **Amount****Basic
                EPS**(Loss)
                income available to common stockholders
            
            $
            (11,117,316
            )
            
            101,257,688
            
            $
            (0.11
            )
            $
            (3,081,878
            )
            
            65,091,552
            
            $
            (0.05
            )Effect
                of Dilutive SecuritiesNone
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            —**Diluted
                EPS**(Loss)
                income available to common stockholders
            
            $
            (11,117,316
            )
            
            101,257,688
            
            $
            (0.11
            )
            $
            (3,081,878
            )
            
            65,091,552
            
            $
            (0.05
            )





Potentially
      dilutive shares include:





**2006**
            
            **2005**Warrants
                outstanding
            
            
            18,425,192
            
            
            2,089,280Stock
                options outstanding
            
            
            7,741,668
            
            
            -




**Accounting
      for Stock-Based Compensation**




Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting
      Standards (SFAS) No. 123-R, “Share-Based Payment” ** (“SFAS
      123-R”), which requires the measurement and recognition of compensation expense
      for all share-based payment awards made to employees and directors, including
      stock options based on their fair values. SFAS 123-R supersedes Accounting
      Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” ** (“APB
      25”), which the Company previously followed in accounting for stock-based
      awards. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ** (SAB
      107) to provide guidance on SFAS 123-R. The Company has applied SAB 107 in
      its
      adoption of SFAS 123-R.




F-9


FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


The
      Company adopted SFAS 123-R on January 1, 2006 using the modified prospective
      transition method as of and for the year ended December 31, 2006. In accordance
      with the modified prospective transition method, the Company’s financial
      statements for prior periods have not been restated to reflect, and do not
      include, the impact of SFAS 123-R. Share-based compensation expense recognized
      is based on the value of the portion of share-based payment awards that is
      ultimately expected to vest. Share-based compensation expense recognized in
      the
      Company’s Consolidated Statement of Operations during the year ended December
      31, 2006 includes compensation expense for share-based payment awards granted
      after December 31, 2005 based on the grant date fair value estimated in
      accordance with the pro forma provisions of SFAS 123.





**Recent
      Pronouncements**





In
      February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
      Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
      years beginning after November 15, 2007. Early adoption is permitted subject
      to
      specific requirements outlined in the new Statement. Therefore, calendar-year
      companies may be able to adopt FAS 159 for their first quarter 2007 financial
      statements.





The
      new
      Statement allows entities to choose, at specified election dates, to measure
      eligible financial assets and liabilities at fair value that are not otherwise
      required to be measured at fair value. If a company elects the fair value option
      for an eligible item, changes in that item's fair value in subsequent reporting
      periods must be recognized in current earnings. FAS 159 also establishes
      presentation and disclosure requirements designed to draw comparison between
      entities that elect different measurement attributes for similar assets and
      liabilities. The management is currently evaluating the effect of this
      pronouncement on financial statements.





In
      September 2006, FASB issued SFAS 158 ‘Employers’ Accounting for Defined Benefit
      Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87,
      88, 106, and 132(R)’ This Statement improves financial reporting by requiring an
      employer to recognize the over funded or under funded status of a defined
      benefit postretirement plan (other than a multiemployer plan) as an asset or
      liability in its statement of financial position and to recognize changes in
      that funded status in the year in which the changes occur through comprehensive
      income of a business entity or changes in unrestricted net assets of a
      not-for-profit organization. The Company currently does not have any defined
      benefit plan and so FAS 158 will not affect the financial
      statements.





In
      September 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This Statement
      defines fair value, establishes a framework for measuring fair value in
      generally accepted accounting principles (GAAP), and expands disclosures about
      fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. This Statement is effective for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. The management is currently
      evaluating the effect of this pronouncement on financial
      statements.




F-10




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements




In
      March
      2006 FASB issued SFAS 156 “Accounting for Servicing of Financial Assets.” This
      Statement amends FASB Statement No. 140, “Accounting for Transfers and Servicing
      of Financial Assets and Extinguishments of Liabilities,” ** with
      respect to the accounting for separately recognized servicing assets and
      servicing liabilities. The Company does not have any servicing assets and
      therefore the statement will not have any impact on the financial statements.





In
      February 2006, FASB issued SFAS No. 155, “Accounting for Certain Hybrid
      Financial Instruments.” SFAS No. 155 amends SFAS No 133, “Accounting for
      Derivative Instruments and Hedging Activities,” and SFAF No. 140, “Accounting
      for Transfers and Servicing of Financial Assets and Extinguishments of
      Liabilities.” SFAS No. 155, permits fair value remeasurement for any hybrid
      financial instrument that contains an embedded derivative that otherwise would
      require bifurcation, clarifies which interest-only strips and principal-only
      strips are not subject to the requirements of SFAS No. 133, establishes a
      requirement to evaluate interest in securitized financial assets to identify
      interests that are freestanding derivatives or that are hybrid financial
      instruments that contain an embedded derivative requiring bifurcation, clarifies
      that concentrations of credit risk in the form of subordination are not embedded
      derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
      qualifying special-purpose entity from holding a derivative financial instrument
      that pertains to a beneficial interest other than another derivative financial
      instrument. The Company currently does not have any derivative instruments
      requiring bifurcation and therefore this statement will not have any impact
      on
      the financial statements.





In
      July
      2006, the FASB released FASB Interpretation No. 48, Accounting for Uncertainty
      in Income Taxes, an interpretation of FASB Statement No. 109 (FIN 48). FIN
      48
      clarifies the accounting and reporting for uncertainties in income tax law.
      This
      interpretation prescribes a comprehensive model for the financial statement
      recognition, measurement, presentation and disclosure of uncertain tax positions
      taken or expected to be taken in income tax returns. This statement is effective
      for fiscal years beginning after December 15, 2006. The Company believes that
      the adoption of FIN 48 will not have a material impact on its results of
      operations and financial position.





**Going
      Concern**





As
      shown
      in the accompanying consolidated financial statements, the Company incurred
      losses of $11,117,316 and $3,081,878 as of December 31, 2006 and December 31,
      2005, respectively. Negative cash flows from the operations of $7,455,868 and
      $1,979,633 were noted for the years ended December 31, 2006 and December 31,
      2005, respectively. These matters raise substantial doubt about the Company’s
      ability to continue as a going concern.




The
      accompanying consolidated financial statements have been prepared assuming
      that
      the Company will continue as a going concern. This basis of accounting
      contemplates the recovery of the Company’s assets and the satisfaction of
      liabilities in the normal course of business. Successful completion of the
      Company’s development program and its transition to attaining profitable
      operations is dependent upon obtaining additional financing adequate to fulfill
      its product development activities and achieving a level of revenue adequate
      to
      support its cost structure. The Company believes that it can effectively manage
      its working capital to fund operations through December 2007; however, the
      Company does not anticipate having significant revenue from operations until
      the
      third quarter of 2007, therefore, it is actively seeking additional debt or
      equity financing until it becomes cash flow positive. There can be no assurances
      that there will be adequate financing available to the Company and the
      consolidated financial statements do not include any adjustments to reflect
      the
      possible future effects on the recoverability and classification of assets
      or
      the amounts and classification of liabilities that may result from the outcome
      of this uncertainty.





The
      Company has taken certain restructuring steps to provide the necessary capital
      to continue its operations. These steps included: 1) reducing payroll and
      payroll related expenses, 2) outsourcing a portion of our software development
      work and 3) terminating relationships with certain consultants. The Company
      plans to continue actively seeking additional funding plans to further
      restructure the operations to decrease operating expenses and to minimize the
      liabilities.


F-11


FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements





**Note
      3. Accounts Payable and Accrued Expenses**





Following
      is the detail of accounts payable and accrued expenses as of December 31,
      2006.





Accounts
                payable
            
            $
            418,025Accrued
                vacation
            
            
            296,676Payroll,
                payroll taxes and 401(k)
            
            
            107,128Credit
                cards payable
            
            
            11,336Payable
                to outside director
            
            
            10,000Professional
                fees
            
            
            43,232**Total**
            
            $
            886,397




**Note
      4. Registration Rights Liability**





As
      part
      of the Company’s August and October 2006 private placements, a separate
      registration rights agreement was entered into with each investor. Under the
      terms of the registration rights agreements, the Company agreed to submit a
      SB-2
      registration statement to the Securities and Exchange Commission on a timely
      basis, to respond to questions posed by the SEC and to attempt to have the
      registration statement declared effective per the terms of the registration
      rights agreements.





Through
      December 31, 2006 and up to the date of this report, we have been unable to
      meet
      the deadline to get our registration statement declared effective and we have,
      therefore, accrued the maximum penalties allowed under the agreements related
      to
      the private placements closed in August and October 2006 which will start
      accruing on February 16, 2007.





Specifically,
      the Company has recorded penalty shares of $326,657 as shares to be issued
      based
      on its third private placement registration rights agreement and $450,000 as
      liquidated damages based on its fourth private placement registration rights
      agreement.





**Note
      5. Related-Party Transactions**





In
      March
      2004, Taskport entered into a consulting agreement with Jnan Dash, TI’s Chief
      Technology Evangelist, pursuant to which TI agreed to pay him a fee of $10,000
      per month commencing upon receipt by TI of at least $3,000,000 of financing,
      and
      as part of the agreement issued to Mr. Dash 200,000 shares of common stock
      upon
      commencement of service in 2004, and 200,000 shares upon the beta launch of
      our
      product in November 2004, 300,000 shares upon TI’s receipt of at least
      $3,000,000 of financing in October 2005 and agreed to issue up to an additional
      500,000 shares in increments upon achievement by TI of certain milestones
      pertaining to the successful production launch of the TI service and the receipt
      of subscriptions from 1,000,000 users of the TI service. The agreement may
      be
      terminated at any time by either party. During the year ended December 31,
      2006,
      the Company paid $120,000 to Jnan Dash pursuant to the above agreement and
      on
      June 19, 2006, the Company issued 300,000 shares of common stock upon the
      production launch of our product. These shares were recorded at the fair market
      value of $882,000, which is based on the price of shares on the date, June
      15,
      2006, the milestone was achieved.





We
      ceased
      paying Mr. Dash the monthly fee as of February 2006 but will issue 200,000
      shares when we reach the final milestone as per the agreement.





In
      March
      2005, the Company, through TI, entered into an engagement agreement with CFO911
      pursuant to which CFO911 agreed to provide services to TI including assistance
      in completing TI’s business plan and performing due diligence on TI’s financial
      projections for reasonableness and accuracy from a financial investor’s
      perspective. The Company agreed to pay CFO911 a total of $10,000 for these
      services and to issue CFO911 300,000 shares of common stock if the Company
      went
      public. The Company may engage CFO911 to perform other services. The Company’s
      Chief Financial Officer is associated with CFO911, and is the brother of an
      associate of Brookstreet Securities Corporation, the placement agent of prior
      private placements by TI/Foldera.


F-12


FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


The
      Company entered into reverse merger transaction which was approved by the
      majority of the Company’s shareholders on February 13, 2006. This event
      triggered the issuance of 300,000 shares of common stock to CFO911. These shares
      have been recorded at fair value of $150,000, which is based on the price of
      shares issued close to the date of services rendered and
      charged to operations.





The
      Company entered into indemnification agreements with each of its directors
      and
      officers. The indemnification agreements and the Company’s certificate of
      incorporation and bylaws require it to indemnify its directors and officers
      to
      the fullest extent permitted by Nevada law.





**Note
      6. Stockholder’s Equity**





On
      May
      10, 2006, the board of directors and holders of a majority of the outstanding
      shares of common stock of the Company, approved (i) an increase in the number
      of
      authorized shares of common stock from 100,000,000 shares to 250,000,000 shares
      and (ii) a 4-for-1 forward split of the outstanding shares of common stock
      of
      the Company to effect the Shares Increase and Forward Stock Split by filing
      a
      Certificate of Amendment with the Nevada Secretary of State on May 15, 2006,
      with the Forward Stock Split becoming effective on May 16, 2006.





All
      stock
      issuances have been retroactively updated for the effect of 4-for-1 forward
      split.




F-13




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements




Following
      is the summary of the Company’s equity-related transactions during the year
      ended December 31, 2006.





1.
            Following
                is the summary of stock issuances from January 2006 through December
                31,
                2006,
              
              We
                sold 4,328,000 shares of our common stock to accredited investors
                in the
                second private placement offering, and Brookstreet Securities Corporation
                acted as placement agent. The cash proceeds for the issuance of shares,
                net of offering costs of $289,181, amounted to $1,874,819 in the
                second
                private placement. Following the closing of our second private placement
                offering in February 2006, we issued five-year warrants to the placement
                agent to purchase 1,228,860 shares of our common stock at a price
                of $0.25
                per share and 2,551,424 shares of our common stock at a price of
                $0.50 per
                share. The proceeds from the issuance of the 4,328,000 shares were
                recorded net of the fair value of the warrants and the placement
                agent’s
                commission and expenses. The fair value of the warrants was calculated
                using the Black-Scholes option pricing model using the following
                assumptions: risk free rate of return of 4.5%, volatility of 0.001%,
                dividend yield of 0% and expected life of five years.On
                August 16, 2006, we completed the initial closing of a private placement
                to accredited investors of approximately 1,235,144 shares of our
                common
                stock, at a purchase price of $2.25 per share, for gross proceeds
                of
                $2,779,074.25. As part of the private placement, the investors were
                issued
                three-year warrants to purchase up to an aggregate of 617,572 shares
                of
                our common stock, at an initial exercise price of $2.25. As an inducement
                to the investors to complete the initial closing of the private placement,
                on or about August 14, 2006, we entered into an oral agreement with
                Brookstreet Securities Corporation (“Brookstreet”), the exclusive
                placement agent for the private placement, to provide to the investors
                price-protection for any equity issuances within three months of
                the final
                closing of the private placement. Pursuant to this price-protection
                commitment, we agreed that if we issued any additional equity securities
                for less than $2.25 per share (an “Additional Issuance”) within three
                months of the final closing of the private placement, the investors
                would
                receive additional shares of our common stock and additional warrants
                to
                purchase shares of our common stock, and the exercise price of the
                investors’ outstanding warrants to purchase shares of our common stock
                would be reduced, as if such investors had originally participated
                in such
                Additional Issuance.
              
              Subsequent
                closings of this private placement (the “August 2006 private placement”)
                occurred on August 25, 2006 and August 29, 2006. In the August 2006
                private placement, we issued an aggregate of 1,957,917 shares of
                our
                common stock at a purchase price of $2.25 per share, for gross proceeds
                of
                $4,405,315.25, and three-year warrants to purchase up to a maximum
                of
                978,959 shares of our common stock at an exercise price of $2.25
                per
                share. The net proceeds from the August 2006 private placement, following
                the payment of offering-related expenses, will be used by us for
                our
                capital expenditure requirements and for working capital and other
                general
                corporate purposes. At the closing of the August 2006 private placement,
                we paid Brookstreet cash compensation of 13% of the gross proceeds
                of the
                August 2006 private placement or $572,690 and a three-year warrant
                to
                purchase 293,687 shares of our common stock at an initial exercise
                price
                of $2.25 per share. The proceeds from the issuance of the 1,957,917
                shares
                were recorded net of the fair value of the warrants and the placement
                agent’s commission and expenses. The fair value of the warrants was
                calculated using the Black-Scholes option pricing model using the
                following assumptions: risk free rate of return of 4.75%, volatility
                of
                73.1% dividend yield of 0% and expected life of three years.
              
              On
                October 19, 2006, we completed a private placement to two institutional
                accredited investors of 4,166,667 shares of our common stock at a
                purchase
                price of $1.08 per share, for gross proceeds of $4,500,000, and five-year
                warrants to purchase up to an aggregate of 2,083,334 shares of our
                common
                stock at an initial exercise price of $1.75 per share.




F-14




FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


The
                  October 2006 private placement constituted an Additional Issuance
                  for
                  purposes of our price-protection commitment to the investors who
                  participated in the August 2006 private placement. Accordingly,
                  in
                  November 2006 we issued to those investors an aggregate of 2,121,079
                  additional shares of our common stock and warrants to purchase
                  an
                  additional 1,060,536 shares of our common stock at an exercise
                  price of
                  $1.75. We issued 2,121,079 additional shares of our common stock
                  because
                  such investors would have received an aggregate of 4,078,996 shares
                  if the
                  purchase price in the August 2006 private placement was reduced
                  from $2.25
                  per share to $1.08 per share, and we issued warrants to purchase
                  an
                  additional 1,060,536 shares of our common stock to provide such
                  investors
                  with fifty percent (50%) warrant coverage based on the as-adjusted
                  total
                  number of shares issued in the August 2006 private placement. In
                  addition,
                  we reset the exercise price of the outstanding warrants held by
                  those
                  investors from $2.25 per share to $1.75 per share.
              
              As
                a result of the issuance of additional shares of our common stock
                to the
                investors who participated in the August 2006 private placement at
                an
                effective purchase price of $1.08 per share, we issued to Brookstreet
                in
                November 2006 warrants to purchase an additional 318,162 shares of
                our
                common stock at an exercise price of $1.08 per share, and reset the
                exercise price of the outstanding warrants held by Brookstreet from
                $2.25
                per share to $1.08 per share, as required by the terms of our placement
                agency agreement with Brookstreet. Pursuant to this placement agency
                agreement, Brookstreet was entitled to receive warrants to purchase
                an
                aggregate of fifteen percent (15%) of the total number of shares
                issued in
                the August 2006 private placement at a per share exercise price equal
                to
                the price per share paid for our shares of common stock in the August
                2006
                private placement.
              
              The
                proceeds from the issuance of the 4,078,996 shares are recorded net
                of the
                fair value of the warrants and the placement agent’s commission and
                expenses.On
                October 19, 2006, we completed a private placement to two institutional
                accredited investors of4,166,667shares of our common stock, at a purchase price of $1.08 per share,
                for
                gross proceeds of $4,500,000. The investors were Vision Opportunity
                Master
                Fund Ltd., which purchased 3,703,704 shares of our common stock,
                and
                Crescent International Ltd., which purchased 462,963 shares of our
                common
                stock. As part of the private placement, the investors were issued
                five-year series A warrants to purchase up to an aggregate of 2,083,334
                shares of our common stock, at an initial exercise price of $1.75.
                As lead
                investor, Vision Opportunity Master Fund Ltd. was also issued two
                additional warrants: (1) a six-month series B warrant to purchase
                up to
                3,703,704 shares of our common stock, at an initial exercise price
                of
                $1.25, and (2) a five-year series C warrant to purchase up to 1,851,852
                shares of our common stock, at an initial exercise price of
                $2.00.
              
              For
                  each of the five-year warrants, the holder will be able to exercise
                  the
                  warrant on a so-called cashless basis at any time following the
                  one-year
                  anniversary of the closing of the private placement that a registration
                  statement covering the shares of our common stock underlying such
                  warrants
                  is not effective. For the six-month warrant, the holder will be
                  able to
                  exercise the warrant on a cashless basis at any time within the
                  30-day
                  period prior to the expiration of such warrant that a registration
                  statement covering the shares of our common stock underlying such
                  warrants
                  is not effective.
                
                The
                    net proceeds from the private placement, following the payment
                    of
                    offering-related expenses, will be used by us for our capital
                    expenditure
                    requirements and for working capital and other general corporate
                    purposes.
                    At the closing of the private placement, we paid HPC Capital
                    Management
                    Corp., the exclusive placement agent for the private placement,
                    cash
                    compensation of 8% of the gross proceeds of the private placement
                    and a
                    five-year warrant to purchase up to 416,667 shares of our common
                    stock, at
                    an initial exercise price of $1.08. At the closing of the private
                    placement, we also paid Brookstreet Securities Corporation cash
                    compensation of 5% of the gross proceeds of the private placement
                    and a
                    five-year warrant to purchase up to 208,334 shares of our common
                    stock, at
                    an initial exercise price of $1.08, as required by the terms
                    of our
                    placement agency agreement, as amended, with Brookstreet Securities
                    Corporation.




F-15




FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


Following
                is the summary of warrants issued as part of the October 19, 2006
                private
                placement


**Issued
                  to**
              
              **Description**
              
              **Number
                  **of
                  warrants****
              
              **Exercise
                  **Price****Investors
              
              Series
                  A warrants
              
              2,083,333
              
              $1.75/shareInvestors
              
              Series
                  B warrants
              
              3,703,704
              
              $1.25/shareInvestors
              
              Series
                  C warrants
              
              1,851,852
              
              $2.00/shareHPC
              
              Agent
                  warrants
              
              416,667
              
              $1.08/shareBrookstreet
                  Securities
              
              Agent
                  warrants
              
              208,334
              
              $1.08/share
  The
                      cash proceeds for the issuance of shares, net of offering cost
                      of $595,000
                      amounted to $3,905,000 in this private placement round. The
                      proceeds from
                      the issuance of the 4,166,667 shares were recorded net of the
                      fair value
                      of the warrants and the placement agent’s commission and expenses. The
                      fair value of the warrants was calculated using the Black-Scholes
                      option
                      pricing model using the following assumptions:


A
              
              B
              
              CRisk
                  free rate of return
              
              
              4.5
              %
              
              4.88
              %
              
              4.5
              %Volatility
              
              
              116
              %
              
              116
              %
              
              116
              %Dividend
                  yield
              
              
              0
              %
              
              0
              %
              
              0
              %Expected
                  life in years
              
              
              5
              
              
              0.5
              
              
              5


The
                        fair value of the warrants issued to agents was calculated
                        using the
                        Black-Scholes option pricing model using the following assumptions:
                        risk
                        free rate of return of 4.5%, volatility of 116% dividend
                        yield of 0% and
                        expected life of five years.


2.
            On
                February 13, 2006, the Company issued 300,000 shares to CFO911 as
                part of
                its reverse merger and according to the terms of agreement with CFO911,
                as
                referred to in note 5. These shares have been recorded at fair value
                of
                $150,000, which is based on the price of shares issued close to the
                date
                of services rendered and charged to operations.





3.
            On
                February 13, 2006, the Company issued 8,559,600 shares of its common
                stock
                and paid transaction costs of $175,000 in cash to Expert Systems
                Inc., as
                a result of the recapitalization. These shares were recorded at the
                carrying value of net assets acquired.





4.
            On
                February 13, 2006, the Company issued 3,020,000 warrants at the exercise
                price of $0.50 with a five-year term to two outside service providers
                for
                investor relations and marketing services. The fair value of the
                warrants
                was calculated using the Black-Scholes option pricing model using
                the
                following assumptions: risk free rate of return of 5.0%, volatility
                of
                0.001%, dividend yield of 0% and expected life of five years. The
                fair
                value of the warrants of $330,966 was amortized over the life of
                the
                service contract. As of December 31, 2006 the Company expensed $198,654
                and deferred $132,312.





5.
            On
                February 13, 2006, the Company issued 8,700,000 options to employees
                and
                200,000 options to outside consultants. The fair value of the options
                was
                calculated using the Black-Scholes option pricing model using the
                following assumptions: risk free rate of return of 5.0%, volatility
                of
                0.001%, dividend yield of 0% and expected life of 6 years and the
                options
                vest over a period of three years. During the year ended December
                31,
                2006, 3,893,871 of the options granted to employees vested and the
                Company
                recorded $545,273 in expense related to these options. 33,333 of
                the
                options granted to the consultants were vested as of December 31,
                2006 and
                the Company recorded $4,290 in expenses related to these
                options.





6.
            On
                February 15, 2006, the Company issued 340,000 warrants at the exercise
                price of $0.50 with a five-year term to St. George & Carnegie, an
                outside provider of legal services. The fair value of the warrants
                was
                calculated using the Black-Scholes option pricing model using the
                following assumptions: risk free rate of return of 5.0%, volatility
                of
                0.001%, dividend yield of 0% and expected life of five years. The
                fair
                value of the warrants of $186,011 has been expensed in the year ended
                December 31, 2006.





7.
            On
                May 30, 2006, Day and Campbell, an outside provider of legal services,
                exercised 40,000 warrants at an exercise price of $0.25 per
                share.




F-16


FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


8.
            On
                June 19, 2006, the Company issued 300,000 shares of common stock
                to our
                Chief Technology Evangelist and consultant for achieving an agreed
                upon
                milestone, as referred to in note 5. These shares were recorded at
                the
                fair market value of $882,000, which is based on the price of shares
                on
                the date, June 15, 2006, the milestone was achieved and charged to
                operations.





9.
            On
                June 30, 2006, the Company issued 40,000 shares of common stock to
                Joseph
                McCann, an outside business advisor, as compensation for service
                provided.
                These shares were recorded at the fair market value of $85,600, which
                is
                based on the price of our stock on the date the services were rendered
                and
                charged to operations.10.
            On
                July 24, 2006, Brookstreet Securities, an outside provider of investment
                banking services, exercised 409,620 warrants at an exercise price
                of $0.25
                per share.





11.
            On
                August 8, 2006, the Company issued 4,000 shares to Ms. M. Garcia.
                Funds
                from Ms. Garcia had previously been received by the
                Company.





12.
            On
                August 24, 2006, Mr. Schmitt, an affiliate of Trilogy Capital Partners,
                an
                outside investor relations consultant, exercised 25,000 warrants
                at an
                exercise price of $0.50 per share.





13.
            On
                September 12, 2006, the Equity Performance Group, an outside investor
                relations consultant, exercised 90,000 warrants at an exercise price
                of
                $0.50 per share.


14.
            On
                September 30, 2006, an employee exercised 6,667 options at an exercise
                price of $0.50 per share.




15.
            On
                October 9, 2006, Mr. Frost, an affiliate of Brookstreet, exercised
                12,600
                warrants at an exercise price of $0.50 per
                share.





16.
            On
                October 13, 2006, Trilogy Capital Partners, an outside investor relations
                consultant, exercised 10,000 warrants at an exercise price of $0.50
                per
                share.





17.
            On
                October 13, 2006, Mr. Olson, an affiliate of Trilogy Capital Partners,
                an
                outside investor relations consultant, exercised 70,000 warrants
                at an
                exercise price of $0.50 per share.





18.
            On
                October 13, 2006, Corporate Communications Network, an outside investor
                relations consultant, exercised 30,000 warrants at an exercise price
                of
                $0.50 per share.




19.
            On
                October 27, 2006, we issued 80,000 shares of our common stock to
                the Ibis
                Consulting Group in connection with an investor relations consulting
                agreement. These shares have been recorded at fair value of $118,900,
                based on the price of our stock on October 1, 2006, as per the agreement
                and charged to operations.





20.
            On
                October 27, 2006, we issued 7,500 shares of our common stock to George
                Mottel as a bonus for meeting performance goals. These shares have
                been
                recorded at fair value of $8,700, which is based on the price of
                our stock
                on the date the shares were issued and charged to
                operations.





21.
            On
                November 7, 2006, Corporate Communications Network, an outside investor
                relations consultant, exercised 300,000 warrants at an exercise price
                of
                $0.50 per share.





22.
            On
                November 9, 2006, a Brookstreet broker requested a cashless exercise
                of
                387,620 warrants at an exercise price of $0.50 per share. Based on
                the
                formula provided in the agreement, the broker received a total of
                320,789
                shares.




23.
            On
                November 10, 2006, Trilogy Capital Partners, an outside investor
                relations
                consultant, exercised 30,000 warrants at an exercise price of $0.50
                per
                share.




F-17




FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


24.
            On
                November 10, 2006, Mr. Cruz, an affiliate of Trilogy Capital Partners,
                an
                outside investor relations consultant, exercised 28,000 warrants
                at an
                exercise price of $0.50 per share.





25.
            On
                November 30, 2006, Newport Capital, an affiliate of Corporate
                Communications Network, an outside investor relations consultant,
                exercised 100,000 warrants at an exercise price of $0.50 per
                share.





26.
            On
                November 30, 2006, Trilogy Capital Partners, an outside investor
                relations
                consultant, exercised 70,000 warrants at an exercise price of $0.50
                per
                share.





27.
            On
                November 30, 2006, Mr. Briggs, an affiliate of Trilogy Capital Partners,
                an outside investor relations consultant, exercised 50,000 warrants
                at an
                exercise price of $0.50 per share.





28.
            On
                December 5, 2006, MBA Holdings, an affiliate of Trilogy Capital Partners,
                an outside investor relations consultant, exercised 25,000 warrants
                at an
                exercise price of $0.50 per share.





29.
            On
                December 12, 2006, a Brookstreet broker exercised 41,704 warrants
                at an
                exercise price of $0.50 per share.




Warrants
      outstanding:




Aggregate
              Intrinsic
                Value
            
            Number
                of WarrantsOutstanding
                at December 31, 2005
            
            $
            700,365
            
            
            2,089,280Granted
            
            
            
            
            
            18,055,456Exercised
            
            
            
            
            
            1,652,713Cancelled
            
            
            
            
            
            66,831Outstanding
                at December 31, 2006
            
            $
            -
            
            
            18,425,192





Outstanding
                Warrants
            
            
            
            Exercisable
                WarrantsRange
                of Exercise
              Price
            
            Number
            
            Weighted
                Average Remaining Contractual Life
            
            Weighted
                Average Exercise
              Price
            
            Number
            
            Average
                Exercise Price$0.0625-$2.25
            
            
            18,425,192
            
            
            4.1
                years
            
            $
            1.09
            
            
            18,425,192
            
            $
            1.31




F-18




FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


**Note
      7. Stock-Based Compensation**





**Stock-Based
      Compensation Plan**





The
      May
      2005 Stock Option Plan (the "Plan") gives the board of directors the ability
      to
      provide incentives through grants or awards of stock options, stock appreciation
      rights and restricted stock awards (collectively, "Awards") to present and
      future employees of us and our affiliated companies. Outside directors,
      consultants and other advisors are also eligible to receive Awards under the
      Plan.





A
      total
      of 12,000,000 shares of our Common Stock are reserved for issuance under the
      Plan. If an incentive award expires or terminates unexercised or is forfeited,
      or if any shares are surrendered to us in connection with an Award, the shares
      subject to such award and the surrendered shares will become available for
      further awards under the Plan.





Shares
      issued under the Plan through the settlement, assumption or substitution of
      outstanding Awards or obligations to grant future Awards as a condition of
      acquiring another entity will not reduce the maximum number of shares available
      under the Plan. In addition, the number of shares subject to the Plan, any
      number of shares subject to any numerical limit in the Plan, and the number
      of
      shares and terms of any Award may be adjusted in the event of any change in
      our
      outstanding common stock by reason of any stock dividend, spin-off, split-up,
      stock split, reverse stock split, recapitalization, reclassification, merger,
      consolidation, liquidation, business combination or exchange of shares or
      similar transaction.





The
      board
      of directors or one of its committees will administer the Plan. If Section
      162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and Rule
      16b-3 under the Securities Exchange Act of 1934, as amended, apply to us and
      the
      Plan, then each member of the board or committee, which must have at least
      two
      members, must meet the standards of independence necessary to be classified
      as
      an "outside director" for purposes of Section 162(m) of the Code and an outside
      director for the purposes of Rule 16b-3. Subject to the terms of the Plan,
      the
      committee will have complete authority and discretion to determine the terms
      of
      Awards.





The
      Plan
      authorizes the grant of Incentive Stock Options and Nonqualified Stock Options.
      Incentive Stock Options are stock options that satisfy the requirements of
      Section 422 of the Code. Nonqualified Stock Options are stock options that
      do
      not satisfy the requirements of Section 422 of the Code. Options granted under
      the Plan entitle the grantee, upon exercise, to purchase a specified number
      of
      shares from us at a specified exercise price per share. The committee determines
      the period of time during which an Option may be exercised, as well as any
      vesting schedule, except that no Option may be exercised more than 10 years
      after the date of grant. The exercise price for shares of common stock covered
      by an Option cannot be less than the fair market value of the common stock
      on
      the date of grant.


F-19




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements




There
      are
      no specific required minimum service periods for option grants, however, options
      generally have a three-year vesting schedule with 1/3 cliff vesting after
      one-year and 1/24 of the remaining options on a monthly basis over the two
      remaining years and the maximum contractual option term is 10
      years.





In
      February 2006, options to purchase 8,900,000 shares of common stock were granted
      under the Plan. During the year ended December 31, 2006, 1,151,665 options
      were
      forfeited and 6,667 options were exercised. As of December 31, 2006, 7,441,668
      options were outstanding and 4,251,665 options were available for future option
      grants.




The
      Company adopted SFAS No. 123-R effective January 1, 2006 using the
      modified prospective method. Under this transition method, stock compensation
      expense recognized during the year ended December 31, 2006 includes compensation
      expense for all stock-based compensation awards granted on or after
      January 1, 2006, based on the grant-date fair value estimated in accordance
      with the provisions of SFAS No. 123-R. There were no stock-based awards
      outstanding as of December 31, 2005.





Prior
      to
      January 1, 2006, the company measured stock compensation expense using the
      intrinsic value method of accounting in accordance with Accounting Principles
      Board (APB) Opinion No. 25, “Accounting for Stock Issued to
      Employees,” and related interpretations (“APB No. 25”). Thus, expense was
      generally not recognized for the Company’s employee stock option and purchase
      plans.





**Impact
      of Adoption of SFAS No. 123-R in January 2006**





Employee
      related stock-based compensation expense measured in accordance with SFAS
      No. 123-R totaled approximately $545,273, or $(0.01) per basic and fully
      diluted share in the year ended December 31, 2006. The adoption of SFAS
      No. 123-R resulted in increased expense of approximately $545,273 as
      compared to the stock compensation expense that would have been recorded
      pursuant to APB No. 25. During the year ended December 31, 2005, no expense
      was recorded as the Company did not have any stock options awarded during that
      period.





During
      the year ended December 31, 2006, 200,000 stock options were granted to
      consultants. 33,333 of these options were vested as of December 31, 2006 and
      the
      Company recorded $4,290 in expenses related to these options.





During
      the year ended December 31, 2005, no stock options were granted or vested to
      consultants.





F-20




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements




**Methods
      of Estimating Fair Value**





Under
      both SFAS No. 123-R and under the fair value method of accounting under
      SFAS No. 123 (i.e., SFAS No. 123 Pro Forma), the fair value of
      restricted stock is determined based on the number of shares granted and the
      quoted price of the Company’s common stock on the date of grant. The fair value
      of stock options is determined using the Black-Scholes model.





**Significant
      Assumptions Used to Estimate Fair Value**





The
      weighted-average assumptions used in estimating the fair value of stock options
      granted during the period, along with the weighted-average grant date fair
      values, were as follows:





Expected
                volatility
            
            
            0.001
            %Expected
                life in years
            
            
            6
                yearsRisk
                free interest rate
            
            
            5.010
            %Dividend
                yield
            
            
            0
            %Wt.
                average grant date fair value
            
            $
            0.21





There
      was
      no public trading of our stock prior to the completion of the reverse merger
      in
      February 2006, but shares were issued in private placements. In those private
      placements, the Company’s stock was sold at a consistent price. The Company
      issued its 25,569,100 shares of common stock from October 2005 through February
      2006 at $0.50 per share in multiple traunches. Given that the price was the
      same
      in each of the private placement transactions, there was no price volatility.
      Consequently, there was no expected price volatility at that time. The Company
      has chosen a deminimus volatility value of .001% to reflect the negligible
      volaitility in the shares of the stock.





The
      Company used guidance in paragraphs A26 - A30 of SFAS 123-R and question 6
      of
      Topic 14:D.2 of SAB 107 to estimate the expected term of the options. The
      Company characterized the options issued as “Plain-Vanilla Options” and
      calculated the fair value of the options based on the simplified method to
      estimate the expected term of the options granted.





The
      risk-free interest rate for the expected term of the option is based on the
      U.S.
      Treasury Zero Coupon Bond rate in effect at the time of grant.





Stock
      compensation expense recognized during the year ended 2006 is based on awards
      expected to vest and there were no estimated forfeitures. SFAS No. 123-R
      requires forfeitures to be estimated at the time of grant and revised in
      subsequent periods, if necessary, if actual forfeitures differ from those
      estimates.




Options
      outstanding:





Weighted
                Average Exercise Price
            
            Aggregate
                Intrinsic Value
            
            Number
                of OptionsOutstanding
                at December 31, 2005
            
            
            
            
            $
            0
            
            
            0Granted
            
            $
            0.51
            
            
            
            
            
            8,900,000Forfeited
            
            
            0.50
            
            
            
            
            
            1,151,665Exercised
            
            
            0.50
            
            
            
            
            
            6,667Outstanding
                at December 31, 2006
            
            $
            0.51
            
            $
            3,001,667
            
            
            7,741,668





Outstanding
                Options
            
            
            
            Exercisable
                OptionsRange
                of Exercise
              Price
            
            Number
            
            Weighted
                Average Remaining Life
            
            Weighted
                Average Exercise Price
            
            Number
            
            Average
                Exercise Price$0.50-$0.55
            
            
            7,741,668
            
            
            5.8
                years
            
            $
            0.51
            
            
            3,927,207
            
            $
            0.51




F-21




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements





Details
      of the Company’s non-vested options are as follows:





Non-Vested
                Options
            
            Weighted
                Average Exercise Price
            
            Weighted
                Average Vesting Period
            
            Grant
                Date Fair ValueNon-vested
                - December 31, 2005
            
            
            0Granted
            
            
            8,900,000
            
            $
            0.51
            
            
            
            
            
            1,164,948Forfeited
            
            
            (1,151,665
            )
            
            0.50Vested
            
            
            (3,927,204
            )
            
            0.51Exercised
            
            
            (6,667
            )
            
            0.50Non-vested
                - December 31, 2006
            
            
            3,814,464
            
            
            0.51
            
            
            1.5
                Years





The
      total
      compensation cost not yet recognized related to non-vested stock options is
      $565,225, which is expected to be recognized over a period of 1.5
      years.





**Note
      8. Income Taxes**





Through
      December 31, 2006, the Company incurred net operating losses for tax purposes
      of
      approximately $8,029,000. The net operating loss carry forward for federal
      and
      state purposes may be used to reduce taxable income through the year 2025.
      Net
      operating loss carry forward for the State of California is generally available
      to reduce taxable income through the year 2011. The availability of the
      Company's net operating loss carry forward is subject to limitation if there
      is
      a 50% or more positive change in the ownership of the Company's stock. The
      provision for income taxes consists of the state minimum tax imposed on
      corporations.





The
      gross
      deferred tax asset balance as of December 31, 2006 is $6,756,000. A 100%
      valuation allowance has been established against the deferred tax assets, as
      the
      utilization of the loss carry forward cannot reasonably be assured. Components
      of deferred tax asset at December 31, 2006 are as follows:


2006
              
              2005Net
                  operating loss
              
              $
              6,756,000
              
              $
              3,545,000Less
                  Valuation allowance
              
              
              (6,756,000
              )
              
              (3,545,000
              )$
              -
              
              $
              -




The
      following is a reconciliation of the provision for income taxes at the U.S.
      federal income tax rate to the income taxes reflected in the Statements of
      Operations:




2006
              
              2005Tax
                  expense (credit) at statutory rate-federal
              
              
              (34)
              %
              
              (34
              %)State
                  tax expense net of federal tax
              
              
              (6)
              %
              
              (6
              %)Changes
                  in valuation allowance
              
              
              40
              %
              
              40
              %Tax
                  expense at actual rate
              
              
              -
              
              
              -


F-22


FOLDERA,
        INC.
 (A
        Development Stage Company)
 
 Notes
        to
        Audited Consolidated Financial Statements


**Note
      9. Commitments**





(a)
        SAVVIS agreement:





On
      December 28, 2004, the Company entered into a collocation agreement with SAVVIS,
      Inc. SAVVIS is a global information technology (“IT”) utility services provider.
      With an IT services platform that extends to 47 countries, SAVVIS is an industry
      leader in delivering secure, reliable and scalable hosting and network and
      application services.





Under
      the
      terms of this agreement, SAVVIS will provide collocation facilities, cage space,
      bandwidth, power, backup power and security. The term of the agreement shall
      continue until the expiration of the last expiring service term. On June 30,
      2006, the Company signed a twelve-month service agreement whereby the Company
      agreed to pay $15,566 per month for services to be provided by SAVVIS.




(b)
        Office Space Lease:





On
      September 15, 2005, the Company entered into a lease agreement to lease 15,154
      square feet of office space in Huntington Beach, California to house its
      administrative, marketing, system development and technical support operations.
      The Company pays approximately $29,950 per month in rent under this lease,
      which
      expires in September 2010. In 2006, the company also rented three satellite
      offices for executives working out of California. The Chicago, IL office was
      rented in April 2006 at $1,335 per month, the Bellevue, Washington office in
      July 2006 at $725 per month and the Albuquerque, New Mexico office in August
      2006 at $1,029 per month. The Company recognized $379,397 in office occupancy
      expenses for the year ended December 31, 2006 compared to $110,428 for the
      year
      ended December 31, 2005.





(c)
        Equipment Leases:





As
      of
      December 31, 2006, the Company had entered into capital leases with thirteen
      strategic vendors for the financing of computer equipment. The Company pays
      approximately $12,664 per month under these leases, the last of which expires
      in
      November 2011.




F-23




FOLDERA,
      INC.


(A
      Development Stage Company)





Notes
      to
      Audited Consolidated Financial Statements





Total
      minimum lease payments under the above leases are as follows:





Capital
            
            OperatingLeases
            
            Leases
            
            Total2007
            
            $
            112,014
            
            
            298,532
            
            $
            410,5462008
            
            
            70,408
            
            $
            366,727
            
            
            437,1342009
            
            
            38,694
            
            
            375,819
            
            
            414,5132010
            
            
            12,601
            
            
            350,057
            
            
            362,6582011
            
            
            11,551
            
            
            -
            
            
            11,551Thereafter
            
            
            -
            
            
            -
            
            
            -$
            245,267
            
            $
            1,391,135
            
            $
            1,636,402Less:
                Amount representing interest
            
            
            36,119Present
                value of minimum lease payments
            
            
            209,148Less:
                Current portion
            
            
            86,680$
            122,486




(d)
        Consulting agreements:





On
      March
      24, 2004, the Company entered into an agreement with its Chief Technology
      Evangelist. As part of this service agreement, the Chief Technology Evangelist
      is also responsible for assisting in the closing of certain financings. The
      term
      of the service agreement began on April 1, 2004 and was for a term of ninety
      (90) days, with automatic monthly renewals until terminated. As of December
      31,
      2006, the Company had issued 1,000,000 shares as per terms of the agreement
      in
      addition to paying $120,000 in cash. This consulting agreement was terminated
      in
      December, 2006. The Company is no longer obligated to pay the monthly consulting
      fee, but will issue 200,000 shares of its common stock when it reaches the
      final
      milestone as per the agreement.





In
      March
      2005, the Company, through TI, entered into an engagement agreement with CFO911
      pursuant to which CFO911 agreed to provide services to TI including assistance
      in completing TI’s business plan and performing due diligence on TI’s financial
      projections for reasonableness and accuracy from a financial investor’s
      perspective. The Company agreed to pay CFO911 a total of $10,000 for these
      services and to issue CFO911 300,000 shares of common stock if the Company
      went
      public. The Company may engage CFO911 to perform other services. The Company
      entered into reverse merger transaction which was approved by the majority
      of
      the Company’s shareholders on February 13, 2006. This event triggered the
      issuance of 300,000 shares of common stock to CFO911. These shares have been
      recorded at fair value of $150,000, which is based on the price of shares issued
      close to the date of services rendered and charged to operations.





On
      February 13, 2006, the Company entered into an investor relations consulting
      agreement with the Equity Performance Group. Under the terms of agreement,
      Equity Performance agreed to render services related to investor relations
      and
      communications. The agreement was for a two and half month period and terminated
      on May 1, 2006. The Company paid the consultants $10,000 per month and issued
      warrants to purchase 120,000 shares of the Company’s common stock at an exercise
      price of $0.50 per share. The warrants were recorded at the fair value of
      $13,151 and charged to operations.





On
      February 13, 2006, the Company signed a letter of engagement with Trilogy
      Capital Partners, Inc. According to the terms of the agreement, Trilogy agreed
      to structure and implement a marketing program designed to create extensive
      financial market and investor’s awareness for the Company. The agreement was for
      a twelve-month period and the Company agreed to pay $12,500 per month to Trilogy
      and issue warrants to purchase 2,900,000 shares of the Company’s common stock at
      an exercise price of $0.50 per share. These warrants were recorded at the fair
      value of $317,815. On October 3, 2006 the Company cancelled its investor
      relations consulting agreement with Trilogy and signed a one-year contract
      with
      Corporate Communications Network, Inc. to provide similar services. As part
      of
      the cancellation agreement, Trilogy transferred 1,535,000 warrants, which are
      exercisable at $0.50 per share, to Corporate Communications Network, Inc. The
      Company has been expensing the fair value of these warrants over the term of
      the
      agreement. As of December 31, 2006 the Company has expensed $185,503 and the
      unamortized $132,312 amount of the warrants transferred to CCN appears in our
      December 31, 2006 Consolidated Balance Sheet as prepaid investor relations
      expense-warrants under Current Assets.




F-24





In
      April
      2006, the Company entered into a one-year consulting agreement with Ibis
      Consulting Group for the purpose of providing investor relations services.
      Pursuant to the contract, the Company agreed to pay Ibis $3,500 per month upon
      commencement of the contract and to issue a total of 160,000 shares of common
      stock based on the following schedule: 80,000 shares to be issued on October
      1,
      2006 and the remaining 80,000 shares to be issued on April 1, 2007. 80,000
      shares were issued on October 1, 2006 and these shares have been recorded at
      fair value of $118,900, based on the price of our stock on October 1, 2006,
      as
      per the agreement.





In
      June
      2006, the Company entered into a one-month consulting contract with Joseph
      McCann for the purpose of advising the Company on business matters, including
      the development of relationships with strategic business partners. Pursuant
      to
      the contract, the Company agreed to issue Mr. McCann at total of 40,000 shares
      of common stock. On June 30, 2006, the Company issued 40,000 shares of common
      stock to Mr. McCann, as compensation for services provided and the shares were
      recorded at the fair market value of $85,600, which is based on the price of
      our
      stock on the date the services were rendered and charged to
      operations.




F-25