**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
  **FORM
        10-KSB**
 
 x
              
              ANNUAL
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
  For
        the
        fiscal year ended December 31, 2007
  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
              
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)
  **2952
                  Daimler St.****Santa
                  Ana, California**
              
              **92705**(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: None
 
 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, 2007, were
        $0.
  The
        aggregate market value of the voting and non-voting stock held by non-affiliates
        of the issuer was approximately $4,439,835, based on the closing price of
        $0.08
        per share on March 1, 2008, as quoted by the OTC Bulletin Board.
  As
        of
        March 1, 2008, 125,507,944 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**
                **7****ITEM
                    3.**
                **LEGAL
                    PROCEEDINGS**
                **8****ITEM
                    4.**
                **SUBMISSION
                    OF MATTERS TO A VOTE OF SECURITY HOLDERS**
                **8****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**
                **16****ITEM
                    7.**
                **FINANCIAL
                    STATEMENTS**
                **24****ITEM
                    8.**
                **CHANGES
                    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                    DISCLOSURE**
                **25****ITEM
                    8A.**
                **CONTROLS
                    AND PROCEDURES**
                **25****ITEM
                    8B.**
                **OTHER
                    INFORMATION**
                **25****PART
                    III****ITEM
                    9.**
                **DIRECTORS,
                    EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE
                    GOVERNANCE;
                    COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT**
                **26****ITEM
                    10.**
                **EXECUTIVE
                    COMPENSATION**
                **30****ITEM
                    11.**
                **SECURITY
                    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                    STOCKHOLDER MATTERS**
                **33****ITEM
                    12.**
                **CERTAIN
                    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
                    INDEPENDENCE**
                **34****ITEM
                    13.**
                **EXHIBITS**
                **35****ITEM
                    14.**
                **PRINCIPAL
                    ACCOUNTANT FEES AND SERVICES**
                **36**
  
   **PART
        I**
 
 **ITEM
        1.**  **DESCRIPTION
        OF BUSINESS.**
  **Overview**
 
 Our
        company, Foldera, Inc. (the “Company”), intends to provide consumer and business
        users with an easy-to-use software service for email and file sharing. We
        plan
        to offer end users with an intuitive and easy to use suite of web-based
        applications, including email, file sharing, calendar, contact manager and
        task
        manager in an integrated software-as-a-service (SaaS) solution. When available,
        our software service is expected to provide users with a better way to manage,
        aggregate and organize emails and files, projects, activities, communities
        or
        users. This service, which we call Foldera, is designed for use by individuals,
        businesses and organizations who want to improve collaboration and productivity
        between colleagues, friends and families.
 
 After
        more than five years in development, testing and feature refinement, we launched
        our sign-up page in mid-February 2006 and received more than 16,000 account
        requests for the free Foldera service. On June 19, 2006, we officially
        launched a limited beta version of our Foldera service, rolling it out to
        a
        select number of users in the United States. During this limited beta program
        rollout, the Foldera service was not able to handle the large number of users
        wanting the service and we began to concentrate on further development of
        our
        software application and to re-architect the application in order to more
        effectively support the number of users who had indicated an interest in
        using
        our service. On March 30, 2007, we launched an expanded public preview of
        the
        application and by October 2007 we had in excess of 2,800 businesses and
        over
        11,000 users signed-up for our application.
 
 In
        November 2007, we changed our go-to-market strategy and shifted our sales
        and
        distribution model to Internet Service Providers (ISPs) and other application
        service providers (ASPs) who are capable of hosting the Foldera service.
        As part
        of this strategy shift, we entered
        into a contractual agreement with Tiscali Group (an Italian-based ISP) in
        order
        to provide infrastructures and services to further our efforts to offer the
        Foldera service in Europe. We intend to deliver the service to third-party
        ISP,
        ASP and mobile operator subscribers using a SaaS delivery model. This approach
        is intended to eliminate the need for the service providers who resell the
        Foldera service to build out infrastructure, develop software or host the
        Foldera service themselves. Tiscali currently manages 12 million email accounts,
        delivers broadband internet services to more than 3 million customers and
        hosts
        important portals generating over 18 million unique users.
 
 We
        intend
        to target consumers and small to mid-size businesses through ISPs, ASPs and
        mobile operators in Europe. We believe that our service will be especially
        useful to consumers wanting a single tool to integrate their emails and to
        share
        files and photos with friends and family and for business teams that work
        away
        from a central office and need to collaborate on multiple projects and
        activities. We believe these ISPs, ASPs and mobile operators are losing
        customers due to the inadequacy of their current offerings and portal sites
        which leads to poor user experience with email and lack of a file-sharing
        solution.
 
 On
        December 20, 2007, we executed an operational change to shut down our publicly
        available beta offering of the Foldera application in the United States. 
This decision will allow us to reduce costs while enabling us to focus on
        a
        service provider hosting strategy and to concentrate our effort on increasing
        our presence in the European market through our hosting partnership with
        Tiscali.
 
 **Product
        Overview**
 
 We
        intend
        to deliver a powerful, easy to use and secure information organizer and group
        sharing suite of tools that will be targeted at consumers and businesses
        who
        want a cost-effective, web-based application for collaborating their digital
        information across multiple groups of people. When development is complete,
        we anticipate Foldera will be a comprehensive suite of software tools
        that will integrate email, file sharing, calendar, contact management and
        task
        management. Foldera will be designed to provide a seamless interface and
        an easy
        to use design for a fast and simple method of integrating work and home
        information into a single environment.
 
 Foldera
        simplifies the task of collaborating and information sharing between colleagues,
        friends and family. Foldera is designed for the fundamental way people share
        and
        interact with other people by using groups to aggregate and organize user’s
        information. These Groups can be business teams, communities, friends, family
        members or any other group of people an individual wants to share and
        communicate with. By using Groups and folders, all relevant information on
        a
        project, activity or community can be managed and shared with the appropriate
        people and it can be easily updated and organized for improved productivity.
        Foldera will be developed on an extensible platform designed to provide users
        with enhanced capabilities such as integrating with mobile phones, social
        and
        business networking features and synchronization with tools and applications
        currently used by the user.
 
 Foldera
        is intended to be an email and file-sharing solution that goes beyond a standard
        Personal Information Manager (PIM). By employing our easy-to-use web interface,
        Foldera users can be up and running and fully coordinated and sharing
        information with colleagues, friends and family within minutes. Foldera enables
        users to add additional team members, friends and family for easy sharing
        and
        collaboration. From a member’s perspective, there will be no hardware to buy, no
        downloads, no patches, no upgrade cycles, no IT resource involvement for
        set up
        or maintenance. Because the Foldera product offering will be browser-based,
        we
        anticipate that members will require very modest training in order to
        effectively utilize our product.
  1
 
 Users
        can
        feel confident that their communications will remain confidential as Foldera
        will offer encrypted transmission using SSL technology, the same as bank
        and
        online financial transactions.  In addition, we anticipate that Foldera
        will incorporate anti-spam and anti-virus protection for user emails and
        files.
 
 New
        information should be instantly available to all entitled members in one
        centralized location on the Internet. With Foldera, communications will be
        more
        efficient and effective, and information sharing is expected to be 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 and individuals
        will be kept up to date and working more productively on a parallel basis,
        saving time and potential confusion within the business.
 
 **Market
        Research**
 
 According
        to a study conducted by Bluestreak, Inc. in November 2006, over 65% of internet
        users in the United States have three or more email addresses. In addition,
        on
        average, users received approximately 600 work and personal emails per week.
        Finally, email was the predominant and most frequently used messaging tool
        by
        internet users. We believe this research shows that users can benefit from
        a
        single platform that can manage and aggregate multiple email addresses and
        information sources and instantly organize this information for improved
        productivity and sharing.
 
 The
        SaaS
        market is growing rapidly as internet broadband reaches mass adoption and
        users
        want a less expensive, easier to use and manage software than standard desktop
        applications. The ability for web-based applications to be secure and to
        offer
        features and updates without complicated installations and downloads provides
        users with an easier to use and less costly solution than previously available
        in a desktop-only environment.
 
 Businesses
        around the world are looking to gain competitive advantage while lowering
        costs.
        One of the ways that businesses are seeking to lower their costs is to outsource
        their email and collaboration software to a trusted service provider. The
        ability of service providers to differentiate themselves through an
        ever-expanding range of services delivered at a competitive and profitable
        price
        is the principal determining factor between success and failure. Basic email
        is
        no longer adequate to meet the increasing expectations of business customers.
        In
        May 2007, the Radicati Group, a consulting group that provides market research
        on the messaging and collaboration (email services) market, stated the
        following:
 
 ·
              Revenue
                  in the corporate messaging and collaboration software segment expanded
                  to
                  roughly $2.7 billion in 2007 and will grow to $4 billion per annum
                  by 2011
 ·
              The
                  total number of hosted email mailboxes will increase from 1.4 billion
                  mailboxes in 2007, to nearly 2 billion mailboxes in
                  2011
 ·
              The
                  hosted email market is expected to grow from $695 million in 2007,
                  to over
                  $1.2 billion in 2011
 ·
              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 trendtoward
                  outsourced and hosted email
                  solutions.
  **Industry
        Overview**
 
 We
        intend
        to focus on two large industry segments: the European hosted email market
        and
        the messaging and collaboration SaaS market.
 
 **The
        European Hosted Email Market.** According
        to a 2007 Radicati Group report on the European hosted email market, European
        ISPs and service providers have not been able to offer as much storage and
        functionality as webmail providers. Many of these service providers are
        transitioning away from less competitive and costly home-grown services to
        commercially available products.
 
 In
        addition, these same ISPs and service providers are losing customers from
        their
        portal sites as they are not offering competitive email and file sharing
        solutions that are available from other hosted SaaS vendors. A solution for
        these ISPs and service providers to reverse the current trend is to offer
        a
        unique and competitive email and file sharing solutions directly to their
        customers. By doing this, the ISP or service provider can retain and grow
        their
        customer base (and grow user volume and storage beyond their own customer
        base)
        and obtain additional revenue streams from their customer base (and extended
        customer base users).
 
 ISP
        and
        service providers can potentially benefit from the Foldera service in the
        following ways:
  ·
              Improve
                  customer retention to their portal sites and increase overall
                  web-traffic
 ·
              Obtain
                  incremental revenue stream opportunities with storage and premium
                  services
                  (customization, mobile, etc.)
 ·
              Increase
                  advertising revenue with increased web traffic and advertising
                  placements
 ·
              Participate
                  in the rapidly growing social and business networking
                  space
 ·
              Reduce
                  the support and maintenance costs with a vendor provided email
                  and
                  collaboration/sharing solution
 ·
              Participate
                  in the growing mobile phone and text messaging
                  markets
  2
  **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. In their May 2007 study, the Radicati Group projects that the
        total
        number of hosted email mailboxes will increase from 1.4 billion mailboxes
        in
        2007, to nearly 2 billion mailboxes in 2011. Foldera is a hosting service
        provider.
 
 In
        September 2006, The Gartner Group released a report entitled, “Enterprise Social
        Software to Boost Efficacy of Non-Routine Work.” In this report, The Gartner
        Group 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 The Gartner
        Group, “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).
 
 **Target
        Audience - European Consumers and Small and Medium-size Businesses (SMB)
        through
        ISPs and service providers**
 
 We
        intend
        to target two customer segments in the European market with the Foldera offering
        - consumers and small-to-mid-sized businesses. Our approach will be to sell
        the
        Foldera application to ASPs, ISPs and mobile operators who want web email
        and
        group collaboration application designed to retain customers and offer new
        revenue models and services to their customers. ISPs have spent a significant
        amount of money on building out infrastructure for customer broadband access.
        In
        comparison, ASPs focus on providing applications to users over the internet.
        By
        targeting both ISPs and ASPs, we can gain access to a large installed base
        of
        customers and a sales channel for small and mid-sized businesses and consumers.
        In addition, mobile operators may want to increase their revenue stream by
        delivering email and collaboration solutions to their mobile users. According
        to
        a January 18, 2008 survey by Webcredible, 33% of the mobile users they survey
        stated that the ability to receive email on their mobile device would be
        their
        number one priority if service quality and speed were not an issue.
 
 By
        focusing our efforts on the service providers, we intend to reach millions
        of
        mail boxes and customers more directly than marketing solely to end users.
        Since
        the service provider and ISPs, ASPs and mobile operators will host our offering,
        we can focus our resources on software development along with sales and
        marketing to meet the demands of the current installed client base of ISPs,
        ASPs
        and mobile operators without the full cost of building out a complete hosting
        infrastructure.
 
 The
        European ISP market presents us with an opportunity to deliver a better email
        client to their customer base with an improved user experience and latest
        features at a lower cost than other software currently available in the market.
        Many of these ISPs are transitioning from home-grown email systems and want
        a
        solution that will reduce their total cost of ownership while increasing
        customer adoption and retention.
 
 **Revenue
        Model**
 
 We
        anticipate generating revenue from selling the Foldera email and file sharing
        solution to European ASPs, ISPs and mobile operators. Our revenue is expected
        to
        be primarily generated by ISPs, ASPs and mobile operators paying us a per
        user
        licensing fee. There are also additional opportunities for revenue sharing
        from
        enhanced services and features, including:
 
 **Sales
        of Premium Storage.** Sale of
        additional storage amounts to users and businesses. We anticipate that storage
        requirements will increase as users fully adopt our solution and increase
        the
        amount of information they store and share.
 
 **Mobile
        Phone Email Delivery.** We
        intend to offer users the ability to receive emails on standard mobile phones.
        It is envisioned that this service will generate an extra monthly fee which
        can
        be split between us and the ISPs and mobile providers.
 
 **Advertising.** Foldera’s platform will offer ISPs the ability to host advertising within the
        application. This advertising revenue can be shared between us and the service
        provider.
 
 **Premium
        Features and Services.** We are
        considering offering additional premium features and capabilities. These
        pre-mium features or services may include the following:
  ·
              Revenue
                  from partner promotions of additional features and
                  services
 ·
              Customization
                  services to help businesses create groups and
                  websites
 ·
              Revenue
                  from partner offerings and services (potential examples include
                  printing
                  photos, booking hotels, travel,
                  etc.)
 
 3
 
 **Rollout
        Strategy**
  **Service
        Provider and ISP Distribution Strategy.** We plan
        to have European ISPs and ASPs host and distribute the Foldera application
        to
        end users. This should allow us to focus on software development along with
        sales and marketing without having to spend time and money building out
        infrastructure that already exists. Our intent is to leverage the Tiscali
        Services hosting partnership in Europe to provide the Foldera offering to
        other
        ASPs and ISPs. We will provide our software to the ISPs, ASPs and Mobile
        operators for them to host and make available to their customer base.
 
 Our
        sales
        strategy is to focus on the European ISP, ASP and Mobile operator companies
        who
        want a less costly, more feature rich email and file sharing solution to
        offer
        their customers. We intend provide these companies with a software solution
        that
        provides the latest “web 2.0” features customers are demanding while also
        providing additional revenue streams, such as mobile phone email and file
        storage.
 
 We
        believe that Foldera customer adoption will virally increase as users add
        groups
        and other users to their account This should duplicate a cost-effective strategy
        for customer adoption that has been used by other successful web-based software
        offerings. For example, Hotmail, Skype, Firfox, MySpace, Flickr, Facebook,
        Linked-In and others used this marketing and distribution strategy to
        successfully obtain millions of members in a short period of time. We believe
        that when people discover an online service they like, they will tell their
        friends and business associates about it, who, in turn, tell others through
        word-of-mouth or email. While Foldera’s rollout will be modeled after other
        successful web-based offerings, we can offer no assurances that the market
        will
        similarly receive our product.
 
 **Ongoing
        Improvements - Application Roadmap**
 
 Here
        are
        a few of the items on our product roadmap:
 
 **Enhanced
        Web Email.** This
        feature would provide service providers hosting the Foldera service with
        the
        ability to either integrate into an existing email service and use the Foldera
        application to manage, organize and integrate their email addresses or to
        replace their existing email service with Foldera’s webmail service. The result
        would provide flexibility, cost savings and easy migration for the service
        providers while users can experience an easier to use email client that is
        integrated with other features that the Foldera application provides, such
        as
        task management, contact manager and file sharing.
 
 **Deluxe
        Website and Wiki Editing.** The
        editing tools used for creating a user’s own website and/or wikis will be
        enhanced to provide more functionality and ease of use. Additional new layout
        tools, RSS support and templates may be released so users can quickly and
        easily
        create websites from within Foldera which can be shared and published.
 
 **Intelligent
        Email and File Auto-Sorting.** We may
        deliver customers with an artificial-intelligence based solution to bring
        organization and simplified management to chaotic emails and file
        sharing/management.
 
 **Foldera
        Toolbar.** This
        tool would provide users with an easy way to quickly and easily add contacts
        and
        calendar events to groups within their Foldera application.
 
 **Group
        Templates.** We may
        make available group options and templates that would provide users with
        an
        easier experience in creating a new group with pre-populated settings and
        configurations so they can quickly start using and engaging in the new
        group.
 
 **Additional
        Customization for the Main Page.** We may
        make the main page of the application fully customizable. Users would be
        able to
        layout Foldera data gadgets (like calendar and list gadgets) as well as
        integrate third-party web gadgets like RSS readers, local weather gadgets,
        etc.
        In addition, several templates may be made available to choose from depending
        upon user interests.
 
 **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.
 
 4
  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.
  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 us to respond quickly to, or significantly influence, rapid
        technological change and changes in consumer demand. If we are unable to
        compete
        effectively in the messaging and collaboration software industry, we 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 our revenue and prospects for achieving profitability. The markets for
        our
        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 our products and services. Customers
        may
        experience financial difficulties, cease or scale back operations or reverse
        prior decisions to adopt our products and services. As a result, we could
        experience longer product sales cycles and pressure from the market to reduce
        prices. A reduction in prices could cause us to realize lower revenues and
        margins.
  5
  Continuing
        changes in technology and industry standards could render our software products
        unmarketable or obsolete. The markets for our 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. Our 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 we will be successful in achieving
        these goals or that it will do so in a manner that is sufficiently timely
        to
        ensure that we are able to successfully compete for customers and market
        share.
        Additionally, if we 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 our revenues may level off or decline as a consequence.
  Technological
        advances also require us, on a continuing basis, to commit substantial resources
        to acquiring and applying new technologies for use in its products and services.
        Product development for SaaS products requires substantial lead time for
        development and testing. If we do not commit resources to developing and
        selling
        products incorporating new technologies at the rate demanded by our markets,
        our
        products and services may be rendered obsolete, revenues could suffer and
        we may
        not achieve profitability. Even if we do develop new or enhanced products
        and
        services, we 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 us from achieving profitability.
  The
        competitive factors described above may have a material adverse effect on
        our
        future operating results, including reduced profit margins and loss of market
        share. Accordingly, there can be no assurance that we will be successful
        in our
        ability to enhance current products and develop and introduce future product
        attributes that will achieve market acceptance. Our future is largely dependent
        on the development of new product feature sets for its messaging and
        collaboration software offering. Because we are 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 websites 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 websites.
        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 us from achieving
        profitability.
  We
        also compete with destination websites that seek to increase their
        search-related traffic. These destination websites 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 provided by us. 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.
  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 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.
  6
  **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, 2007. Research and product development expenditures were
        approximately $1,892,559 and $2,414,864 in the years ended December 31, 2006
        and
        2007, respectively.
  **Employees**
  At
        December 31, 2007, we had 6 employees 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 current Chairman and former
        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 up to the reverse merger.
  Our
        principal executive offices are located at 2952 Daimler Street, Santa Ana,
        California 92705, 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 report and should not be relied upon with respect to the
        report.
 
 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 intend to start selling a newer version of the Foldera
        service to European ISPs and service providers during the second quarter
        of
        2008.  We expect to continue the development of the Foldera application to
        deliver the functions and features requested by ISPs, service providers and
        end
        users during 2008.  Our product competitiveness and feature set is
        dependent upon continued funding of our software development efforts and
        there
        is no guaranty that we will have sufficient funding to complete our product
        offering.  We anticipate generating revenue primarily through license fees
        paid by these European ISPs and service providers for the Foldera
        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 returned to us at the beginning of month 37 of the lease
        term.
 
 In
        November 2007, we subleased approximately 60% of the Huntington Beach offices
        and in January 2008, the property managers took over the balance of the office
        space. As a part of the lease surrender agreement we are required to pay
        $5,350
        a month through March 2008.
 
 In
        January 2008, we entered into an agreement to lease 3,805 square feet of
        office
        space in Santa Ana, California to house our operations. We pay approximately
        $5,327 per month in rent under this lease, which expires in January
        2009.
  7
 
 **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. In March
        2008,
        we received a letter threatening a lawsuit regarding a commission that was
        potentially due when we subleased a portion of our office space in Huntington
        Beach, California and when the landlord agreed to take over the balance of
        the
        space. There can be no assurance that this or any future actions, if they
        occur,
        would not have a material adverse effect on the business.
 
 **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, 2007.
  8
 
 **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 EXSM.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, 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
              
              
              0.82
              
              
              0.17Third
                  Quarter
              
              
              0.44
              
              
              0.05Fourth
                  Quarter
              
              
              0.42
              
              
              0.06
 
 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 1, 2008, there were 125,507,944 shares of our common stock outstanding,
        owned by approximately 442 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 2007.
  9
 
 **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 $12,033,342 and $9,302,156 for the years ended December 31, 2006 and 2007,
        respectively. Further, we may incur significant losses through 2008 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.
  **Due
        to our continual dependence upon outside financing, there is substantial
        doubt
        as to whether we can continue as a going concern beyond December 2008 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 $29,572,276 at December 31, 2007. Through December
        2007,
        we have been continually dependent upon equity injections raised through
        private
        stock and convertible debt offerings and equipment leases 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, and subsequently shut down, a limited beta version of our
        Foldera
        product in the United States, we have not launched our Foldera product into
        European Union ISP market and there can be no assurance that our product
        will be
        accepted by the European Union ISP market. If the market finds any or all
        of our
        products undesirable, we will be required to make potentially time-consuming
        and
        costly changes to the Foldera product, 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.
  **Our
        senior secured convertible debentures contain financial and other restrictive
        covenants that limit our ability to engage in activities that may be in our
        long-term best interests.**
 
 Our
        senior secured convertible debentures contain financial and other restrictive
        covenants and events of default that limit our ability to engage in activities
        that may be in our long-term best interests. These restrictions include,
        among
        other things, limits on our ability to make investments, pay dividends, incur
        debt, sell assets, or enter into certain change of control transactions.
        If we
        take or fail to take any action that results in an event of default and such
        event of default is cured or waived, the holders of our senior secured
        convertible debentures may, among other things, accelerate our debt.
 
 **If
        we are obligated for any reason to repay our outstanding senior secured
        convertible debentures, we would be required to deplete our working capital
        and/or raise additional funds. If we are unable to repay our senior secured
        convertible debentures, the holders of these debentures would be entitled
        to
        foreclose on substantially all of our assets which secure the repayment of
        such
        debentures.**
 
 On
        December 7, 2007, we issued and sold up to $7,000,000 million in aggregate
        principal amount of senior secured convertible debentures. These debentures
        are
        due and payable on the earlier of (i) two years from the last draw down or
        (ii)
        November 1, 2010, unless sooner converted into shares of our common stock.
        Upon
        the occurrence of an event of default or change of control, we could be required
        to repay these debentures prior to maturity. If we are obligated for any
        reason
        to repay these debentures in full, we would be required to use our limited
        working capital and/or raise additional funds. If we are unable to repay
        these
        debentures when required, the holders of these debentures could foreclose
        on
        substantially all of our assets which secure the repayment of such debentures.
  10
  **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 websites 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 websites. 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 websites that seek to increase their
        search-related traffic. These destination websites 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 our 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.
  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 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 portion of our revenues from integrated search advertising.
        Advertisers can generally terminate their contracts at any time and advertisers
        will not continue to do business with European Union ISPs or us if their
        investment in advertising does not generate sales leads and, ultimately,
        customers.
  **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 business. 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.
  11
  **We
        intend to outsource critical billing functions to the third-party ISPs and
        service providers 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
        have entered into an arrangement with Tiscali Services SpA (“Tiscali”) to
        outsource our European Union (“EU”) billing and collection functions. However,
        there can be no assurance that the arrangement will be successfully completed
        and implemented. We intend to enter into similar agreements and billing
        arrangements with other third-party EU ISPs.
  If
        we do
        not successfully implement this billing 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 Tiscali and/or other third-party service providers
        on a
        timely basis, or at all. Even if this integration is completed on a timely
        basis, Tiscali and/or other third-party service providers may not perform
        to
        agreed upon service levels. Failure of Tiscali and/or other third-party service
        providers 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.
  **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 Hugh Dunkerley, our President and Chief Executive
        Officer and certain key employees and consultants, including Reid Dabney
        and Ken
        Loyd. We have not entered into employment agreements with our key personnel
        and
        our failure to retain Messrs. Dunkerley, Dabney and Loyd in particular, or
        to
        attract and retain additional qualified personnel, could adversely affect
        our
        business, financial condition and results of operations.
  12
  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 (both software and hardware) has to
        perform well and be reliable. The greater the user traffic and complexity
        of our
        products and services, the more infrastructure we will need. We expect to
        spend
        substantial amounts to purchase and/or lease equipment along with upgrading
        our
        technology and network infrastructure to handle traffic in order to roll
        out new
        EU 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.
  **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.
  13
  **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.
  14




**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.




**Each
      of Vision Opportunity Master Fund, Ltd.,**  **and
      our founder 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.**




Vision
      Opportunity Master Fund, Ltd., and Richard Lusk, our founder and chairman,
      currently beneficially own approximately 31.0% and 24.0%, respectively of our
      common stock. Each 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, each of Vision Opportunity Master
      Fund, Ltd., and 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 2007, for example, the closing market
      price of our shares ranged from a low of $0.05 per share to a high of $1.07
      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 there is no
      assurance 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,
      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.




15





**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, 2007 and so are considered a
      development stage company. We ended 2007 with $1,731,655 million of cash on
      our
      balance sheet. Given our current cash usage rate, a risk exists that our
      available cash on hand and the cash we anticipate generating from operating
      activities will be insufficient to sustain our operations. To address the
      potential cash shortfall situation, on December 7, 2007, we entered into a
      Securities Purchase Agreement with Vision Opportunity Master Fund, Ltd.,
      (“Vision”) an institutional investor, to provide up to $7,000,000 in financing
      for us. Under the agreement, the investor agreed to provide us with $1,000,000
      million at closing pursuant to an 8% Senior Secured Convertible Debenture,
      with
      an additional $1,000,000 available to us at Vision’s sole discretion on January
      1, 2008, and $500,000 available to us at Vision’s sole discretion every 30-day
      period thereafter through November 1, 2008. As of March 1, 2008 we received
      $1,000,000 in convertible debt funding from Vision, but there is no assurance
      that we will receive any additional funding from Vision under this Securities
      Purchase Agreement. Additionally, we pledged all of our assets to Vision in
      connection with the Senior Secured Convertible Debenture offering. Furthermore,
      we have historically been able to issue shares, warrants or stock options to
      pay
      for certain operating expenses. We believe that our pro-forma working capital
      on
      hand as of the date of this report, along with our ability to raise capital
      and
      meet certain operating expense obligations through the issuance of stock or
      stock equivalents, will provide us with the capital we need through the end
      of
      2008. However, we believe that our ability to operate beyond the end of 2008
      will require us to raise significant additional capital, of which there can
      be
      no assurance. We are, therefore, actively seeking additional debt or equity
      financing until we become cash flow positive.





Additionally,
      we have made the following changes to reduce our operating costs from an average
      of $750,000 to approximately $200,000 a month during the year ended December
      31,
      2007:





·
            Reduced
                head count from a peak level 65 employees to six at the end of 2007,
                which
                helped us cut payroll related expenses by approximately $4,000,000
                per
                year.


·
            We
                relocated our offices from a 15,154 square foot office space in Huntington
                Beach, California to a 3,805 square foot office space in Santa Ana,
                California. Additionally we closed our three satellite offices in
                Chicago,
                IL, Bellevue, WA and Albuquerque, NM. These changes will generate
                savings
                of approximately $378,000 a year.


·
            We
                have terminated our relationship with two consultants which resulted
                in
                savings of approximately $240,000 per
                year.


·
            We
                have eliminated the $2,500 per month cash payment to the independent
                members of our board of directors until we are on a cash flow breakeven
                basis.





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 intend to release a more robust
      version of our product during 2008 with commensurate revenue being generated
      at
      that time.




Due
      to
      the ongoing cost of operations and the uncertainty of generating enough revenues
      to cover those operating expenses, there is a probability that we 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.




16




**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 software licensing fees.




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 software licensing fees. Revenue will be
      recognized when all obligations have been performed pursuant to the terms of
      the
      formal arrangement and collectibility is reasonably assured.




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




Included
      in property and equipment is approximately $517,433 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 $325,785.




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 $68,508 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, 2007, the cash balances held at financial
      institutions were either in excess of federally insured limits or not subject
      to
      the federal insurance system.




**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.





We
      also
      adopted FAS 142, “Goodwill and Other Intangible Assets,” which recognizes
      impairment testing for those long-lived assets that are not subject to
      amortization. We currently do not have any long-lived assets that are not
      amortized. However, we do 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.





**Accounting
      for Stock-Based Compensation.** Effective January 1, 2006, we adopted Statement of Financial Accounting
      Standards No. 123-R, “Share-Based Payment,” ** or
      SFAS
      No. 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 No. 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 No. 123-R. We have applied SAB 107 in our
      adoption of SFAS No. 123-R.




We
      adopted SFAS No. 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 No. 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
      No. 123-R. There were no stock options outstanding as of December 31,
      2005.




17




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




**Results
      of Operations**




**Comparison
      of the Years ended December 31, 2007 and December 31, 2006**




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, 2007 decreased to $9,548,794,
      or $(0.08) per share from $12,181,963, or $(0.12) per share, for the year ended
      December 31, 2006. The overall decrease in expenses, for the year ended December
      31, 2007 as compared to the year ended December 31, 2006, of $2,633,169, or
      approximately 21.6% over the prior period, is due to the following decreases
      in:





·
            equity-based
                compensation paid to consultants declined by $1,273,985 or 76% in
                2007 to
                $408,557 as compared to $1,682,542 in
                2006,





·
            legal
                and accounting expenses declined by $239,800, or 28% to $605,755
                in 2007
                as compared to $845,555 in 2006,





·
            travel
                expenses declined by $185,263, or 74% to $63,664 in 2007 as compared
                to
                $248,927 in 2006,





·
            investor
                relations expense declined by $176,574, or 31% to $393,124 in 2007
                as
                compared to 569,698 in 2006,





·
            payroll
                related costs declined by $172,093, or 4% to $3,715,175 in 2007 as
                compared to $3,887,268 in 2006,




·
            employee
                options expense declined by $152,942, or 14% to $924,259 in 2007
                as
                compared to $1,077,201 in 2006,





·
            professional
                fees declined by $110,000, or 92% to $10,000 in 2007 as compared
                to
                $120,000 in 2006, and





·
            recruiting
                costs declined by $105,212, or 85% to $19,055 in 2007 as compared
                to
                $124,267 in 2006.




The
      above
      decreases were a result of the following factors:





·
            Equity-based
                compensation paid to consultants declined as we issued 120,000 shares
                for
                service in 2007 as compared to 427,500 in 2006. Additionally, no
                warrants
                were issued to consultants in 2007 while 460,000 warrants were issued
                in
                2006. In 2007, we issued shares to investment management and marketing
                consultants, while in 2006 the shares were issued to experts in the
                technology, business management and investor relations areas,





·
            Legal
                and accounting services costs declined as we reduced our dependence
                on
                attorney’s and accountants,





·
            Travel
                expenses costs declined as we cut our out-of-state staff and reduced
                our
                investor relations activity,





·
            Investor
                relations costs declined as we instituted cost cutting measures and
                reduced our investor relations
                activity,





·
            Payroll
                costs declined as we reduced our head-count from 50 at the beginning
                of
                2007 to a total of six employees by the end of
                2007,





·
            Employee
                options expense declined as we reduced our staff through
                lay-offs,





·
            Professional
                fees were reduced as we terminated a contract with a consultant in
                January
                2007, and





·
            Recruiting
                costs declined as we reduced our hiring
                activity.





The
      above
      expense reductions were somewhat offset by the following increases:





·
            Marketing
                and promotion increased by $100,380, or 159% to $163,387 in 2007
                as
                compared to $63,007 in 2006,





·
            Hosting
                services increased by $79,042, or 72% to $189,492 in 2007 as compared
                to
                $110,450 in 2006,





·
            Employee
                benefits increased by $7,002, or 5% to $161,522 in 2007 as compared
                to
                $154,520 in 2006.





18





The
      above
      increases were a result of the following factors:





·
            In
                anticipation of the potential public release of our product, we allocated
                a larger budget for marketing and promotion, thus increasing the
                cost,





·
            In
                anticipation of the potential public release of our product, we expanded
                our hosting services and increased back-up capacity,
                and





·
            The
                small increase in employee benefits represents increase in cost for
                employee health care.




**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 our employee stock option and purchase plans.





Stock
      compensation expense measured in accordance with SFAS No. 123-R totaled
      approximately $924,259, or $(0.01) per basic and fully diluted share for the
      year ended December 31, 2007. The adoption of SFAS No. 123-R resulted in
      increased expense of approximately $924,259 as compared to the stock
      compensation expense that would have been recorded pursuant to APB No. 25.
      During the year ended December 31 2006, we recorded $1,077,201 in employee
      stock
      option expense.





**Net
      Loss** .
      Our net
      loss for the year ended December 31, 2007 declined to $9,302,156 or $(0.08)
      per
      share, from $12,033,342 or $(0.12) per share, for the year ended December 31,
      2006. The overall decline in net loss of $2,731,186, or approximately 22.7%
      over
      the prior year period, is primarily due to declines in equity-based compensation
      to consultants, legal and accounting, travel expenses, investor relations,
      payroll related costs, employee options expense, professional fees and
      recruiting costs. These reductions were somewhat offset by increases in
      marketing and promotion, hosting services and employee benefits.




**Assets.** Assets
      declined by $5,600,749 to $2,258,344 as of December 31, 2007, or approximately
      71.3%, from $7,859,093 as of December 31, 2006. This decline was due primarily
      to the decline in cash and cash equivalents by $4,035,701 to $1,731,655 from
      $5,767,356 or 70.0% as we funded our loss for the year, the $1,398,769 decline
      in fixed assets to $292,837 or 82.7% from $1,691,606 as we recognized a $787,171
      impairment loss on property and equipment and continued to depreciate the
      property and equipment and the $155,420 decrease in prepaid expenses and other
      current assets to $143,325 or 52.0% from $298,745 as we reduced our operating
      costs significantly.





**Liabilities.** Total
      liabilities decreased by $465,907 to $1,406,294 as of December 31, 2007, or
      approximately 24.9%, from $1,872,201 as of December 31, 2006. The decrease
      was
      primarily due to a decrease of $637,177 to $249,220 or 71.9% from $886,397
      as of
      December 31, 2006 in accounts payable, accrued expenses and payroll-related
      expenses as we substantially reduced our operational expenses, registration
      rights penalties declined by $450,000 to zero during 2007 as compared to
      $450,000 in 2006 and shares to be issued as penalty shares declined by $326,657
      to zero during 2007 as compared to $326,657 in 2006. These declines were
      somewhat offset by an increase in convertible debt financing of $956,875 to
      $956,875 as of December 31, 2007, from zero as of December 31,
      2006.




**Stockholders’
      Equity.** Stockholders’ equity decreased by $5,134,842 to $852,050 as of December 31,
      2007, or approximately 85.8% from $5,986,892 as of December 31, 2006. The
      decrease was primarily due to a net loss of $9,280,408 during the year ended
      December 31, 2007 which was somewhat offset by financing activity which included
      two private equity placement offerings totaling $1,978,021, net of offering
      costs, and the exercise of warrants.




**Liquidity
      and Capital Resources**




**General.** Overall,
      we had a decline in cash flows of $4,035,701 for the year ended December 31,
      2007 resulting from $6,880,338 cash used in operating activities, $69,481 of
      cash used in investing activities, offset by $2,914,118 of cash provided by
      our
      financing activities. At December 31, 2007, our cash balance was $1,731,655
      as
      compared to $5,767,356 for the prior year, a decline of $4,035,701 or 70%.
      The
      cash used in our operating activities was primarily due to the net loss for
      the
      year end December 31, 2007 of $9,302,156 which was somewhat offset by cash
      provided from our financing activities which was primarily due to the
      $1,978,021, net of offering cost, raised from two private equity placement
      offerings during 2007 and $956,875, net of cost, raised from a convertible
      debt
      financing.





**Cash
      Flows from Operating Activities.** Net cash
      used in operating activities of $6,880,338 for the year ended December 31,
      2007
      was primarily attributable to a net loss of $9,302,156, the adjustments to
      reconcile the net loss to net cash, including depreciation and amortization
      expense of $790,908, employee options expense of $924,259, impairment of
      property and equipment of $787,171, deferred expense - warrants of $234,713,
      prepaid expenses and other current assets of $155,420, issuance of shares for
      services of $77,300, registration rights liability of $57,488, issuance of
      stock
      options for services of $23,402, deposits of $10,859 and discount on convertible
      debentures of $96 partially offset by a decrease in accounts payable, accrued
      expenses and other liabilities of $517,094 and change in fair value of penalty
      shares of $122,704.




19





**Cash
      Flows from Investing Activities.** Net cash
      used in investing activities of $69,481 for the year ended December 31, 2007
      was
      primarily attributable to an investment in fixed assets.




**Cash
      Flows from Financing Activities.** Net cash
      of $2,914,118 generated in financing activities in the year ended December
      31,
      2007 was primarily due to the issuance of shares for cash of $1,978,021,
      proceeds from convertible debt financing of $956,875 and receipts from exercise
      of warrants of $98,000, partially offset by $118,778 payment for leased
      equipment.




**Financing.** We have
      not generated any revenues as of December 31, 2007 and so are considered a
      development stage company. We ended 2007 with $1,731,655 of cash on our balance
      sheet. Given our current cash usage rate, 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.





To
      address the potential cash shortfall situation, we sold 1,666,667 shares of
      our
      common stock to the Vision Opportunity Master Fund Ltd. (“Vision”) on May 10,
      2007 at $0.60 per share and received $1,000,000.,On July 27, 2007, we entered
      into Amendment No. 1 to the Common Stock Purchase Agreement, dated as of May
      4,
      2007, by and between us and Vision. Pursuant to the terms of the July 27
      amendment, we sold 6,666,666 shares of our Common Stock to Vision at price
      of
      $0.15 per share, or an aggregate purchase price of $1,000,000.





On
      December 7, 2007, we entered into a Securities Purchase Agreement with Vision
      to
      provide up to $7,000,000 in financing for us. Under the agreement, Vision agreed
      to provide us with $1,000,000 at closing pursuant to an 8% Senior Secured
      Convertible Debenture, with an additional $1,000,000 available to us on January
      1, 2008, and $500,000 available to us every 30-day period thereafter through
      November 1, 2008. Each drawdown request would be at our sole discretion,
      provided there are no events of default then existing under the Senior Secured
      Convertible Debenture. Following any drawdown request, Vision will have three
      business days to decide, in its sole discretion, whether to fund the drawdown.
      Vision may also accelerate the drawdown periods and advance funds earlier than
      scheduled. The Senior Secured Convertible Debenture (i) bears interest at 8%
      per
      year, paid quarterly in cash, (ii) has a maturity of two years following the
      final drawdown closing, (iii) is convertible at Vision’s option into shares of
      our common stock at $0.15 per share, and is automatically convertible at our
      option if our common stock trades above $0.50 per share for each of any 20
      consecutive trading days, and (iv) is secured by all of our assets including
      inventory, receivables, unencumbered equipment and intellectual property under
      the terms of a Security Agreement. We also agreed to issue to Vision five-year
      Common Stock Purchase Warrants to purchase up to 20,000,000 shares of our common
      stock (assuming full financing, but pro rata as to actual amounts drawn down)
      at
      an exercise price of $0.35 per share. We expect to use the net proceeds of
      the
      financing for our working capital requirements. As of March 1, 2008, we have
      received a total of $1,000,000 from Vision, and there can be no assurance that
      we will receive any additional funding from Vision under this Securities
      Purchase Agreement.





Furthermore,
      we have historically been able to issue shares, warrants or stock options to
      pay
      for certain operating expenses. We believe that our pro-forma working capital
      on
      hand as of the date of this report, along with our ability to raise capital
      and
      meet certain operating expense obligations through the issuance of stock or
      stock equivalents, will provide us with the capital we need through year end
      2008. However, we believe that our ability to operate beyond the end of 2008
      will require us to raise additional capital, of which there can be no assurance.
      We are, therefore, actively seeking additional debt or equity financing until
      we
      become cash flow positive.





**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.




**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, 2007, we issued 14,704,748 shares and zero are
      to be
      issued as compared to 23,517,476 shares were issued and 424,567 shares were
      to
      be issued during the year ended December 31, 2006, respectively.





As
      of
      December 31, 2007, we had entered into seven capital leases with various
      equipment suppliers in the amount of $517,433, of which $200,200 was outstanding
      as of December 31, 2007.





**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 2008, 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.




20





**Recent
      Developments**





On
      December 7, 2007, we entered into a Securities Purchase Agreement with Vision
      to
      provide up to $7,000,000 in financing for us. Under the agreement, Vision agreed
      to provide us with $1,000,000 at closing pursuant to an 8% Senior Secured
      Convertible Debenture, with an additional $1,000,000 available to us on January
      1, 2008, and $500,000 available to us every 30-day period thereafter through
      November 1, 2008. Each drawdown request would be at our sole discretion,
      provided there are no events of default then existing under the Senior Secured
      Convertible Debenture. Following any drawdown request, Vision will have three
      business days to decide, in its sole discretion, whether to fund the drawdown.
      Vision may also accelerate the drawdown periods and advance funds earlier than
      scheduled. The Senior Secured Convertible Debenture (i) bears interest at 8%
      per
      year, paid quarterly in cash, (ii) has a maturity of two years following the
      final drawdown closing, (iii) is convertible at Vision’s option into shares of
      our common stock at $0.15 per share, and is automatically convertible at our
      option if our common stock trades above $0.50 per share for each of any 20
      consecutive trading days, and (iv) is secured by all of our assets including
      inventory, receivables, unencumbered equipment and intellectual property under
      the terms of a Security Agreement. We also agreed to issue to Vision five-year
      Common Stock Purchase Warrants to purchase up to 20,000,000 shares of our common
      stock (assuming full financing, but pro rata as to actual amounts drawn down)
      at
      an exercise price of $0.35 per share. We expect to use the net proceeds of
      the
      financing for our working capital requirements. As of March 1, 2008, we have
      received a total of $1,000,000 from Vision, and there can be no assurance that
      we will receive any additional funding from Vision under this Securities
      Purchase Agreement.




The
      Senior Secured Convertible Debenture contains customary events of default,
      as
      well as events based on our possible failure to achieve specified net revenue
      thresholds. Assuming aggregate drawdowns under the Senior Secured Convertible
      Debenture of the full $7,000,000, we will be in default under the Senior Secured
      Convertible Debenture if we do not report net revenue of at least (i) $250,000
      for the six months ending June 30, 2008, (ii) $600,000 for the nine months
      ending September 30, 2008, (iii) $2,500,000 for the 12 months ending December
      31, 2008, or (iv) $2,000,000 for any fiscal quarter commencing with the quarter
      ending March 31, 2009; provided, that if aggregate drawdowns are less than
      $7,000,000, but are at least $3,500,000, each net revenue threshold date is
      extended by six months. The net revenue event of default will be inapplicable
      if
      total drawdowns are less than $3,500,000.




Both
      the
      conversion price under the Senior Secured Convertible Debenture and the exercise
      price under the Warrants are subject to “full-ratchet” price protection in the
      event of stock issuances below their respective conversion or exercise prices,
      except for specified exempted issuances including grants of stock options and
      stock issuances to strategic partners.




We
      agreed
      to grant registration rights to the investor, by filing a registration statement
      covering the shares of common stock issuable upon the conversion of the Senior
      Secured Convertible Debenture and exercise of the Common Stock Purchase Warrants
      within 45 days after the final drawdown closing, and obtaining effectiveness
      of
      the registration statement within 150 days after the final drawdown closing
      (or
      180 days in the event of a “full review” by the SEC). Our officers and directors
      also agreed to execute lock-up letter agreements prohibiting sales of our common
      stock by them for one year after the effectiveness of the foregoing registration
      statement and limiting such sales for two years thereafter.





In
      November 2007, we entered into a six-month consulting agreement with SECP,
      LLC
      for the purpose of providing strategic and financial advisory services. Pursuant
      to the contract, the Company agreed to pay SECP $8,000 per month throughout
      the
      term of the agreement that shall accrue over the term of the agreement and
      be
      paid as a single final payment upon the successful execution of a specified
      transaction. If no transaction is concluded over the term of the agreement,
      the
      consultant will receive 50% of the accrued amount as final payment at the end
      of
      the term. If and when a successful transaction is completed, the consultant
      is
      also eligible to receive 4-6% of the aggregate value of the transaction. The
      contact is cancelable by either party upon 30-days written notice.





In
      February 2008, we entered into a one-year consulting agreement with Monarch
      Bay
      Associates, LLC (“Monarch”) for the purpose of providing investment banking
      services. Pursuant to the contract, we agreed to pay Monarch $10,000 per month
      for the first three months of the contract and to pay $5,000 per month for
      the
      balance of the contract.  The contract is cancelable by either party upon
      30-days written notice after the first three months of the contract have
      transpired.





**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.




21




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.(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.




22





**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,




·
            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 this 2007 Form 10-KSB to be a
      complete discussion of all potential risks or uncertainties *.*




23





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




Our
      audited financial statements for the year ended December 31, 2007, are included
      as a separate section of this Annual Report beginning on page F-1.





24





**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, 2007, effective February 22, 2007.





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




**Evaluation
      of Disclosure Controls and Procedures**




Our
      management has evaluated, under the supervision and with the participation
      of
      our Chief Executive Officer and Chief Financial Officer, the effectiveness
      of
      our disclosure controls and procedures as of the end of the period covered
      by
      this report pursuant to Rule 13a-15(b) under the Securities Exchange Act of
      1934 (the *“Exchange
      Act”* ).
      Based
      on the evaluation, our Chief Executive Officer and Chief Financial Officer
      have
      concluded that, as of December 31, 2007, our disclosure controls and procedures
      are not effective.


**Managements'
      Annual Report on Internal Control over Financial Reporting**




Management
      is responsible for establishing and maintaining adequate internal control over
      financial reporting of the Company. Internal control over financial reporting
      is
      a process designed by, or under the supervision of, our chief executive and
      chief financial officers and effected by our board of directors, management
      and
      other personnel, to provide reasonable assurance regarding the reliability
      of
      financial reporting and the preparation of financial statements for external
      purposes in accordance with generally accepted accounting
      principals.





Management,
      with the participation of our principal executive officer and principal
      financial officer, has evaluated the effectiveness of our internal control
      over
      financial reporting as of December 31, 2007 based on criteria established under
      the COSO framework, an integrated framework for evaluation of internal controls
      issued to identify the risks and control objectives related to the evaluation
      of
      the control environment by the Committee of Sponsoring Organizations of the
      Treadway Commission.





Based
      on
      our evaluation described above, management has concluded that our internal
      control over financial reporting was not effective as of December 31, 2007.
      Management has determined that (i) our inadequate staffing and supervision
      and
      (ii) the significant amount of manual intervention required in our accounting
      and financial reporting process are material weaknesses in our internal control
      over financial reporting.





This
      annual report does not include an attestation report of the Company’s registered
      public accounting firm regarding internal control over financial reporting.
      Management’s report was not subject to attestation requirements by our
      registered public accounting firm pursuant to temporary rules of the Securities
      and Exchange Commission that permit the Company to provide only management’s
      report in this annual report.





**Changes
      in Internal Control Over Financial Reporting**




There
      was
      no change in our internal control over financial reporting during the quarter
      ended December 31, 2007 that has materially affected, or is reasonably
      likely to materially affect, our internal control over financial
      reporting.





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




None.




25





**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 27, 2008:




**Name**
            
            **Age**
            
            **Position**Hugh
                Dunkerley
            
            34
            
            President
                and Chief Executive OfficerSuyen
                Castellon
            
            34
            
            Secretary
                and DirectorReid
                Dabney
            
            56
            
            Senior
                Vice President and Chief Financial OfficerRichard
                Lusk
            
            52
            
            Chairman
                of the BoardDanilo
                Cacciamatta
            
            62
            
            DirectorJnan
                Dash
            
            60
            
            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:




**Hugh
      Dunkerley** became
      our President and Chief Executive Officer on October 31, 2007. He has served
      as
      our Chief Operating Officer from June 2007 to October 31, 2007 and as our Vice
      President of Corporate Finance from June 2006 to June 2007. Prior to joining
      us,
      Mr. Dunkerley served as Vice President of Small-Mid Cap Equities at Hunter
      Wise
      Financial Group, LLC from January 2006 to July 2006, specializing in investment
      banking advisory services to US and EU companies. Mr. Dunkerley served as
      Director of Corporate Development at ChromaDex Inc. from October 2002 to
      December 2005. Mr. Dunkerley has served as a Director of ChromaDex, Inc. since
      December 2005. Mr. Dunkerley received his undergraduate degree from the
      University of Westminster, London and earned a MBA from South Bank University,
      London. Mr. Dunkerley also holds Series 7 and 66 licenses from the Financial
      Industry Regulatory Authority (FINRA).





**Suyen
      Castellon** became
      a member of our board in February 2006. She was a director and secretary of
      Taskport since its inception in 2001. Suyen Castellon is married to Richard
      Lusk, our Chairman of the Board and Director.




**Reid
      Dabney** ****** became
      our Senior Vice President and Chief Financial Officer in February 2006. Mr.
      Dabney was Taskport’s Chief Financial Officer since March 2005. From July 2003
      to November 2005, Mr. Dabney was engaged by CFO911 as a business and financial
      consultant. From January 2003 to August 2004, 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. Mr. Dabney has served
      as a Director of ChromaDex, Inc. since October 2007. 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. Mr. Dabney also holds Series 7, 24
      and 63 licenses from FINRA.




**Richard
      Lusk** became a
      member of our board in February 2006 and served as our Chairman, President
      and
      Chief Executive Officer from February 2006 until October 2007 when he became
      exclusively Chairman of the Board. 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. Under
      Mr. Lusk’s direction, we have been attempting to pioneer a
      sophisticated on-demand information management systems. Prior to founding
      Foldera, Mr. Lusk was a founding shareholder of Predictive Technologies and
      Oanda.com, the latter being a foreign exchange website which serviced 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.





**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.




26




**Jnan
      Dash** became a
      director in June 2007. Prior to joining the board, Mr. Dash served as Group
      Vice
      President of Systems Architecture and Technology at Oracle Corporation. He
      is
      also a 16-year veteran of IBM, where he was in charge of development of IBM’s
      DB2 family of products, as well as head of database strategy, architecture
      and
      technology. At
      Oracle, he lead the planning and market introduction of Oracle's flagship server
      and mid-tier products like Oracle 8i and 9i. With a BS in Engineering and an
      MS
      in Systems Design from the University of Waterloo, Ontario, Mr. Dash is a
      Chartered Member of TIE Silicon Valley and sits on the boards and advisory
      boards of a number of corporations, including Sonata.





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 Aspinall, as specified in Section 3(a)(58)(B) of the
      Securities Exchange Act. Upon Mr. Aspinall’s resignation in June 2007, Jnan Dash
      joined the committee as a member. Messrs. Cacciamatta and Dash 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 of 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;




·
            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.




27




**Compensation
      Committee.** We
      established a compensation committee in December 2006, comprised of Simon
      Aspinall (Chairman) and Danilo Cacciamatta (member). Upon Mr. Aspinall’s
      resignation in June 2007, Mr. Cacciamatta became the Chairman and Jnan Dash
      joined the committee as a member. 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 Michael Arrington, chairman and sole member. Upon Mr. Arrington’s
      resignation in June 2007, Danilo Cacciamatta became the chairman and Jnan Dash
      joined the committee as a 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;·
              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.




28




**Director
      Independence**





Each
      of
      Danilo Cacciamatta and Jnan Dash 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 assumed the Chairmanship of the
      compensation committee in June 2007. Mr. Dash has served as a member of the
      compensation and audit committees since June 2007. Since June 2007, Mr.
      Cacciamatta has served as the chairman of the nominations and corporate
      governance committees while Mr. Dash has served as a member of these committees.
      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. Cacciamatta
      and
      Dash.




On
      June
      27, 2007, our Board of Directors, acting upon a recommendation of its Nominating
      and Corporate Governance Committee, appointed Jnan Dash to serve as a director.
      Mr. Dash will serve for a term commencing on June 27, 2007 and expiring at
      the
      next annual meeting of our stockholders. Mr. Dash will also serve as a member
      of
      the Audit Committee, Compensation Committee and Nominating and Corporate
      Governance Committee of the Board of Directors. The Board of Directors
      determined that Mr. Dash is “independent” under the rules of The NASDAQ Stock
      Market LLC and Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as
      amended. There are no arrangements or understandings between Mr. Dash and
      any other person pursuant to which he was selected as a director.





**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., 2952 Daimler Street,
      Santa Ana, California 92705. 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.




29





**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,
      2007:





**Summary
      Compensation Table**




Name
                and Principal Position
              (a)
            
            Year
            
            Salary
              ($)
              (b)
            
            Bonus
              ($)
              (c)
            
            Stock
                Awards
              ($)
              (d)
            
            Option
                Awards
              ($)
              (e)
            
            Non-Equity
              Incentive
                Plan
              Compensation
              ($)
              (f)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
              (g)
            
            All
                Other Compensation
              ($)
              (h)
            
            Total
              ($)
              (i)Hugh
                Dunkerley, CEO
            
            
            2007
            
            
            138,077
            
            
            -
            
            
            -
            
            
            27,001
            
            
            -
            
            
            -
            
            
            -
            
            
            165,0782006
            
            
            57,695
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            57,695Richard
                Lusk, former CEO and current
              Chairman of the Board
            
            
            2007
            
            
            152,244
            
            
            -
            
            
            -
            
            
            122,665
            
            
            -
            
            
            -
            
            
            -
            
            
            274,9092006
            
            
            254,819
            
            
            
            
            
            
            
            
            77,084
            
            
            
            
            
            
            
            
            
            
            
            331,903Reid
                Dabney, CFO
            
            
            2007
            
            
            154,200
            
            
            -
            
            
            -
            
            
            48,001
            
            
            -
            
            
            -
            
            
            -
            
            
            202,2012006
            
            
            146,845
            
            
            
            
            
            
            
            
            40,673
            
            
            
            
            
            
            
            
            
            
            
            187,518





The
      Summary Compensation Table serves as the principal disclosure vehicle regarding
      executive compensation paid in the last two fiscal years. This table shows
      the
      named executive officers’ total compensation deemed “earned” or potentially
“earned” for each of the last three years, whether or not actually paid
      out.





(a)
      The
      three most highly compensated executive officers, on the basis of total
      compensation for the last fiscal year.




(e)
      Options, stock appreciation rights and similar equity-based compensation
      instruments that have option-like features.





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




Option
                Awards
            
            Stock
                AwardsName
                (a)
            
            Number
              of
              Securities
                Underlying Unexercised Options
              (#)
              (b)
            
            Number
                of Securities Underlying Unexercised Options
              (#)
              (c)
            
            Equity
                Incentive Plan Awards: Number of Securities Underlying Unexercised
                Unearned Options
              (#)
              (d)
            
            Option
                Exercise Price
              ($)
              (e)
            
            Option
                Expiration Date
              (f)
            
            Number
                of Shares or Units of Stock That Have Not Vested
              (#)
              (g)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested
              ($)
              (h)
            
            Equity
                Incentive Plan Awards: Number of Unearned Shares, Units or Other
                Rights
                That Have Not Vested
              (#)
              (i)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              ($)
              (j)Hugh
                Dunkerley, CEO
            
            
            100,003
            
            
            99,997
            
            
            -
            
            
            0.15
            
            
            2/12/2016
            
            
            -
            
            
            -
            
            
            -
            
            
            --
            
            
            2,800,000
            
            
            -
            
            
            0.15
            
            
            12/6/2017
            
            
            -
            
            
            -
            
            
            -
            
            
            -Richard
                Lusk, former CEO and current
              Chairman of the Board
            
            
            1,377,769
            
            
            222,231
            
            
            -
            
            
            0.15
            
            
            2/12/2016
            
            
            -
            
            
            -
            
            
            -
            
            
            -Reid
                Dabney, CFO
            
            
            516,673
            
            
            83,327
            
            
            -
            
            
            0.15
            
            
            2/12/2016
            
            
            -
            
            
            -
            
            
            -
            
            
            --
            
            
            2,400,000
            
            
            -
            
            
            0.15
            
            
            12/6/2017
            
            
            -
            
            
            -
            
            
            -
            
            
            -





30





The
      Outstanding Equity Awards at Fiscal Year-End Table is designed to disclose
      information regarding outstanding previously granted awards that the named
      executive officers may or may not realize but which represent potential
      compensation amounts. The table is divided between option awards and stock
      awards.




The
      columns applicable to unexercised options, stock appreciation rights, and
      similar instruments as of fiscal year end with option-like features are as
      follows:





(a)
      Named
      executive officer




(b)
      The
      number of securities underlying unexercised instruments that are
      exercisable.




(c)
      The
      number of securities underlying unexercised instruments that are
      unexercisable.




(e)
      The
      exercise or base price.




(f)
      The
      option expiration date.





**Employment
      Agreements**




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




**2005
      Stock Option Plan**




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, its parents or subsidiaries
      to
      purchase our common stock.





Our
      Board
      of Directors approved an amendment to our 2005 Stock Option Plan (the “Plan”) on
      December 6, 2007 to, among other things, increase the number of shares of common
      stock reserved for issuance under the plan from 12,000,000 to
      18,800,000.





Also
      on
      December 6, 2007, our Board of Directors approved an amendment to the
      outstanding stock options under the Plan held by the Company’s named executive
      officers and non-employee directors to reduce the exercise price of such stock
      options to $0.15 per share. The $0.15 per share exercise price is 150% of the
      closing price of the Company’s common stock on December 6, 2007 as reported on
      the Over-the-Counter Bulletin Board. Prior to such amendments, the outstanding
      stock options held by the Company’s named executive officers and non-employee
      directors under the Plan had an average exercise price of $0.51 per
      share.





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, 2007, there were outstanding stock options to purchase 17,960,000
      shares of 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. The Board of Directors
      approved an amendment to the Foldera, Inc. 2005 Stock Option Plan on December
      6,
      2007 to, among other things, increase the number of shares of common stock
      reserved for issuance under the Plan from 12,000,000 to 18,800,000. As of the
      date hereof, of the 18,800,000 shares of common stock that may be issued under
      the 2005 Plan, 17,960,000 shares of common stock are covered by outstanding
      awards and 840,000 shares 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.




31





**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.




**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**





Beginning
      in January 2007, our non-employee directors have agreed to forego receiving
      cash
      compensation until we reach a cash flow breakeven position.





The
      table
      below summarizes the compensation that we paid to non-employee directors for
      the
      fiscal year ended December 31, 2007.




**Director
      Compensation**




Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards
              ($)
            
            Non-Equity
                Incentive Plan Compensation
              ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation
              ($)
            
            Total
                ($)Danilo
                Cacciamatta
            
            
            -
            
            
            
            
            
            27,000
            
            
            
            
            
            
            
            
            
            
            
            27,000Jnan
                Dash
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            -Sue
                Castellon
            
            
            
            
            
            
            
            
            22,999
            
            
            
            
            
            
            
            
            
            
            
            22,999J.
                Michael Arrington
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            -Simon
                J. Aspinall
            
            
            -
            
            
            
            
            
            -
            
            
            
            
            
            
            
            
            
            
            
            -





32





**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 1, 2008, by:





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




·
            each
                of our directors and executive officers named in the Summary Compensation
                Table appearing on page 30, 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., 2952 Daimler
      Street, Santa Ana, California 92705.





**Name
                and Address of Beneficial Owner**
            
            **Number
                of Shares Beneficially Owned**
            
            **Percentage
                of Shares**
              **Beneficially**
              **Owned
                (1)**Richard
                Lusk
            
            
            30,109,884
            
            
            24.0
            %Suyen
                Castellon
            
            
            30,109,884
            
            
            24.0
            %Hugh
                Dunkerley
            
            
            —
            
            
            *Reid
                Dabney
            
            
            —
            
            
            *Danilo
                Cacciamatta
            
            
            —
            
            
            *Jnan
                Dash
            
            
            1,000,000
            
            
            *All
                directors and executive officers as a group (6 persons)
            
            
            31,109,884
            
            
            24.8
            %Vision
                Opportunity Master Fund, Ltd.
            
            
            38,900,128
            
            
            31.0
            %





* Less
      than 1% of outstanding shares.




(1)
            Based
                upon 125,507,944 shares of common stock outstanding on March 1, 2008,
                as
                calculated in accordance with Rule 13d-3 under the Securities Exchange
                Act
                of 1934 and zero officer and director stock options vested and in
                the
                money as of March 1, 2008. 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 report 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.




**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.





Our
      Board
      of Directors approved an amendment to our 2005 Stock Option Plan (the “Plan”) on
      December 6, 2007 to, among other things, increase the number of shares of common
      stock reserved for issuance under the plan from 12,000,000 to
      18,800,000.





Also
      on
      December 6, 2007, our Board of Directors approved an amendment to the
      outstanding stock options under the Plan held by the Company’s named executive
      officers and non-employee directors to reduce the exercise price of such stock
      options to $0.15 per share. The $0.15 per share exercise price was 150% of
      the
      closing price of the Company’s common stock on December 6, 2007 as reported on
      the Over-the-Counter Bulletin Board. Prior to such amendments, the outstanding
      stock options held by the Company’s named executive officers and non-employee
      directors under the Plan had an average exercise price of $0.51 per
      share.





As
      of
      December 31, 2007, of the 18,800,000 shares of common stock are authorized
      for
      issuance, 17,960,000 of such options shares have been granted with a weighted
      average exercise price of $0.31 per shares and 840,000 shares of common stock
      are available for future grants under our 2005 Stock Option Plan.




33





The
      following table provides information as of December 31, 2007, 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
            
            
            17,960,000
            
            $
            0.31
            
            
            840,000Equity
                compensation plans not approved by security holders
            
            
            —
            
            
            —
            
            
            —Total
            
            
            17,960,000
            
            $
            0.31
            
            
            840,000





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





**Related
      Transactions**




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




We
      ceased
      paying Mr. Dash the monthly fee as of February 2007 but will issue 200,000
      shares if and when we reach the final milestone as per the
      agreement.





In
      January 2007, we engaged Sonata to assist our United States software development
      team to further develop and improve our Foldera software code. The contract
      was
      ultimately terminated in November 2007. In the year ended December 31, 2007,
      we
      paid Sonata $ 245,304 .
      Jnan
      Dash is a member of Sonata’s Board of Directors. Mr. Dash received no fees or
      other compensation whatsoever in connection with the Sonata
      contract.





In
      June
      2007, Mr. Dash joined the Board of Foldera, Inc. as a Director.





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.





34





**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)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
            
            Amendment
                to 2005 Stock Option Plan (10)10.5
            
            Form
                of Stock Option Agreement (10)10.6
            
            Dash
                Consulting Agreement, dated March 24, 2004 (6)10.7
            
            CFO911
                Agreement, dated March 7, 2005 (6)10.8
            
            Amendment
                No. 1, dated as of July 27, 2007, to Common Stock Purchase Agreement,
                dated as of May 4, 2007, by and between Foldera, Inc. and Vision
                Opportunity Master Fund Ltd. (11)10.9
            
            Common
                Stock Purchase Agreement, dated as of May 4, 2007, by and between
                Foldera,
                Inc. and Vision Opportunity Master Fund Ltd. (12)10.10
            
            Registration
                Rights Agreement, dated as of May 4, 2007, by and between Foldera,
                Inc.
                and Vision Opportunity Master Fund Ltd. (12)10.11
            
            Securities
                Purchase Agreement, dated as of December 7, 2007, between Foldera,
                Inc.
                and Vision Opportunity Master Fund, Ltd. (13)10.12
            
            Form
                of 8% Senior Secured Convertible Debenture issued December 7, 2007,
                by
                Foldera, Inc. to Vision Opportunity Master Fund, Ltd.
                (13)10.13
            
            Form
                of Common Stock Purchase Warrant issued December 7, 2007, by Foldera,
                Inc.
                to Vision Opportunity Master Fund, Ltd. (13)10.14
            
            Registration
                Rights Agreement, dated as of December 7, 2007, between Foldera,
                Inc. and
                Vision Opportunity Master Fund, Ltd. (13)10.15
            
            Security
                Agreement, dated as of December 7, 2007, between Foldera, Inc. and
                Vision
                Opportunity Master Fund, Ltd. (13)14.1
            
            Code
                of Business Conduct and Ethics (6)14.2
            
            Code
                of Ethics for CEO and Senior Financial Officers* (8)21.1
            
            Subsidiaries
                of Foldera, Inc.* (8)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 (9)99.2
            
            Compensation
                Committee Charter (9)99.3
            
            Nominations
                and Corporate Governance Charter
                (9)




*Filed
      herewith.





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




35




(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 Form 8-K filed on August 22,
      2006.




(8) Incorporated
      herein by reference to registrant’s Form 10-KSB filed on April 13,
      2007.




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




(10) Incorporated
      by reference to registrant's Form 8-K/A filed December 13, 2007.





(11) Incorporated
      by reference to registrant's Form 8-K filed August 1, 2007.





(12) Incorporated
      by reference to registrant’s Form 8-K filed May 11, 2007.





(13) Incorporated
      by reference to registrant's Form 8-K filed December 10, 2007.





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




**Audit
      Fees**





For
      the
      years ended December 31, 2007 and 2006, we incurred audit fees totaling $63,500
      and $57,000, respectively, payable to Kabani & Company, Inc., our
      auditors.





**Audit
      Related Fees**





None





**Tax
      Fees**





For
      the
      years ended December 31, 2007 and 2006, we incurred tax fees totaling $2,500
      and
      $10,000 (includes tax returns for five years), respectively, payable to Kabani
      & Company, Inc.





**All
      Other Fees**





For
      the
      years ended December 31, 2007 and 2006, we incurred other fees totaling $25,500
      and $21,000, 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. The audit committee
      approved all of the services rendered by our auditors in 2007.





36




**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:
                March 27, 2008
            FOLDERA,
                INC.By:
            /s/ Hugh
                DunkerleyHugh
                DunkerleyPresident
                and Chief Executive Officer
              (principal
                executive officer)


Dated:
                March 27, 2008
            By:
            /s/ Reid
                DabneyReid
                DabneySenior
                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/
                Hugh Dunkerley
            
            President,
                Chief Executive Officer
            
            March
                27, 2008Hugh
                  Dunkerley/s/
                Suyen Castellon
            
            Secretary
                and Director
            
            March
                27, 2008Suyen
                  Castellon/s/
                Reid Dabney
            
            Senior
                Vice President and Chief Financial Officer
            
            March
                27, 2008Reid
                  Dabney
            
            (principal
                financial and accounting officer)/s/
                Richard Lusk
            
            Director
            
            March
                27, 2008Richard
                Lusk/s/
                Danilo Cacciamatta
            
            Director
            
            March
                27, 2008Danilo
                Cacciamatta/s/
                Jnan Dash
            
            Director
            
            March
                27, 2008Jnan
                  Dash





37




Report
      of
      Independent Registered Public Accounting Firm





Board
      of
      Directors and Stockholders of


Foldera
      Inc.


Santa
      Ana, California





We
      have
      audited the accompanying consolidated balance sheet of Foldera, Inc. as of
      December 31, 2007, and the statements of operations, stockholders' equity
      (deficit), and cash flows for each of the years in the two year period ended
      December 31, 2007 and for the period from December 3, 2001 (inception) to
      December 31, 2007. 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,
      2007, and the results of its operations and its cash flows for each of the
      years
      in the two year period ended December 31, 2007 and for the period from December
      3, 2001 (inception) to December 31, 2007, 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, 2007 and at December 31, 2006 and for the period from December
      3,
      2001 (inception) to December 31, 2007. 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


February
      22, 2008.




F-1




**FOLDERA,
                  INC.****(A
                  Development Stage Company)****Consolidated
                  Balance Sheet****As
                  of December 31, 2007**
  **ASSETS****CURRENT
                  ASSETS:**Cash
                  & cash equivalents
              
              $
              1,731,655Prepaid
                  expenses and other current assets
              
              
              143,325**TOTAL
                  CURRENT ASSETS**
              
              
              1,874,980CERTIFICATE
                  OF DEPOSIT - RESTRICTED
              
              
              68,508PROPERTY
                  AND EQUIPMENT, net
              
              
              292,837SECURITY
                  DEPOSIT
              
              
              22,019$
              2,258,344**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****CURRENT
                  LIABILITIES:**Accounts
                  payable and accrued expenses
              
              $
              249,220Current
                  portion of capital lease obligations
              
              
              84,494**TOTAL
                  CURRENT LIABILITIES**
              
              
              333,714CAPITAL
                  LEASE OBLIGATIONS, net
              
              
              115,705CONVERTIBLE
                  DEBENTURE, net
              
              
              956,875COMMITMENTS
                  & CONTINGENCIES
              
              
              -**STOCKHOLDERS'
                  EQUITY:**Common
                  stock, $0.001 par value, 250,000,000 shares authorized,125,507,944
                  shares issued and outstanding
              
              
              125,508Additional
                  paid in capital
              
              
              30,923,819Deficit
                  accumulated during development stage
              
              
              (30,197,277
              )**TOTAL
                  STOCKHOLDERS' EQUITY**
              
              
              852,050$
              2,258,344
  **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)
                  to****2007**
              
              **2006**
              
              **December
                  31, 2007****NET
                  REVENUE**
              
              $
              -
              
              $
              -
              
              $
              -**OPERATING
                  EXPENSES**General
                  and administrative
              
              
              8,761,623
              
              
              12,181,963
              
              
              29,181,112Impairment
                  loss on property & equipment
              
              
              787,171
              
              
              -
              
              
              787,171OPERATING
                  LOSS
              
              
              (9,548,794
              )
              
              (12,181,963
              )
              
              (29,968,283
              )**OTHER
                  (INCOME) EXPENSE**Other
                  Income
              
              
              (5,035
              )
              
              (7,158
              )
              
              (7,701
              )Change
                  in fair value of penalty shares
              
              
              (122,704
              )
              
              -
              
              
              (122,704
              )Interest
                  income
              
              
              (118,899
              )
              
              (141,463
              )
              
              (265,602
              )TOTAL
                  OTHER INCOME
              
              
              (246,638
              )
              
              (148,621
              )
              
              (396,007
              )NET
                  LOSS
              
              $
              (9,302,156
              )
              $
              (12,033,342
              )
              $
              (29,572,276
              )LOSS
                  PER SHARE - BASIC AND DILUTED
              
              $
              (0.08
              )
              $
              (0.12
              )BASIC
                  & DILUTED WEIGHTED AVERAGE NUMBER OFSHARES
                  OUTSTANDING
              
              
              112,710,317
              
              
              101,257,688
  **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, 2007**
  Deficitaccumulated
              
              TotalAdditional
              
              Shares
              
              
              
              during
                  the
              
              stockholder'sCommon
                  stock
              
              paid
                  in
              
              to
                  be
              
              Deferred
              
              development
              
              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
              
              
              -
              
              
              -
              
              
              1,535,404
              
              
              -
              
              
              (234,713
              )
              
              -
              
              
              1,300,691Issuance
                  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
              
              
              -
              
              
              -
              
              
              -
              
              
              554,646Registration
                  rights penalties
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (12,033,342
              )
              
              (12,033,342
              )Balance
                  at December 31, 2006
              
              
              110,803,196
              
              
              110,803
              
              
              26,997,588
              
              
              8,334
              
              
              (234,713
              )
              
              (20,895,121
              )
              
              5,986,891Issuance
                  of shares for cash
              
              
              8,333,334
              
              
              8,333
              
              
              1,969,688
              
              
              -
              
              
              -
              
              
              -
              
              
              1,978,021Issuance
                  of stock options for services
              
              
              -
              
              
              -
              
              
              23,402
              
              
              -
              
              
              -
              
              
              -
              
              
              23,402Issuance
                  of stock options for compensation
              
              
              -
              
              
              -
              
              
              924,259
              
              
              -
              
              
              -
              
              
              -
              
              
              924,259Issuance
                  of stock for exercise of stock options
              
              
              6,667
              
              
              7
              
              
              3,327
              
              
              (3,334
              )
              
              -
              
              
              -
              
              
              -Issuance
                  of stock for services
              
              
              180,000
              
              
              180
              
              
              77,120
              
              
              -
              
              
              -
              
              
              -
              
              
              77,300Issuance
                  of stock for settlement of registration rights & penalty shares
              
              
              3,741,381
              
              
              3,741
              
              
              707,700
              
              
              -
              
              
              -
              
              
              -
              
              
              711,441Exercise
                  of warrants for cash
              
              
              212,000
              
              
              212
              
              
              97,788
              
              
              -
              
              
              -
              
              
              -
              
              
              98,000Exercise
                  of warrants - cashless
              
              
              52,086
              
              
              52
              
              
              (52
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Exercise
                  of warrants against settlement of debt
              
              
              2,049,280
              
              
              2,049
              
              
              118,033
              
              
              -
              
              
              -
              
              
              -
              
              
              120,083Deferred
                  expense - warrants
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              234,713
              
              
              -
              
              
              234,713Discount
                  on convertible debentures
              
              
              -
              
              
              -
              
              
              96
              
              
              -
              
              
              -
              
              
              -
              
              
              96Exercise
                  of warrants - cash received in previous year
              
              
              10,000
              
              
              10
              
              
              4,990
              
              
              (5,000
              )
              
              -
              
              
              -
              
              
              -Subscription
                  receivable
              
              
              120,000
              
              
              120
              
              
              (120
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (9,302,156
              )
              
              (9,302,156
              )Balance
                  at December 31, 2007
              
              
              125,507,944
              
              $
              125,508
              
              $
              30,923,819
              
              $
              -
              
              $
              -
              
              $
              (30,197,277
              )
              $
              852,050
  **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****2007**
              
              **2006**
              
              **December
                  31, 2007**CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (9,302,156
              )
              $
              (12,033,342
              )
              $
              (29,572,276
              )Adjustments
                  to reconcile net loss tonet
                  cash used in operating activities:Depreciation
              
              
              790,908
              
              
              520,906
              
              
              1,443,707Loss
                  on settlement of debt
              
              
              -
              
              
              -
              
              
              64,022Impairment
                  of property & equipment
              
              
              787,171
              
              
              -
              
              
              796,704Deferred
                  expense - warrants
              
              
              234,713
              
              
              -
              
              
              234,713Issuance
                  of employee stock options for compensation
              
              
              924,259
              
              
              1,077,201
              
              
              4,178,131Issuance
                  of shares for services
              
              
              77,300
              
              
              1,245,485
              
              
              3,350,293Issuance
                  of warrants for services
              
              
              -
              
              
              765,014
              
              
              765,014Issuance
                  of stock options for services
              
              
              23,402
              
              
              8,039
              
              
              31,441Shares
                  to be issued as penalty shares
              
              
              -
              
              
              326,657
              
              
              326,657Discount
                  on convertible debentures
              
              
              96
              
              
              -
              
              
              96Change
                  in fair value of penalty shares
              
              
              (122,704
              )
              
              -
              
              
              (122,704
              )Changes
                  in assets and liabilities:Prepaid
                  expenses and other current assets
              
              
              155,420
              
              
              (241,910
              )
              
              (143,325
              )Deposits
              
              
              10,859
              
              
              (5,129
              )
              
              (90,527
              )Accounts
                  payable, accrued expenses and other liabilities
              
              
              (517,094
              )
              
              431,211
              
              
              247,835Registration
                  rights liability
              
              
              57,488
              
              
              450,000
              
              
              507,488Total
                  adjustments
              
              
              2,421,818
              
              
              4,577,474
              
              
              11,589,545NET
                  CASH USED IN OPERATING ACTIVITIES
              
              
              (6,880,338
              )
              
              (7,455,868
              )
              
              (17,982,731
              )CASH
                  FLOWS FROM INVESTING ACTIVITIESPurchase
                  of property and equipment
              
              
              (69,481
              )
              
              (1,295,375
              )
              
              (1,930,558
              )Cash
                  received as part of merger
              
              
              -
              
              
              (1,110
              )
              
              (1,110
              )NET
                  CASH USED IN INVESTING ACTIVITIES
              
              
              (69,481
              )
              
              (1,296,485
              )
              
              (1,931,668
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from issuance of shares for cash
              
              
              1,978,021
              
              
              9,787,730
              
              
              20,906,437Proceeds
                  from convertible debt financing
              
              
              956,875
              
              
              -
              
              
              956,875Cost
                  of raising capital
              
              
              -
              
              
              (524,858
              )
              
              (524,858
              )Receipts
                  from exercise of warrants
              
              
              98,000
              
              
              554,646
              
              
              652,646Payments
                  to related parties
              
              
              -
              
              
              (2,000
              )
              
              -Payments
                  for leased equipment
              
              
              (118,778
              )
              
              (121,854
              )
              
              (345,046
              )NET
                  CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              2,914,118
              
              
              9,693,664
              
              
              21,646,054NET
                  INCREASE (DECREASE) IN CASH & CASH EQUIVALENT
              
              
              (4,035,701
              )
              
              941,311
              
              
              1,731,655CASH
                  & CASH EQUIVALENT- BEGINNING OF PERIOD
              
              
              5,767,356
              
              
              4,826,045
              
              
              -CASH
                  & CASH EQUIVALENT- END OF PERIOD
              
              $
              1,731,655
              
              $
              5,767,356
              
              $
              1,731,655SUPPLEMENTAL
                  INFORMATION:Taxes
                  paid
              
              $
              -
              
              $
              800Interest
                  paid
              
              $
              95,190
              
              $
              15,552NON-CASH
                  INVESTING & FINANCING ACTIVITIES:a)
                          Company issued 8,559,600 shares as part of recapitalization
                          effected on
                          February 13, 2006.
              
              $
              -
              
              $
              -b)
                        Company issued 2,049,280 shares for the exercise of warrants
                        against
                        settlement of debt.
              
              $
              120,083
              
              $
              -c)
                      Assets acquired under capital leases.
              
              $
              112,452
              
              $
              -d)
                        Company issued 407,905 shares as penalty
                        shares.
              
              $
              203,953
              
              $
              -e)
                        Company issued 3,333,476 shares for the settlement of registration
                        rights
                        liability including interest
              
              $
              507,488
              
              $
              -
  **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 prior to the acquisition date 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
      accompanying consolidated financial statements have been prepared in accordance
      with the rules and regulations of the Securities and Exchange Commission for
      the
      presentation of financial information, and include all the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements. In the opinion of management, all adjustments considered
      necessary for a fair presentation have been included.





**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.





**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 software licensing fees.





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 software licensing fees. The Company anticipates
      users will be billed a monthly subscription fee. Revenue will be recognized
      on
      an accrual basis, based upon reported revenue from the individual service
      provider whose customers are using Foldera’s software application.





**Depreciation
      and Amortization**





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-6





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 $517,433 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 $325,785.





Depreciation
      and amortization expense for the year ended December 31, 2007 and 2006 was
      $790,908 and $520,906, respectively.





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.





It
      is the
      Company’s policy to assess its long lived assets for impairment on an annual
      basis, or more frequently if warranted by circumstances. In the light of current
      measures taken by the management as described under ‘Going Concern’ the Company
      completed an impairment analysis of all the property and equipment. As a result
      of the analysis, the carrying value of the property and equipment has been
      written down by $787,171 during the year ended December 31, 2007.





Property
      and equipment consisted of the following as of December 31, 2007:




Computer
                & equipment
            
            $
            1,608,039Furniture
                & fixtures
            
            
            107,498Software
            
            
            21,007Accumulated
                depreciation
            
            
            (1,443,707
            )**Net fixed assets**
            
            $
            292,837





**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. The Company maintains
      cash and cash equivalents with high credit quality financial institutions.
      At
      December 31, 2007, the cash balances held at financial institutions were either
      in excess of federally insured limits or not subject to the federal insurance
      system.





**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.





**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, 2007
      and 2006 have been excluded from diluted loss per share, as their effect would
      be anti-dilutive for the year then ended.




F-7





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





**Years
                Ended December 31,****2007**
            
            **2006****Loss**
              **(Numerator)**
            
            **Shares**
              **(Denominator)**
            
            **Per**
              **Share**
              **Amount**
            
            **(Numerator)**
            
            **Shares**
              **(Denominator)**
            
            **Per**
              **Share**
              **Amount****Basic
                EPS**(Loss)
                income available to common stockholders
            
            $
            (9,302,156
            )
            
            112,710,317
            
            $
            (0.08
            )
            $
            (12,033,342
            )
            
            101,257,688
            
            $
            (0.12
            )Effect
                of Dilutive SecuritiesNone
            
            
            —
            
            
            —
            
            
            
            
            
            —
            
            
            —**Diluted
                EPS**(Loss)
                income available to common stockholders
            
            $
            (9,302,156
            )
            
            112,710,317
            
            $
            (0.08
            )
            $
            (12,033,342
            )
            
            101,257,688
            
            $
            (0.12
            )





Potentially
      dilutive shares include:





**2007**
            
            **2006**Warrants
                outstanding
            
            
            21,960,334
            
            
            18,425,192Stock
                options outstanding
            
            
            17,960,000
            
            
            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
      No. 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 No. 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 No. 123-R. The Company has applied SAB 107 in its
      adoption of SFAS No. 123-R.





**Recent
      Pronouncements**





In
      December 2007, FASB issued FASB Statement No. 160, Noncontrolling Interests
      in
      Consolidated Financial Statements—an amendment of ARB No. 51. This Statement
      applies to all entities that prepare consolidated financial statements, except
      not-for-profit organizations, but will affect only those entities that have
      an
      outstanding non-controlling interest in one or more subsidiaries or that
      deconsolidate a subsidiary. Not-for-profit organizations should continue to
      apply the guidance in Accounting Research Bulletin No. 51, Consolidated
      Financial Statements, before the amendments made by this Statement, and any
      other applicable standards, until the Board issues interpretative guidance.
      This
      Statement is effective for fiscal years, and interim periods within those fiscal
      years, beginning on or after December 15, 2008 (that is, January 1, 2009, for
      entities with calendar year-ends). Earlier adoption is prohibited. The effective
      date of this Statement is the same as that of the related Statement 141(R).
      This
      Statement shall be applied prospectively as of the beginning of the fiscal
      year
      in which this Statement is initially applied, except for the presentation and
      disclosure requirements. The presentation and disclosure requirements shall
      be
      applied retrospectively for all periods presented. This statement has no effect
      on the financial statements as the Company does not have any outstanding
      non-controlling interest.





In
      February 2007, the Financial Accounting Standards Board 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.




F-8





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 Company management is
      currently evaluating the effect of this pronouncement on financial
      statements.




In
      December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
      Combinations”. The objective of this statement will significantly change the
      accounting for business combinations. Under Statement 141R, an acquiring entity
      will be required to recognize all the assets acquired and liabilities assumed
      in
      a transaction at the acquisition -date fair value with limited exceptions.
      Statement 141 applies prospectively to business combinations for which the
      acquisition date is on or after the beginning of the first annual reporting
      period beginning on or after December 15, 2008. The Company does not expect
      the
      adoption of SFAS No. 141R to have a material impact on the consolidated
      financial statements





**Going
      Concern**




As
      shown
      in the accompanying consolidated financial statements, the Company incurred
      losses of $9,302,156 and $12,033,342 as of December 31, 2007 and December 31,
      2006, respectively. Negative cash flows from the operations of $6,880,338 and
      $7,455,868 were noted for the years ended December 31, 2007 and December 31,
      2006, 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 2008; however, the
      Company does not anticipate having significant revenue from operations until
      the
      second quarter of 2008 and, 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.





Additionally,
      we have made the following changes to reduce our operating costs from an average
      of $750,000 to approximately $200,000 a month during the year ended December
      31,
      2007:





·
            Reduced
                head count from a peak level of 65 employees to six at the end of
                2007,
                which helped us cut payroll related expenses by approximately $4,000,000
                per year.


·
            We
                relocated our offices from a 15,154 square foot office space in Huntington
                Beach, California to a 3,805 square foot office space in Santa Ana,
                California. Additionally we also closed our three satellite offices in
                Chicago, IL, Bellevue, WA and Albuquerque, NM. These changes will
                generate
                savings of approximately $378,000 a year.


·
            We
                have terminated our relationship with two consultants which resulted
                in
                savings of approximately $240,000 per
                year.


·
            We
                have eliminated the $2,500 per month cash payment to the independent
                members of our board of directors until we are on a cash flow breakeven
                basis.





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 intend to release a more robust
      version of our product during 2008 with commensurate revenue being generated
      at
      that time.





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





The
      Company plans to continue actively seeking additional funding opportunities
      and
      plans to further restructure the operations to decrease operating expenses
      and
      to minimize the liabilities.





F-9





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





Following
      is the detail of accounts payable and accrued expenses as of December 31,
      2007.





Accounts
                payable
            
            $
            57,292Accrued
                vacation
            
            
            117,214Occupancy
                expense
            
            
            34,214Legal
                and accounting
            
            
            32,500Consulting
                fees
            
            
            8,000**Total**
            
            $
            249,220




**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 an
      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.





The
      initial determination had been that the Company would satisfy the registration
      filing requirement and that any penalty payment under the registration rights
      agreements was not probable. However, on February 12, 2007, the Company
      determined that it would not meet the timing requirement for registration of
      the
      shares and recorded a liability for the maximum penalties payable under such
      registration rights agreements. With respect to the August 2006 private
      placement, the maximum penalty was calculated as 10% of the 4,078,995 shares
      issued in the private placement and recorded as 1% per week starting February
      19, 2007 for the total of 10 weeks or maximum 10%. The stock price used in
      calculating the liability due to the affected stockholders was the closing
      price
      at the end of each week the Company could not meet the timing requirement.
      A
      total of 407,905 shares were actually issued on May 11, 2007. The Company
      revalued these shares based on their fair market value prior to such issuance,
      and recorded $122,704 as change in fair value of penalty shares issued in the
      accompanying financial statements.





With
      respect to the October 2006 private placement, the maximum penalty was
      calculated as 10% of the $4,500,000 purchase price in the private placement
      and
      recorded as $450,000 as registration rights liability. Under the registration
      rights agreement for this private placement, the Company was permitted to pay
      liquidated damages either in cash or in additional shares of common stock,
      valued for such purpose at 120% of the volume weighted average price of the
      common stock for the 10 trading days prior to payment. In addition, the Company
      was required to pay interest on any liquidated damages that were not paid within
      seven days after the date payable at the rate of 18% per annum (or such lesser
      maximum amount that is permitted to be paid by applicable law). On July 30,
      2007
      the Company reduced the registration rights liability by issuing 882,858 shares
      valued at $131,339. On December 12, 2007 the Company issued 2,450,618 shares
      to
      satisfy the $373,747 balance plus interest accrued thereon.





Note
      5. **Senior
      Secured Convertible Debenture**





On
      December 7, 2007, we entered into a Securities Purchase Agreement with Vision
      Opportunity Master Fund, Ltd., an institutional investor, to provide up to
      $7,000,000 in financing for us. Under the agreement, the investor agreed to
      provide us with $1,000,000 at closing pursuant to an 8% Senior Secured
      Convertible Debenture, with an additional $1,000,000 available to us on January
      1, 2008, and $500,000 available to us every 30-day period thereafter through
      November 1, 2008.  Each drawdown request would be at our sole discretion,
      provided there are no events of default then existing under the Senior Secured
      Convertible Debenture. Following any drawdown request, the investor will have
      three business days to decide, in its sole discretion, whether to fund the
      drawdown. The investor may also accelerate the drawdown periods and advance
      funds earlier than scheduled. The Senior Secured Convertible Debenture (i)
      bears
      interest at 8% per year, paid quarterly in cash, (ii) has a maturity of two
      years following the final drawdown closing, (iii) is convertible at the
      investor’s option into shares of our common stock at $0.15 per share, and
      automatically convertible at our option if our common stock trades above $0.50
      per share for each of any consecutive 20 trading days, and (iv) is secured
      by
      all of our assets including inventory, receivables, unencumbered equipment
      and
      intellectual property under the terms of a Security Agreement. We also agreed
      to
      issue to the investor five-year Common Stock Purchase Warrants to purchase
      up to
      20,000,000 shares of our common stock (assuming full financing, but pro rata
      as
      to actual amounts drawn down) at an exercise price of $0.35 per share. We expect
      to use the net proceeds of the financing for our working capital
      requirements.




The
      Senior Secured Convertible Debenture contains customary events of default,
      as
      well as events based on our possible failure to achieve specified net revenue
      thresholds. Assuming aggregate drawdowns under the Senior Secured Convertible
      Debenture of the full $7,000,000, we will be in default under the Senior Secured
      Convertible Debenture if we do not report net revenue of at least (i) $250,000
      for the six months ending June 30, 2008, (ii) $600,000 for the nine months
      ending September 30, 2008, (iii) $2,500,000 for the 12 months ending December
      31, 2008, or (iv) $2,000,000 for any fiscal quarter commencing with the quarter
      ending March 31, 2009; provided, that if aggregate drawdowns are less than
      $7,000,000, but are at least $3,500,000, each net revenue threshold date is
      extended by six months. The net revenue event of default will be inapplicable
      if
      total drawdowns are less than $3,500,000.




Both
      the
      conversion price under the Senior Secured Convertible Debenture and the exercise
      price under the Warrants are subject to “full-ratchet” price protection in the
      event of stock issuances below their respective conversion or exercise prices,
      except for specified exempted issuances including grants of stock options and
      stock issuances to strategic partners.




We
      agreed
      to grant registration rights to the investor, by filing a registration statement
      covering the shares of common stock issuable upon the conversion of the Senior
      Secured Convertible Debenture and exercise of the Common Stock Purchase Warrants
      within 45 days after the final drawdown closing, and obtaining effectiveness
      of
      the registration statement within 150 days after the final drawdown closing
      (or
      180 days in the event of a “full review” by the SEC). Our officers and directors
      also agreed to execute lock-up letter agreements prohibiting sales of our common
      stock by them for one year after the effectiveness of the foregoing registration
      statement and limiting such sales for two years thereafter.




F-10




HPC
      Capital Management Corp. acted as the sole placement agent for the
      transaction.




On
      December 7, 2007 the Company has received $955,000 in drawdowns, net of $45,000
      costs.  During the year ended December 31, 2007 the Company accrued $5,556
      in interest expense to Vision as part of the convertible debenture
      agreement.




On
      December 7, 2007 The Company issued 2,857,143 5-year warrants to Vision at
      an
      exercise price of $0.35.  The fair value of these warrants was calculated
      using the Black Scholes model using the following assumptions: $0.09 stock
      price, 18.60% volatility rate, 2.88% risk free interest rate amounting to $96.
      The Company expensed the value of warrants during the year and recorded
      convertible debenture net of prepaid financing cost after amortization of
      $$1,875 at $956,875.





**Note
      6. Related-Party Transactions**





During
      2007 the Company paid $10,000 to Jnan Dash, its Chief Technology Evangelist
      and
      recently elected member of the Company's Board of Directors, pursuant to a
      consulting agreement signed in March 2004. The agreement was terminated in
      January 2007.





We
      ceased
      paying Mr. Dash the monthly fee as of February 2007 but have agreed to issue
      200,000 shares when we reach the final milestone as per the
      agreement.





On
      June
      27, 2007, the Company appointed Mr. Dash to serve on the Board of Directors
      for
      the term commencing on the same date and expiring at the next annual meeting
      of
      stockholders or until a successor is duly elected and qualified.





Mr.
      Dash
      is also a member of the Board of Directors of Sonata. Sonata provided technical
      outsourcing to the Company. Mr. Dash received no fees or other compensation
      whatsoever in connection with the Sonata 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.





The
      Company entered into a 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
      were 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 has 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
      7. Stockholders’ 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.




Following
      is the summary of the Company’s equity-related transactions during the year
      ended December 31, 2007.





·
            On
                January 16, 2007, Mr. Robert Rein, an affiliate of Trilogy Capital
                Partners, an outside investor relations consultant, exercised 10,000
                warrants at an exercise price of $0.50 per
                share.





·
            On
                January 16, 2007, Trilogy Capital Partners, an outside investor relations
                consultant, exercised 50,000 warrants at an exercise price of $0.50
                per
                share.





·
            On
                February 13, 2007, Mr. William Dabney, the father of our CFO, Mr.
                Reid
                Dabney, exercised 32,000 warrants at an exercise price of $0.25 per
                share.




F-11




·
            On
                February 16, 2007, a Brookstreet Securities broker requested a cashless
                exercise of 42,980 warrants at an exercise price of $0.50 per share.
                Based
                on the formula provided in the Brookstreet agreement, the broker
                received
                25,072 shares.





·
            On
                February 22, 2007, Mr. Robert Rein, an affiliate of Trilogy Capital
                Partners, an outside investor relations consultant, exercised 10,000
                warrants at an exercise price of $0.50 per
                share.





·
            On
                March 20, 2007, Mr. Robert Rein, an affiliate of Trilogy Capital
                Partners,
                an outside investor relations consultant, exercised 20,000 warrants
                at an
                exercise price of $0.50 per share.





·
            On
                March 21, 2007, St. George and Carnegie, an outside legal consultant,
                exercised 2,049,280 warrants at an exercise price of $0.0625 per
                share.
                The Company settled $120,080 payable to St. George and Carnegie against
                the exercise of the warrants.





·
            On
                March 29, 2007, Trilogy Capital Partners, an outside investor relations
                consultant, exercised 50,000 warrants at an exercise price of $0.50
                per
                share.





·
            On
                April 17, 2007, Trilogy Capital Partners, an outside investor relations
                consultant, exercised 50,000 warrants at an exercise price of $0.50
                per
                share.





·
            On
                May 7, 2007, the Company issued Mr. James Koralek, an ex-employee,
                6,667
                shares for stock options that were exercised in 2006 at an exercise
                price
                of $0.50 per share.





·
            On
                May 10, 2007, the Company cancelled 5,555,556 series B and C warrants
                issued to the October 2006 investors and broker with exercise prices
                ranging from $1.08 to $2.00 and issued 4,326,388 new warrants at
                an
                exercise price of $0.60 in consideration of our fifth private placement
                offer (see item 16 below).





·
            On
                May 11, 2007, the Company issued 407,905 shares to investors in the
                August
                2006 private placement as registration rights penalty shares per
                agreement.





·
            On
                June 5, 2007, the Company issued 120,000 shares to James and Mary
                O'Neil.
                Mr. and Mrs. O'Neill allegedly paid $60,000 to Brookstreet Securities
                Corporation to purchase these shares in connection with the Company's
                February 2006 private placement. However, Brookstreet Securities
                Corporation, who served as placement agent in connection with such
                private
                placement, never remitted such payment to the Company. After discussing
                this matter with Mr. and Mrs. O'Neill, the Company elected to issue
                the
                shares to Mr. and Mrs. O'Neill and has unsuccessfully attempted to
                recover
                the $60,000 from Brookstreet Securities Corporation, who ceased operations
                in June 2007.





·
            On
                June 13, 2007, the Company issued 80,000 shares to the Ibis Consulting
                Group in connection with an investor relations consulting agreement.
                These
                shares have been recorded at fair value of $60,800, based on the
                price of
                our stock on April 1, 2007, as per the agreement and charged to
                operations.





·
            On
                June 20, 2007, a Brookstreet broker requested a cashless exercise
                of
                54,028 warrants at an exercise price of $0.50 per share. Based on
                the
                formula included in the agreement, we issued a total of 27,014 shares
                to
                the broker.





·
            On
                July 12, 2007, the Company issued 1,666,667 shares to Vision Opportunity
                Master Fund Ltd., (“Vision”) in the fifth private placement offering of
                $1,000,000 which closed on May 10, 2007. The cash proceeds from the
                issuance of shares, net of offering costs of $17,163, amounted to
                $982,837. As part of the private placement we agreed with Vision
                and HPC
                Capital Management Corp, the broker, to cancel series B and C warrants
                and
                to increase the number of series A warrants to 6,076,388 from 2,083,333
                and broker warrants to 750,000 from 416,667 by reducing the exercise
                price
                from $1.75 to $0.60 per share. As a part of this agreement, Richard
                Lusk,
                our former President and Chief Executive Officer, agreed to transfer
                to
                Vision, for nominal consideration, a total of 4,000,000 unregistered
                shares of our common stock. The grant date fair value of the warrants
                amounted to $1,490,059 which was calculated using the Black-Scholes
                option
                pricing model with the following assumptions: risk-free rate of return
                of
                4.5%, volatility of 50.15%, and dividend yield of 0% and expected
                life of
                five years.





·
            On
                July 30, 2007, the Company issued 882,858 shares as registration
                rights
                penalty shares to the October 2006 private placement investors in
                settlement of partial liability.





·
            On
                July 27, 2007, the Company entered into Amendment No. 1 to Common
                Stock
                Purchase Agreement, dated May 4, 2007, with Vision. Pursuant to the
                terms
                of the July 27 amendment, we sold 6,666,666 shares of our common
                stock to
                Vision at a purchase price of $0.15 per share, for gross proceeds
                of
                $1,000,000 ($995,172, net of offering costs of $4,829). Vision agreed
                to
                eliminate the liquidated damages provision in the registration rights
                agreement dated as of May 4, 2007, and Vision waived the "full-ratchet"
                anti-dilution provision contained in the series A warrant issued
                to it in
                connection with the fifth private placement. Additionally, Mr. Lusk
                transferred to Vision, for nominal consideration, an additional 20,000,000
                unregistered shares of our common stock. Pursuant to the anti-dilution
                provision in the warrants issued in the October 2006 private placement,
                we
                reduced the exercise price of the warrant issued to Crescent International
                Ltd. to $0.15 per share from $0.60 per shares and increased the number
                of
                shares underlying such warrant from 675,152 to 2,700,608, and we
                reduced
                the exercise price of the warrant issued to HPC Capital Management
                Corporation to $0.15 from $0.60 per share and increased the number
                of
                shares underlying such warrant from $750,000 to 3,000,000. The grant
                date
                fair value of the warrants amounted to $188,671 was calculated using
                the
                Black-Scholes option pricing model using the following assumptions:
                risk-free rate of return of 3.88%, volatility of 51.4%, and dividend
                yield
                of 0% and expected life of five
                years.




F-12




·
            On
                December 10, 2007, the Company issued 100,000 shares to Davide Caramico
                in
                connection with a marketing consulting agreement. These shares have
                been
                recorded at fair value of $16,500 based on the price of our stock
                on the
                date of issuance.





·
            On
                December 12, 2007, the Company issued 2,450,618 shares as registration
                rights penalty shares to the October 2006 private placement investors
                in
                final settlement of liability.





Warrants
      outstanding:





Aggregate
              Intrinsic
                Value
            
            Number
                of WarrantsOutstanding
                at December 31, 2006
            
            $
            -
            
            
            18,425,192Granted
            
            
            
            
            
            13,542,319Exercised
            
            
            
            
            
            (2,323,366
            )Cancelled
            
            
            
            
            
            (7,683,811
            )Outstanding
                at December 31, 2007
            
            $
            -
            
            
            21,960,334




Outstanding
                WarrantsRange
                of Exercise
              Price
            
            
            Number
            
            
            Weighted
                Average Remaining Contractual Life
            
            
            Weighted
                Average Exercise
              Price$0.0625-$2.25
            
            
            21,960,334
            
            
            3.8
                years
            
            $
            0.60





All
      outstanding warrants were exercisable as of December 31, 2007.





**Note
      8. 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.





Our
      Board
      of Directors approved an amendment to our 2005 Stock Option Plan (the “Plan”) on
      December 6, 2007 to, among other things, increase the number of shares of common
      stock reserved for issuance under the Plan from 12,000,000 to
      18,800,000.





Also
      on
      December 6, 2007, the Board of Directors approved an amendment to the
      outstanding stock options under the Plan held by the Company’s named executive
      officers and non-employee directors to reduce the exercise price of such stock
      options to $0.15 per share. $0.15 per share is 150% of the closing price of
      the
      Company’s common stock on December 6, 2007 as reported on the Over-the-Counter
      Bulletin Board. Prior to such amendments, the outstanding stock option held
      by
      the Company’s named executive officers and non-employee directors under the Plan
      had an average exercise price of $0.51 per share. As a result the Company
      recorded $21,750 in additional stock based compensation expense during the
      year.





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.




F-13





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.





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, in May 2007, 3,120,000 options were granted with an additional
      10,000,000 options being granted in December 2007. During the year ended
      December 31, 2007, 1,723,895 (2006:0) options were forfeited, 1,177,773
      (2006:1,151,665) were cancelled and 6,667 options were issued against exercise
      of options in 2006. As of December 31, 2007, 17,960,000 options were outstanding
      and 840,000 options were available for future option grants.





**Impact
      of Adoption of SFAS No. 123-R**





Employee
      related stock-based compensation expense measured in accordance with SFAS
      No. 123-R totaled approximately $924,259, or $(0.01) per basic and fully
      diluted share in the year ended December 31, 2007. The adoption of SFAS
      No. 123-R resulted in increased expense of approximately $924,259 as
      compared to the stock compensation expense that would have been recorded
      pursuant to APB No. 25. During the year ended December 31, 2006
      $1,077,201 or $(0.01) per basic and fully diluted share stock-based
      compensation expense was recorded.





During
      the year ended December 31, 2006, 200,000 stock options were granted to
      consultants and zero options were granted during the ended December 31, 2007.
      97,227 of these options vested in the year ended 2007 and the Company recorded
      $23,402 in expenses related to these options.





During
      the year ended December 31, 2006, 33,333 stock options granted to consultants
      vested and the Company recorded $8,039 in expenses related to these
      options.





**Significant
      Assumptions Used to Estimate Fair Value**





During
      the year ended December 31, 2007, the Company issued the following stock option
      grants:





In
      May
      2007, the Company granted 3,120,000 options to our Board of Directors and
      certain employees and officers. These options 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. The weighted-average assumptions used in estimating the fair
      value of these options, along with the weighted-average grant date fair values
      were as follows:





Expected
                volatility
            
            
            49.55
            %Expected
                life in years
            
            
            6
                yearsRisk
                free interest rate
            
            
            4.6
            %Dividend
                yield
            
            
            0
            %Wt.
                average grant date fair value
            
            $
            0.27





In
      December 2007, the Company granted 10,000,000 options to our Board of Directors
      and certain employees and officers. These options 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. The weighted-average assumptions used in estimating
      the
      fair value of these options, along with the weighted-average grant date fair
      values were as follows:





Expected
                volatility
            
            
            49.54
            %Expected
                life in years
            
            
            6
                yearsRisk
                free interest rate
            
            
            3.875
            %Dividend
                yield
            
            
            0
            %Wt.
                average grant date fair value
            
            $
            0.04





The
      Company adopted SFAS No. 123-R as of December 15, 2005 and as such, applied
      the
      pronouncement starting in its fiscal year ended December 31, 2006. Foldera
      completed its reverse merger on February 13, 2006 and as such, became a publicly
      traded company at that time. Although the Company initially used a diminimus
      volatility factor for its stock option and warrant grants in the
      Black-Scholes Pricing Option formula, and could do so for grants prior to the
      adoption of SFAS No. 123-R, given the low trading volume in the Company's stock,
      the Company now believes that utilizing an appropriate industry sector index
      will more accurately reflect the value and the cost of the stock option and
      warrant grants.




F-14




Per
      paragraph 23 and A32 of SFAS No. 123-R, surrogate public entities and
      indices are recommended for nonpublic and newly public entitles where the
      historical volatility is difficult to estimate. Foldera has chosen to follow
      this recommendation and is using an industry sector index for software
      companies: the Dow Jones Small Cap Software Index. The historical volatility
      as
      calculated from the index is 49.89% and has been applied in the
      Black-Scholes Option Pricing formula.





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 2007 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, 2006
            
            $
            0.51
            
            $
            3,001,667
            
            
            7,741,668Granted
            
            
            0.18
            
            
            
            
            
            13,120,000Forfeited
            
            
            0.50
            
            
            
            
            
            (1,723,895
            )Cancelled
            
            
            0.50
            
            
            
            
            
            (1,177,73
            )Exercised
            
            
            -
            
            
            
            
            
            -Outstanding
                at December 31, 2007
            
            $
            0.31
            
            $
            -
            
            
            17,960,000




Options
                Outstanding
            
            Exercisable
                OptionsRange
                  of Exercise
                Price
            
            Number
            
            Weighted
                  Average Remaining Life
            
            Weighted
                  Average Exercise Price
            
            Weighted
                  Average Remaining Life
            
            Number
            
            Weighted
                  Average Exercise Price$0.15-$0.50
            
            
            17,760,000
            
            
            5.2
                years
            
            $
            0.31
            
            
            5.2
                years
            
            
            3,128,319
            
            $
            0.31




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, 2006
            
            
            3,814,464
            
            $
            0.51Granted
            
            
            13,120,000
            
            
            0.18
            
            
            
            
            $
            1,251,589Forfeited
            
            
            (1,723,895
            )
            
            0.50Cancelled
            
            
            (1,177,773
            )
            
            0.50Vested
            
            
            (3,128,319
            )
            
            0.51Exercised
            
            
            (6,667
            )Non-vested
                - December 31, 2007
            
            
            10,897,810
            
            
            0.31
            
            
            2
                Years




The
      total
      compensation cost not yet recognized related to non-vested stock options is
      $926,208, which is expected to be recognized over a period of 2
      years.





**Note
      9. Income Taxes**





Through
      December 31, 2007, the Company incurred net operating losses for tax purposes
      of
      approximately $25,243,000. The net operating loss carry forward for federal
      and
      state purposes may be used to reduce taxable income through the year 2027.
      Net
      operating loss carry forward for the State of California is generally available
      to reduce taxable income through the year 2022. 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.




F-15





The
      gross
      deferred tax asset balance as of December 31, 2007 is $12,902,000. 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, 2007 are as follows:




**2007**
            
            **2006**Net
                operating loss
            
            $
            12,902,000
            
            $
            6,756,000Less
                valuation allowance
            
            
            (12,902,000
            )
            
            (6,756,000
            )$
            -
            
            $
            -





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:





**2007**
            
            **2006**Tax
                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
            
            
            -
            
            
            -




**Note
      10. 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.





On
      December 31, 2007 the Company cancelled the hosting agreement with SAVVIS and
      is
      currently hosting the servers in-house.





(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 $1,029 per month, the Bellevue, Washington office in
      July 2006 at $725 per month and the Albuquerque, New Mexico office in August
      2006 at $860 per month. By the end of the year 2007 the Company closed all
      three
      satellite offices out of California. The Company recognized $350,974 in office
      occupancy expenses for the year ended December 31, 2007 compared to $379,397
      for
      the year ended December 31, 2006.





In
      November 2007, the Company subleased approximately 60% of the Huntington Beach,
      California offices and in January 2008, the property managers took over the
      balance of the office space. As a part of the lease surrender agreement we
      are
      required to pay $5,350 a month through March 2008.





In
      January 2008, the Company entered into an agreement to lease 3,805 square feet
      of office space in Santa Ana, CA. to house our operations. We pay approximately
      $5,327 per month in rent under this lease, which expires in January
      2009.





(c)
        Equipment Leases:





As
      of
      December 31, 2007, the Company had entered into capital leases with seven
      strategic vendors for the financing of computer equipment. The Company pays
      approximately $9,898 per month under these leases, the last of which expires
      in
      November 2011.





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





Capital
            
            OperatingLeases
            
            Leases
            
            Total2008
            
            $
            107,307
            
            $
            85,324
            
            
            192,6312009
            
            
            74,102
            
            
            5,327
            
            
            79,4292010
            
            
            32,153
            
            
            -
            
            
            32,1532011
            
            
            28,425
            
            
            -
            
            
            28,425Thereafter
            
            
            -
            
            
            -
            
            
            -$
            241,987
            
            $
            90,651
            
            $
            332,638Less:
                Amount representing interest
            
            
            (41,788
            )Present
                value of minimum lease payments
            
            
            200,200Less:
                Current portion
            
            
            (84,494
            )$
            115,705




F-16




Total
      minimum lease payments for the 60% of Huntington Beach offices sub-leased,
      as
      mentioned above, are as follows:




Operating
            
            
            Sub-leaseLeases
            
            
            Income2008
            
            $
            220,036
            
            
            220,0362009
            
            
            225,492
            
            
            225,4922010
            
            
            210,034
            
            
            210,034Thereafter
            
            
            0
            
            
            0$
            655,562
            
            
            655,562





(d)
        Consulting agreements:





On
      March
      24, 2004, the Company entered into an agreement with Jnan Dash, its Chief
      Technology Evangelist. As part of this service agreement, the Chief Technology
      Evangelist was 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 January 2007. The Company is no longer obligated to pay the
      monthly consulting fee, but has agreed to issue 200,000 shares of its common
      stock when it reaches the final milestone as per the agreement.





On
      February 13, 2006, the Company signed a letter of engagement with Trilogy
      Capital Partners, Inc. (“Trilogy”). According to the terms of the agreement,
      Trilogy agreed to structure and implement a marketing program designed to create
      extensive financial market and investor 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 to 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 $635,331 based on 42.68% volatility, 4.5%
      risk-free rate of return and 0% annual rate of quarterly dividend yield and
      a
      five year expected life. On October 3, 2006, the Company terminated this
      agreement with Trilogy and signed a one-year contract with Corporate
      Communications Network, Inc. (“CCN”) to provide similar services. Pursuant to
      the contract, the Company paid in advance $106,875 representing a monthly
      payment of $11,250 per month for ten months followed by a final payment of
      $5,625 in October 2007. Additionally, the Company paid CCN $200,054 for
      consulting services provided in 2007. As part of the cancellation agreement,
      Trilogy transferred 1,535,000 warrants, which were exercisable at $0.50 per
      share, to CCN. The Company has been expensing the fair value of these warrants
      over the term of the agreement. During the year ended December 31, 2007, the
      Company recorded $234,713 as warrant expense..




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 this agreement, the Company agreed to pay Ibis $3,500 per month upon
      commencement of the term of the agreement 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 were recorded
      at
      fair value of $118,900, based on the price of our stock on October 1, 2006,
      as
      per the agreement. An additional 80,000 shares were issued on June 13, 2007
      and
      these shares were recorded at fair value of $60,800, based on price of our
      stock
      on April 1, 2007, as per the agreement. On April 1, 2007 the Company extended
      the consulting agreement with Ibis on the same terms as the April 2006
      agreement. This agreement was terminated on August 1, 2007.




In
      January 2007, the Company entered into an ongoing technical outsourcing
      agreement with Sonata, a software development firm in India, for providing
      software coding services. Pursuant to the contract, the Company agreed to pay
      Sonata based on hourly invoices submitted. The contract is cancelable by either
      party upon 90-days written notice. The contract was cancelled by the Company
      in
      November 2007. During the year ended December 31, 2007, the Company paid
      approximately $245,304 to Sonata.





In
      April
      2007, the Company entered into a one-year consulting agreement with Lewis Global
      Public Relations for the purpose of providing public relations services.
      Pursuant to this agreement, the Company agreed to pay Lewis $9,000 a month
      upon
      commencement of the term of the agreement. This agreement was terminated on
      September 1, 2007, and the Company paid a termination fee of
      $20,400.





In
      October 2007, the Company entered into a 10-month consulting agreement with
      Mr.
      Davide Caramico for the purpose of providing business development services
      in
      Europe. Pursuant to the contract, the Company agreed to issue 100,000 shares
      of
      the Company’s common stock and to pay Mr. Caramico 5,000 Euros monthly in cash
      during the term of this consulting agreement, which ends in July 2008. The
      100,000 shares were issued to Mr. Caramico in December 2007 and the fair value
      of the shares, amounting to $16,500, was charged to operations. During the
      year
      December 31, 2007, the Company paid approximately $17,307 in cash to Mr.
      Caramico.




F-17





In
      October 2007, the Company entered into a project-based consulting agreement
      with
      Cambridge Technology Consulting Group, Inc. for the purpose of providing
      technology audit and strategic planning services. Pursuant to the contract,
      the
      Company agreed to pay Cambridge based on hourly invoices submitted. The contract
      is cancelable by either party with a 30-days written notice. At the conclusion
      of two projects, the Company terminated the contract. During the year ended
      December 31, 2007 the Company paid approximately $97,251.





In
      November 2007, the Company entered into a six-month consulting agreement with
      SECP, LLC for the purpose of providing strategic and financial advisory
      services. Pursuant to the contract, the Company agreed to pay SECP $8,000 per
      month throughout the term of the agreement that shall accrue over the term
      of
      the agreement and be paid as a single final payment upon the successful
      execution of a specified transaction. If no transaction is concluded over the
      term of the agreement, the consultant will receive 50% of the accrued amount
      as
      final payment at the end of the term. Once a successful transaction is completed
      the consultant is also eligible to receive 4-6% of the aggregate value of the
      transaction. The contact is cancelable by either party upon 30-day written
      notice.





(e)
      Marketing and hosting agreements:





On
      October 24, 2007, the Company entered into a partnership agreement with Tiscali
      Services S.p.A. (“Tiscali”), a European ISP. Pursuant to this partnership
      agreement, Tiscali will provide the Company with infrastructure and services
      to
      further the Company’s efforts to launch the Foldera product in the European
      Union, and Tiscali may market the Foldera product to its own customers in the
      European Union. The partnership agreement provides that the Company will be
      solely responsible for all costs and expenses associated with the development,
      commercialization and marketing of the Foldera product in the European Union,
      and that the Company will determine when the Foldera product will be made
      available in the European Union. Tiscali will be responsible to provide
      electrical power, bandwidth, co-location space, firewall, load balancing, LAN
      switch, anti-spam and anti-virus and other services on an ongoing basis. The
      partnership agreement further provides that, during the term of the partnership
      agreement, Tiscali will receive ten percent (10%) of the revenue generated
      by
      the Company and/or Tiscali from the commercialization of the Foldera product
      in
      certain specified countries within European Union. The partnership agreement
      does not have a fixed expiration date but may be terminated by either party
      upon
      six months notice, provided that no such notice may be given prior to the second
      anniversary of the date upon which the Foldera product is first made available
      in the European Union.





The
      Company entered into a separate agreement with Tiscali on October 24, 2007,
      pursuant to which Tiscali will provide personnel to manage and maintain the
      hardware and equipment to be installed by the Company at Tiscali’s premises in
      Cagiliari, Italy. Pursuant to this agreement, the Company will be solely
      responsible for all costs and expenses associated with the delivery and
      installation of the hardware and equipment at Tiscali’s premises, and Tiscali
      will be required to provide such services within ten business days after the
      later of January 15, 2008 and the date upon which the hardware and equipment
      is
      delivered and installed. This agreement provides that the Company will pay
      a
      minimum monthly fee of Euros 11,666 (which is currently expected to be
      approximately $18,000 per month), based on the number of servers and other
      equipment Foldera requires to be operated and maintained to Tiscali for such
      personnel commencing on January 15, 2008, regardless of when the hardware and
      equipment is delivered and installed. Based on mutual agreement between Foldera
      and Tiscali, the date of the first monthly payment was postponed until March
      1,
      2008 and all subsequent payments have been postponed for an additional 45 days.
      Unless sooner terminated for cause, the initial term of this agreement will
      expire on January 15, 2009.




**Note
      11. Subsequent events**





In
      February 2008, the Company entered into a one-year consulting agreement with
      Monarch Bay Associates, LLC for the purpose of providing investment banking
      services. Pursuant to the contract, the Company agreed to pay Monarch Bay
      $10,000 per month for the first three months of the contract and to pay $5,000
      per month for the balance of the contract.  The contract is cancelable by
      either party upon 30-days written notice after the first three months of the
      contract have transpired.




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