##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549





FORM 10-K





(Mark One)

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

For the fiscal year period ended December 31, 2007

OR



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

For the transition period from              to

Commission File Number: 000-31559





Invenda Corporation

(Exact Name of Registrant as Specified in Its Charter)







|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 52-1988332                       
|(State or Other Jurisdiction of Incorporation or Organization) |  | (IRS Employer Identification No.)

6901 Rockledge Drive, 6th Floor, Bethesda, MD 20817

(Address of Principal Executive Offices)

(240) 333-6100

(Registrants Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: Not Applicable

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

Common
Stock, par value $0.01 per share

(Title of class)





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

Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.   ̈

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

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

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



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

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

Issuers revenues for the fiscal year ended December 31, 2007: $10,077,296.

The
aggregate market value of common stock held by non-affiliates of the registrant, based upon the closing price of the issuers common stock on the SWX Swiss Exchange as of February 29, 2008 was $12,506,982(1).

(1)Assumes an exchange rate of 1.06022 Swiss Francs per one U.S. Dollar as of February 29, 2008.

As of February 29, 2008, there were 16,465,388 shares of issuers common stock outstanding.









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Invenda Corporation

Form 10-K

Table of Contents



|           |  |             |  |                                                                                                |  |     
|---------- |  | ----------- |  | ---------------------------------------------------------------------------------------------- |  | ----
|           |  |             |  |                                                                                                |  | Page
|PART I     |  |             |  |                                                                                                |  |     
|           |  | Item 1.     |  | Business                                                                                       |  | 4   
|           |  | Item 1A.    |  | Risk Factors                                                                                   |  | 8   
|           |  | Item 2.     |  | Properties                                                                                     |  | 13  
|           |  | Item 3.     |  | Legal Proceedings                                                                              |  | 14  
|           |  | Item 4.     |  | Submission of Matters to a Vote of Security Holders                                            |  | 14  
|PART II    |  |             |  |                                                                                                |  |     
|           |  | Item 5.     |  | Market for Common Equity and Related Stockholder Matters                                       |  | 14  
|           |  | Item 6.     |  | Selected Financial Data                                                                        |  | 15  
|           |  | Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |  | 15  
|           |  | Item 8.     |  | Financial Statements and Supplementary Data                                                    |  | 21  
|           |  | Item 9.     |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           |  | 21  
|           |  | Item 9A(T). |  | Controls And Procedures                                                                        |  | 21  
|           |  | Item 9B.    |  | Other Information                                                                              |  | 22  
|PART III   |  |             |  |                                                                                                |  |     
|           |  | Item 10.    |  | Directors, Executive Officers and Corporate Governance                                         |  | 22  
|           |  | Item 11.    |  | Executive Compensation                                                                         |  | 24  
|           |  | Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |  | 27  
|           |  | Item 13.    |  | Certain Relationships and Related Transactions, and Director Independence                      |  | 28  
|           |  | Item 14.    |  | Principal Accountant Fees and Services                                                         |  | 29  
|           |  | Item 15.    |  | Exhibits and Financial Statement Schedules                                                     |  | 30  
|SIGNATURES |  | 31         



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Cautionary Note Regarding Forward-Looking Statements

Except for any historical information, the matters we discuss in this Annual Report on Form 10-K concerning our company contain forward-looking
statements. Any statements in this Annual Report on Form 10-K that are not statements of historical fact, are intended to be, and are, forward-looking statements under the safe harbor provided by Section 27(a) of the Securities Act
of 1933. Without limitation, the words anticipates, believes, estimates, expects, intends, plans and similar expressions are intended to identify forward-looking statements. The
important factors we discuss below under the captions Fisk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations, as well as other factors identified in our filings with the
SEC and those presented elsewhere by its management from time to time, could cause actual results to differ materially from those indicated by the forward-looking statements made in this Annual Report on Form 10-K. The Company assumes no obligation
to update any forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information.



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INVENDA CORPORATION

PART I

ITEM 1- BUSINESS

Overview

We provide digital marketing technologies and services, as well as on-line advertising capabilities and solutions for companies across a range of industries. We were founded in 1996 to enable businesses to acquire and
retain customers through the Internet. With our proprietary technologies and services, we provide customer acquisition and retention solutions for companies that do business with millions of Internet users every day. We currently derive our revenues
from two operating segments: Digital Marketing Solutions (formerly called the Interactive Database Marketing division) and Digital Media (formerly called the ConsumerReview.com division).



| |  |  | Our Digital Marketing Solutions segment consists of our Collabrys and E-centives business units. Our Collabrys business unit offers a suite of interactive consumer
relationship marketing technologies and services, including e-mail marketing, data warehousing, online reporting, subscription management, strategic consulting and program management, user experience design and development, and analytics and data
mining. Our E-centives business unit provides Internet couponing and promotions technologies and services either as a standalone solution or integrated with the Collabrys suite of solutions. Through a hosted technology infrastructure, we provide
solutions for digital marketing, including creating, targeting, publishing, managing and tracking e-mails, coupons and promotional incentives, as well as data management and tracking of individual consumers responses to such activities.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our Digital Media segment, which includes ConsumerReview.com, manages web communities around common product interests, and provides on-line advertising and
e-commerce services through its network of web communities. The web properties are dedicated to meeting the needs of consumers who are researching products on the web. We focus on creating an online environment that fosters communication and
consumer-generated reviews of products, by providing an interface to a large database of product information, forums, and other useful content.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For financial information regarding our reportable segments, including operating revenue, operating profit/loss, identifiable assets and other information by segment, see Note 13 of the Notes to Financial Statements
that begin on page F-7 of this Annual Report.

Of our total revenue of $10.1 million for the year ended December 31, 2007, $4 million
of the revenue was from a patent sale agreement and a patent license agreement with Google, Inc. One of our Digital Marketing Solutions segments customers, Reckitt Benckiser, contributed $1.9 million, or 19%, of our net revenue. This
customers initial contract expired in October 2002 and the customer subsequently signed six annual renewal agreements, with the most recent renewal expiring on December 31, 2008. Loss of this customer could have a material adverse effect
on our business, financial condition, results of operations and cash flow.

Industry Background

The Internet has emerged as a powerful marketing medium that allows millions of consumers and marketers to conduct business and interact with each other
in unprecedented ways. The Internet is particularly well suited to marketers because of its ability to access both broad audiences, as well as precisely defined groups. As a result, the Internet provides marketers with opportunities to identify and
attract customers, as well as target specific types of users and collect data on their preferences. At the same time, we believe the Internet appeals to consumers because it offers more individual control over marketing messages. The growth of the
Internet has encouraged companies to spend more of their marketing budgets via the Internet. We believe there is a need for a marketing infrastructure that could satisfy the objectives of both marketers and consumers, which would enable businesses
to acquire and retain customers, yet operate from a consumer-centric approach that would provide relevant information and meaningful value to the individual user.

Products and Services

Digital Marketing Solutions Segment

For the years ended December 31, 2007 and 2006, the Digital Marketing Solutions segment generated 37% and 61%, respectively, of our total revenue.
Approximately 52% and 47% of the segments revenue for the years ended December 31, 2007 and 2006, respectively, was generated from our contract with Reckitt Benckiser. Digital Marketing Solutions includes the Collabrys and the E-centives
business units.



During the year ended December 31, 2005 we
began to receive royalties from licensing two of our patents related to the Digital Marketing Solutions segment. This was the result of the settlement of a lawsuit with Coupons, Inc. whereby we are being paid quarterly royalties based on revenue
earned by Coupons, Inc. related to patents that were licensed to them as part of a settlement agreement. Royalties represented less than 1% and 1% of our total revenue for the years ended December 31, 2007 and 2006, respectively.



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E-centives

E-centives is a provider of secure, print-controlled Internet coupons technologies and solutions, as well as a broad range of electronic
incentives and interactive promotions, including sweepstakes, contests, and rewards-based programs. E-centives Internet coupon and promotions solutions are built on advanced technologies and expert services that help manage clients
marketing initiatives more efficiently and effectively.

Our Internet coupon and promotions solutions enable companies to
create, manage, deliver and track promotions, such as print controlled online coupons. Printable coupons can be individually tailored with relevant content and different incentive values based on the respective recipients, enabling marketers to
target coupons much more efficiently and cost-effectively than traditional methods. In addition, our system has high tracking capabilities, including individually coded offers that can be cross-referenced against specific consumer profiles.

The principal offerings of the business unit include Internet coupons, interactive promotions, online reporting and
professional services that include such areas as strategic services, analytic services, creative services and program execution services.

Collabrys

Collabrys, formerly called the Interactive Database Marketing unit, is a provider of
interactive consumer relationship marketing solutions. Collabrys offers advanced marketing technologies, consumer data management, and client services that enable cost efficiencies, better resource management, and more meaningful consumer
interactions. Collabrys data-driven, integrated solutions help companies to acquire, retain and build stronger, more profitable relationships with their consumers.

Collabrys provides a hosted technology infrastructure which allows companies to establish direct consumer relationships through a set of
tools that include campaign management, targeted e-mail marketing, transaction database, data warehouse, micro site and survey generator, and can also be integrated with E-centives patented coupon and promotion system. This combination enables
companies to acquire consumers, collect consumers preferences and usage information, segment consumers within loyalty categories, communicate with consumers via e-mail marketing, deliver coupons, engage consumers with promotions, track
individual usage of each coupon, as well as track and report every consumer interaction with the system.

The principal
offerings of the business unit includes e-mail marketing, data warehousing, online reporting, Internet couponing and promotions via integration with the E-centives unit, strategic consulting and program management, user experience design and
development, as well as analytics and data mining.

Digital Media Segment

For the years ended December 31, 2007 and 2006, the Digital Media segment, which includes ConsumerReview.com, generated 23% and 39%, respectively,
of our revenues through its advertising and e-commerce related services. ConsumerReview.com is a source of user-generated buying advice for outdoor sporting goods and consumer electronics. Consumers visit ConsumerReview.coms websites to learn,
interact, and buy or sell the products showcased within our network of web communities, including sites like AudioREVIEW.com and MtbREVIEW.com. On these websites, users find the products they are interested in, read and write reviews, participate in
discussions, compare prices, and are able to link to other sites where they can shop online. ConsumerReview.coms revenues are primarily derived from online advertising and e-commerce referral fees.

Patents

In October 2007, we
entered into a patent sale agreement with Google, Inc. for the sale of a web search patent for a purchase price of $2 million. We retained a royalty free license to the sold patent. In a related transaction, we entered into two non-exclusive patent
license agreements with Google, Inc. for a one time payment of $2 million. The patent revenue represented 40% of our revenue for the year ended December 31, 2007.

Sales and Marketing

We seek to establish relationships with clients principally through our direct
sales force, as well as working with advertising or promotional agencies to reach their clients. During 2007, we maintained sales personnel in the Washington, D.C. and San Francisco metropolitan areas.

In order to strengthen our existing relationships with clients, we offer account management, technology integration and consulting services. We assign
account managers with knowledge of on-line marketing to clients with the goal of increasing the performance of their marketing efforts and overall satisfaction with our services. Our account managers also provide periodic reports to clients and help
formulate strategies to more effectively market their products and services.



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Our primary marketing efforts include conferences, tradeshows and events.

Technology

We have a variety of technologies that enable our solutions. Our Digital Marketing Solutions segments technologies are delivered through a hosted infrastructure and consist of a variety of hardware and software,
such as application servers, database servers, data collection and transformation servers, web servers, mail servers, reporting servers, and client-side plug-in software. Our hardware infrastructure has been designed to allow us to scale our
systems, by adding hardware as required. ConsumerReview.com has a proprietary web architecture based on Microsoft .NET® enterprise server technology that enables it to meet the demands of
its network of growing web communities and product research sites. The system was built for scalability, reliability, and interoperability with web-enabled enterprise partners.

We host our systems in a data center that provides redundant network connectivity and diesel generated backup power. In addition we monitor and test our
system and software, and from time to time have identified minor defects. We address such defects by rewriting software code and, if possible, replacing small portions of our proprietary software with commercially available software components. Any
difficulties in implementing new software may result in greater than expected expense and may cause disruptions to our business.

We spent
approximately $1,110,000 and $930,000 in 2007 and 2006 on research and development activities.

Intellectual Property Rights

A part of our success depends on protecting our intellectual property, which we believe is one of our important assets. If we do not adequately protect
our intellectual property, our business, financial condition, results of operations and cash flow could be harmed.

We have developed and
acquired various proprietary technologies. Our Digital Marketing Solutions segments clients enter into technology and services agreements with us. In addition, we generally require employees, contractors and other persons with access to our
proprietary information to execute confidentiality and non-compete agreements. We seek to protect our software, documentation and other written materials under trade secret and other intellectual property laws, which afford only limited protection.
We have some registered copyrights in the U.S.

We have several issued U.S. patents and a number of pending U.S. and foreign patent
applications. Many of our pending patent applications seek to protect technology we use or may use in our business. We have one issued foreign patent and several pending foreign patent applications. It is possible that no patents will be issued from
the currently pending U.S. or foreign patent applications. It is also possible that our patents or any potential future patents may be found not infringed, invalid or unenforceable, or otherwise be successfully challenged. Also, any patent we
have currently or that is issued to us may not provide us with any competitive advantages. We may not develop future proprietary products or technologies that are patentable, and the patents of others may seriously limit or prevent our ability to do
business.

We have registered the trademark E-centives. We have filed intent to use U.S. trademark applications for BrightStreet and
BrightStreet.com and both applications have been allowed. We have also filed two applications for registration of the trademark MAESTRO and one has been registered and the other application has been allowed. MasterCard International opposed one of
the applications; however, we have settled the matter. Through our acquisition of substantially all of the assets of Consumer Review, Inc., we obtained several additional registered U.S. trademarks, including but not limited to Car Review, MTB
Review, PC Photo Review, Golf Review, Garden Review, Computing Review, Videogame Review and Photography Review. We currently own several additional U.S. registered trademarks related to the ConsumerReview.com business line, and we also claim rights
in a number of additional tradenames associated with our business activities.

We hold rights to various web domain names including
Invenda.com, E-centives.com, BrightStreet.com, ConsumerReview.com and Collabrys.com, as well as several other review-related domains. Regulatory bodies in the United States and abroad could establish additional top-level domains, appoint additional
domain name registrars or modify the requirements for holding domain names. The relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. We may be unable to prevent third
parties from acquiring domain names that are similar to or diminish the value of our trademarks and other proprietary rights.

Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Policing unauthorized use of our products is difficult, and, while we are
unable to determine the extent to which piracy of our software products exists, software piracy can be expected to be a persistent problem. In addition, the laws of some foreign countries do not protect our proprietary rights to as great an extent
as do the laws of the United States. Our means of protecting our proprietary rights may not be adequate, and our competitors may independently develop similar technology, duplicate our products or design around patents issued to us or our other
intellectual property.



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There has been a substantial amount of litigation in the software industry regarding intellectual
property rights. During 2005, we reached a settlement with one of our competitors regarding infringement of two of our patents and during 2000 we reached a settlement with another competitor regarding intellectual property. It is possible that in
the future, other third parties may claim that our current or potential future products infringe upon their intellectual property. We expect that software developers will increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in different industry segments overlaps. Any claims, with or without merit, could be time-consuming to defend, result in costly litigation, require us to enter into royalty
or licensing agreements or subject us to an injunction. These agreements, if required, may not be available on terms acceptable to us or at all, which could materially adversely affect our business, financial condition, results of operations and
cash flow.

We integrate third-party software from vendors such as Oracle Corporation into the software we use in our business. The
third-party software may not continue to be available to us on commercially reasonable terms. We may not be able to renew these agreements or develop alternative technology. If we cannot maintain licenses to key third-party software, develop similar
technology or license similar technology from another source on a timely or commercially feasible basis, our business, financial condition, results of operations and cash flow could be materially adversely affected.

Competition

We generally compete for the budgets
that companies allocate to marketing.

We believe that the market for our Digital Marketing Solutions segments solutions to be
rapidly evolving and intensely competitive. As a provider of digital marketing technologies and services, we generally compete with other marketing programs for a portion of a marketers total marketing budget. In this area, we compete with a
variety of businesses. Current or potential competitors include vendors that provide:



| |  |  | marketing technologies and services;
| | - |  | ------------------------------------



| |  |  | e-mail marketing solutions;
| | - |  | ---------------------------



| |  |  | coupon and promotion programs;
| | - |  | ------------------------------



| |  |  | database marketing solutions; and
| | - |  | ---------------------------------



| |  |  | interactive advertising agencies.
| | - |  | ---------------------------------

We believe the market for ConsumerReview.com to also be rapidly evolving and competitive. In this area, some of our current and potential competitors include:



| |  |  | other providers of product reviews;
| | - |  | -----------------------------------



| |  |  | publishers of content and information on special interest product categories;
| | - |  | -----------------------------------------------------------------------------



| |  |  | shopping comparison or price search web sites; and
| | - |  | --------------------------------------------------



| |  |  | providers of community forums, message boards and photo galleries.
| | - |  | ------------------------------------------------------------------

The failure to compete successfully would impair our ability to generate revenues and become profitable. Our ability to compete depends on many factors.

Factors over which we have some level of control include:



| |  |  | ability to enter into relationships with marketers;
| | - |  | ---------------------------------------------------



| |  |  | ability to provide simple, cost-effective and reliable solutions;
| | - |  | -----------------------------------------------------------------



| |  |  | timely development and marketing of new services; and
| | - |  | -----------------------------------------------------



| |  |  | ability to manage rapidly changing technologies, frequent new service introductions and evolving industry standards.
| | - |  | --------------------------------------------------------------------------------------------------------------------

Factors outside our control include:



| |  |  | development, introduction and market acceptance of new or enhanced services by our competitors;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | changes in pricing policies of our competitors;
| | - |  | -----------------------------------------------



| |  |  | entry of new competitors in the market;
| | - |  | ---------------------------------------



| |  |  | ability of marketers to provide simple, cost-effective and reliable promotions; and
| | - |  | -----------------------------------------------------------------------------------



| |  |  | market economy impacts on our clients marketing budgets.
| | - |  | ---------------------------------------------------------

We expect competition to intensify as more competitors enter our markets. However, as referenced above, one of our most



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important assets is our intellectual property, which we believe will help offset some of the competitive pressures for certain of our offerings. Many of our
existing competitors, as well as a number of potential new competitors, have significantly greater financial, technical, marketing and managerial resources than we do. Many of our competitors also generate greater revenue and are better known than
we are. They may compete more effectively and be more responsive to industry and technological change.

Employees

As of December 31, 2007, we employed a total of 44 employees, 42 of whom are full-time and 43 of whom are based in the United States. None of our
employees are represented by a labor union, nor have we ever experienced a work stoppage. We believe our relationship with our employees is good.

Available Information

Our Internet website address is www.Invenda.com. We make available, free of charge, on or through our
website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to,
the Securities and Exchange Commission. The information contained on our website does not form a part of and is not incorporated in this Form 10-K.

ITEM 1A- RISK FACTORS

We caution you that our performance is subject to risks and uncertainties.
There are a variety of important factors like those that follow that may cause our future business, financial conditions, results of operations and cash flow to differ materially and/or adversely from those projected in any of our forward-looking
statements made in this Annual Report on Form 10-K or otherwise. The following risk factors and other information in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only
ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business, financial conditions, results of operations and cash flow.

Risks Related to Our Business

We
have incurred net losses since inception, expect to incur continuing losses and may never become profitable.

To date, we have not
been profitable. As of December 31, 2007, we had an accumulated deficit of approximately $162 million. For the years ended December 31, 2007 and 2006 we incurred net losses from operations of $.06 million, and $1.7 million, respectively.
We may continue to incur losses and may never become profitable. If we cannot achieve operating profitability or positive cash flows from our operating activities, we may be unable to secure additional funding, our stock price may decline and we may
be unable to continue our operations.

Our future results and the demand for our services are uncertain, and we will not become profitable if our
services do not achieve market acceptance.

We were incorporated in August 1996 and launched our online direct marketing system in
November 1998. We did not charge for our services and did not begin to generate revenues until the third quarter of 1999. Since then, we have discontinued offering certain services and have started offering additional services, some through
acquisitions and others through the launching of internally developed services. Since some of our services are new, our future results are uncertain and our historical results may not be representative of our future results. If our products and
services do not achieve market acceptance, our business will not become profitable.

Loss of a significant customer could have a material adverse
effect on our business, financial condition, results of operations and cash flow.

Approximately 19% and 28% of our revenue for the
years ended December 31, 2007 and 2006, respectively, was derived from one of our Digital Marketing Solutions segment customers. Our most recent contract with this customer expires on December 31, 2008. While this customer has renewed its
contract for the past six years, there can be no assurance that it will renew again. The loss of this client could have a material adverse effect on our business, financial condition, results of operations and cash flow.

If we are unable to obtain financing to fund our business we may be forced to cease operations.

We anticipate that our current cash position, future revenues and the commitment by Friedli Corporate Finance to provide our funding needs through the
first quarter of 2009 will be sufficient to meet our anticipated cash needs for working capital and capital expenditures through the first quarter of 2009.



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If our future revenues are not sufficient to cover our operating costs, we will need to raise funds to
continue operations. Additional funds may also be needed to respond to competitive pressures, to develop new or enhanced products or services, to fund our expansion or to make acquisitions. If Friedli Corporate Finance is unable or unwilling to
fulfill its financing commitment to us or we are not offered financing by Friedli Corporate Finance on acceptable terms and conditions, it is not likely that we will be able to replace such committed funds on acceptable terms or at all. If adequate
funds are not available, or not available on acceptable terms, we may not be able to continue operations, and would need to seek bankruptcy protection or a buyer for our assets.

We may not be able to compete successfully against current and future competitors.

We
generally compete with companies for the budgets that companies allocate to marketing. We expect competition to continue to increase as a result of such factors as:



| |  |  | market acceptance of existing, or development, introduction of new or enhanced, services by our competitors;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | changes in pricing policies of our competitors; and
| | - |  | ---------------------------------------------------



| |  |  | entry of new competitors in the market;
| | - |  | ---------------------------------------

The market in which our Digital Marketing Solutions segment operates is intensely competitive and rapidly changing. We compete for marketing budgets with many companies in several fields, such as vendors that provide:



| |  |  | marketing technologies and services;
| | - |  | ------------------------------------



| |  |  | e-mail marketing solutions;
| | - |  | ---------------------------



| |  |  | coupon and promotions programs;
| | - |  | -------------------------------



| |  |  | database marketing solutions; and
| | - |  | ---------------------------------



| |  |  | interactive advertising agencies.
| | - |  | ---------------------------------

We believe the market for ConsumerReview.com to also be rapidly evolving and competitive. In this area, some of our current and potential competitors include:



| |  |  | other providers of product reviews;
| | - |  | -----------------------------------



| |  |  | publishers of content and information on special interest product categories;
| | - |  | -----------------------------------------------------------------------------



| |  |  | shopping comparison or price search web sites; and
| | - |  | --------------------------------------------------



| |  |  | providers of community forums, message boards and photo galleries.
| | - |  | ------------------------------------------------------------------

Many of our other existing and potential competitors have significantly greater financial, technical, marketing and managerial resources than we do. Many competitors also generate greater revenue and are better known
than we are. As a result, they may compete more effectively than we do and be more responsive to industry and technological change than we are. We operate in an intensely competitive environment with a significant number of existing and potential
competitors. The failure to compete successfully would impair our ability to generate revenues and become profitable.

Our Collabrys and E-centives
brands may not achieve the level of recognition necessary to attract additional clients, and building recognition of these brands may require us to expend funds on marketing, either of which could materially adversely affect our business, financial
condition, results of operations and cash flow.

To be successful, we must continue to build and increase market recognition of our
operating business units brands because our market is competitive, with low barriers to entry. We currently do not advertise to attract visitors to our website, but rather are attempting to build brands that businesses identify with the
appropriate online marketing segments of each of our business units. We believe that the recognition of the brands is critical to our success and the importance of this will increase as more companies enter our market and competition for
marketers attention increases. Building recognition of our brands may require us to expend funds on marketing. The outcome of our marketing efforts is hard to predict. If we are not successful in our marketing efforts to increase our brand
awareness, our ability to attract marketing clients could be harmed which would cause a materially adverse affect on our business, financial condition, results of operations and cash flow.

Our ConsumerReview.com brand, and the brands of our respective web sites, may not achieve the level of recognition necessary to attract additional clients and
consumers, and building recognition of such brands may require us to expend funds on marketing, either of which could materially adversely affect our business, financial condition, results of operations and cash flow.



To be successful, we also must continue to build and increase market recognition
of the brands within our ConsumerReview.com network of sites. We believe that the recognition of these brands is critical to our success and the importance of this will increase as more companies enter our market and competition for marketers
and consumers attention increases. Building recognition of the ConsumerReview.com brands may require us to expend significant funds on marketing. If we are not successful in our marketing efforts to increase our brand awareness, our ability to
attract consumers and marketing clients could be harmed which would cause a materially adverse affect on our business, financial condition, results of operations and cash flow.



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Our network infrastructure, computing systems or software may fail or be compromised or damaged, which could harm
our reputation, as well as materially adversely affect our business, financial condition, results of operations and cash flow.

The
performance of our hardware and software is critical to our business. System failures that cause an interruption in service or a decrease in responsiveness of our transaction processing or data storage capabilities could impair our reputation and
the attractiveness of our products and services. We have experienced periodic system interruptions, which may occur from time to time in the future. All such disruptions were caused by errors in our software code that were all subsequently corrected
and did not result in a material disruption to our business. Any significant increase in the frequency or severity of future disruptions could have a material adverse effect on our business, financial condition, results of operations and cash flow.

The software for our systems is complex and may contain undetected errors or defects, especially when we implement upgrades to our system.
Any errors or defects that are discovered after our software is released for use could damage our reputation or result in lost revenues.

We regularly monitor and test our system and software, and from time to time we have identified minor defects. We currently address such defects by rewriting software code and, if possible, replacing portions of our proprietary software
with commercially available software components. Any difficulties in implementing this new software may result in greater than expected expense and may cause disruptions to our business.

SAVVIS hosts our systems and provides us with communications links. The delivery of our services is substantially dependent on our ability and the
ability of the provider to protect our computer hardware and network infrastructure against damage from, among other things:



| |  |  | human error;
| | - |  | ------------



| |  |  | fire and flooding;
| | - |  | ------------------



| |  |  | power loss;
| | - |  | -----------



| |  |  | telecommunications failure; and
| | - |  | -------------------------------



| |  |  | on-line or physical sabotage.
| | - |  | -----------------------------

We
rely on SAVVIS for a significant portion of our Internet access as well as monitoring and managing the power and operating environment for our server and networking equipment. Any interruption in these services, or any failure of SAVVIS to handle
higher volumes of Internet use, could result in financial losses or impair our reputation.

Our system capacity needs are untested at higher levels
than we have serviced in the past and our failure to handle the growth of each of our systems may materially adversely affect our business, financial condition, results of operations and cash flow or require us to expend substantial capital.

The capacity of our system has not been tested far beyond what we have serviced in the past and we do not yet know the ability of
our system to manage substantially larger amounts of users and related activity or data. A substantial increase in the number of users and a corresponding increase in the number of data records could strain our servers and storage capacity, which
could lead to slower response time or system failures. We may not be able to handle our expected user and transaction levels while maintaining satisfactory performance. System failures or slowdowns adversely affect the speed and responsiveness of
our transaction processing. These would have a negative impact on the experience for our clients users and our sites users, and reduce our systems effectiveness. Such an increase could require us to expand and upgrade our
technology, processing systems and network infrastructure. Any unexpected upgrades could be disruptive and costly. Our failure to handle the growth of our databases could lead to system failures, inadequate response times or corruption of our data,
and could materially adversely affect our business, financial condition, results of operations and cash flow. We believe that on average, our various systems hardware, at peak traffic levels, run at approximately 10-50% of capacity. We may be
unable to expand and upgrade our systems and infrastructure to accommodate this growth in a timely manner. Any failure to expand or upgrade our systems could damage our reputation and our business.

In addition, if our usage of telecommunications capacity increases, we will need to purchase additional networking equipment and rely more heavily on our
web hosting providers to maintain adequate data transmission speeds. The availability of these products or services may be limited or their cost may be significant.

Our business could suffer if Internet users reduce or block our access to their personal data.

For certain parts of our business, we collect consumer demographic and purchase preference information from users and also collect certain data, such as data regarding the e-mails viewed or offers clicked-on by such users. Privacy concerns
may cause users to resist signing up for our system, providing personal information and allowing us to monitor their usage. If users were to reduce the information voluntarily supplied or block access to their data, our ability to improve our
database of user information and the value of

our service would diminish.



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Privacy laws may be enacted or applied to us, which could restrict our ability to disclose consumer data to third
parties, which could materially adversely affect our business, financial condition, results of operations and cash flow.

For
certain parts of our business we currently report consumer information to our clients about their users. Our clients receive detailed and specific information about the activities of their users for purposes of targeting marketing messages or
promotions to subscribers with certain demographic or purchase preference criteria. Growing concern about privacy and the collection, distribution and use of personal information, even in the aggregate, may lead to the enactment and application of
federal or state laws or regulations that would restrict our ability to provide user data to third parties. In addition, several states have proposed legislation that would limit the uses of user information gathered online. Consequently, any future
regulation that would restrict our ability to provide information regarding users would have a materially adverse impact on our business, financial condition, results of operations and cash flow by restricting our methods of operation or imposing
additional costs.

If we are not successful in protecting our intellectual property, our business will suffer.

We depend heavily on technology to operate our business. Our success depends on protecting and enforcing our intellectual property, which is one of our
important assets. We have developed and acquired various proprietary technologies.

Our means of protecting our intellectual property may
not be adequate. Unauthorized parties may attempt to copy aspects of our service or to obtain and use information that we regard as proprietary. It is also possible that our patents or any potential future patents may be found invalid or
unenforceable, or otherwise be successfully challenged. If any of our current or future patents are successfully challenged by a third party, we could be deprived of our right to prevent others from using the methods covered by such patents. In
addition, competitors may be able to devise methods of competing with our business that are not covered by our patents or other intellectual property. Although Internet users can access our service over the Internet from anywhere in the world, we
currently only provide our services from the U.S. The laws of some foreign countries do not protect our intellectual property rights to as great an extent as do the laws of the United States. Our competitors may independently develop similar
technology, duplicate our technology or design around any patents that we may obtain or our other intellectual property. If we do not adequately protect our intellectual property, our business, financial condition, results of operations and cash
flow could be materially adversely affected.

If we infringe upon the intellectual property rights of others, our business, financial condition,
results of operations and cash flow could be materially adversely affected.

There has been a substantial amount of litigation in
the software and Internet industry regarding intellectual property rights. It is possible that, in the future, third parties may claim that our current or potential future technologies infringe upon their intellectual property. We expect that
software developers will increasingly be subject to infringement claims as the number of products and competitors in our industry segment grows. Any such claims, with or without merit, could be time-consuming, result in costly litigation and
diversion of management resources, require us to enter into royalty or licensing agreements or subject us to an injunction. Royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could seriously
harm our ability to operate our business and our financial condition may suffer.

We may be subject to claims based on the content of promotions we
deliver.

The online promotions developed by our clients may not comply with federal, state or local laws governing the content of
advertisements and the sale of products and services. We do not control the content of the promotions for which we provide promotions technology. Our role in facilitating these promotions may expose us to liability based on the content of the
promotions. We also may face liability if the promotional information in the promotions is defamatory, inaccurate, or infringes on proprietary rights of others. Our clients or our employees may make errors or enter inaccurate information, and we do
not verify the accuracy of information contained in the promotions or otherwise for compliance with applicable advertising laws. We may face civil or criminal liability for unlawful advertising or other marketer activities. We could also face claims
based on the content that is accessible from our website through links to other websites.

We may not be adequately insured to cover these
claims. Any claims could require us to spend significant time and money in litigation, even if we ultimately prevail. In addition, negative publicity caused by these inaccuracies could damage our reputation and diminish our brand.

Our business may be affected by seasonal fluctuations in marketing spending and Internet use, which could cause our stock price to fluctuate widely and/or
materially adversely affect our business, financial operations, financial results and cash flow.

We expect seasonal fluctuations
will affect ConsumerReview.com. We believe that marketing spending is generally highest in the fourth quarter of each calendar year due to increased consumer spending during the holiday period, and lowest during the summer months of the third
quarter. Because the market for Internet marketing services is emerging, we cannot be certain of these seasonal patterns and additional patterns may develop in the future as the market matures. This could cause our operating results and stock price
to fluctuate widely and/or materially adversely affect our business, financial operations, financial results and cash flow.



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If we do not manage our growth, our business, financial condition, results of operations and cash flow could be
materially adversely affected.

We may not be successful in managing our growth. Past growth has placed, and future growth will
continue to place, a significant strain on our management and resources, related to the successful integration of personnel.

To manage the
expected growth of our operations, we will need to improve our operational and financial systems, procedures and controls. We will also need to manage our finance, administrative, client services and operations staff and train and manage our growing
employee base effectively. Our current and planned personnel, systems, procedures and controls may not be adequate to support our future operations. Our business, financial condition, results of operations and cash flow could be materially adversely
affected if we do not effectively manage our growth.

If we lose the services of any of our key personnel, our business and stock price could suffer.

Our success depends in large part on the contributions of Kamran Amjadi, our Chairman and Chief Executive Officer and Mehrdad
Akhavan, our President and Chief Marketing Officer and certain other key executives, whose understanding of our services, strategy and relationships would be extremely difficult to duplicate from outside our company. The loss of the services of any
of our key personnel could have a material adverse effect on our business, financial condition, results of operations and cash flow. The Company does not have any key man life insurance policies.

If we are unable to attract and retain highly skilled employees, our business, financial condition, results of operations and cash flow could be materially
adversely affected.

Our future success also depends on our ability to identify, attract, retain and motivate highly skilled
employees, particularly additional technical, sales and marketing personnel. We face competition in hiring and retaining personnel from a number of sectors, including technology and Internet companies, government contractors and traditional
businesses. Many of these companies have greater financial resources than we have to attract and retain qualified personnel. We have occasionally encountered and expect to continue to encounter difficulties in hiring and retaining highly skilled
employees. We may be unable to retain our highly skilled employees or identify, attract, assimilate or retain other highly qualified employees in the future, which may in turn materially adversely affect our business, financial operations, financial
results and cash flow.

Risks Related to Our Industry

The demand for Internet direct marketing services is uncertain.

The market for online direct
marketing has only recently begun to develop. Many businesses have little or no experience using the Internet for direct marketing and promotion. As a result, many businesses have allocated only a limited portion of their marketing budgets to online
marketing. In addition, companies that have invested a significant portion of their marketing budgets in online marketing may decide after a time to return to more traditional methods if they find that online marketing is a less effective method of
promoting their products and services than traditional marketing methods. We cannot predict the amount of marketing spending on the Internet in general, or demand for our targeted direct marketing services in particular. The demand for online
marketing may not develop to a level sufficient to support our continued operations or may develop more slowly than we expect.

Many of
ConsumerReview.coms clients are emerging Internet companies that represent credit risks.

Many of ConsumerReview.coms
clients are Internet companies, which have significant losses, negative cash flow and limited access to capital. Many of these companies represent credit risks and could fail. Any financial difficulties of our clients may result in difficulties in
our ability to collect accounts receivable or lower than expected sales of our products and services. If our Internet clients continue to have financial difficulties or if such difficulties worsen, our business, financial condition, results of
operations and cash flow could be materially adversely affected.

New regulation of, and uncertainties regarding the application of existing laws and
regulations to, online direct marketing and the Internet could prohibit, limit or increase the cost of our business.

New laws or
regulations applicable to online direct marketing, e-mail marketing or the Internet, or the application of existing laws and regulations to online direct marketing, e-mail marketing or the Internet, could negatively impact our business. Due to the
increasing popularity and use of the Internet, as well as increase in e-mail marketing, it is likely that additional laws and regulations will be adopted covering issues such as privacy, pricing, content, copyrights, distribution, taxation,
antitrust, characteristics and quality of services and consumer protection. The adoption of any additional laws or regulations may impair the growth of the Internet or online direct marketing, which could, in turn, decrease the demand for our
services and prohibit, limit or increase the cost of our doing business.



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Additional Risks Related to Ownership of Our Common Stock

We are, and will continue to be, controlled by our board members, who may approve corporate actions with which you may disagree.

We are, and will continue to be, controlled by our board members, who may approve corporate actions with which you may disagree. As of December 31,
2007, our Executive officers and Board of Directors beneficially owned directly or indirectly approximately 75% of our outstanding common stock. To the extent that these stockholders exercise their voting rights in concert, they may to be able to
control most matters requiring stockholder approval, such as electing a majority of the directors and approving significant corporate matters, including a merger or sale of the business. The interest of these stockholders may at times conflict with
the interests of our other stockholders.

Although our common stock is listed on the SWX Swiss Exchange, it is thinly traded. The market price of our
common stock, like the market prices of stocks of other Internet-related companies, may fluctuate widely and rapidly.

For the most
part, trading volume in our common stock has been low. Although our common stock has been listed on the SWX Swiss Exchange since October 3, 2000, there is no assurance that more trading activity in the common stock will develop.

In addition, the market price of our common stock, like the market prices of stocks of other Internet-related companies, may fluctuate widely and
rapidly. The market price and trading volume of our common stock, since our initial public offering has been and may continue to be highly volatile. Factors such as variations in our revenue, earnings and cash flow and announcements of new service
offerings, technological innovations, strategic alliances and/or acquisitions involving competitors or price reductions by us, our competitors or providers of alternative services could cause the market price of our common stock to fluctuate
substantially. Also, broad market fluctuations, including fluctuations of the SWX Swiss Exchange, which result in changes to the market prices of the stocks of many companies but are not directly related to the operating performance of those
companies, could also adversely affect the market price of our common stock.

The listing of our shares on the SWX Swiss Exchange may limit our
ability to raise capital and could limit our ability to do acquisitions with our stock.

We are the first U.S. company to list
solely on the SWX Swiss Exchange. We are not listed on any U.S. exchange. Because we are the first U.S. company to do this, we are uncertain what effect, if any, our listing solely on the SWX Swiss Exchange will have upon our ability to raise
additional financing in the U.S. capital markets. If the listing of our shares solely on the SWX Swiss Exchange is received by investors with uncertainty, the listing may discourage potential investors and could hinder our ability to raise necessary
financing on acceptable terms. In addition, the fact that our shares are not listed on any U.S. exchange may make acquisitions using our stock more difficult or more costly due to concerns about or unfamiliarity with the listing on the SWX Exchange.

Our stockholders have experienced substantial dilution in their equity ownership and voting power over the last several years and may experience
further dilution in the future.

Over the last several years, our stockholders have experienced substantial dilution of their percentage of equity
ownership interest and voting power in our company due to the issuance of convertible securities issued in connection with various financings and acquisitions. Our stockholders may experience further dilution based on the conversion or exercise of
options and warrants. We may continue to raise additional financing or to pay for acquisitions from time to time through the issuance of equity or debt securities convertible into common stock. In the event of any such issuances, the relative voting
power and equity interests of persons who purchased the common stock prior to the time of such issuances would be reduced. Further, a significant amount of shares of common stock sold on the SWX Swiss Exchange after the conversion of such securities
could adversely affect the market price for our common stock.

ITEM 2 PROPERTIES

We do not currently own any real estate. Our headquarters and principal
administrative, finance, legal, sales and marketing operations are located in leased office space in Bethesda, Maryland, a suburb of Washington, D.C. This lease for approximately 7,116 square feet was renewed during the fourth quarter of 2005. The
lease has monthly rent payments of approximately $16,000 and expires in September 2008.

We also maintain an office in California. In
December 2004, we entered into an 8,000 square foot office space lease in San Mateo, California. The lease was most recently renewed in November 2007 with monthly rental payments of $20,000 commencing in January 2008 and ending in June 2008. The
prior renewal agreement had monthly rental payments of $16,000 commencing in January 2007 and ended in December 2007.



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ITEM 3  LEGAL PROCEEDINGS

We are subject to legal proceedings and claims from time to time, which
arise in the ordinary course of business. Other than the matter described below, as of December 31, 2007, management is not aware of any asserted or pending litigation or claims against the Company that would have a material adverse effect on
our financial condition, results of operations or liquidity.

On November 14, 2002, we filed a joint patent infringement action with
Black Diamond CCT Holding, LLC against Coupons, Inc. in the Federal District Court of Maryland. In this suit, we alleged infringement of two U.S. patents relating to online coupons, rights of which we acquired from BrightStreet.com. On
April 25, 2005 the companies reached a settlement in which we received an aggregate of $1 million over two years (starting in May 2005 and ending in April 2007), in exchange for the release of all claims raised in the suit, including claims of
lost profits and past royalties. As part of the settlement, Coupons, Inc. has been granted a limited license to the two patents, pursuant to which the Company may receive royalty payments based on future revenue of Coupons, Inc. related to these
patents. The $1 million was recognized on a cash receipts basis due to the uncertainty as to its collection.

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

We held our annual meeting of
stockholders on December 21, 2007 for the purpose of considering and voting upon the following matters:



| |  |  | To re-elect all four of our directors to our Board of Directors to serve until their successors have been duly elected and qualified.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To ratify the designation of BDO Seidman, LLP as independent registered public accounting firm.
| | - |  | -----------------------------------------------------------------------------------------------

The following table sets forth the number of votes cast for, against or withheld, as well as the number of abstentions as to each of the matters set
forth above.



|                                                                             |  |            |  |            |  |           |  |          
|---------------------------------------------------------------------------- |  | ---------- |  | ---------- |  | --------- |  | ---------
|                                                                             |  | For      |  | Withheld |  | Against |  | Abstain
|MATTER DESCRIPTION                                                           |  | Votes      |  | Votes      |  | Votes     |  | Votes    
|Election of Directors:                                                       |  |            |  |            |  |           |  |          
|Kamran Amjadi                                                                |  | 11,006,241 |  | 500        |  |           |  |          
|Mehrdad Akhavan                                                              |  | 11,006,241 |  | 500        |  |           |  |          
|Peter Friedli                                                                |  | 11,006,241 |  | 500        |  |           |  |          
|David Jodoin                                                                 |  | 11,006,241 |  | 500        |  |           |  |          
|                                                                             |  |            |  |           
|Ratify BDO Seidman, LLP as our independent registered public accounting firm |  | 11,006,741 |  |            |  |           |  |          

PART II

ITEM 5  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

In April 2007, our Board of
Directors approved a reverse stock split of the our common stock at a ratio of one-for-ten, causing each ten shares of outstanding common stock to be combined into one share of common stock. The reverse split became effective at the close of
business on May 18, 2007. All references to common share and per common share amounts for all periods presented have been retroactively restated to reflect this reverse split.

Market Information

Since our initial public offering on October 3, 2000, our common stock has
traded on the SWX Swiss Exchange under the symbol ECEN and beginning on May 18, 2007 under the symbol INVN. The following table reflects the high and low sales prices, in Swiss Francs and U.S. Dollars, reported on the
SWX Swiss Exchange for each quarter listed. The amounts listed in U.S. Dollars reflect the relevant exchange rate as of the date of such high or low price. The quotations prior to May 18, 2007 have not been adjusted for the one-for-ten reverse
stock split of all issued and outstanding shares of our common stock, which became effective on that date.



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|                                 |  |              |  |            |  |                |      |     |   |      |  |        |  |       
|-------------------------------- |  | ------------ |  | ---------- |  | -------------- | ---- | --- | - | ---- |  | ------ |  | ------
|                                 |  | SWISS FRANCS |  | US DOLLARS |  | EXCHANGE RATES
|PERIOD                           |  | HIGH         |  | LOW        |  | HIGH           |      | LOW |   | HIGH |  | LOW   
|2006                             |  |              |  |            |  |                |      |     |   |      |  |        |  |       
|Quarter ended March 31, 2006     |  | CHF 0.44     |  | CHF 0.35   |  | $              | 0.34 |     | $ | 0.27 |  | 0.7367 |  | 0.7701
|Quarter ended June 30, 2006      |  | CHF 0.40     |  | CHF 0.22   |  | $              | 0.31 |     | $ | 0.18 |  | 0.7776 |  | 0.8046
|Quarter ended September 30, 2006 |  | CHF 0.26     |  | CHF 0.21   |  | $              | 0.21 |     | $ | 0.17 |  | 0.8177 |  | 0.8146
|Quarter ended December 31, 2006  |  | CHF 0.33     |  | CHF 0.22   |  | $              | 0.26 |     | $ | 0.18 |  | 0.7889 |  | 0.8001
|2007                             |  |              |  |            |  |                |      |     |   |      |  |        |  |       
|Quarter ended March 31, 2007     |  | CHF 0.31     |  | CHF 0.26   |  | $              | 0.25 |     | $ | 0.21 |  | 0.8080 |  | 0.8013
|Quarter ended June 30, 2007      |  | CHF 7.75     |  | CHF 0.28   |  | $              | 6.30 |     | $ | 0.23 |  | 0.8128 |  | 0.8234
|Quarter ended September 30, 2007 |  | CHF 5.85     |  | CHF 4.00   |  | $              | 4.81 |     | $ | 3.29 |  | 0.8225 |  | 0.8129
|Quarter ended December 31, 2007  |  | CHF 4.10     |  | CHF 2.75   |  | $              | 3.49 |     | $ | 2.40 |  | 0.8509 |  | 0.8711

Holders

As of December 31, 2007, there were approximately 79 holders of record of our common stock.

Dividends

We have never declared or paid any cash dividends on our common stock. We intend to retain future earnings, if any, to finance the
expansion of our business, and do not expect to pay any cash dividends in the foreseeable future. Please see Item 7  Managements Discussion and Analysis of Financial Condition and Results of Operations  Liquidity and Capital
Resources for further details.

The declaration of dividends is within the discretion of our Board of Directors and subject to
limitations set forth in the Delaware General Corporation Law. Our certificate of incorporation provides that if dividends are paid, they must be paid equally on each share of outstanding common stock. Payment of any dividends on our common stock is
subject to the rights of any preferred stock then outstanding.

ITEM 6  SELECTED FINANCIAL DATA

Not applicable.

ITEM 7  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations together with our financial statements and the notes to those financial statements included elsewhere in this Annual Report on Form 10-K
beginning on page F-1. In addition to historical information, this discussion contains forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking
information due to competitive factors, risks associated with our expansion plans and other factors.

Overview

We provide interactive database marketing technologies and services, as well as on-line advertising capabilities and solutions for companies across a
range of industries. With our proprietary technologies and services, we provide customer acquisition and retention solutions for companies that do business with millions of Internet users every day. We currently derive our revenues from two
operating segments: the Digital Marketing Solutions (formerly called the Interactive Database Marketing division) and Digital Media (formerly called the ConsumerReview.com division).



| |  |  | Our Digital Marketing Solutions segment consists of our Collabrys and E-centives business units. Our Collabrys business unit offers a suite of interactive consumer
relationship marketing technologies and services, including e-mail marketing, data warehousing, online reporting, subscription management, strategic consulting and program management, user experience design and development, and analytics and data
mining. Our E-centives business unit provides Internet couponing and promotions technologies and services, either as a standalone solution or integrated with the Collabrys suite of solutions. Through a hosted technology infrastructure, we provide
solutions for digital marketing, including creating, targeting, publishing, managing and tracking e-mails, coupons and promotional incentives, as well as data management and tracking of individual consumers responses to such activities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Our Digital Media segment, which includes ConsumerReview.com, manages web communities around common product interests, and provides on-line advertising and
e-commerce services through its network of web communities. The web properties are dedicated to meeting the needs of consumers who are researching products on the web. We focus on creating an online environment that fosters communication and
consumer-generated reviews of products, by providing an interface to a large database of product information, forums, and other useful content.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For financial information regarding our reportable operating segments, including operating revenue, operating profit/loss, identifiable assets and other information by segment, see Note 13 of the Notes to Financial
Statements.

To date we have not been profitable, incurring net losses of $13.0 million and $3.1 million for the years ended
December 31, 2007 and 2006, respectively. The net loss for the year ended December 31, 2007 included a non-operating loss of approximately $12 million associated with the exchange of outstanding convertible promissory notes for common
stock that occurred during September 2007. Over the past few years we have shifted focus away from our older solutions and devoted resources towards building our two operating segments. We have undertaken a series of cost-cutting measures to
preserve cash and have continued to decrease our operating losses over the past few years. This has included reduction in personnel and other operating expenses such as rent, hosting charges and professional fees. We also continue to examine ways to
reduce general overhead expenses and manage our human and capital resources more efficiently, without materially impacting our ability to properly serve our clients and continue technological innovation.

We believe that as more consumers use the Internet, marketers will shift more of their marketing budgets online. We believe this will improve demand for
Internet based marketing programs. According to Forrester Research, marketers are pushing more of their budgets online, with U.S. online advertising and marketing spending expected to reach $61 billion by 2012.

We have focused on further building our products and services through internal development. We gained new clients through our internal sales force, and
expanded our relationship with existing clients through the provision of additional products and services. We have renewed agreements with key clients, including Reckitt Benckiser, whose renewals have also included the expansion of the solutions we
provide to them. We plan to continue to evaluate corporate acquisitions or other strategic arrangements that could enable us to increase our revenues, expand our list of clients or add to our products and services.

We are changing the sales force of our Collabrys and E-centives business units and continue to look for sales personnel whose background and experience
are suited to positively impact our revenue. As we do this, executive management is actively involved in all sales opportunities. We have revamped and expanded our client services and service delivery personnel in order to improve operational
efficiencies and enhance our strategic capabilities. We believe these changes will enable us to acquire new clients and to better focus on increasing the size of our existing clients businesses through growing the level and types of
technologies and services we provide to them. ConsumerReview.com is focusing on enhancing the user experience on its sites, growing traffic to its various sites and increasing business with its existing clients and expanding its number of advertiser
clients.

We believe that the combination of expense reduction and control measures, new sales and client services resources and the
pursuit of additional acquisitions will enable us to achieve profitability, although there can be no assurances as to the timing or effectiveness of any such efforts. If future revenues are insufficient to cover our operating costs or if we do not
receive the proceeds from the financing commitments or obtain addition funding, we may not be able to obtain replacement or additional financing on acceptable terms or at all. In such event, we would not be able to continue our operations, which
could result in the full loss of your investment in us. (See Liquidity and Capital Resources below for further details.)

Results of
Operations

Year ended December 31, 2007 compared to year ended December 31, 2006:

Revenue. Revenue increased by $3,575,000, or 55%, to $10,077,000 for the year ended December 31, 2007, compared to $6,502,000 for the year
ended December 31, 2006. The increase in revenue can primarily be attributed to the patent sale and patent license agreements that generated $4,000,000 in revenue for the year ended December 31, 2007.

The Digital Marketing Solutions segments revenue of $3,754,000 was lower by $185,000 or 5% when compared to the prior year. Although we did sign on
several new customers during the year ended December 31, 2007, the overall decrease in revenue relates to the renewal contract for our second largest customer being smaller than the 2006 contract. We continue to focus on increasing future
revenue for the Collabrys and E-centives business units by acquiring new clients and increasing the size of business from our existing clients through growing the level and types of technologies and services we provide to them.



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The Digital Media segments revenue of $2,323,000 was lower by $240,000 or 9% when compared to the
prior year. The Digital Media segments decrease in revenue can be attributed to the decline of agency driven media buys due to the small size of ConsumerREVIEW.coms overall network in comparison to other sites on the Internet. This size
issue prevents our network from being listed high enough in the media buyers planning tools. To help alleviate this situation and improve our future revenue, we are focusing on bringing additional traffic to the network and better marketing
efforts.

Cost of Revenue. Cost of revenue consists primarily of expenses related to providing our services,
including payroll and related expenses for personnel, depreciation of servers, content costs, network/hosting charges. For the year ended December 31, 2007, cost of revenue related expenses of $3,490,000 was $500,000 or 17% higher than the
$2,990,000 for the year ended December 31, 2006. This increase can be primarily attributed to higher personnel related costs and higher network/hosting charges.

Product Development. Product development consists primarily of expenses related to the development and enhancement of our
technology and services, including payroll and related expenses for personnel, as well as other associated expenses for our technology department. We expense product development costs as incurred. Product development expense, exclusive of
stock-based compensation of approximately $9,000 and $32,000 for the years ended December 31, 2007 and 2006, increased by $202,000, or 22%, to $1,101,000 for the year ended December 31, 2007, compared to $899,000 for the year ended
December 31, 2006. This increase can be primarily attributed to the use of outside consultants in the Digital Marketing Solutions segment working on developing new products for the segment.

We expect that product development costs will remain at the same level, with no current plans to significantly change the number of personnel related to
this group.

General and Administrative. General and administrative expenses include payroll and related expenses
for accounting, finance, legal, human resources, and administrative personnel, as well as selected executives. In addition, general and administrative expenses include fees for professional services, occupancy related costs, and all other corporate
costs, including depreciation and amortization. General and administrative expenses, exclusive of stock-based compensation of approximately $86,000 and $106,000 for years ended December 31, 2007 and 2006, increased $654,000, or 19%, to
$4,073,000 for the year ended December 31, 2007 when compared to $3,419,000 for the year ended December 31, 2006.

A large portion
of this increase can also be attributed to higher legal bills associated with the reverse stock split, the name change to Invenda Corporation, the adoption of the 2007 Stock Incentive Plan, the conversion of series C convertible preferred stock into
common stock and the exchange of the outstanding convertible promissory notes for common stock. In the second quarter of 2006 there was a reversal of a $250,000 accrual that was recorded in 2001 associated with a legal settlement, which reduced
general and administrative expenses for 2006. The accrual was reversed because the payment of the amount was no longer deemed probable.

We
expect that our general and administrative expenses will be lower in future periods in the near term as we anticipate that legal expenses will decrease.

Sales and Marketing. Sales and marketing expenses consist primarily of payroll, sales commissions and related expenses for personnel engaged in sales and marketing, as well as advertising and promotional
expenditures. Sales and marketing expenses, exclusive of stock-based compensation of approximately $7,000 and $3,000 for years ended December 31, 2007 and 2006, was $1,576,000 and $1,280,000 for the years ended December 31, 2007 and 2006,
respectively. The expenses were higher by $296,000, or 23%, primarily due to the $400,000 in commissions paid on the patent sale and patent license agreements, offset by lower personnel related costs due to the Collabrys and E-centives business
units having fewer sales personnel during 2007.

Excluding the $400,000 in commissions paid on the patent sale and patent license
agreements, we expect that our sales and marketing expenses will increase in future periods as we increase our sales force and our marketing efforts.

Stock-based Compensation. Stock-based compensation expense of approximately $102,000 and $140,000 for the years ended December 31, 2007 and 2006, respectively, represents expenses related to FAS 123(R),
Share-Based Payments, which we adopted on January 1, 2006 using the modified prospective method. Compensation cost is recognized (a) based on the requirements of FAS 123(R) for all share-based payments granted after the
effective date and (b) based on the requirement of FAS 123(R) for all awards granted to employees prior to the effective date of FAS 123(R) that remained unvested on the effective date.

Other Income. Other income of $167,000 and $500,000 for the years ended December 31, 2007 and 2006, respectively, represented
payments associated with the settlement of our litigation with Coupons, Inc. Per the settlement, we received an aggregate of $1 million dollars over a two year period, starting in May 2005 and ending in April 2007 (see Item 3  Legal
Proceedings for further details.) This income was recognized on a cash receipts basis due to the uncertainty as to the collection of the $1 million.



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Non Operating Loss. The non-operating loss of $12,207,000 for the year ended
December 31, 2007 relates to the loss incurred in association with the September 18, 2007 exchange of outstanding convertible promissory notes of $8,250,000 plus accrued and unpaid interest and final payment fees for 6,410,626 shares of
our common stock. The convertible promissory notes were surrendered and terminated as part of the debt exchange.

Interest Expense. Interest expense primarily consists of interest and final payment fees related to the convertible promissory notes and deferred financing fee amortization. Interest expense of $763,000 for the year ended
December 31, 2007 was $620,000 lower than the interest expense of $1,383,000 for the year ended December 31, 2006 primarily due to the exchange of the convertible promissory notes for common stock that occurred in September 2007. This
decrease included lower final payment fees on the convertible promissory notes of approximately $373,000, lower interest on the convertible promissory notes of approximately $116,000 and lower deferred financing fee amortization of approximately
$133,000.

We expect that interest expense will be lower in future periods due to the exchange of the outstanding convertible promissory
notes for common stock.

Net Loss. Net loss increased by $9,911,000 to $13,007,000 the year ended December 31,
2007, compared to $3,096,000 the year ended December 31, 2006. This is the combined effect of higher revenue of $3,575,000, an increase in operating expenses of $1,580,000, a decrease in other income of $333,000, lower interest expense of
$620,000 and the one time non-operating loss of $12,207,000 that occurred during 2007.

We believe that our net loss will incrementally
decrease in future periods due to anticipated increases in revenue based on revamping the sales force of our Collabrys and E-centives business units and improved user experience in some of our ConsumerREVIEW.com sites, as well as constant operating
costs.

Liquidity and Capital Resources

During the year ended December 31, 2006 we issued three 10% convertible promissory notes with principal balances totaling $1,500,000 and one 4% convertible with a principal value of $1,000,000.

On September 18, 2007, we entered into Note Exchange Agreements with the holders of all of our outstanding convertible promissory notes. Pursuant to
the Note Exchange Agreements, we retired the debt represented by such outstanding convertible promissory notes of $8,250,000 plus accrued and unpaid interest and final payment fees, by exchanging the outstanding convertible promissory notes for an
aggregate of 6,410,626 shares of our common stock. The outstanding convertible promissory notes were surrendered and terminated as part of the debt exchange.

On December 31, 2007, we held $2,399,000 in cash and cash equivalents. Cash provided by operating activities for the year ended December 31, 2007 was $1,977,000, while cash used in operating activities for
the year ended December 31, 2006 was $1,827,000. The $3,804,000 improvement can primarily be attributed to the $4,000,000 received in October 2007 associated with the patent sale and patent license agreements.

Investing activities for the year ended December 31, 2007 was $200,000, while investing activities for the year ended December 31, 2006 was
$340,000. Cash used in investing activities for both of the years ended December 31, 2007 and 2006 reflects the purchase of property and equipment.

For the year ended December 31, 2007, net cash provided by financing activities of $36,000 includes $19,000 from the exercise of options and $17,000 from the exercising of warrants. Net cash provided by financing
activities for the year ended December 31, 2006, of $2,286,000 reflects $2,500,000 million in funding associated with issuance of convertible promissory notes and $41,000 from the exercise of options, offset by $250,000 in debt issuance costs
and $5,000 in payments for capital lease obligations.

We anticipate that our current cash position, future revenues and the commitment by
Friedli Corporate Finance to provide our funding needs through the first quarter of 2009 will be sufficient to meet our anticipated cash needs for working capital and capital expenditures through the first quarter of 2009.

If our future revenues are not sufficient to cover our operating costs, we will need to raise funds to continue operations. Additional funds may also be
needed to respond to competitive pressures, to develop new or enhanced products or services, to fund our expansion or to make acquisitions. If Friedli Corporate Finance is unable or unwilling to fulfill its financing commitment to us or we are not
offered financing by Friedli Corporate Finance on acceptable terms and conditions, it is not likely that we will be able to replace such committed funds on acceptable terms or at all. If adequate funds are not available, or not available on
acceptable terms, we may not be able to continue operations, and would need to seek bankruptcy protection or a buyer for our assets.



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Critical Accounting Policies

Invendas financial statements are prepared in conformity with accounting principles generally accepted in the United States. For a comprehensive discussion of our accounting policies, see Note 2 of the Notes to
the Financial Statements, which notes begin on page F-7.

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

Estimates are used in accounting for, among other things, allowance for uncollectible receivables, recoverability of long-lived assets, intangible assets, depreciation and amortization, taxes and contingencies. Estimates and assumptions are
reviewed periodically and the effects of revisions are reflected in the financial statement in the period they are determined to be necessary.

Our critical accounting policies are as follows:

Revenue Recognition

Digital Marketing Solutions:The Digital Marketing Solutions segment, which represented 37% and 61% of our revenue for the years
ended December 31, 2007 and 2006, respectively, is a solution that allows businesses to build direct consumer relationships. Revenue is generated by charging fees for data hosting, database management, e-mail delivery, promotion delivery,
campaign and program management, strategy services, creative services, as well as various analytical services. Revenue related to one-time service fees for setting up the customer is recognized ratably over the expected term of the customer
relationship and all other revenue is recognized when the service is provided, assuming collection is reasonably assured.

During the year
ended December 31, 2005 we began to receive royalties from licensing two of our patents related to the Digital Marketing Solutions segment. This was the result of a settlement of a lawsuit with Coupons, Inc. (see Item 3  Legal
Proceedings for further details) whereby we are being paid quarterly royalties based on revenue earned by Coupons, Inc. related to patents that were licensed to them as part of the settlement agreement. Revenue is being recognized on a cash
receipts basis due to our inability to calculate the royalties.

Digital Media:ConsumerReview.com, which was
acquired in December 2002, manages web communities around common product interests. The web properties are dedicated to meeting the needs of consumers who are researching products on the web. Revenue is predominantly generated through on-line
advertising and e-commerce fees. Advertising revenue is derived from the sale of advertisements on pages delivered to community members of our websites. This revenue is recognized in the period in which the advertisements are delivered. E-commerce
fees are derived from on-line performance-based programs and are earned on either a lead referral basis or on an affiliate commission basis. Revenue is earned from performance-based programs when a user of our websites responds to a commerce link by
linking to a customers websites. For lead referral programs, customers are charged on a cost-per-click basis, and revenue is recognized in the month the click occurs. For affiliate-commission programs revenue is recognized when the commission
is earned, which is in the month the transaction occurs. ConsumerReview.com represented 23% and 39% of our total revenue for years ended December 31, 2007 and 2006, respectively.

Patent Revenue:In October 2007, we entered into a patent sale agreement for the sale of a web search patent for a purchase price
of $2 million. In a related transaction, we entered into two non-exclusive patent license agreements for a one time payment of $2 million. The patent revenue was recognized at the time the agreements were signed and represented 40% of our revenue
for the year ended December 31, 2007.

Other Income

Starting in May 2005 we began to receive monthly payments resulting from the settlement of a lawsuit with Coupons, Inc. (see Item 3
 Legal Proceedings for further details). We received an aggregate of $1 million over a two year period from May 2005 through April 2007. Income was recognized on a cash receipts basis due to the uncertainty as to its collection.

Estimating valuation allowance for doubtful accounts

The preparation of financial statements requires us to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported period. We analyze historical bad debts, customer concentrations, customer credit-worthiness, and current economic trends when evaluating the adequacy of the allowance
for doubtful accounts. As a result, we recorded bad debt



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expense of approximately $57,600 and $25,000 for the years ended December 31, 2007 and 2006, respectively. As of December 31, 2007, our accounts
receivable balance was approximately $1.1 million, net of allowance for doubtful accounts of approximately $36,000.

Stock-Based Compensation

We adopted FAS 123(R), Share-Based Payment, on January 1, 2006 using the modified-prospective method and
began accounting for stock-based compensation using a fair value based recognition method. Under the fair value recognition requirement of FAS 123(R), stock-based compensation cost is estimated at the grant date based on the fair value of the award
and is recognized as an expense over the requisite service period of the award.

Impairment of long-lived and amortizable intangible assets

As of December 31, 2007 we had amortizable intangible assets with a net value of approximately $572,000 related to
patents we acquired in conjunction with the acquisition of substantially all the assets of BrightStreet.com. The patents relate to the coupon system of our Digital Marketing Solutions segment. We filed a joint patent infringement action related to
two of the patents. In April 2005 a settlement was reached in which we received $1 million. As part of the settlement, the company was granted a limited license to the two patents, pursuant to which we receive royalty payments based on their
revenue.

We perform an on-going analysis of the recoverability of our long-lived and amortizable intangible assets and, for
the year ended December 31, 2007, this was done in accordance with FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets,which we adopted on January 1, 2002. Based on quantitative and qualitative measures, we
assess the need to record impairment losses on long-lived and amortizable intangible assets used in operations when impairment indicators are present. The impairment conditions evaluated by us may change from period to period, given that we operate
in a volatile business environment. However, such impairment conditions considered are the ability to maintain financial performance objectives, access to new markets and customers, overall market conditions, as well as the value of new contracts.
We recorded no impairment charges during 2007 and 2006.

Because the conditions underlying the factors we use to evaluate
our acquisitions change from time to time, we may determine that it is necessary to take additional material impairment charges in future periods, which could have a material adverse impact on our business, financial condition, results of operations
and cash flow.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued FAS 157, Fair Value Measurement, which defines fair value, establishes a framework for measuring fair value and enhances disclosures
about fair value measures required under other accounting pronouncements, but does not change existing guidance as to whether or not an instrument is carried at fair value. In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2,
Effective Date of FASB Statement No. 157. FSP FAS 157-2 amends FAS 157 to delay the effective date of this Statement for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair
value in the financial statements on a recurring basis (at least annually). For items within its scope, FSP FAS 157-2 defers the effective date of FAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years. We will adopt this standard on January 1, 2009 and we currently believe it will not have a material effect on the financial statements.

In February 2007, the FASB issued FAS 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an amendment of FASB Statement No. 115, which permits entities to choose to
measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each
subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal
years. We do not believe that the adoption of FAS 159 will have a material effect on the financial statements.

In December
2007, the FASB issued FAS 141R, Business Combinations, which replaces FAS 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are
recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the
expensing of acquisition-related costs as incurred. FAS 141R is effective for 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. We do
not believe that the adoption of FAS 141R will have a material effect on the financial statements.

In December 2007, the
FASB issued FAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes the accounting and reporting for minority interests. Minority interests will be recharacterized as



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noncontrolling interests and will be reported as a component of equity separate from the parents equity, and purchases or sales of equity interests
that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement and, upon a
loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. FAS 160 is effective for annual periods beginning after December 15, 2008. We do not believe that
the adoption of FAS 160 will have a material effect on the financial statements.

Contractual Obligations and Commercial Commitments

As of December 31, 2007, our contractual obligations and commercial commitments consist of future minimum lease payments under non-cancelable leases
for office space. As of December 31, 2007, future minimum lease payments are approximately $273,000 for the year ending December 31, 2008 and there are no future minimum lease payments for years ending subsequent to December 31, 2008.
We are obligated under non-cancelable operating leases for office space in Maryland and California, which expire in September 2008 and in June 2008, respectively.

As of December 31, 2007 we are not obligated under any capital leases, but we did have several capital leases for certain computer and office equipment that expired in early 2006. Payments under capital leases
were approximately $5,000 for the year ended December 31, 2006.

Off Balance Sheet Arrangements

We do not currently have any off balance sheet arrangements.

ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our Financial Statements are set forth starting
on page F-1 of this Annual Report.

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

None.

ITEM 9A(T)  CONTROLS AND PROCEDURES

Limitations on the Effectiveness of Controls

A control system is subject to inherent limitations and, as a result, can provide only reasonable, not absolute, assurance that the systems
objectives will be achieved. In the first instance, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, decision-making in
connection with system design or operation can be faulty, and breakdowns can occur because of simple error or mistake. In addition, controls can be circumvented by the acts of single individuals, by collusion of two or more individuals, or by
management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives
under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. In light of the inherent limitations in a cost-effective
control system, misstatements due to error or fraud may occur and not be detected.

Disclosure Controls and Procedures

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the Companys disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2007. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period,
the Companys disclosure controls and procedures were designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and forms and were operating in an effective manner.

Managements Report on Internal
Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control over financial reporting is a process designed to provide



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reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. As noted above, because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal ControlIntegrated Framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2007.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal controls over financial reporting
Managements report was not subject to attestation 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

No change in the Companys internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the year ended December 31, 2007 that has materially
affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.

ITEM 9B  OTHER INFORMATION

None.

PART III

ITEM 10  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table presents
information about each of our executive officers, key employees and directors as of December 31, 2007.



|                |  |     |  |                                                           
|--------------- |  | --- |  | ----------------------------------------------------------
|Name            |  | Age |  | Position(s) with Company                                  
|Kamran Amjadi   |  | 44  |  | Chief Executive Officer and Chairman                      
|Mehrdad Akhavan |  | 44  |  | Chief Marketing Officer, President, Secretary and Director
|Tracy Slavin    |  | 38  |  | Chief Financial Officer                                   
|John Hoffman    |  | 48  |  | Vice President of Network Operations                      
|Amori Langstaff |  | 36  |  | Vice President of Client Services                         
|Peter Friedli   |  | 54  |  | Director                                                  
|David Jodoin    |  | 43  |  | Director                                                  

Kamran Amjadi served as our Chairman and Chief Executive Officer from August 1996 (when he
co-founded our business) through June 2004 when he resigned as Chief Executive Officer and Chairman. From June 2004 through April 2005 he worked as a consultant for the Company and in April 2005 he was re-appointed our Chairman and Chief Executive
Officer. From September 1990 until August 1996, Mr. Amjadi was the Executive Vice President and Director of United States Operations for MP Technologies, a software company. From July 1986 until August 1990, Mr. Amjadi was a software
engineer with the Hewlett-Packard Corporation.

Mehrdad Akhavan was appointed to the new position of Chief Marketing Officer in April 2005.
From June 2004 through April 2005 he served as our Chief Executive Officer. Prior to that time, he served as our President and Chief Operating Officer since October 1999, having served as our Executive Vice President and Secretary since he
co-founded our business in August 1996. Mr. Akhavan was elected to our Board of Directors in October 1996. From December 1994 until August 1996, Mr. Akhavan was President of TechTreK, a childrens computer entertainment and education
center. From January 1991 until December 1994, Mr. Akhavan was President of Trident Software, a company he co-founded, which digitized works of art.

Tracy Slavin became our Chief Financial Officer in June 2004. Ms. Slavin joined us in September 2000, and until her promotion served as Controller and Senior Director of Accounting. Ms. Slavin, a CPA, has an
MBA and corporate accounting, finance and auditing experience. Prior to joining the Company, she served as Vice President of Accounting for Thomson Financial, a division of



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The Thomson Corporation, a leading provider of financial information, analysis, research and software products. From 1993 to 1997, Ms. Slavin served as
Assistant Controller for Phillips International, Inc., a consumer and business-to-business information company. Ms. Slavin began her career as an auditor with PricewaterhouseCoopers LLP.

John Hoffman oversees our internal and external computer services, security and operation as our Vice President of Network Operations. He became a member
or our team when we acquired BrightStreet.com in December 2001. At BrightStreet.com, he oversaw their network infrastructure, where he managed more than 24 systems providing scalability and high availability architectures. John brings more than 19
years of experience in computer operations, software development and security. He has obtained varied development and operational experience both in high security government work and the Internet. Prior to BrightStreet.com, he held various positions
at Lockheed Missile & Space Company, from 1998 to 2000, and at Netcom Online Communications, from 1994 to 1998.

Amori Langstaff,
our Vice President of Client Services, joined us in March 2000. Amori oversees all client implementations, managing such processes as account services, business strategy, performance analyses and production. She brings to the Company ten years of
experience designing and delivering results-based database and customer loyalty marketing solutions for retail and hospitality companies, including the Mandarin Oriental Hotel Group, Asset Marketing and Regent International Hotels. Amori has
extensive experience in creating and implementing marketing campaigns, customer segmentations, database marketing programs and corporate business plans, and in leading consultative client engagements. At the Company, her contributions have promoted
better and more profitable client relationships, streamlined sales and fulfillment processes.

Peter Friedli co-founded our business in
August 1996. Mr. Friedli was elected to our Board of Directors in October 1996. Mr. Frieldi is the President of Friedli Corporate Finance and was also the President of Friedli Corporate Finance, Inc. Belize. Prior to joining Friedli
Corporate Finance, Inc. Belize, Inc. Belize, Mr. Friedli worked as an international management consultant for service and industrial companies in Europe and the U.S. Mr. Friedli also serves as the President of New Venturetec, Inc., a
publicly traded Swiss venture capital investment company and currently serves as a Director of Osiris Therapeutics a publicly traded biotech company. He also serves as a Director in certain private companies.

David Jodoin was appointed as a Director in November 2005. Since December 2005 Mr. Jodoin has been the Chief Executive Officer of Iperia, an
enterprise software company specializing in solutions for service providers in the voice over IP industry. From 2002 until 2005, Mr. Jodoin served as Chief Executive Officer of Alpha NetSolutions, Inc., an information technology consulting
organization specializing in strategic consulting, web services and Linux migration strategies. Previously, Mr. Jodoin was the founder and Chief Executive Officer of Innovative Computer Concepts, which merged with Vantive Corporation, a
publicly held customer relationship management software company, which eventually merged with PeopleSoft, Inc. While at Vantive, Mr. Jodoin held the position of Executive Vice President and General Manager.

Board of Directors

Our Board of Directors consists
of Kamran Amjadi, Mehrdad Akhavan, Peter Friedli and David Jodoin, with Mr. Amjadi serving as Chairman of the Board. The Board affirmatively determines the independence of each Director and nominee for election as a Director; and has adopted
the independence standards of The NASDAQ Stock Market LLC. At this time, the Board has determined that only one member of our Board of Directors, David Jodoin, is independent under such standards.

Compensation Committee:The Compensation Committee determines the salaries and incentive compensation of our officers and provides
recommendations for the salaries and incentive compensation of other employees and consultants. The Compensation Committee also administers our various incentive compensation, stock and benefit plans. As of December 31, 2007, the Compensation
Committee consisted of Mr. Friedli. The Company currently does not have a Compensation Committee Charter.

Compensation Committee Interlocks and Insider Participation:None of our executive officers serves as a member of the Board of Directors or compensation committee of any entity that has one or more executive officers serving on our
Board of Directors or Compensation Committee.

Audit Committee/Audit Committee Financial Expert:We do not have a
separately designated standing Audit Committee of our Board of Directors, and therefore we do not have any independent audit committee financial experts under Item 407(e) of Regulation S-B. We are listed on the SWX Swiss Exchange, which does
not currently require that listed companies have an audit committee. We intend to expand our current Board of Directors to accommodate a separately designated Audit Committee, and to appoint members of such Committee, at a later date.

Stockholder Communications with Directors: Company stockholders who want to communicate with the Board or any individual director
can write to:

Invenda Corporation

Board Administration

6901 Rockledge Drive, 6th Floor

Bethesda, MD 20817



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Letters should indicate that you are a Company stockholder. Depending on the subject matter, management
will:



| |  |  | Forward the communication to the director or directors to whom it is addressed;
| | - |  | -------------------------------------------------------------------------------



| |  |  | Attempt to handle the inquiry directly, when it is a request for information about the Company or it is a stock-related matter; or
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Not forward the communication if it is primarily commercial in nature or if it relates to an improper or irrelevant topic.
| | - |  | --------------------------------------------------------------------------------------------------------------------------

At each Board meeting, a member of management will present a summary of all communications received since the last meeting that were not forwarded and
will make those communications available to the directors on request.

Limitation of Liability and Indemnification of Directors and Officers

Our certificate of incorporation provides that our directors will not be personally liable to us, or our stockholders, for monetary
damages for breach of their fiduciary duties as a director, except for liability:



| |  |  | for any breach of the directors duty of loyalty to us or our stockholders;
| | - |  | ---------------------------------------------------------------------------



| |  |  | for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | under a provision of Delaware law relating to unlawful payment of dividends or unlawful stock purchase or redemption of stock; or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | for any transaction from which the director derives an improper personal benefit.
| | - |  | ---------------------------------------------------------------------------------

As a result of this provision, we and our stockholders may be unable to obtain monetary damages from a director for breach of his or her duty of care.

Our bylaws provide for the indemnification of our directors and officers and any person who is or was serving at our request as a
director, officer, employee, partner or agent of another corporation or of a partnership, joint venture, limited liability company, trust or other enterprise. This indemnification is provided to the fullest extent authorized by, and subject to the
conditions set forth in, the Delaware General Corporation Law. This indemnification will include the right to advanced payment of expenses by us of any proceeding for which indemnification may be had in advance of its final disposition.

Section 16(a) Beneficial Ownership Reporting Compliance

To our knowledge, based solely on review of the copies of reports under Section 16(a) of the Exchange Act that have been furnished to us and written representations that no other reports were required,
during the fiscal year ended December 31, 2007 all executive officers, directors and greater than 10% beneficial owners have complied with all applicable Section 16(a) filing requirements.

Code of Ethics

We have adopted a Code of Ethics that
applies to our directors and to all of our employees, including our chief executive officer and chief financial officer. Our Code of Ethics has been distributed to all employees and is available at our website (www.Invenda.com). Any additions
or amendments to the Code of Ethics, and any waivers of the Code of Ethics for executive officers or our Directors, will be posted on our website.

ITEM 11  EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation for the years ended December 31, 2007 and 2006 for our Chief Executive Officer and our other
executive officers as of December 31, 2007, and two other most highly compensated employees for the year ended December 31, 2007 (collectively, the Named Executive Officers).



|                                                           |  |      |  |        |         |       |   |                  |  |                       |        |  |       |         |     |  |   |        
|---------------------------------------------------------- |  | ---- |  | ------ | ------- | ----- | - | ---------------- |  | --------------------- | ------ |  | ----- | ------- | --- |  | - | -------
|Name and Principal Position(s)                             |  | Year |  | Salary |         | Bonus |   | Optionawards (1) |  | All othercompensation |        |  | Total
|Kamran Amjadi                                              |  | 2007 |  | $      | 250,000 |       | $ | 8,500            |  | $                     |       |  | $     | 400,000 | (2) |  | $ | 658,500
|Chief Executive Officer and Chairman                       |  | 2006 |  | $      | 250,000 |       | $ |                 |  | $                     |       |  | $     |        |     |  | $ | 250,000
|                                                           |  |      |  |        |         |      
|Mehrdad Akhavan                                            |  | 2007 |  | $      | 200,000 |       | $ | 6,000            |  | $                     |       |  | $     |        |     |  | $ | 206,000
|Chief Marketing Officer, President, Secretary and Director |  | 2006 |  | $      | 200,000 |       | $ |                 |  | $                     |       |  | $     |        |     |  | $ | 200,000
|                                                           |  |      |  |        |         |      
|Tracy Slavin                                               |  | 2007 |  | $      | 150,000 |       | $ | 2,600            |  | $                     | 37,439 |  | $     |        |     |  | $ | 190,039
|Chief Financial Officer                                    |  | 2006 |  | $      | 150,000 |       | $ |                 |  | $                     | 44,417 |  | $     |        |     |  | $ | 194,417
|                                                           |  |      |  |        |         |      
|John Hoffman                                               |  | 2007 |  | $      | 150,000 |       | $ | 2,600            |  | $                     |       |  | $     |        |     |  | $ | 152,600
|Vice President of Network Operations                       |  | 2006 |  | $      | 150,000 |       | $ |                 |  | $                     | 11,250 |  | $     |        |     |  | $ | 161,250
|                                                           |  |      |  |        |         |      
|Amori Langstaff                                            |  | 2007 |  | $      | 150,000 |       | $ | 10,000           |  | $                     | 18,413 |  | $     |        |     |  | $ | 178,413
|Vice President of Client Services                          |  | 2006 |  | $      | 150,000 |       | $ |                 |  | $                     | 36,375 |  | $     |        |     |  | $ | 186,375



24



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|(1) | Amounts shown in this column are based on the accounting expense for the corresponding year related to stock option awards made in that year and in prior periods. The assumptions
used to calculate the accounting expense recognized are set forth in Note 11 of the Notes to Financial Statements that begin on page F-7 of this Annual Report.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | This amount represents a 10% commission payment to Kamran Amjadi for the successful completion of a patent sale and license transaction that generated $4 million in revenue.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Grants of Plan-Based Awards Table

There were no grants of plan-based awards to any of our Named Executive Officers during the year ended December 31, 2007.

Narrative Disclosure to Summary Compensation Table

We do not have employment agreements with any of our Named Executive
Officers. The Chief Executive Officer recommends annual salary adjustments by evaluating the performance of each executive officer after considering new responsibilities and the previous years performance and the financial health of the
Company. The Compensation Committee performs the same review when evaluating the performance of the Chief Executive Officer. Individual performance ratings take into account such factors as achievement of specific goals that are driven by the
Companys strategic plan and attainment of specific individual objectives.

Bonuses. The Compensation Committee
may award bonuses to its executive officers that are based on both corporate and individual performance, as well as the financial health of the Company. The corporate performance factors include, among other things, revenue and earnings targets
established in the Companys annual budget. The Compensation Committee decided to issue bonuses to its executives and other eligible employees for the year ended December 31, 2007 in order to reward them for successful renewals and new
accounts that were signed during 2007. This decision does not reflect future decisions on bonus payments as other factors may weigh more prominently in the future.

Stock-Based Compensation. Another component of executive officers compensation consists of awards under the Invenda
Corporation 2007 Stock Incentive Plan, adopted in May 2007, pursuant to which we grant executive officers and other key employees options to purchase shares of common stock. Although the Amended and Restated E-centives, Inc. Stock Option and
Incentive Plan adopted in September 2000 remains in effect and options under the plan remain outstanding, we ceased making awards under the plan as of the adoption of our 2007 Stock Incentive Plan.

The Compensation Committee grants stock options to executives in order to align the interests of those executives with the interests of the stockholders.
Stock options are considered by the Compensation Committee to be an effective long-term incentive because the executives gains are linked to increases in the value of the common stock, which in turn results in stockholder gains. The
Compensation Committee generally grants options to new executive officers and other employees upon their commencement of employment and thereafter as determined by the Compensation Committee. The options generally are granted at an exercise price
equal to the closing market price of the common stock on the trading day of the date of grant. Options granted typically vest over a period of four years following the date of grant. The maximum option term is ten years. The full benefit of the
options is realized upon appreciation of the stock price in future periods, thus providing an incentive to create value for our stockholders through appreciation of stock price. Management believes that stock options have been helpful in attracting
and retaining skilled executive personnel.

The Company decided not to issue any options to its executives for the year ended
December 31, 2007, primarily due to the fact that the Company continued to require external funding. This decision does not reflect future decisions on option grants as other factors may weigh more prominently in the future.

Other. The Company has a tax-qualified employee savings plan, which covers all of its employees. Eligible employees may defer up
to 25% of their pre-tax earnings, subject to the Internal Revenue Services annual contribution limit. The 401(k) plan



25



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##### Table of Contents

permits the Company to make additional discretionary matching contributions on behalf of all participants in the 401(k) plan in an amount determined by the
Company, although it currently does not do so. The 401(k) plan is intended to qualify under Section 401 of the Internal Revenue Code of 1986 so that contributions by employees or by the Company to the 401(k) plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the plan, and so that contributions made by the Company, if any, will be deductible by the Company when made.

Chief Executive Officer Compensation. The executive compensation policy described above is applied in setting the Chief Executive
Officers compensation. The Chief Executive Officers compensation generally participates in the same executive compensation plans and arrangements available to the other senior executives. Accordingly, the compensation consists of an
annual base salary, a potential annual cash bonus and, potentially, long-term equity-linked compensation in the form of stock options. The Compensation Committees general approach in establishing the Chief Executive Officers compensation
is to be competitive with peer companies, but to have a percentage of his target compensation based upon certain performance criteria and targets established in the Companys strategic plan.

For the year ended December 31, 2007, the Compensation Committee decided to reward the Chief Executive Officer $400,000 for the successful effort in
selling and licensing patents that generated $4 million in revenue.

2007 Outstanding Equity Awards at Fiscal Year End Table

The following table presents information with respect to stock options held by each of our Named Executive Officers as of December 31, 2007. The
Company has not issued any stock awards.



|                |  |                                                   |  |                     |  |                      |        |  |           
|--------------- |  | ------------------------------------------------- |  | ------------------- |  | -------------------- | ------ |  | ----------
|                |  | Option Awards                                    
|Name            |  | Number of SecuritiesUnderlying UnexercisedOptions |  | OptionExercisePrice |  | OptionExpirationDate
|                |  | Exercisable                                       |  | Unexercisable       |  |                      |        | 
|Mehrdad Akhavan |  | 10,000                                            |  |                    |  | $                    | 25.00  |  | 05/14/2009
|                |  | 27,500                                            |  |                    |  | $                    | 130.00 |  | 06/30/2010
|                |  | 186,825                                           |  |                    |  | $                    | 1.30   |  | 10/07/2012
|Tracy Slavin    |  | 1,500                                             |  |                    |  | $                    | 65.00  |  | 10/03/2010
|                |  | 1,125                                             |  |                    |  | $                    | 1.30   |  | 10/07/2012
|                |  | 15,250                                            |  | 7,625               |  | $                    | 1.30   |  | 06/21/2014
|John Hoffman    |  | 2,000                                             |  |                    |  | $                    | 5.50   |  | 12/12/2011
|                |  | 10,000                                            |  |                    |  | $                    | 1.30   |  | 10/07/2012
|Amori Langstaff |  | 500                                               |  |                    |  | $                    | 65.00  |  | 03/12/2010
|                |  | 10,000                                            |  |                    |  | $                    | 1.30   |  | 10/07/2012
|                |  | 11,250                                            |  | 3,750               |  | $                    | 1.30   |  | 06/21/2014

Option Exercises and Stock Vested Table

During the year ended December 31, 2007, no stock options were exercised by any of the Named Executive Officers and as we have not granted any stock
awards, there were no stock awards that vested.

Potential Payments upon Termination or Change in Control

There are no potential payments upon termination or a change in control of the Company for any of our Named Executive Officers.

Director Compensation

We do not currently compensate
our directors who are also employees. Each non-employee director is currently reimbursed for reasonable travel expenses for each board meeting attended. During the year ended December 31, 2007, the Board of Directors approved the issuance of
10,000 shares of common stock to each non-employee director. Peter Friedli declined such director compensation. Future years compensation for non-employee directors has not yet been decided.

In July 1996, we entered into a consulting agreement with Friedli Corporate Finance, Inc. Belize, whereby Mr. Friedli provided financial consulting
services and investor relations advice. There have been subsequent renewal agreements, with the most recent renewal being signed in November 2006, extending the agreement until November 2008. Pursuant to the agreement, Friedli Corporate



26



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Finance, Inc. Belize was paid $4,000 per month plus reimbursement of expenses related to Mr. Friedlis services. In early 2008, to further our cost
cutting initiatives, Friedli Corporate Finance, Inc. Belize agreed to the termination of the consulting agreement. Peter Frieldi has agreed to provide the same consulting services to us free of charge. See Item 13  Certain Relationships
and Related Transactions, and Director Independence for additional information on various relationships between Mr. Friedli and his affiliates and the company.

The following tables set forth the compensation for the year ended December 31, 2007 and the aggregate number of equity awards outstanding at December 31, 2007 for our non-employee directors as of
December 31, 2007.

2007 Director Compensation Table



|              |  |              |        |     |                        |   |        |       |  |   |       
|------------- |  | ------------ | ------ | --- | ---------------------- | - | ------ | ----- |  | - | ------
|Name          |  | Stock Awards |        |     | All Other Compensation |   |        | Total
|Peter Friedli |  | $            |       |     |                        | $ | 63,000 | (1)   |  | $ | 63,000
|David Jodoin  |  | $            | 34,477 | (2) |                        | $ |       |       |  | $ | 34,477



|(1) | Represents the amount expensed during 2007 for Peter Friedlis consulting services.
|--- | -----------------------------------------------------------------------------------

|(2) | Represents the 10,000 shares of common stock approved by the Board of Directors for services provided during 2007.
|--- | ------------------------------------------------------------------------------------------------------------------

Outstanding Director Equity Awards at Fiscal Year-End Table



|              |  |                                               
|------------- |  | ----------------------------------------------
|Name          |  | Stock Option Awards(exercisable/unexercisable)
|Peter Friedli |  | 9,000 /                                      
|David Jodoin  |  |  /                                          

ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table presents information regarding the beneficial ownership of common stock as of January 31, 2008:



| |  |  | each person, or group of affiliated persons, who is the beneficial owner of more than 5% of our outstanding common stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | each of our Named Executive Officers;
| | - |  | -------------------------------------



| |  |  | each of our directors; and
| | - |  | --------------------------



| |  |  | all of our executive officers and directors as a group.
| | - |  | -------------------------------------------------------

Unless otherwise indicated, the address of each person identified is c/o Invenda Corporation, 6901
Rockledge Drive, 6thFloor, Bethesda, Maryland 20817.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a stockholder vote. The persons named in this table have sole voting power for all shares of our common stock shown
as beneficially owned by them, subject to community property laws where applicable and except as indicated in the footnotes to this table. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. In
computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to options and warrants held by that person that are currently exercisable or exercisable within 60 days after
January 31, 2008 are deemed outstanding. These shares, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.



|                                                            |  |                           |  |                 
|----------------------------------------------------------- |  | ------------------------- |  | ----------------
|                                                            |  | Shares Beneficially Owned
|Name                                                        |  | Number                    |  | Percent of Class
|Kamran Amjadi                                               |  | 159,600                   |  | *               
|Mehrdad Akhavan (1)                                         |  | 290,325                   |  | 1.7             
|David Jodoin                                                |  | 5,000                     |  | *               
|Peter Friedli (2)                                           |  | 12,241,394                |  | 73.6            
|Venturetec, Inc. (3)                                        |  | 2,436,203                 |  | 14.7            
|New Venturetec AG (4)                                       |  | 2,436,203                 |  | 14.7            
|InVenture, Inc.                                             |  | 3,155,139                 |  | 19.2            
|US Venture 05, Inc.                                         |  | 4,683,520                 |  | 28.4            
|Tracy Slavin (5)                                            |  | 17,875                    |  | *               
|John Hoffman (5)                                            |  | 12,000                    |  | *               
|Amori Langstaff (5)                                         |  | 21,750                    |  | *               
|Executive officers and directors as a group (5 persons) (6) |  | 12,714,195                |  | 75.3            



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|* | Less than 1% of the outstanding shares of common stock.
|- | -------------------------------------------------------

|(1) | Includes 66,000 shares of common stock and 224,325 shares issuable upon exercise of vested stock options.
|--- | ---------------------------------------------------------------------------------------------------------

|(2) | Includes 1,890,932 shares of common stock, 9,000 shares issuable upon exercise of vested stock options and 66,600 shares issuable upon exercise of warrants held by Mr. Friedli
individually, as well as shares of common stock and common stock underlying warrants held by entities over which Mr. Friedli has control, as follows: InVenture, Inc.  3,155,139 shares of common stock; US Venture 05, Inc.  4,683,520
of common stock and Venturetec, Inc.  2,336,203 shares of common stock and 100,000 shares issuable on exercise of warrants. Mr. Friedli has sole voting and investment power with respect to 1,966,532 shares and shared voting and investment
power with respect to 10,274,862 shares. See Item 13Certain Relationships and Related Transactions, and Director Independence for a description of Mr. Friedlis relationships with these entities.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes 2,336,203 shares of common stock and 100,000 shares issuable on exercise of warrants.
|--- | ----------------------------------------------------------------------------------------------

|(4) | Includes 2,336,203 shares of common stock and 100,000 shares issuable on exercise of warrants held by Venturetec, Inc. New Venturetec AG may be deemed to control Venturetec, Inc. by
virtue of its ownership of 100% of Venturetec, Inc.s capital stock and its corresponding right to elect Venturetec, Inc.s directors, and, therefore, our capital stock owned by Venturetec, Inc. may also be deemed to be beneficially owned
by New Venturetec, Inc. New Venturetec AG has shared voting and investment power with respect to 2,436,203 shares.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents shares issuable upon exercise of vested stock options.
|--- | -----------------------------------------------------------------

|(6) | Includes 12,296,394 shares of common stock, 251,201 shares issuable upon exercise of vested stock options and 166,600 shares issuable upon exercise of warrants.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

Securities Authorized for Issuance under Equity Compensation Plans

Below is information as of December 31, 2007 with respect to compensation plans under which equity securities are authorized for issuance.



|                                                           |  |                                                                                          |     |  |                                                                          |       |                                                                                                                                        |           |    
|---------------------------------------------------------- |  | ---------------------------------------------------------------------------------------- | --- |  | ------------------------------------------------------------------------ | ----- | -------------------------------------------------------------------------------------------------------------------------------------- | --------- | ---
|                                                           |  | A                                                                                        |     |  | B                                                                        |       | C                                                                                                                                      |          
|                                                           |  | Number of securitiesto be issued upon exerciseof outstanding options,warrants and
rights |     |  | Weighted-averageexercise price ofoutstanding options,warrants and rights |       | Number of securities remainingavailable for future issuance underequity compensation
plans(excluding securities reflected in column A) |          
|Equity compensation plans approved by security holders (1) |  | 345,031                                                                                  | (2) |  | $                                                                        | 13.53 |                                                                                                                                        | 7,290,000 | (2)
|Equity compensation plans not approved by security holders |  |                                                                                         |     |  |                                                                          |      |                                                                                                                                        |          |    
|                                                           |  |                                                                                          |     |  |                                                                          |       |                                                                                                                                        |           |    
|Total                                                      |  | 345,031                                                                                  |     |  |                                                                          |       |                                                                                                                                        | 7,290,000 |    
|                                                           |  |                                                                                          |     |  |                                                                          |       |                                                                                                                                        |           |    



|(1) | Plans approved by stockholders include the Amended and Restated E-centives, Inc. Stock Option and Incentive Plan and the Invenda Corporation 2007 Stock Incentive Plan adopted May
2007. Although the Amended and Restated E-centives, Inc. Stock Option and Incentive Plan remain in effect and options under the plan remain outstanding, we ceased making awards under the plan as of the adoption of our 2007 Stock Incentive Plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The number of common stock reserved and available for issuance under the 2007 Stock Incentive Plan.
|--- | ---------------------------------------------------------------------------------------------------

ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Peter Friedli,
one of our stockholders and a director, has relationships with several of our investors and stockholders. He serves as the investment advisor to Venturetec, Inc. and InVenture, Inc. He also serves as President of US Venture 05, Inc., InVenture, Inc.
and Venturetec, Inc., as well as its parent corporation, New Venturetec AG. Mr. Friedli is the President of Friedli Corporate Finance and was also the President of Friedli Corporate Finance, Inc. Belize. Mr. Friedli engaged in a number of
transactions with us, both directly and through companies with which he has affiliations, as follows:

Funding Commitment.
Friedli Corporate Finance has committed to providing our funding needs through the first quarter of 2009.



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Promissory Notes. On September 18, 2007, we issued an aggregate of 5,316,182 shares of
common stock in exchange for the cancellation of outstanding convertible promissory notes held by Venturetec, Inc. and US Venture 05, Inc. As a result of the exchange, the outstanding convertible promissory notes were canceled and we owe no further
amounts thereunder.

Series C Convertible Preferred Stock. Effective April 30, 2007, Peter Friedli, InVenture, Inc.,
Venturetec, Inc. and US Venture 05, Inc. exercised their option to convert their series C convertible preferred shares, together with unpaid dividends accrued until April 30, 2007, into shares of common stock. As a result 3,239,986 shares of
series C convertible preferred stock were converted into 3,239,986 shares of common stock and 535,537 shares of common stock were issued as dividends. These share numbers reflect the reverse stock split which occurred on May 18, 2007, after the
effective date of the conversion.

Consulting Agreement. In July 1996, we entered into a consulting agreement with Friedli
Corporate Finance, Inc. Belize whereby Mr. Friedli provided financial consulting services and investor relations advice. There have been subsequent renewal agreements, with the most recent renewal being signed in November 2006, extending the
agreement until November 2008. Pursuant to this agreement, Friedli Corporate Finance, Inc. Belize was paid $4,000 per month plus reimbursement of expenses related to Mr. Friedlis services. In early 2008, to further our cost cutting
initiatives, Friedli Corporate Finance, Inc. Belize agreed to the termination of the consulting agreement. Mr. Friedli has agreed to provide us the same consulting services free of charge.

Friedli Corporate Finance, Inc. Belize also provided investment banking services, including but not limited to, helping raise funds for the Company.
Friedli Corporate Finance, Inc. Belize was paid $250,000 in 2006 and $0 in 2007 for such services and related costs, which they have indicated to us may be distributed to a number of third party banks who assisted in the financing efforts.

As of December 31, 2007, only one member of our Board of Directors, David Jodoin, is independent.

ITEM 14  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Aggregate fees for professional services rendered
to the Company by BDO Seidman, LLP for the years ended December 31, 2007 and 2006 respectively, are summarized in the table below.



|                   |  |      |         |      |   |        
|------------------ |  | ---- | ------- | ---- | - | -------
|                   |  | 2007 |         | 2006
|Audit fees(1)      |  | $    | 164,000 |      | $ | 152,000
|Audit Related fees |  |      | 0       |      |   | 0      
|Tax fees(2)        |  |      | 27,000  |      |   | 27,000 
|All Other fees     |  |      | 0       |      |   | 0      
|                   |  |      |         |      |   |        
|Total fees         |  | $    | 191,000 |      | $ | 179,000
|                   |  |      |         |      |   |        



|(1) | Audit fees include consents and review of and assistance with documents filed with the SEC.
|--- | -------------------------------------------------------------------------------------------

|(2) | Tax fees consists of fees for services related to tax compliance, including the preparation of tax returns, tax planning and tax advice.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

Audit Committee Pre-Approval Policies and Procedures

As we do not have an Audit Committee, the Board of Directors has established a policy regarding pre-approval of all audit and non-audit services provided to us by our independent registered public accounting firm. On an ongoing basis,
management communicates specific projects and categories of service for which the advance approval of the Board of Directors is requested. The Board of Directors reviews these requests and advises management if the Board of Directors approves the
engagement of the independent registered public accounting firm. On a periodic basis, management reports to the Board of Directors regarding the actual spending for such projects and services compared to the approved amounts. The projects and
categories of service are as follows:



| |  |  | Audit fees: Professional services rendered for the audits of the financial statements of the Company and assistance with review of documents filed with the SEC.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Audit Related fees: Services related to employee benefit plan audits, business acquisitions, accounting consultations and consultations concerning financial and
accounting and reporting standards.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Tax fees: Services related to tax compliance, including the preparation of tax returns, tax planning and tax advice.
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | All Other fees: Other services are pre-approved on an engagement-by-engagement basis.
| | - |  | -------------------------------------------------------------------------------------

ITEM 15  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Financial Statements

The financial statements filed as part of this Annual Report on Form 10-K are set forth on page F-1 of this Annual Report on the Index to Financial
Statements.

Financial Statement Schedules

None.

Exhibits

The exhibits
to this Annual Report on Form 10-K are listed in the Exhibit Index.



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##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Bethesda, State of Maryland, on March 28, 2008.



INVENDA CORPORATIONBy:

/s/ Kamran AmjadiKamran AmjadiChief Executive Officer and Chairman


Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has
been signed by the following persons in the capacities and on the dates indicated.



|                                    |  |                                                                      |  |               
|----------------------------------- |  | -------------------------------------------------------------------- |  | --------------
|Name                                |  | Title                                                                |  | Date          
|                                    |  |                                                                     
|/s/ Kamran Amjadi Kamran
Amjadi     |  | Chief Executive Officer (Principal Executive Officer) and Chairman   |  | March 28, 2008
|                                    |  |                                                                     
|/s/ Tracy L. Slavin Tracy L. Slavin |  | Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 28, 2008
|                                    |  |                                                                     
|/s/ Mehrdad Akhavan Mehrdad Akhavan |  | Director                                                             |  | March 28, 2008
|                                    |  |                                                                     
|/s/ Peter Friedli Peter
Friedli     |  | Director                                                             |  | March 28, 2008
|                                    |  |                                                                     
|/s/ David Jodion David
Jodoin       |  | Director                                                             |  | March 28, 2008



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INVENDA CORPORATION

INDEX TO FINANCIAL STATEMENTS



|                                                        |  |    
|------------------------------------------------------- |  | ---
|Report of Independent Registered Public Accounting Firm |  | F-2
|Balance Sheets                                          |  | F-3
|Statements of Operations                                |  | F-4
|Statements of Stockholders Equity (Deficit)            |  | F-5
|Statements of Cash Flows                                |  | F-6
|Notes to Financial Statements                           |  | F-7



F-1



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Invenda Corporation

Bethesda, MD

We have audited the accompanying balance sheets of Invenda Corporation (the Company) as of December 31, 2007 and 2006 and the related statements of operations,
stockholders equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our
audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Invenda Corporation at December 31,
2007 and 2006, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, the Company is dependent upon its principal stockholder for continued funding.

As discussed in Note 2 to the financial statements, effective January 1, 2006, the Company adopted Financial Accounting Standard FAS 123(R), Share-Based Payments.

/s/ BDO Seidman, LLP

Bethesda, MD

March 28, 2008



F-2



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##### Table of Contents

INVENDA CORPORATION

BALANCE SHEETS



|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------------ | - | ---------------- | - | ------------ | -
|                                                                                                                                                                                                                                                                |  | December 31,2007 |              |   | December 31,2006 |  
|ASSETS                                                                                                                                                                                                                                                          |  |                  |              |   |                  |   |              |  
|Current assets:                                                                                                                                                                                                                                                 |  |                  |              |   |                  |   |              |  
|Cash and cash equivalents                                                                                                                                                                                                                                       |  | $                | 2,398,662    |   |                  | $ | 586,051      |  
|Accounts receivable, net of allowance for doubtful accounts of $36,063 and $73,536 at December 31, 2007 and December 31, 2006,
respectively.                                                                                                                    |  |                  | 1,096,301    |   |                  |   | 2,020,823    |  
|Other receivables                                                                                                                                                                                                                                               |  |                  |             |   |                  |   | 43,033       |  
|Prepaid expenses                                                                                                                                                                                                                                                |  |                  | 115,167      |   |                  |   | 63,872       |  
|Other                                                                                                                                                                                                                                                           |  |                  | 36,011       |   |                  |   | 11,000       |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total current assets                                                                                                                                                                                                                                            |  |                  | 3,646,141    |   |                  |   | 2,724,779    |  
|Property and equipment, net                                                                                                                                                                                                                                     |  |                  | 343,738      |   |                  |   | 346,185      |  
|Other intangible assets, net                                                                                                                                                                                                                                    |  |                  | 571,921      |   |                  |   | 1,195,836    |  
|Deferred financing fee                                                                                                                                                                                                                                          |  |                  |             |   |                  |   | 246,454      |  
|Other assets                                                                                                                                                                                                                                                    |  |                  |             |   |                  |   | 16,011       |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total assets                                                                                                                                                                                                                                                    |  | $                | 4,561,800    |   |                  | $ | 4,529,265    |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|                                                                                                                                                                                                                                                                |  |                 
|LIABILITIES, CONVERTIBLE REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                                                          |  |                  |              |   |                  |   |              |  
|Current liabilities:                                                                                                                                                                                                                                            |  |                  |              |   |                  |   |              |  
|Short term debt                                                                                                                                                                                                                                                 |  | $                |             |   |                  | $ | 8,250,000    |  
|Interest and final payment fees payable                                                                                                                                                                                                                         |  |                  |             |   |                  |   | 1,411,410    |  
|Accounts payable                                                                                                                                                                                                                                                |  |                  | 1,259,009    |   |                  |   | 905,713      |  
|Accrued expenses                                                                                                                                                                                                                                                |  |                  | 307,404      |   |                  |   | 204,404      |  
|Deferred revenue                                                                                                                                                                                                                                                |  |                  | 16,706       |   |                  |   | 175,572      |  
|Other liabilities                                                                                                                                                                                                                                               |  |                  | 27,553       |   |                  |   | 111,853      |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total current liabilities                                                                                                                                                                                                                                       |  |                  | 1,610,672    |   |                  |   | 11,058,952   |  
|Other long-term liabilities                                                                                                                                                                                                                                     |  |                  | 12,435       |   |                  |   | 35,578       |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total liabilities                                                                                                                                                                                                                                               |  |                  | 1,623,107    |   |                  |   | 11,094,530   |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Commitments and contingencies                                                                                                                                                                                                                                   |  |                  |              |   |                  |   |              |  
|Convertible redeemable preferred stock                                                                                                                                                                                                                          |  |                  |              |   |                  |   |              |  
|Series C convertible preferred stock (voting), $.01 par value, 5,000,000 shares authorized, 0 and 3,239,986 shares issued and outstanding at
December 31, 2007 and December 31,2006, respectively. (liquidation preference of $25,919,888 at December 31, 2006) |  |                  |             |   |                  |   | 12,959,940   |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total convertible redeemable preferred stock                                                                                                                                                                                                                    |  |                  |             |   |                  |   | 12,959,940   |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Stockholders equity (deficit):                                                                                                                                                                                                                                 |  |                  |              |   |                  |   |              |  
|Common stock, $.01 par value, 120,000,000 shares authorized, 16,465,388 and 6,254,364 shares issued and outstanding at December 31, 2007
and December 31, 2006, respectively.                                                                                   |  |                  | 164,654      |   |                  |   | 62,544       |  
|Additional paid-in capital                                                                                                                                                                                                                                      |  |                  | 165,172,558  |   |                  |   | 127,661,812  |  
|Accumulated deficit                                                                                                                                                                                                                                             |  |                  | (162,398,519 | ) |                  |   | (147,249,561 | )
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total stockholders equity (deficit)                                                                                                                                                                                                                            |  |                  | 2,938,693    |   |                  |   | (19,525,205  | )
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  
|Total liabilities, convertible redeemable preferred stock and stockholders equity (deficit)                                                                                                                                                                    |  | $                | 4,561,800    |   |                  | $ | 4,529,265    |  
|                                                                                                                                                                                                                                                                |  |                  |              |   |                  |   |              |  

See accompanying notes to financial statements.



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##### Table of Contents

INVENDA CORPORATION

STATEMENTS OF OPERATIONS



|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                                                                                                                     |  | Year ended December 31, |            
|                                                                                                                                                                     |  | 2007                    |             |   | 2006 |  
|Revenue                                                                                                                                                              |  |                         |             |   |      |   |            |  
|Product sales                                                                                                                                                        |  | $                       | 6,032,290   |   |      | $ | 6,445,502  |  
|Royalties                                                                                                                                                            |  |                         | 45,006      |   |      |   | 56,571     |  
|Patents                                                                                                                                                              |  |                         | 4,000,000   |   |      |   |           |  
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Total revenue                                                                                                                                                        |  |                         | 10,077,296  |   |      |   | 6,502,073  |  
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Operating expenses (income)                                                                                                                                          |  |                         |             |   |      |   |            |  
|Cost of revenue                                                                                                                                                      |  |                         | 3,490,390   |   |      |   | 2,989,671  |  
|Product development, inclusive of stock-based compensation of $9,320 and $31,618 for the years ended December 31, 2007 and
December 31, 2006, respectively.          |  |                         | 1,110,073   |   |      |   | 930,305    |  
|General and administrative, inclusive of stock-based compensation of $86,154 and $105,653 for the years ended December 31, 2007 and
December 31, 2006, respectively. |  |                         | 4,124,400   |   |      |   | 3,524,671  |  
|Sales and marketing, inclusive of stock-based compensation of $6,567 and $3,141 for the years ended December 31, 2007 and
December 31, 2006, respectively.           |  |                         | 1,582,885   |   |      |   | 1,283,067  |  
|Other income                                                                                                                                                         |  |                         | (166,667    | ) |      |   | (500,000   | )
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Total operating expenses (income)                                                                                                                                    |  |                         | 10,141,081  |   |      |   | 8,227,714  |  
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Loss from operations                                                                                                                                                 |  |                         | (63,785     | ) |      |   | (1,725,641 | )
|Loss on exchange of convertible promissory notes                                                                                                                     |  |                         | (12,206,617 | ) |      |   |           |  
|Interest expense                                                                                                                                                     |  |                         | (762,596    | ) |      |   | (1,382,741 | )
|Interest income                                                                                                                                                      |  |                         | 26,189      |   |      |   | 12,087     |  
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Loss before income taxes                                                                                                                                             |  |                         | (13,006,809 | ) |      |   | (3,096,295 | )
|Income taxes                                                                                                                                                         |  |                         |            |   |      |   |           |  
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Net loss                                                                                                                                                             |  |                         | (13,006,809 | ) |      |   | (3,096,295 | )
|Dividends on convertible redeemable preferred stock                                                                                                                  |  |                         | 2,142,149   |   |      |   |           |  
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Net loss attributable to common stockholders                                                                                                                         |  | $                       | (15,148,958 | ) |      | $ | (3,096,295 | )
|                                                                                                                                                                     |  |                         |             |   |      |   |            |  
|Basic and diluted net loss per common share                                                                                                                          |  | $                       | (1.43       | ) |      | $ | (0.50      | )
|Shares used to compute basic and diluted net loss per common share                                                                                                   |  |                         | 10,623,373  |   |      |   | 6,236,870  |  

See accompanying notes to financial statements.



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##### Table of Contents

INVENDA CORPORATION

STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)



|                                                                   |  |              |  |                           |         |                    |   |             |                                    |   |              |   |  |   |             |  
|------------------------------------------------------------------ |  | ------------ |  | ------------------------- | ------- | ------------------ | - | ----------- | ---------------------------------- | - | ------------ | - |  | - | ----------- | -
|                                                                   |  | Common Stock |  | Additionalpaid-in Capital |         | AccumulatedDeficit |   |             | TotalStockholdersEquity
(Deficit) |  
|                                                                   |  | Shares       |  | Amount                    |         |                    |  
|Balance at January 1, 2006                                         |  | 6,216,514    |  | $                         | 62,165  |                    | $ | 127,465,490 |                                    | $ | (144,153,266 | ) |  | $ | (16,625,611 | )
|                                                                   |  |              |  |                           |         |                    |   |             |                                    |   |              |   |  |   |             |  
|Stock-based compensation                                           |  |             |  |                           |        |                    |   | 140,412     |                                    |   |             |   |  |   | 140,412     |  
|Exercise of stock options                                          |  | 31,600       |  |                           | 316     |                    |   | 41,098      |                                    |   |             |   |  |   | 41,414      |  
|Issuance of common stock for services                              |  | 6,250        |  |                           | 63      |                    |   | 14,812      |                                    |   |             |   |  |   | 14,875      |  
|Net loss                                                           |  |             |  |                           |        |                    |   |            |                                    |   | (3,096,295   | ) |  |   | (3,096,295  | )
|                                                                   |  |              |  |                           |         |                    |   |             |                                    |   |              |   |  |   |             |  
|Balance at December 31, 2006                                       |  | 6,254,364    |  |                           | 62,544  |                    |   | 127,661,812 |                                    |   | (147,249,561 | ) |  |   | (19,525,205 | )
|                                                                   |  |              |  |                           |         |                    |   |             |                                    |   |              |   |  |   |             |  
|Stock-based compensation                                           |  |             |  |                           |        |                    |   | 102,041     |                                    |   |             |   |  |   | 102,041     |  
|Dividends on Series C convertible preferred stock                  |  | 535,537      |  |                           | 5,355   |                    |   | 2,136,794   |                                    |   | (2,142,149   | ) |  |   |            |  
|Conversion of Series C convertible preferred stock to common stock |  | 3,239,986    |  |                           | 32,400  |                    |   | 12,927,540  |                                    |   |             |   |  |   | 12,959,940  |  
|Exchange of convertible promissory notes for common stock          |  | 6,410,626    |  |                           | 64,106  |                    |   | 22,308,979  |                                    |   |             |   |  |   | 22,373,085  |  
|Exercise of stock options                                          |  | 13,875       |  |                           | 139     |                    |   | 18,499      |                                    |   |             |   |  |   | 18,638      |  
|Exercise of warrants                                               |  | 11,000       |  |                           | 110     |                    |   | 16,893      |                                    |   |             |   |  |   | 17,003      |  
|Net loss                                                           |  |             |  |                           |        |                    |   |            |                                    |   | (13,006,809  | ) |  |   | (13,003,300 | )
|                                                                   |  |              |  |                           |         |                    |   |             |                                    |   |              |   |  |   |             |  
|Balance at December 31, 2007                                       |  | 16,465,388   |  | $                         | 164,654 |                    | $ | 165,172,558 |                                    | $ | (162,398,519 | ) |  | $ | 2,938,693   |  
|                                                                   |  |              |  |                           |         |                    |   |             |                                    |   |              |   |  |   |             |  

See accompanying notes to financial statements.



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##### Table of Contents

INVENDA CORPORATION

STATEMENTS OF CASH FLOWS



|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                                                                                                                                                                                                                           |  | Year ended December 31, |            
|                                                                                                                                                                                                                                                                           |  | 2007                    |             |   | 2006 |  
|Cash flows used in operating activities:                                                                                                                                                                                                                                   |  |                         |             |   |      |   |            |  
|Net loss                                                                                                                                                                                                                                                                   |  | $                       | (13,006,809 | ) |      | $ | (3,096,295 | )
|Adjustments to reconcile net loss to net cash used in operating activities:                                                                                                                                                                                                |  |                         |             |   |      |   |            |  
|Loss on exchange of promissory notes                                                                                                                                                                                                                                       |  |                         | 12,206,617  |   |      |   |           |  
|Depreciation and amortization                                                                                                                                                                                                                                              |  |                         | 826,600     |   |      |   | 770,757    |  
|Amortization of deferred financing fee                                                                                                                                                                                                                                     |  |                         | 246,454     |   |      |   | 379,297    |  
|Stock-based compensation                                                                                                                                                                                                                                                   |  |                         | 102,041     |   |      |   | 140,412    |  
|Issuance of common stock for services                                                                                                                                                                                                                                      |  |                         |            |   |      |   | 14,875     |  
|Provision for doubtful accounts                                                                                                                                                                                                                                            |  |                         | 57,558      |   |      |   | 25,000     |  
|(Increase) decrease in:                                                                                                                                                                                                                                                    |  |                         |             |   |      |   |            |  
|Accounts receivable                                                                                                                                                                                                                                                        |  |                         | 866,964     |   |      |   | (714,646   | )
|Other receivables                                                                                                                                                                                                                                                          |  |                         | 43,033      |   |      |   | 308,364    |  
|Prepaid expenses and other current assets                                                                                                                                                                                                                                  |  |                         | (51,295     | ) |      |   | (9,416     | )
|Other assets                                                                                                                                                                                                                                                               |  |                         | (9,000      | ) |      |   |           |  
|Increase (decrease) in:                                                                                                                                                                                                                                                    |  |                         |             |   |      |   |            |  
|Accounts payable                                                                                                                                                                                                                                                           |  |                         | 353,296     |   |      |   | (498,191   | )
|Accrued expenses and other liabilities                                                                                                                                                                                                                                     |  |                         | 500,615     |   |      |   | 751,816    |  
|Deferred revenue                                                                                                                                                                                                                                                           |  |                         | (158,866    | ) |      |   | 100,530    |  
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Net cash provided by (used in) operating activities                                                                                                                                                                                                                        |  |                         | 1,977,208   |   |      |   | (1,827,497 | )
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Cash flows from investing activities:                                                                                                                                                                                                                                      |  |                         |             |   |      |   |            |  
|Acquisition of property and equipment                                                                                                                                                                                                                                      |  |                         | (200,238    | ) |      |   | (339,953   | )
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Net cash used in investing activities                                                                                                                                                                                                                                      |  |                         | (200,238    | ) |      |   | (339,953   | )
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Cash flows from financing activities:                                                                                                                                                                                                                                      |  |                         |             |   |      |   |            |  
|Payments on obligations under capital leases                                                                                                                                                                                                                               |  |                         |            |   |      |   | (5,208     | )
|Proceeds from issuance of debt                                                                                                                                                                                                                                             |  |                         |            |   |      |   | 2,500,000  |  
|Debt issuance costs                                                                                                                                                                                                                                                        |  |                         |            |   |      |   | (250,000   | )
|Exercise of warrants                                                                                                                                                                                                                                                       |  |                         | 17,003      |   |      |   |           |  
|Exercise of stock options                                                                                                                                                                                                                                                  |  |                         | 18,638      |   |      |   | 41,414     |  
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Net cash provided by financing activities                                                                                                                                                                                                                                  |  |                         | 35,641      |   |      |   | 2,286,206  |  
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Net increase in cash and cash equivalents                                                                                                                                                                                                                                  |  |                         | 1,812,611   |   |      |   | 118,756    |  
|Cash and cash equivalents, beginning of year                                                                                                                                                                                                                               |  |                         | 586,051     |   |      |   | 467,295    |  
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Cash and cash equivalents, end of year                                                                                                                                                                                                                                     |  | $                       | 2,398,662   |   |      | $ | 586,051    |  
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|Supplemental disclosure of cash flow information:                                                                                                                                                                                                                          |  |                         |             |   |      |   |            |  
|Cash paid for interest                                                                                                                                                                                                                                                     |  | $                       | 11,084      |   |      | $ | 84,511     |  
|                                                                                                                                                                                                                                                                           |  |                         |             |   |      |   |            |  
|                                                                                                                                                                                                                                                                          
|Supplemental disclosure of non-cash investing and financing activities:                                                                                                                                                                                                    | 
|                                                                                                                                                                                                                                                                          
|Effective April 30, 2007, all shares of the Companys series C convertible preferred stock were converted into 3,239,986
shares of the Companys common stock.                                                                                                             | 
|                                                                                                                                                                                                                                                                          
|Effective April 30, 2007, accrued dividends of $2,142,149 on the Companys series C convertible preferred stock were
converted into 535,537 shares of the Companys common stock.                                                                                          | 
|                                                                                                                                                                                                                                                                          
|During May 2007, the Company implemented a one-for-ten reverse stock split of the Companys outstanding shares of common
stock that reduced the shares outstanding from approximately 100,327,738 shares to approximately 10,032,774 shares.                               | 
|                                                                                                                                                                                                                                                                          
|Effective September 18, 2007, all of the Companys outstanding convertible promissory notes with principal values
totaling $8,250,000, plus accrued and unpaid interest and final payment fees payable, were exchanged for 6,410,626 shares of the Companys common stock. | 

See accompanying notes to financial statements.



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##### Table of Contents

INVENDA CORPORATION

NOTES TO FINANCIAL STATEMENTS



|(1) | Organization
|--- | ------------

Invenda Corporation
(Invenda or the Company) was originally established as Imaginex, Inc. on August 2, 1996, through incorporation in the State of Delaware. In October 1996, March 1999 and May 2007 the Company amended its Certificate
of Incorporation to change its name to Emaginet, Inc., E-centives, Inc. and to Invenda Corporation, respectively.

The purpose of the name
change to Invenda Corporation was to establish a brand identity that more accurately reflects the Companys current businesses. The name E-centives reflected the Companys main product at the time which was related to electronic
incentives. The Company has been providing a multitude of other products and services via three business units, as described below, for several years. Invenda acts as an umbrella for the three business units.

Invenda provides digital marketing technologies and services, as well as on-line advertising capabilities and solutions for companies across a range of
industries. Invenda currently consists of three business units: Collabrys, E-centives and ConsumerReview.com. Through its business units, the Company provides acquisition and retention solutions for companies that do business with millions of
Internet users every day. For financial reporting purposes, the Company currently organizes its revenues into two operating segments: Digital Marketing Solutions (formerly the Interactive Database Marketing or IDBM division) and Digital
Media (formerly the ConsumerReview.com division). Digital Marketing Solutions includes the Collabrys and the E-centives business units and Digital Media includes the ConsumerReview.com business unit.

The principal offerings of the business units in Digital Marketing Solutions include data warehousing, online reporting, e-mail marketing, Internet
couponing and promotions, strategic consulting and program management, user experience design and development, as well as analytics and data mining. The principal offerings of the business unit in Digital Media are on-line advertising and e-commerce
services.

One of the Companys Digital Marketing Solutions segment customers, Reckitt Benckiser, contributed 19% and 28%,
respectively, of the Companys revenue for the years ended December 31, 2007 and 2006. The customers initial contract expired in October 2002 and the customer has subsequently signed six annual renewal agreements, with the most
recent renewal expiring on December 31, 2008. Loss of this customer could have a material adverse effect on the Companys business, financial condition, results of operations and cash flows.

The Company currently anticipates that its current cash position, future revenues and the commitment from Friedli Corporate Finance to provide the
Company with its funding needs through the first quarter of 2009 will be sufficient to meet the anticipated cash needs for working capital and capital expenditures through the first quarter of 2009.

If future revenues are not sufficient to cover operating costs, the Company will need to raise funds to continue operations. Additional funds may also be
needed to respond to competitive pressures, to develop new or enhanced products or services, to fund expansion or to make acquisitions. If Friedli Corporate Finance is unable or unwilling to fulfill its financing commitment or the Company is not
offered financing by Friedli Corporate Finance on acceptable terms and conditions, it is not likely that the Company will be able to replace such committed funds on acceptable terms or at all. If adequate funds are not available, or not available on
acceptable terms, the Company may not be able to continue operations, and would need to seek bankruptcy protection or a buyer for its assets.



|(2) | Summary of Significant Accounting Policies
|--- | ------------------------------------------



|(a) | Basis of Presentation
|--- | ---------------------

The
Corporations financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).



|(b) | Use of Estimates
|--- | ----------------

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

Estimates are used in accounting for, among other things, allowance for uncollectible receivables, recoverability of long-lived assets,
intangible assets, depreciation and amortization, taxes and contingencies. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the financial statements in the period they are determined to be necessary.



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##### Table of Contents

|(c) | Cash and Cash Equivalents
|--- | -------------------------

All
highly liquid investments with maturities of three months or less when purchased are considered cash equivalents. Those investments with maturities less than twelve months at the balance sheet date are considered short-term investments. Cash and
cash equivalents consist of cash on deposit with banks and money market funds stated at cost, which approximates fair value.



|(d) | Accounts Receivable
|--- | -------------------

The
Companys accounts receivable arise in the normal course of business. Accounts receivable are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts.

The Company provides an allowance for doubtful accounts equal to the estimated collection losses that could be incurred. The estimated
losses are based on historical collection experience coupled with review of the current status of existing receivables.



|(e) | Property and Equipment
|--- | ----------------------

Property
and equipment are stated at cost and equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from
three to seven years. Equipment under capital leases is capitalized and amortized using the straight-line method over the shorter of its estimated useful life or the term of the respective lease. Leasehold improvements acquired in a business
combination or purchased after the inception of a lease are capitalized and amortized over the shorter of (a) the useful life of the assets or (b) a term that includes required lease periods and renewals that are reasonably assured upon
the acquisition of the purchase (see Note 4).

Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized and depreciated over the remaining useful lives of the asset. When assets are retired or sold, the cost and related accumulated
depreciation are removed from the accounts and any resulting gain or loss is recognized in the results of operations.



|(f) | Long-Lived and Amortizable Intangible Assets
|--- | --------------------------------------------

In accordance with the provisions of FAS 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the Company assesses the recoverability of long-lived assets, including amortizable intangible
assets, whenever adverse events or changes in circumstances or business climate indicate that the carrying value of the asset may not be recoverable. Each impairment test is based on a comparison of the undiscounted cash flows to the recorded value
of the asset. If impairment is indicated, the asset is written down by the amount, if any, in which the carrying value of the asset exceeds the related fair value of the asset. No impairment charges were recorded during the years ended
December 31, 2007 and 2006.

In accordance with the amortization provisions of FAS 142, Goodwill and Other
Intangible Assets, the Company amortizes intangible assets with definite useful lives over their respective estimated useful lives to their estimated residual values, and reviews them for impairment in accordance with FAS 144.



|(g) | Revenue Recognition
|--- | -------------------

The Company
recognizes revenue in accordance with SAB 101, Revenue Recognition in Financial Statements, as amended by SAB 104, Revenue Recognition. Consistent with the requirements of SAB 101 and SAB 104 revenue is recognized when
(i) persuasive evidence of arrangement exists, (ii) delivery has occurred, (iii) the sellers price to the buyer is fixed and (iv) collectibility is reasonably assured.

Revenue is currently generated by providing the services of the Companys two segments: Digital Marketing Solutions and Digital
Media.

The Digital Marketing Solutions segment, which represented 37% and 61% of the Companys revenue for the years
ended December 31, 2007 and 2006, respectively, is a solution that allows businesses to build direct consumer relationships. Revenue is generated by charging fees for data hosting, database management, e-mail delivery, promotion delivery,
campaign and program management, strategy services, creative services, as well as various analytical services. Revenue related to one-time service fees for setting up the customer is recognized ratably over the expected term of the customer
relationship and all other revenue is recognized when the service is provided, assuming collection is reasonably assured. During the year ended December 31, 2005 the Company began to receive royalties from licensing two of its patents related
to the Digital Marketing Solutions segment. This was the result of a settlement of a lawsuit with Coupons, Inc. (see Note 9b) whereby the Company is being paid quarterly royalties based on revenue earned by Coupons, Inc. related to patents that were
licensed to them as part of the settlement agreement. Royalties are being recognized on a cash receipts basis due to the Companys inability to calculate the royalties.



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The Digital Media segment, which includes ConsumerReview.com, manages web communities
around common product interests. The web properties are dedicated to meeting the needs of consumers who are researching products on the web. Revenue is predominantly generated through on-line advertising and e-commerce fees. Advertising revenue is
derived from the sale of advertisements on pages delivered to community members of our websites. This revenue is recognized in the period in which the advertisements are delivered. E-commerce fees are derived from on-line performance-based programs
and are earned on either a lead referral basis or on an affiliate commission basis. Revenue is earned from performance-based programs when a user of our websites responds to a commerce link by linking to a customers websites. For lead referral
programs, customers are charged on a cost-per-click basis, and revenue is recognized in the month the click occurs. For affiliate-commission programs revenue is recognized when the commission is earned, which is in the month the transaction occurs.
ConsumerReview.com represented 23% and 39% of the Companys total revenue for years ended December 31, 2007 and 2006, respectively.

In October 2007, the Company entered into a patent sale agreement for the sale of a web search patent for a purchase price of $2 million. In a related transaction, the Company entered into two non-exclusive patent
license agreements for a one time payment of $2 million. The patent revenue was recognized at the time the agreements were signed and represented 40% of the Companys revenue for the year ended December 31, 2007.



|(h) | Cost of Revenue
|--- | ---------------

Cost of revenue
consists primarily of expenses related to providing the Companys services, including related personnel costs, depreciation of servers, content costs, as well as network and hosting charges.



|(i) | Product Development Costs
|--- | -------------------------

Product
development consists primarily of compensation and related benefits and other operating expenses associated with the Companys technology department. The technology department performs research and development, enhances and maintains existing
products and provides quality assurance. The Company expenses product development costs as they are incurred, as the costs do not meet the criteria to be capitalized.



|(j) | Sales and Marketing Costs
|--- | -------------------------

Sales
and marketing expenses consist primarily of payroll, sales commissions and related expenses for personnel engaged in sales, marketing and customer support, as well as advertising and promotional expenditures. Such costs are expensed as incurred.



|(k) | Stock-Based Compensation
|--- | ------------------------

At
December 31, 2007, the Company had one stock-based compensation plan, which is described more fully in Note 11. Beginning January 1, 2006, the Company adopted FAS 123(R) using the modified-prospective method, and as such, prior periods
have not been restated. Compensation expense is recognized over the requisite service period.



|(l) | Income Taxes
|--- | ------------

The Company uses the
asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and operating and tax loss carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation
allowance to reduce the deferred tax assets to the amount that is more likely than not to be recognized.

On January 1,
2007 the Company adopted FIN 48, Accounting for Uncertainty in Income Taxes, which requires financial statement benefits to be recognized for positions taken for tax return purposes when it is more-likely-than-not that the position will be
sustained. There has been no change in the Companys financial position and results of operations due to the adoption of FIN 48 (see Note 6).



|(m) | Net Income (Loss) Per Share
|--- | ---------------------------

The
Company computes net income (loss) applicable to common stockholders in accordance with FAS 128, Earnings Per Share. Under the provisions of FAS 128, basic net income (loss) available per share is computed by dividing the net income (loss)
available to common stockholders for the period by the weighted average number of common shares outstanding during the



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period. Diluted net income (loss) available per share is computed by dividing the net income (loss) for the period by the weighted average number of common
and dilutive common equivalent shares outstanding during the period. As the Company had a net loss in each of the periods presented, basic and diluted net income (loss) available per share is the same. For the years ended December 31, 2007 and
2006, 859,206 and 1,130,010 shares, respectively, attributable to outstanding stock options and warrants were excluded from the calculation of diluted earnings per share because the effect was anti-dilutive.



|(n) | Concentration of Credit Risk
|--- | ----------------------------

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with high quality financial
institutions. At times, these accounts may exceed federally insured limits. The Company has not experienced any losses in such bank accounts. The Company believes it is not exposed to significant credit risk related to cash and cash equivalents and
short-term investments.

In the year ended December 31, 2007, the Company incurred charges related to bad debts of
approximately $57,600. While the Company believes that its allowance for doubtful accounts as of December 31, 2007 is adequate to cover any difficulties with the collection of its accounts receivable balance, there can be no assurance that the
allowance will be adequate to cover any receivables later deemed to be uncollectible.

For the years ended December 31,
2007 and 2006, one customer accounted for 19% and 28%, respectively, of the Companys total revenue. This customer accounted for 13% and 30% of the Companys total accounts receivable at December 31, 2007 and 2006, respectively.



|(o) | Retirement Plan
|--- | ---------------

The Company
sponsors a defined contribution retirement plan established under the provisions of Internal Revenue Code Section 401(k). Eligible employees may defer up to 25% of their pre-tax earnings, subject to the Internal Revenue Services annual
contribution limit. The 401(k) plan permits the Company to make additional discretionary matching contributions on behalf of all participants in the 401(k) plan in an amount determined by the Company; however, no contributions have been made for the
years presented.



|(p) | Reclassification
|--- | ----------------

Certain amounts
in prior years financial statements have been reclassified to conform to the current year presentation.

In April
2007, the Companys Board of Directors approved a reverse stock split of the Companys common stock at a ratio of one-for-ten, causing each ten shares of outstanding common stock to be combined into one share of common stock. The reverse
split became effective at the close of business on May 18, 2007. Stockholders equity has been restated to give retroactive recognition to the reverse split for all periods presented by reclassifying the excess par value resulting from the
reduced number of shares from common stock to additional paid-in capital. All references to common share and per common share amounts for all periods presented have been retroactively restated to reflect this reverse split.



|(3) | Recent Accounting Pronouncements
|--- | --------------------------------

In September
2006, the FASB issued FAS 157, Fair Value Measurement, which defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measures required under other accounting pronouncements, but does not
change existing guidance as to whether or not an instrument is carried at fair value. In February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No. 157. FSP FAS 157-2 amends FAS 157 to delay the effective date of
this Statement for all nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). For items within its scope, FSP FAS 157-2
defers the effective date of FAS 157 to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The Company will adopt this standard on January 1, 2009 and does not believe it will have a material
effect on the financial statements.

In February 2007, the FASB issued FAS 159, The Fair Value Option for Financial Assets and Financial
Liabilities - Including an amendment of FASB Statement No. 115, which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to
report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. This statement is expected to expand the use of fair value measurement. FAS 159 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company does not believe that the adoption of FAS 159 will have a material effect on the financial statements.

In December 2007, the FASB issued FAS 141R, Business Combinations, which replaces FAS 141. The statement retains the purchase method of
accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities



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are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires
the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. FAS 141R is effective for 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 believe that the adoption of FAS 141R will have a material effect on the financial statements.

In December 2007, the FASB issued FAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB 51, which changes
the accounting and reporting for minority interests. Minority interests will be recharacterized as noncontrolling interests and will be reported as a component of equity separate from the parents equity, and purchases or sales of equity
interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement
and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in earnings. FAS 160 is effective for annual periods beginning after December 15, 2008. The
Company does not believe that the adoption of FAS 160 will have a material effect on the financial statements.



|(4) | Property and Equipment
|--- | ----------------------

Property and equipment
consists of the following:



|                               |  |             |  |              |            |   |      |   |            |  
|------------------------------ |  | ----------- |  | ------------ | ---------- | - | ---- | - | ---------- | -
|                               |  |             |  | December 31, |           
|                               |  | useful life |  | 2007         |            |   | 2006 |  
|Computer equipment             |  | 3 years     |  | $            | 6,869,683  |   |      | $ | 6,748,480  |  
|Furniture and equipment        |  | 5-7 years   |  |              | 383,195    |   |      |   | 383,195    |  
|Leasehold improvements         |  | 5 years     |  |              | 23,072     |   |      |   | 23,072     |  
|                               |  |             |  |              |            |   |      |   |            |  
|                               |  |             |  |              | 7,275,950  |   |      |   | 7,154,747  |  
|Less: accumulated depreciation |  |             |  |              | (6,932,212 | ) |      |   | (6,808,562 | )
|                               |  |             |  |              |            |   |      |   |            |  
|                               |  |             |  | $            | 343,738    |   |      | $ | 346,185    |  
|                               |  |             |  |              |            |   |      |   |            |  

Depreciation expense related to property and equipment was approximately $203,000 and $147,000 for
the years ended December 31, 2007 and 2006, respectively.



|(5) | Intangible Assets
|--- | -----------------

Intangible assets at
December 31, 2007 and December 31, 2006, consisted of patents, which were acquired in connection with the BrightStreet.com acquisition, and technology and tradenames, which were acquired in connection with the ConsumerReview.com
acquisition. The intangible assets were recorded at their estimated fair value and are amortized on a straight-line basis over three years. The technology and tradenames intangible assets were fully amortized as of November 2005.

Intangible assets consisted of the following as of December 31, 2007 and 2006:



|                                    |  |                      |           |                         |   |            |          |  |                      |         |                         |   |           |          |   |            |   |  |   |          
|----------------------------------- |  | -------------------- | --------- | ----------------------- | - | ---------- | -------- |  | -------------------- | ------- | ----------------------- | - | --------- | -------- | - | ---------- | - |  | - | ---------
|                                    |  | December 31, 2007    |           | December 31, 2006      
|                                    |  | Gross CarryingAmount |           | AccumulatedAmortization |   |            | NetValue |  | Gross CarryingAmount |         | AccumulatedAmortization |   |           | NetValue
|Amortizable intangible assets:      |  |                      |           |                         |   |            |          |  |                      |         |                         |   |           |          |   |            |   |  |   |          
|Patents                             |  | $                    | 2,345,679 |                         | $ | (1,773,758 | )        |  | $                    | 571,921 |                         | $ | 2,345,679 |          | $ | (1,149,843 | ) |  | $ | 1,195,836
|Technology                          |  |                      | 3,774,685 |                         |   | (3,774,685 | )        |  |                      |        |                         |   | 3,774,685 |          |   | (3,774,685 | ) |  |   |         
|Tradenames                          |  |                      | 112,408   |                         |   | (112,408   | )        |  |                      |        |                         |   | 112,408   |          |   | (112,408   | ) |  |   |         
|                                    |  |                      |           |                         |   |            |          |  |                      |         |                         |   |           |          |   |            |   |  |   |          
|Total amortizable intangible assets |  | $                    | 6,232,772 |                         | $ | (5,660,851 | )        |  | $                    | 571,921 |                         | $ | 6,232,772 |          | $ | (5,036,936 | ) |  | $ | 1,195,836
|                                    |  |                      |           |                         |   |            |          |  |                      |         |                         |   |           |          |   |            |   |  |   |          

Amortization expense related to intangible assets was approximately $624,000 for each of the years
ended December 31, 2007 and 2006, respectively. Estimated amortization expense for the year ended December 31, 2008 is $572,000. No amortization expense is expected for the years ending subsequent to December 31, 2008.



|(6) | Income Taxes
|--- | ------------

The Company has incurred operating
losses since its inception and has recognized no US current or deferred income tax provision or benefit. For the years ended December 31, 2007 and 2006, there was no income tax expense or benefit attributable to operations.



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The provision for income taxes is different from that which would be obtained by applying the statutory
US federal income tax rate to pretax loss before income taxes. The items affecting this difference are as follows:



|                                                 |  |                         |            |   |      |   |            |  
|------------------------------------------------ |  | ----------------------- | ---------- | - | ---- | - | ---------- | -
|                                                 |  | Year Ended December 31, |           
|                                                 |  | 2007                    |            |   | 2006 |  
|Expected tax benefit at statutory rate           |  | $                       | 4,422,315  |   |      | $ | 1,052,740  |  
|State tax, net of federal                        |  |                         | 28,907     |   |      |   | 119,657    |  
|Loss on exchange of convertible promissory notes |  |                         | (4,150,250 | ) |      |   |           |  
|Stock-based compensation, not deductible         |  |                         | (14,187    | ) |      |   | (4,002     | )
|Other, net                                       |  |                         | (6,702     | ) |      |   | (22,148    | )
|Increase in valuation allowance                  |  |                         | (280,083   | ) |      |   | (1,146,247 | )
|                                                 |  |                         |            |   |      |   |            |  
|Tax benefit                                      |  | $                       |           |   |      | $ |           |  
|                                                 |  |                         |            |   |      |   |            |  

Temporary differences and carry forwards that give rise to deferred tax assets and liabilities are
as follows:



|                                                              |  |                         |             |   |      |   |             |  
|------------------------------------------------------------- |  | ----------------------- | ----------- | - | ---- | - | ----------- | -
|                                                              |  | Year Ended December 31, |            
|                                                              |  | 2007                    |             |   | 2006 |  
|Deferred tax assets:                                          |  |                         |             |   |      |   |             |  
|Net operating loss and general business credits carryforwards |  | $                       | 48,803,775  |   |      | $ | 49,997,491  |  
|Interest expense                                              |  |                         | 519,478     |   |      |   |            |  
|Intangible assets                                             |  |                         | 2,247,875   |   |      |   | 2,285,786   |  
|Deferred compensation                                         |  |                         | 1,208,291   |   |      |   | 1,192,601   |  
|Allowance for doubtful accounts receivable                    |  |                         | 13,668      |   |      |   | 27,870      |  
|Property and equipment                                        |  |                         | 20,708      |   |      |   | 29,964      |  
|                                                              |  |                         |             |   |      |   |             |  
|Total gross deferred tax assets                               |  |                         | 53,813,795  |   |      |   | 53,533,712  |  
|Valuation allowance                                           |  |                         | (53,813,795 | ) |      |   | (53,533,712 | )
|                                                              |  |                         |             |   |      |   |             |  
|                                                              |  | $                       |            |   |      | $ |            |  
|                                                              |  |                         |             |   |      |   |             |  

In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or the entire amount of deferred tax assets will not be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods in which temporary
differences become deductible and tax credit carry forwards are available. Management considers scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies that can be implemented by the Company in
making this assessment. Based upon the lack of historical taxable income, scheduled reversals of deferred tax liabilities, projections for future taxable income and uncertainty regarding ultimate realization of the tax benefits regarding the
deferred tax assets, the Company has established a valuation allowance of approximately $53,814,000 as of December 31, 2007. The net change in the valuation allowance for the years ended December 31, 2007 and 2006 was an increase of
approximately $280,000 and $1,146,000, respectively. The federal net operating loss is approximately $130,899,000 as of December 31, 2007. The federal net operating loss carry forward period expires commencing in 2011 through the year 2022.
Further, as a result of certain financing and capital transactions, an annual limitation on the future utilization of a portion of the net operating loss may occur. As a result, the net operating loss carry forward may not be fully utilized before
expiration.

Effective January 1, 2007, the Company adopted the provisions of FIN 48. There has been no change in the Companys
financial position and results of operations due to the adoption of FIN 48. As of January 1, 2007, the Company had no unrecognized tax benefits that would have an affect on the effective tax rate. The Company elected to continue to report any
interest and penalties as income taxes. No interest or penalties were accrued as of January 1, 2007 as a result of the adoption of FIN 48.



|(7) | Convertible Promissory Notes
|--- | ----------------------------

On September 18,
2007, the Company entered into Note Exchange Agreements with the holders of all of its outstanding convertible promissory notes. Pursuant to the Note Exchange Agreements, the Company retired the debt represented by such convertible promissory notes
of $8,250,000 plus accrued and unpaid interest and final payment fees, by exchanging the convertible promissory notes for an aggregate of 6,410,626 shares of the Companys common stock. The convertible promissory notes were surrendered and
terminated as part of the debt exchange. The common stock issued had a fair value in excess of the book value of the debt, resulting in a non operating loss of $12,206,617.



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|(8) | Guarantees and Indemnifications
|--- | -------------------------------

The Company
accounts for guarantees and indemnifications under the guidance of FIN 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.

The Company sometimes indemnifies certain of its customers against damages, if any, they might incur as a result of a claim brought against them related
to patent infringement from the use of the Companys products. The Company is unable to estimate the maximum exposure of such indemnifications due to the inherent uncertainty and the varying nature of the contractual terms.



|(9) | Commitments and Contingencies
|--- | -----------------------------



|(a) | Leases
|--- | ------

As of December 31,
2007, the Company is not obligated under any capital leases, but did have several capital leases for certain computer and office equipment that expired in early 2006. Payments under capital leases were approximately $5,000 for the year ended
December 31, 2006. Amounts related to assets under non-cancelable capital leases that have been capitalized as property and equipment as of December 31, 2007 and 2006 are as follows:



|                               |  |              |          |   |      |   |          |  
|------------------------------ |  | ------------ | -------- | - | ---- | - | -------- | -
|                               |  | December 31, |         
|                               |  | 2007         |          |   | 2006 |  
|Computer equipment             |  | $            | 570,580  |   |      | $ | 570,580  |  
|Office equipment               |  |              | 23,789   |   |      |   | 23,789   |  
|Less: accumulated depreciation |  |              | (594,369 | ) |      |   | (591,067 | )
|                               |  |              |          |   |      |   |          |  
|                               |  | $            |         |   |      | $ | 3,302    |  
|                               |  |              |          |   |      |   |          |  

In addition, the Company is obligated under non-cancelable operating leases,
primarily for office space. Rent expense under operating leases was approximately $394,000 and $341,000 for the years ended December 31, 2007 and 2006, respectively.

As of December 31, 2007, future minimum lease payments are $273,000 for the year ending December 31, 2008. There are no future
minimum lease payments for years ending subsequent to December 31, 2008.



|(b) | Litigation
|--- | ----------

The Company is subject
to legal proceedings and claims from time to time, which arise in the ordinary course of business. Other than the matters described below, as of December 31, 2007, management is not aware of any asserted or pending litigation or claims against
the Company that would have a material adverse effect on the Companys financial condition, results of operations or liquidity.

On September 24, 2003, Trifocal, LLC (Trifocal) filed suit against the Company in California Superior Court, County of Santa Clara, alleging, among other things, breach of contract, breach of statute, and intentional and
negligent misrepresentation. Trifocal sought over $1 million in compensatory damages, plus interest, statutory damages and attorneys fees and costs. In December 2003, the Company removed the case to the United States District Court for the
Northern District of California, San Jose Division (the Court), denied any liability, and filed counterclaims seeking damages of approximately $1.8 million. During trial proceedings held in January and February 2006, the Company withdrew
its counterclaims and Trifocal reduced its damages claim to approximately $800,000, not including interest, statutory damages, attorneys fees or costs. At the close of trial proceedings, the Court found in favor of the Company on $536,515 of
Trifocals claims, and awarded Trifocal $50,937. In a subsequent decision of the Court on the remaining open issues, the Court found in favor of the Company on all issues but the interest due on the original $50,937 award. The Court then
entered judgment against the Company on April 19, 2006 for $83,417 (the Judgment). The total amount of the Judgment, with interest and costs, of approximately $100,000 was paid in July 2006.

On November 14, 2002, the Company filed a joint patent infringement action with Black Diamond CCT Holding, LLC against Coupons, Inc.
in the Federal District Court of Maryland. In this suit, the Company alleged infringement of two U.S. patents relating to online coupons, rights to which the Company acquired from BrightStreet.com. On April 25, 2005 the companies reached a
settlement, in which the Company received an aggregate of $1 million over two years (starting in May 2005 and ending in April 2007), in exchange for the release of all claims raised in the suit, including claims of lost profits and past royalties.
As part of the settlement, Coupons, Inc. has been granted a limited license to the two patents pursuant to which the Company may receive royalty payments based on future revenue of Coupons, Inc. related to these patents. The $1 million, which was in
received in full, was recognized as Other Income on a cash receipts basis due to the uncertainty as to its collection.





|(c) | Employment Agreements
|--- | ---------------------

The Company
currently has no employment agreements with any of its officers and employees, but does have bonus agreements with certain officers and employees. The Company issued bonuses totaling $108,500 during the year ended December 31, 2007, of which
$71,900 was paid and $36,600 was accrued for as of December 31, 2007. No bonuses were issued during the year ended December 31, 2006, therefore no accrual for bonuses were made as of December 31, 2006.



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|(10) | Preferred Stock, Stock Plans and Warrants
|---- | -----------------------------------------



|(a) | Preferred Stock
|--- | ---------------

On March 31,
2005, 2,614,794 shares of the Series C convertible preferred stock were issued in exchange for certain of the Companys 8% convertible promissory notes and associated accrued interest. If the Series C convertible preferred stock that was issued
as part of the exchange has not been converted to common stock pursuant to its terms prior to February 2, 2009, then, as additional consideration, the Company will issue to holder, a warrant to purchase shares of the Companys common
stock. The exercise price for each warrant will be equal to twenty percent below the average of the market prices for the five trading days prior to, but not including February 2, 2009.

As of December 31, 2006, there were 3,239,986 shares of Series C convertible preferred stock issued and outstanding. As of
December 31, 2006 the Series C convertible preferred stock was classified on the balance sheet as redeemable in accordance with EITF Topic D-98 Classification and Measurement of Redeemable Securities,due to the holders ability to
require redemption through a liquidation of the Company.

Effective April 30, 2007 all holders of the series C
convertible preferred stock exercised their option to convert their preferred shares, together with unpaid dividends accrued until April 30, 2007, into shares of the Companys common stock. As a result 3,239,986 shares of series C
convertible preferred stock were converted into 3,239,986 shares of common stock and 535,537 shares of common stock were issued as dividends. These share numbers reflect the reverse stock split which occurred after the effective date of the
conversion.



|(b) | Stock Incentive and Option Plan
|--- | -------------------------------

The Companys 2007 Stock Incentive Plan, which was adopted in May 2007, provides and its Amended and Restated Stock Incentive and Option Plan, which expired in August 2006, provided for the grant of stock options, restricted stock and
other stock-based compensation to the Companys employees, consultants and advisors. As of December 31, 2007, there were 7,290,000 shares of common stock reserved for issuance under the 2007 Stock Incentive Plan.

As of December 31, 2007 there were 354,031 options to purchase shares of common stock outstanding at a weighted average exercise
price of $13.53 per share under the Amended and Restated Stock Incentive and Option Plan. Options typically vest over time, usually ratably over four years from the date of grant, with some subject to acceleration in the event of a change of control
of the Company. Typically, an option expires ten years after it is granted. In addition, the plan allows for grants of options the vesting of which is tied to the employees performance. The plan provides for the granting of both incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of 1986 and non-statutory options.



|(c) | Warrants
|--- | --------

At December 31,
2007, the Company had outstanding warrants to purchase 584,600 shares of the Companys common stock with a weighted average exercise price of $1.40. During the year ended December 31, 2007 the Company did not issue any warrants, but 39,900
warrants expired and 11,000 warrants were exercised. During year ended December 31, 2006, the Company did not issue or cancel any warrants.



|         |  |               |      |                 |                  
|-------- |  | ------------- | ---- | --------------- | -----------------
|Warrants |  | ExercisePrice |      | Expiration Date
|5,600    |  | $             | 1.00 |                 | December 31, 2008
|579,000  |  | $             | 1.40 |                 | April 7, 2008    



|(11) | Stock-Based Compensation
|---- | ------------------------

The Companys 2007
Stock Incentive Plan, which was adopted in May 2007, provides and its Amended and Restated Stock Incentive and Option Plan, which expired in August 2006, provided for the grant of stock options, restricted stock and other stock-based compensation to
the Companys employees, consultants and advisors.



|(a) | Stock
|--- | -----

During the year ended
December 31, 2007, the Board of Directors approved the issuance of 10,000 shares of common stock to each non-employee director. Peter Friedli declined such director compensation. The 10,000 shares authorized to be issued to David Jodoin have
not yet been issued and an expense of approximately $34,000 was recorded for the year ended December 31, 2007.



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##### Table of Contents

|(b) | Stock Options
|--- | -------------

Stock options
typically vest over time, usually ratably over four years from the date of grant, with some subject to acceleration in the event of a change of control of the Company. Typically, an option expires ten years after it is granted. In addition, the plan
allows for grants of options the vesting of which is tied to the employees performance. The plan provides for the granting of both incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986 and
non-statutory options.

The Company is using the Black-Scholes model to value the stock-based compensation expense
associated with FAS 123(R). In addition, the Company estimates forfeitures when recognizing stock-based compensation expense. In estimating the grant date fair value, the expected stock price volatility rates were based on historical volatilities of
the Companys common stock over a period commensurate with the expected life of the options. Since the Company does not pay dividends, the expected dividend yield used was 0%. The risk-free interest rates were based on the U.S. Treasury yield
curve in effect at the time of grant for periods corresponding with the expected life of the option. In March 2005, the SEC issued SAB 107 regarding the Staffs interpretation of FAS 123(R). This interpretation provides the Staffs views
regarding interactions between FAS 123(R) and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public companies. The interpretive guidance is intended to assist companies in applying the
provisions of FAS 123(R) and investors and users of the financial statements in analyzing the information provided. The expected life of the options was determined using the simplified approach described under SAB 107.

The Company did not grant any options to employees during the year ended December 31, 2007 and granted 44,800 options during the
year ended December 31, 2006. The assumptions used in the model for the year ended December 31, 2006 were as follows:



|                    |  |             
|------------------- |  | ------------
|Expected volatility |  | 103% - 105% 
|Expected dividends  |  | 0%          
|Risk-free rate      |  | 4.59% -5.10%
|Expected term       |  | 6.25 years  

For the years ended December 31, 2007 and 2006, the Company recognized
stock-based compensation expense of approximately $68,000 and $140,000, respectively.

A summary of option activity under
the Companys plan, as of December 31, 2007 and changes during the year then ended, is presented below:



|                               |  |          |   |  |                               |       |                                          |           |                             |   |        
|------------------------------ |  | -------- | - |  | ----------------------------- | ----- | ---------------------------------------- | --------- | --------------------------- | - | -------
|                               |  | Options  |   |  | Weighted-AverageExercisePrice |       | Weighted-AverageRemainingContractualTerm |           | AggregateIntrinsicValue (1)
|Balance, January 1, 2007       |  | 672,010  |   |  | $                             | 13.40 |                                          | 3.9 years |                             |   |        
|Exercised during the period    |  | (13,875  | ) |  | $                             | 1.34  |                                          |           |                             |   |        
|Cancelled during the period    |  | (304,104 | ) |  | $                             | 13.81 |                                          |           |                             |   |        
|Outstanding, December 31, 2007 |  | 354,031  |   |  | $                             | 13.53 |                                          | 5.5 years |                             | $ | 313,114
|                               |  |          |   | 
|Exercisable, December 31, 2007 |  | 335,081  |   |  | $                             | 14.18 |                                          | 5.4 years |                             | $ | 297,852



|(1) | The aggregate intrinsic value is the sum of the amounts by which
the quoted market price of the Companys stock at December 29, 2007, $2.40 per share, exceeded the exercise price of the options, for those options for which the quoted market price exceeded the exercise price
(in-the-money-options).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A summary of the Companys non-vested options as of
December 31, 2007, and changes during the year then ended, is presented below:



|                                |  |         |   |  |                                        |     
|------------------------------- |  | ------- | - |  | -------------------------------------- | ----
|                                |  | Options |   |  | Weighted-Average Grant-Date Fair Value
|Non-vested at January 1, 2007   |  | 40,450  |   |  | $                                      | 4.46
|Vested                          |  | (17,075 | ) |  | $                                      | 4.72
|Forfeited                       |  | (4,425  | ) |  | $                                      | 3.17
|Non-vested at December 31, 2007 |  | 18,950  |   |  | $                                      | 4.53



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##### Table of Contents

At December 31, 2007, the expected compensation cost of options outstanding but not
yet vested was approximately $44,000. The Company expects to recognize this cost over a weighted average period of approximately 1 year. The total fair value of options vested during the year ended December 31, 2007 was approximately $81,000.
The total intrinsic value of options exercised during the year ended December 31, 2007 was approximately $21,000.



|(12) | Related Party Transactions
|---- | --------------------------

Peter Friedli, one of
the Companys stockholders and a director, has relationships with several of the Companys investors and stockholders. He serves as the investment advisor to Venturetec, Inc. and InVenture, Inc. He also serves as President of US Venture
05, Inc., InVenture, Inc. and Venturetec, Inc., as well as its parent corporation, New Venturetec AG. Mr. Friedli is the President of Friedli Corporate Finance and was also the President of Friedli Corporate Finance, Inc. Belize.

During the year ended December 31, 2006, the Company issued three 10% convertible promissory notes with principal amounts totaling $1,500,000 and
one 4% convertible promissory note with a principal amount of $1,000,000 to a company affiliated with Peter Frieldi. As further described in Note 7, these four convertible promissory notes were exchanged for common stock on September 18, 2007.

As further described in Note 7, on September 18, 2007, the Company issued an aggregate of 5,316,182 shares of common stock in
exchange for the cancellation of all outstanding convertible promissory notes held by organizations affiliated with Peter Friedli, amounting to $7,000,000 plus accrued and unpaid interest and final payment fees. As a result of the exchange, the
convertible promissory notes were canceled and the Company owes no further amounts thereunder. The common stock issued had a fair value in excess of the book value of the debt, resulting in a non operating loss of $10,229,503.

As further described in Note 10, effective April 30, 2007, all holders of series C convertible preferred stock (all of which are related parties of
Peter Friedli) exercised their option to convert their series C convertible preferred shares, together with unpaid dividends accrued until April 30, 2007, into shares of the Companys common stock. As a result 3,239,986 shares of series C
convertible preferred stock were converted into 3,239,986 shares of common stock and 535,537 shares of common stock were issued as dividends. These share numbers reflect the reverse stock split, which occurred on May 18, 2007 after the
effective date of the conversion.

Friedli Corporate Finance has committed to providing our funding needs through the first quarter of
2009.

In July 1996, the Company entered into a consulting agreement with Friedli Corporate Finance, Inc. Belize which was renewed several
times, with the most recent renewal expiring in November 2008. Under the agreement, Friedli Corporate Finance, Inc. Belize provided services to the Company in the form of consultation, advice and other assistance upon the Companys request.
Such services could include, but were not limited to, (a) providing general business, financial and investment advice to the Company during the term of the agreement, and (b) serving as liaison between Friedli Corporate Finance, Inc.
Belize clients/investors and the Company by disseminating information to such investors on behalf of the Company. Pursuant to this agreement, Friedli Corporate Finance, Inc. Belize was paid $4,000 per month plus reimbursement of expenses related to
services. Consulting expense under the Friedli Corporate Finance, Inc. Belize agreement was approximately $63,000 for each of the years ended December 31, 2007 and 2006. As a result of additional investment banking services and costs related
with securing the funds associated with the convertible promissory notes and the preferred stock financing, Friedli Corporate Finance, Inc. Belize was paid $250,000 in 2006 and $0 in 2007, which they have indicated may be distributed to a number of
third party banks who assisted in the financing efforts. In early 2008, to further the Companys cost cutting initiatives, Friedli Corporate Finance, Inc. Belize agreed to the termination of the consulting agreement. Peter Friedli has agreed to
provide the Company with the same consulting services free of charge.



|(13) | Segment Information
|---- | -------------------



|(a) | Operating Segments
|--- | ------------------

The Company has
two reportable operating segments: Digital Marketing Solutions (formerly the Interactive Database Marketing or IDBM division) and Digital Media (formerly called ConsumerReview.com). Digital Marketing Solutions, which includes the Collabrys and
E-centives business units, provides such services as data warehousing, online reporting, Internet couponing and promotions, e-mail marketing, strategic consulting and program management, user experience design and development, and analytics and data
mining; while Digital Media, which includes ConsumerREVEIW.com, provides on-line advertising and e-commerce services that are provided through its network of web communities.

Information as to the operations of the reportable operating segments as of and for the year ended December 31, 2007 and 2006 are set
forth below. The Companys chief operating decision maker evaluates performance based primarily on operating profit and cash generated from operations. The accounting policies of the operating segments are the same as those described in the
summary of significant accounting.



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##### Table of Contents

|                              |  |                            |            |   |               |   |           |               |  |   |                    |   |  |       |           |     |  |   |            |  
|----------------------------- |  | -------------------------- | ---------- | - | ------------- | - | --------- | ------------- |  | - | ------------------ | - |  | ----- | --------- | --- |  | - | ---------- | -
|2007                          |  | Digital MarketingSolutions |            |   | Digital Media |   |           | SegmentTotals |  |   | UnallocatedAmounts |   |  | Total |          
|Operating revenue             |  | $                          | 3,754,352  |   |               | $ | 2,322,944 |               |  | $ | 6,077,296          |   |  | $     | 4,000,000 | (1) |  | $ | 10,077,296 |  
|Operating (loss) profit       |  |                            | (3,212,983 | ) |               |   | (450,802  | )             |  |   | (3,663,785         | ) |  |       | 3,600,000 | (2) |  |   | (63,785    | )
|Depreciation and amortization |  |                            | 795,137    |   |               |   | 31,463    |               |  |   | 826,600            |   |  |       |          |     |  |   | 826,600    |  
|Capital expenditures          |  |                            | 175,389    |   |               |   | 24,849    |               |  |   | 200,238            |   |  |       |          |     |  |   | 200,238    |  
|Assets                        |  |                            | 1,557,104  |   |               |   | 606,034   |               |  |   | 2,163,138          |   |  |       | 2,398,662 | (3) |  |   | 4,561,800  |  
|                              |  |                            |            |   |              
|2006                          |  | Digital MarketingSolutions |            |   | Digital Media |   |           | SegmentTotals |  |   | UnallocatedAmounts |   |  | Total |          
|Operating revenue             |  | $                          | 3,939,395  |   |               | $ | 2,562,678 |               |  | $ | 6,502,073          |   |  | $     |          |     |  | $ | 6,502,073  |  
|Operating loss                |  |                            | (1,591,827 | ) |               |   | (133,814  | )             |  |   | (1,725,641         | ) |  |       |          |     |  |   | (1,725,641 | )
|Depreciation and amortization |  |                            | 760,623    |   |               |   | 10,134    |               |  |   | 770,757            |   |  |       |          |     |  |   | 770,757    |  
|Capital expenditures          |  |                            | 330,322    |   |               |   | 9,631     |               |  |   | 339,953            |   |  |       |          |     |  |   | 339,953    |  
|Assets                        |  |                            | 3,402,595  |   |               |   | 540,619   |               |  |   | 3,943,214          |   |  |       | 586,051   | (3) |  |   | 4,529,265  |  



|(1) | The operating revenue, unallocated amounts, represents revenue from a patent sale agreement and a patent license agreement.
|--- | ---------------------------------------------------------------------------------------------------------------------------

|(2) | The operating profit, unallocated amounts, represents revenue from a patent sale agreement and a patent license agreement less commissions paid on the agreements.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The asset, unallocated amounts, represents corporate assets that consist of cash and cash equivalents.
|--- | ------------------------------------------------------------------------------------------------------



|(b) | Customers
|--- | ---------

For the year ended
December 31, 2007, one of the Companys Digital Marketing Solutions segment customers represented 10% or more of the Companys revenue. Reckitt Benckiser contributed $1.9 million in revenue and $1.8 million in revenue for the years
ended December 31, 2007 and 2006, or 19% and 28%, respectively, of the Companys revenue for each of the years. The customers original agreement expired in October 2002, and the customer subsequently entered into six renewal
agreements, with the most recent one expiring on December 31, 2008.

In October 2007, the Company entered into a patent
sale agreement and a patent license agreement with Google Inc. for payments totaling $4 million. The revenue represented 40% of the Companys revenue for the year ended December 31, 2007.

No other customer represented 10% or more of the Companys revenue for the year ended December 31, 2007.



|(14) | Selected Quarterly Financial Data (unaudited)
|---- | ---------------------------------------------

The
following tables contain unaudited Statement of Operations information for each quarter of 2007 and 2006. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the
information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period.



|                                                    |  |             |            |   |             |   |            |             |  |   |             |   |  |   |          
|--------------------------------------------------- |  | ----------- | ---------- | - | ----------- | - | ---------- | ----------- |  | - | ----------- | - |  | - | ---------
|                                                    |  | 2007       
|                                                    |  | 1st Quarter |            |   | 2nd Quarter |   |            | 3rd Quarter |  |   | 4th Quarter
|Revenues                                            |  | $           | 1,467,033  |   |             | $ | 1,462,080  |             |  | $ | 1,425,276   |   |  | $ | 5,722,907
|                                                    |  |             |            |  
|Gross profit                                        |  |             | 578,616    |   |             |   | 573,325    |             |  |   | 584,329     |   |  |   | 4,850,636
|Operating (loss) profit                             |  |             | (886,586   | ) |             |   | (1,039,703 | )           |  |   | (896,635    | ) |  |   | 2,759,139
|Income (loss) before income tax                     |  |             | (1,202,086 | ) |             |   | (1,359,467 | )           |  |   | (13,217,764 | ) |  |   | 2,772,508
|Net income (loss) applicable to common stockholders |  |             | (1,202,086 | ) |             |   | (3,501,616 | )           |  |   | (13,217,764 | ) |  |   | 2,772,508
|Basic net income (loss) per common share (1)        |  | $           | (0.19      | ) |             | $ | (0.40      | )           |  | $ | (1.21       | ) |  | $ | 0.17     
|Diluted net income (loss) per common share (1)      |  | $           | (0.19      | ) |             | $ | (0.40      | )           |  | $ | (1.21       | ) |  | $ | 0.16     



F-17



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##### Table of Contents

|                                                |  |             |            |   |             |   |           |             |  |   |             |   |  |   |           |  
|----------------------------------------------- |  | ----------- | ---------- | - | ----------- | - | --------- | ----------- |  | - | ----------- | - |  | - | --------- | -
|                                                |  | 2006        |           
|                                                |  | 1st Quarter |            |   | 2nd Quarter |   |           | 3rd Quarter |  |   | 4th Quarter |  
|Revenues                                        |  | $           | 1,380,948  |   |             | $ | 1,449,386 |             |  | $ | 1,761,876   |   |  | $ | 1,909,863 |  
|Gross Profit                                    |  |             | 626,501    |   |             |   | 629,668   |             |  |   | 1,001,124   |   |  |   | 1,255,109 |  
|Operating (loss) profit                         |  |             | (950,878   | ) |             |   | (604,058  | )           |  |   | (291,945    | ) |  |   | 121,240   |  
|Loss before income tax                          |  |             | (1,354,486 | ) |             |   | (909,774  | )           |  |   | (602,445    | ) |  |   | (229,590  | )
|Net loss applicable to common stockholders      |  |             | (1,354,486 | ) |             |   | (909,774  | )           |  |   | (602,445    | ) |  |   | (229,590  | )
|Basic and diluted net loss per common share (1) |  | $           | (0.22      | ) |             | $ | (0.15     | )           |  | $ | (0.10       | ) |  | $ | (0.04     | )



|(1) | Earnings per share is computed independently for each of the quarters presented, therefore the sum of the quarterly earnings per share may not equal the total computed for the year
due to shares issued each quarter.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The improvement for the 4th quarter of 2007 can primarily be attributed to the $4,000,000 in revenue generated from a patent sale agreement and a patent license agreement.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-18



---

##### Table of Contents

INDEX TO EXHIBITS



|               |  |                                                                                                                                                                                           
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                               
|3.1.1          |  | Restated Certificate of Incorporation of E-centives, Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 333-42574))                              
|               | 
|3.1.2          |  | Certificate of Amendment to Restated Certificate of Incorporation of E-centives, Inc., dated May 17, 2007 (incorporated by reference to the Current Report on Form 8-K filed May 23,
2007)
|               | 
|3.2            |  | Amended and Restated Bylaws of E-centives, Inc. (incorporated by reference to the Registration Statement on Form S-1 (Registration No. 333-42574))                                        
|               | 
|10.1+          |  | 2007 Stock Incentive Plan (incorporated by reference to Appendix C to the Companys Information Statement on Schedule 14C filed April 23, 2007).                                          
|               | 
|23.1*          |  | Consent of BDO Seidman, LLP.                                                                                                                                                              
|               | 
|31.1*          |  | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                       
|               | 
|31.2*          |  | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                       
|               | 
|32.1*          |  | Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation S-K.                         
|               | 
|32.2*          |  | Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished under Exhibit 32 of Item 601 of Regulation S-K.                         



|* | Filed or furnished with this report.
|- | ------------------------------------

|+ | Management contract or compensatory plan or arrangement.
|- | --------------------------------------------------------