Results of Operations



Year Ended December 31, 2007 Compared To Year Ended December 31, 2006



Total Revenues. The Company had total revenues of $5,895,726 and $6,229,944 for
the years ended December 31, 2007 and 2006, respectively. The decrease in total
revenue was $334,218 for the year ended December 31, 2007 representing
approximately a 5.4% decrease compared to the total revenue for the year ended
December 31, 2006. Of the $5,895,726 for the year ended December 31, 2007 and
the $6,229,944 for the year ended December 31, 2006, $5,895,726 and $6,222,752,
respectively, was related to the business operations of NOW Solutions, a
wholly-owned subsidiary of the Company.


Revenues primarily consist of fees for software licenses, and consulting and
maintenance. The revenue from license and maintenance for the year ended
December 31, 2007 decreased by $86,922 from the same period in the prior year,
representing approximately a 1.7% decrease, due to selling less new or upgraded
software licenses. These sales decreases were partially offset by an increase in
maintenance fees as contractual increases in maintenance revenues and the
maintenance from the 2006 new software license fees offset most of the loss in
maintenance revenues from customer attrition.


Consulting revenue for the year ended December 31, 2007 decreased by $340,132
from the same period in the prior year, representing approximately a 37.3%
decrease. This decrease was due to fewer implementation and upgrade consulting
services as a result of fewer software licenses being sold in 2007 as compared
to 2006. Consulting revenues traditionally lag behind software license revenues
as the implementation of new software sales takes several months. There was a
slight increase in consulting revenues in the fourth quarter as some customers
requested assistance in implementing emPath version 6.4 released the end of July
2007.


Other revenue, which consists primarily of reimbursable travel expenses, hosting
fees, and fees related to user conferences for the years ended December 31, 2007
and 2006 increased by $92,836 from the prior year, which represented
approximately a 55.7% increase. This increase was the result of hosting revenues
beginning in 2007, the Now Solutions' user conference in 2007, partially offset
by reduced reimbursable travel costs related to the lower consulting revenues in
2007 as compared to 2006.


Selling, General and Administrative Expenses. The Company had selling, general
and administrative expenses of $6,637,848 and $7,156,711 for the years ended
December 31, 2007 and 2006, respectively. The total selling, general and
administrative expenses for the year ended December 31, 2007 decreased by
$518,863 compared to the selling, general and administrative expenses for the
year ended December 31, 2006, representing approximately an 7.3% decrease. Of
the $6,637,848 for the year ended December 31, 2007 and the $7,156,711 for the
year ended December 31, 2006, NOW Solutions accounted for $5,454,204, and
$6,173,446, respectively. The decrease of $518,863 was primarily attributed to
the reduction in source code amortization as NOW Solutions source code was
completely amortized in the first quarter of 2006, a reduction in loan
commitment fees from refinancing notes payable in 2006 for Vertical and NOW
Solutions, a reduction in NOW Solutions salaries related to the layoff of the
sales department in the U.S. in March 2007, a reduction in NOW Solutions
advertising and trade show costs, a reduction in NOW Solutions travel costs due
to reduced sales staff and reduced consultant travel, and lower contract labor
costs for software development and consulting at NOW Solutions.


Operating Loss. The Company had an operating loss of $985,113 and $1,140,839 for
the years ended December 31, 2007 and 2006, respectively. The operating loss
decreased by $155,726 compared to the operating loss for the year ended December
31, 2006, representing a decrease of approximately 13.7%. The decrease was
attributable to the combination of a reduction of $518,863 in selling, general
and administrative expenses partially offset by the $334,218 decrease in
revenues.


Interest Expense. The Company had interest expense of $1,005,325 and $590,896
for the years ended December 31, 2007 and 2006, respectively. Interest expense
increased for the year ended December 31, 2007 by $414,429, representing an
increase of approximately 70.1%, compared to the same type of expense for the
year ended December 31, 2006. The increase was the result of additional
borrowings, the recognition of default interest rates on the debt in technical
default, and the impact of higher interest rates on new and renegotiated
borrowings.


Net Loss. The Company had a net loss of $1,566,345 and $1,728,709 for the years
ended December 31, 2007 and 2006, respectively. Net loss for the year ended
December 31, 2007 decreased by $162,364 representing a decrease of approximately
9.4%. The decrease in the net loss of $162,364 was attributable to the
combination of a decrease in revenues of $334,218 and the increase in interest
expense of $414,429 and the increase of bad debt expense of $173,529, partially
offset by the decrease in selling, general and administrative expenses of
$518,863.



18





Dividend Applicable to Preferred Stock. The Company has outstanding Series A 4%
Convertible Cumulative Preferred Stock that accrues dividends (if such dividends
are declared) at a rate of 4% on a semi-annual basis. The Company also has
outstanding Series C 4% Convertible Cumulative Preferred Stock that accrues
dividends (if such dividends are declared) at a rate of 4% on a quarterly basis.
The total dividends applicable to Series A and Series C Preferred Stock were
$588,000 and $600,000 for the years ended December 31, 2007 and 2006,
respectively. The Company did not declare or pay any dividends in 2007 or 2006.


Net Loss Applicable to Common Stockholders. The Company had a net loss
attributed to common stockholders of $2,154,345 and $2,328,709 for the years
ended December 31, 2007 and 2006, respectively. Net loss applicable to common
stockholders for the year ended December 31, 2007 decreased by $174,364,
representing a decrease of approximately 7.5%, compared to the net loss
applicable to common stockholders for the year ended December 31, 2006. The
decrease in the net loss applicable to common stockholders of $174,364 was
primarily attributable to the combination of a decrease in revenues of $334,218
and the increase in interest expense of $414,429 and the increase of bad debt
expense of $173,529, partially offset by the decrease in selling, general and
administrative expenses of $518,863 and a decrease in dividends applicable to
preferred stock of $12,000.


Net Loss Per Share. The Company had a net loss per share of $0.00 and $0.00 for
the years ended December 31, 2007 and 2006, respectively.