UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended ~~April~~July 3031, 2007


		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 1-11601

iDNA, INC.
(Exact name of registrant as specified in its charter)


Delaware			34-1816760
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
415 Madison Avenue, 7^th Floor, New York, New York			10017
(Address of principal executive offices)			(Zip Code)
(212) 644-1400
(Registrant’s telephone number, including area code)

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 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer (See definition of ‘‘accelerated filer’’ and ‘‘large accelerated filer’’ in Rule 12b-2 of the Exchange Act). (Check one):

Large accelerated filer Accelerated filer Non-~~Accelerated~~accelerated filer

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class			Outstanding at ~~June~~September 12, 2007
Common Stock, $0.05 par value			9,954,614

iDNA, Inc. and Subsidiaries

TABLE OF CONTENTS

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements		3
	Report of Independent Registered Public Accounting Firm		3
	Condensed Consolidated Balance Sheets as of April 30, 2007 and January 31, 2007		4
	Condensed Consolidated Balance Sheets as of July 31, 2007 and January 31, 2007		4
	Condensed Consolidated Statements of Operations for the Three Months Ended April 30, 2007 and 2006		5
	Condensed Consolidated Statements of Operations for the Three Months and Six Months Ended July 31, 2007 and 2006		5
	Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Loss for the Three Months Ended April 30, 2007		6
	Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Loss for the Six Months Ended July 31, 2007		6
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended April 30, 2007 and 2006		7
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended July 31, 2007 and 2006		7
	Notes to Condensed Consolidated Financial Statements		8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1720
Item 3.	Quantitative and Qualitative Disclosures ~~about~~About Market Risk		2635
Item 4.	Controls and Procedures		2635
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings		2736
Item 1A.	Risk Factors		2837
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		2837
Item 3.	Defaults Upon Senior Securities		2837
Item 4.	Submission of Matters to a Vote of Security Holders		2837
Item 5.	Other Information		2837
Item 6.	Exhibits		2837
Signatures			3039
Certifications			3140

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

~~To the~~ Board of Directors and Stockholders of iDNA, Inc. and Subsidiaries New York, New York

We have reviewed the accompanying condensed consolidated balance sheet of iDNA, Inc. and Subsidiaries as of ~~April~~July 3031, 2007, the related condensed consolidated statements of operations for each of the three-month and six-month periods ended ~~April~~July 3031, 2007 and 2006;, the related condensed consolidated statement of stockholders’ equity and comprehensive loss for the ~~three~~six-month period ended ~~April~~July 3031, 2007 and the condensed consolidated statements of cash flows for each of the three-month and six-month periods ended ~~April~~July 3031, 2007 and 2006. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States) (‘‘PCAOB’’). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with standards of the PCAOB, the consolidated balance sheet as of January 31, 2007, and the related consolidated statements of operations, stockholders’ equity and comprehensive loss, and cash flows for the year then ended (not presented herein); and in our report dated May 3, 2007, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 31, 2007, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Grant Thornton LLP Cleveland, Ohio ~~June~~September 1213, 2007

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iDNA, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)

	April 30, 2007				January 31, 2007
	July 31, 2007				January 31, 2007
	(unaudited)
ASSETS
Cash and cash equivalents		$	~~774~~294			$	548
Restricted cash (Note 1)			147				147
Accounts receivable, net of allowance of $77 and $82, respectively (Note 1)			2,148				1,796
Accounts receivable, net of allowance of $72 and $82, respectively (Note 1)			1,785				1,796
Income taxes refundable			19				19
Inventory (Note 1)			~~205~~163				232
Prepaid expenses			~~205~~283				293
Other current assets			55282				115
Total current assets			32,~~553~~973				3,150
Property and equipment, net of accumulated depreciation of $3,049 and $2,833, respectively (Note 1)			2,551				2,752
Property and equipment, net of accumulated depreciation of $3,254 and $2,833, respectively (Note 1)			2,389				2,752
Investment in AFC (Note 2)			6,~~745~~810				7,224
Goodwill (Note 1)			2,728				2,728
Other intangible assets, net of accumulated amortization of $2,386 and $2,183, respectively (Note 1)			5,912				6,115
Other intangible assets, net of accumulated amortization of $2,588 and $2,183, respectively (Note 1)			5,710				6,115
Other assets			108				109
		$	2120,~~597~~718			$	22,078
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Current maturities of long term obligations (Note 3)		$	1,~~806~~710			$	805
Accounts payable			12,~~526~~017				1,621
Accrued income taxes			378				298
Deferred revenue (Note 1)			1,~~379~~850				1,033
Self-insurance claims (Note 4)			235				235
Other liabilities			1,~~638~~367				1,445
Total current liabilities			67,~~962~~557				5,437
Long term obligations (Note 3)			10,~~054~~011				11,071
Convertible promissory note (Note 3)			2,825				2,825
			19,841				19,333
			20,393				19,333
COMMITMENTS AND CONTINGENCIES (Note 4)			—				—
STOCKHOLDERS’ EQUITY
Preferred stock			—				—
Common stock – $.05 par value, authorized 50,000,000 shares, issued 39,949,589 and 39,949,589 shares, respectively			1,997				1,997
Additional paid-in capital			~~174~~175,~~947~~067				174,837
Retained deficit			(~~153~~154,~~024~~581	)			(151,699	)
Deferred compensation			(3630	)			(41	)
Treasury stock, at cost, 29,994,975 and 30,294,975 shares, respectively			(22,128	)			(22,349	)
Total stockholders’ equity			~~1,756~~325				2,745
		$	2120,~~597~~718			$	22,078

See accompanying notes to condensed consolidated financial statements.

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iDNA, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)

	Three Months Ended April 30,
	Three Months Ended July 31,								Six Months Ended July 31,
	2007				2006				2007				2006
Revenues (Note 1)		$	32,~~600~~824			$	3,~~432~~538			$	6,424			$	6,970
Cost of revenues (Note 1)			2,~~521~~045				2,~~334~~041				4,566				4,375
Gross profit			~~1,079~~779				1,~~098~~497				1,858				2,595
Selling, general and administrative			2,~~334~~349				2,~~138~~777				4,683				4,915
Loss from operations			(1,255	)			(1,040	)
Impairment charge (Note 6)			—				4,482				—				4,482
Other income (expense):
Loss from operations			(1,570	)			(5,762	)			(2,825	)			(6,802	)
Income from AFC investment (Note 2)			271				68
Other income (expense):
Interest income			2				3
Income from AFC investment (Note 2)			65				192				336				260
Interest expense (Note 3)			(55	)			(174	)
Interest income			1				3				3				6
Loss from continuing operations before income taxes			(1,037	)			(1,143	)
Interest expense (Note 3)			(58	)			(189	)			(113	)			(363	)
Provision for income taxes			(6	)			(11	)
Interest expense abatement (Note 3)			—				631				—				631
Loss from continuing operations			(1,043	)			(1,154	)
Loss from continuing operations before income taxes			(1,562	)			(5,125	)			(2,599	)			(6,268	)
Income from discontinued operations, net of tax			5				1
Benefit (provision) for income taxes			2				(12	)			(4	)			(23	)
Net loss		$	(1,038	)		$	(1,153	)
Loss from continuing operations			(1,560	)			(5,137	)			(2,603	)			(6,291	)
Basic and diluted loss per share
Income from discontinued operations, net of tax			3				1				8				2
Continuing operations		$	(.11	)		$	(.13	)
Net loss		$	(1,557	)		$	(5,136	)		$	(2,595	)		$	(6,289	)
Discontinued operations			—				—
Basic and diluted loss per share
Net loss per share		$	(.11	)		$	(.13	)
Continuing operations		$	(.15	)		$	(.56	)		$	(.26	)		$	(.69	)
Weighted average number of shares outstanding
Discontinued operations			—				—				—				—
Basic and diluted			9,861				9,036
Net loss per share		$	(.15	)		$	(.56	)		$	(.26	)		$	(.69	)
Weighted average number of shares outstanding
Basic and diluted			9,955				9,081				9,908				9,059

See accompanying notes to condensed consolidated financial statements.

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iDNA, Inc. and Subsidiaries Condensed Consolidated Statement of Stockholders’ Equity and Comprehensive Loss ~~Three~~Six Months Ended ~~April~~July 3031, 2007 (in thousands, except share data) (unaudited)

	Preferred Stock					Common Stock					Additional Paid-In Capital			Retained Deficit				Treasury Stock				Deferred Compensation Expense				Total				Comprehensive Income (Loss)
	Shares		Par Value			Shares		Par Value
Balance at January 31, 2007		—		$	—		39,949,589		$	1,997		$	174,837		$	(151,699	)		$	(22,349	)		$	(41	)		$	2,745
Adjustment to retained deficit (Note 1)																(80	)											(80	)
Cumulative adjustment for the adoption of FIN 48 (Note 1)																(80	)											(80	)
Net loss																(12,~~038~~595	)											(12,~~038~~595	)		$	(12,~~038~~595	)
Share-based compensation expense													~~110~~230															~~110~~230
Treasury stock issued																(207	)			221								14
Deferred compensation expense																								511				511
Comprehensive income (loss)																															$	(12,~~038~~595	)
Balance at April 30, 2007		—		$	—		39,949,589		$	1,997		$	174,947		$	(153,024	)		$	(22,128	)		$	(36	)		$	1,756
Balance at July 31, 2007		—		$	—		39,949,589		$	1,997		$	175,067		$	(154,581	)		$	(22,128	)		$	(30	)		$	325

See accompanying notes to condensed consolidated financial statements.

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iDNA, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

	Three Months Ended April 30,
	Six Months Ended July 31,
	2007				2006
Cash flows from operating activities
Net loss		$	(12,~~038~~595	)		$	(16,~~153~~289	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			~~419~~826				~~397~~796
Income from AFC investment			(271	)			(68	)
Impairment charge			—				4,482
Share-based compensation expense			77				73
Income from AFC investment			(336	)			(260	)
Stock issued as compensation for services rendered			33				—
Share-based compensation expense			151				140
Amortization of deferred compensation expense			5				6
Stock issued as compensation for services rendered			79				5
Amortization of deferred compensation expense			11				12
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable			~~(352~~11	)			(~~287~~389	)
Accrued income tax/refundable			—				(4432	)
Accounts payable			~~(95~~396	)			~~157~~54
Deferred revenue			~~346~~817				~~190~~396
Other operating assets and liabilities, net			~~369~~(165	)			79(577	)
Net cash used in operating activities			(~~507~~805	)			(~~650~~1,662	)
Cash flows from investing activities:
Proceeds from AFC distributions			750				~~287~~1,207
Purchase of other property and equipment			(15	)			(31	)
Purchase of letter of credit, increase in restricted cash			—				(147	)
Net cash provided by investing activities			735				256
Purchase of other property and equipment			(58	)			(302	)
Net cash provided by investing activities			692				758
Cash flows from financing activities:
Proceeds from issuance of promissory note			—				1,000
Proceeds from exercise of stock options			14				—
Payments to retire due to former OTI Members			—				(~~326~~530	)
Payments on debt, notes payable and capital lease			(16155	)			(60209	)
Net cash used in financing activities			(2141	)			~~(386~~261	)
Increase (decrease) in cash and cash equivalents			226				(780	)
Decrease in cash and cash equivalents			(254	)			(643	)
Cash and cash equivalents at beginning of period			548				1,144
Cash and cash equivalents at end of period		$	~~774~~294			$	~~364~~501
Supplemental disclosures of cash flow information:
Interest paid		$	41115			$	139
Income taxes paid		$	—			$	55

See accompanying notes to condensed consolidated financial statements.

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iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies

General

The accompanying unaudited condensed consolidated financial statements include the accounts of iDNA, Inc. and its subsidiaries (‘‘iDNA’’). iDNA’s operations are comprised of three principal reportable segments: (i) strategic communications services, (ii) information services and (iii) entertainment. iDNA manages each segment separately as a consequence of different marketing, service requirements and technology strategies (see Note 5).

The strategic communications services segment provides content development via the design, development and production of media, collateral material, logistics, support and/or broadcast services for presentations at corporate and institutional events, meetings, training seminars and symposiums. The presentations may be live at single or multi-site venues and can include video conferencing, satellite broadcasting and webcasting or the presentations may be provided via on-demand access via internet websites, DVD or video tape.

The information services segment utilizes custom wireless communication technology and proprietary software to facilitate client audience interaction, participation and polling to collect, exchange and/or analyze data and information in real-time during a meeting or event. The wireless communication services are available as a turn-key service provided by iDNA during a scheduled meeting or event or alternatively, a client can purchase from iDNA the required electronic components and related proprietary software to administer its needs independently.

As a consequence of iDNA’s investment in the Angelika Film Centers, LLC (‘‘AFC’’), iDNA operates in the movie exhibition and entertainment industry (see Note 2).

The financial statements are unaudited but in the opinion of management, reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of iDNA’s consolidated financial position, results of operations, stockholders’ equity and comprehensive loss, and cash flows for the periods presented.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with the rules of the Securities and Exchange Commission applicable to interim financial statements and therefore do not include all disclosures that might normally be required for financial statements prepared in accordance with generally accepted accounting principles. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with iDNA’s consolidated financial statements, including the notes thereto, appearing in iDNA’s Annual Report on Form 10-K for the year ended January 31, 2007. The results of operations for the three months and six months ended ~~April~~July 3031, 2007 are not necessarily indicative of operating results that may be achieved over the course of the full year.

The preparation of financial statements and the accompanying notes thereto, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the respective reporting periods. Examples include provision for bad debt, useful lives of property and equipment and intangible assets, impairment of property and equipment and intangible assets, deferred income taxes, self insurance claims and assumptions related to equity-based compensation. Actual results could differ from those estimates.

iDNA uses a January 31 year-end for financial reporting purposes. References herein to the fiscal year ending January 31, 2008 shall be the term ‘‘Fiscal 2008’’ and references to other ‘‘Fiscal’’ years

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iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies — continued

shall mean the year, that ended (or ends, as the case may be) on January 31 of the year indicated. The term the ‘‘Company’’ or ‘‘iDNA’’ as used herein refers to iDNA, Inc. together with its consolidated subsidiaries unless the context otherwise requires.

Revenues

iDNA’s revenues are earned within short time periods, generally less than one week. iDNA recognizes revenue from its strategic communications segment, including the video production, video editing, meeting services and broadcast satellite or webcast services, and its information services segment when the services are complete and delivered or all technical services have been rendered. Deposits and other prepayments are recorded as deferred revenue until revenue is recognized. iDNA does not have licensing or other arrangements that result in additional revenues following the delivery of the video or a broadcast. Costs accumulated in the production of the video, meeting services or broadcasts are deferred until the sale and delivery are complete. Deferred production costs of $55282,000 and $115,000, respectively, are reported as other current assets at ~~April~~July 3031, 2007 and January 31, 2007.

iDNA recognizes revenue from the sale of electronic equipment, proprietary software and related components at the time of shipment. Deposits and other prepayments received prior to shipment are recorded as deferred revenue until the electronic equipment and related software are shipped. iDNA has licensing and technical support arrangements for future software enhancements and upgrades for technical support for previously delivered electronic equipment. Revenues derived from licensing and technical support are recognized over the term of the licensing and technical support period, which generally are sold in increments of one year of coverage. For the three months ended ~~April~~July 3031, 2007 and 2006, electronic equipment sales were $~~576~~508,000 and $~~775~~518,000, respectively. For the six months ended July 31, 2007 and 2006, electronic equipment sales were $1.1 million and $1.3 million, respectively.

iDNA recognizes revenue from website design and development when the customer accepts the completed project. Deposits and other prepayments are recorded as deferred revenue until revenue is recognized. These contracts are generally limited to the design and development of websites and the presentation of site library content developed by iDNA. Clients also have the option to engage iDNA to maintain and upgrade their websites. These projects are separate from the website development and design engagements, and the related revenue is recognized over the term of the agreement, which is generally up to one year.

iDNA recognizes revenue from developing and maintaining websites pursuant to the requirements of Statement of Position No. 97-2, ‘‘Software Revenue Recognition’’ (‘‘SOP 97-2’’), as amended by Statement of Position No. 98-9, ‘‘Software Revenue Recognition with Respect to Certain Arrangements.’’ Under SOP 97-2, revenue attributable to an element in a customer arrangement is recognized when persuasive evidence of an arrangement exists and delivery has occurred, provided the fee is fixed or determinable, collectibility is probable and the arrangement does not require significant customization of the software. If at the outset of the customer arrangement, iDNA determines that the arrangement fee is not fixed or determinable or that collectibility is not probable, iDNA defers the revenue and recognizes the revenue when the arrangement fee becomes due and payable or, when collectibility is uncertain, as cash is collected.

Cost of Revenues

Cost of revenues consists of direct expenses specifically associated with client service revenues. The cost of revenues includes direct salaries and benefits, purchased products or services for clients, web hosting, support services, shipping and delivery costs.

Research and Development Costs

Research and development costs are comprised principally of personnel costs incurred for enhancements, modifications, updates, service and support expenditures for iDNA’s proprietary software. Research and development costs are charged to operations as incurred and are included as a component of costs of revenues. iDNA charged $111,000 and $118,000, respectively, to research and development expense for the three months ended July 31, 2007 and 2006. iDNA charged $208,000 and $198,000, respectively, to research and development expense for the six months ended July 31, 2007 and 2006.

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iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies — continued

software. Research and development costs are charged to operations as incurred and are included as a component of costs of revenues. iDNA charged $97,000 and $80,000, respectively, to research and development expense for the three months ended April 30, 2007 and 2006.

Restricted Cash

In June 2006, iDNA obtained a letter of credit in an amount of $147,000 that was issued in favor of the landlord of iDNA’s new New York headquarters. The letter of credit is collateralized by an interest bearing money market account in the same amount. Therefore, $147,000 is classified as restricted cash as of ~~April~~July 3031, 2007 and January 31, 2007.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is iDNA’s best estimate of the amount of probable credit losses in iDNA’s existing accounts receivable. iDNA determines the allowance based on analysis of historical bad debts, client concentrations, client credit-worthiness and current economic trends. iDNA reviews its allowance for doubtful accounts quarterly. Past-due balances over 90 days and specified other balances are reviewed individually for collectibility. All other balances are reviewed on an aggregate basis. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. iDNA does not have any off-balance sheet credit exposure related to its clients.

Inventory

Inventory is comprised principally of electronic equipment and related components held for sale to clients. Inventory is valued at the lower of cost or market using the first-in –— first-out inventory cost method.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which range from eighteen months to ten years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related improvements.

Goodwill and Other Intangible Assets

Intangible assets with indefinite lives, including goodwill, are not subject to amortization but are subject to testing for impairment at least annually or whenever there is an impairment indicator (see Note 6).

In its acquisition of Option Technologies Interactive, LLC (‘‘OTI’’), iDNA acquired certain intangible assets including client relationships and lists and a non-competition agreement with an aggregate fair value of $703,000. The useful lives of these intangibles are estimated to be 5 to 7 years. The intangible assets with definite useful lives are amortized using the straight-line method over those lives. For the three months ended ~~April~~July 3031, 2007 and 2006, iDNA charged to operations $26,000 and $1363,000, respectively, for the amortization of these intangible assets. For the six months ended July 31, 2007 and 2006, iDNA charged to operations $52,000 and $76,000, respectively, for the amortization of these intangible assets.

In its acquisition of Audience Response Systems, Inc. and the Campus Group Companies, Inc. (collectively, the ‘‘Campus Group’’), iDNA acquired certain intangible assets including client relationships and lists and a non-competition agreement with an initial aggregate fair value of $9.5 million. The useful lives of these intangibles were initially estimated to be 17 years and 9 years, respectively. In connection with iDNA’s impairment analysis, effective July 31, 2006, among other

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iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies — continued

~~respectively. In connection with iDNA’s impairment analysis, effective July 31, 2006, among other~~ adjustments, the estimated useful life of the client relationships was revised to 10 years. The intangible assets with definite useful lives are amortized using the straight-line method over those lives. For the three months ended ~~April~~July 3031, 2007 and 2006, iDNA charged to operations $177,000 and $142,000, respectively for the amortization of these intangible assets. For the six months ended July 31, 2007 and 2006, iDNA charged to operations $353,000 and $284,000, respectively for the amortization of these intangible assets.

Valuation of Long-Lived Assets and Goodwill

iDNA reviews the carrying value of its long-lived assets (other than goodwill) whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When indicators of impairment exist, iDNA determines whether the estimated undiscounted sum of the future cash flows from such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which, the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future cash flows discounted at a rate determined by management to be commensurate with iDNA’s business risk. The estimation of fair value utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition; and general economic and business conditions, among other factors.

Income Taxes

Deferred income taxes are provided for all temporary differences between the book and tax basis of assets and liabilities. Deferred income taxes are adjusted to reflect new tax rates when they are enacted into law. 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. A valuation allowance is recognized if it is anticipated that some or all of a net deferred tax asset may not be realized.

In February 2007, iDNA adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (‘‘FIN 48’’), an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial recognition and measurement of a tax position taken or expected to be taken on a tax return. The interpretation requires that iDNA recognize the impact of a tax position in the financial statements if that position is less likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition classification, interest and penalties, accounting in interim periods and disclosure. In accordance with the provisions of FIN 48, any cumulative effect resulting from the change in accounting principle is to be recorded as an adjustment to the opening balance of retained earnings (deficit).

As of January 31, 2007, iDNA had federal net operating loss carryforwards of $88.8 million that may be used to reduce future taxable income, subject to limitations. Largely as a consequence of these operating loss carryforwards, iDNA reported a net deferred tax asset of $39.4 million and an offsetting valuation allowance of $39.4 million since iDNA is unable to determine, at this time, that it more likely than not will generate future taxable income against which the net operating loss could be applied.

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies — continued

Effective November 3, 2000, iDNA repurchased shares of its common stock, $0.05 par value, (‘‘Common Stock’’) and underwent a ‘‘change in ownership’’ as defined for the purposes of Sections 382 and 383 of the Internal Revenue Code. As a consequence of this ‘‘change in ownership’’, the use of net operating loss carryforwards totaling $61.0 million incurred prior to November 3, 2000 (‘‘pre-change losses’’) will be subject to significant annual limitation. Based upon an evaluation of the tax position regarding the Section 382 limitation on the pre-change losses, iDNA has determined that $5.9 million of these pre-change losses may expire unused resulting in a tax-effected reduction of $2.1 million to iDNA’s net operating loss carryforwards included in its net deferred tax asset. As a consequence of this evaluation, ~~iDNA~~as ~~has~~of ~~recorded~~February 1, 2007 ~~adjustments~~iDNA to (i) ~~reduce~~reduced the amount of its net deferred tax asset attributable to its net operating loss carryforwards by $2.1 million, thereby reducing its total net deferred tax asset from $39.4 million to $37.3 million, and (ii) ~~reduce~~reduced iDNA’s valuation allowance by $2.1 million from $39.4 million to $37.3 million. These adjustments offset one another, resulting in no net charge to iDNA’s opening retained deficit reported for the ~~quarter~~six months ended ~~April~~July 3031, 2007.

As a consequence of the adoption of the provisions of FIN 48, iDNA recorded an adjustment to retained deficit of $80,000 to reflect potential liabilities for iDNA’s uncertain tax ~~position~~positions, inclusive of interest. In addition, iDNA’s tax years open for examination vary by jurisdiction. iDNA was last under examination by the IRS for the taxable years through January 31, 1998. iDNA recognizes interest and penalties associated with uncertain tax positions as a component of tax expense (benefit).

Stock-Based Compensation

Effective February 1, 2006, iDNA adopted the provisions of Statement of Financial Accounting Standards (‘‘SFAS’’) No. 123R (revised 2004), Share-Based Payment (‘‘SFAS No. 123(R)’’), which replaces SFAS No. 123, Accounting for Stock-Based Compensation (‘‘SFAS No. 123’’), and ~~supersedes~~superseded APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first interim or annual period after December 15, 2005. iDNA elected the prospective method of adopting SFAS No. 123(R) which requires that compensation expense be recorded over the remaining periods for what would have been the remaining fair value under SFAS No. 123 of all unvested stock options and restricted stock at the beginning of the first quarter of adoption. The compensation costs for that portion of awards is based on the grant-date fair value of the awards as calculated for pro forma disclosures under SFAS No. 123. iDNA charged to operations $7774,000 and $7367,000, respectively, for share-based compensation for the three months ended ~~April~~July 3031, 2007 and 2006. iDNA charged to operations $151,000 and $140,000, respectively, for share-based compensation for the six months ended July 31, 2007 and 2006.

Earnings Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of iDNA, $0.05 par value common stock (‘‘Common Stock’’) outstanding for the period. Dilutive earnings per share for all periods presented is the same as basic earnings per share because the inclusion of common stock equivalents would have an anti-dilutive effect on loss per share for the three months ~~ended~~and ~~April~~six ~~30,~~months ended July 31, 2007 and 2006. Common stock equivalents, in the form of stock options, which were excluded from the earnings (loss) per share computation due to their dilutive effect were 312,~~176~~736 and 12104,~~707~~699, respectively, for the three months ended ~~April 30~~July 31, 2007 and 2006 and 100,549 and 14,110, respectively, for the six months ended July 31, 2007 and 2006.

New Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial Accounting Standards (‘‘SFAS’’) No. 157, Fair Value Measurement (‘‘SFAS No. 157’’). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with Generally Accepted Accounting Principles (‘‘GAAP’’), and expands disclosures about fair value measurements. The provisions of SFAS No. 157 are effective for fiscal years beginning after November 15, 2007. iDNA does not anticipate the application of this pronouncement will have a material impact on iDNA’s reported consolidated financial position or results of operations.

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 1 — Basis of Presentation and Significant Accounting Policies — continued

InNew ~~February 2007,~~Accounting the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (‘‘SFAS 159’’). SFAS 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS 159 is effective for fiscal years beginning after November 15, 2007, and early application is allowed under certain circumstances. iDNA is currently evaluating the impact SFAS 159 will have on its consolidated financial position.Pronouncements

In February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (‘‘SFAS No. 159’’). SFAS No. 159 allows entities the option to measure eligible financial instruments at fair value as of specified dates. Such election, which may be applied on an instrument by instrument basis, is typically irrevocable once elected. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, and early application is allowed under certain circumstances. iDNA is currently evaluating the impact SFAS No. 159 will have on its consolidated financial position.

Reclassifications

Certain Fiscal 2007 amounts have been reclassified to conform with Fiscal 2008 presentations.

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 2 — Investment in AFC

On April 5, 2000, iDNA, through its wholly owned subsidiary National Cinemas, Inc., acquired a 50% membership interest in AFC. AFC is the owner and operator of the Angelika Film Center, which is a multiplex cinema and café complex in the Soho District of Manhattan in New York City.

AFC is currently owned 50% by iDNA and 50% by Reading International, Inc. (‘‘Reading’’). The articles and bylaws of AFC provide that for all matters subject to a vote of the members, a majority is required, except that in the event of a tie vote, the Chairman of Reading shall cast the deciding vote.

iDNA uses the equity method to account for its investment in AFC. iDNA’s initial investment exceeded its share of AFC’s net assets and that portion of the investment balance is accounted for in a manner similar to goodwill. AFC uses a December 31 year-end for financial reporting purposes. iDNA reports on a January 31 year-end, and for its fiscal quarters ending April 30, July 31, October 31 and January 31 records its pro-rata share of AFC’s earnings on the basis of AFC’s fiscal quarters ending March 31, June 30, September 30 and December 31, respectively. For the three months ended ~~April~~July 3031, 2007 and 2006, iDNA recorded income of $~~271~~65,000 and $68192,000, respectively, representing its share of AFC’s net income. For the six months ended July 31, 2007 and 2006, iDNA recorded income of $336,000 and $260,000, respectively, representing its share of AFC’s net income.

Summarized income statement data for AFC for the three months and six months ended ~~March~~June 3130, 2007 and 2006, respectively, is as follows (in thousands):

	Three Months Ended March 31,
	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006
Revenues		$	21,~~000~~288		$	1,~~465~~464		$	3,288		$	2,929
Film rental			~~562~~296			~~517~~296			857			813
Operating costs			~~654~~645			~~603~~571			1,300			1,174
Depreciation and amortization			195			~~166~~171			390			337
General and administrative expenses			4721			4243			68			85
			1,458			1,328
			1,157			1,081			2,615			2,409
Net income		$	~~542~~131		$	~~137~~383		$	673		$	520
iDNA’s proportionate share of net income		$	~~271~~65		$	68192		$	336		$	260

Note 3 — Current and Long Term Obligations

As a consequence of iDNA’s acquisition of OTI effective November 18, 2005, iDNA issued to Flexner Wheatley & Associates (‘‘FWA’’) and MeetingNet Interactive, Inc. (‘‘MeetingNet’’) promissory notes in an aggregate principal amount of $1.5 million (the ‘‘OTI Promissory Notes’’). The OTI Promissory Notes bear interest at 5% per annum and are repayable in quarterly installments according to a formula based upon the future cash flows realized from OTI’s operations. The OTI Promissory Notes are secured by the membership interests in OTI. At July 31, 2007, iDNA had outstanding principal obligations under the terms of the OTI Promissory Notes of $1.0 million and accrued interest of $13,000.

13 As a consequence of iDNA’s acquisition of the Campus Group effective July 31, 2003, iDNA issued to Mr. Steve Campus and certain family trusts promissory notes in an aggregate principal amount of $9.9 million and a convertible promissory note in the principal amount of $2.8 million (collectively, the ‘‘Campus Notes’’). Of the $9.9 million in promissory notes issued by iDNA, $6.6 million of the promissory notes (‘‘Base Notes’’) bear interest at 5% per annum and are repayable in quarterly installments according to a formula based upon the future cash flows realized from the

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 3 — Current and Long Term Obligations — continued

~~Promissory~~Campus Group over a period not to exceed seven years. The remaining $3.3 million in promissory notes (‘‘Trailing Notes’’) issued by iDNA bear interest at 5% per annum and are repayable in quarterly installments, commencing upon the retirement of the Base Notes, according to a formula based upon the future cash flows realized from ~~OTI~~the Campus Group over a period not to exceed three years subsequent to the retirement of the Base Notes. The $2.8 million convertible promissory note (‘‘Convertible Note’’) (i) bears interest at 5% per annum, payable quarterly in cash or accumulating as principal at the election of iDNA, (ii) requires principal payments to commence upon the retirement of the Base Notes and Trailing Notes and is then repayable in quarterly installments according to a formula based upon the future cash flows realized from the Campus Group over a period not to exceed three years and (iii) is convertible at the option of the holder into shares of iDNA’s ~~operations~~Common Stock at a base conversion price of $1.50 per share. The ~~OTI~~holder ~~Promissory~~may not convert the Convertible Note into shares of iDNA’s Common Stock prior to repayment of the Base Notes and Trailing Notes. The Campus Notes are secured by the ~~membership~~capital ~~interests~~stock of ~~OTI~~the companies comprising the Campus Group. At ~~April~~July 3031, 2007, iDNA had outstanding principal obligations under the terms of the ~~OTI~~Base ~~Promissory~~Notes, Trailing Notes and the Convertible Note of $16.10 million, $3.3 million and $2.8 million, respectively, and accrued interest of $29156,000.

AsFor athe ~~consequence~~trailing oftwelve ~~iDNA’s~~month ~~acquisition~~period ofended ~~the Campus Group effective~~ July 31, ~~2003~~2006, ~~iDNA~~The ~~issued to Mr. Steve~~ Campus ~~and~~Group’s ~~certain~~financial ~~family~~performance ~~trusts~~fell ~~promissory~~below ~~notes~~certain inminimum anoperating ~~aggregate~~cash ~~principal~~flow ~~amount~~thresholds ofestablished ~~$9.9 million~~pursuant ~~and~~to ~~a convertible promissory note in~~ the ~~principal~~terms ~~amount~~ of ~~$2.8 million (collectively,~~ the ‘‘Campus Notes~~’’)~~. OfAs ~~the~~a ~~$9.9 million in promissory notes issued by iDNA~~consequence, ~~$6.6 million of~~ the ~~promissory notes (‘‘Base Notes’’) bear~~ interest atexpense 5%incurred ~~per~~by ~~annum~~iDNA ~~and~~during ~~are repayable in quarterly installments according to a formula based upon~~ the ~~future~~twelve ~~cash~~month ~~flows realized from the Campus Group over a~~ period ~~not~~ended ~~to exceed seven years. The remaining $3.3~~July ~~million in promissory notes (‘‘Trailing Notes’’) issued by iDNA bear interest at 5% per annum and are repayable in quarterly installments~~31, 2006 ~~commencing~~was ~~upon~~abated. ~~the~~As ~~retirement~~a consequence of the ~~Base~~interest ~~Notes~~abatement, ~~according~~iDNA torealized a ~~formula~~gain ~~based~~from ~~upon~~ the ~~future~~abatement ~~cash~~of ~~flows~~interest ~~realized~~on ~~from~~ the Campus ~~Group~~Notes ~~over a period not to exceed three years subsequent to the retirement~~ of ~~the Base Notes. The~~ $~~2.8 million convertible promissory note (‘‘Convertible Note’’) (i) bears interest at 5% per annum~~631,000 ~~payable~~during ~~quarterly in cash or accumulating as principal at~~ the ~~election~~second ofquarter ~~iDNA, (ii) requires principal payments to commence upon the retirement~~ of ~~the~~Fiscal ~~Base~~2007. ~~Notes~~For ~~and Trailing Notes and is then repayable in quarterly installments according to a formula based upon~~ the ~~future~~trailing ~~cash~~twelve ~~flows~~month ~~realized from the Campus Group over a~~ period ~~not~~ended toJuly 31, 2007, ~~exceed three years and (iii) is convertible at~~ the ~~option~~Campus ~~of the holder into shares of iDNA~~Group’s ~~Common~~financial ~~Stock~~performance atremained abelow ~~base~~the ~~conversion~~minimum ~~price~~operating ofcash ~~$1.50~~flow ~~per share~~thresholds. ~~The~~As ~~holder~~a ~~may~~consequence ~~not~~no ~~convert~~interest ~~the~~was ~~Convertible~~incurred ~~Note~~on ~~into shares of iDNA’s Common Stock prior to repayment of~~ the ~~Base~~Campus Notes ~~and~~during ~~Trailing Notes. The promissory notes are secured by~~ the ~~capital~~period ~~stock~~February 1, 2007 ofthrough ~~the companies comprising the Campus Group. At April~~July 3031, 2007. Prospectively, ~~iDNA~~interest ~~had~~may ~~outstanding~~accrue ~~principal~~pursuant ~~obligations~~to ~~under~~ the terms of the ~~Base~~Campus Notes; however, ~~Trailing~~iDNA ~~Notes~~is ~~and~~not ~~the~~obligated ~~Convertible~~to ~~Note~~pay ofany ~~$6.0 million,~~principal ~~$3.3 million~~or ~~and~~interest ~~$2.8 million,~~on ~~respectively,~~the ~~and~~Campus ~~accrued~~Notes ~~interest~~until ~~of $156~~October 31,~~000~~ 2007.

~~For~~As ~~the~~a ~~trailing~~consequence ~~twelve~~of ~~month~~iDNA’s ~~period~~acquisition ~~ended~~of OMI Business Communications, Inc. (‘‘OMI’’) effective April 301, ~~2007~~2003, ~~the~~iDNA ~~Campus~~assumed ~~Group’s~~a ~~financial~~$402,000 ~~performance~~loan ~~fell~~guaranteed ~~below~~by ~~certain~~the ~~minimum~~U.S. ~~operating~~Small ~~cash~~Business ~~flow~~Administration ~~thresholds~~(the ~~established~~‘‘SBA ~~pursuant~~Loan’’). toAt July 31, 2007, the ~~terms~~remaining balance of the ~~Campus~~SBA ~~Notes.~~Loan Asof a$313,000 ~~consequence~~is norepayable ~~interest~~in ~~was~~monthly ~~incurred~~installments onof ~~the~~$3,309 ~~Campus~~with ~~Notes during~~ the ~~period~~last ~~February 1, 2007~~payment ~~through~~due in April ~~30, 2007~~2017. ~~Prospectively,~~The ~~interest~~SBA ~~may~~Loan ~~accrue~~bears ~~pursuant~~interest toat the ~~terms~~rate of ~~the~~4% ~~Campus~~per ~~Notes;~~annum. ~~however,~~The ~~iDNA~~SBA Loan is ~~not~~collateralized ~~obligated~~by tosubstantially ~~pay~~all ~~any~~of ~~principal~~OMI’s orassets ~~interest~~and on the ~~Campus~~personal ~~Notes~~guarantee ~~until~~of ~~October~~Mr. 31Dean Thompson, ~~2007~~President of OMI.

AsIn aSeptember 2006, ~~consequence~~OMI ofconsummated ~~iDNA’s~~equipment ~~acquisition~~financing ofin ~~OMI~~the ~~Business~~form ~~Communications,~~of ~~Inc.~~a ~~(‘‘OMI’’)~~capital ~~effective~~lease ~~April 1, 2003,~~with ~~iDNA~~a ~~assumed~~financing ainstitution to acquire $~~402~~102,000 ~~loan~~in ~~guaranteed~~various bydigital ~~the~~media ~~U.S.~~production ~~Small~~and ~~Business~~editing ~~Administration (the ‘‘SBA Loan’’)~~equipment. AtThe ~~April 30, 2007,~~capital ~~the~~lease ~~remaining balance of the SBA Loan of $320,000~~ is ~~repayable~~payable in monthly installments ~~of $3,309~~ with the last payment due in ~~April~~July ~~2017.~~2009 ~~The~~and ~~SBA~~bears ~~Loan~~an ~~bears~~implied interest ~~at the~~ rate of 410% ~~per annum~~. The ~~SBA~~capital ~~Loan~~lease is collateralized by ~~substantially~~the ~~all~~digital ofmedia production and editing equipment acquired by OMI’s. ~~assets~~At ~~and~~July 31, 2007, the ~~personal~~remaining ~~guarantee~~balance ofdue Mrunder the capital lease was $69,000. The accumulated depreciation for the underlying equipment pursuant to the capital lease was $30,000 and $14,000, respectively at July ~~Dean Thompson~~31, ~~President~~2007 ofand ~~OMI.~~January 31, 2007

InOn ~~September~~July 20, 2006, ~~OMI~~iDNA consummated ~~equipment~~a ~~financing~~Loan inand ~~the~~Security ~~form~~Agreement ofwith a ~~capital~~lender ~~lease~~and ~~with~~issued a ~~financing~~Promissory ~~institution~~Note to(the ~~acquire~~‘‘Note’’) ~~$102,000~~ in ~~various~~a ~~digital~~principal ~~media~~amount ~~production~~of ~~and editing equipment~~$1.0 million. The ~~capital~~lender, ~~lease~~Seasons Go Round, is ~~payable~~an inunaffiliated ~~monthly~~third ~~installments~~party ~~with~~lender. Pursuant to the ~~last~~terms ~~payment~~of ~~due~~the inNote, ~~July 2009~~(i) ~~and~~the ~~bears~~outstanding anprincipal ~~implied~~of ~~interest~~the ~~rate~~Note ofis ~~10%.~~due ~~The~~February 15, 2008, ~~capital~~(ii) ~~lease~~iDNA is ~~collateralized~~required byto ~~the~~pay ~~digital~~interest ~~media~~only, ~~production~~monthly and ~~editing~~in ~~equipment~~arrears, ~~acquired~~during bythe ~~OMI.~~term Atof ~~April 30, 2007,~~the Note and (iii) the ~~remaining~~Note ~~balance~~bears ~~due~~interest ~~under~~at ~~the~~fourteen ~~capital~~percent ~~lease~~(14%) ~~was~~per ~~$77,000~~annum. ~~The~~iDNA ~~accumulated~~may ~~depreciation~~prepay ~~for~~ the ~~underlying~~Note ~~equipment~~at ~~pursuant~~any totime ~~the~~and ~~capital~~without ~~lease~~a ~~was~~prepayment ~~$23,000~~penalty. ~~and~~The ~~$14,000,~~Note ~~respectively~~is atsecured ~~April 30, 2007~~by ~~and~~a ~~January 31, 2007~~

1415

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 3 — Current and Long Term Obligations — continued

On July 20, 2006, iDNA consummated a Loan and Security Agreement with a lender and issued a Promissory Note (‘‘Note’’) in a principal amount of $1.0 million. The lender, Seasons Go Round, is an unaffiliated third party lender. Pursuant to the terms of the Note, (i) the outstanding principal of the Note is due February 15, 2008, (ii) iDNA is required to pay interest only, monthly and in arrears, during the term of the Note and (iii) the Note bears interest at fourteen percent (14%) per annum. iDNA may prepay the Note at any time and without a prepayment penalty. The Note is secured by a perfected first priority security interest in and to, and a lien on and pledge of iDNA’s right, title and interest in and to virtually all of iDNA’s assets not previously pledged pursuant to other long term obligations. At ~~April~~July 3031, 2007, the balance due under the Note was $1.0 million.

The components of long term obligations at ~~April~~July 3031, 2007 are as follows (in thousands):

	Amounts
Capital leases		$	7769
SBA loan			~~320~~313
Promissory note			1,000
OTI promissory notes			1,~~142~~018
Base promissory notes			6,046
Trailing promissory notes			3,275
Convertible debt			2,825
			14,685
			14,546
Less current maturities			(1,~~806~~710	)
Long-term obligations and convertible debt		$	12,~~879~~836

iDNA’s current maturities and long term obligations at ~~April~~July 3031, 2007 are as follows (in thousands):

	Amounts
2008		$	1,~~812~~715
2009			1,~~041~~042
2010			~~623~~589
2011			~~514~~515
2012			4,~~429~~430
Thereafter			6,~~275~~264
			14,694
			14,555
Less: capital lease interest			(9	)
		$	14,~~685~~546

Note 4 — Commitments and Contingencies

Self-Insurance Reserves for Property Damage and Personal Injury Claims

iDNA, under the names Agency Rent-A-Car, Inc. (‘‘ARAC’’), Altra Auto Rental and Automate Auto Rental, previously engaged in the rental of automobiles on a short-term basis, principally to the insurance replacement market. In Fiscal 1996, iDNA disposed of its rental fleet business through the sale of certain assets and through certain leases to a national car rental company. All liabilities related to the discontinued rental business, principally self-insurance claims, were retained by ARAC.

15 iDNA is subject to certain self-insurance claims and litigation expenses relating to its discontinued automobile rental operations. iDNA’s management estimates the required self-insurance liability based upon specific identification of the known matters subject to future claims, the nature of the claim and the estimated costs to be incurred. These estimates include, but are not limited to, ARAC’s historical loss experience and projected loss factors. The required self-insurance liability is subject to adjustment in the future based upon changes in the nature of the remaining claims or the ultimate cost. As a consequence of iDNA’s sale of its automobile rental operations in 1995, iDNA believes that all

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 4 — Commitments and Contingencies — continued

iDNA is subject to certain self-insurance claims and litigation expenses relating to its discontinued automobile rental operations. iDNA’s management estimates the required self-insurance liability based upon specific identification of the known matters subject to future claims, the nature of the claim and the estimated costs to be incurred. These estimates include, but are not limited to, ARAC’s historical loss experience and projected loss factors. The required self-insurance liability is subject to adjustment in the future based upon changes in the nature of the remaining claims ~~or the ultimate cost. As a consequence of iDNA’s sale of its automobile rental operations in 1995, iDNA believes that all incurred claims~~ have been reported to ARAC and that there are no longer any incurred but not yet reported claims to be received by ARAC. iDNA’s self-insurance liability at both ~~April~~July 3031, 2007 and January 31, 2007 was $235,000.

Other Litigation

In the normal course of its business, iDNA is periodically named as defendant in legal proceedings. It is the policy of iDNA to vigorously defend litigation and/or enter into settlements of claims where management deems appropriate. In the opinion of management, the amount of ultimate liability with respect to any current actions, if any, is unlikely to materially affect iDNA’s financial position, results of operations or liquidity.

Note 5 — Segment Information

iDNA’s operations are comprised of three principal reportable segments,: (i) strategic communications services, (ii) information services and (iii) entertainment. iDNA manages each segment separately as a consequence of different marketing, service requirements and technology strategies for the respective segments.

iDNA evaluates the performance of its segments and allocates resources based on revenues and operating income. The table below presents the information about reportable segments for continuing operations used by iDNA’s chief operating decision-makers for the three months and six months ended ~~April~~July 3031, 2007 and 2006. Prior financial periods have been conformed to the current presentation (in thousands):

	Information Services				Strategic Communications Services				Entertainment			Undistributed Corporate Expenses				Intersegment Elimination				Total
Three Months Ended April 30, 2007
Revenues		$	2,305			$	1,326			$	—		$	—			$	(31	)		$	3,600
Operating income (loss)			(226	)			(811	)			271			(271	)			—				(1,037	)
Depreciation and amortization expense			220				185				—			14				—				419
Capital expenditures			3				—				—			12				—				15
Three Months Ended April 30, 2006
Revenues		$	2,403			$	1,035			$	—		$	—			$	(6	)		$	3,432
Operating income (loss)			(101	)			(825	)			68			(285	)			—				(1,143	)
Depreciation and amortization expense			202				179				—			16				—				397
Capital expenditures			23				4				—			4				—				31

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16 iDNA, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (unaudited)

Note 5 — Segment Information — continued


	Information Services				Strategic Communications Services				Entertainment			Undistributed Corporate Expenses				Intersegment Elimination				Total
Three Months Ended July 31, 2007
Revenues		$	2,337			$	514			$	—		$	—			$	(27	)		$	2,824
Operating income (loss)			(290	)			(1,035	)			65			(302	)			—				(1,562	)
Depreciation and amortization expense			217				177				—			12				—				406
Capital expenditures			36				—				—			7				—				43
Three Months Ended July 31, 2006
Revenues		$	2,449			$	1,127			$	—		$	—			$	(38	)		$	3,538
Operating income (loss)			(29	)			(5,412	)			192			124				—				(5,125	)
Depreciation and amortization expense			221				161				—			16				—				398
Impairment charge			—				4,482				—			—				—				4,482
Capital expenditures			196				24				—			51				—				271
Six Months Ended July 31, 2007
Revenues		$	4,642			$	1,840			$	—		$	—			$	(58	)		$	6,424
Operating income (loss)			(516	)			(1,846	)			336			(573	)			—				(2,599	)
Depreciation and amortization expense			437				362				—			27				—				826
Capital expenditures			39				—				—			19				—				58
Six Months Ended July 31, 2006
Revenues		$	4,852			$	2,162			$	—		$	—			$	(44	)		$	6,970
Operating income (loss)			(129	)			(6,237	)			260			(162	)			—				(6,268	)
Depreciation and amortization expense			424				340				—			32				—				796
Impairment charge			—				4,482				—			—				—				4,482
Capital expenditures			219				28				—			55				—				302

Table of Contents

iDNA, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(unaudited)

Note 6 — Impairment of Long-Lived Assets and Goodwill

Pursuant to iDNA’s established accounting policies, iDNA conducted its Fiscal 2006 annual analysis of goodwill as of January 31, 2006. iDNA estimated the fair value of its reporting units and compared those values to the carrying values of those reporting units. If the estimated fair value of the reporting unit is less than the estimated book value, then an impairment is deemed to have occurred. In estimating the fair value of each reporting unit, iDNA used primarily the income approach (which utilizes forecasted discounted cash flows to estimate the fair value of the reporting unit. iDNA concluded that as of January 31, 2006 there was no impairment of its goodwill based upon the then estimated fair value of its reporting units.

However, during the second quarter of Fiscal 2007, as a consequence of declining revenues and the loss of a client, the results of the operations of the Campus Group Companies, Inc. (‘‘CGC’’) reporting unit raised questions as to whether projections used at the last valuation date were still valid. Accordingly, management performed additional impairment tests as of July 31, 2006 for CGC and determined that impairment charges were required at that date. Accordingly, based upon iDNA’s preliminary assessment, second quarter operations for Fiscal 2007 were charged $2.6 million and $1.9 million for the estimated impairment of CGC’s goodwill and other intangible assets, respectively. Additionally, iDNA determined it appropriate to reduce the useful life of the CGC client relationships intangible asset from 17 years to 10 years. iDNA will continue to monitor CGC’s operations and will recognize further impairment charges if and when deemed appropriate.

iDNA conducted its Fiscal 2007 annual analysis of goodwill as of January 31, 2007. iDNA estimated the fair value of its reporting units and compared those values to the carrying values of those reporting units. If the estimated fair value of the reporting unit is less than the estimated book value, then an impairment is deemed to have occurred. In estimating the fair value of each reporting unit, iDNA used primarily the income approach (which utilizes forecasted discounted cash flows to estimate the fair value of the reporting unit. iDNA concluded that as of January 31, 2007 there were no additional impairments of its goodwill based upon the then estimated fair value of its reporting units.

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations

Item 2.

General

iDNA, Inc. (the ‘‘Company’’ or ‘‘iDNA’’), began operations in 1969 and was incorporated in Delaware in 1971. As a consequence of iDNA’s consummation of a series of acquisitions during the past four years, iDNA’s operations are comprised of three principal reportable segments: (i) strategic communications services, (ii) information services and (iii) entertainment. iDNA manages each segment separately as a consequence of different marketing, service requirements and technology strategies for the respective segments.

The strategic communications services segment provides content development via the design, development and production of media, collateral material, logistics, support and/or broadcast services for presentations at corporate and institutional events, meetings, training seminars and symposiums. The presentations may be live at single or multi-site venues and can include video conferencing, satellite broadcasting and webcasting, or the presentations may be provided via on-demand access via internet websites, DVD or video tape.

As of consequence of iDNA’s investment in the Angelika Film Centers, LLC (‘‘AFC’’), iDNA operates in the movie exhibition and entertainment industry.

Critical Accounting Policies

iDNA’s consolidated financial statements are prepared in accordance with generally accepted accounting principles, which require iDNA to make estimates and assumptions. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses of iDNA. iDNA’s significant accounting policies are described in Note 1 of Notes to Condensed Consolidated Financial Statements included under Item 1 of this Part I (hereinafter, the ‘‘Notes’’). However, certain accounting policies are deemed ‘‘critical’’, as they require management’s highest degree of judgment, estimates and assumptions. These accounting estimates and disclosures have been discussed with the Audit Committee of iDNA’s Board of Directors. A discussion of iDNA’s critical accounting policies, the judgments and uncertainties affecting their application and the likelihood that materially different amounts would be reported under different conditions or using different assumptions are as follows:

Revenues: iDNA’s revenues are earned within short time periods, generally less than one week. iDNA recognizes revenue from its strategic communications segment, including the video production, video editing, meeting services and broadcast satellite or webcast services, and its information services segment when the services are complete and delivered or all technical services have been rendered. Deposits and other prepayments are recorded as deferred revenue until revenue is recognized. iDNA does not have licensing or other arrangements that result in additional revenues following the delivery of the video or a broadcast. Costs accumulated in the production of the video, meeting services or broadcasts are deferred until the sale and delivery are complete. Deferred production costs of $55282,000 and $115,000, respectively, are reported as other current assets at ~~April~~July 3031, 2007 and January 31, 2007.

~~iDNA recognizes revenue from the sale of electronic equipment, proprietary software and related components at the time of shipment. Deposits and other prepayments received prior to shipment are~~ 20

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Cost of Revenues: Cost of revenues consists of direct expenses specifically associated with client service revenues. The cost of revenues includes direct salaries and benefits, purchased products or services for clients, web hosting, support services, shipping and delivery costs.

Accounts Receivable: iDNA extends credit to clients in the normal course of business. iDNA continuously monitors collections and payments from clients and maintains an allowance for doubtful accounts based upon historical experience and any specific client collection issues that have been identified. Since accounts receivable are concentrated in a relatively few number of clients, a significant change in the liquidity or financial position of any of these clients could have a material adverse impact on the collectibility of the accounts receivable and future operating results. iDNA does not have any off-balance sheet credit exposure related to its customers.

Valuation of Long-lived Assets and Goodwill: iDNA reviews the carrying value of its long-lived assets (other than goodwill) whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When indicators of impairment exist, iDNA determines whether the estimated undiscounted sum of the future cash flows from such assets is less than their carrying amounts. If less, an impairment loss is recognized in the amount, if any, by which, the carrying amount of such assets exceeds their respective fair values. The determination of fair value is based on quoted market prices in active markets, if available, or independent appraisals; sales price negotiations; or projected future cash flows discounted at a rate determined by management to be commensurate with iDNA’s business risk. The estimation of fair value utilizing discounted forecasted cash flows includes significant judgments regarding assumptions of revenue, operating and marketing costs; selling and administrative expenses; interest rates; property and equipment additions and retirements; industry competition; and general economic and business conditions, among other factors.

~~Self-Insurance~~Pursuant ~~Claims:~~ to iDNA’s ~~wholly-owned~~established ~~subsidiary~~accounting ~~ARAC~~policies, ~~Inc.~~iDNA ~~(‘‘ARAC’’)~~conducted ~~maintained~~its ~~and~~Fiscal ~~continues~~2006 toannual ~~maintain~~analysis ~~self-insurance~~of ~~for~~goodwill ~~claims~~as ~~and~~of ~~associated~~January 31, 2006. ~~litigation~~iDNA ~~expenses~~estimated ~~relating~~the tofair ~~bodily~~value ~~injury~~of orits ~~property~~reporting ~~damage~~units ~~from~~and ~~accidents~~compared ~~involving~~those ~~the~~values ~~vehicles rented~~ to ~~customers~~the bycarrying ~~its~~values ~~discontinued~~of ~~automobile~~those ~~rental~~reporting ~~operations~~units. ~~occurring~~If inthe ~~Fiscal~~estimated ~~1996~~fair ~~and~~value ~~prior.~~of ~~ARAC~~the ~~was,~~reporting ~~when~~unit ~~required~~is byless ~~either~~than ~~governing state law or~~ the ~~terms~~estimated ofbook ~~its rental agreement~~value, ~~self-insured~~then ~~for~~an ~~the~~impairment ~~first~~is ~~$1.0 million~~deemed ~~per~~to ~~occurrence,~~have ~~and~~occurred. ~~for~~In ~~losses~~estimating inthe ~~excess~~fair value of ~~$5.0 million~~each ~~per~~reporting ~~occurrence~~unit, ~~for~~iDNA ~~bodily~~used ~~injury~~primarily ~~and~~the ~~property~~income ~~damage~~approach ~~resulting~~(which ~~from~~utilizes ~~accidents~~forecasted ~~involving~~discounted ~~its~~cash ~~rental~~flows ~~vehicles.~~to ~~ARAC~~estimate ~~was~~the ~~also~~fair ~~self-insured,~~value upof tothe ~~certain~~reporting ~~retained~~unit. ~~limits,~~iDNA ~~for~~concluded ~~bodily~~that ~~injury~~as ~~and~~of ~~property~~January 31, 2006 ~~damage~~there ~~resulting~~was ~~from~~no ~~accidents~~impairment ~~involving~~of ~~ARAC~~its ~~vehicles~~goodwill ~~operated~~based byupon ~~employees~~the ~~within~~then ~~the~~estimated ~~scope~~fair value of ~~their~~its ~~employment~~reporting units.

~~ARAC~~However, isduring the ~~subject~~second toquarter ~~certain~~of ~~self-insurance~~Fiscal ~~claims~~2007, ~~and~~as ~~associated~~a ~~litigation~~consequence ~~expenses~~of ~~relating~~declining torevenues ~~its~~and ~~discontinued automobile rental operations. iDNA’s management estimates~~ the ~~required~~loss ~~self-insurance liability based upon specific identification~~ of ~~the~~a ~~known matters subject to future claims~~client, the ~~nature~~results of the ~~claim~~operations ~~and~~of the ~~estimated~~Campus ~~costs~~Group toCompanies, ~~be incurred~~Inc. ~~These~~(‘‘CGC’’) ~~estimates~~reporting ~~include,~~unit ~~but~~raised ~~are~~questions ~~not~~as ~~limited~~ to, ~~ARAC’s~~whether ~~historical~~projections ~~loss~~used ~~experience~~at ~~and~~the ~~projected~~last ~~loss~~valuation ~~factors.~~date ~~The~~were ~~required~~still ~~self-insurance~~valid. ~~liability~~Accordingly, ismanagement ~~subject~~performed toadditional ~~adjustment~~impairment intests ~~the~~as ~~future~~of ~~based~~July 31, 2006 ~~upon~~for ~~changes~~CGC inand ~~the~~determined ~~nature~~that ofimpairment ~~the~~charges ~~remaining~~were ~~claims~~required orat ~~the~~that ~~ultimate cost~~date. AsAccordingly, abased ~~consequence~~upon of iDNA’s ~~sale~~preliminary ofassessment, ~~its~~second ~~automobile~~quarter ~~rental~~ operations infor ~~1995,~~Fiscal ~~iDNA~~2007 ~~believes~~were ~~that~~charged ~~all~~$2.6 million ~~incurred~~and ~~claims~~$1.9 million ~~have~~for ~~been~~the ~~reported~~estimated toimpairment ~~ARAC~~of ~~and~~CGC’s ~~that~~goodwill ~~there~~and ~~are~~other nointangible ~~longer~~assets, ~~any~~respectively. ~~incurred~~Additionally, ~~but~~iDNA ~~not~~determined ~~yet~~it ~~reported~~appropriate ~~claims~~ to bereduce ~~received~~the byuseful ~~ARAC.~~life ~~iDNA’s~~of ~~self-insurance~~the ~~liability~~CGC atclient ~~April 30, 2007~~relationships ~~and January 31, 2007 was $235,000 and $235,000, respectively.~~

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Financial Condition and Results of Operations — continued

intangible asset from 17 years to 10 years. iDNA will continue to monitor CGC’s operations and will recognize further impairment charges if and when deemed appropriate.

Self-Insurance Claims: iDNA’s wholly-owned subsidiary ARAC, Inc. (‘‘ARAC’’) maintained and continues to maintain self-insurance for claims and associated litigation expenses relating to bodily injury or property damage from accidents involving the vehicles rented to customers by its discontinued automobile rental operations occurring in Fiscal 1996 and prior. ARAC was, when required by either governing state law or the terms of its rental agreement, self-insured for the first $1.0 million per occurrence, and for losses in excess of $5.0 million per occurrence, for bodily injury and property damage resulting from accidents involving its rental vehicles. ARAC was also self-insured, up to certain retained limits, for bodily injury and property damage resulting from accidents involving ARAC vehicles operated by employees within the scope of their employment.

ARAC is the subject to certain self-insurance claims and associated litigation expenses relating to its discontinued automobile rental operations. iDNA’s management estimates the required self-insurance liability based upon specific identification of the known matters subject to future claims, the nature of the claim and the estimated costs to be incurred. These estimates include, but are not limited to, ARAC’s historical loss experience and projected loss factors. The required self-insurance liability is subject to adjustment in the future based upon changes in the nature of the remaining claims or the ultimate cost. As a consequence of iDNA’s sale of its automobile rental operations in 1995, iDNA believes that all incurred claims have been reported to ARAC and that there are no longer any incurred but not yet reported claims to be received by ARAC. iDNA’s self-insurance liability at July 31, 2007 and January 31, 2007 was $235,000 and $235,000, respectively.

Because of the uncertainties related to several residual small claims and legal proceedings involving iDNA’s former rental operations and self-insurance claims, it is difficult to project with precision the ultimate effect that the adjudication or settlement of these matters will have on iDNA. As additional information regarding iDNA’s potential liabilities becomes available, iDNA will revise its estimates as appropriate.

Stock-Based Compensation: Effective February 1, 2006, iDNA adopted the provisions of Statement of Financial Accounting Standards (‘‘SFAS’’) No. 123R (revised 2004), Share-Based Payment (‘‘SFAS No. 123(R)’’), which ~~replaces~~replaced SFAS No. 123, Accounting for Stock-Based Compensation (‘‘SFAS No. 123’’), and ~~supersedes~~superseded APB Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values beginning with the first interim or annual period after December 15, 2005. iDNA elected the prospective method of adopting SFAS No. 123(R) which requires that compensation expense be recorded over the remaining periods for what would have been the remaining fair value under SFAS No. 123 of all unvested stock options and restricted stock at the beginning of the first quarter of adoption. The compensation costs for that portion of awards is based on the grant-date fair value of the awards as calculated for pro forma disclosures under SFAS No. 123. iDNA charged to operations $7774,000 and $7367,000, respectively, for share-based compensation for the three months ended ~~April~~July 3031, 2007 and 2006. iDNA charged to operations $151,000 and $140,000, respectively, for share-based compensation for the six months ended July 31, 2007 and 2006.

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Financial Condition and Results of Operations — continued

Income Taxes: iDNA recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. Loss carrybacks, reversal of deferred tax liabilities, tax planning and estimates of future taxable income are considered in assessing the need for a valuation allowance. At the time it is determined that iDNA will more likely than not be able to realize deferred tax assets in excess of the recorded amount, net of its valuation allowance, an adjustment to reduce the valuation allowance would be recorded that would increase income in the period such determination was made. Likewise, should management determine that iDNA would not be able to realize all or part of net deferred tax assets generated in the future, an increase to the valuation allowance would be charged to and reduce income in the period such determination was made.

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Financial Condition and Results of Operations Results from Operations for the Three Months Ended ~~April~~July 3031, 2007 as Compared to the Three Months Ended ~~April~~July 3031, 2006

The following table sets forth for the three months ended ~~April~~July 3031, 2007 and 2006 certain statements of operations data by segment obtained from iDNA’s consolidated statement of operations (in thousands).

	Information Services Three Months Ended April 30,								Strategic Communications Services Three Months Ended April 30,								Intersegment Elimination Three Months Ended April 30,
	Information Services Three Months Ended July 31,								Strategic Communications Services Three Months Ended July 31,								Intersegment Elimination Three Months Ended July 31,
	2007				2006				2007				2006				2007				2006
Revenues		$	2,~~305~~337			$	2,~~403~~449			$	~~1,326~~514			$	1,~~035~~127			$	(3127	)		$	(638	)
Cost of revenues			1,~~346~~438				1,~~319~~332				~~1,206~~634				~~1,021~~747				(3127	)			(638	)
Selling, general and admininistrative expenses			1,186				1,185				931				838				—				—
Selling, general and administrative expenses			1,182				1,146				915				1,310				—				—
Operating income (loss)			(~~226~~290	)			(~~101~~29	)			(~~811~~1,035	)			(~~825~~5,412	)			—				—
Depreciation and amortization expense			~~220~~217				~~202~~221				~~185~~177				~~179~~161				—				—
Impairment charge			—				—				—				4,482				—				—

	Entertainment Three Months Ended April 30,						Undistributed Corporate Expenses Three Months Ended April 30,								Consolidated Three Months Ended April 30,
	Entertainment Three Months Ended July 31,						Undistributed Corporate Expenses Three Months Ended July 31,								Consolidated Three Months Ended July 31,
	2007			2006			2007				2006				2007				2006
Revenues		$	—		$	—		$	—			$	—			$	32,~~600~~824			$	3,~~432~~538
Cost of revenues			—			—			—				—				2,~~521~~045				2,~~334~~041
Selling, general and admininistrative expenses			—			—			217				115				2,334				2,138
Selling, general and administrative expenses			—			—			252				321				2,349				2,777
Operating income (loss)			~~271~~65			68192			(~~271~~302	)			~~(285~~124	)			(1,~~037~~562	)			(15,~~143~~125	)
Depreciation and amortization expense			—			—			1412				16				~~419~~406				~~397~~398
Impairment charge			—			—			—				—				—				4,482

Revenues: Revenues ~~increased~~decreased 420.92% to $32.68 million for the three months ended ~~April~~July 3031, 2007 as compared to $3.45 million for the three months ended ~~April~~July 3031, 2006.

Revenues attributed to the information services segment decreased $98112,000 to $2.3 million for the three months ended ~~April~~July 3031, 2007 as compared to $2.4 million for the three months ended ~~April~~July 3031, 2006. The decrease in revenues was principally due to changes in the timing and/or scope of the projects completed during the three months ended ~~April~~July 3031, 2007 as compared to the three months ended ~~April~~July 3031, 2006.

Revenues attributed to the strategic communications services segment ~~increased~~decreased $~~291~~613,000 to $~~1.3 million~~514,000 for the three months ended ~~April~~July 3031, 2007 as compared to $1.01 million for the three months ended ~~April~~July 3031, 2006. The ~~increase~~decrease in revenues was principally due to ana ~~increase~~decrease in the scope, size and timing of projects ~~served~~completed during the three months ended ~~April~~July 3031, 2007 as compared to the three months ended ~~April~~July 3031, 2006. Although the timing of projects completed during the three months ended July 31, 2007 decreased, iDNA experienced an increase of $817,900 for deferred revenue as a consequence of an increase in depository billing associated with projects scheduled for completion during the third quarter of Fiscal 2008.

The nature of iDNA’s business is such that the nature and timing of assignments completed for clients, and the resulting revenue, will vary from period to period in terms of scope, size of projects and the ultimate revenues derived. ~~iDNA’s~~The ~~recently~~timing ~~consolidated~~and ~~its~~fluctuations ~~previously~~between ~~decentralized~~periods ~~marketing~~ for ~~strategic~~assignments ~~communications~~is ~~services~~particularly inapparent ~~an effort to improve the coordination and program value~~ for ~~current~~strategic ~~and~~communications ~~prospective~~segment ~~clients.~~where ~~Each~~assignments oftend ~~iDNA’s~~to ~~senior~~be ~~marketing~~fewer ~~strategists develops new marketing initiatives, creates new project opportunities, seeks new clients for its services and expands~~ in

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~~existing~~number ~~client~~but ~~relationships~~larger toin ~~generate~~scope ~~new~~than ~~revenues~~the toinformation ~~reduce~~services ~~period to period fluctuations~~segment. ~~Although~~As noa ~~assurances can be made~~consequence, ~~iDNA~~revenues ~~continues~~tend to ~~seek~~fluctuate ~~revenue~~from ~~expansion through its new marketing strategists’ initiatives as a means to reduce year-to-year and~~ quarter-to-quarter ~~fluctuations~~based inupon ~~its~~the ~~revenues as well as to ultimately increase revenues. Generally, there is a six to twelve month investment period in new~~ client ~~initiatives~~determined ~~and~~timing ~~relationships~~for ~~before~~completion ~~iDNA expects to realize revenues in the form~~ of ~~new~~an ~~projects and/or clients~~assignment.

~~Cost~~iDNA’s ofrecently ~~Service~~consolidated ~~Revenues: Cost~~its ofpreviously ~~revenues~~decentralized marketing for strategic communications services in an effort to improve the ~~three~~coordination ~~months~~and ~~ended~~program ~~April 30~~value for current and prospective clients. Each of iDNA’s senior marketing strategists develops new marketing initiatives, ~~2007~~ creates new project opportunities, seeks new clients for its services and ~~2006~~expands ~~was~~existing $2client relationships to generate new revenues to reduce period to period fluctuations.~~5 million~~ Although no assurances can be made, iDNA continues to seek revenue expansion through its new marketing strategists’ initiatives as a means to reduce year-to-year and $2quarter-to-quarter fluctuations in its revenues as well as to ultimately increase revenues.~~3 million~~ Generally, ~~respectively~~there is a six to twelve month investment period in new client initiatives and relationships before iDNA expects to realize revenues in the form of new projects and/or clients.

Cost of ~~revenues~~Service ~~attributed~~Revenues: Cost toof ~~the~~revenues ~~information services segment remained steady at $1.3 million~~ for the three months ended ~~April~~July 3031, 2007 asand ~~compared~~2006 towas $12.30 million ~~for~~and ~~the three months ended April~~$2.0 30million, ~~2006~~ respectively.

~~The~~Cost ~~gross~~of ~~profit~~revenues ~~realized~~attributed byto the information services segment ~~for the three months ended April 30, 2007 and 2006~~ was ~~$1.0 million~~at ~~and~~ $1.14 million, ~~respectively. The gross profit decrease of $125,000~~ for the three months ended ~~April~~July 3031, 2007 as compared to ~~the three months ended April 30, 2006 is due principally to the net effects of (i) a decline in revenues of~~ $~~98,000, offset by, (ii) an increase in project overhead costs~~1. ~~The gross margin for the three months ended April~~3 ~~30, 2007~~million ~~decreased 3.5% to 41.6% as compared to 45.1%~~ for the three months ended ~~April~~July 3031, 2006~~, principally due to the net effects of (i) a decrease in direct project costs of 2~~.~~5% that resulted in higher project margins, offset by, (ii) an increase of 6% in indirect production overhead.~~

~~Cost~~The ofgross ~~revenues~~profit ~~attributable~~realized toby the ~~strategic~~information ~~communications~~services segment ~~increased $185,000 to $1.2 million~~ for the three months ended ~~April~~July 3031, 2007 asand ~~compared~~2006 towas $899,000 and $1.01 million ~~for the three months ended April 30~~, ~~2006~~ respectively. The ~~increase~~gross inprofit ~~the~~decrease ~~costs~~ of ~~revenues was principally due to an increase in direct project costs as a consequence of the~~ $~~291~~218,000 ~~increase in revenues~~ for the three months ended ~~April~~July 3031, 2007 as compared to the three months ended ~~April~~July 3031, 2006. ~~The~~is ~~gross~~due ~~profit~~principally ~~realized~~(i) bya ~~the~~decline ~~strategic~~in ~~communications~~revenues ~~segment~~of ~~for~~$112,000, ~~the~~(ii) ~~three~~a ~~months~~reduction ~~ended~~in ~~April 30, 2007~~project ~~and~~margins ~~2006~~for ~~was~~the ~~$120,000~~period and ~~$14,000~~(iii) ~~respectively.~~an ~~The~~increase ~~gross~~in ~~profit~~project ~~increase~~overhead ofcosts. ~~$106,000~~The gross margin for the three months ended ~~April~~July 3031, 2007 decreased 7.1% to 38.5% as compared to 45.6% for the three months ended ~~April~~July 3031, 2006, is principally due to ~~the~~(i) an increase ofin ~~revenues. The nature of the strategic communications segment’s cost of revenues includes various fixed production, operating and personnel costs as well as variable~~ direct project costs. Asof a5.5% ~~consequence,~~that ~~the~~resulted ~~absorption~~in oflower ~~the~~project ~~fixed~~margins ~~production operating~~ and ~~personnel~~(ii) ~~costs~~an ~~can~~increase ~~cause~~of ~~quarter-to-quarter~~1.6% ~~fluctuations~~ in ~~gross~~indirect ~~profit~~production ~~realized~~overhead expenses as ~~iDNA~~a ~~experiences~~percentage ~~quarter-to-quarter~~of ~~fluctuations in~~ revenues.

~~Selling,~~Cost ~~General~~of ~~and~~revenues ~~Administrative~~attributable ~~(‘‘SG&A’’): SG&A~~to the strategic communications segment decreased $113,000 to $634,000 for the three months ended ~~April~~July 3031, 2007 ~~and~~as compared to $747,000 for the three months ended ~~April~~July 3031, 2006. The decrease in the costs of revenues was principally due to a decrease in direct project costs as a consequence of the $2613,000 decrease in revenues for the three months ended July 31, 2007 as compared to the three months ended July 31, 2006.3 The gross profit realized by the strategic communications segment for the three months ended July ~~million~~31, 2007 and 2006 was ($2120,000) and $380,000 respectively.1 The gross profit decrease of $500,000 for the three months ended July ~~million~~31, ~~respectively~~2007 as compared the three months ended July 31, 2006 is principally due to the decrease of revenues. The nature of the strategic communications segment’s cost of revenues includes various fixed production, operating and personnel costs as well as variable direct project costs. As a consequence, the absorption of the fixed production operating and personnel costs can cause quarter-to-quarter fluctuations in gross profit realized as iDNA experiences quarter-to-quarter fluctuations in revenues. For the three months ended July 31, 2007, the strategic communications segment incurred a negative gross profit due to the combination of direct project costs and fixed production operating and personnel costs incurred exceeding revenues realized for completed projects during the period.

~~SG&A~~Selling, ~~attributed~~General toand ~~the~~Administrative ~~information~~(‘‘SG&A’’): SG&A ~~services segment remained stable at $1.2 million~~ for the three months ended ~~April~~July 3031, 2007 and the three months ended ~~April~~July 3031, 2006 was $2.3 million and $2.8 million, respectively.

SG&A ~~attributable~~attributed to the ~~strategic~~information ~~communications~~ services segment ~~increased~~was $~~93,000~~1.2 million toand $~~931~~1.1 million,~~000~~ respectively, for three months ended ~~April~~July 3031, 2007 asand ~~compared to $838,000 for~~ the three months ended ~~April~~July 3031, 2006. The net increase in information services SG&A was ~~principally~~$36,000 ~~due~~for tothe anthree ~~increase~~months inended ~~personnel~~July 31, 2007 ~~and~~as ~~related~~compared ~~benefit~~to ~~expenses~~the three months ended July 31, 2006.

SG&A ~~for~~attributable ~~undistributed~~to ~~corporate expenses for~~ the ~~three~~strategic ~~months~~communications ~~ended~~services ~~April 30, 2007~~segment ~~and~~decreased ~~April 30, 2006 was~~ $~~217~~395,000 ~~and~~to $~~115~~915,000, ~~respectively. The corporate expenses incurred by iDNA relate principally to expenses incurred at its executive offices~~ for ~~executive~~three ~~and~~months ~~corporate~~ended ~~finance personnel~~July 31, 2007 ~~certain employee benefits, professional services such~~ as ~~consulting,~~compared ~~legal and accounting fees, corporate insurance, corporate marketing initiatives and the costs associated with maintaining its New York facility. iDNA allocates~~ to ~~its various business segments or units the proportionate share of corporate expenses that directly relate to and/or benefit such business segment or unit~~$1.3 million ~~The~~for ~~undistributed corporate expenses reflect~~ the ~~remaining~~three ~~expenses~~months ~~incurred but not directly attributable~~

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Financial Condition and Results of Operations — continued

toended ~~a business segment or unit~~July 31, 2006. The ~~increase~~decrease in ~~corporate~~ SG&A ofwas ~~$102,000~~principally ~~for~~due ~~the~~to ~~three~~(i) ~~months~~a ~~ended~~net ~~April 30, 2007~~decrease asin ~~compared~~personnel toand related benefit expenses and (ii) the ~~three~~reduction ~~months~~in ~~ended~~facility ~~April 30, 2006~~rent ~~was~~and ~~due~~related ~~principally~~occupancy costs as iDNA initiated its plan to anconsolidate ~~increase~~its inNew ~~personnel~~York ~~and~~City-based ~~related~~strategic ~~benefit~~communications ~~expenses~~operations into one facility.

~~Income~~SG&A ~~from~~for ~~AFC~~undistributed ~~Investment: iDNA~~corporate ~~accounts~~expenses for ~~its investment in AFC using~~ the ~~equity method. For the~~ three months ended ~~April~~July 3031, 2007 and ~~April~~July 3031, 2006, ~~iDNA~~was ~~recorded income of~~ $~~271~~252,000 and $68321,000, respectively. The corporate expenses incurred by iDNA relate principally to expenses incurred at its executive offices for executive and corporate finance personnel, ~~representing~~certain employee benefits, professional services such as consulting, legal and accounting fees, corporate insurance, corporate marketing initiatives and the costs associated with maintaining its New York facility. iDNA’s allocates to its various business segments or units the proportionate share of ~~AFC’s~~corporate ~~net~~expenses ~~income~~that directly relate to and/or benefit such business segment or unit. The undistributed corporate expenses reflect the remaining expenses incurred but not directly attributable to a business segment or unit. The decrease in corporate SG&A of $69,000 for the three months ended July 31, 2007 as compared to the three months ended July 31, 2006 was due principally to a decrease in personnel and related benefit expenses.

~~Summarized~~Income ~~income~~from ~~statement~~AFC ~~data~~Investment: iDNA accounts for its investment in AFC ~~for~~using the equity method. For the three months ended ~~March~~July 31, 2007 and July 31, 2006, iDNA recorded income of $65,000 and $192,000, respectively, isrepresenting asiDNA’s ~~follows~~share ~~(in~~of ~~thousands):~~AFC’s net income.

	Three Months Ended March 31,
	2007			2006
Revenues		$	2,000		$	1,465
Film rental			562			517
Operating costs			654			603
Depreciation and amortization			195			166
General and administrative expenses			47			42
			1,458			1,328
Net income		$	542		$	137
iDNA’s proportionate share of net income		$	271		$	68

Summarized income statement data for AFC for the three months ended June 30, 2007 and 2006, respectively, is as follows (in thousands):

AFC’s revenues increased $535,000 for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006, principally as a result of (i) an increase of 39.5% in attendance period-to-period, (ii) a 2.2% increase in average ticket prices and (iii) an increase of $43,000 in other, concession and café revenues. The attendance, and at times the ticket prices, at AFC will vary depending on audience interest in, and the popularity of the films it exhibits and other factors. Film rental expense, as a percentage of revenue, decreased 7.2% to 28.1% from 35.3% for the three months ended March 31, 2007 and 2006, respectively. Film rental expense generally is a factor of a fixed percentage rental rate per film multiplied by the number of tickets sold. AFC experiences fluctuations in film rental expense, as a percentage of revenue, depending upon the rental rate per film and the popularity of the film. Operating costs, as a percent of revenue, decreased 8.5% to 32.7% for the three months ended March 31, 2007, as compared to 41.2% for the three months ended March 31, 2006 due principally to the increased revenues without a corresponding increase in operating costs for the three months ended March 31, 2007 as compared to the three months ended March 31, 2006. The nature of AFC’s operating costs tend generally to be more fixed overhead-related costs and advertising expenses.


	Three Months Ended June 30,
	2007			2006
Revenues		$	1,288		$	1,464

Film rental			296			296
Operating costs			645			571
Depreciation and amortization			195			171
General and administrative expenses			21			43
			1,157			1,081
Net income		$	131		$	383
iDNA’s proportionate share of net income		$	65		$	192

~~Interest~~AFC’s ~~Expense: For~~revenues decreased $176,000 for the three months ended ~~April~~June 30, 2007 ~~and~~as compared to the three months ended June 30, 2006, ~~iDNA~~principally ~~incurred~~as ~~interest~~a ~~expense~~result of the net effects of (i) a decrease of 11.5% in attendance period-to-period, (ii) a decrease of $5549,000 in other, concession and ~~$174~~café revenues,~~000~~ offset by, ~~respectively~~(iii) a 0.9% increase in average ticket prices. The ~~decrease~~attendance, ofand ~~$119~~at times the ticket prices,~~000~~ inat AFC will vary depending on audience interest ~~expense~~in, ~~for~~and the ~~three~~popularity ~~month~~of ~~period~~the ~~ended~~films ~~April 30~~it exhibits and other factors. Film rental expense, ~~2007~~ as ~~compared~~a percentage of revenue, increased 2.8% to 23.0% from 20.2% for the three ~~month~~months ~~period~~ ended ~~April~~June 30, 2007 and 2006, isrespectively. ~~due~~Film ~~principally~~rental toexpense ~~the~~generally ~~net~~is ~~effects~~a factor of ~~(i)~~a fixed percentage rental rate per film multiplied by the ~~suspension~~number of ~~interest~~tickets ~~attributable~~sold. toAFC ~~the~~experiences ~~Base~~fluctuations ~~Notes~~in film rental expense, ~~Trailing~~as ~~Notes~~a percentage of revenue, depending upon the rental rate per film and ~~Convertible~~the ~~Note~~popularity ~~(each~~of ~~defined~~the ~~below)~~film. ~~(collectively~~Operating costs, ~~the~~as ~~‘‘Campus~~a ~~Notes’’)~~percent of revenue, increased 11.1% to 50.1% for the ~~period~~three ~~February~~months ended June 130, 2007, ~~through~~as ~~April~~compared to 39.0% for the three months ended June 30, ~~2007,~~2006 ~~offset~~due ~~by,~~principally to the combined effect of (i) decreased revenues and (ii) an increase ofin ~~$41~~operating costs,~~000~~ inprincipally ~~interest~~for ~~expense~~rent, ~~relating~~professional tofees aand ~~$1.0 million~~depreciation, ~~promissory~~for ~~note~~the ~~issued~~three ~~in July 2006.~~

The aggregate value of the Campus Notes outstanding during the interest suspension period was $12.1 million and the value of the foregone interest was $150,000. The Campus Notes issued by iDNA to acquire Audience Response Systems, Inc. and the Campus Group Companies, Inc. (collectively, the ‘‘Campus Group’’) bear interest at 5% per annum and are repayable in quarterly installments 26

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

~~according~~months ~~to a formula based upon the future cash flows realized from the Campus Group. For the trailing twelve month period~~ ended ~~April~~June 30, 2007, ~~the~~as ~~Campus~~compared ~~Group’s financial performance fell below certain minimum operating cash flow thresholds established pursuant~~ to the ~~terms~~three ofmonths ~~the~~ended ~~Campus Notes. As a consequence no interest was incurred on the Campus Notes during the period February~~June ~~1, 2007 through April~~ 30, ~~2007~~2006. ~~Prospectively,~~The ~~interest~~nature ~~may accrue pursuant to the terms~~ of ~~the~~AFC’s ~~Campus~~operating ~~Notes;~~costs ~~however,~~tend ~~iDNA~~generally ~~is not obligated~~ to ~~pay~~be ~~any~~more ~~principal~~fixed oroverhead-related ~~interest~~costs onand ~~the~~advertising ~~Campus Notes until October 31, 2007~~expenses.

~~Income~~Interest ~~Taxes~~Expense: ~~Due~~For tothe ~~net~~three ~~operating~~months ~~losses~~ended July 31, 2007 and ~~the~~2006, ~~availability~~iDNA ofincurred ~~net~~interest ~~operating~~expense ~~loss~~of ~~carryforwards~~$58,000 ~~iDNA’s~~and ~~effective~~$189,000, ~~federal~~respectively. ~~income~~The ~~tax~~decrease ~~rate~~of ~~was~~$131,000 ~~zero~~in interest expense for the three month ~~periods~~period ended ~~April~~July 3031, 2007 ~~and~~as ~~April~~compared to the three month period ended July 3031, 2006. ~~iDNA~~is ~~has~~due ~~provided~~principally ato ~~full~~the ~~valuation~~net ~~allowance~~effects ~~against~~of ~~its~~(i) ~~net~~the ~~operating~~suspension ~~loss~~of ~~carryforward~~interest attributable to the Base Notes, Trailing Notes and ~~other~~Convertible ~~net~~Note ~~deferred~~(each ~~tax~~defined ~~asset~~below) ~~items~~(collectively, ~~due~~the to‘‘Campus Notes’’) for the ~~uncertainty~~period February 1, 2007 through July 31, 2007, offset by, (ii) an increase of ~~their~~$37,000 ~~future~~in ~~realization~~interest expense relating to a $1.0 million promissory note issued in July 2006.

The aggregate carrying value of the Campus Notes outstanding during the interest suspension period was $12.1 million and the value of the foregone interest for the three months ended July 31, 2007 was $155,000. The Campus Notes issued by iDNA to acquire Audience Response Systems, Inc. and the Campus Group Companies, Inc. (collectively, the ‘‘Campus Group’’) bear interest at 5% per annum and are repayable in quarterly installments according to a formula based upon the future cash flows realized from the Campus Group. For the trailing twelve month period ended July 31, 2007, the Campus Group’s financial performance fell below certain minimum operating cash flow thresholds established pursuant to the terms of the Campus Notes. As a consequence no interest was incurred on the Campus Notes during the period February 1, 2007 through July 31, 2007. Prospectively, interest may accrue pursuant to the terms of the Campus Notes; however, iDNA is not obligated to pay any principal or interest on the Campus Notes until October 31, 2007.

Interest expense abatement: The Campus Notes bear interest at 5% per annum and are repayable in quarterly installments according to a formula based upon the future cash flows realized from The Campus Group. For the trailing twelve month period ended July 31, 2006, the Campus Group’s financial performance fell below certain minimum operating cash flow thresholds established pursuant to the terms of the Campus Notes. As a consequence, the interest expense incurred by iDNA during the twelve month period ended July 31, 2006 was abated. As a consequence of the interest abatement, iDNA realize a gain from the abatement of interest on the Campus Notes of $631,000 for the three months ended July 31, 2006.

Income Taxes: Due to net operating losses and the availability of net operating loss carryforwards, iDNA’s effective federal income tax rate was zero for the three month periods ended July 31, 2007 and July 31, 2006. iDNA has provided a full valuation allowance against its net operating loss carryforward and other net deferred tax asset items due to the uncertainty of their future realization.

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

Financial Condition and Results of Operations
Results from Operations for the Six Months Ended July 31, 2007
as Compared to the Six Months Ended July 31, 2006

The following table sets forth for the six months ended July 31, 2007 and 2006 certain statements of operations data by segment obtained from iDNA’s consolidated statement of operations (in thousands).


	Information Services Six Months Ended July 31,								Strategic Communications Services Six Months Ended July 31,								Intersegment Elimination Six Months Ended July 31,
	2007				2006				2007				2006				2007				2006
Revenues		$	4,642			$	4,852			$	1,840			$	2,162			$	(58	)		$	(44	)
Cost of revenues			2,784				2,650				1,840				1,769				(58	)			(44	)
Selling, general and admininistrative expenses			2,367				2,331				1,846				2,148				—				—
Operating income (loss)			(516	)			(129	)			(1,846	)			(6,237	)			—				—
Depreciation and amortization expense			437				424				362				340				—				—
Impairment charge			—				—				—				4,482				—				—


	Entertainment Six Months Ended July 31,						Undistributed Corporate Expenses Six Months Ended July 31,								Consolidated Six Months Ended July 31,
	2007			2006			2007				2006				2007				2006
Revenues		$	—		$	—		$	—			$	—			$	6,424			$	6,970
Cost of revenues			—			—			—				—				4,566				4,375
Selling, general and admininistrative expenses			—			—			470				436				4,683				4,915
Operating income (loss)			336			260			(573	)			(162	)			(2,599	)			(6,268	)
Depreciation and amortization expense			—			—			27				32				826				796
Impairment charge			—			—			—				—				—				4,482

Revenues: Revenues decreased 7.8% to $6.4 million for the six months ended July 31, 2007 as compared to $7.0 million for the six months ended July 31, 2006.

Revenues attributed to the information services segment decreased $210,000 to $4.6 million for the six months ended July 31, 2007 as compared to $4.8 million for the six months ended July 31, 2006. The decrease in revenues was principally due to changes in the timing and/or scope of the projects completed during the six months ended July 31, 2007 as compared to the six months ended July 31, 2006.

Revenues attributed to the strategic communications services segment decreased $322,000 to $1.8 million for the six months ended July 31, 2007 as compared to $2.2 million for the six months ended July 31, 2006. The decrease in revenues was principally due to a decrease in the scope, size and timing of projects completed during the six months ended July 31, 2007 as compared to the six months ended July 31, 2006. Although the timing of projects completed during the six months ended July 31, 2007 decreased, iDNA experienced an increase of $817,900 for deferred revenue as a consequence of an increase in depository billing associated with projects scheduled for completion during the third quarter of Fiscal 2008.

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

The nature of iDNA’s business is such that the nature and timing of assignments completed for clients, and the resulting revenue, will vary from period to period in terms of scope, size of projects and the ultimate revenues derived. The timing and fluctuations between periods for assignments is particularly apparent for the strategic communications segment where assignments tend to be fewer in number but larger in scope than the information services segment. As a consequence, revenues tend to fluctuate from quarter-to-quarter based upon the client determined timing for completion of an assignment.

iDNA’s recently consolidated its previously decentralized marketing for strategic communications services in an effort to improve the coordination and program value for current and prospective clients. Each of iDNA’s senior marketing strategists develops new marketing initiatives, creates new project opportunities, seeks new clients for its services and expands existing client relationships to generate new revenues to reduce period to period fluctuations. Although no assurances can be made, iDNA continues to seek revenue expansion through its new marketing strategists’ initiatives as a means to reduce year-to-year and quarter-to-quarter fluctuations in its revenues as well as to ultimately increase revenues. Generally, there is a six to twelve month investment period in new client initiatives and relationships before iDNA expects to realize revenues in the form of new projects and/or clients.

Cost of Service Revenues: Cost of revenues for the six months ended July 31, 2007 and 2006 was $4.6 million and $4.4 million, respectively.

Cost of revenues attributed to the information services segment was at $2.8 million for the six months ended July 31, 2007 as compared to $2.7 million for the six months ended July 31, 2006.

The gross profit realized by the information services segment for the six months ended July 31, 2007 and 2006 was $1.9 million and $2.2 million, respectively. The gross profit decrease of $344,000 for the six months ended July 31, 2007 as compared to the six months ended July 31, 2006 is due principally (i) a decline in revenues of $210,000, (ii) a reduction in project margins for the period and (iii) an increase in project overhead costs. The gross margin for the six months ended July 31, 2007 decreased 5.4% to 40.0% as compared to 45.4% for the six months ended July 31, 2006, principally due to (i) an increase in direct project costs of 4.3% that resulted in lower project margins and (ii) an increase of 1.1% in indirect production overhead expenses.

Cost of revenues attributable to the strategic communications segment increased $71,000 to $1.84 million for the six months ended July 31, 2007 as compared to $1.77 million for the six months ended July 31, 2006. The gross profit decrease of $393,000 for the six months ended July 31, 2007 as compared the six months ended July 31, 2006 is principally due to (i) the decrease of revenues and (ii) an increase in direct project costs as a consequence of the completion of smaller, lower margin projects during the period. The nature of the strategic communications segment’s cost of revenues includes various fixed production, operating and personnel costs as well as variable direct project costs. As a consequence, the absorption of the fixed production operating and personnel costs can cause quarter-to-quarter fluctuations in gross profit realized as iDNA experiences quarter-to-quarter fluctuations in revenues. For the six months ended July 31, 2007, gross profit broke even due to the combination of direct project costs and fixed production operating and personnel costs incurred were equal to the revenues realized for completed projects during the period.

Selling, General and Administrative (‘‘SG&A’’): SG&A for the six months ended July 31, 2007 and the six months ended July 31, 2006 was $4.7 million and $4.9 million, respectively.

SG&A attributed to the information services segment was $2.4 million and $2.3 million, respectively, for six months ended July 31, 2007 and the six months ended July 31, 2006. The net increase in information services SG&A was $36,000 for the six months ended July 31, 2007 as compared to the six months ended July 31, 2006.

SG&A attributable to the strategic communications services segment decreased $302,000 to $1.8 million for six months ended July 31, 2007 as compared to $2.1 million for the six months ended

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

July 31, 2006. The decrease in SG&A was principally due to (i) a net decrease in personnel and related benefit expenses, (ii) a decrease in professional services and consulting expenses and (iii) the reduction in facility rent and related occupancy costs as iDNA initiated its plan to consolidate its New York City-based strategic communications operations into one facility.

SG&A for undistributed corporate expenses for the six months ended July 31, 2007 and July 31, 2006 was $470,000 and $436,000, respectively. The corporate expenses incurred by iDNA relate principally to expenses incurred at its executive offices for executive and corporate finance personnel, certain employee benefits, professional services such as consulting, legal and accounting fees, corporate insurance, corporate marketing initiatives and the costs associated with maintaining its New York facility. iDNA allocates to its various business segments or units the proportionate share of corporate expenses that directly relate to and/or benefit such business segment or unit. The undistributed corporate expenses reflect the remaining expenses incurred but not directly attributable to a business segment or unit. The decrease in corporate SG&A of $34,000 for the six months ended July 31, 2007 as compared to the six months ended July 31, 2006 was due principally to a decrease in personnel and related benefit expenses.

Income from AFC Investment: iDNA accounts for its investment in AFC using the equity method. For the six months ended July 31, 2007 and July 31, 2006, iDNA recorded income of $336,000 and $260,000, respectively, representing iDNA’s share of AFC’s net income.

Summarized income statement data for AFC for the six months ended June 30, 2007 and 2006, respectively, is as follows (in thousands):


	Six Months Ended June 30,
	2007			2006
Revenues		$	3,288		$	2,929

Film rental			857			813
Operating costs			1,300			1,174
Depreciation and amortization			390			337
General and administrative expenses			68			85
			2,615			2,409
Net income		$	673		$	520
iDNA’s proportionate share of net income		$	336		$	260

AFC’s revenues increased $359,000 for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006, principally as a result of the net effects of (i) an increase of 13.8% in attendance period-to-period, (ii) a 1.6% increase in average ticket prices, offset by, (iii) a decrease of $7,000 in other, concession and café revenues. The attendance, and at times the ticket prices, at AFC will vary depending on audience interest in, and the popularity of the films it exhibits and other factors. Film rental expense, as a percentage of revenue, decreased 1.6% to 26.1% from 27.7% for the six months ended June 30, 2007 and 2006, respectively. Film rental expense generally is a factor of a fixed percentage rental rate per film multiplied by the number of tickets sold. AFC experiences fluctuations in film rental expense, as a percentage of revenue, depending upon the rental rate per film and the popularity of the film. Operating costs, as a percent of revenue, decreased 0.6% to 39.5% for the six months ended June 30, 2007, as compared to 40.1% for the six months ended June 30, 2006 due principally to the net effect of (i) increased revenues, offset by, (ii) an increase in operating costs, principally for rent, professional fees and depreciation, for the six months ended June 30, 2007 as compared to the six months ended June 30, 2006. The nature of AFC’s operating costs tend generally to be more fixed overhead-related costs and advertising expenses.

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

Interest Expense: For the six months ended July 31, 2007 and 2006, iDNA incurred interest expense of $113,000 and $363,000, respectively. The decrease of $250,000 in interest expense for the six month period ended July 31, 2007 as compared to the six month period ended July 31, 2006 is due principally to the net effects of (i) the suspension of interest attributable to the Campus Notes for the period February 1, 2007 through July 31, 2007, offset by, (ii) an increase of $78,000 in interest expense relating to a $1.0 million promissory note issued in July 2006.

The aggregate principal amount of the Campus Notes outstanding during the interest suspension period was $12.1 million and the value of the foregone interest for the six months ended July 31, 2007 was $306,000. The Campus Notes issued by iDNA to acquire the Campus Group bear interest at 5% per annum and are repayable in quarterly installments according to a formula based upon the future cash flows realized from the Campus Group. For the trailing twelve month period ended July 31, 2007, the Campus Group’s financial performance fell below certain minimum operating cash flow thresholds established pursuant to the terms of the Campus Notes. As a consequence no interest was incurred on the Campus Notes during the period February 1, 2007 through July 31, 2007. Prospectively, interest may accrue pursuant to the terms of the Campus Notes; however, iDNA is not obligated to pay any principal or interest on the Campus Notes until October 31, 2007.

Interest expense abatement: The Campus Notes bear interest at 5% per annum and are repayable in quarterly installments according to a formula based upon the future cash flows realized from The Campus Group. For the trailing twelve month period ended July 31, 2006, The Campus Group’s financial performance fell below certain minimum operating cash flow thresholds established pursuant to the terms of the Campus Notes. As a consequence, the interest expense incurred by iDNA during the twelve month period ended July 31, 2006 was abated. As a consequence of the interest abatement, iDNA realize a gain from the abatement of interest on the Campus Notes of $631,000 for the six months ended July 31, 2006.

Income Taxes: Due to net operating losses and the availability of net operating loss carryforwards, iDNA’s effective federal income tax rate was zero for the six month periods ended July 31, 2007 and July 31, 2006. iDNA has provided a full valuation allowance against its net operating loss carryforward and other net deferred tax asset items due to the uncertainty of their future realization.

Table of Contents

iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

Liquidity and Capital Resources

As a consequence of periodic fluctuations in iDNA’s working capital needs based upon the timing of collections, distributions from AFC, and periods of increased production activity, on July 20, 2006, iDNA consummated a Loan and Security Agreement (‘‘Loan Agreement’’) with a lender and issued a Promissory Note (the ‘‘Note’’) in a principal amount of $1.0 million. The lender, Seasons Go Round, is an unaffiliated third party lender. Pursuant to the terms of the Note, (i) the outstanding principal amount owed under the Note is due February 15, 2008, (ii) iDNA is required to pay interest only, monthly and in arrears, during the term of the Note and (iii) the Note bears interest at fourteen percent (14%) per annum. iDNA may prepay the Note at any time and without a prepayment penalty. The Note is secured by a perfected first priority security interest in and to, and a lien on and pledge of, iDNA’s right, title and interest in and to virtually all of iDNA’s assets. The lien does not extend to the common stock or membership interests of certain subsidiaries — the Campus Group and Option Technologies Interactive, LLC. (‘‘OTI’’)

~~Prior~~As toa ~~the~~consequence ~~issuance~~ of ~~the~~iDNA’s ~~Note,~~acquisition ~~iDNA~~of ~~had~~OTI noeffective ~~external~~November 18, 2005, ~~source~~iDNA ofissued ~~financing~~to ~~and~~Flexner ~~had~~Wheatley ~~operated~~& onAssociates ~~its~~(‘‘FWA’’) ~~existing~~and ~~cash~~MeetingNet ~~balances~~Interactive, ~~cash~~Inc. ~~flows~~(‘‘MeetingNet’’) ~~from~~promissory ~~operations~~notes ~~and~~in ~~distributions~~an ~~from~~aggregate ~~its~~principal ~~investment~~amount inof ~~AFC~~$1.5 million ~~iDNA~~(the ~~will~~‘‘OTI ~~continue~~Promissory toNotes’’). ~~pursue~~The ~~reductions~~OTI inPromissory ~~its~~Notes ~~operating~~bear ~~expenses~~interest ~~and~~at ~~invest~~5% inper ~~marketing~~annum ~~initiatives~~ and isare ~~actively~~repayable ~~seeking~~in ~~new~~quarterly ~~debt~~installments oraccording ~~equity~~to ~~financing~~a ~~(though~~formula ~~there~~based ~~can~~upon bethe nofuture ~~assurance~~cash ~~that~~flows ~~iDNA~~realized ~~will~~from ~~obtain such financing) as means of supplementing iDNA~~OTI’s ~~resources~~operations. ~~available~~The toOTI ~~pursue~~Promissory ~~new~~Notes ~~acquisitions,~~are ~~joint~~secured ~~ventures~~by orthe ~~other~~membership ~~business~~interests ~~development~~of ~~opportunities and to secure working capital~~OTI. At ~~April~~July 3031, 2007, iDNA had ~~unrestricted~~outstanding ~~cash~~principal ofobligations ~~$774,000,~~under ~~which~~the ~~together~~terms ~~with~~of ~~any~~the ~~cash~~OTI ~~flow~~Promissory ~~derived~~Notes ~~from~~of ~~its~~$1.0 million ~~investment in AFC~~ and ~~the~~accrued ~~operations~~interest of ~~iDNA’s corporate communications business will be used to pursue such opportunities~~$13,000.

As a consequence of iDNA’s acquisition of ~~OTI~~The Campus Group effective ~~November~~July 1831, ~~2005~~2003, iDNA issued to ~~Flexner~~Mr. Steve Campus ~~Wheatley~~and &certain ~~Associates~~family trusts promissory notes in an aggregate principal amount of $9.9 million and a convertible promissory note in the principal amount of $2.8 million (collectively, the ‘‘~~FWA~~Campus Notes’’). ~~and~~Of ~~MeetingNet~~the ~~Interactive~~$9.9 million in promissory notes issued by iDNA, ~~Inc~~$6.6 million of the promissory notes (‘‘~~MeetingNet~~Base Notes’’) ~~promissory~~bear ~~notes~~interest at 5% per annum and are repayable in anquarterly ~~aggregate~~installments ~~principal~~according ~~amount~~to ofa formula based upon the future cash flows realized from The Campus Group over a period not to exceed seven years. The remaining $13.53 million ~~(the~~in promissory notes (‘‘~~OTI~~Trailing ~~Promissory~~ Notes’’). issued by iDNA bear interest at 5% per annum and are repayable in quarterly installments, commencing upon the retirement of the Base Notes, according to a formula based upon the future cash flows realized from The ~~OTI~~Campus ~~Promissory~~Group over a period not to exceed three years subsequent to the retirement of the Base Notes. ~~bear~~The $2.8 million convertible promissory note (‘‘Convertible Note’’) (i) bears interest at 5% per annum, payable quarterly in cash or accumulating as principal at the election of iDNA, (ii) requires principal payments to commence upon the retirement of the Base Notes and ~~are~~Trailing Notes and is then repayable in quarterly installments according to a formula based upon the future cash flows realized from ~~OTI~~The Campus Group over a period not to exceed three years and (iii) is convertible at the option of the holder into shares of iDNA’s ~~operations~~Common Stock at a base conversion price of $1.50 per share. The ~~OTI~~holder ~~Promissory~~may not convert the Convertible Note into iDNA’s Common Stock prior to repayment of the Base Notes and Trailing Notes. The Campus Notes are secured by the ~~membership~~capital ~~interests~~stock of ~~OTI~~the companies comprising The Campus Group. At ~~April~~July 3031, 2007, iDNA had outstanding principal obligations under the terms of the ~~OTI~~Base ~~Promissory~~Notes, Trailing Notes and the Convertible Note of $16.10 million, $3.3 million and $2.8 million, respectively, and accrued interest of $29156,000.

AsFor athe ~~consequence~~trailing oftwelve ~~iDNA’s~~month ~~acquisition~~period ofended ~~The Campus Group effective~~ July 31, ~~2003~~2006, ~~iDNA~~The ~~issued~~Campus toGroup’s ~~Mr. Steve Campus~~financial ~~and~~performance fell below certain ~~family~~minimum ~~trusts~~operating ~~promissory~~cash ~~notes~~flow inthresholds anestablished ~~aggregate~~pursuant ~~principal~~to ~~amount~~the terms of $9the Campus Notes.~~9 million~~ ~~and~~As a ~~convertible~~consequence, ~~promissory~~the ~~note~~interest inexpense incurred by iDNA during the ~~principal~~twelve ~~amount~~month ofperiod ~~$2.8 million~~ended ~~(collectively~~July 31, 2006 ~~the~~was ~~‘‘Campus Notes’’)~~abated. OfAs a consequence of the ~~$9.9 million~~interest inabatement ~~promissory~~on ~~notes~~the ~~issued~~Campus byNotes, iDNA, ~~$6.6 million~~realized a gain of $631,000 during the ~~promissory~~second ~~notes~~quarter ~~(‘‘Base~~of ~~Notes’’)~~Fiscal ~~bear~~2007. ~~interest~~For atthe 5%trailing ~~per~~twelve ~~annum~~month ~~and~~period ~~are~~ended ~~repayable~~July 31, 2007, the Campus Group’s financial performance

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

inremained ~~quarterly~~below ~~installments according to a formula based upon~~ the ~~future~~minimum operating cash ~~flows~~flow ~~realized~~thresholds. ~~from~~As ~~The Campus Group over~~ a ~~period~~consequence ~~not~~no ~~to exceed seven years. The remaining $3.3 million in promissory notes (‘‘Trailing Notes’’) issued by iDNA bear~~ interest atwas 5%incurred ~~per~~on ~~annum and are repayable in quarterly installments, commencing upon~~ the ~~retirement~~Campus ~~of the Base~~ Notes, ~~according~~during ~~to a formula based upon~~ the ~~future cash flows realized from The Campus Group over a~~ period ~~not to exceed three years subsequent to the retirement of the Base Notes. The $2.8~~February ~~million~~1, 2007 ~~convertible~~through ~~promissory note (‘‘Convertible Note’’) (i) bears interest at 5% per annum~~July 31, 2007. ~~payable quarterly in cash or accumulating as principal at the election of iDNA~~Prospectively, ~~(ii)~~interest ~~requires~~may ~~principal~~accrue ~~payments~~pursuant to ~~commence upon~~ the ~~retirement~~terms of the ~~Base~~Campus Notes; ~~and~~however, ~~Trailing~~iDNA ~~Notes and~~ is ~~then~~not ~~repayable~~obligated ~~in quarterly installments according~~ to apay ~~formula~~any ~~based~~principal ~~upon~~or ~~the~~interest ~~future~~on ~~cash flows realized from The Campus Group over a period not to exceed three years and (iii) is convertible at~~ the option of the holder into shares of iDNA’s Common Stock at a base conversion price of $1.50 per share. The holder may not convert the Convertible Note into iDNA’s Common Stock prior to repayment of the Base Notes and Trailing Notes. The Campus Notes ~~are~~until ~~secured by the capital stock of the companies comprising The Campus Group. At April~~October 3031, 2007~~, iDNA had outstanding principal obligations under the terms of the Base Notes, Trailing Notes and the Convertible Note of $6~~.~~0 million, $3.3 million and $2.8 million, respectively, and accrued interest of $156,000.~~

~~For~~As ~~the~~a ~~trailing~~consequence ~~twelve~~of ~~month~~iDNA’s ~~period~~acquisition ~~ended~~of OMI Business Communications, Inc. (‘‘OMI’’) effective April 301, ~~2007~~2003, ~~the~~iDNA ~~Campus~~assumed ~~Group’s~~a ~~financial~~$402,000 ~~performance~~loan ~~fell~~guaranteed ~~below~~by ~~certain~~the ~~minimum~~U.S. ~~operating~~Small ~~cash~~Business ~~flow~~Administration ~~thresholds~~(the ~~established~~‘‘SBA ~~pursuant~~Loan’’). toAt July 31, 2007, the ~~terms~~remaining balance of the ~~Campus~~SBA ~~Notes.~~Loan Asof a$313,000 ~~consequence~~is norepayable ~~interest~~in ~~was~~monthly ~~incurred~~installments onof ~~the~~$3,309 ~~Campus~~with ~~Notes during~~ the ~~period~~last ~~from~~payment ~~February 1, 2007~~due ~~through~~in April ~~30, 2007~~2017. ~~Prospectively,~~The ~~interest~~SBA ~~may~~Loan ~~accrue~~bears ~~pursuant~~interest toat the ~~terms~~rate of ~~the~~4% ~~Campus~~per ~~Notes;~~annum. ~~however,~~The ~~iDNA~~SBA Loan is ~~not~~collateralized ~~obligated~~by tosubstantially ~~pay~~all ~~any~~of ~~principal~~OMI’s orassets ~~interest~~and onpayment thereunder is subject to the ~~Campus~~personal ~~Notes~~guarantee ~~until~~of ~~October~~Mr. 31Dean Thompson, ~~2007~~President of OMI.

AsIn aSeptember 2006, ~~consequence~~OMI ofconsummated ~~iDNA’s~~equipment ~~acquisition~~financing ofin ~~OMI~~the ~~Business~~form ~~Communications,~~of ~~Inc.~~a ~~(‘‘OMI’’)~~capital ~~effective~~lease ~~April 1, 2003,~~with ~~iDNA~~a ~~assumed~~financing ainstitution to acquire $~~402~~102,000 ~~loan~~in ~~guaranteed~~various bydigital ~~the~~media ~~U.S.~~production ~~Small~~and ~~Business~~editing ~~Administration (the ‘‘SBA Loan’’)~~equipment. AtThe ~~April 30, 2007,~~capital ~~the~~lease ~~remaining balance of the SBA Loan of $320,000~~ is ~~repayable~~payable in monthly installments ~~of $3,309~~ with the last payment due in ~~April~~July ~~2017.~~2009 ~~The~~and ~~SBA~~bears ~~Loan~~an ~~bears~~implied interest ~~at the~~ rate of 410% ~~per annum~~. The ~~SBA~~capital ~~Loan~~lease is collateralized by ~~substantially~~the ~~all~~digital ofmedia ~~OMI’s~~production ~~assets~~ and ~~payment~~editing ~~thereunder~~equipment isacquired ~~subject~~by toOMI. At July 31, 2007, the ~~personal~~remaining ~~guarantee~~balance ofdue ~~Mr. Dean Thompson, President~~under ofthe ~~OMI~~capital lease was $69,000.

InFor ~~September 2006, OMI consummated equipment financing in~~ the ~~form~~six ofmonths aended ~~capital~~July31, ~~lease~~2007, ~~with~~iDNA’s acash ~~financing~~and ~~institution~~cash toequivalents ~~acquire~~decreased $~~102~~254,000 indue ~~various~~principally ~~digital~~to ~~media~~the ~~production~~net ~~and~~effects ~~editing~~of ~~equipment.~~(i) ~~The~~proceeds ~~capital~~from ~~lease~~AFC isdistributions ~~payable~~of in$750,000, ~~monthly~~(ii) ~~installments~~proceeds ~~with~~from the ~~last~~exercise ~~payment~~of ~~due~~stock inoptions ~~July 2009 and bears an implied interest rate~~ of ~~10%.~~$14,000, ~~The~~offset ~~capital lease is collateralized~~ by ~~the~~(iii) ~~digital~~cash ~~media~~flows ~~production~~used ~~and~~in ~~editing~~operations ~~equipment~~of ~~acquired~~$805,000, by(iv) capital ~~OMI.~~expenditures Atof ~~April 30~~$58, ~~2007~~000, ~~the~~and ~~remaining~~(v) ~~balance due under~~ the ~~capital~~repayment ~~lease~~of ~~was~~debt of $77155,000.

~~For~~Prior to the ~~three~~issuance ~~months~~of ~~ended~~the ~~April 30~~Note, ~~2007~~ iDNA had no external source of financing and had operated on its existing cash balances, cash flows from operations and distributions from its investment in AFC. iDNA is currently pursuing (i) reductions in its operating expenses, (ii) investments in new marketing initiatives and (iii) new debt or equity financing as means of supplementing iDNA’s ~~cash~~resources ~~and~~available ~~cash~~to ~~equivalents~~pursue ~~increased~~new ~~$226~~acquisitions,~~000~~ ~~due~~joint ~~principally~~ventures or other business development opportunities and to secure working capital. iDNA has identified and is in the ~~net~~advanced ~~effects~~stages of negotiation and documentation of a proposed new credit facility of $4.2 million (ithe ‘‘Proposed Facility’’) ~~proceeds~~with ~~from~~a ~~AFC~~third ~~distributions~~party lender. Pursuant to the terms of ~~$750~~the Proposed Facility,~~000,~~ (iii) ~~proceeds~~the ~~from~~maturity date for the ~~exercise~~facility ofwill ~~stock~~be ~~options~~September 2009 ofwith ~~$14~~iDNA possessing the option,~~000~~ subject to certain criterion, ~~offset~~to byextend the facility for an additional one year period, (~~iii~~ii) ~~cash~~iDNA ~~flows~~is ~~used~~required to pay principal and interest quarterly and in ~~operations~~arrears via the assignment of ~~$507~~future distributions by AFC to the lender,~~000~~ (iii) the outstanding principal bears interest at the prime rate plus four percent (4%) per annum, (iv) ~~capital~~outstanding ~~expenditures~~principal is subject to one-half of one percent (0.5%) facility fee, (v) iDNA shall pay a $15120,000, prepayment or exit fee at maturity and (v) iDNA shall issue to the ~~repayment~~lender 1.5 million warrants to purchase iDNA Common Stock at an exercise price equal to 110% of ~~debt~~the average closing bid price of ~~$16~~iDNA Common Stock for the twenty day trading period preceding the closing date. The projected use of proceeds from the Proposed Facility includes (i) the re-payment and retirement of the Note,~~000~~ (ii) the payment of transaction fees and (iii) general working capital.

AsThe ofProposed ~~April 30~~Facility will be secured by a perfected first priority security interest in and to, ~~2007~~ and a lien on and pledge of, iDNA’s ~~had~~right, ~~cash~~title and ~~cash~~interest ~~equivalents~~in ofand ~~$774,000.~~to ~~iDNA~~virtually ~~believes~~all ~~that~~of ~~its~~iDNA’s ~~current~~assets. ~~cash~~The ~~balances~~lien ~~combined~~does ~~with~~not ~~cash~~extend ~~distributions~~to ~~from~~the ~~its~~common ~~investment~~stock inof ~~AFC~~certain ~~and~~subsidiaries ~~cash~~— ~~flow~~the ~~from~~Campus ~~operations~~Group ~~will~~Companies, beInc., ~~sufficient~~Audience toResponse ~~pay~~Systems, ~~operating~~Inc., ~~expenses~~Multi-Video Service, Inc. and ~~existing~~Interactive ~~liabilities~~Conferencing Network, toInc. ~~fund~~(collectively ~~existing~~known ~~debt~~as ~~repayments~~‘‘The ~~and~~Campus Group’’) or to ~~fund~~the ~~its~~membership ~~activities~~interests ~~through~~of ~~the~~Option ~~next~~Technologies ~~twelve~~Interactive, ~~months~~LLC. ~~However,~~Though asthe ~~previously~~negotiation ~~discussed,~~of ~~iDNA’s~~the ~~lack~~terms ofand ~~external~~conditions ~~financing~~of ~~sources~~the ~~may~~Proposed ~~limit~~Facility ~~its~~is ~~ability~~at toan ~~pursue~~advanced ~~strategic~~stage, ~~business~~there ~~alternatives~~can ~~being~~be ~~considered~~no byassurance that iDNA’s ~~Board~~will close such financing and the final terms and underlying economics of ~~Directors.~~the ~~Such~~Proposed ~~limitations~~Facility may ~~have~~be ansubject ~~adverse~~to ~~impact~~material onchange prior to a closing. iDNA’s ~~financial~~ability ~~position,~~to ~~results~~consummate the financing is dependent on the state of ~~operations~~the debt and/or ~~liquidity.~~equity Asmarkets aat ~~consequence,~~the ~~iDNA~~time isof ~~currently~~the ~~investigating~~closing ~~additional~~of ~~financing~~the ~~alternatives,~~Proposed ~~including~~Facility ~~equity~~ and~~/or~~ ~~debt~~the ~~financing~~final tostructure of the

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iDNA, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations — continued

(i) refinance certain debt obligations, (ii) pursue certain strategic ventures which may include a business combination and to (iii) manage its periodic fluctuations in working capital needs based upon the timing of collections, distributions from AFC, and periods of increased production activity. iDNA’s ability to consummate a financing ~~is dependent on the state of the debt and/or equity markets at the time of the proposed financing and the structure of the financing~~. There is no assurance that capital in any form will be available to iDNA, and if available, will be available on terms and conditions that are acceptable to iDNA.

As of July 31, 2007, iDNA had cash and cash equivalents of $294,000. iDNA believes that its current cash balances combined with cash distributions from its investment in AFC and cash flow from operations will be sufficient to pay operating expenses and existing liabilities, to fund existing debt repayments and to fund its activities through the next twelve months regardless of whether the Proposed Facility closes. However, as previously discussed, iDNA’s lack of external financing sources may limit its ability to pursue strategic business alternatives being considered by iDNA’s Board of Directors. Such limitations may have an adverse impact on iDNA’s financial position, results of operations and liquidity.

Other

New Accounting Pronouncements

Inflation

Inflation has not had a material adverse impact on iDNA.

Off-Balance Sheet Arrangements

iDNA does not have in place any off-balance sheet arrangements (as defined in Item 303(a)(4) of Regulation S-K).

Forward Looking Statements

Some of the information in this report contains forward looking statements within the meaning of the federal securities laws that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause us or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by the forward-looking statements. You should not rely on forward-looking statements in this report. Forward-looking statements typically are identified by use of terms such as ‘‘anticipate’’, ‘‘believe’’, ‘‘plan’’, ‘‘expect’’, ‘‘intend’’, ‘‘may’’, ‘‘will’’, ‘‘should’’, ‘‘estimate’’, ‘‘predict’’, ‘‘potential’’, ‘‘continue’’ and similar words, although some forward-looking statements are expressed differently. This report may contain forward-looking statements attributed to third parties relating to their estimates regarding the growth of our markets or other factors. All forward-looking statements address matters that involve risk and uncertainties, and there are many important risks, uncertainties and other factors that could cause our actual results as well as those of the markets we serve, levels of activity, performance, achievements and prospects to differ materially from the forward-looking statements contained in this report. You should also consider carefully the statements under other sections of this report that address additional factors that could cause our actual results to differ from those set forth in any forward-looking statements. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

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~~Item~~iDNA, 3Inc. ~~Quantitative~~ and ~~Qualitative~~Subsidiaries Management’s ~~Disclosures~~Discussion ~~About~~and ~~Market~~Analysis ~~Risk~~of Financial Condition and Results of Operations — continued

of our markets or other factors. All forward-looking statements address matters that involve risk and uncertainties, and there are many important risks, uncertainties and other factors that could cause our actual results as well as those of the markets we serve, levels of activity, performance, achievements and prospects to differ materially from the forward-looking statements contained in this report. You should also consider carefully the statements under other sections of this report that address additional factors that could cause our actual results to differ from those set forth in any forward-looking statements. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future developments or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Like virtually all commercial enterprises, iDNA can be exposed to the risk (‘‘market risk’’) that the cash flows to be received or paid relating to certain financial instruments could change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes.

iDNA does not engage in trading activities and does not utilize interest rate swaps or other derivative financial instruments or buy or sell foreign currency, commodity or stock indexed futures or options. Accordingly, iDNA is not exposed to market risk from these sources.

As of ~~April~~July 3031, 2007, the interest rates under iDNA’s long term and convertible debt are fixed. As a result iDNA has limited market risk associated with market interest rates.

Item 4. Controls and Procedures.

As of the end of the period covered by this Quarterly Report on Form 10-Q, the Chief Executive Officer and the Chief Financial Officer of iDNA (the ‘‘Certifying Officers’’) have conducted evaluations of iDNA’s disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), the term ‘‘disclosure controls and procedures’’ means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer 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 Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Certifying Officers have reviewed iDNA’s disclosure controls and procedures and have concluded that those disclosure controls and procedures were effective as of the end of our most recent fiscal quarter. In compliance with Section 302 of the Sarbanes-Oxley Act of 2002, (18 U.S.C. 1350), each of the Certifying Officers has executed the requisite Officer’s Certification included as Exhibit 31 to this Quarterly Report on Form 10-Q.

The Certifying Officers have also conducted an evaluation of iDNA’s internal control over financial reporting and have concluded that there has been no change in our internal control over financial reporting during our most recent fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. — OTHER INFORMATION

Item 1. Legal Proceedings

Self-Insurance Reserves for Property Damage and Personal Injury Claims

iDNA, under the names Agency Rent-A-Car, Inc. (‘‘ARAC’’), Altra Auto Rental and Automate Auto Rental, previously engaged in the rental of automobiles on a short-term basis, principally to the insurance replacement market. In Fiscal 1996, iDNA discontinued its automobile rental fleet business through the sale of certain assets and through certain leases to a national car rental company. All liabilities related to the discontinued rental business, principally self-insurance claims, were retained by ARAC.

iDNA’s wholly-owned subsidiary ARAC maintained and continues to maintain self-insurance for claims relating to bodily injury or property damage from accidents involving the vehicles rented to customers by its discontinued automobile rental operations occurring in Fiscal 1996 and prior. ARAC was, when required by either governing state law or the terms of its rental agreement, self-insured for the first $1.0 million per occurrence, and for losses in excess of $5.0 million per occurrence, for bodily injury and property damage resulting from accidents involving its rental vehicles. ARAC was also self-insured, up to certain retained limits, for bodily injury and property damage resulting from accidents involving ARAC vehicles operated by employees within the scope of their employment.

ARAC is subject to certain self-insurance claims and litigation expenses relating to its discontinued automobile rental operations. iDNA’s management estimates the required self-insurance liability based upon specific identification of the known matters subject to future claims, the nature of the claim and the estimated costs to be incurred. These estimates include, but are not limited to, ARAC’s historical loss experience and projected loss factors. The required self-insurance liability is subject to adjustment in the future based upon changes in the nature of the remaining claims or the ultimate cost. As a consequence of iDNA’s sale of its automobile rental operations in 1995, iDNA believes that all incurred claims have been reported to ARAC and that there are no longer any incurred but not yet reported claims to be received by ARAC. iDNA’s self-insurance liability at ~~April~~July 3031, 2007 and January 31, 2007 was $235,000 and $235,000, respectively.

Because of the uncertainties related to several residual small claims and legal proceedings involving iDNA’s former rental operations and self-insurance claims, it is difficult to project with precision the ultimate effect the adjudication or settlement of these matters will have on iDNA. As additional information regarding iDNA’s potential liabilities becomes available, iDNA will revise the estimates as appropriate.

Trademarks

On August 16, 2006, OTI was named as a defendant in a complaint filed in the United States District Court for the Northern District of Illinois Eastern Division (the ‘‘Court’’) entitled ‘‘Brahler ICS Konferenztechnik AG (‘‘Brahler’’) vs. Digivote, Inc., Option Technologies Interactive, LLC and Suneel Mirchandani’’. The complaint alleges that since on or about September 2004 the defendants wrongfully used and infringed upon Brahler’s federally registered trademark Digivote for their own commercial gain without the authorization of Brahler.

In January 2007, at the request of the parties, the Court held a settlement conference during which all parties agreed in principal to a global settlement. Pursuant to the terms of the proposed global settlement, OTI agreed not to use the trademark Digivote (OTI had ceased that use substantially before the litigation commenced) and to make a cash payment of $25,000 to Brahler. ~~OTI’s~~In ~~co-defendants agreed to more numerous and complex settlement terms. Since the January~~July 2007 ~~settlement conference~~, ~~Brahler and OTI’s co-defendants have been unable to reduce into writing their portion of~~ the ~~global~~ settlement ~~and as a consequence, the Court ordered all of the parties to appear at another settlement conference on May 18, 2007. The May 18, 2007 settlement conference~~ was ~~postponed~~confirmed ~~at the request of Brahler~~ and ~~has not yet been rescheduled by~~ the ~~Court.~~matter ~~The~~was ~~terms~~dismissed ofwith ~~the~~ prejudice.

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global settlement that are currently in contention do not affect OTI’s portion of the proposed global settlement. As of April 30, 2007 and January 31, 2007, iDNA has accrued $25,000 pursuant to the terms of the proposed global settlement.

This matter is in its early stage of review however, OTI and iDNA believe that OTI has a number of affirmative defenses regarding this matter and we intend to vigorously defend this litigation and/or enter into settlements of claims where management deems appropriate. In the opinion of management, the amount of ultimate liability with respect to this action, if any, is unlikely to materially affect our financial position, results of operations or liquidity.

Other Litigation

In the normal course of its business, iDNA is periodically named as defendant in legal proceedings. It is the policy of iDNA to vigorously defend litigation and/or enter into settlements of claims where management deems appropriate. In the opinion of management, the amount of ultimate liability with respect to any current actions, if any, is unlikely to materially affect our financial position, results of operations or liquidity.

Item 1A. Risk Factors.

Not applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable

Item 3. Defaults Upon Senior Securities.

Not applicable

Item 4. Submission of Matters to a Vote of Security Holders.

Not applicable

Item 5. Other Information.

Not applicable

Item 6. Exhibits.

Exhibit Number			Title of Exhibit	Page Number
	3	.1	Second Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on November 4, 2005, SEC File No. 1-11601).	N/A
	3	.2	Second Amended and Restated By-Laws of the Company dated as of November 4, 2005 (incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on November 4, 2005, SEC File No. 1-11601).	N/A
	4	.1	Certificate of Designation, Number, Powers, Preferences and Relative, Participating, Optional and Other Special Rights and the Qualifications, Limitations, Restrictions, and Other Distinguishing Characteristics of the Series A Convertible Preferred Stock of the Company, dated as of April 5, 2000 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on April 20, 2000, SEC File No. 1-11601).	N/A
	4	.2	Certificate of Designations of Series B and Series C Preferred Stock of the Company dated as of December 15, 2000 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on January 2, 2001, SEC File No. 1-11601).	N/A
	4	.3	Certificate of Designation Preferences and Rights of Series D Junior Participating Preferred Stock of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 9, 2001, SEC File No. 1-11601).	N/A

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Exhibit Number			Title of Exhibit	Page Number
	4	.24	~~Certificate~~Specimen ofStock ~~Designations~~Certificate of— ~~Series B and Series C Preferred Stock~~ of ~~The~~the Company’s ~~dated~~Common asStock ~~of December 15, 2000~~ (incorporated by reference to Exhibit 4.1(c) to the Company’s ~~Current~~Annual Report on Form 810-K for the fiscal year ended January 31, 1996, filed on ~~January~~April 225, ~~2001~~1996, SEC File No. 1-11601).	N/A
	4	.3	Certificate of Designation Preferences and Rights of Series D Junior Participating Preferred Stock of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on October 9, 2001, SEC File No. 1-11601).	N/A
	4	.4	Specimen Stock Certificate – of the Company’s Common Stock (incorporated by reference to Exhibit 4(c) to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 1996, filed on April 25, 1996, SEC File No. 1-11601).	N/A
	4	.5	Specimen Stock Certificate of the Company’s Series C Redeemable Preferred Stock Certificate (incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2001, filed on May 16, 2001, SEC File No. 1-11601).	N/A
	4	.6	Rights Agreement, dated as of September 26, 2001, between the Company and American Stock Transfer & Trust Company, which ~~included~~includes the form of Certificate of Designation, Preferences and Rights for the Series D Junior Participating Preferred Stock as Exhibit ‘‘A’’, the form of Rights Certificate as Exhibit ‘‘B’’ and the Summary of Rights to Purchase Preferred Stock as Exhibit ‘‘C’’ (incorporated ~~herein~~ by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed on October 9, 2001, SEC File No. 1-11601).	N/A
	31	.1	~~Officer’s~~ Certification of Principal Executive Officer Pursuant to ~~Section~~Rule ~~302~~13a-14(a)/ 15d-14(a) of the ~~Sarbanes-Oxley~~Securities Exchange Act of ~~2002 (18 U.S.C. 1350)~~1934	3140
	31	.2	~~Officer’s~~ Certification of Principal Financial Officer Pursuant to ~~Section~~Rule ~~302~~13a-14(a)/ 15d-14(a) of the ~~Sarbanes-Oxley~~Securities Exchange Act of ~~2002 (18 U.S.C. 1350)~~1934	3241
	32	.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(b) of the Securities Act of 1934 and 18 U.S.C. (Section 1350, (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)	3342
	32	.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(b) of the Securities Act of 1934 and 18 U.S.C. (Section 1350, (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)	3443

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Table of Contents

SIGNATURES

Pursuant to the requirements 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.

3039

iDNA, INC.

Date: June 12, 2007

/s/ James J. McNamara

Date: September 18, 2007

/s/ James J. McNamara

James J. McNamara Chairman of the Board and Chief Executive Officer (principal executive officer)

/s/ Robert V. Cuddihy, Jr.

Robert V. Cuddihy, Jr. Chief Financial Officer (principal accounting and financial officer)

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