0001011034-12-000245.txt : 20121207 0001011034-12-000245.hdr.sgml : 20121207 20121207150017 ACCESSION NUMBER: 0001011034-12-000245 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20120930 FILED AS OF DATE: 20121207 DATE AS OF CHANGE: 20121207 FILER: COMPANY DATA: COMPANY CONFORMED NAME: XFormity Technologies, Inc. CENTRAL INDEX KEY: 0001048501 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 841434313 STATE OF INCORPORATION: CO FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23391 FILM NUMBER: 121249673 BUSINESS ADDRESS: STREET 1: 14333 PROTON DRIVE CITY: DALLAS STATE: TX ZIP: 75244 BUSINESS PHONE: (972) 661-1200 MAIL ADDRESS: STREET 1: 14333 PROTON DRIVE CITY: DALLAS STATE: TX ZIP: 75244 FORMER COMPANY: FORMER CONFORMED NAME: XML GLOBAL TECHNOLOGIES INC DATE OF NAME CHANGE: 19991110 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL CAPITAL FUNDING INC DATE OF NAME CHANGE: 19971027 10-Q 1 f10q93012v8.htm UNITED STATES UNITED STATES

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

___________________________________

FORM 10-Q

(Mark One)

[X]     Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2012

OR

[   ]    Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 0-23391


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


Colorado

84-1434313

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


4100 Spring Valley Road, Suite 800,  Dallas, Texas 75244 
(Address of principal executive offices, including zip code)
Issuer's Telephone No., including area code: (972) 661-1200


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


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [   ]  No  [  ]


Smaller reporting company   X

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

The number of shares outstanding of the Issuer’s Common stock, $0.0001 par value, at November 21, 2012 is 53,756,553.



1






PART I.

FINANCIAL INFORMATION

PAGE

Item 1.

Financial statements

 

 

 

 

 

Consolidated Balance Sheets – September 30, 2012 (Unaudited) and June 30, 2012

3

 

 

 

 

Unaudited Consolidated Statements of Operations – Three Months Ended September  30, 2012 and 2011

4

 

 

 

 

Unaudited Consolidated Statements of Cash Flows – Three Months Ended September 30, 2012 and 2011

5

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

6

 

 

 

Item 2.

Management's Discussion and Analysis and Results of Operations

11

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

13

 

 

 

Item 4.

Controls and Procedures

13

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

13

 

 

 

Item 1A

Risk Factors

13

 

 

 

Item 2.

Unregistered Sales of Securities and Use of Proceeds

14

 

 

 

Item 3.

Defaults upon Senior Securities

14

 

 

 

Item 4.

[Removed]

14

 

 

 

Item 5.

Other Information

14

 

 

 

Item 6.

Exhibits

14

 

 

 








2





XFormity Technologies, Inc. and Subsidiary

Consolidated Balance Sheets


 

September 30,

 

June 30,

 

2012

 

2012

 

ASSETS

(Unaudited)

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

 $              198,296

 

 $               85,753

 

Accounts receivable - trade

 97,402    

 

 171,454

 

Accounts receivable – related party - trade

 -

 

 14,859

 

Prepaid expenses

 17,689

 

 3,466

 

Assets held for sale - current

 27,532

 

 5,373

 

Total Current Assets

$     340,919

 

$    280,905

 

 

 

 

 

 

Assets held for sale – long-term

                     --

 

          25,913

 

Total Assets

$  340,919

 

$  306,818

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 Convertible debentures - related parties

$               906,682

 

$             906,682

 

 Convertible debentures

               300,081

 

             300,081

 

 Accounts payable

                6,350

 

              2,718

 

 Accrued expenses

               271,813

 

             244,441

 

 Liabilities associated with assets held for sale - current

319,501

 

348,465

 

Total current liabilities

            1,804,427

 

          1,802,387

 

Liabilities associated with assets held for sale – long-term

                           -

 

                123,955

 

Total Liabilities

1,804,427

 

1,926,342

 

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

Preferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding at September 30, 2012 and June 30, 2012


                          - 

 


                        - 

 

Common stock, $0.0001 par value, 125,000,000 shares authorized, 53,756,553 shares issued and outstanding at September 30, 2012 and June 30, 2012

                   5,376 

 

                  5,376 

 

Additional paid-in capital

            6,933,117 

 

           6,933,117 

 

Accumulated deficit

          (8,402,001)

 

          (8,558,017)

 

Total Stockholders' Deficit

          (1,463,508)

 

          (1,619,524)

 

Total Liabilities and Stockholders' Deficit

  $             340,919

 

 $           306,818




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






3



XFormity Technologies, Inc. and Subsidiary

Consolidated Statements of Operations


 

(Unaudited)

 

Three Months Ended September 30,

 

2012

 

2011

 

 

 

 

Expenses

                         

 

 

General and administrative

                           48,819

 

                              26,203

Loss from operations

                         (48,819)

 

(26,203)

Interest expense

                         (27,375)

 

                           (84,581)

Change in fair value of derivatives

                                    -

 

                            55,955

Loss from continuing operations

                         (76,194)

 

(54,829)

Income from discontinued operations

                         232,210

 

                              31,113

Net Income (loss)

$                    156,016

 

    $                    (23,716)

Net loss per share –from discontinued operations

 $                        (0.00)

 

 $                        (0.00)

Net income per share –from discontinued operations

 $                        (0.00)

 

 $                        (0.00)

Net Income (loss) per share – basic and diluted

 $                        (0.00)

 

 $                        (0.00)

 

 

 

 

Weighted average number of shares – basic and diluted

                  53,756,553

 

                  53,339,977 



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











4



XFormity Technologies, Inc. and Subsidiary

Consolidated Statements of Cash Flows


 

(Unaudited)

 

Three Months Ended September 30,

 

2012

2011

Operating activities:

 

 

Net income (loss)

$               156,016

$            (23,716)

Depreciation

                      2,181

                  2,718 

Gain on sale of license

            (300,000)

                            -

Amortization of debt discount

                             -

                58,413

Non-cash transactions for:

 

 

    Change in fair value - derivatives

                            -

               (55,955)

Changes in:

 

 

    Accounts receivable

                    88,912

                      6,890

    Prepaid expenses

                (12,651)

                 (10,879)

    Accounts payable

                  (63,961)

                 (10,334) 

    Accrued expenses

                 (22,988)

                    38,550

    Deferred revenue

                  (31,753)

                    11,712

    Deferred credits

                 (3,213)

                   (3,056)

Net cash used in operating activities

               (187,457)

               14,343

Investing activities:

 

 

 Proceeds from sale of license

300,000

                            -

 Net cash provided from investing activities

300,000

                            -

 

 

 

Increase in cash and cash equivalents

                  112,543

                    14,343

    Cash and cash equivalents, beginning of period

          85,753

                 56,625 

    Cash and cash equivalents, end of period

 $              198,296

$                70,968 

 

 

 

Supplemental disclosure of non-cash financing and investing activities

 

 

         Interest paid

  $                    - 

$                 - 








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





5




XFormity Technologies, Inc. and Subsidiary
Notes to Consolidated Financial Statements
September 30, 2012

(Unaudited)


Note 1   Organization and Nature of Business.


The reporting entity in this form 10-Q is XFormity Technologies, Inc. (a Colorado Corporation) ("XFormity" or the "Company") and includes the operations of XFormity, Inc. (a Texas Corporation) (“XFM”), the wholly owned subsidiary of the Company.  XFormity provides technology and services to multi-unit business operators.  The Company’s core products are hosted Business Intelligence (BI), Balanced Scorecard and Benchmarking solutions.  These solutions help customers with operational data analysis, trend reporting, issue identification and tracking.  The Company provides data integration and management services that feed the BI and Scorecard solution with data from many key data sources.  The Company’s solutions are provided to customers as a hosted (software-as-a-service) model, which allows the Company to rapidly configure and implement solutions for new customers in an affordable, cost-effective manner.


The Company provides services for franchisors and franchisees in a growing list of customers across the United States and Canada.  XFormity is the provider of Burger King Corporation's (BKC) operational reporting for all company owned and operated restaurants in the US and Canada. In addition to this deployment, the Company has had success in delivering solutions on a big scale by the use of its balanced scorecard and financial benchmarking tools for all Burger King Corporate restaurants in the United States and Canada, totalling nearly 6,500 restaurants. The Company has expanded its services to customers in both fine and casual dining.


In August, 2012, the Company executed and delivered the following agreements with Altametrics XFormity, LLC (“Altametrics”)

:

1.

Asset Sale and Purchase Agreement effective August 1, 2012 (“APA”)

2.

Escrow Agreement

3.

License Agreement

4.

Management agreement.


Under the terms of the APA, , Altametrics agreed to purchase substantially all of the Company’s assets in consideration of $1,300,000. Of the total purchase price, $650,000 has been deposited into escrow with the Company’s stock transfer agent, Corporate Stock Transfer, Inc., as Escrow Agent under the terms of an Escrow Agreement. Consummation of the APA is subject to several material conditions precedent, including the approval of the Company’s shareholders.  Pending consummation of the APA, the Company entered into two additional agreements with Altametrics:  a Management Agreement pursuant to which Altametrics agreed to serve as Business Manager of the Company’s operations effective August 1, 2012; and a License Agreement pursuant to which, in consideration of a one time license fee in the amount of $300,000, the Company granted to Altametrics a non-exclusive license to use the Company’s intellectual property rights.  Since August 1, 2012, Altametrics has been managing the Company’s operations under the Management Agreement and License, in consideration for which Altametrics is entitled to retain any net profits realized from those operations during the management period.


Effective July 31, 2012, all of the Company’s senior secured convertible debentures (“Debentures”) in the aggregate principal amount of approximately $1.2 million matured and became due and payable in full.  



6



As a result, the Company is in default under the Debentures; and a majority in interest of the Debenture holders have served upon the Company a notice of default and a further notice that the Debenture holders would not agree to a further extension of the Debentures.  The Debenture holders have a senior security interest in all of the tangible and intangible assets of the Company and could foreclose on those assets at any time.  A majority in interest of the Debenture holders have agreed in principle to accept payment in the amount of the total net proceeds received by the Company from the consummation of the APA with Altametrics in satisfaction of all liability under the Debentures, which amount is expected to be several hundred thousand dollars less than the total principal and accrued and unpaid interest due under the Debentures.  In the event the Company is unable to secure the approval of its shareholders to the APA, the Debenture holders have executed a back-up Asset Purchase Agreement with Altametrics pursuant to which they have agreed to foreclose on the Company’s assets under their senior security interest and convey those assets to Altametrics for the same consideration, to wit: $1.3 million. Under either scenario, there will be no funds available for distribution to the Company’s shareholders resulting from the sale of its assets to Altametrics.


As a result of the foregoing transactions, effective August 1, 2012, the Company’s assets, other than its cash and cash equivalents, accounts receivable resulting from sales made prior to August 1, 2012, and specific insurance polices, are reflected as assets held for sale and include its property and equipment, security deposits and its intellectual property with a carrying value of  $27,542.  Concurrently, the liabilities associated with the discontinued operation, including all accounts payable and accrued expenses  incurred in the normal course of the discontinued operation  are reflected as liabilities associated with the assets held for sale with a carrying value of $319,501.  See management’s discussion and analysis of the revenues and expenses relating to the discontinued operation.


Note 2    Basis of Financial Statement Presentation.


The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been consolidated or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of such consolidated financial statements.


The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operation, financial position or cash flow.


Although management believes the disclosures and information presented are adequate to not make the information misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's most recent audited financial statements and notes thereto included in its June 30, 2012 Annual Report on Form 10-K and the 8-K and 8-K/A as reflected above. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year or any other period.


The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The ability of the Company to continue as a going concern is dependent on the Company; (1) to obtain adequate capital from outside sources, or (2) to fund itself through profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.



7




Note 3   Going Concern


As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $8,402,001 and a working capital deficit of $1,463,508 as of September 30, 2012. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern or if the sale of its assets to Altametrics is not completed.


Note 4    Property and Equipment - (are part of the assets held for sale)


Property and equipment are stated at cost less accumulated depreciation.  Depreciation of property and equipment is computed for financial statement purposes using accelerated methods over a five year estimated useful life of the assets. Accumulated depreciation at September 30, 2012 was $187,653 and $185,742 at June 30, 2012.  Management has evaluated the difference between the straight line and accelerated method used and has deemed the difference immaterial.


Note 5    Deferred Credits – (are part of the liabilities associated with assets held for sale)


In January 2006, the Board of Directors, agreed to offer then seven major customers, (“consortium members”) the following options in exchange for any further billing credits: (1) a right to receive $150,000 in billing credits applied against their monthly business intelligence software billings at a rate of 25% of the billings commencing July 1, 2006, or (2) a right to receive an additional 833,333 shares of the Company’s common stock per consortium member. These shares would be in addition to the shares issued to consortium members in exchange for their original $100,000 investment in fiscal 2004.  


Only two consortium members elected option (1), one commencing January 1, 2006, and the other commencing July 1, 2006.  The deferred credits at March 31, 2012 in the respective amounts of $68,357 and $71,866, net of amortization, are expected to be utilized over an 11 to 12 year period based on their current billing rates using a 5% discount rate that approximated the risk-free rate in effect during the offered option period.


Note 6   Accounts Payable


Accounts payable represents balances due to trade creditors and fees for professional services incurred for legal and audit services.  




8



Note 7  Accrued Expenses


Accrued expenses other than as reflected herein are part of the liabilities associated with assets held for sale.

 

September 30,

         June 30,

 

        2012   

         2012   

Accrued interest on convertible debentures

271,813

244,441


Note 8   Convertible Debentures


If all of the remaining debenture holders at September 30, 2012 elected to convert their debentures and warrants into shares of the Company’s common stock, the Company would be required to issue an additional 18,597,504 shares. Effective July 31, 2012, all of the Company’s senior secured convertible debentures (“Debentures”) in the aggregate principal amount of approximately $1.2 million matured and became due and payable in full.  As a result, the Company is in default under the Debentures; and a majority in interest of the Debenture holders have served upon the Company a notice of default and a further notice that the Debenture holders would not agree to a further extension of the Debentures.  The Debenture holders have a senior security interest in all of the tangible and intangible assets of the Company and could foreclose on those assets at any time.  A majority in interest of the Debenture holders have agreed in principle to accept payment in the amount of the total net proceeds received by the Company from the consummation of the APA with Altametrics in satisfaction of all liability under the Debentures, which amount is expected to be several hundred thousand dollars less than the total principal and accrued and unpaid interest due under the Debentures.  In the event the Company is unable to secure the approval of its shareholders to the APA, the Debenture holders have executed a back-up Asset Purchase Agreement with Altametrics pursuant to which they have agreed to foreclose on the Company’s assets under their senior security interest and convey those assets to Altametrics for the same consideration, to wit: $1.3 million. As a result, it is unlikely that the Debenures will be converted into shares of common stock. .


Note 9    Derivative Liabilities


The Company’s warrants and its Convertible Notes have reset provisions to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision resulted in a derivative liability in our financial statements that was evaluated at zero at June 30, 2012 and September 30, 2012 by an independent consultant.


In the quarter ended September 30, 2011, the derivative liabilities decreased to $458,131 at September 30, 2011, from $514,086 at June 30, 2011. During the three months ended September 30, 2011, the Company recorded a gain of $55,955 for the change in fair value.  


Note 10    Earnings per Share  

 

Basic earnings per share are calculated based on the weighted-average number of outstanding common shares.  As of September 30, 2012, the Company had 53,756,553 shares outstanding, As of September 30, 2012, the Company had issued convertible debentures in the amount of $1,206,763 convertible at a conversion price of the lesser of (i) 70% of the price per share of common stock or common stock equivalent paid by investors in the Company’s next round of equity or debt financing consisting of at least $1,000,000 in cumulative gross proceeds, or (ii) $0.12, warrants outstanding of 4,802,642 consisting of 2,401,321 with an exercise price of $0.14 and 2,401,321 with an exercise price of $0.18.




9



For the three months ended September 30, 2012, the conversion of all of the above would result in a possible dilution of 22,604,178 shares.  However, as the convertible debentures, options, and warrants have a strike price equal to or in excess of the market price, $0.002 at September 30, 2012, and are considered not “in the money”, they are excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.


Note 11    Income Taxes


As of July 1, 2007, the Company adopted the current accounting guidance for the Accounting for Uncertainty in Income Taxes, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions.  The Company believes it does not have any uncertain tax positions taken or expected to be taken in its income tax returns.


At September 30, 2012, the Company had net operating loss carry-forwards approximating $15,100,000 that expire in 2017 through 2028.  The carry-forward losses and the related deferred tax benefit are significantly limited by the provisions of Internal Revenue Code Section 382. The Company’s taxable losses, have created a deferred tax benefit of approximately $1,877,000 that is fully reserved.

Note 12   Related Party Transactions  


Six of our customers who are also stockholders in the Company, generated revenues approximating $42,000 in the three months ended September 30, 2012.  In the same period in the prior year, revenues approximated $38,200. A principal in one current customer serves as a member of the Board of Directors and the Audit Committee.


Of the total 9% convertible debentures issued through Setpember 30, 2012, related parties hold $906,682. Interest expense accrued to related parties for the three months ended September 30, 2012 was $20,568.


Note 13    Commitments and Contingencies


The lease obligations are part of the liabilities associated with assets held for sale. The Company entered into a 65 month net lease at its Dallas, Texas office, commencing June 1, 2008, with rent approximating $4,300 per month. The Company also had a month-to-month lease for $700 per month at its Northbrook, Illinois office that was terminated as of August 31, 2012. Total rent expense for the three months ended September 30, 2012 was $14,386 compared to $15,086 for the three months ended September 30, 2011 The Company accounts for these leases as operating leases.


Note 14  Subsequent Events


Management reported that there are no reportable events through the date of this filing.



10




ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS



Safe Harbour - Forward Looking Statements


When used in this Quarterly Report on Form 10-Q, in documents incorporated herein and elsewhere by us from time to time, the words "believes," "anticipates," "expects" and similar expressions are intended to identify forward-looking statements concerning our business operations, economic performance and financial condition, including in particular, our business strategy and means to implement the strategy, our objectives, the amount of future capital expenditures required, the likelihood of our success in developing and introducing new products and expanding the business, and the timing of the introduction of new and modified products or services. These forward looking statements are based on a number of assumptions and estimates which are inherently subject to significant risks and uncertainties, many of which are beyond our control and reflect future business decisions which are subject to change.


A variety of factors could cause actual results to differ materially from those expected in our forward-looking statements, including those set forth from time to time in our press releases and reports and other filings made with the Securities and Exchange Commission. We caution that such factors are not exclusive. Consequently, all of the forward-looking statements made in this document are qualified by these cautionary statements and readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release the results of any revisions of such forward-looking statements that may be made to reflect events or circumstances after the date hereof, or thereof, as the case may be, or to reflect the occurrence of unanticipated events.

RESULTS OF OPERATIONS


REVENUE FROM DISCONTINUED OPERATIONS   

The Company’s primary revenue is derived by delivering software as a service, or hosted solutions for its clients billed on a monthly basis for each location serviced.  For the three months ended September 30, 2012, the Company generated $254,838 in revenues compared to $396,452 in the comparable prior year’s period.  The decreases in revenues were attributable to; a loss of two major customers representing a revenue loss approximating $36,000 and the sale of corporate stores to franchisees that represented a revenue loss of approximately $50,000, a decrease in license fees of $18,750 that were terminated at August 1,2011, and decreased professional service contracts for special projects and other revenue sources in the three months ended September 30, 2012 of $28,877.


COST OF REVENUE FROM DISCONTINUED OPERATIONS     

The cost of revenue for the three months ended September 30, 2012 and 2011, consist primarily of personnel, related payroll costs and support service costs in the amounts of $74,284 compared to $147,677 in the comparable prior year’s period. Other costs include travel, data hosting services, telecommunication costs and depreciation of computer equipment used in the maintenance and processing of customers' data.  The decrease was primarily attributable to a reduction in personnel and related payroll costs, further decreased by a reallocation of time to research and development from existing personnel, for reductions of $71,092. Other operating costs including license fees decreased by $2,301.


RESEARCH AND DEVELOPMENT FROM DISCONTINUED OPERATIONS

Research and development costs are charged to operations as incurred and consist primarily of personnel, related benefit costs and outside contracted services. The costs for the three months ended September 30, 2012 and 2011 were $137,463 and $95,678 in the prior year’s period. In the current year, the Company



11



re-allocated personnel time from operations to research and development, resulting in increased payroll and related costs of $50,470. The Company further reduced the use of outside contractors and its other costs by $8,685 in the three months ended September 30, 2012. The Company’s research and development is part of its strategic plan to provide enhancements and integration into new and existing franchise operations in the retail market.


MARKETING AND SELLING FROM DISCONTINUED OPERATIONS     

Marketing and selling costs for the three months ended September 30, 2012 were $33,040 compared to $31,684 in the comparable period of the prior year. The Company’s marketing and selling expenses in the current periods increased due to higher trade show and sales costs of $5,764 offset by elimination of the outside consultant and re-allocated personnel time and related costs to marketing and sales from operations and administration in the amount of $4,408.


GENERAL AND ADMINISTRATIVE FROM DISCONTINUED OPERATIONS.

The Company’s general and administrative costs consist primarily of executive salaries and related benefits, professional fees for attorneys, our independent auditor, rent, expenses related to being a public company and other administrative costs.  The costs for the three months ended September 30, 2012 were $77,452 compared to $86,189 in the comparable period of the prior year. The decrease was primarily a result of a reduction of payroll and related costs due to a reallocation of time and personnel from general and administrative of $8,166 and other expenses of $571.


GENERAL AND ADMINISTRATIVE   

The administrative expenses consist of professional fees for legal and accounting, public company expenses and insurance. The costs for the three months ended September 30, 2012 were $48,819 compared to $26,203 in the comparable period of the prior year primarily attributable to legal fees in conjunction with the Altametrics transactions.

INTEREST EXPENSE   Interest expense consists of the following:



Interest expense

 

 

 

Three Months Ended

  September 30,

 

 

 

     2012   

    2011    

 

 

Accrued interest on convertible debentures

$    27,375

$   27,375

 

 

Amortization of debt discount

      -

      58,413

 

 

Net interest expense

$   27,375

$   84,581

 

 

Interest expense attributable to discontinued operations

$    1,142

$    1,245

 

 

NET (LOSS) INCOME   The net income from discontinued operations for the three months ended September 30, 2012 was $232,210 compared to $31,113 for the comparable period in 2011.  The increase in the net income for the current three months was primarily the result of the one time sale of the non-exclusive license to Altametrics.


NET (LOSS)    The net loss from operations for the three months ended September 30, 2012 was $76,194 compared to $54,829 for the comparable period in 2011 primarily due to the elimination of income from the change in fair value of the derivatives offset by the amortization of debt discount in the debentures.




12



The net income from discontinued operations per share for the three months ended September 30, 2012 was $0.00 per share on 53,756,553 weighted average common shares outstanding. The net income per share in the comparable period in the prior year was $0.00 on 53,339,977 weighted average common shares outstanding.


The net loss from continuing operations per share for the three months ended September 30, 2012 was $0.00 per share on 53,756,553 weighted average common shares outstanding. The net income per share in the comparable period in the prior year was $0.00 on 53,339,977 weighted average common shares outstanding.



LIQUIDITY AND CAPITAL RESOURCES


The Company had previously addressed resulting liquidity issues through the sales of its software and professional services and the issuance of convertible debentures. In July 2012, Company received an offer to acquire its assets from Altametrics, a California Company that provides unrelated services to the hospitality industry, an offer to acquire a non-exclusive license for its Business Intelligence Solution and the notice of no further forbearance on the convertible debentures.  The Board of Directors reviewed all of the existing options available to the Company, and agreed that it was in the best interest of the Company and its shareholders to accept the offer from Altametrics.  The sale of the assets requires shareholder approval that if not given, the debenture holders will foreclose on those assets and take possession under the terms of the Debentures. If consummated, of which there can be no assurance, the Company will use the proceeds from these transactions to retire all of its current obligations and pay the principal on the convertible debentures. Shareholders will not receive any distribution from the proceeds of the sale of the assets under the APA but will retain their interest in the remaining shell company.


Item 3.    Quantitative and Qualitative Disclosures about Market Risk


Not applicable


Item 4.    Controls and Procedures


Evaluation of Disclosure Controls and Procedures


Our management has evaluated, under the supervision and with the participation of our chief executive officer and chief financial officer,  the effectiveness  of  our  disclosure controls  and  procedures  (as defined  in  Rules  13a-15(e) and 15d-15(e) of the  Exchange  Act).   Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as  of  the  end  of  the  period covered  in  this  report,  our disclosure controls and procedures were ineffective to ensure  that information required to be disclosed in reports filed  under  the Securities Exchange Act of 1934, as amended (the "Exchange  Act") is  recorded,  processed,  summarized  and  reported  within  the required time periods and is accumulated and communicated to  our management,   including  our  principal  executive  officer   and principal  financial  officer, as  appropriate  to  allow  timely decisions regarding required disclosure.


Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud.  A control system, no matter how well conceived and   operated, can provide only reasonable,  not   absolute, assurance   that  the  objectives  of  the  control  system   are met.   Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs.  Due to the inherent limitations in all control systems, no evaluation of controls can



13



provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.


Changes in Internal Control over Financial Reporting


In addition, our management with the participation of our Principal Executive Officer and Principal Financial Officer have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended September 30, 2012 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION

Item 1       Legal Proceedings

None


Item 1A    Risk Factors


None

Item 2      Unregistered Sales of Securities and Use of Proceeds

None, except as previously reported.

ITEM 3    Defaults upon Senior Securities

None, except as previously reported.

ITEM 4   [Removed]

ITEM 5     Other information

None

ITEM 6      Exhibits

None



14



SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

XFormity Technologies, Inc.

 

 

Date:  December 5, 2012  

/s/ Christopher Ball           
Christopher Ball
Chief Executive Officer

Date:  December 5, 2012

/s/ Jack Rabin                  
Jack Rabin
Chief Financial Officer




15


EX-31 2 exh310912.htm NOTE: FOR SIGNATURE OF CEO AND CFO RE: SMALL BUSINESS ISSUER NOTE:  FOR SIGNATURE OF CEO AND CFO <font style='font-family:Arial Unicode MS,Times New Roman'>–</font> RE: SMALL BUSINESS ISSUER

CERTIFICATION


I, Jack Rabin, certify that:


1.

I have reviewed this Quarterly Report on Form 10-Q of XFormity Technologies, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

 

4.

The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:

 

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

(c)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

(d)

Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and





 

 

 

 

5.

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

 

 

 

 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

 

 

 

 

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

 

 


Date: December 5, 2012



 _/s/ Jack Rabin_______________

 

Jack Rabin

Chief Financial Officer





CERTIFICATION


I, Christopher Ball, certify that:


1.

I have reviewed this Quarterly Report on Form 10-Q of XFormity Technologies, Inc.;

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

 

 

4.

The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:





 

 

 

 

 

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

 

 

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

 

 

 

 

 

(c)

Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

 

 

 

 

 

(d)

Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and

 

 

 

 

5.

The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):

 

 

 

 

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and

 

 

 

 

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.

 

 


Date: December 5, 2012



  _/s/ Christopher Ball____ 

 

Christopher Ball

Chief Executive Officer







EX-32 3 exhibit320912.htm CERTIFICATION PURSUANT TO CERTIFICATION PURSUANT TO

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


            In connection with the Quarterly Report of XFormity Technologies, Inc. (the "Company") on Form 10-Q for the period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Christopher Ball, Chief Executive Officer of the Company and Jack Rabin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:


 

(1)

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

 

 

 

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



/s/ Chris Ball

Christopher Ball

Chief Executive Officer

December 5, 2012


/s/ Jack Rabin

Jack Rabin

Chief Financial Officer

December 5, 2012




EX-101.INS 4 xfrm-20120930.xml XBRL INSTANCE DOCUMENT 10-Q 2012-09-30 false XFormity Technologies, Inc. 0001048501 --06-30 Smaller Reporting Company Yes No No 2013 Q1 53756553 97402 171454 14859 17689 3466 27532 5373 340919 280905 25913 340919 306818 906682 906682 300081 300081 6350 2718 271813 244441 319501 348465 1804427 1802387 123955 1804427 1926342 5376 5376 6933117 6933117 -8558017 -1463508 -1619524 340919 306818 0.01 0.01 100000000 100000000 0 0 0 0 0.0001 0.0001 125000000 125000000 53756553 53756553 53756553 48819 26203 -48819 -26203 -27375 -84581 -76194 -54829 232210 31113 -0.00 -0.00 -0.00 -0.00 -0.00 -0.00 53756553 53339977 156016 -23716 2181 2718 -300000 58413 55955 88912 6890 -12651 -10879 -63961 -10334 -22988 38550 -31753 11712 -3213 -3056 -187457 14343 300000 300000 112543 14343 85753 56625 198296 70968 <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;line-height:110%'><b><u><font lang="EN-GB" style='line-height:110%'>Note 1&#160;&#160; Organization and Nature of Business.</font></u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;line-height:110%'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">The reporting entity in this form 10-Q is XFormity Technologies, Inc. (a Colorado Corporation) (&quot;XFormity&quot; or the &quot;Company&quot;) and includes the operations of XFormity, Inc. (a Texas Corporation) (&#147;XFM&#148;), the wholly owned subsidiary of the Company.&#160; XFormity provides technology and services to multi-unit business operators.&#160; The Company&#146;s core products are hosted Business Intelligence (BI), Balanced Scorecard and Benchmarking solutions.&#160; These solutions help customers with operational data analysis, trend reporting, issue identification and tracking.&#160; The Company provides data integration and management services that feed the BI and Scorecard solution with data from many key data sources.&#160; The Company&#146;s solutions are provided to customers as a hosted (software-as-a-service) model, which allows the Company to rapidly configure and implement solutions for new customers in an affordable, cost-effective manner.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">The Company provides services for franchisors and franchisees in a growing list of customers across the United States and Canada.&#160; XFormity is the provider of Burger King Corporation's (BKC) operational reporting for all company owned and operated restaurants in the US and Canada. In addition to this deployment, the Company has had success in delivering solutions on a big scale by the use of its balanced scorecard and financial benchmarking tools for all Burger King Corporate restaurants in the United States and Canada, totalling nearly 6,500 restaurants. The Company has expanded its services to customers in both fine and casual dining.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">In August, 2012, the Company executed and delivered the following agreements with Altametrics XFormity, LLC (&#147;Altametrics&#148;)</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">:</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.75in;margin-bottom:.0001pt;text-align:justify;text-indent:-.25in'><font lang="EN-GB">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font><font lang="EN-GB">Asset </font><font lang="EN-GB">Sale</font><font lang="EN-GB"> and Purchase Agreement effective August 1, 2012 (&#147;APA&#148;)</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.75in;margin-bottom:.0001pt;text-align:justify;text-indent:-.25in'><font lang="EN-GB">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font><font lang="EN-GB">Escrow Agreement</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.75in;margin-bottom:.0001pt;text-align:justify;text-indent:-.25in'><font lang="EN-GB">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font><font lang="EN-GB">License Agreement</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;margin-bottom:0in;margin-left:.75in;margin-bottom:.0001pt;text-align:justify;text-indent:-.25in'><font lang="EN-GB">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font><font lang="EN-GB">Management agreement.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">Under the terms of the APA, , Altametrics agreed to purchase substantially all of the Company&#146;s assets in consideration of $1,300,000. Of the total purchase price, $650,000 has been deposited into escrow with the Company&#146;s stock transfer agent, Corporate Stock Transfer, Inc., as Escrow Agent under the terms of an Escrow Agreement. Consummation of the APA is subject to several material conditions precedent, including the approval of the Company&#146;s shareholders.&#160; Pending consummation of the APA, the Company entered into two additional agreements with Altametrics:&#160; a Management Agreement pursuant to which Altametrics agreed to serve as Business Manager of the Company&#146;s operations effective August 1, 2012; and a License Agreement pursuant to which, in consideration of a one time license fee in the amount of $300,000, the Company granted to Altametrics a non-exclusive license to use the Company&#146;s intellectual property rights.&#160; Since August 1, 2012, Altametrics has been managing the Company&#146;s operations under the Management Agreement and License, in consideration for which Altametrics is entitled to retain any net profits realized from those operations during the management period.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">Effective July 31, 2012, all of the Company&#146;s senior secured convertible debentures (&#147;Debentures&#148;) in the aggregate principal amount of approximately $1.2 million matured and became due and payable in full.&#160; As a result, the Company is in default under the Debentures; and a majority in interest of the Debenture holders have served upon the Company a notice of default and a further notice that the Debenture holders would not agree to a further extension of the Debentures.&#160; The Debenture holders have a senior security interest in all of the tangible and intangible assets of the Company and could foreclose on those assets at any time.&#160; A majority in interest of the Debenture holders have agreed in principle to accept payment in the amount of the total net proceeds received by the Company from the consummation of the APA with Altametrics in satisfaction of all liability under the Debentures, which amount is expected to be several hundred thousand dollars less than the total principal and accrued and unpaid interest due under the Debentures.&#160; In the event the Company is unable to secure the approval of its shareholders to the APA, the Debenture holders have executed a back-up Asset Purchase Agreement with Altametrics pursuant to which they have agreed to foreclose on the Company&#146;s assets under their senior security interest and convey those assets to Altametrics for the same consideration, to wit: $1.3 million. Under either scenario, there will be no funds available for distribution to the Company&#146;s shareholders resulting from the sale of its assets to Altametrics.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">As a result of the foregoing transactions, effective August 1, 2012, the Company&#146;s assets, other than its cash and cash equivalents, accounts receivable resulting from sales made prior to August 1, 2012, and specific insurance polices, are reflected as assets held for sale and include its property and equipment, security deposits and its intellectual property with a carrying value of&#160; </font><font lang="EN-GB">$27,542</font><font lang="EN-GB">.&#160; Concurrently, the liabilities associated with the discontinued operation, including all accounts payable and accrued expenses&#160; incurred in the normal course of the discontinued operation&#160; are reflected as liabilities associated with the assets held for sale with a carrying value of </font><font lang="EN-GB">$319,501</font><font lang="EN-GB">.&#160; See management&#146;s discussion and analysis of the revenues and expenses relating to the discontinued operation.</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>Note 2&#160;&#160;&#160; Basis of Financial Statement Presentation.</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been consolidated or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of such consolidated financial statements.</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operation, financial position or cash flow.</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>Although management believes the disclosures and information presented are adequate to not make the information misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's most recent audited financial statements and notes thereto included in its June 30, 2012 Annual Report on Form 10-K and the 8-K and 8-K/A as reflected above. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year or any other period.</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The ability of the Company to continue as a going concern is dependent on the Company; (1) to obtain adequate capital from outside sources, or (2) to fund itself through profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.</p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><b><u>Note 3&#160;&#160; Going Concern</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of </font><font lang="EN-GB">$8,402,001</font><font lang="EN-GB"> and a working capital deficit of </font><font lang="EN-GB">$1,463,508</font><font lang="EN-GB"> as of September 30, 2012. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern or if the sale of its assets to Altametrics is not completed.</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><b><u>Note 4&#160;&#160;&#160; Property and Equipment - </u></b><b>(are part of the assets held for sale)</b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Property and equipment are stated at cost less accumulated depreciation.&#160; Depreciation of property and equipment is computed for financial statement purposes using accelerated methods over a five year estimated useful life of the assets. Accumulated depreciation at September 30, 2012 was $187,653 and $185,742 at June 30, 2012.&#160; Management has evaluated the difference between the straight line and accelerated method used and has deemed the difference immaterial.</p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><b><u><font lang="EN-GB">Note 5&#160;&#160;&#160; Deferred Credits &#150; (are part of the liabilities associated with assets held for sale)</font></u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none'>In January 2006, the Board of Directors, agreed to offer then seven major customers, (&#147;consortium members&#148;) the following options in exchange for any further billing credits: (1) a right to receive $150,000 in billing credits applied against their monthly business intelligence software billings at a rate of 25% of the billings commencing July 1, 2006, or (2) a right to receive an additional 833,333 shares of the Company&#146;s common stock per consortium member. These shares would be in addition to the shares issued to consortium members in exchange for their original $100,000 investment in fiscal 2004.</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">Only two consortium members elected option (1), one commencing January 1, 2006, and the other commencing July 1, 2006.&#160; The deferred credits at March 31, 2012 in the respective amounts of </font><font lang="EN-GB">$68,357</font><font lang="EN-GB"> and </font><font lang="EN-GB">$71,866</font><font lang="EN-GB">, net of amortization, are expected to be utilized over an 11 to 12 year period based on their current billing rates using a 5% discount rate that approximated the risk-free rate in effect during the offered option period.</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>Note 6&#160;&#160; Accounts Payable</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><font lang="EN-GB">Accounts payable represents balances due to trade creditors and fees for professional services incurred for legal and audit services.</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u><font lang="EN-GB">Note 7&#160; Accrued Expenses</font></u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b>Accrued expenses other than as reflected herein are part of the liabilities associated with assets held for sale.</b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="612" style='width:459.0pt;margin-left:5.4pt;border-collapse:collapse'> <tr align="left"> <td width="372" valign="top" style='width:279.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>September 30,</u></b></p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; June 30,</u></b></p> </td> </tr> <tr align="left"> <td width="372" valign="top" style='width:279.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>&#160;&#160;&#160;&#160; &nbsp;&nbsp;&nbsp;2012&nbsp;&nbsp;&nbsp;</u></b></p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>&nbsp;&nbsp;&nbsp;&#160;&#160;&#160;&#160;&#160; 2012&nbsp;&nbsp;&nbsp;</u></b></p> </td> </tr> <tr align="left"> <td width="372" valign="top" style='width:279.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Accrued interest on convertible debentures </p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:center;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>271,813</p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:10.0pt;margin-left:30.25pt;punctuation-wrap:simple;text-autospace:none;margin:0in;margin-bottom:.0001pt;text-align:center'>244,441</p> </td> </tr> </table> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>Note 8&#160;&#160; Convertible Debentures</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>If all of the remaining debenture holders at September 30, 2012 elected to convert their debentures and warrants into shares of the Company&#146;s common stock, the Company would be required to issue an additional 18,597,504 shares. <font lang="EN-GB">Effective July 31, 2012, all of the Company&#146;s senior secured convertible debentures (&#147;Debentures&#148;) in the aggregate principal amount of approximately $1.2 million matured and became due and payable in full.&#160; As a result, the Company is in default under the Debentures; and a majority in interest of the Debenture holders have served upon the Company a notice of default and a further notice that the Debenture holders would not agree to a further extension of the Debentures.&#160; The Debenture holders have a senior security interest in all of the tangible and intangible assets of the Company and could foreclose on those assets at any time.&#160; A majority in interest of the Debenture holders have agreed in principle to accept payment in the amount of the total net proceeds received by the Company from the consummation of the APA with Altametrics in satisfaction of all liability under the Debentures, which amount is expected to be several hundred thousand dollars less than the total principal and accrued and unpaid interest due under the Debentures.&#160; In the event the Company is unable to secure the approval of its shareholders to the APA, the Debenture holders have executed a back-up Asset Purchase Agreement with Altametrics pursuant to which they have agreed to foreclose on the Company&#146;s assets under their senior security interest and convey those assets to Altametrics for the same consideration, to wit: $1.3 million. As a result, it is unlikely that the Debenures will be converted into shares of common stock. .</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><b><u><font lang="EN-GB">Note 9&#160;&#160;&#160; Derivative Liabilities</font></u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">The </font><font lang="EN-GB">Company&#146;s warrants and its Convertible Notes have reset provisions to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. </font><font lang="EN-GB">This ratchet provision resulted in a derivative liability in our financial statements that was evaluated at zero</font><font lang="EN-GB"> at June 30, 2012 and September 30, 2012 by an independent consultant.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">In the quarter ended September 30, 2011, the derivative liabilities decreased to </font><font lang="EN-GB">$458,131</font><font lang="EN-GB"> at September 30, 2011, from </font><font lang="EN-GB">$514,086</font>eq<font lang="EN-GB"> at June 30, 2011. During the three months ended September 30, 2011, the Company recorded a gain of </font><font lang="EN-GB">$55,955</font><font lang="EN-GB"> for the change in fair value.</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>Note 10&#160;&#160;&#160; Earnings per Share</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Basic earnings per share are calculated based on the weighted-average number of outstanding common shares.&#160; As of September 30, 2012, the Company had 53,756,553<font lang="EN-GB"> </font>shares outstanding, As of September 30, 2012, the Company had issued convertible debentures in the amount of $1,206,763 convertible at a conversion price of the lesser of (i) 70% of the price per share of common stock or common stock equivalent paid by investors in the Company&#146;s next round of equity or debt financing consisting of at least $1,000,000 in cumulative gross proceeds, or (ii) $0.12, warrants outstanding of 4,802,642 consisting of 2,401,321 with an exercise price of $0.14 and 2,401,321 with an exercise price of $0.18.</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>For the three months ended September 30, 2012, the conversion of all of the above would result in a possible dilution of 22,604,178 shares.&#160; However, as the convertible debentures, options, and warrants have a strike price equal to or in excess of the market price, $0.002 at September 30, 2012, and are considered not &#147;in the money&#148;, they are excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.</p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><b><u><font lang="EN-GB">Note 11&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes</font></u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><font lang="EN-GB">As of July 1, 2007, the Company adopted the current accounting guidance for the<i> Accounting for Uncertainty in Income Taxes, </i>which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions.&nbsp;&nbsp;The Company believes it does not have any uncertain tax positions taken or expected to be taken in its income tax returns.</font></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-top:0in;margin-right:0in;margin-bottom:12.0pt;margin-left:0in;text-align:justify;line-height:110%'><font lang="EN-GB" style='line-height:110%'>At September 30, 2012, the Company had net operating loss carry-forwards approximating $15,100,000 that expire in 2017 through 2028.&nbsp;&nbsp;The carry-forward losses and the related deferred tax benefit are significantly limited by the provisions of Internal Revenue Code Section 382. The Company&#146;s taxable losses, have created a deferred tax benefit of approximately $1,877,000 that is fully reserved.</font></p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>Note 12&#160;&#160; Related Party Transactions</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Six of our customers who are also stockholders in the Company, generated revenues approximating $42,000 in the three months ended September 30, 2012.&#160; In the same period in the prior year, revenues approximated $38,200. A principal in one current customer serves as a member of the Board of Directors and the Audit Committee.</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Of the total 9% convertible debentures issued through Setpember 30, 2012, related parties hold $906,682. Interest expense accrued to related parties for the three months ended September 30, 2012 was $20,568.</p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'><b><u><font lang="EN-GB">Note 13&#160;&#160;&#160; Commitments</font></u></b><b><u><font lang="EN-GB"> and Contingencies</font></u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b>The lease obligations are part of the liabilities associated with assets held for sale. </b>The Company entered into a 65 month net lease at its Dallas, Texas office, commencing June 1, 2008, with rent approximating $4,300 per month. The Company also had a month-to-month lease for $700 per month at its Northbrook, Illinois office that was terminated as of August 31, 2012. Total rent expense for the three months ended September 30, 2012 was $14,386 compared to $15,086 for the three months ended September 30, 2011 The Company accounts for these leases as operating leases.</p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>Note 14&#160; Subsequent Events</u></b></p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Management reported that there are no reportable events through the date of this filing.</p> <!--egx--><p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> <table border="0" cellspacing="0" cellpadding="0" width="612" style='width:459.0pt;margin-left:5.4pt;border-collapse:collapse'> <tr align="left"> <td width="372" valign="top" style='width:279.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>September 30,</u></b></p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; June 30,</u></b></p> </td> </tr> <tr align="left"> <td width="372" valign="top" style='width:279.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>&nbsp;</p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>&#160;&#160;&#160;&#160; &nbsp;&nbsp;&nbsp;2012&nbsp;&nbsp;&nbsp;</u></b></p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'><b><u>&nbsp;&nbsp;&nbsp;&#160;&#160;&#160;&#160;&#160; 2012&nbsp;&nbsp;&nbsp;</u></b></p> </td> </tr> <tr align="left"> <td width="372" valign="top" style='width:279.0pt;padding:0in 5.4pt 0in 5.4pt'> <p style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:justify;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>Accrued interest on convertible debentures </p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:1.0in;margin-bottom:0in;margin-left:0in;margin-bottom:.0001pt;margin-right:0in;text-align:center;punctuation-wrap:simple;text-autospace:none;vertical-align:baseline'>271,813</p> </td> <td width="120" valign="top" style='width:1.25in;padding:0in 5.4pt 0in 5.4pt'> <p align="center" style='margin-top:0in;margin-right:0in;margin-bottom:10.0pt;margin-left:30.25pt;punctuation-wrap:simple;text-autospace:none;margin:0in;margin-bottom:.0001pt;text-align:center'>244,441</p> </td> </tr> </table> 27542 319501 -8402001 -1463508 187653 185742 68357 71866 271813 244441 0 0 458131 514086 55955 53756553 As of September 30, 2012, the Company had issued convertible debentures in the amount of $1,206,763 convertible at a conversion price of the lesser of (i) 70% of the price per share of common stock or common stock equivalent paid by investors in the Company&#146;s next round of equity or debt financing consisting of at least $1,000,000 in cumulative gross proceeds, or (ii) $0.12, warrants outstanding of 4,802,642 consisting of 2,401,321 with an exercise price of $0.14 and 2,401,321 with an exercise price of $0.18. 1206763 906682 20568 14386 15086 0001048501 2012-07-01 2012-09-30 0001048501 2012-11-21 0001048501 2012-09-30 0001048501 2012-06-30 0001048501 2011-07-01 2011-09-30 0001048501 2011-06-30 0001048501 2011-09-30 0001048501 2012-07-31 0001048501 fil:ConsortiumMember1Member 2012-03-31 0001048501 fil:ConsortiumMember2Member 2012-03-31 0001048501 fil:N9ConvertibleDebenturesMember 2012-09-30 0001048501 fil:N9ConvertibleDebenturesMember 2012-07-01 2012-09-30 iso4217:USD shares iso4217:USD shares EX-101.CAL 5 xfrm-20120930_cal.xml XBRL TAXONOMY EXTENSION CALCULATION LINKBASE DOCUMENT EX-101.DEF 6 xfrm-20120930_def.xml XBRL TAXONOMY EXTENSION DEFINITION LINKBASE DOCUMENT EX-101.LAB 7 xfrm-20120930_lab.xml XBRL TAXONOMY EXTENSION LABELS LINKBASE DOCUMENT Accumulated Depreciation Note 12: Related Party Transactions Note 8: Convertible Debentures Notes Common Stock, Shares Outstanding Common Stock, Shares Authorized Current Assets Entity Common Stock, Shares Outstanding Entity Central Index Key Note 6: Accounts Payable Note 1: Organization and Nature of Business. 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Note 7: Accrued Expenses: Schedule of Accrued Expenses (Details) (USD $)
Sep. 30, 2012
Jun. 30, 2012
Accrued interest on convertible debentures $ 271,813 $ 244,441
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Note 4: Property and Equipment
3 Months Ended
Sep. 30, 2012
Notes  
Note 4: Property and Equipment

Note 4    Property and Equipment - (are part of the assets held for sale)

 

Property and equipment are stated at cost less accumulated depreciation.  Depreciation of property and equipment is computed for financial statement purposes using accelerated methods over a five year estimated useful life of the assets. Accumulated depreciation at September 30, 2012 was $187,653 and $185,742 at June 30, 2012.  Management has evaluated the difference between the straight line and accelerated method used and has deemed the difference immaterial.

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Note 13: Commitments and Contingencies (Details) (USD $)
3 Months Ended
Sep. 30, 2012
Sep. 30, 2011
Operating Leases, Rent Expense $ 14,386 $ 15,086
XML 15 R28.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note 12: Related Party Transactions (Details) (USD $)
3 Months Ended
Sep. 30, 2012
Jun. 30, 2012
Sep. 30, 2012
9% convertible debentures
Convertible debentures - related parties $ 906,682 $ 906,682 $ 906,682
Interest Expense, Related Party     $ 20,568
XML 16 R8.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note 3: Going Concern
3 Months Ended
Sep. 30, 2012
Notes  
Note 3: Going Concern

Note 3   Going Concern

 

As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $8,402,001 and a working capital deficit of $1,463,508 as of September 30, 2012. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern or if the sale of its assets to Altametrics is not completed.

XML 17 R2.htm IDEA: XBRL DOCUMENT v2.4.0.6
Consolidated Balance Sheets (September 30, 2012 Unaudited) (USD $)
Sep. 30, 2012
Jun. 30, 2012
Current Assets    
Cash and cash equivalents $ 198,296 $ 85,753
Accounts receivable - trade 97,402 171,454
Accounts receivable - related party - trade   14,859
Prepaid expenses 17,689 3,466
Assets held for sale - current 27,532 5,373
Total Current Assets 340,919 280,905
Assets held for sale - long-term   25,913
Total Assets 340,919 306,818
Current Liabilities    
Convertible debentures - related parties 906,682 906,682
Convertible debentures 300,081 300,081
Accounts payable 6,350 2,718
Accrued expenses 271,813 244,441
Liabilities associated with assets held for sale - current 319,501 348,465
Total current liabilities 1,804,427 1,802,387
Liabilities associated with assets held for sale - long-term   123,955
Total Liabilities 1,804,427 1,926,342
Stockholders' Deficit    
Common stock 5,376 5,376
Additional paid-in capital 6,933,117 6,933,117
Accumulated deficit (8,402,001) (8,558,017)
Total Stockholders' Deficit (1,463,508) (1,619,524)
Total Liabilities and Stockholders' Deficit $ 340,919 $ 306,818
XML 18 R6.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note 1: Organization and Nature of Business.
3 Months Ended
Sep. 30, 2012
Notes  
Note 1: Organization and Nature of Business.

Note 1   Organization and Nature of Business.

 

The reporting entity in this form 10-Q is XFormity Technologies, Inc. (a Colorado Corporation) ("XFormity" or the "Company") and includes the operations of XFormity, Inc. (a Texas Corporation) (“XFM”), the wholly owned subsidiary of the Company.  XFormity provides technology and services to multi-unit business operators.  The Company’s core products are hosted Business Intelligence (BI), Balanced Scorecard and Benchmarking solutions.  These solutions help customers with operational data analysis, trend reporting, issue identification and tracking.  The Company provides data integration and management services that feed the BI and Scorecard solution with data from many key data sources.  The Company’s solutions are provided to customers as a hosted (software-as-a-service) model, which allows the Company to rapidly configure and implement solutions for new customers in an affordable, cost-effective manner.

 

The Company provides services for franchisors and franchisees in a growing list of customers across the United States and Canada.  XFormity is the provider of Burger King Corporation's (BKC) operational reporting for all company owned and operated restaurants in the US and Canada. In addition to this deployment, the Company has had success in delivering solutions on a big scale by the use of its balanced scorecard and financial benchmarking tools for all Burger King Corporate restaurants in the United States and Canada, totalling nearly 6,500 restaurants. The Company has expanded its services to customers in both fine and casual dining.

 

In August, 2012, the Company executed and delivered the following agreements with Altametrics XFormity, LLC (“Altametrics”)

:

1.      Asset Sale and Purchase Agreement effective August 1, 2012 (“APA”)

2.      Escrow Agreement

3.      License Agreement

4.      Management agreement.

 

Under the terms of the APA, , Altametrics agreed to purchase substantially all of the Company’s assets in consideration of $1,300,000. Of the total purchase price, $650,000 has been deposited into escrow with the Company’s stock transfer agent, Corporate Stock Transfer, Inc., as Escrow Agent under the terms of an Escrow Agreement. Consummation of the APA is subject to several material conditions precedent, including the approval of the Company’s shareholders.  Pending consummation of the APA, the Company entered into two additional agreements with Altametrics:  a Management Agreement pursuant to which Altametrics agreed to serve as Business Manager of the Company’s operations effective August 1, 2012; and a License Agreement pursuant to which, in consideration of a one time license fee in the amount of $300,000, the Company granted to Altametrics a non-exclusive license to use the Company’s intellectual property rights.  Since August 1, 2012, Altametrics has been managing the Company’s operations under the Management Agreement and License, in consideration for which Altametrics is entitled to retain any net profits realized from those operations during the management period.

 

Effective July 31, 2012, all of the Company’s senior secured convertible debentures (“Debentures”) in the aggregate principal amount of approximately $1.2 million matured and became due and payable in full.  As a result, the Company is in default under the Debentures; and a majority in interest of the Debenture holders have served upon the Company a notice of default and a further notice that the Debenture holders would not agree to a further extension of the Debentures.  The Debenture holders have a senior security interest in all of the tangible and intangible assets of the Company and could foreclose on those assets at any time.  A majority in interest of the Debenture holders have agreed in principle to accept payment in the amount of the total net proceeds received by the Company from the consummation of the APA with Altametrics in satisfaction of all liability under the Debentures, which amount is expected to be several hundred thousand dollars less than the total principal and accrued and unpaid interest due under the Debentures.  In the event the Company is unable to secure the approval of its shareholders to the APA, the Debenture holders have executed a back-up Asset Purchase Agreement with Altametrics pursuant to which they have agreed to foreclose on the Company’s assets under their senior security interest and convey those assets to Altametrics for the same consideration, to wit: $1.3 million. Under either scenario, there will be no funds available for distribution to the Company’s shareholders resulting from the sale of its assets to Altametrics.

 

As a result of the foregoing transactions, effective August 1, 2012, the Company’s assets, other than its cash and cash equivalents, accounts receivable resulting from sales made prior to August 1, 2012, and specific insurance polices, are reflected as assets held for sale and include its property and equipment, security deposits and its intellectual property with a carrying value of  $27,542.  Concurrently, the liabilities associated with the discontinued operation, including all accounts payable and accrued expenses  incurred in the normal course of the discontinued operation  are reflected as liabilities associated with the assets held for sale with a carrying value of $319,501.  See management’s discussion and analysis of the revenues and expenses relating to the discontinued operation.

XML 19 R22.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note 3: Going Concern (Details) (USD $)
Sep. 30, 2012
Jun. 30, 2012
Accumulated deficit $ 8,402,001 $ 8,558,017
Working Capital Earnings (Deficit) $ 1,463,508  
XML 20 R24.htm IDEA: XBRL DOCUMENT v2.4.0.6
Note 5: Deferred Credits (Details) (USD $)
Mar. 31, 2012
Consortium Member 1
 
Other Deferred Credits, Current $ 68,357
Consortium Member 2
 
Other Deferred Credits, Current $ 71,866
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    Note 2: Basis of Financial Statement Presentation.
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 2: Basis of Financial Statement Presentation.

    Note 2    Basis of Financial Statement Presentation.

     

    The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been consolidated or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of such consolidated financial statements.

     

    The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operation, financial position or cash flow.

     

    Although management believes the disclosures and information presented are adequate to not make the information misleading, it is suggested that these interim consolidated financial statements be read in conjunction with the Company's most recent audited financial statements and notes thereto included in its June 30, 2012 Annual Report on Form 10-K and the 8-K and 8-K/A as reflected above. Operating results for the three months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year or any other period.

     

    The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The ability of the Company to continue as a going concern is dependent on the Company; (1) to obtain adequate capital from outside sources, or (2) to fund itself through profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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    Consolidated Balance Sheets - Parenthetical (USD $)
    Sep. 30, 2012
    Jun. 30, 2012
    Preferred Stock, Par Value $ 0.01 $ 0.01
    Preferred Stock, Shares Authorized 100,000,000 100,000,000
    Preferred Stock, Shares Issued 0 0
    Preferred Stock, Shares Outstanding 0 0
    Common Stock, Par Value $ 0.0001 $ 0.0001
    Common Stock, Shares Authorized 125,000,000 125,000,000
    Common Stock, Shares Issued 53,756,553 53,756,553
    Common Stock, Shares Outstanding 53,756,553 53,756,553
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    Note 12: Related Party Transactions
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 12: Related Party Transactions

    Note 12   Related Party Transactions

     

    Six of our customers who are also stockholders in the Company, generated revenues approximating $42,000 in the three months ended September 30, 2012.  In the same period in the prior year, revenues approximated $38,200. A principal in one current customer serves as a member of the Board of Directors and the Audit Committee.

     

    Of the total 9% convertible debentures issued through Setpember 30, 2012, related parties hold $906,682. Interest expense accrued to related parties for the three months ended September 30, 2012 was $20,568.

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    Document and Entity Information
    3 Months Ended
    Sep. 30, 2012
    Nov. 21, 2012
    Document and Entity Information    
    Entity Registrant Name XFormity Technologies, Inc.  
    Document Type 10-Q  
    Document Period End Date Sep. 30, 2012  
    Amendment Flag false  
    Entity Central Index Key 0001048501  
    Current Fiscal Year End Date --06-30  
    Entity Common Stock, Shares Outstanding   53,756,553
    Entity Filer Category Smaller Reporting Company  
    Entity Current Reporting Status Yes  
    Entity Voluntary Filers No  
    Entity Well-known Seasoned Issuer No  
    Document Fiscal Year Focus 2013  
    Document Fiscal Period Focus Q1  
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    Note 13: Commitments and Contingencies
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 13: Commitments and Contingencies

    Note 13    Commitments and Contingencies

     

    The lease obligations are part of the liabilities associated with assets held for sale. The Company entered into a 65 month net lease at its Dallas, Texas office, commencing June 1, 2008, with rent approximating $4,300 per month. The Company also had a month-to-month lease for $700 per month at its Northbrook, Illinois office that was terminated as of August 31, 2012. Total rent expense for the three months ended September 30, 2012 was $14,386 compared to $15,086 for the three months ended September 30, 2011 The Company accounts for these leases as operating leases.

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    Consolidated Statements of Operations (Unaudited) (USD $)
    3 Months Ended
    Sep. 30, 2012
    Sep. 30, 2011
    General and administrative $ 48,819 $ 26,203
    Income (Loss) from operations (48,819) (26,203)
    Interest expense (27,375) (84,581)
    Change in fair value of derivatives   55,955
    Loss from continuing operations (76,194) (54,829)
    Income from discontinued operations 232,210 31,113
    Net income (loss) $ 156,016 $ (23,716)
    Net Income (Loss) per share -from continuing operations $ 0.00 $ 0.00
    Net Income (Loss) per share -from discontinued operations $ 0.00 $ 0.00
    Net Income (loss) per share - basic and diluted $ 0.00 $ 0.00
    Weighted average number of shares - basic and diluted 53,756,553 53,339,977
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    Note 7: Accrued Expenses
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 7: Accrued Expenses

    Note 7  Accrued Expenses

     

    Accrued expenses other than as reflected herein are part of the liabilities associated with assets held for sale.

     

     

    September 30,

             June 30,

     

            2012   

             2012   

    Accrued interest on convertible debentures

    271,813

    244,441

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    Note 6: Accounts Payable
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 6: Accounts Payable

    Note 6   Accounts Payable

     

    Accounts payable represents balances due to trade creditors and fees for professional services incurred for legal and audit services.

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    Note 4: Property and Equipment (Details) (USD $)
    Sep. 30, 2012
    Jun. 30, 2012
    Accumulated Depreciation $ 187,653 $ 185,742
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    Note 14: Subsequent Events
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 14: Subsequent Events

    Note 14  Subsequent Events

     

    Management reported that there are no reportable events through the date of this filing.

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    Note 10: Earnings Per Share
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 10: Earnings Per Share

    Note 10    Earnings per Share

     

    Basic earnings per share are calculated based on the weighted-average number of outstanding common shares.  As of September 30, 2012, the Company had 53,756,553 shares outstanding, As of September 30, 2012, the Company had issued convertible debentures in the amount of $1,206,763 convertible at a conversion price of the lesser of (i) 70% of the price per share of common stock or common stock equivalent paid by investors in the Company’s next round of equity or debt financing consisting of at least $1,000,000 in cumulative gross proceeds, or (ii) $0.12, warrants outstanding of 4,802,642 consisting of 2,401,321 with an exercise price of $0.14 and 2,401,321 with an exercise price of $0.18.

     

    For the three months ended September 30, 2012, the conversion of all of the above would result in a possible dilution of 22,604,178 shares.  However, as the convertible debentures, options, and warrants have a strike price equal to or in excess of the market price, $0.002 at September 30, 2012, and are considered not “in the money”, they are excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.

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    Note 8: Convertible Debentures
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 8: Convertible Debentures

    Note 8   Convertible Debentures

     

    If all of the remaining debenture holders at September 30, 2012 elected to convert their debentures and warrants into shares of the Company’s common stock, the Company would be required to issue an additional 18,597,504 shares. Effective July 31, 2012, all of the Company’s senior secured convertible debentures (“Debentures”) in the aggregate principal amount of approximately $1.2 million matured and became due and payable in full.  As a result, the Company is in default under the Debentures; and a majority in interest of the Debenture holders have served upon the Company a notice of default and a further notice that the Debenture holders would not agree to a further extension of the Debentures.  The Debenture holders have a senior security interest in all of the tangible and intangible assets of the Company and could foreclose on those assets at any time.  A majority in interest of the Debenture holders have agreed in principle to accept payment in the amount of the total net proceeds received by the Company from the consummation of the APA with Altametrics in satisfaction of all liability under the Debentures, which amount is expected to be several hundred thousand dollars less than the total principal and accrued and unpaid interest due under the Debentures.  In the event the Company is unable to secure the approval of its shareholders to the APA, the Debenture holders have executed a back-up Asset Purchase Agreement with Altametrics pursuant to which they have agreed to foreclose on the Company’s assets under their senior security interest and convey those assets to Altametrics for the same consideration, to wit: $1.3 million. As a result, it is unlikely that the Debenures will be converted into shares of common stock. .

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    Note 9: Derivative Liabilities
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 9: Derivative Liabilities

    Note 9    Derivative Liabilities

     

    The Company’s warrants and its Convertible Notes have reset provisions to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision resulted in a derivative liability in our financial statements that was evaluated at zero at June 30, 2012 and September 30, 2012 by an independent consultant.

     

    In the quarter ended September 30, 2011, the derivative liabilities decreased to $458,131 at September 30, 2011, from $514,086eq at June 30, 2011. During the three months ended September 30, 2011, the Company recorded a gain of $55,955 for the change in fair value.

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    Note 11: Income Taxes
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 11: Income Taxes

    Note 11    Income Taxes

     

    As of July 1, 2007, the Company adopted the current accounting guidance for the Accounting for Uncertainty in Income Taxes, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions.  The Company believes it does not have any uncertain tax positions taken or expected to be taken in its income tax returns.

     

    At September 30, 2012, the Company had net operating loss carry-forwards approximating $15,100,000 that expire in 2017 through 2028.  The carry-forward losses and the related deferred tax benefit are significantly limited by the provisions of Internal Revenue Code Section 382. The Company’s taxable losses, have created a deferred tax benefit of approximately $1,877,000 that is fully reserved.

    XML 37 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Note 1: Organization and Nature of Business. (Details) (USD $)
    Jul. 31, 2012
    Assets Held-for-sale, at Carrying Value $ 27,542
    Liabilities associated with the assets held for sale, Carrying Value $ 319,501
    XML 38 R26.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Note 9: Derivative Liabilities (Details) (USD $)
    3 Months Ended
    Sep. 30, 2012
    Jun. 30, 2012
    Sep. 30, 2011
    Jun. 30, 2011
    Derivative Liabilities $ 0 $ 0 $ 458,131 $ 514,086
    Gain recorded for change in fair value of derivative liabilities $ 55,955      
    XML 39 R5.htm IDEA: XBRL DOCUMENT v2.4.0.6
    Consolidated Statements of Cash Flows (Unaudited) (USD $)
    3 Months Ended
    Sep. 30, 2012
    Sep. 30, 2011
    Net income (loss) $ 156,016 $ (23,716)
    Depreciation 2,181 2,718
    Gain on sale of license (300,000)  
    Amortization of debt discount   58,413
    Non-cash transactions for:    
    Change in fair value - derivatives   (55,955)
    Change in Accounts receivable 88,912 6,890
    Change in Prepaid expenses (12,651) (10,879)
    Change in Accounts payable (63,961) (10,334)
    Change in Accrued expenses (22,988) 38,550
    Change in Deferred revenue (31,753) 11,712
    Change in Deferred credits (3,213) (3,056)
    Net cash provided (used) in operating activities (187,457) 14,343
    Proceeds from sale of license 300,000  
    Net cash used in investing activities 300,000  
    Increase (decrease) in cash and cash equivalents 112,543 14,343
    Cash and cash equivalents, beginning of period 85,753 56,625
    Cash and cash equivalents, end of period $ 198,296 $ 70,968
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    Note 5: Deferred Credits
    3 Months Ended
    Sep. 30, 2012
    Notes  
    Note 5: Deferred Credits

    Note 5    Deferred Credits – (are part of the liabilities associated with assets held for sale)

     

    In January 2006, the Board of Directors, agreed to offer then seven major customers, (“consortium members”) the following options in exchange for any further billing credits: (1) a right to receive $150,000 in billing credits applied against their monthly business intelligence software billings at a rate of 25% of the billings commencing July 1, 2006, or (2) a right to receive an additional 833,333 shares of the Company’s common stock per consortium member. These shares would be in addition to the shares issued to consortium members in exchange for their original $100,000 investment in fiscal 2004.

     

    Only two consortium members elected option (1), one commencing January 1, 2006, and the other commencing July 1, 2006.  The deferred credits at March 31, 2012 in the respective amounts of $68,357 and $71,866, net of amortization, are expected to be utilized over an 11 to 12 year period based on their current billing rates using a 5% discount rate that approximated the risk-free rate in effect during the offered option period.

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    Note 10: Earnings Per Share (Details) (USD $)
    3 Months Ended
    Sep. 30, 2012
    Jun. 30, 2012
    Common Stock, Shares Outstanding 53,756,553 53,756,553
    Long-term Debt, Description As of September 30, 2012, the Company had issued convertible debentures in the amount of $1,206,763 convertible at a conversion price of the lesser of (i) 70% of the price per share of common stock or common stock equivalent paid by investors in the Company’s next round of equity or debt financing consisting of at least $1,000,000 in cumulative gross proceeds, or (ii) $0.12, warrants outstanding of 4,802,642 consisting of 2,401,321 with an exercise price of $0.14 and 2,401,321 with an exercise price of $0.18.  
    Convertible Debentures Issued $ 1,206,763  
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    3 Months Ended
    Sep. 30, 2012
    Tables/Schedules  
    Schedule of Accrued Expenses

     

     

    September 30,

             June 30,

     

            2012   

             2012   

    Accrued interest on convertible debentures

    271,813

    244,441