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

FORM 10-Q/A

(Mark One)


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

	For the Quarterly Period Ended January 31, 2010

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

For the transition period from _______________ to _______________

Commission File Number: 333-128614

CORNERWORLD CORPORATION
(Exact name of registrant as specified in its charter)


Nevada		98-0441869
(State of incorporation)		(I.R.S. Employer Identification No.)

12404 Park Central Drive, Suite 400
Dallas, Texas 75251
(Address of principal executive offices)

(214) 224-1000
(Issuer’s telephone number including area code)

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

Indicate by check mark 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 ST (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ___ No ___

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer” and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___ Accelerated filer ___ Non-accelerated filer ___ Smaller reporting company X

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

The number of shares outstanding of the registrant’s common stock, $0.001 par value per share, as of March 16, 2009 was 95,518,317.

Explanatory Note

The purpose for this Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2010 filed by CornerWorld Corporation (the “Company” on March 17, 2010 (the “Original Filing”) is to restate the financial statements to consolidate the results of an entity that management concluded, because the Company controlled the entity but did not own it, met the definition of a Variable Interest Entity pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) number 810. In addition, during the three months ended July 31, 2009, the Company reclassified a debt payment to interest expense and reversed stock compensation expense related to warrants which had been misclassified as stock options as well as other adjustments as delineated in the tables that follow. The revisions necessary for such restatement are reflected in Items 1 and 2 of Part I. However, for the reader’s convenience, the Company has restated the entire quarterly report.

Other than as directly related to the restatements as described above, the disclosures in this Amendment No. 1 continue to describe conditions as of the date of the Original Filing, and the disclosures contained herein have not been updated to reflect events, results or developments that have occurred after the Original Filing, or to modify or update those disclosures affected by subsequent events. Among other things, forward-looking statements made in the Original Filing have not been revised to reflect events, results or developments that have occurred or facts that have become known to us after the date of the Original Filing, and such forward looking statements should be read in their historical context. This Amendment No. 1 should be read in conjunction with the Company’s filings made with the SEC subsequent to the Original Filing, including any amendments to those filings.

As a result of this Amendment No. 1, the certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, filed as exhibits to the Original Filing have been revised, re-executed and re-filed as of the date of this Amendment No. 1.

The effects of the restatement of the financial statements for the fiscal quarter ended January 31, 2010 were as follows:


	Three Months Ended January 31, 2010								Nine Months Ended January 31, 2009

Statement of Operations	As Previously Reported			Effect of Restatement		As Restated			As Previously Reported			Effect of Restatement			As Restated

Sales	$	2,811,354		$	94,089	$	2,905,443		$	8,684,642		$	63,756		$	8,748,398
Cost of sales		881,712			57,333		939,045			2,471,305			171,805			2,643,110
Selling general and administrative		1,699,653			22,127		1,721,780			3,934,975			23,851			3,958,826
Operating income (loss)		(395,785	)		14,629		(381,156	)		378,931			(131,900	)		247,031
Net income (loss)	$	(829,688	)	$	14,629	$	(815,059	)	$	(1,055,768	)	$	(185,333	)	$	(1,241,101	)


	As of January 31, 2010

Balance Sheet	As Previously Reported			Effect of Restatement			As Restated

Cash	$	621,029		$	894		$	621,923
Accounts receivable		2,040,693			2,883			2,043,576
Other current assets		101,409			1,567			102,976
Total current assets		2,763,131			5,344			2,768,475
Goodwill		1,790,422			(70,508	)		1,719,914
Other assets		95,781			(63,630	)		32,151
Total assets		15,772,595			(128,794	)		15,643,801
Accounts payable		2,794,346			28,837			2,823,183
Accrued liabilities		715,325			2,370			717,695
Total current liabilities		7,050,861			31,207			7,082,068
Long term debt		7,510,765			53,434			7,564,199
Total liabilities		16,586,626			84,641			16,671,267
Additional paid-in capital		7,713,631			(28,102	)		7,685,529
Retained earnings (deficit)		(8,623,430	)		(185,333	)		(8,808,763	)
Stockholders’ equity		(814,031	)		(213,435	)		(1,027,466	)
Total liabilities and stockholders’ equity	$	15,772,595		$	(128,794	)	$	15,643,801


	Nine Months Ended January 31, 2010

Cash Flow Statement	As Previously Reported			Effect of Restatement			As Restated

Net Income	$	(1,055,768	)	$	(185,333	)	$	(1,241,101	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Stock-based compensation		225,013			(28,102	)		196,911
Accounts receivable		(397,482	)		(2,883	)		(400,365	)
Prepaid expenses and other current assets		603,821			(1,567	)		602,254
Intangibles and other assets		(74,000	)		63,630			(10,370	)
Goodwill		(148,673	)		70,508			(78,165	)
Accounts payable		195,619			28,837			224,456
Accrued liabilities		480,320			2,370			482,690
Net cash provided by operating activities		1,382,732			(52,540	)		1,330,192
Payments on related party notes payable		(1,159,235	)		53,434			(1,105,801	)
Net cash used in financing activities		(1,309,135	)		53,434			(1,255,701	)
Net change in cash		19,286			894			20,180
Cash	$	621,029		$	894		$	621,923

CORNERWORLD CORPORATION

INDEX


Item Number		Page
	PART I. FINANCIAL INFORMATION

1	Financial Statements (Unaudited):	1
	Condensed Consolidated Balance Sheets as of January 31, 2010 and April 30, 2009	1
	Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended January 31, 2010 and 2009	2
	Condensed Consolidated Statement of Stockholders’ Equity for the Nine Months Ended January 31, 2010	3
	Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended January 31, 2010 and 2009	4
	Notes to Condensed Consolidated Financial Statements	5
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
3	Quantitative and Qualitative Disclosure about Market Risk	24
4T	Controls and Procedures	24

	PART II. OTHER INFORMATION

1	Legal Proceedings	25
1A	Risk Factors	25
2	Unregistered Sales of Equity Securities and Use of Proceeds	25
3	Defaults Upon Senior Securities	25
4	Submission of Matters to a Vote of Security Holders	25
5	Other Information	25
6	Exhibits	26
	Signatures	27

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CornerWorld Corporation

Condensed Consolidated Balance Sheets


	January 31, 2010			April 30, 2009

	(unaudited)			(audited)
Assets		(as restated)
Current assets:

Cash	$	621,923		$	601,743
Accounts receivable, net		2,043,576			1,688,211
Prepaid expenses and other current assets		102,976			705,230

Total current assets		2,768,475			2,995,184

Property and equipment, net		1,118,704			1,545,451
Goodwill		1,719,914			1,641,749
Patent		9,476,783			10,645,154
Intangibles, net		527,774			777,776
Other assets		32,151			21,781

TOTAL ASSETS	$	15,643,801		$	17,627,095

Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	2,823,183		$	2,598,727
Accrued expenses		717,695			235,005
Line of credit		265,000			385,000
Notes payable, current portion		—			30,000
Notes payable related parties, current portion		1,943,333			2,113,333
Deferred revenue		333,210			235,000
Other current liabilities		999,647			1,488,406

Total current liabilities		7,082,068			7,085,471
Long-term liabilities:
Notes payable related parties, net of current portion		7,564,199			8,500,000
Other liabilities		2,025,000			2,025,000

Total liabilities		16,671,267			17,610,471

Commitments and Contingencies (Notes 5,6,7 and 9)

Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value, 250,000,000 shares authorized; 95,768,317 and 64,318,317 shares issued and outstanding, at January 31, 2010 and April 30, 2009, respectively		95,768			64,318
Additional paid-in capital		7,685,529			7,519,968
Retained earnings (accumulated deficit)		(8,808,763	)		(7,567,662	)

Total stockholders’ equity (deficit)		(1,027,466	)		16,624

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	15, 643,801		$	17,627,095

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation

Condensed Consolidated Statements of Operations
(unaudited)


	For the Three Months Ended January 31,						For the Nine Months Ended January 31,

	2010			2009			2010			2009

	(as restated)						(as restated)

Sales, net	$	2,905,443		$	728,382		$	8,748,398		$	1,342,232

Costs of goods sold		939,045			492,417			2,643,110			813,581


Gross profit		1,966,398			235,965			6,105,288			528,651

Expenses:
Selling, general and administrative expenses		1,721,780			681,724			3,958,826			1,231,686
Depreciation and amortization		625,774			113,291			1,899,431			223,216

Total Operating expenses		2,347,554			(795,015	)		5,858,257			1,454,902

Operating income (loss)		(381,156	)		(559,050	)		247,031			(926,251	)


Other income (expense), net:
Interest expense		(433,900	)		(46,659	)		(1,477,776	)		(76,370	)
Other income (expense), net		(3	)		4,882			(10,356	)		23,624

Total other expense, net		(433,903	)		(41,777	)		(1,488,132	)		(52,746	)

Income (loss) before income taxes		(815,059	)		(600,827	)		(1,241,101	)		(978,997	)
Income taxes		—			—			—			—

Net income (loss)	$	(815,059	)	$	(600,827	)	$	(1,241,101	)	$	(978,997	)


Basic and diluted loss per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.02	)


Basic and diluted weighted average number shares outstanding		95,768,317			46,991,795			86,196,578			50,454,815

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(unaudited)


	Common Shares				Additional Paid-in			Accumulated			Total Stockholders’

	Shares		Amount		Capital			Deficit			Equity

Balance, April 30, 2009		64,318,317	$	64,318	$	7,519,968		$	(7,567,662	)	$	16,624
Exercise of warrants associated with
Woodland acquisition		31,450,000		31,450		(31,350	)		—			100
Stock-based compensation expense, as restated		—		—		196,911			—			196,911
Net loss, as restated		—		—		—			(1,241,101	)		(1, 241,101	)

Balance, January 31, 2010, as restated		95,768,317	$	95,768	$	7,685,529		$	(8,808,763	)	$	(1,027,466	)

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation

Condensed Consolidated Statements of Cash Flows
(unaudited)


	For the Nine Months ended January 31,

	2010			2009

	(as restated)
Cash Flows from Operating Activities
Net income (loss)	$	(1,241,101	)	$	(978,997	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		1,899,431			223,216
Provision for doubtful accounts		45,000			—
Stock-based compensation		196,911			241,124
Common stock issued for consulting services		—			6,000
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable		(400,365	)		69,740
Prepaid expenses and other current assets		602,254			(6,226	)
Goodwill		(78,165	)		—
Other assets		(10,370	)		—
Accounts payable		224,456			520,242
Accrued expenses		482,690			(126,216	)
Deferred revenue		98,210			—
Other liabilities		(488,759	)		—

Net cash provided by (used in) operating activities		1,330,192			(51,117	)

Cash Flows from Investing Activities
Purchases of property and equipment		(54,311	)		(9,000	)

Net cash used in investing activities		(54,311	)		(9,000	)

Cash Flows from Financing Activities
Proceeds from notes payable		—			145,000
Proceeds from exercise of warrants		100			—
Principal payments on related party notes payable		(1,105,801	)		—
Payments on related party line of credit		(120,000	)		—
Principal payments on debt		(30,000	)		—

Net cash provided by financing activities		(1,255,701	)		145,000

Net increase (decrease) in cash		20,180			84,883
Cash at beginning of period		601,743			45,164

Cash at end of period	$	621,923		$	130,047

Cash paid for:
Interest	$	975,455		$	—
Income taxes	$	—		$	—

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation

Notes to Condensed Consolidated Financial Statements
January 31, 2010
(unaudited)

1. Basis of Presentation

Interim Unaudited Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements as of January 31, 2010 and for the three and nine month periods ended January 31, 2010 and 2009 contained in this Quarterly Report (collectively, the Unaudited Interim Condensed Consolidated Financial Statements) were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for all periods presented. The results of operations for the three and nine month periods ended January 31, 2010 are not necessarily indicative of the results that may be expected for the entire fiscal year.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the regulations for interim financial information of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited accompanying statements of financial condition and related interim statements of operations, cash flows, and stockholders’ equity include all adjustments (which consist only of normal and recurring adjustments) considered necessary for a fair presentation in conformity with U.S. GAAP. These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the CornerWorld Corporation consolidated financial statements as of and for the year ended April 30, 2009, as filed with the SEC on Form 10-K, and the unaudited interim condensed consolidated financial statements as of and for the periods ended July 31, 2009 and October 31, 2009 as filed with the SEC on Forms 10-Q/A.

Restatement

During the nine month period ended January 31, 2010, CornerWorld Corporation (the “Company”, “Cornerworld”, “we”, “our” or “us”) did not consolidate a division that the Company does not own, Phone Services and More, LLC DBA Visitatel (“PSM”). The Company has since concluded that PSM met the definition of a Variable Interest Entity (“VIE”) pursuant to the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) number 810. The Company has not yet finalized the acquisition of PSM but has funded PSM’s operating losses to date. The Company concluded that, despite the fact that the Company does not own PSM, the aforementioned factors demonstrate that PSM qualifies as a VIE and should be consolidated in the Company’s financial statements.

In addition, the Company concluded that a three month period ended July 31, 2009 payment, previously classified as a reduction of principal debt, should have been classified as interest. This payment totaled $53,434 and the Company reclassified the amount to interest expense during the three months ended July 31, 2009, the cumulative impact of which impact the nine month period ended January 31. 2010. See also Note 5 to the unaudited condensed consolidated financial statements, Debt, for further information regarding this correction.

Finally, the Company also reversed $28,102 of stock compensation expense in the three month period ended July 31, 2009. These expenses related to warrants, issued in 2007, which had been mis-classified as stock options. The Company has reversed the expense and has reclassified the securities to warrants; see also Note 7 to the unaudited condensed consolidated financial statements, Stock-Based Compensation, for further information regarding this correction.

The following tables summarize the accounts that have been restated as a result of such adjustments:


	Three Months Ended January 31, 2010								Nine Months Ended January 31, 2009

Statement of Operations		Previously Reported			Effect of Restatement		As Restated			As Previously Reported			Effect of Restatement			As Restated

Sales	$	2,811,354		$	94,089	$	2,905,443		$	8,684,642		$	63,756		$	8,748,398
Cost of sales		881,712			57,333		939,045			2,471,305			171,805			2,643,110
Selling general and administrative		1,699,653			22,127		1,721,780			3,934,975			23,851			3,958,826
Loss before income taxes		(395,785	)		14,629		(381,156	)		378,931			(131,900	)		247,031
Net loss	$	(829,688	)	$	14,629	$	(815,059	)	$	(1,055,768	)	$	(185,333	)	$	(1,241,101	)

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)


	As of January 31, 2010

Balance Sheet		As Previously Reported			Effect of Restatement			As Restated

Cash	$	621,029		$	894		$	621,923
Accounts receivable		2,040,693			2,883			2,043,576
Other current assets		101,409			1,567			102,976
Total current assets		2,763,131			5,344			2,768,475
Goodwill		1,790,422			(70,508	)		1,719,914
Other assets		95,781			(63,630	)		32,151
Total assets		15,772,595			(128,794	)		15,643,801
Accounts payable		2,794,346			28,837			2,823,183
Accrued liabilities		715,325			2,370			717,695
Total current liabilities		7,050,861			31,207			7,082,068
Long term debt		7,510,765			53,434			7,564,199
Total liabilities		16,586,626			84,641			16,671,267
Additional paid-in capital		7,713,631			(28,102	)		7,685,529
Retained earnings (deficit)		(8,623,430	)		(185,333	)		(8,808,763	)
Stockholders’ equity		(814,031	)		(213,435	)		(1,027,466	)
Total liabilities and stockholders’ equity	$	15,772,595		$	(128,794	)	$	15,643,801


	Nine Months Ended January 31, 2010

Cash Flow Statement		As Previously Reported			Effect of Restatement			As Restated

Net loss	$	(1,055,768	)	$	(185,333	)	$	(1,241,101	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Stock-based compensation		225,013			(28,102	)		196,911
Accounts receivable		(397,482	)		(2,883	)		(400,365	)
Prepaid expenses and other current assets		603,821			(1,567	)		602,254
Intangibles and other assets		(74,000	)		63,630			(10,370	)
Goodwill		(148,673	)		70,508			(78,165	)
Accounts payable		195,619			28,837			224,456
Accrued liabilities		480,320			2,370			482,690
Net cash provided by operating activities		1,382,732			(52,540	)		1,330,192
Payments on related party notes payable		(1,159,235	)		53,434			(1,105,801	)
Net cash used in financing activities		(1,309,135	)		53,434			(1,255,701	)
Net change in cash		19,286			894			20,180
Cash	$	621,029		$	894		$	621,923

Organization

CornerWorld was incorporated in the State of Nevada, on November 9, 2004 as Olympic Weddings International, Inc. Effective May 1, 2007, we changed our name to CornerWorld Corporation. The Company’s year end is April 30^th.

The Company entered into a Share Exchange Agreement and Plan of Merger (the “Agreement”) with Enversa Companies LLC, a Texas limited liability company (“Enversa”), Leadstream LLC, a Texas limited liability company (“Leadstream”), and the holders of the membership interests of Leadstream on August 27, 2008. Pursuant to the Agreement, on August 27, 2008, Leadstream merged with and into Enversa (the “Merger”), of which CornerWorld is the sole member. Enversa was the surviving company in the merger and, as such, acquired all right, title and interest in and to all real estate and other property of Leadstream and became responsible for

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

all liabilities and obligations of Leadstream and Enversa. Until the Merger on August 27, 2008, the Company was in the development stage and had not realized any revenues from its operations. See also Note 3, Acquisitions, for more detail.

Enversa is a technology-oriented direct response marketing company. Using its proprietary technology, Enversa identifies qualified leads for advertisers thereby connecting them with potential consumers. Enversa utilizes a pay-for-performance pricing model which is very appealing to clients because it insures that they are billed solely for campaign performance.

Enversa is a subsidiary of CornerWorld and is a marketing communications provider. Enversa offers a full menu of services for brand and direct response customer acquisition campaigns, including media buying and planning for online and mobile media. It provides customer relationship marketing and interactive services, as well as customer data collection and analysis tools used for planning and targeting client marketing efforts across a network of partner, representative and owned content sites, including CornerWorld.com. Moreover, Enversa operates several ad networks and a proprietary request for proposal (RFP) technology that highlights promotional offers from a variety of corporate clients. Enversa uses an established media auction technology to deliver significantly more inventory than current market rates. Enversa effectively enables media properties to compete against each other, empowering advertisers to extend their marketing budgets beyond typical marketplace levels through fair and free market competition.

On February 23, 2009, CornerWorld completed its acquisition (the “Woodland Acquisition”) of all of the issued and outstanding equity interests of each of Woodland Wireless Solutions, Ltd. (“Woodland Wireless”), West Michigan Co-Location Services, L.L.C. (“WMCLS”) and T2 TV, L.L.C. (“T2 TV”), and forty voting member units of S Squared, LLC, doing business in the state of Michigan as “Ranger Wireless LLC” (“Ranger”), through its newly-formed wholly-owned subsidiary, Woodland Holdings Corp. (“Woodland Holdings”), pursuant to the terms of a Stock Purchase Agreement (the “Stock Purchase Agreement”), dated February 23, 2009 (the “Effective Date”), by and among Woodland Holdings, CornerWorld, Ned B. Timmer and HCC Foundation (“HCC Foundation”). Immediately following the Woodland Acquisition, the forty voting member units of Ranger that were purchased by Woodland Holdings were contributed to Woodland Wireless and all other issued and outstanding voting member units of Ranger remained held by Woodland Wireless.

As a result, Ranger became a wholly-owned subsidiary of Woodland Wireless. In addition, pursuant to a Unit Purchase Agreement (the “Unit Purchase Agreement”) entered into on the Effective Date among Woodland Holdings, PSM, T2 Communications, L.L.C. (“T2 Communications”) and Ned B. Timmer, Woodland Holdings agreed to purchase all of the outstanding voting member units of each of PSM and T2 Communications, for an aggregate purchase price of $300,000. Final consummation of the transactions contemplated by the Unit Purchase Agreement remains subject to ongoing discussions among the parties.

Woodland Wireless, Ranger, WMCLS and PSM are collectively referred to herein as the “Ranger Wireless Group.” T2 Communications and T2 TV are collectively referred to herein as the “T2 Group.” See also Note 3, Acquisitions, for more detail.

RANGER® is a shortcode application service provider to the wireless industry. The core service offered is 611 Roaming Service™, a patented application providing seamless means for connecting wireless subscribers to their home provider, customer service call center while roaming on another provider’s network. Calls are sent to RANGER® for treatment from nearly 40 wireless providers throughout North America. On an annual basis, RANGER® processes approximately 14 million calls with an infrastructure capable of handling millions more. RANGER® also manages an online portal which allows carriers access to their monthly statements and reporting on call volume to and from their company.

As a provider of Internet Protocol Television (IPTV), Internet and VoIP services, T² Communications delivers leading-edge technology to residential and business customers in Michigan. Offerings include: phone lines, Internet connections, 275 all-digital television stations, colocation, long distance and toll-free services. T² Communications is a Competitive Local Exchange Carrier (CLEC) that manages its own Fiber to the Premise (FTTP) network with a 10 gigabit backbone and up to 1 gigabit per second connections to end users.

PSM holds an FCC 214 License as a wholesale long distance service provider to the carrier community and large commercial users of transport minutes. Serving service providers, WMCLS offers telecommunications equipment storage and leasing.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CornerWorld, its wholly owned subsidiaries and joint ventures as well as all entities deemed to qualify as VIE’s. All significant intercompany transactions and balances have been eliminated in consolidation.

2. Summary of Significant Accounting Policies

In June 2009, the FASB issued the ASC, the single source of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (“GAAP”) in the United States. All guidance contained in the ASC carries an equal level of authority. The ASC supersedes all existing non-SEC accounting and reporting standards and was effective for the Company beginning July 1, 2009. The FASB will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it will issue Accounting Standards Updates. The FASB will not consider Accounting Standards Updates as authoritative in their own right; these updates will serve only to update the ASC, provide background information about the guidance, and provide the bases for conclusions on the changes in the ASC. The adoption of the ASC did not have a material impact on our condensed consolidated financial statements.

This summary of significant accounting policies is presented to assist in understanding the Company’s condensed consolidated financial statements. The condensed consolidated financial statements and notes are representations of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements. The financial statements are stated in United States of America dollars.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, the realizability of accounts receivable, recoverability of property and equipment, intangibles and goodwill and valuation of stock-based compensation and deferred tax assets. Actual results could differ from these estimates.

Fair Value of Financial Instruments

ASC No. 850 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company’s cash and cash equivalents, accounts receivable, accounts receivable-related party, accounts payable, accounts payable-related party, accrued liabilities, and notes payable approximate their estimated fair values due to their short-term maturities.

Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements.

Organizational and Start-up Costs

Until August 27, 2008, CornerWorld Corporation was in the development stage. Costs of start-up activities, including organization costs, were expensed as incurred.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” as revised by SAB 104. As such, the Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable and collectibility is probable. Sales are recorded net of sales discounts.

At Enversa, revenue is recognized along with the related cost of revenue as leads are delivered. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. Amounts billed to clients in advance of delivery of leads are classified under current liabilities as deferred revenue.

For Woodland, the majority of revenue is derived from month-to-month, bundled service contracts for the phone, television and internet services used by each customer. Revenue is recognized as the services are provided.

Income Taxes

The Company accounts for income tax in accordance with ASC No. 740 which requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with the ASC. The Company’s primary long-lived assets are website development costs, Goodwill, a patent, identifiable intangible assets and property and equipment. The ASC requires a company to assess the recoverability of its long-lived assets whenever events and circumstances indicate the carrying value of an asset or asset group may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. Management does not believe the Goodwill, patent and identifiable intangible assets associated with its recent acquisitions are impaired. No impairment charges have been recorded as of January 31, 2010.

Stock-Based Compensation

The Company accounts for awards made under its two stock-based compensation plans pursuant to the fair value provisions of ASC No. 718. ASC No. 718 requires the recognition of stock-based compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. ASC No. 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company accounts for stock-based compensation in accordance with ASC No. 718 and estimates its fair value based on using the Black-Scholes option pricing model.

The Company’s determination of fair value of share-based payment awards is made as of their respective dates of grant using that option pricing model and is affected by the Company’s stock price as well as a number of subjective assumptions. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behavior. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the pricing term of the grant effective as of the date of the grant. The expected volatility is based on the historical volatility of the Company’s stock price. These factors could change in the future, affecting the determination of stock-based compensation expense in future periods. The Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s options have certain characteristics that are significantly different from traded options, the existing valuation models may not provide an accurate measure of the fair value of the Company’s options. Although the fair value of the Company’s options is determined in accordance with ASC

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

No. 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The calculated compensation cost is recognized on a straight-line basis over the vesting period of the options. See also Note 7 Stock Based Compensation, for more details.

Recent Accounting Pronouncements

In April 2009, the FASB issued authoritative disclosure guidance for financial instruments. The guidance requires an entity to provide interim disclosures about the fair value of financial instruments and to include disclosures related to the methods and significant assumptions used in estimating those instruments. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

In April 2009, the FASB issued additional guidance on estimating fair value when the volume and level of transaction activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. Additionally, this guidance requires additional disclosures regarding fair value in interim and annual reports. The adoption did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

In May 2009, the FASB issued authoritative guidance for subsequent events, which establishes standards on events that occur after the balance sheet date but prior to the issuance of the financial statements. This guidance distinguishes events requiring recognition in the financial statements and those that may require disclosure in the financial statements. Furthermore, it requires disclosure of the date through which subsequent events were evaluated. The Company has evaluated subsequent events for potential recognition and/or disclosure through the date the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q/A were available to be issued.

Reclassifications

Certain prior year accounts have been reclassified to conform to the current year’s presentation.

3. Acquisitions

Acquisition of Leadstream

On August 27, 2008, Leadstream LLC merged with and into Enversa. The results of Leadstream’s operations have been included in the consolidated financial statements since that date. This business combination was accounted for as a purchase of Leadstream by CornerWorld in accordance with ASC No. 805, Business Combinations. The aggregate purchase price was $1,662,000 which was comprised of $1,500,000 in promissory notes, and 3,600,000 shares of common stock valued at $162,000. Because the Company’s common stock is so thinly traded, the value of the 3,600,000 common shares issued was determined based on the Company’s estimated enterprise value as of August 27, 2008.

The following table summarizes the carrying values of the assets acquired and liabilities assumed at the date of acquisition.


	At August 27, 2008

Current assets	$	724,704
Property, plant and equipment		25,698
Intangible assets		1,000,000

Total assets acquired		1,750,402
Total liabilities assumed		643,388

Net assets acquired	$	1,107,014

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

The $1,000,000 of intangible assets relates to customer lists that have an expected useful life of three years. The excess of the purchase price over the tangible net assets and identifiable intangible assets was allocated to Goodwill. Accordingly, the Company recorded $554,987 in Goodwill as a result of the Enversa acquisition.

Woodland Acquisition

On February 23, 2009, CornerWorld completed the Woodland Acquisition. The results of Woodland’s operations have been included in the consolidated financial statements since that date. This business combination was accounted for as a purchase in accordance with ASC No. 805. The aggregate purchase price was $13,696,300 which was comprised of $1,900,000 in cash, a $3,100,000 Secured Debenture, a $4,200,000 Purchase Money Note, an earn-out of $2,700,000, $300,000 in payables subject to ongoing discussions among the parties, $1,383,800 for warrants to purchase 31,450,000 shares of the Company’s common stock and 2,500,000 shares of the Company’s common stock valued at $112,500. In addition, the Company capitalized fees totaling $513,000 associated with the issuance of the debt raised to pay the $1,900,000 cash consideration to the Woodland seller. Due to the fact that the Company’s common stock is so thinly traded, the value of the common shares and warrants issued was determined based on the Company’s estimated enterprise value as of February 23, 2009.

The following table summarizes the carrying values of the assets acquired and liabilities assumed at the date of acquisition.


	At February 23, 2009

Current assets	$	882,647
Property, plant and equipment		1,492, 356
Intangible assets		10,904,792

Total assets acquired		13,279,795
Total liabilities assumed		670,258

Net assets acquired	$	12,609,537

The $10,904,792 patent is being amortized over its expected useful life of seven years. The excess of the purchase price over the tangible net assets and identifiable intangible assets was allocated to Goodwill. Accordingly, the Company recorded $1,086,763 in Goodwill as a result of the Woodland acquisition. In accordance with the Stock Purchase Agreement, during the nine months ended January 31, 2010, the Company adjusted the purchase price by recording an additional $148,673 of Goodwill which was in the form of the return of acquisition date cash and working capital to Woodland’s previous owner. In addition, during the nine months ended January 31, 2010, the Company reduced Goodwill by $70,508 to reflect the impact of the consolidation of PSM. The Woodland purchase price is expected to be finalized after the Company completes its assessment of the fair values of the fixed assets acquired in this acquisition.

Pro Forma Summary Financial Data

The following unaudited condensed pro forma summary financial data for the three and nine month periods ended January 31, 2009 presents our pro forma condensed financial information as if we had completed the acquisitions of Woodland and Enversa at the beginning of the prior fiscal year:


	For the Three Months Ended January 31, 2009			For the Nine Months Ended January 31, 2009

Revenue	$	2,869,525		$	8,111,972
Loss from operations		(1,134,914	)		(97,924	)
Net loss	$	(1,402,464	)	$	(913,838	)

Basic and diluted loss per share	$	(0.01	)	$	(0.01	)

Weighted average shares outstanding		95,768,317			95,768,317

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

4. Intangible Assets

Identifiable intangibles acquired in connection with business acquisitions accounted for under the purchase method are recorded at their respective fair values. The Company is amortizing the identifiable intangibles over their estimated useful lives, ranging from three to seven years. Intangibles consist of the following:


	January 31, 2010			April 30, 2009			Estimated Useful Life (Years)

Patent	$	10,904,792		$	10,904,792			7
Customer list		1,000,000			1,000,000			3

		11,904,792			11,904,792
Accumulated amortization		(1,900,235	)		(481,862	)

	$	10,004,557		$	11,422,930

Amortization expense related to identifiable intangible assets totaled $472,791 and $83,333 for the three month periods ended January 31, 2010 and 2009, respectively, and $1,418,373 and $138,889 for the nine month periods ended January 31, 2010 and 2009, respectively.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

5. Debt


	January 31, 2010			April 30, 2009

		(as restated)
Line of Credit
Revolving line of credit with a related party up to $500,000 at an interest rate of 8%per annum. Interest payable monthly; line matures February 10, 2010. See also note 9, Related Party Transactions.¹	$	265,000		$	385,000

Long-term Debt
Note payable to Internet University; payments due quarterly based on the achievement of certain cash flow targets. At January 31, 2010 and April 30, 2009 the interest rate was 4.58%.²	$	1,464,199		$	1,500,000
Note payable to IU Investments, LLC, due March 15, 2010. At January 31, 2010 and April 30, 2009 the interest rate was 16.0%. ³		740,000			1,755,000
Purchase Money Note Payable, due February 23, 2012. At January 31, 2010 and April 30, 2009 the interest rate was 12.0%. See also note 9, Related Party Transactions.		4,200,000			4,200,000
Secured Debenture, due February 23, 2012. At October 31 and April 30, 2009 the interest rate was 12.0%. See also note 9, Related Party Transactions.		3,100,000			3,100,000
Various notes payable to related parties, due February 17, 2010. At April 30, 2009 the interest rate was 10%.		3,333			58,333
Note payable due February 17, 2010. At April 30, 2009 the interest rate was 10%.		—			30,000

Total debt		9,507,532			10,643,333
Less current portion of long-term debt		(1,943,333	)		(2,143,333	)

Non-current portion of long-term debt	$	7,564,199		$	8,500,000

The notes are collateralized by 100% of the assets of all companies and the notes themselves are all cross-defaulted.



¹The Company is in the process of renegotiating this arrangement with this lender and obtained a waiver for the period from December 1, 2009 through February 28, 2010. Accordingly, the Company was in compliance with the terms of this instrument at January 31, 2010 and the Company was not required to make its December 2009 or January 2010 payments.

²The Company is in the process of renegotiating this arrangement with this lender and obtained a waiver for the period from December 1, 2009 through February 28, 2010. Accordingly, the Company was in compliance with the terms of this instrument at January 31, 2010 and the Company was not required to make its October 2009 payments.

³The Company is in the process of renegotiating the payment terms of this instrument with this lender and obtained a waiver for the period from December 1, 2009 through February 28, 2010. Accordingly, the Company was in compliance with the terms of this instrument at January 31, 2010 and the Company was not required to make its December 2009 or January 2010 payments.

6. Commitments and Contingencies

Woodland Earnout

As detailed in Note 1, on February 23, 2009, CornerWorld completed the Woodland Acquisition. Among other consideration tendered, the Company accrued an earn-out payable to Mr. Ned Timmer, the Woodland seller, totaling $2,700,000. The earn-out was computed based on an estimated $675,000 payable to Mr. Timmer annually over each of the next 4 fiscal years and assumes Woodland achieves certain operating results. Actual payouts could differ from this estimate.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

T2 Group Accrual

As detailed in Note 1, on February 23, 2009, CornerWorld completed the Woodland Acquisition. As part of the Unit Purchase Agreement, the Company agreed to acquire certain operating assets and liabilities of the T-2 Group after receiving regulatory approval for the purchase of these assets. The Company has received regulatory approval for this transaction and has accrued $300,000 pursuant to the Unit Purchase Agreement for this contingency which remains outstanding pending ongoing discussions among the parties.

7. Stock-Based Compensation

Incentive Stock Plan

On August 17, 2007, the Company’s board of directors adopted and implemented the Company’s 2007 Incentive Stock Plan. Under the Incentive Stock Plan, the Company is authorized to issue 4,000,000 shares of its common stock to the Company’s directors, officers, employees, advisors or consultants.

Any Incentive Stock Option granted to an employee of the Company shall become exercisable over a period of no longer than 5 years, and no less than 20% of the shares covered thereby shall become exercisable annually. Twenty percent (20%) of shares vest annually beginning on the first anniversary of the grant. The options expire 10 years from the grant date.

The Company issued 250,000 stock options to their Chief Financial Officer during the nine months ended January 31, 2010 pursuant to this plan.

Stock Compensation Plan

On August 17, 2007, the Company’s board of directors adopted and implemented the Company’s 2007 Stock Compensation Plan. The total number of shares of the Company’s common stock which may be purchased or granted directly by Options, Stock Awards or Warrants under the Compensation Plan shall not exceed 4,000,000 shares of the Company’s common stock.

Awards granted to a participant of the Company shall become exercisable over a period of no longer than 5 years, and may vest as determined at the Company’s discretion at the time of grant.

The Company issued no stock options pursuant to this plan during the nine months ended January 31, 2010.

A summary of the shares reserved for grant and awards available for grant under each Stock Plan is as follows:


	January 31, 2010

	Shares Reserved for Grant		Awards Available for Grant

				(as restated)
Incentive Stock Plan		4,000,000		2,256,000
Stock Compensation Plan		4,000,000		3,120,000

		8,000,000		5,376,000

The Company issues awards to employees, qualified consultants and directors that generally vest over time based solely on continued employment or service during the related vesting period and are exercisable over a five to ten year service period. Options are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

The fair value of each stock-based award is estimated on the grant date using the Black-Scholes option-pricing model. Expected volatilities are based on the historical volatility of the Company’s stock price. The expected term of options granted subsequent to the adoption of ASC No. 718 is derived using the simplified method as defined in the SEC’s SAB No. 107. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury interest rates in effect at the time of grant. The fair value of options granted was estimated using the following weighted-average assumptions:


	For the three months ended January 31					For the nine months ended January 31

	2010		2009			2010			2009


Expected term (in years)		—		5.0			5.0			5.0
Expected volatility		—		298.0	%		99.1	%		268.6	%
Risk-free interest rate		—		2.0	%		2.3	%		2.5	%
Dividend yield		—		0.0	%		0.0	%		0.0	%

A summary of activity under the Stock Plans and changes during the period ended January 31, 2010 is presented below:


				Weighted-Average

	Shares			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding at May 1, 2009		2,694,000		$	0.67		4.25	$	0.00
Issued		250,000		$	0.20		5.00	$	0.00
Cancelled/forfeited		—			—
Reclassified**		(320,000	)	$	1.20
Exercised		—			—

Outstanding at January 31, 2010		2,624,000		$	0.53		3.72	$	0.00

Options vested *		670,111		$	0.70		3.49	$	0.00

Options exercisable at end of period		670,011		$	0.70		3.49	$	0.00


	* Due to the Company’s limited operating history, no estimate for forfeitures has been made in these financial statements as there has been virtually no turnover of employees to whom options were granted. As such, disclosures related to options expected to vest have been excluded until such time as the Company develops a longer operating history.

	** Upon review of the instruments, the Company reclassified these options to warrants.

For the three month periods ended January 31, 2010 and 2009, the Company recognized $75,414 and $122,235 of stock-based compensation expense, respectively, and for the nine month periods ended January 31, 2010 and 2009, the Company recognized $196,911 and $241,124 of stock-based compensation expense, respectively. As of January 31, 2010 there was $701,745 of total unrecognized compensation cost, net of forfeitures, related to unvested employee and director stock option compensation arrangements. That cost is expected to be recognized on a straight-line basis over the next 3.31 weighted average years.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

8. Business Segments

The following table summarizes selected financial information for each operating segment:


	Direct Marketing Services		Communications Services			Corporate Overhead				Consolidated

Three Months Ended January 31, 2010
Revenue	$	1,246,271	$	1,659,172		$	—		$	2,905,443
Income (loss) from continuing operations before tax		50,931		(201,432	)		(664,558	)		(815,059	)
Net (loss) income		50,931		(201,432	)		(664,558	)		(815,059	)
Total assets		2,323,739		13,303,967			16,095			15,643,801
Intangibles		527,774		9,476,783			—			10,004,557
Goodwill		—		1,164,928			554,986			1,719,914
Depreciation and amortization		85,734		508,407			31,633			625,774


	Direct Marketing Services			Communications Services		Corporate Overhead			Consolidated

Three Months Ended January 31, 2009
Revenue	$	728,382		$	—	$	—		$	728,382
Loss from continuing operations before tax		(105,804	)		—		(495,023	)		(600,827	)
Net (loss) income		(105,804	)		—		(495,023	)		(600,827	)
Total assets		1,758,247			—		3,334,587			5,092,834
Intangibles		861,111			—		—			861,111
Goodwill		—			—		3,236,986			3,236,986
Depreciation and amortization		86,933			—		26,358			113,291


	Direct Marketing Services		Communications Services		Corporate Overhead			Consolidated

Nine Months Ended January 31, 2010
Revenue	$	3,270,380	$	5,478,018	$	—		$	8,748,398
Income (loss) from continuing operations before tax		138,417		520,233		(1,899,751	)		(1,241,101	)
Net (loss) income		138,417		520,233		(1,899,751	)		(1,241,101	)
Total assets		2,323,739		13, 303,967		16,095			15,643,801
Intangibles		527,774		9,476,783		—			10,004,557
Goodwill		—		1, 164,928		554,986			1, 719,914
Depreciation and amortization		260,802		1,550,626		88,003			1,899,431

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)


	Direct Marketing Services			Communications Services		Corporate Overhead			Consolidated

Nine Months Ended January 31, 2009
Revenue	$	1,342,232		$	—	$	—		$	1,342,232
Income (loss) from continuing operations before tax		(169,867	)		—		(809,130	)		(978,997	)
Net (loss) income		(169,867			—		(809,130	)		(978,997	)
Total assets		1,758,247			—		3,334,587			5,092,834
Intangibles		861,111			—		—			861,111
Goodwill		—			—		3,236,986			3,236,986
Depreciation and amortization		144,889			—		78,327			223,216

There were no intersegment sales. All of the Company’s business activities are conducted within the United States geographic boundaries.

9. Related Party Transactions

Enversa receives administrative support from Internet University, Inc., which was one of the three former members of Leadstream. Included in such administrative support are human resources, accounting, IT and facilities services.

On August 27, 2008, Enversa entered into a $500,000 line of credit with Internet University which was originally intended to expire on February 23, 2009. On February 23, 2009, Enversa and Internet University entered into an amendment to the line of credit, which extended the maturity date until February 22, 2010 and provided a schedule for payments. The line of credit bears interest at 8.00% per annum and is secured by a second priority security interest in CornerWorld’s membership interests in Enversa and a first priority security interest in all of Enversa’s assets and in all products, proceeds, revenues, distributions, dividends, stock dividends, securities and other property, rights and interests that CornerWorld and Enversa receive or are at any time entitled to receive. The Company paid $120,000 of principal on this note and recorded interest of $18,900 on this facility during the nine month period ended January 31, 2010. The balance of this line of credit totaled $265,000 at January 31, 2010.

As part of the Enversa acquisition, the Company borrowed $1,500,000 from Internet University, Inc. A member of the Company’s Board of Directors as well as one of the former members of Leadstream is the president of a division of Internet University, Inc. The Company paid $35,801 of principal on this note and recorded interest of $101,655 on this facility during the nine month period ended January 31, 2010. The balance of this note totaled $1,410,765 at January 31, 2010.

As previously noted, on February 23, 2009, the Company completed the Woodland Acquisition. Pursuant to the acquisition, the Company issued debt and equity securities to Mr. Ned Timmer who became a member of the Board of Directors and the President of the Company’s Woodland division. Mr. Timmer is the holder of the Company’s $4,200,000 secured debenture as well as the holder of the Company’s $3,100,000 purchase money note. The Company accrued interest expenses to Mr. Timmer totaling approximately $219,000 and $657,000, respectively, on these two facilities during the three and nine month periods ended January 31, 2010, respectively; the Company paid approximately $777,000 in cash related to interest due to Mr. Timmer during the nine months ended January 31, 2010.

As part of the Woodland Acquisition, the Company borrowed $1,900,000 from IU Investments LLC. The Company paid $1,015,000 of principal on this note and recorded interest of $131,333 on this facility during the nine month period ended January 31, 2010. The balance of this note totaled $740,000 at January 31, 2010.

On July 23, 2009, Mr. Timmer exercised his warrant to purchase 31,450,000 shares of the Company’s common stock for $100.

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

10. Legal Proceedings

On December 11, 2009, the Company, received a letter (the “Notice”) from an attorney representing Mr. Ned Timmer (“Timmer”) which alleged certain defaults with respect to that certain Secured Debenture issued by the Company and the Company’s wholly-owned subsidiary, Woodland, in favor of Timmer, with a maturity date of February 23, 2012 (the “Debenture”), that certain Purchase Money Note issued by Woodland in favor of Timmer with a maturity date of February 23, 2012 (the “Note”), and certain related security agreements and collateral perfection agreements (collectively with the Debenture and the Note, the “Seller Loan Documents”) all of which were issued in connection with the Woodland Acquisition. Further, on December 14, 2009, the Company received documents from Timmer pursuant to which Timmer purported to appoint new directors and officers of each of the Woodland’s subsidiaries.

The Company believed that the events described in the Notice did not constitute defaults and, on December 14, 2009 the Company filed an action against Timmer, another member of the Company’s Board of Directors, and certain other parties in the United States District Court for the Western District of Michigan for fraud, breach of contract, breach of fiduciary duty, conversion and other matters and requesting, among other things, injunctive relief and damages.

On December 21, 2009, the Company presented its arguments in the United States District Court for the Western District of Michigan. On December 22, 2009, the judge issued an order (the “Order”) in the Company’s favor. The Order denied Timmer’s request for an injunction against the Company and granted the Company’s request for injunction against Timmer. Among other things, the injunction ordered: (1) The actions taken by Timmer on December 10, 2009 to gain corporate control over Woodland are deemed null and void; (2) Timmer shall return to CornerWorld all collateral and/or property belonging to the Company over which he has asserted control, including, but not limited to, the funds contained in bank accounts; and (3) Timmer shall be removed from active management of the Woodland employees, but shall be retained on the Board of Directors of the Company. The Company immediately moved to comply with the Order.

On December 31, 2009, Timmer filed a motion for reconsideration and the Company immediately responded.

On January 7, 2010, Timmer’s motion for reconsideration was denied.

Based on available information, including the current status or stage of such proceedings, and taking into account accruals for matters where we have established them, we currently believe that any liabilities ultimately resulting from such claims and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial condition, results of operations or cash flows.

RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q/A

This Form 10-Q/A contains certain forward-looking statements within the meaning of the Private Bank Securities Litigation Reform Act of 1995. All statements other than statements of historical fact made in this report are forward looking. These statements include the plans and objectives of management for future operations. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could be inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Form 10-Q/A will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Furthermore, except as required by law, we do not undertake any obligation to update forward-looking statements made herein.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

CornerWorld Corporation (hereinafter referred to as “Cornerworld,” the “Company,” “we,” “our,” or “us”) is a marketing and technology services company building services for the increased accessibility of content across mobile, television and Internet platforms. Our key asset is a patented 611 Roaming Service™ from RANGER Wireless Solutions®, which generates revenue by processing over 14 million calls per year from wireless customers and seamlessly connecting them to their service provider.

Year to date period ended January 31, 2010 Highlights:


	•	We paid down approximately $1.3 million of debt.

	•	We completed the integration of our Leadstream Acquisition and our Woodland Acquisition via centralization of the accounting, treasury and human resources functions.

	•	We began to leverage the benefits of our centralized accounting platform by closing and consolidating every month and reporting results to our Board of Directors.

	•	We hired a Chief Financial Officer, relocated our accounting and HR functions to our corporate offices and built an internal sales force.

After taking into account unplanned litigation related legal fees totaling $306,223 along with non-cash depreciation & amortization and stock-based compensation expense totaling $196,911, and $1,899,431, respectively, the Company’s pro-forma net income for the nine month period ended January 31, 2010 would have totaled approximately $1,161,464. See the table below for more details. We expect to continue generating positive operating cash flows through the end of our fiscal year.

We define “pro-forma net income” as net loss after removal of (i) unplanned litigation related legal fees and (ii) non-cash charges, including depreciation and amortization and stock-based compensation. Management believes pro-forma net income provides useful additional information concerning the Company’s potential profitability. However, pro-forma net income is not a measure of financial performance under Generally Accepted Accounting Principles (“GAAP”). Accordingly, pro-forma net income should not be considered an alternative to net loss as an indicator of operating performance. The table below provides a reconciliation between GAAP net loss and pro-forma net income.


	For the nine month period ended January 31, 2010			Per share data

Net Loss	$	(1,241,101	)	$	(0.01	)

Unplanned litigation related legal fees		306,223			0.00

Non-cash charges:
Stock-based compensation		196,911			0.00
Depreciation and amortization		1,899,431			0.01

Total non-cash charges		2,096,342			0.02


Pro-Forma Net Income	$	1,161,464		$	0.01

Weighted average common shares outstanding:
Basic and diluted		86,196,578			86,196,578

Service Offerings

The Company’s business consists of three integrated service offerings: (i) direct marketing services, (ii) communication services and (iii) on-line media networks. See also Note 8 – Business Segments – of the Notes to the unaudited condensed consolidated financial statements for additional segment information.

Critical Accounting Policies

In preparing our unaudited condensed consolidated financial statements, we make estimates, assumptions and judgments that can have a significant effect on our revenues, income from operations, and net income, as well as on the value of certain assets on our condensed consolidated balance sheets. We believe that there are several accounting policies that are critical to an understanding of our historical and future performance as these policies affect the reported amounts of revenues, expenses, and significant estimates and judgments applied by management. While there are a number of accounting policies, methods and estimates affecting our financial statements, areas that are particularly significant include allowance for doubtful accounts, recoverability of long-lived assets (including goodwill), revenue recognition, stock-based compensation, and deferred taxes. See Note 2 – Summary of Significant Accounting Policies – to the unaudited condensed consolidated financial statements included in this report for further discussion of our accounting policies.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, the realizability of accounts receivable, recoverability of property and equipment, intangibles and goodwill and valuation of stock-based compensation and deferred tax assets. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements.

Organizational and Start-up Costs

Until August 27, 2008, CornerWorld was in the development stage. Costs of start-up activities, including organizations costs, were expensed as incurred.

Revenue Recognition

Income Taxes

Long-Lived Assets

Stock-Based Compensation

The Company’s determination of fair value of share-based payment awards is made as of their respective dates of grant using that option pricing model and is affected by the Company’s stock price as well as a number of subjective assumptions. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behavior. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the pricing term of the grant effective as of the date of the grant. The expected volatility is based on the historical volatility of the Company’s stock price. These factors could change in the future, affecting the determination of stock- based compensation expense in future periods. The Black-Scholes option pricing model was developed for use in estimating the value

of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s options have certain characteristics that are significantly different from traded options, the existing valuation models may not provide an accurate measure of the fair value of the Company’s options. Although the fair value of the Company’s options is determined in accordance with ASC No. 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The calculated compensation cost is recognized on a straight-line basis over the vesting period of the options. See also Note 7 – Stock Based Compensation – of the notes to the unaudited condensed consolidated financial statements, for more details.

Recent Accounting Pronouncements

Results of Operations

Comparison of the three months ended January 31, 2010 to the three months ended January 31, 2009

Direct marketing services

Our direct marketing services segment consists of our Enversa division, which was acquired on August 27, 2008.

Revenues and Gross profit:

Our direct marketing segment had revenues totaling $1,246,271 for the three month period ended January 31, 2010 as compared to $728,382 for the three month period ended January 31, 2009. This increase is due to the investment in an internal sales organization at our Enversa division as well as due to the utilization of existing employee base in diverse service areas including mobile, search engine optimization and performance marketing.

Similarly, gross profit at our direct marketing segment increased for the three months ended January 31, 2010 to $644,529 from $235,965 for the three month period ended January 31, 2009. Gross profit as a percentage of revenue increased from 32.4% to 51.7% due to increased profit margins from our expanded client base and the delivery of high margin services including mobile, search engine optimization and performance marketing.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses totaled $485,904 for the three months ended January 31, 2010 as compared to $311,530 for the corresponding period in the prior year. The increase of $174,374 is primarily due to the fact that we increased our number of employees when we invested in our internal sales organization which created corresponding increases in rent and utilities. These increases were offset, to some extent, by the reallocation of certain administrative functions as well as a portion of rent and utilities to corporate infrastructure.

Communications services

Our communications services segment consists of everything that the Company acquired in the Woodland Acquisition. As previously noted, we closed the Woodland Acquisition on February 23, 2009 and this report only includes operating data for that segment since that date. Accordingly, presentation of an analysis of the current year’s operating results versus prior year’s operating results would be misleading. Please see Note 3 Acquisitions, of the notes to the attached unaudited condensed consolidated financial statements for pro-forma financial data with respect to this segment.

Corporate

Our corporate segment consists of the CornerWorld, Inc. division as well as expenses generated from our corporate group. By its nature, the Corporate group generates no revenues or gross profit.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses totaled $439,985 for the three months ended January 31, 2010 as compared to $410,394 for the corresponding period in the prior year. The increase of $27,591 is primarily due to the fact that we continued to develop our operations and build our corporate infrastructure. Accordingly, we experienced increased corporate overhead expenses, including stock based compensation, accounting, legal, board of directors and other related costs associated in managing a publicly traded company.

Comparison of the nine months ended January 31, 2010 to the nine months ended January 31, 2009

Direct marketing services

As noted above, because the acquisition of Enversa closed in the middle of the nine months ended January 31, 2009, presentation of an analysis of the current year’s operating results versus the prior year’s operating results would be misleading. Please see Note 3 – Acquisitions – of the notes to the unaudited condensed consolidated financial statements for pro-forma financial data with respect to this segment.

Communications services

As previously noted, we closed the Woodland Acquisition on February 23, 2009 and this report only includes operating data for that segment only since that date. Presentation of an analysis of the current year’s results versus the prior year’s results would be misleading. Please see Note 3 – Acquisitions – of the notes to the unaudited condensed consolidated financial statements for pro-forma financial data with respect to this segment.

Corporate

Selling, General and Administrative (as restated)

Selling, general and administrative (“SG&A”) expenses totaled $1,061,667 for the nine month period ended January 31, 2010 as compared to $920,157 for the corresponding period in the prior year. The increase of $141,510 is primarily due to the fact that we continued to develop our operations and build our corporate infrastructure. Thus, we experienced increased corporate overhead expenses including stock-based compensation, accounting, legal, board of directors and other related costs involved in managing a publicly traded company.

Liquidity and Capital Resources (as restated)

As of January 31, 2010, we had a working capital deficit of approximately $4.3 million and cash of $621,923. Our working capital deficit is primarily related to the short-term nature of selected tranches of the debt we issued to finance our acquisitions and has deteriorated slightly from our April 30, 2009 year end deficit which totaled approximately $4.1 million. This deterioration is primarily due to the fact that $1.2 million of long term debt became current during the nine months ended January 31, 2010. Though we expect

that we will refinance a substantial portion of these short-term obligations, there can be no guarantee that we will be successful in doing so. We believe the cash flows from our existing operations will be adequate to manage our debt commitments should we be unsuccessful in refinancing our short-term obligations.

Our investing activity for the three months ended January 31, 2010, consisted primarily of $54,311 of capital expenditures.

We presently have a $500,000 line of credit with Internet University, Inc. At January 31, 2010, we had approximately $265,000 outstanding under this credit line, but we no longer have access to the unused portion of this line. The Company is in the process of renegotiating this arrangement with this lender and obtained a waiver for the period from December 1, 2009 through February 28, 2010. Accordingly, the Company was in compliance with the terms of this instrument at January 31, 2010 and the Company was not required to make its December 2009 or January 2010 payments. We have no other bank financing or other external sources of liquidity. This was the third consecutive quarter that the Company’s operations generated positive operating cash flow and we expect that trend to continue.

We will need to obtain additional capital in order to expand our operations. We are currently investigating other financial alternatives, including additional equity and/or debt financing. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. However, there can be no assurance that any additional financing will become available to us, and if available, that such financing will be on terms acceptable to us.

Off-balance sheet arrangements

We have not entered into any off-balance sheet arrangements.

Effects of Inflation

Inflation has not had any material impact of the Company’s prices, net sales or revenues.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We had no variable rate debt outstanding at January 31, 2010. Accordingly, we had no exposure to interest rate variations.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of its chief executive officer and its chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) as of January 31, 2010. Based on that evaluation, the Company’s chief executive and chief financial officers concluded that, as of that date, the Company’s disclosure controls and procedures, were not effective at a reasonable assurance level, due to the identification of a material weakness.

Management’s Remediation Plan

Management determined that a material weakness existed due to a lack of an adequate number of personnel in the accounting department. Management is in the process of remediating the material weakness identified by hiring a sufficient number of people to aid in the timeliness of the financial statement close process leading to the correct preparation, review, presentation of and disclosures in our consolidated statements. The Company has hired a chief financial officer and has replaced selected accounting personnel with more seasoned professionals, including additional certified public accountants, to help perform certain accounting and financial functions. Management believes the foregoing efforts will effectively remediate this material weakness. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above.

We cannot assure you that, as circumstances change, any additional material weakness will not be identified.

Changes in Internal Control over Financial Reporting

Except as noted above, there were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings

Please see Note 10 – Legal Proceedings – of the notes to the unaudited condensed consolidated financial statements for more details.

Item 1a. Risk Factors

Not applicable.

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

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibit		Method of
Numbers	Description	Filing


31.1	Rule 13a-14(a) Certification by our chief executive officer	(1)

31.2	Rule 13a-14(a) Certification by our chief financial officer	(1)

32.1	Section 1350 Certification by our chief executive officer	(1)

32.2	Section 1350 Certification by our chief financial officer	(1)




(1) Filed herewith.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	CORNERWORLD CORPORATION

	Registrant

July 27, 2010	/s/ V. Chase McCrea III

	V. Chase McCrea III
	Chief Financial Officer


	/s/ Scott N. Beck

	Scott N. Beck
	Chief Executive Officer


	/s/ Scott N. Beck

	Scott N. Beck
	Chief Executive Officer