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

FORM 10-Q

(Mark One)



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

	For the Quarterly Period Ended July 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
(Registrant’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 S-T (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 the definitions of “large accelerated filer”, “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 September 9, 2010 was 95,518,317.

CORNERWORLD CORPORATION

INDEX


Item Number		Page

	PART I. FINANCIAL INFORMATION

1	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of July 31, 2010 and April 30, 2010	1
	Condensed Consolidated Statements of Operations for the Three Months Ended July 31, 2010 and 2009	2
	Condensed Consolidated Statement of changes in stockholders’ deficit for the Three Months Ended July 31, 2010	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended July 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	14
3	Quantitative and Qualitative Disclosures about Market Risk	19
4	Controls and Procedures	19

	PART II. OTHER INFORMATION

1	Legal Proceedings	20
1A	Risk Factors	20
2	Unregistered Sales of Equity Securities and Use of Proceeds	20
3	Defaults Upon Senior Securities	20
4	[Removed and Reserved]	20
5	Other Information	20
6	Exhibits	20

	Signatures	21

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CornerWorld Corporation
Condensed Consolidated Balance Sheets



	July 31, 2010			April 30, 2010

Assets	(unaudited)			(audited)
Current assets:
Cash	$	904,660		$	590,163
Accounts receivable (net of allowance for doubtful accounts of $79,484 and $63,012 at July 31, 2010 and April 30, 2010, respectively)		1,508,789			1,813,166
Prepaid expenses and other current assets		100,491			119,939

Total current assets		2,513,940			2,523,268

Property and equipment, net		609,721			700,387
Goodwill		2,136,836			2,136,836
Patent		8,697,869			9,087,326
Intangibles, net		361,106			444,440
Other assets		28,133			31,184

TOTAL ASSETS	$	14,347,605		$	14,923,441


Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	3,051,323		$	3,432,129
Accrued expenses		352,928			393,427
Line of credit		140,000			215,000
Notes payable related parties, current portion		1,700,000			1,505,000
Deferred revenue		96,328			197,769
Other current liabilities		1,349,145			1,053,235

Total current liabilities		6,689,724			6,796,560
Long-term liabilities:
Notes payable related parties, net of current portion		7,079,199			7,604,199
Other liabilities		2,025,000			2,025,000

Total liabilities		15,793,923			16,425,759

Commitments and Contingencies

Stockholders’ 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; 95,518,317 shares issued and outstanding, at July 31, 2010 and April 30, 2010		95,518			95,518
Additional paid-in capital		7,777,299			7,740,043
Accumulated deficit		(9,319,135	)		(9,337,879	)

Total stockholders’ deficit		(1,446,318	)		(1,502,318	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	14,347,605		$	14,923,441

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation
Condensed Consolidated Statements of Operations
(unaudited)



	For the Three Months Ended July 31,

	2010			2009


Sales, net	$	2,877,603		$	2,914,655


Costs of goods sold		1,028,384			941,856


Gross profit		1,849,219			1,972,799

Expenses:
Selling, general and administrative expenses		1,421,404			1,045,071
Depreciation and amortization		568,000			649,005

Total Operating expenses		1,989,404			1,694,076

Operating income (loss)		(140,185	)		278,723


Other income (expense), net:
Interest expense		(259,511	)		(672,596	)
Other income (expense), net		418,440			(10,333	)

Total other income (expense), net		158,929			(682,929	)

Income (loss) before income taxes		18,744			(404,206	)
Income taxes		—			—

Net income (loss)	$	18,744		$	(404,206	)


Basic and diluted earnings (loss) per share	$	0.00		$	(0.01	)


Basic and diluted weighted average number shares outstanding		95,518,317			67,053,100

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation
Condensed Consolidated Statements of Stockholders’ Deficit
(unaudited)



	Common Shares

	Shares		Amount		Additional Paid-in Capital		Accumulated Deficit			Total Stockholders’ Deficit

Balance, April 30, 2010		95,518,317	$	95,518	$	7,740,043	$	(9,337,879	)	$	(1,502,318	)
Stock-based compensation expense		—		—		37,256		—			37,256
Net income		—		—		—		18,744			18,744

Balance, July 31, 2010		95,518,317	$	95,518	$	7,777,299	$	(9,319,135	)	$	(1,446,318	)

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation
Condensed Consolidated Statements of Cash Flows
(unaudited)



	For the Three Months ended July 31,

	2010			2009
Cash Flows from Operating Activities
Net income (loss)	$	18,744		$	(404,206	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization		568,000			649,005
Provision for doubtful accounts		27,445			15,000
Stock-based compensation		37,256			46,883
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable		276,932			(405,579	)
Prepaid expenses and other current assets		19,448			253,476
Goodwill		—			(48,430	)
Other assets		3,051			(7,535	)
Accounts payable		(380,806	)		55,177
Accrued expenses		(40,499	)		386,057
Deferred revenue		(101,441	)		61,667
Other liabilities		295,910			(465,764	)

Net cash provided by operating activities		724,040			135,751

Cash Flows from Investing Activities
Purchases of property and equipment		(4,543	)		(28,437	)

Net cash used in investing activities		(4,543	)		(28,437	)

Cash Flows from Financing Activities
Proceeds from exercise of warrants		—			100
Principal payments on related party notes payable		(330,000	)		(487,467	)
Payments on related party line of credit		(75,000	)		(45,000	)
Principal payments on debt		—			(30,000	)

Net cash used in financing activities		(405,000	)		(562,367	)

Net increase (decrease) in cash		314,497			(455,053	)
Cash at beginning of period		590,163			601,743

Cash at end of period	$	904,660		$	146,690

Cash paid for:
Interest	$	258,260		$	339,000
Income taxes	$	—		$	—

See Notes to Condensed Consolidated Financial Statements.

CornerWorld Corporation
Notes to Condensed Consolidated Financial Statements July 31, 2010
(unaudited)

1. Basis of Presentation

Interim Unaudited Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements as of July 31, 2010 and for the three months ended July 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 month period ended July 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, 2010, as filed with the SEC on Form 10-K.

Organization

The Company 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.

Cornerworld, Inc. was formed under the laws of the state of Delaware on October 7, 2003 and remained inactive until September 1, 2006. Cornerworld Inc. is an Interactive Media Company with a focus in direct marketing that leverages its proprietary lead generation engine to garner qualified leads (consumers) for Fortune 1000 advertisers across social networking websites, niche based websites, its own burgeoning music portal and offline venues.

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 all liabilities and obligations of Leadstream and Enversa.

Enversa, a subsidiary of the Company, 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 ensures that they are billed solely for campaign performance.

The Company operates several ad networks and a proprietary request for proposal (RFP) technology that highlights promotional offers from a variety of corporate clients.

On February 23, 2009, the Company 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, dated February 23, 2009 (the “Effective Date”), by and among Woodland Holdings, the Company, 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 a nd all other issued and outstanding voting member units of Ranger remained held by Woodland Wireless.

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

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, Phone Services and More, L.L.C., doing business as Visitatel (“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”.

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 reach their home providers 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.

The Company’s year-end is April 30^th.

Principles of Consolidation

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

2. Summary of Significant Accounting Policies

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 US GAAP and have been consistently applied in the preparation of the financial statements. The financial statements are stated in United States of America dollars.

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (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, prov ide 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 consolidated financial statements.

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

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

Accounting Standards Codification (“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.

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 Wireless, 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 July 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.

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

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 i n 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 6 Stock Based Compensation, for more details.

Reclassifications

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

3. Intangible Assets

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:



	July 31, 2010			April 30, 2010			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		(2,845,817	)		(2,373,026	)

	$	9,058,975		$	9,531,766

Amortization expense related to identifiable intangible assets totaled $472,791 and $472,265 for the three months ended July 31, 2010 and 2009, respectively.

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

4. Debt



	July 31, 2010			April 30, 2010

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 December 31, 2010. See also note 8, Related Party Transactions.	$	140,000		$	215,000

Long-term Debt
Notes payable to Internet University and the other selling members of Leadstream; the notes mature December 31, 2012. At July 31, 2010 and April 30, 2010 the interest rate was 4.58%.	$	1,414,199		$	1,444,199
Note payable to IU Investments, LLC, due December 31, 2010. At July 31, 2010 and April 30, 2010 the interest rate was 16.0%.		665,000			665,000
Purchase Money Note Payable, due February 23, 2012. At July 31, 2010 and April 30, 2010 the interest rate was 12.0%. See also note 8, Related Party Transactions.		4,200,000			4,200,000
Secured Debenture, due February 23, 2012. At July 31, 2010 and April 30, 2010 the interest rate was 12.0%. See also note 8, Related Party Transactions.		2,500,000			2,800,000

Total debt		8,779,199			9,109,199
Less current portion of long-term debt		(1,700,000	)		(1,505,000	)

Non-current portion of long-term debt	$	7,079,199		$	7,604,199

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

5. Commitments and Contingencies

Litigation

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 Holdings, in favor of Timmer, with a maturity date of February 23, 2012, that certain Purchase Money Note issued by Woodland Holdings in favor of Timmer with a maturity date of February 23, 2012, and certain related security agreements and collateral perfection agreements all of which were 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 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”) which 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.

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

The Company entered into mediation discussions with Mr. Timmer on June 21, 2010 and again on August 11, 2010. The parties did not agree to a settlement as a result of the mediation discussions.

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.

The Company is occasionally involved in litigation matters relating to claims arising from the ordinary course of business. The Company’s management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations and financial condition.

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 4 fiscal years and assumes Woodland achieves certain operating results. As of January 31, 2010, the first measurement date, Woodland had not met the thresholds necessary for Mr. Timmer to receive a payout pursuant to the Earn Out agreement. The Earn-Out Agreement contains a catch-up provision whereby the threshold could be achieved at a later date. Accordingly, the liability for the first year’s earnout provision has not yet been removed from the Company’s balance sheet.

T-2 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. As previously noted, final consummation of the transactions contemplated by the Unit Purchase Agreement remains subject to ongoing discussions among the parties. The Company has accrued $300,000 pursuant to the Unit Purchase Agreement for this contingency.

6. 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. 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 no stock options pursuant to this plan during the three months ended July 31, 2010.

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 three months ended July 31, 2010.

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

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



	July 31, 2010

		Shares Reserved for Grant	Awards Available for Grant

Incentive Stock Plan		4,000,000	2,975,000
Stock Compensation Plan		4,000,000	3,120,000

		8,000,000	6,095,000

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.

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 ASC 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 month periods Ended July 31,

		2010	2009

Expected term (in years)		—	—
Expected volatility		—	—
Risk-free interest rate		—	—
Dividend yield		—	—

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



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

Outstanding at May 1, 2010		2,579,000		$	0.54		3.47	$	0.00
Cancelled/forfeited		(674,000	)		1.00
Exercised		—			—

Outstanding at July 31, 2010		1,905,000		$	0.38		3.43	$	0.00

Options vested and expected to vest*		1,905,000		$	0.38		3.43	$	0.00

Options exercisable at end of period		597,958		$	0.42		3.35	$	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 no turnover of employees to whom options were granted.

As of July 31, 2010 and 2009, the Company recognized $37,256 and $46,883 of stock-based compensation expense, respectively. As of July 31, 2010 there was $468,463 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 4.0 weighted average years.

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

7. Business Segments

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



Three Months Ended July 31, 2010	Direct Marketing Services			Communications Services		Corporate			Consolidated

Revenue	$	1,176,030		$	1,701,573	$	—		$	2,877,603
Income (loss) from continuing operations before tax		(146,752	)		556,164		(390,668	)		18,744
Net (loss) income		(146,752	)		556,164		(390,668	)		18,744
Total assets		1,106,600			12,660,514		580,491			14,347,605
Intangibles		361,106			8,697,869		—			9,058,975
Goodwill		—			1,581,850		554,986			2,136,836
Depreciation and amortization		85,032			473,535		9,433			568,000



Three Months Ended July 31, 2009	Direct Marketing Services		Communications Services		Corporate			Consolidated

Revenue	$	982,196	$	1,932,459	$	—		$	2,914,655
Income (loss) from continuing operations before tax		9,303		304,418		(717,927	)		(404,206	)
Net (loss) income		9,303		304,418		(717,927	)		(404,206	)
Total assets		2,018,354		13,066,951		1,659,237			16,744,542
Intangibles		694,968		10,255,697		—			10,950,665
Goodwill		—		1,135,193		554,986			1,690,179
Depreciation and amortization		86,934		535,712		26,359			649,005

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

8. 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. From time to time, Enversa and Internet University amended the line of credit, which extended the maturity date until December 31, 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 the Company’s membership interests in Enversa, 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 the Company and Enversa receives or is at any time entitled to receive. There was an outstanding balance of $140,000 under the line of credit at July 31, 2010 and the Company no longer has access to the unused portion. The Company recognized interest expenses totaling $2,059 during the three month period ended July 31, 2010 related to this line of credit.

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 a holder of the Company’s $3,100,000 purchase money note; the Company has made multiple principal payments on the purchase money note, including a payment totaling $300,000 during the three month period ended July 31, 2010. The purchase money note balance now stands at $2,500,000. The Company recognized interest expenses payable to Mr. Timmer totaling approximately $213,900 and $219,000 on the secured debenture and the purchase money note during the three month periods ended July 31, 2010 and 2009, respectively.

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

In addition, the Company leases office space for the Company's Woodland division from an entity owned by Mr. Timmer. During the three month periods ended July 31, 2010 and 2009, the Company paid approximately $52,911 and 52,911, respectively, in rent and management fees to Mr. Timmer as a result of this lease.

In connection with the closing of the Woodland Acquisition, the Company issued 1,321,000 warrants to our Chief Executive Officer to purchase the Company’s common stock at an exercise price of $0.20 per share. As of July 31, 2010, the Company has accrued liabilities totaling approximately $285,000 to our Chief Executive Officer.

As part of the Enversa acquisition, the Company borrowed $1,500,000 from Internet University, Inc. and other selling partners of Enversa. A member of the Company’s Board of Directors as well as one of the selling partners of Enversa is the president of Internet University, Inc. The Company made principal payments totaling $30,000 during the three month period ended July 31, 2010 on the facility. In addition, the Company recorded interest of $43,552 and $78,828 on this facility during the three month periods ended July 31, 2010 and 2009, respectively. The balance of the facility totaled $1,414,199 at July 31, 2010.

As part of the Woodland Acquisition, the Company borrowed $1,900,000 from IU Investments LLC. A member of the Company’s Board of Directors as well as one of the selling partners of Enversa is the President of Internet University. The Chief Executive Officer of Internet University is the sole manager of IU Investments LLC. The Company recorded interest of $26,819 and $219,000 on this facility during the three month periods ended July 31, 2010 and 2009, respectively. The balance of this note totaled $665,000 at July 31, 2010.

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

This Form 10-Q 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 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.

Three Months ended July 31, 2010 Highlights:



	•	We continue to generate positive operating cash flow and paid down approximately $405,000 in principal on our outstanding debt.

	•	After removal of non-recurring legal fees totaling $173,417 along with non-cash depreciation & amortization and stock-based compensation expense totaling $568,000 and $37,256, respectively, the Company’s pro-forma profit for the three months ended July 31, 2010 would have totaled approximately $797,417. See the table that follows for more details. The Company expects to continue to generate positive operating cash flows for the fiscal year ended April 30, 2011.

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 income as an indicator of operating performance. The table below provides a reconciliation between GAAP net income and pro-forma net income.



	For the three month period ended July 31, 2010		Per share data

Net Income	$	18,744	$	0.00


Unplanned litigation related legal fees		173,417		0.00

Non-cash charges:
Stock-based compensation		37,256		0.00
Depreciation and amortization		568,000		0.01

Total non-cash charges		605,256		0.01


Pro-Forma Net Income	$	797,417	$	0.01

Weighted average common shares outstanding:
Basic and diluted		95,518,317		95,518,317

Service Offerings

The Company’s business consists of three integrated service offerings: (i) direct marketing services, (ii) communication services and (iii) corporate (formerly on-line media networks). See also Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements – Business Segments for additional segment information.

Critical Accounting Policies and Estimates

In June 2009, the Financial Accounting Standards Board (“FASB”) issued the FASB Accounting Standards Codification (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, provid e 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 consolidated financial statements.

Use of Estimates and Critical Accounting Policies

In preparing our condensed consolidated unaudited financial statements, we make estimates, assumptions and judgments that can have a significant effect on our revenues, income (loss) from operations, and net income (loss), as well as on the value of certain assets on our consolidated balance sheet. 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, impairment of long-lived assets (including goodwill), revenue recognition and stock-based compensation. In addition, please refer to Note 2 of the Notes to the Unaudited Condenses Consolidated Financial Statements for fur ther discussion of our accounting policies.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on an estimate of buckets of customer accounts receivable, stratified by age, that, historically, have proven to be uncollectible; in addition, in certain cases, the allowance estimate is supplemented by specific identification of larger customer accounts and our best estimate of the likelihood of potential loss, taking into account such factors as the financial condition and payment history of major customers. We evaluate the collectibility of our receivables at least quarterly. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The differences could be material and could significantly impact cash flows from operating activities.

Impairment of Long-Lived Assets

The Company’s management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment is measured based on fair value and is charged to operations in the period in which long-lived asset impairment is determined by management.

Goodwill

Goodwill represents the excess of acquisition cost over the net assets acquired in a business combination. Management reviews, on an annual basis, the carrying value of goodwill in order to determine whether impairment has occurred. Impairment is based on several factors including the Company’s projection of future undiscounted operating cash flows. If an impairment of the carrying value were to be indicated by this review, the Company would adjust the carrying value of goodwill to its estimated fair value.

Website Development Costs

Website development costs representing capitalized costs of design, configuration, coding, installation and testing of the Company’s website are capitalized until initial implementation. Upon implementation, the asset is amortized to expense over its estimated useful life of three (3) years using the straight-line method. Ongoing website post-implementation costs of operation, including training and application maintenance, will be charged to expense as incurred.

Revenue Recognition

It is the Company’s policy that revenue from product sales or services will be recognized in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB No. 104”), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. 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 record ed. The Company will defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

Stock-Based Compensation

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model also requires the input of highly subjective assumptions including:



	(a)	The expected volatility of our common stock price, which we determine based on historical volatility of our common stock over the prior eighteen month period;

	(b)	Expected dividends (which do not apply, as we do not anticipate issuing dividends);

	(c)	Expected life of the award, which is estimated based on the historical award exercise behavior of our employees; and

	(d)	The risk-free interest rate which we determine based on the yield of a U.S. Treasury bond whose maturity period equals the options expected term.

These factors could change in the future, affecting the determination of stock-based compensation expense in future periods. In the future, we may elect to use different assumptions under the Black-Scholes valuation model or a different valuation model, which could result in a significantly different impact on our net income or loss.

The Company’s determination of fair value of share-based payment awards is made as of their respective dates of grant using the Black Scholes option valuation model. Because the Company’s options have certain characteristics that are significantly different from traded options, the Black Scholes option valuation model 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, 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 6 – Stock Based Compensation of the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding our accounting policies for stock-based compensation.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued during the three months ended July 31, 2010, none of which are expected to have a material impact on the Company’s consolidated financial position, operations, or cash flows.

Results of Operations

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

Direct marketing services

Our direct marketing services segment consists of our Enversa division.

Revenues, Cost of Sales and Gross profit:

Our direct marketing segment had revenues totaling $1,176,030 for the three month period ended July 31, 2010 as compared to $982,196 for the three month period ended July 31, 2009. This increase is due to adddition of 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 July 31, 2010 to $494,316 from $442,510 for the three month period ended July 31, 2009. Gross profit as a percentage of revenue decreased from 45.1% to 42.0% due to an increase in sales of lower margin services.

Selling, General and Administrative

Selling, general and administrative (“SG&A”) expenses totaled $553,977 for the three months ended July 31, 2010 as compared to $320,879 for the corresponding period in the prior year. The increase of $233,098 is primarily due to the fact that we invested in building a prospecting database and an internal sales process which created corresponding increases in headcount, rent and utilities. In addition, we recorded bad debt expense of $27,445 for the three month period ended July 31, 2010 related to problems associated with revenues from one customer.

Net Loss

Net loss totaled $146,752 for the three months ended July 31, 2010 as compared to net income of $9,303 for the corresponding period in the prior year. The net loss is primarily due to the SG&A increases associated with the investment in building a prospecting database and our internal sales organization. In addition, we recorded bad debt expense of $27,445 for the three month period ended July 31, 2010 related to problems associated with revenues from one customer.

Communications services

Our communications services segment consists of all the businesses acquired in the Woodland Acquisition.

Revenues, Cost of Sales and Gross profit:

Our communications services segment had revenues totaling $1,701,573 for the three month period ended July 31, 2010 as compared to $1,932,459 for the three month period ended July 31, 2009. This decrease is primarily due to the fact that our two largest customers merged in the second half of calendar year 2009 and, accordingly, the Company experienced a reduction in roaming revenues.

For the same reasons, gross profit decreased for the three months ended July 31, 2010 to $1,354,903 from $1,530,289 for the three month period ended July 31, 2009. Gross profit as a percentage of revenue remained relatively flat at 79.6% during the three months ended July 31, 2010 versus 79.2% during the corresponding period in the prior year.

Selling, General and Administrative

SG&A expenses totaled $529,739 for the three months ended July 31, 2010 as compared to $460,681 for the corresponding period in the prior year. The increase of $69,058 is primarily due to non-recurring legal expenses which totaled $173,417 incurred during the three month period ended July 31, 2010. Absent legal expenses, SG&A for the three months ended July 31, 2010 would have totaled $356,322 a decrease of $104,359 from the prior year period. This decrease is attributable primarily to staffing reductions and other cost saving measures enacted at our communications services segment.

Net Income

Net income totaled $556,164 for the three months ended July 31, 2010 as compared to net income of $304,418 for the corresponding period in the prior year. The increase of $251,746 is primarily due to the fact that we received a favorable lawsuit settlement during the three month period ended July 31, 2010. In addition, interest expenses were slightly down resulting from the pay down of debt. These increases were offset, to some extent, by the decrease in revenues related to the merger of our two largest customers during the second half of 2009.

Corporate (formerly On-line media networks)

Our corporate segment consists of the CornerWorld, Inc. division as well as expenses generated from our corporate group.

Revenues, Cost of Sales and Gross profit:

By its nature, the Corporate group generates no revenues or gross profit.

Selling, General and Administrative

SG&A costs totaled $337,688 for the quarter ended July 31, 2010 versus $263,331 for the corresponding period in the prior year. The increase of $74,357 is primarily due to the fact that we continued to develop our operations, including the relocation of all accounting and human resources personnel to our Dallas office. These costs had previously been borne in the SG&A of their respective divisions. Expenses for this segment also include all costs associated with corporate overhead, including accounting, legal, corporate governance and other related costs involved in being a publicly traded company.

Liquidity and Capital Resources

As of July 31, 2010, we had a working capital deficit of approximately $4,175,784 and cash of $904,660. Our working capital deficit is primarily related to the short-term nature of selected tranches of the debt we issued to finance our acquisitions. Though we expect that we will refinance a substantial portion of these short-term obligations, there can be no guarantee that we will do 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 July 31, 2010, consisted primarily of $4,543 of capital expenditures.

We presently have a $500,000 line of credit with Internet University, Inc. At July 31, 2010, we had approximately $140,000 outstanding under this credit line, but we no longer have access to the unused portion of this line. We have been making payments as prescribed pursuant to the line of credit agreement. We have no other bank financing or other external sources of liquidity. We source all of our liquidity through our operations. This was our fifth consecutive quarter where the Company’s operations generated positive operating cash flow and we expect that trend to continue.

We may 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. 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 (the Exchange Act”), 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 principal executive officer and its chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) or 15d-15(e)) as of July 31, 2010. Based on that evaluation, the Company’s chief executive office and chief financial officer 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, described above, related to a shortage of resources in the accounting department.

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. 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

None.

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. [Removed and Reserved]

Item 5. Other information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report:



Exhibit Numbers	Description	Method of 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	(2)
32.2	Section 1350 Certification by our chief financial officer	(2)




(1)	Filed herewith.
(2)	Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.

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

September 14, 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