Cornerworld (CWRLD) 10-K 2010 FY Annual report

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

FORM 10-K

(Mark One)

R	Annual report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 for the fiscal year ended April 30, 2010
Or
o	Transition report pursuant to Section 13 or 15(d) of the Securities and 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 or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

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

(214) 224-1000
(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value
(Title of class)

Indicate by check mark whether the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
Yeso    NoR

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yeso    NoR

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YesR    Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yeso    Noo

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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. (Check one):

Large accelerated filero Accelerated filero Non-accelerated filero Smaller reporting companyR

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

As of October 31, 2009, the aggregate market value of the issued and outstanding common stock held by non-affiliates of the registrant, based upon the closing price of the common stock as quoted on the National Association of Securities Dealers Inc. OTC Bulletin Board of $0.06 was approximately $5,746,099. For purposes of the above statement only, all directors, executive officers and 10% shareholders are assumed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for any other purpose. As of August 10, 2010, there were 95,518,317 shares of the registrant’s common stock outstanding.

INDEX

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	3
Item 1B.	Unresolved Staff Comments	3
Item 2.	Properties	3
Item 3.	Legal Proceedings	3
Item 4.	Submission of Matters to a Vote of Security Holders	4
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4
Item 6.	Selected Financial Data	5
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	6
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	12
Item 8.	Financial Statements and Supplementary Data	12
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	13
Item 9A(T).	Controls and Procedures	13
Item 9B.	Other Information	15
PART III
Item 10.	Directors, Officers, and Corporate Governance	15
Item 11.	Executive Compensation	15
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	15
Item 13.	Certain Relationships and Related Transactions, and Director Independence	15
Item 14.	Principal Accountant Fees and Services	15
PART IV
Item 15	Exhibits and Financial Statement Schedules	16
Signatures		21

PART I

ITEM 1. BUSINESS

Overview and Plan of Operation

Company History
Cornerworld Corporation (hereinafter referred to as “Cornerworld”, the “Company”, “we” “our” or “us”) was incorporated on November 9, 2004, in the State of Nevada. Effective May 2007, we changed our name to Cornerworld Corporation. Our principal executive offices are currently located at 12404 Park Central, Suite 400, Dallas, Texas 75251. Our telephone number is (214) 224-1000 and our fiscal year-end is April 30.

The Company is a marketing and technology services company creating opportunities from the increased accessibility of content across mobile, television and internet platforms. Our key asset is the patented 611 Roaming Service^TM from RANGER Wireless Solutions ®, which generates revenue by processing over 14 million calls from roaming wireless customers per year and seamlessly connecting them to their service provider.

On August 27, 2008, Cornerworld entered into a Share Exchange Agreement and Plan of Merger (the “Enversa 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. Pursuant to the Enversa 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.

As a result of the merger, Enversa, a leading marketing communications provider, became a subsidiary of Cornerworld. 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, 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 of the Woodland Acquisition, 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 (“Visitatel”), 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 Visitatel 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 the satisfaction of certain closing conditions.

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Woodland Wireless, Ranger, WMCLS and Visitatel 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 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.

Visitatel 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.

Business Segments

Our business consists primarily of three integrated business segments: (i) direct marketing services, (ii) communications services and (iii) corporate. Our direct marketing services segment is primarily comprised of our Enversa Companies and subsidiaries. Our communication services segment consists of the Ranger Wireless Group and the entities comprising the T2 Group, which, although they are not owned by us, are controlled by us pursuant to the terms of the Unit Purchase Agreement and, therefore, treated by us as variable interest entities (“VIE’s”) and consolidated for accounting purposes. Our on-line media network segment is comprised primarily of CornerWorld, Inc. For financial information relating to our business segments, please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data.”

Regulatory Matters

Portions of our operations, particularly our application services to the cellular industry, are highly regulated and subject to a variety of federal and state laws, including environmental laws, which require that we obtain various licenses, permits and approvals. We must obtain and maintain various federal, state and local governmental licenses, permits and approvals in order to provide our services. We believe we are in material compliance with all applicable licensing and similar regulatory requirements.

Employees

As of April 30, 2010, including leased employees, we had an aggregate of 27 full-time employees. None of these employees are represented by collective bargaining agreements and the Company considers it relations with its employees to be good.

Corporate Information

CornerWorld, Corporation is a Nevada corporation with principal executive offices located at 12404 Park Central Drive, Suite 400, Dallas, Texas 75251. Our website address is www.cornerworld.com. We make available on our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and any amendments to such reports, as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the SEC.

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Forward-Looking Statements

The information in this annual report contains forward-looking statements within the meaning of the Private Securities litigation Reform Act of 1995. This Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about themselves so long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than these statements of historical fact made in this report are forward-looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations.

The following discussion and analysis should be read in conjunction with the financial statements of Cornerworld Corporation, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Company currently leases office space that it shares with Enversa consisting of approximately 4,000 square feet. The lease agreement for this property is contained in the transition services agreement with Internet University, Inc. which expires August 27, 2011.

The Ranger Wireless Group and the T2 Group lease an office building as their headquarters in Holland, Michigan. The lease agreement for this property expires February 23, 2012.

ITEM 3. 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 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 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.

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          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.

          The Company entered into mediation discussions with Mr. Timmer on June 21, 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Not applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Common Equity and Related Stockholder Matters

Our common stock is traded on the OTC Bulletin Board under the symbol “CWRL”. The following table sets forth the range of high and low prices per share of our common stock for each period indicated.

These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not necessarily reflect actual transactions.

Trading in our common stock in the over-the-counter market has been limited and sporadic and the quotations set forth below are not necessarily indicative of actual market conditions.

	High		Low
2010
Quarter ended April 30, 2010	$	0.05	$	0.02
Quarter ended January 31, 2010		0.06		0.03
Quarter ended October 31, 2009		0.06		0.05
Quarter ended July 31, 2009		0.10		0.05
2009
Quarter ended April 30, 2009	$	0.41	$	0.10
Quarter ended January 31, 2009		0.47		0.15
Quarter ended October 31, 2008		0.79		0.20
Quarter ended July 31, 2008		0.80		0.26

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On October 6, 2006 the Company obtained regulatory approval to post common shares for quoting on the OTC Bulletin Board.

As of August 3, 2010, there were approximately70 holders of record of our common stock. Because brokers and other institutions hold many of the shares on behalf of shareholders, we are unable to determine the actual number of shareholders represented by these record holders.

Dividends

We have never declared or paid cash dividends on our common stock. We currently anticipate that we will retain all future earnings to fund the operation of our business and do not anticipate paying dividends on our common stock in the foreseeable future.

Penny Stock

The Company’s common stock is subject to provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), commonly referred to as the “penny stock rule.” Section 15(g) sets forth certain requirements for transactions in penny stock, and Rule 15g-9(d) incorporates the definition of “penny stock” that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines a penny stock to be any equity security that has a market price less than $5 per share, subject to certain exceptions. The Company is subject to the SEC’s Penny Stock rules.

Since the Company’s common stock is deemed to be penny stock, trading in the shares is subject to additional sales practice requirements on broker-dealers who sell penny stock to persons other than established customers and accredited investors. “Accredited investors” are persons with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse. For transactions covered by these rules, broker-dealers must make a special suitability determination for the purchase of such security and must have the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt the rules require the delivery, prior to the first transaction of a risk disclosure document, prepared by the SEC, relating to the penny stock market. A broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information for the penny stocks held in an account and information to the limited market in penny stocks. Consequently, these rules may restrict the ability of broker-dealer to trade and/or maintain a market in the Company’s Common Stock and may affect the ability of the Company’s stockholders to sell their shares.

Recent Issuances of Unregistered Stock

The Company issued 31,450,000 shares of its common stock pursuant to the exercise on July 23, 2009 of a warrant issued to Mr. Ned B. Timmer in connection with the Woodland Acquisition. The proceeds from this exercise totaled $100. Since the transaction was not a public offering within the meaning of Section 4(2) of the Securities Act, the issuance was deemed exempt from registration.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The statements of operations data for the years ended April 30, 2010, 2009 and 2008 and the balance sheet data at April 30, 2010 and 2009 are derived from our audited financial statements which are included elsewhere in this Form 10-K. The historical results are not necessarily indicative of results to be expected for future periods.

5

Consolidated Statements of Operations Data:

	For the Year Ended April 30:									For the period from September 1, 2006 to
	2010			2009			2008			April 30, 2007
Revenue	$	11,446,700		$	3,940,672		$	—		$	—
Costs of goods sold		3,601,914			1,574,859			—			—
Gross profit (loss)		7,844,786			2,365,813			—			—
Total operating expenses		(7,890,895	)		(4,282,152	)		(4,968,077	)		(28,081	)
Income (loss) from operations		(46,109	)		(1,916,339	)		(4,968,077	)		(28,081	)
Other (expense) income, net		(1,724,108	)		(636,649	)		(8,016	)
Income taxes		—			(10,500	)		—			—
Net Loss	$	(1,770,217	)	$	(2,563,488	)	$	(4,976,093	)	$	(28,081	)
Basic and diluted loss per share	$	(0.02	)	$	(0.05	)	$	(0.07	)	$	(0.00	)
Shares used in calculation of loss per share:
Basic and diluted		88,490,098			52,745,577			66,768,133			62,700,000

Consolidated Balance Sheet Data:

	April 30,
	2010			2009		2008			2007
Cash and cash equivalents	$	590,163		$	601,743	$	45,164		$	110,873
Total Assets	$	14,923,441		$	17,627,095	$	298,293		$	148,944
Long-term obligations	$	9,629,199		$	10,825,000	$	—		$	—
Total Shareholders’ equity (deficit)	$	(1,502,318	)	$	16,624	$	(131,184	)	$	125,094

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

The following discussion should be read in conjunction with the Financial Statements and Notes thereto. This document contains certain forward-looking statements including, among others, anticipated trends in our financial condition and results of operations and our business strategy. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from these forward-looking statements. Important factors to consider in evaluating such forward-looking statements include (i) changes in external factors or in our internal budgeting process which might impact trends in our results of operations; (ii) unanticipated working capital or other cash requirements; (iii) changes in our business strategy or an inability to execute our strategy due to unanticipated changes in the industries in which we operate; and (iv) various competitive market factors that may prevent us from competing successfully in the marketplace.

Overview:
CornerWorld Corporation is a holding Company whose wholly owned subsidiaries operate in three rapidly changing business segments. 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. Cornerworld.com is a free, groundbreaking business management and social networking platform that empowers independent content creators to share and profit from their skills.

6

Fiscal Year 2010 Highlights:

• We paid down approximately $1.7 million in principal on our outstanding debt.

• We completed the integration of our Enversa 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 human resources functions to our corporate offices and built an internal sales force.

• One of our debt holders extended its repayment terms for almost two years while another group of lenders agreed to an amortization of their debt as opposed to being paid a earnings based formula driven “scrape”.

• After removal of non-recurring legal fees totaling $514,403 along with non-cash depreciation & amortization and stock-based compensation expense totaling $2,369,941 and $256,175, respectively, the Company’s pro-forma profit for the year ended April 30, 2010 would have totaled approximately $1,370,302. 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) non-recurring M&A and legal fees and (ii) non-recurring non-cash 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.

	April 30, 2010						April 30, 2009
	Total			Per share data			Total			Per share data
Net Loss	$	(1,770,217	)	$	(0.02	)	$	(2,563,488	)	$	(0.05	)
Non-recurring charges:
Legal		514,403			0.01			738,351			0.01
Merger & acquisitions related charges		—			—			890,000			0.02
Total non-recurring charges		514,403			0.01			1,628,351			0.03
Non-cash charges:
Stock-based compensation		256,175			0.00			379,916			0.01
Depreciation and amortization		2,369,941	1		0.03			791,821			0.01
Total non-cash charges		2,626,116			0.03			1,171,737			0.02
Pro-Forma Net Income	$	1,370,302		$	0.02		$	236,600		$	0.00
Weighted average common shares outstanding:
Basic and diluted		88,490,098						52,745,577

¹ Amount includes $46,666 in impairment losses on assets no longer in service.

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Critical Accounting Policies and Estimates

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

Use of Estimates and Critical Accounting Policies

In preparing our consolidated financial statements, we make estimates, assumptions and judgments that can have a significant effect on our revenues, income (loss) from operations, and net income, 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, recoverability of long-lived assets (including goodwill), revenue recognition and stock-based compensation. In addition, please refer to Note 1 to the accompanying financial statements for further 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.

8

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. 101 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 recorded. 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 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 valuation model.

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 9 – Stock Based Compensation – to the consolidated financial statements contained in this report for additional information regarding our accounting policies for stock-based compensation.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued during the year ended April 30, 2010, none of which are expected to have a material impact on the Company’s consolidated financial position, operations, or cash flows.

9

Results of Operations – Year ended April 30, 2010 compared to April 30, 2009

Direct marketing services

Our direct marketing services segment consists of our Enversa division. As previously noted, Enversa was acquired on August 27, 2008 and this annual report only includes operating data for that segment since that date. Accordingly, presentation of an analysis of current year’s operating results versus prior year operating results would be misleading. Please see Note 3 Acquisitions, in the attached financial statements for pro-forma financial data for the year ended April 30, 2009.

Communications services

Our communications services segment consists of all businesses acquired in the Woodland Acquisition. As previously noted, we closed the Woodland Acquisition on February 23, 2009 and this annual report only includes operating data for that segment since that date. Accordingly, presentation of an analysis of current year’s operating results versus prior year operating results would be misleading. Please see Note 3 Acquisitions, in the attached financial statements for pro-forma financial data for the year ended April 30, 2009.

Corporate

Our corporate segment, formerly called our on-line media networks segment, consists of the CornerWorld, Inc. division as well as expenses generated from our corporate group.

Revenues, Cost of Sales and Gross profit:

Our corporate segment had no revenue or gross profit for the year ended April 30, 2010 or the year ended April 30, 2009. We had no revenue generating operations in either period.

Selling, General and Administrative

Selling, general and administrative (SG&A) costs for our corporate segment totaled $1,495,867 for the year ended April 30, 2010 versus $2,588,830 for the corresponding period in the prior year. The decrease of $1,092,963 is primarily due to the impact of non-recurring legal fees and other merger related costs incurred in the year ended April 30, 2009 associated with our Enversa and Woodland acquisitions. This decrease was offset, to some extent, by increased headcount expenses associated with increasing our corporate infrastructure.

Net Loss

For the year ended April 30, 2010, we incurred a net loss for our corporate segment of $2,413,110 as compared to a net loss of $2,352,751 for the year ended April 30, 2009. The increase in net loss is primarily attributable to increases in interest expenses recognized as a result of debt incurred in connection with the Enversa and Woodland acquisitions.

Results of Operations – Year ended April 30, 2009 compared to April 30, 2008

Direct marketing services

As previously noted, Enversa was acquired on August 27, 2008 and this annual report only includes operating data for that segment since that date. Accordingly, presentation of an analysis of operating results for the year ended April 30, 2009 versus prior year operating results would be misleading. Please see Note 3 Acquisitions, in the attached financial statements for pro-forma financial data for the year ended April 30, 2009.

10

Communications services

As previously noted, we closed the Woodland Acquisition on February 23, 2009 and this annual report only includes operating data for that segment only since that date. Accordingly, presentation of an analysis of operating results for the year ended April 30, 2009 versus prior year operating results would be misleading. Please see Note 3 Acquisitions, in the attached financial statements for pro-forma financial data for the year ended April 30, 2009

Corporate

Revenues, Cost of Sales and Gross profit:
Our Corporate segment, which was formerly known as our on-line media networks segment, had no revenue or gross profit for the year ended April 30, 2009. These results are consistent with the year ended April 30, 2008 when we were a development stage entity and were in the process of building our infrastructure. We had no revenue generating operations in either period.

Selling, General and Administrative
Selling, general and administrative (SG&A) costs for the segment totaled $2,588,830 for the year ended April 30, 2009 versus $496,977 for the corresponding period in the prior year. The increase of $2,091,853 is primarily due to the impact of merger related costs associated with our Enversa and Woodland acquisitions, The most substantial expenses incurred were merger and acquisition fees as well as legal fees totaling $890,000 and $738,351, respectively.

Net Loss

For the year ended April 30, 2009, we incurred a net loss for the segment of $2,352,751 compared to a net loss for the segment of $4,976,093 for the year ended April 30, 2008. The decrease in net loss is primarily attributable to the fact that the prior year figure included shell transaction costs in the form of common stock and stock options issued which totaled $4,055,000.

Liquidity and Capital Resources

As of April 30, 2010, we had a working capital deficit of approximately $4,273,292 and cash of $590,163. 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 be able to 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 year ended April 30, 2010, consisted primarily of the completion of the purchase of our general ledger platform.

We presently have a $500,000 line of credit with Internet University, Inc.; at April 30, 2010, we had approximately $215,000 outstanding under this credit line but 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. Our operations were our primary source of liquidity for the fiscal year ended April 30, 2010. We will need to obtain additional capital in order to maintain and 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, on terms acceptable to us.

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Contractual Obligations

The following table presents our contractual obligations as of April 30, 2010:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1 – 3 Years		4 – 5 Years		More than 5 Years
Notes payable to related parties	$	9,109,199	$	1,505,000	$	7,604,199	$	—	$	—
Line of credit with related party		215,000		215,000		—		—		—
Operating leases		176,370		176,370		—		—		—
Total	$	9,500,569	$	1,896,370	$	7,604,199	$	—	$	—

Off-balance sheet arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Inflation

We believe that, for the year ended April 30, 2010, inflation has not had a material effect on our operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated financial statements and supplementary data are included in pages F-2 through F-24 of this Annual Report on Form 10-K.

Quarterly Results of Operation (Unaudited)

The following table presents the Company’s unaudited quarterly statements of operations for each of the eight quarters in the two-year period ended April 30, 2010. The information in the table should be read in conjunction with the Company’s audited consolidated financial statements and related notes contained elsewhere in this report. The underlying unaudited financial statements are prepared on the same basis as the audited consolidated financial statements included in this report, which include all adjustments, consisting only of normal recurring adjustments, that are considered necessary for the fair presentation of the Company’s financial position and operating results for the quarters presented. Operating results for any quarter are not necessarily indicative of results for any future periods.

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	Three Months Ended
	July 31, 2008			October 31, 2008			January 31, 2009			April 30, 2009			July 31, 2009			October 31, 2009			January 31, 2010			April 30, 2010
Net sales	$	—		$	613,850		$	728,382		$	2,598,440		$	2,914,655		$	2,928,300		$	2,905,443		$	2,698,302
Cost of Sales		—			321,164			492,417			761,278			941,856			762,209			939,045			958,805
Gross profit		—			292,686			235,965			1,837,162			1,972,799			2,166,091			1,966,398			1,739,497
Selling, general and administrative expenses		115,560			459,929			681,724			2,233,118			1,045,071			1,191,975			1,721,780			1,562,128
Depreciation and amortization		—			84,398			113,291			594,132			649,005			624,652			625,774			470,510
Operating Income (loss)		(115,560	)		(251,641	)		(559,050	)		(990,088	)		278,723			349,464			(381,156	)		(293,141	)
Other income (expense), net		7,989			(18,958	)		(41,777	)		(583,903	)		(682,929	)		(371,300	)		(433,903	)		(235,975	)
Loss before income taxes		(107,571	)		(270,599	)		(600,827	)		(1,573,991	)		(404,206	)		(21,836	)		(815,059	)		(529,116	)
Income tax expense		—			—			—			(10,500	)		—			—			—			—
Net loss	$	(107,571	)	$	(270,599	)	$	(600,827	)	$	(1,584,491	)	$	(404,206	)	$	(21,836	)	$	(815,059	)	$	(529,116	)
Basic and diluted net loss per share	$	(0.00	)	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted average common shares outstanding:
Basic and diluted		58,498,752			45,911,795			46,991,795			59,834,609			67,053,100			95,768,317			95,768,317			95,602,587

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A(T) 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 April 30, 2010. Based on that evaluation, the Company’s chief executive officer 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, as discussed further below under Management’s Report on Internal Control over Financial Reporting.

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Management’s Report on Internal Control over Financial Reporting

          Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Section 13a-15(f) of the Securities Exchange Act of 1934, as amended). Internal control over financial reporting is a process designed by, or under the supervision of, the Company’s CEO and the company’s CFO and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in conformity with U.S. GAAP and include those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

          As of April 30, 2010, management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the framework established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the criteria established by COSO management concluded that the Company’s internal control over financial reporting was not effective as of April 30, 2010, as a result of the identification of the material weakness described below.

          A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

          Our management, including our chief executive officer and chief financial officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with associated policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

          The Company’s management has identified a material weakness in the effectiveness of internal control over financial reporting related to a shortage of resources in the accounting department required to assure appropriate segregation of duties. In addition, due to the small size of the accounting staff, the Company does not have adequate personnel required to document and test internal controls other than the personnel actually performing the required duties.

This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to temporary rules of the Securities Exchange Commission that permit the company to provide only management’s report in this annual report.

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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 has hired a sufficient number of resources 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. However, the current size of the accounting department precludes management from adequately segregating duties amongst personnel and documenting and testing the internal controls under which the accounting department operates. Management believes that it has put sufficient review controls in place to mitigate the risks associated with the small size of the accounting department. However, 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.

ITEM 9B. OTHER INFORMATION

None

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

The information required by this Item 10 is incorporated herein by reference to the applicable information in our definitive proxy statement related to the 2010 annual meeting of stockholders (the “2010 Proxy Statement”) to be filed not later than August 30, 2010 with the Securities and Exchange Commission.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item 11 is incorporated by reference to the applicable information in the 2010 Proxy Statement to be filed not later than August 30, 2010 with the Securities and Exchange Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this Item 12 is incorporated by reference to the applicable information in the 2010 Proxy Statement to be filed not later than August 30, 2010 with the Securities and Exchange Commission. The information required by Item 201(d) of Regulation S-K is included in this Form 10-K underItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities, above.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item 13 is incorporated by reference to the applicable information in the 2010 Proxy Statement to be filed not later than August 30, 2010 with the Securities and Exchange Commission.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item 14 is incorporated by reference to the applicable information in the 2010 Proxy Statement to be filed not later than August 30, 2010 with the Securities and Exchange Commission.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Report:

(1.) Financial Statements

The reports of our independent registered public accounting firm and our consolidated financial statements are listed below and begin on page F-1 of this Annual Report on Form 10-K.

Financial Information

	Page Number
Report of Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheets	F-2
Consolidated Statements of Operations	F-3
Consolidated Statements of Stockholders’ Equity (Deficit)	F-4
Consolidated Statements of Cash Flows	F-5
Notes to Consolidated Financial Statements	F-6 – F-23

(2.) Schedules

None.

(3.) Exhibits

The exhibits to this report are listed in the exhibit index below.

(b) Description of exhibits

INDEX TO EXHIBITS

Exhibit Number	Description of Exhibit
2.1	Share Exchange Agreement, dated May 11, 2007, by and among Cornerworld, Inc. and each of the shareholders of Cornerworld, Inc. and Cornerworld Corporation (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed May 30, 2007).
2.2	Letter Agreement, dated June 21, 2007, amending the Share Exchange Agreement, dated May 11, 2007, by and among Cornerworld, Inc. and each of the shareholders of Cornerworld, Inc. and Cornerworld Corporation (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed August 15, 2007).
2.3	Amendment No. 2, dated July 27, 2007, to the Share Exchange Agreement, dated May 11, 2007, by and among Cornerworld, Inc. and each of the shareholders of Cornerworld, Inc. and Cornerworld Corporation (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed August 15, 2007).

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2.4	Amendment No. 3, dated August 8, 2007, to the Share Exchange Agreement, dated May 11, 2007, by and among Cornerworld, Inc. and each of the shareholders of Cornerworld, Inc. and Cornerworld Corporation (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed August 15, 2007).
2.5	Share Purchase Agreement, dated March 7, 2008, by and among Cornerworld Corporation., Sway, Inc. and the shareholders of Sway, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed March 13, 2008).
2.6	Amendment No. 1, dated March 12, 2008, to the Share Purchase Agreement, dated March 7, 2008, by and among Cornerworld Corporation, Sway, Inc. and the shareholders of Sway, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed March 13, 2008).
2.7	Share Exchange Agreement and Plan of Merger, dated August 27, 2008, by and among Cornerworld Corporation, Enversa Companies LLC, Leadstream LLC, and the holders of the membership interests of Leadstream (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed September 3, 2008).
2.8	Stock Purchase Agreement, dated February 23, 2009, by and among Cornerworld Corporation, Woodland Holdings Corp., Ned B. Timmer and HCC Foundation (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
2.9	Unit Purchase Agreement, dated February 23, 2009, by and among Woodland Holdings Corp., Phone Services and More, L.L.C., T2 Communications, L.L.C. and Ned B. Timmer (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
3.1	Articles of Incorporation of CornerWorld Corporation formerly known as Olympic Weddings International, Inc., dated November 9, 2004 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, filed September 27, 2005).
3.2	Bylaws of CornerWorld Corporation formerly known as Olympic Weddings International, Inc., dated November 9, 2004 (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, filed September 27, 2005).
4.1	Form of Registration Rights Agreement, dated August 27, 2008 by and among Cornerworld Corporation, Internet University, Inc., Marc Blumberg and Marc Pickren (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed September 3, 2008).
10.1	Amended and Re-Stated Letter Agreement, dated August 10, 2007, by and among Cornerworld, Inc., Cornerworld Corporation and the Majority Shareholders of Cornerworld Corporation (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed August 15, 2007).

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10.2	Letter Agreement, dated October 19, 2007, by and between Cornerworld Corporation and Dynasty Capital LLC (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed November 7, 2007).
10.3	Purchase Agreement, dated October 19, 2007, by and between Cornerworld, Inc. and Dynasty Capital LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed November 7, 2007).
10.4	Security Agreement, dated October 19, 2007, by and between Cornerworld, Inc. and Dynasty Capital LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed November 7, 2007).
10.5	Promissory Note, dated October 22, 2007, issued by Cornerworld, Inc. to Dynasty Capital LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 7, 2007).
10.6	Form of Promissory Note, dated August 27, 2008, issued by Cornerworld Corporation to Leadstream Members (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed September 3, 2008).
10.7	Debenture, dated February 23, 2009, issued by Woodland Holdings Corp. and Cornerworld Corporation to Ned B. Timmer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.8	Purchase Money Note, dated February 23, 2009, issued by Woodland Holdings Corp. to Ned B. Timmer (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.9w	Warrant to purchase 31,450,000 shares of Cornerworld Corporation common stock, dated February 23, 2009, issued to Ned B. Timmer (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.10w	Warrant to purchase 2,750,000 shares of Cornerworld Corporation common stock, dated February 23, 2009, issued to Ned B. Timmer (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.11	Pledge and Security Agreement, dated February 23, 2009, made by Cornerworld Corporation, Cornerworld, Inc. and Enversa Companies LLC in favor of Ned B. Timmer (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.12	Pledge and Security Agreement, dated February 23, 2009, made by Woodland Holdings Corp., S Squared, LLC, T2 TV, LLC, Woodland Wireless Solutions, Ltd. and West Michigan Co-Location Services, LLC in favor of Ned B. Timmer (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.13	Guaranty, dated February 23, 2009, by Cornerworld Corporation, Cornerworld, Inc., Enversa Companies LLC, Woodland Holdings Corp., S Squared, LLC, T2 TV, LLC, Woodland Wireless Solutions, Ltd. and West Michigan Co-Location Services, LLC, in favor of and for the benefit of Ned B. Timmer (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.14	Earn-Out Agreement, dated February 23, 2009, by and between Woodland Holdings Corp. and Ned B. Timmer (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.15	Subscription Agreement, dated February 23, 2009, by and between Cornerworld Corporation and IU Investments, LLC (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.16	Promissory Note, dated February 23, 2009, issued by Cornerworld Corporation to IU Investments, LLC (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K, filed February 27, 2009).

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10.17	Pledge and Security Agreement, dated February 23, 2009, made by Cornerworld Corporation, Cornerworld, Inc., and Enversa Companies LLC in favor of IU Investments, LLC (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.18	Pledge and Security Agreement, dated February 23, 2009, made by Woodland Holdings Corp., S Squared, LLC, T2 TV, LLC, Woodland Wireless Solutions, Ltd. and West Michigan Co-Location Services, LLC in favor of IU Investments, LLC (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.19	Revolving Line of Credit Note, dated August 27, 2008, by Enversa Companies LLC in favor of Internet University, Inc. (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.20	Amendment No. 1, dated February 23, 2009, to Revolving Line of Credit Note, dated as of August 27, 2008, by and among Cornerworld Corporation, Enversa Companies LLC and Internet University, Inc. (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.21	Letter Agreement with Oberon Securities, LLC, dated February 20, 2009, by and between Cornerworld Corporation and Oberon Securities, LLC (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.22w	Warrant to purchase 250,000 shares of Cornerworld Corporation common stock, dated February 23, 2009, issued by Cornerworld Corporation to Peter Lazor (incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.23w	Employment Agreement, dated February 23, 2009, by and between Woodland Wireless Solutions, Ltd. and Ned B. Timmer (incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.24	Consulting Agreement, dated February 23, 2009, by and between Cornerworld Corporation and Peter Lazor (incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K, filed February 27, 2009).
10.25w	Employment Agreement between CornerWorld Corporation and Scott N. Beck dated August 22, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q/A, filed July 27, 2010).
10.26w	Warrant issued to Marc Blumberg dated November 21, 2008 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q/A, filed July 27, 2010).
10.27w	Warrant issued to Marc Blumberg dated February 23, 2009 (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q/A, filed July 27, 2010).
10.28w	Warrant issued to Scott N. Beck dated February 23, 2009 (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q/A, filed July 27, 2010).
10.29	Amendment No. 1 to Promissory Note dated as of March 31, 2010 between CornerWorld Corporation and IU Investments, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 6, 2010)
10.30	Amendment No. 2 to Line of Credit dated as of March 31, 2010 between Enversa Companies and Internet University, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 6, 2010)
10.31	Amendment No. 1 to Promissory Note dated as of March 31, 2010 between CornerWorld Corporation and Internet University, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 6, 2010)

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10.32	Amendment No. 1 to Promissory Note dated as of March 31, 2010 between CornerWorld Corporation and Marc Blumberg (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 6, 2010)
10.33	Amendment No. 1 to Promissory Note dated as of March 31, 2010 between CornerWorld Corporation and Marc Pickren (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed April 6, 2010)
21.1*	Subsidiaries of Cornerworld Corporation.
31.1*	Certification of Chief Executive Officer pursuant to Rule 13(a)-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
31.2*	Certification of Chief Financial Officer pursuant to Rule 13(a)-14(a) and 15(d)-14(a) of the Securities Exchange Act of 1934, as amended.
32.1**	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.
32.2**	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350.

*	Filed herewith.
**	Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.
w	Management plan, compensatory arrangement or employment agreement.

20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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
August 12, 2010	By:	/s/ Scott Beck
		Scott Beck
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Scott Beck	Chairman of the Board of Directors and	August 12, 2010
Scott Beck	Chief Executive Officer (Principal Executive Officer)
/s/ V. Chase McCrea III	Chief Financial Officer	August 12, 2010
V. Chase McCrea III	(Principal Financial and Accounting Officer)
/s/ Ned B. Timmer	Director	August 12, 2010
Ned B. Timmer
/s/ Peter A. Lazor	Director	August 12, 2010
Peter A. Lazor
/s/ Marc Blumberg	Director	August 12, 2010
Marc Blumberg

21

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
CornerWorld Corporation

We have audited the accompanying consolidated balance sheets of CornerWorld Corporation as of April 30, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for the years ended April 30, 2010, 2009 and 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CornerWorld Corporation as of April 30, 2010 and 2009, and the consolidated results of its operations and cash flows for the three years ended April 30, 2010, in conformity with accounting principles generally accepted in the United States of America.

/s/ SCHUMACHER & ASSOCIATES, INC.

Denver, Colorado
August 12, 2010

F-1

CornerWorld Corporation
Consolidated Balance Sheets
(Dollars and shares in thousands, except per share data)

	April 30,
	2010			2009
Assets
Current assets:
Cash	$	590,163		$	601,743
Accounts receivable, net		1,813,166			1,688,211
Prepaid expenses and other current assets		119,939			705,230
Total current assets		2,523,268			2,995,184
Property and equipment, net		700,387			1,545,451
Goodwill		2,136,836			1,641,749
Patent		9,087,326			10,645,154
Intangibles, net		444,440			777,776
Other assets		31,184			21,781
TOTAL ASSETS	$	14,923,441		$	17,627,095
Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	3,432,129		$	2,598,727
Accrued expenses		393,427			235,005
Line of credit		215,000			385,000
Notes payable, current portion		—			30,000
Notes payable related parties, current portion		1,505,000			2,113,333
Deferred revenue		197,769			235,000
Other current liabilities		1,053,235			1,488,406
Total current liabilities		6,796,560			7,085,471
Long-term liabilities:
Notes payable related parties, net of current portion		7,604,199			8,500,000
Other liabilities		2,025,000			2,025,000
Total liabilities		16,425,759			17,610,471
Commitments and Contingencies (See notes 1- 3,5- 10 and 12-14)
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; 95,518,317 and 64,318,317 shares issued and outstanding, at April 30, 2010 and April 30, 2009, respectively		95,518			64,318
Additional paid-in capital		7,740,043			7,519,968
Retained earnings (accumulated deficit)		(9,337,879	)		(7,567,662	)
Total stockholders’ equity (deficit)		(1,502,318	)		16,624
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	14,923,441		$	17,627,095

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

F-2

CornerWorld Corporation
Consolidated Statements of Operations

	For the Years Ended April 30,
	2010			2009			2008
Sales, net	$	11,446,700		$	3,940,672		$	—
Costs of goods sold		3,601,914			1,574,859			—
Gross profit		7,844,786			2,365,813			—
Expenses:
Selling, general and administrative expenses		5,520,954			3,490,331			496,977
Depreciation and amortization		2,369,941			791,821			—
Common stock issued for consulting services		—			—			415,900
Common stock and options issued for shell acquisition transaction costs		—			—			4,055,200
Total Operating expenses		7,890,895			4,282,152			4,968,077
Operating loss		(46,109	)		(1,916,339	)		(4,968,077	)
Other income (expense), net:
Interest expense		(1,713,752	)		(339,434	)		—
Other income (expense), net		(10,356	)		(297,215	)		(8,016	)
Total other expense, net		(1,724,108	)		(636,649	)		(8,016	)
Loss before income taxes		(1,770,217	)		(2,552,988	)		(4,976,093	)
Income taxes		—			10,500			—
Net loss	$	(1,770,217	)	$	(2,563,488	)	$	(4,976,093	)
Basic and diluted loss per share	$	(0.02	)	$	(0.05	)	$	(0.07	)
Weighted average number shares outstanding – basic and diluted		88,490,098			52,745,577			66,768,133

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

F-3

CornerWorld Corporation
Consolidated Statement of Stockholders’ Equity (Deficit)

								Additional					Total Stockholders’
	Common Shares							Paid-in			Accumulated		Equity
	Shares			Amount			Capital			Deficit			(deficit)
Balance, May 1, 2007		62,700,000		$	62,700		$	90,475		$	(28,081	)	$	125,094
Reorganization/Recapitalization		3,662,500			3,663			(3,663	)		—			—
Sale of common stock		182,210			182			200,318			—			200,500
Stock-based compensation expense		—			—			48,215			—			48,215
Common stock issued for consulting services		279,607			279			415,621			—			415,900
Common stock and options issued for shell acquisition transaction costs		544,000			544			570,656			—			571,200
Stock compensation plan options		—			—			3,484,000			—			3,484,000
Net loss		—			—			—			(4,976,093	)		(4,976,093	)
Balance, April 30, 2008		67,368,317			67,368			4,805,622			(5,004,174	)		(131,184	)
Retirement of common stock		(24,000,000	)		(24,000	)		24,000			—			—
Issuance of common shares for Enversa acquisition		3,600,000			3,600			158,400			—			162,000
Issuance of common shares for Woodland acquisition		2,500,000			2,500			110,000			—			112,500
Issuance of warrants associated with Woodland acquisition		—			—			1,383,800			—			1,383,800
Common stock issued as fee for loan		11,400,000			11,400			501,600			—			513,000
Common stock issued as fee for LOC extension		3,000,000			3,000			132,000			—			135,000
Common stock issued for consulting services		30,000			30			5,970			—			6,000
Common stock issued as fee for Notes payable		420,000			420			18,660			—			19,080
Stock-based compensation expense		—			—			379,916			—			379,916
Net loss		—			—			—			(2,563,488	)		(2,563,488	)
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		—			—			256,175			—			256,175
Retirement of common stock in lieu of legal settlement		(250,000	)		(250	)		(4,750	)		—			(5,000	)
Net loss		—			—			—			(1,770,217	)		(1,770,217	)
Balance, April 30, 2010		95,518,317		$	95,518		$	7,740,043		$	(9,337,879	)	$	(1,502,318	)

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

F-4

CornerWorld Corporation
Consolidated Statements of Cash Flow

	For the Years Ended April 30,
	2010			2009			2008
Cash Flows from Operating Activities
Net loss	$	(1,770,217	)	$	(2,563,488	)	$	(4,976,093	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		2,369,941			791,821			54,962
Provision for doubtful accounts		24,417			49,154			—
Stock-based compensation		256,175			379,916			48,215
Common stock issued for consulting services		—			—			415,900
Shell acquisition transaction costs		—			—			4,055,200
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable		(149,372	)		(414,233	)		(1,500	)
Prepaid expenses and other current assets		585,291			(284,696	)		—
Other assets		(9,403	)		491,219			197,163
Goodwill		(78,165	)		—			—
Accounts payable		833,402			2,105,206			(665	)
Accrued expenses		158,422			(74,718	)		129,129
Deferred revenue		(37,231	)		(207,025	)		—
Other liabilities		(435,171	)		95,552			—
Net cash provided by (used in) operating activities		1,748,089			368,708			(77,689	)
Cash Flows from Investing Activities
Purchases of property and equipment		(50,635	)		(60,462	)		(33,501	)
Capitalized software development		—			—			(235,019	)
Purchase of Woodlands Holdings Corporation		—			(1,900,000	)		—
Net cash used in investing activities		(50,635	)		(1,960,462	)		(268,520	)
Cash Flows from Financing Activities
Proceeds from notes payable		—			1,920,000			80,000
Principal payments on debt		(30,000	)		—			—
Principal payments on related party notes receivable		(1,504,134	)		(156,667	)		—
Proceeds from line of credit, net of repayments		(170,000	)		385,000			—
Proceeds from issuance of common stock		100			—			200,500
Consulting settlement in lieu of common stock		(5,000	)		—			—
Net cash provided by (used in) financing activities		(1,709,034	)		2,148,333			280,500
Net increase (decrease) in cash		(11,580	)		556,579			(65,709	)
Cash at beginning of year		601,743			45,164			110,873
Cash at end of year	$	590,163		$	601,743		$	45,164
Cash paid for:
Interest	$	1,243,042		$	179,501		$	2,136
Income taxes	$	—		$	—		$	—
Non-Cash Investing Activities:
Purchase accounting reclassification of fixed assets to goodwill	$	416,922		$	—		$	—
Goodwill adjustment related to consolidation of VIE’s	$	(70,508	)	$	—		$	—
Non-Cash Financing Activities:
Issuance of debt for Woodland Acquisition	$	—		$	7,300,000		$	—
Issuance of common stock and warrants for Woodland acquisition	$	—		$	1,496,300		$	—
Issuance of debt for Enversa Acquisition	$	—		$	1,500,000		$	—
Issuance of common stock for Enversa acquisition	$	—		$	162,000		$	—
Issuance of common stock in lieu of loan fees	$	—		$	667,080		$	—

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

F-5

CornerWorld Corporation
Notes to Consolidated Financial Statement
April 30, 2010

1. Basis of Presentation

Organization

Cornerworld Corporation (“the Company”, “Cornerworld”, “we”, “our” or “us”) 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. Cornerworld.com is a free, groundbreaking business management and social networking platform that empowers independent content creators to share and profit from their skills.

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. 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 ensures 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, 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, Phone Services and More, L.L.C., doing business as Visitatel (“Visitatel”), 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 Visitatel 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 certain closing conditions.

F-6

CornerWorld Corporation
Notes to Consolidated Financial Statement (Continued)
April 30, 2010

Woodland Wireless, Ranger, WMCLS and Visitatel 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 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.

Although the entities comprising the T2 Group are not owned by us, they are controlled by us pursuant to the terms of the Unit Purchase Agreement and, therefore, treated by us as Variable Interest Entities (“VIE’s”) and consolidated for accounting purposes. The carrying amount of the assets of the T2 group totaled $215,133 while the carrying amount of the liabilities was $402,481 at April 30, 2010. With respect to the assets, $126,333 was classified as non-current while all the liabilities were considered to be current. Though there are no terms or contractual arrangements that require the Ranger Wireless Group to provide financial support to the T2 Group, absent the existence of the T2 Group, the Ranger Wireless Group would be unable to deliver services to its customers.

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 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.

Visitatel 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.

2. Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles (“GAAP”) in the United States of America 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 theFASB 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 Codification 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.

Receivables

Accounts receivable include uncollateralized customer obligations due under normal trade terms requiring payment within 30-60 days from invoice date. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

F-7

CornerWorld Corporation
Notes to Consolidated Financial Statement (Continued)
April 30, 2010

The carrying amount of accounts receivable is reduced by a valuation allowance for doubtful accounts that reflects management’s best estimate of the amounts that will not be collected resulting from past due amounts from customers. The allowance for doubtful accounts was $63,012 and $69,201 as of April 30, 2010 and 2009, respectively.

Selling, General and Administrative Expenses

Enversa receives administrative support from its former parent company, Internet University, Inc. (“Internet University”). Included in such administrative support are human resources, accounting, information technology and facilities services. Enversa operates from office space provided by Internet University and utilizes furniture and equipment provided by Internet University in such office space. The costs of such services have been billed to Cornerworld and are reflected in the income statements in the total amount of $256,862 and $264,796 for the year ended April 30, 2010 and 2009, respectively. Management believes that the amounts recorded for these operating and administrative expenses are indicative of the actual costs and would not have been materially different had Enversa been operated on a standalone basis.

Additionally, all of CornerWorld’s and Enversa’s employees are leased to Enversa through an agreement between Cornerworld, Enversa, and Internet University, Inc. CornerWorld and Enversa employees are paid under the federal employer identification number and are included in the employee benefit programs, such as life, health and disability insurance and 401(k) of a subsidiary of Internet University. The selling, general and administrative expenses on the income statement reflects a total of $1,493,279 and $492,885 of actual salaries for CornerWorld’s corporate and Enversa personnel during the year ended April 30, 2010 and 2009, respectively, as well as an allocation of payroll taxes and employee benefits calculated at 15% of salary.

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.

Income Taxes

The Company accounts for income taxes 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.

Basic and Diluted Loss Per Share

In accordance with ASC 260, the basic and diluted loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted net income per share, if any, is computed similar to basic loss per share except that the denominator is adjusted for the potential dilution that could occur if stock options, warrants, and other convertible securities were exercised or converted into common stock. Potentially dilutive securities were not included in the calculation of the diluted loss per share as their effect would be anti-dilutive.

F-8

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

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.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three (3) months or less to be cash equivalents.

Property and equipment

Property and equipment are recorded at cost and depreciated over their estimates useful lives using the straight-line method as follows:

Computer equipment	3 years
Office furniture	5 years
Computer software packages	3 years
Capitalized software development	3 years
Website Development Costs	3 years

Expenditures for maintenance and repairs which do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment. The property and equipment had not incurred any impairment loss at April 30, 2010.

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.

F-9

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

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 April 30, 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 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.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CornerWorld Corporation, its wholly owned subsidiaries and entities determined to meet the definition of VIE’s. All significant intercompany transactions and balances have been eliminated in consolidation.

Concentrations of cash and cash equivalents

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. At April 30, 2010 and 2009, the Company had $81,652 and $63,262, respectively, in excess of that which is insured by a Federal Government agency.

Concentration of credit risk

Credit is extended based on an evaluation of the customer’s financial condition, and the Company does not require collateral. Write-offs of accounts receivable have historically been nominal. During the year ended April 30, 2010, the Company’s two largest customers merged. After consideration of the aforementioned merger, approximately 39.2 and 15.8% of total revenue was derived from the Company’s largest customer during the year ended April 30, 2010 and 2009, respectively. The Company had no such concentrations for the year ended April 30, 2008.

F-10

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

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 audited consolidated financial statements included in this annual Report on Form 10-K were available to be issued.

Issuance of Stock for Non-Cash Consideration

All issuances of the Company’s stock for non-cash consideration have been assigned a dollar amount equaling either the market value of the shares issued or the value of consideration received, whichever is more readily determinable. The majority of the non-cash consideration received pertains to services rendered by consultants and others and have been valued at the market value of the shares issued. In certain issuances, the Company may discount the value assigned to the issued shares for illiquidity and restrictions on resale.

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 Corporation in accordance with ASC 805, Business Combinations (“ASC 805”). 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

F-11

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

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 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 obtaining certain regulatory approvals, $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. These fees were expensed in their entirety during the year ended April 30, 2010. Due to the fact that 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.

	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. 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 un-audited condensed pro forma summary financial data presents our pro forma condensed combined financial information as if we had completed the acquisitions of Enversa and the businesses acquired in the Woodland Acquisition at the beginning of the year ended April 30, 2009:

Revenue	$	11,253,978
Income from operations		(836,202	)
Net Income	$	(1,553,354	)
Basic and diluted earnings per share	$	(0.02	)
Weighted average shares outstanding		64,318,317

F-12

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

4. Property and Equipment

          Property and equipment is summarized as follows at April 30:

	2010			2009
Computer equipment	$	1,054,048		$	1,543,276
Furniture		23,061			12,519
Vehicles		29,445			29,445
Software and capitalized website development costs		91,554			290,096
Total		1,198,108			1,875,336
Less: accumulated depreciation and amortization		(497,721	)		(329,885	)
Property and equipment, net	$	700,387		$	1,545,451

          Depreciation expense for property and equipment for the years ended April 30, 2010, 2009 and 2008 was $478,777, $259,514 and $54,962, respectively.

          The Company reclassified $416,922 from fixed assets to Goodwill as a result of an appraisal of the fair value of fixed assets acquired in the Woodland Acquisition.

5. Intangible Assets and Goodwill

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 at April 30:

	2010			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		(2,373,026	)		(481,862	)
	$	9,531,766		$	11,422,930

          Amortization expense related to identifiable intangible assets totaled $1,891,164 and $481,862 for the years ended April 30, 2010 and 2009, respectively. The estimated amortization for the next five years is as follows:

2011	$	1,891,164
2012		1,668,940
2013		1,557,828
2014		1,557,828
2015		1,557,828

F-13

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

Goodwill

          Goodwill represents the excess of acquisition cost over the net assets acquired in a business combination and is not amortized in accordance with ASC 350.The provisions of ASC 350 require that the Company allocate its goodwill to its various reporting units, determine the carrying value of those businesses, and estimate the fair value of the reporting units so that a two-step goodwill impairment test can be performed. In the first step of the goodwill impairment test, the fair value of each reporting unit is compared to its carrying value. 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 discounted operating cash flows. If an impairment of the carrying value were to be indicated by this review, the Company would perform the second step of the goodwill impairment test in order to determine the amount of goodwill impairment, if any.

          The changes in the carrying amount of goodwill for the year April 30, 2010 is as follows: (see Note 3 – Acquisitions and Disposals):

Balance as of May 1, 2008	$	—
Goodwill acquired during the year ended April 30, 2009		1,641,749
Balance as of April 30, 2009		1,641,749
Increases in Goodwill due to true-up of acquisition date working capital		148,673
Purchase accounting adjustments		(70,508	)
Purchase accounting mark to market of fixed assets		416,922
Balance as of April 30, 2010	$	2,136,836

6. Debt

	As of April 30,
	2010			2009
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 12, Related Party Transactions.	$	215,000		$	385,000
Long-term Debt
Notes payable to Internet University and the other selling members of Leadstream; the notes mature December 31, 2012. At April 30, 2010 and 2009 the interest rate was 4.58%.	$	1,444,199		$	1,500,000
Note payable to IU Investments, LLC, due December 31, 2010. At April 30, 2010 and 2009 the interest rate was 16.0%.		665,000			1,755,000
Purchase Money Note Payable, due February 23, 2012. At April 30, 2010 and 2009 the interest rate was 12.0%. See also note 12, Related Party Transactions.		4,200,000			4,200,000
Secured Debenture, due February 23, 2012. At April 30, 2010 and 2009 the interest rate was 12.0%. See also note 12, Related Party Transactions.		2,800,000			3,100,000
Various notes payable to related parties, due February 17, 2010. At April 30, 2009 the interest rate was 16%. See also note 12, Related Party Transactions.		—			58,333
Note payable due February 17, 2010. At April 30, 2009 the interest rate was 10%.		—			30,000
Total debt		9,109,199			10,643,333
Less current portion of long-term debt		(1,505,000	)		(2,143,333	)
Non-current portion of long-term debt	$	7,604,199		$	8,500,000

F-14

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

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

The $1,500,000 notes payable are due to the three prior members of Leadstream. These notes bear an interest rate of 4.58%. As previously reported, the Company modified the amortization terms of this note, including the maturity date. The notes mature on December 31, 2012.

Regarding certain related party notes payable, a portion was payable to our chief executive officer, a portion was payable to a trust for the benefit of our chief executive officer’s mother while the remaining balance was payable to our chief executive officer’s cousin. The notes and related interest were paid in their entirety during the year ended April 30, 2010.

Future minimum principal payments pursuant to the above long term debt and line of credit agreements are as follows:

Year ending April 30
2011	$	1,720,000
2012		6,325,000
2013		1,279,199
Total	$	9,324,199

7. Leases

The Company leases its facilities under non-cancelable operating lease agreements. The leases expire on various dates through 2011 and provide for minimum monthly rents of approximately $10,833. Rent expense for the years ended April 30, 2010 and 2009 was approximately $486,263 and $126,391, respectively. See also Note 12, Related Party Transactions, for more details with respect to this lease. During the year ended April 30, 2008, the Company used the offices of its Chief Executive Officer for its minimal office facility needs for no consideration

Future minimum lease payments under non-cancelable leases are as follows:

2011	$	176,370
Total lease payments	$	176,370

8. Equity

Preferred Stock

The Company’s authorized preferred stock consists of 10,000,000 shares with a par value of $0.001 per share. There were no issued and outstanding preferred shares as of April 30, 2010.

Common Stock

The Company’s authorized common stock consists of 250,000,000 shares with a par value of $0.001 per share. As of April 30, 2010, 95,518,317 shares of common stock were issued and outstanding.

On August 27, 2008, Cornerworld acquired Leadstream in exchange for 3,600,000 shares of Cornerworld stock (the “Acquisition Shares”) and a $1,500,000 note payable. After this exchange, the company had a total of 46,968,317 shares of common stock outstanding. The Acquisition Shares, which are restricted securities as defined under the U.S. securities laws, are subject to a leakout provision. The holders of the membership interests of Leadstream (the “Leadstream Members”) agreed that during the two-year period following the Closing Date, they would not sell the Acquisition Shares in the aggregate in excess of 1% of Cornerworld’s outstanding shares (i.e. each Leadstream Member would be entitled to sell up to its pro rata portion of such 1%).

F-15

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

On February 17, 2009, Cornerworld issued an aggregate of 420,000 shares of Cornerworld common stock to the holders of certain promissory notes issued by its wholly-owned subsidiary, Cornerworld, Inc. (the “Cornerworld, Inc. Promissory Notes”), in connection with amendments extending the maturity of the Cornerworld, Inc. Promissory Notes from 2009 until 2010. The aggregate principal amount of the Cornerworld, Inc. Promissory Notes was $70,000 and the holders include (i) Scott Beck, Cornerworld’s Chief Executive Officer, (ii) a trust for the benefit of Mr. Beck’s mother and (iii) Mr. Beck”s second cousin.

On February 23, 2009, the Company issued an aggregate of 2,500,000 shares of Cornerworld common stock to Mr. Ned Timmer in conjunction with the Woodland acquisition. See also Note 3 to these financial statements for more details with respect to that transaction.

Also, on February 23, 2009 and in conjunction with the Woodland Acquisition, the Company borrowed $1,900,000 from IU Investments, LLC. The Company issued 11,400,000 shares of its common stock to IU Investments, LLC pursuant to this note.

The Company also issued 3,000,000 shares to Internet University, Inc. as consideration for Internet University, Inc.’s extension of the due date of the line of credit payable to them by one calendar year.

During the fiscal quarter ended January 31, 2009, the Company issued 30,000 shares of common stock in connection with the settlement of certain outstanding claims.

Warrants

The following summarizes the Company’s warrant transactions for the years ended April 30, 2010, 2009 and 2008:

	Number of Warrants			Weighted Average Exercise Price Per Share
Outstanding, May 1, 2007		—		$	—
Granted		100,000			1.66
Outstanding and exercisable, April 30, 2008		100,000		$	1.66
Granted		46,451,000			0.08
Cancelled or Expired		(1,750,000	)		0.54
Outstanding, April 30, 2009		44,801,000		$	0.08
Exercised		(31,450,000	)		0.00
Reclassified from stock options		320,000			1.40
Outstanding, April 30, 2010		13,671,000		$	0.32
Weighted average fair value of warrants granted:
2008	$	1.30
2009	$	0.07

The following table summarizes information about warrants outstanding as of April 30, 2010:

	Warrants Outstanding and Exercisable
Range of Exercise Prices	Number		Weighted Average Exercise Price
$0.20 - $1.40		13,571,000	$	0.31
>= $1.66		100,000	$	1.66

As part of the Woodland Acquisition, the Company issued warrants to Mr. Ned Timmer, the Woodland seller, an employee and a member of the Board of Directors. One warrant allowed Mr. Timmer to purchase 31,450,000 shares of the Company’s common stock for consideration of $100. Mr. Timmer exercised this warrant on July 23, 2009 and acquired 31,450,000 shares of the Company’s common stock.

F-16

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

The Company issued 5,180,000 warrants to a consultant as consideration for the cancellation of 3,680,000 stock options issued during the year ended April 30, 2008.

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.

9. Stock Based Compensation Plans

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 number of shares outstanding under the Company’s 2007 Incentive Stock Plan as of April 30, 2010 was 1,699,000. During the fiscal quarter ended January 31, 2009, the Company issued to consultants (i) 100,000 incentive stock options with an exercise price of $0.25; (ii) 75,000 stock options with an exercise price of $0.40; and (iii) 425,000 incentive stock options with an exercise price of $0.60.

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.

As of April 30, 2010, 880,000 authorized shares under the Company’s 2007 Stock Compensation Plan had been granted. On November 21, 2008, the Company cancelled 3,680,000 options with an exercise price of $1.10 which had been issued to Crystal Blue Consulting on August 17, 2007. In addition, the Company issued 130,000 options with an exercise price of $0.20 to consultants.

Non-Qualified Options Agreement

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

	April 30, 2010
	Shares Reserved for Grant		Awards Available for Grant
Incentive Stock Plan		4,000,000		2,301,000
Stock Compensation Plan		4,000,000		3,120,000
		8,000,000		5,421,000

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.

F-17

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

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 Year Ended April 30				For the period September 1 2006 through April 30,
	2010		2009		2007
Expected term (in years)		5.0		5.0		—
Expected volatility		99.1%		285.4%		—
Risk-free interest rate		2.3%		2.3%		—
Dividend yield		0.0%		0.0%		—

A summary of activity under the Stock Plans and changes during the years ended April 30, 2010. 2009 and 2008 is presented below:

	Weighted-Average
	Shares			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at May 1, 2007		—		$	0.00					��
Granted		4,509,000			1.14
Cancelled/forfeited		—			—
Exercised		—			0.00	$	—
Outstanding at April 30, 2008		4,509,000		$	1.14		4.33	$	—
Granted		2,320,000			0.43
Cancelled/forfeited		(4,135,000	)		1.04
Exercised		—			—
Outstanding at April 30, 2009		2,694,000		$	0.67		4.25	$	0.00
Granted		250,000			0.20
Cancelled/forfeited		(45,000	)		0.20
Reclassified to warrants **		(320,000	)		1.40
Exercised		—			—
Outstanding at April 30, 2010		2,579,000		$	0.54		3.47	$	0.00
Options vested and expected to vest*		2,030,000		$	0.36		3.46	$	0.00
Options exercisable at end of period		787,893		$	0.68		3.28	$	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.
**	Upon review of the instruments, the Company reclassified these options to warrants.

As of April 30, 2010, 2009 and 2008, the Company recognized $256,175, $379,916 and $48,215 of stock-based compensation expense, respectively. As of April 30, 2010, 2009 and 2008, there was $755,683, $1,178,576 and $3,403,565, respectively, 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 3.47 weighted average years.

F-18

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

10. 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 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”) 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.

The Company entered into mediation discussions with Mr. Timmer on June 21, 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.

F-19

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

Employment Agreements

The Company has an employment contract with its Chairmen of the Board of Directors who also serves as the Chief Executive Officer. The contract provides for an annual salary of $250,000 and includes certain bonus provisions based on the company achieving certain earnings thresholds. This agreement expires in 2011. The agreement contains certain severance payments, upon termination of employment (except for cause), as defined.

The Company has an employment contract with Mr. Ned Timmer, the seller of Woodland, an employee and a member of the Board of Directors. The contract provides for an annual salary of $50,000 and expires February 23, 2011. The agreement contains certain severance payments, upon termination of employment (except for cause), as defined.

The Company has an employment contract with its Chief Marketing Officer. The contract provides for an annual salary of $200,000 and includes certain bonus provisions based on Enversa achieving certain earnings thresholds. This agreement expires in 2010. The agreement contains certain severance payments, upon termination of employment (except for cause), as defined.

The Company has an employment contract with its Chief Technology Officer. The contract provides for an annual salary of $92,000 and includes certain bonus provisions. This agreement expires in 2011. The agreement contains certain severance payments, upon termination of employment (except for cause), as defined.

The Company has an employment contract with two other critical employees. The contracts provide for annual salaries of $78,000 and $48,000, respectively, along with certain bonus provisions. Each agreement expires in 2011 and contain certain severance payments, upon termination of employment (except for cause), as defined.

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. As of April 30, 2010, the Woodland Seller had not met the thresholds necessary 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 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 T2 Group after receiving regulatory approval for the purchase of these assets and the satisfaction of other closing conditions which have not yet been met. Although the entities comprising the T2 Group are not owned by us, they are controlled by us pursuant to the terms of the Unit Purchase Agreement and, therefore, treated by us as VIE’s and consolidated for accounting purposes. The Company has accrued $300,000 pursuant to the Unit Purchase Agreement for this contingency.

F-20

CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

11. Segment Reporting

The Company operates in three integrated business segments: (i) direct marketing services, (ii) communications services and (iii) Corporate, formerly, on-line media networks:

	For the Year Ended April 30
	2010			2009			2008
Net sales:
Direct Marketing Services	$	4,530,341		$	2,384,302		$	—
Communications Services		6,916,359			1,556,370			—
Corporate		—			—			—
Total segment net sales	$	11,446,700		$	3,940,672		$	—
Income (loss) before taxes:
Direct Marketing Services	$	100,946		$	(200,689	)	$	—
Communications Services		541,947			452			—
Corporate		(2,413,110	)		(2,352,751	)		(4,976,093	)
Total segment loss before taxes	$	(1,770,217	)	$	(2,552,988	)	$	(4,976,093	)
Depreciation and amortization included in operating income:
Direct Marketing Services	$	347,736		$	231,824		$	—
Communications Services		1,856,030			404,867			—
Corporate		166,175			155,130			54,962
Total segment depreciation and amortization	$	2,369,941		$	791,821		$	54,962
Intangible assets:
Direct Marketing Services	$	444,440		$	777,776		$	—
Communications Services		9,087,326			10,645,154			—
Corporate		—			—			—
Total segment identifiable assets	$	9,531,766		$	11,422,930		$	—
Goodwill:
Direct Marketing Services	$	—		$	—		$	—
Communications Services		1,581,850			1,086,763			—
Corporate		554,986			554,986			—
Total segment identifiable assets	$	2,136,836		$	1,641,749		$	—
Total assets:
Direct Marketing Services	$	2,282,836		$	2,059,914		$	—
Communications Services		13,081,476			10,907,407			—
Corporate		(440,871	)		4,659,774			298,293
Total segment identifiable assets	$	14,923,441		$	17,627,095		$	298,293

There were no material intersegment sales. Operating income is defined as third party sales less operating expenses. All of the Company’s business activities are conducted within the United States geographic boundaries.

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CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

12. RELATED PARTY TRANSACTIONS

During a portion of the year ended April 30, 2010, the Company used the offices of its Chief Executive Officer for its minimal office facility needs for no consideration. No provision for these costs has been provided since it has been determined that they are immaterial.

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 CornerWorld’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 Cornerworld and Enversa receives or is at any time entitled to receive. There was an outstanding balance of $215,000 under the line of credit at April 30, 2010 and the Company no longer has access to the unused portion. The Company recognized interest expenses totaling $23,575 during the year ended April 30, 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 recognized interest expenses payable to Mr. Timmer totaling approximately $886,333 and $160,000 on these two facilities during the years ended April 30, 2010 and 2009, respectively. In addition, the Company leases office space for the Company's Woodland division from an entity owned by Mr. Timmer. During the year ended April 30, 2010, the Company paid approximately $211,644 in rent and management fees to Mr. Timmer as a result of this lease.

During the year ended April 30, 2009, the Company issued 420,000 shares of its common stock to our chief executive officer, a trust for the benefit of our chief executive officer’s mother and to our chief executive officer’s cousin in connection with their agreement to extend the term on certain notes payable.

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 April 30, 2010, the Company has accrued liabilities totaling approximately $315,000 to our Chief Executive Officer.

As part of the Enversa acquisition, the Company borrowed $1,500,000 from Internet University, Inc. A member of the Company’s Board of Director as well as one of the selling partners of Enversa is the president of Internet University, Inc. The Company recorded interest of $115,247 and $46,301 on this facility during the years ended April 30, 2010 and 2009, respectively.

As part of the Woodland Acquisition, the Company borrowed $1,900,000 from IU Investments LLC. A member of the Company’s Board of Director as well as one of the selling partners of Enversa is an employee of the parent of IU Investments LLC. The Company recorded interest of $177,219 and $42,476 on this facility during the years ended April 30, 2010 and 2009, respectively.

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CornerWorld Corporation
Notes to Consolidated Financial Statements (Continued)
April 30, 2010

13. Income Taxes

The Company accounts for income taxes in accordance with ASC 740. Due to continued losses from operations, since the inception of the Company, no provision for income taxes has been made in these financial statements. The Company’s cumulative deferred tax asset is valued as follows:

Year Ended		Estimated NOL Carryforward			NOL Expiration		Estimated Tax Benefit for NOL		Valuation Allowance			Net Tax Benefit
	4/30/2007	$	(20,081	)		2027	$	9,548	$	(9,548	)	$	—
	4/30/2008		(4,976,093	)		2028		1,691,625		(1,691,625	)		—
	4/30/2009		(2,563,488	)		2029		868,528		(868,528	)		—
	4/30/2010	$	(1,770,217	)		2030		586,902		(586,902	)		—
							$	3,156,603	$	(3,156,603	)	$	—

The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating loss carryforwards. Net operating loss carryforwards may be further limited by a change in company ownership and other provisions of the tax laws.

14. SUBSEQUENT EVENTS

The Company has evaluated all subsequent events through the date the financial statements were available to be issued.

On May 4, 2010, the Company’s T2 subsidiary settled a lawsuit with a service provider for $400,000. The Company received the proceeds of the settlement on June 9, 2010.

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