UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
DC 20549





FORM
10-K/A





x
            ANNUAL REPORT UNDER SECTION 13
      OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934





For
      the fiscal year ended June 30,
2009.




OR




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





For
      the transition period from    to  .




Commission
file number: 333-136069




Future
Now Group Inc.


(Name of
small business issuer in its charter)




Nevada
                  
                  20-4237445(State
      or other jurisdiction of
                    incorporation
      or organization)
                  
                  (I.R.S.
      Employer
                    Identification
      No.)





80 Mountain Laurel
      Rd .,
      Fairfield, CT
                  
                  06824(Address
      of principal executive offices)
                  
                  (Zip
      Code)




Issuer’s
telephone number: 877-643-7244





Securities
registered under Section 12(b) of the Exchange Act: None




Securities
registered under Section 12(g) of the Exchange Act: Common Stock, par value
$0.001




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.  ̈Yes Nox




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act:  ̈Yes Nox




Indicate
by check mark whether the registrant(1) has filed all reports required 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 day. xYes ̈No




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




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 if the Exchange Act.




Large
      accelerated filter  ̈
              Accelerated
      filter  ̈Non-accelerated
      filter    ̈ (Do not check if
      a smaller reporting company)
              Smaller
      reporting company x




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




State the
number of shares outstanding of each of the issuer’s classes of common equity,
as of the latest practicable date.




Class
                  
                  Outstanding
      November 20, 2009Common
      Stock, $0.001 par value per share
                  
                  97,125,063
      shares





Documents
Incorporated by Reference: NONE





Transitional
Small Business Disclosure Format (Check one): Yes   ̈ ;  No  x







SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS




This
report contains forward-looking statements that involve a number of risks and
uncertainties. Although our forward-looking statements reflect the good faith
judgment of our management, these statements can be based only on facts and
factors of which we are currently aware. Consequently, forward-looking
statements are inherently subject to risks and uncertainties. Actual results and
outcomes may differ materially from results and outcomes discussed in the
forward-looking statements.




Forward-looking
statements can be identified by the use of forward-looking words such as “may,”
“will,” “should,” “anticipate,” “believe,” “expect,” “plan,” “future,” “intend,”
“could,” “estimate,” “predict,” “hope,” “potential,” “continue,” or the negative
of these terms or other similar expressions. These statements include, but are
not limited to, statements under the captions “Risk Factors,” “Management’s
Discussion and Analysis or Plan of Operation” and “Description of Business,” as
well as other sections in this report. Such forward-looking statements are based
on our management’s current plans and expectations and are subject to risks,
uncertainties and changes in plans that may cause actual results to differ
materially from those anticipated in the forward-looking statements. You should
be aware that, as a result of any of these factors materializing, the trading
price of our common stock may decline. These factors include, but are not
limited to, the following:





·
            the
      availability and adequacy of capital to support and grow our
      business;





·
            economic,
      competitive, business and other conditions in our local and regional
      markets;





·
              actions
      taken or not taken by others, including competitors, as well as
      legislative, regulatory,judicial
      and other governmental
authorities;





·
            competition
      in our industry;





·
            changes
      in our business and growth strategy, capital improvements or development
      plans;





·
            the
      availability of additional capital to support development;
    and





·
            other
      factors discussed elsewhere in this annual
  report.




The
cautionary statements made in this annual report are intended to be applicable
to all related forward-looking statements wherever they may appear in this
report.




We urge
you not to place undue reliance on these forward-looking statements, which speak
only as of the date of this report. We undertake no obligation to publicly
update any forward looking-statements, whether as a result of new information,
future events or otherwise.


2


EXPLANATORY
NOTE





This
amendment no. 1 to annual report on Form 10-K is being filed to provide
properties required by Item 102 of Regulation S-K, market fro registrant’s
common equity, related stockholder matters and issuer purchases of equity
securities required by Items 201, 701(f) and 703 of Regulation S-K the financial
statements required by Article 8 of Regulation S-X; management’s discussion and
analysis required by Item 303 of Regulation S-K; disclosure controls and
procedures required by Item 307 of Regulation S-K; internal control over
financial reporting required by Item 308 of Regulation S-K; directors, executive
officers and corporate governance required by Items 401, 405, 406, 407©(3),
(d)(4) and (d)(5) of Regulation S-K, executive compensation required by Item 402
of Regulation S-K and paragraph (e)(4) and (e)(5) of Item 407 of Regulation S-K,
security ownership of certain beneficial owners and management and related
stockholder matters required by Item 201(d) of Regulation S-K, certain
relationships and related transactions and director independence required by
Item 404 of Regulation S-K, principal accounting fees and services required by
Item 9(e) of Schedule 14A and certifications required under Rule 13a-14 of the
Securities Exchange Act of 1934, as amended, and Section 1350 of the
Sarbanes-Oxley Act of 2002.  These items were not available for filing with
the annual report on Form 10-K filed by us on October 13,
2009.





PART
I




ITEM 1. DESCRIPTION OF
BUSINESS.




Corporate
Information




Overview




From our
inception on January 23, 2006 to June 30, 2007, we were engaged in no
significant operations other than organizational activities, acquiring and
staking our properties, preparing the registration statements covering our
securities and planning phase 1 of the exploration work on a mining property
known as the “Fir property.” The Fir property is twenty-one cell mineral claims
covering an area totaling 433.24 hectares located in the Kamloops Mining
Division in south central British Columbia, approximately 35 kilometers south of
Kamloops, British Columbia. On May 11, 2007, we announced that we had abandoned
this property determining that the claim did not cover enough ground to host a
viable exploration target. We then abandoned our previous business plan and
focused on the identification of suitable businesses with which to enter into a
business opportunity or business combination.




Share
Exchange with Future Now, Inc.




On
October 30, 2007, we entered into a share exchange agreement with Future Now,
Inc., a privately held Delaware corporation, and the shareholders of Future Now,
Inc. Future Now, Inc. is not a related entity and there were no material
relationships between us and Future Now, Inc. prior to the share exchange. The
closing of the transactions contemplated in the share exchange agreement and the
acquisition of all of the issued and outstanding stock of Future Now, Inc.
occurred on October 30, 2007. In accordance with the closing of the share
exchange agreement, we issued 50,394,191 of our common shares to the
shareholders of Future Now, Inc. in exchange for the acquisition, by us, of all
of the issued and outstanding common shares of Future Now, Inc. on the basis of
nine and one-quarter (9.25) shares of our common stock for one share of Future
Now, Inc.’s common stock.




We had
71,242,191 shares of common stock issued and outstanding as of October 30, 2007,
as a result of the issuance of 50,394,191 shares of common stock in connection
with the closing of the share exchange and the concurrent cancellation of
32,000,000 shares of common stock owned by our former directors. As of the
closing date, the former shareholders of Future Now, Inc. held approximately
70.74% of the issued and outstanding shares of our common stock. The issuance of
the 50,394,191 shares of common stock to the former shareholders of Future Now,
Inc. was deemed to be a reverse acquisition for accounting purposes.
Accordingly, Future Now, Inc. the accounting acquirer entity, is regarded as the
predecessor entity as of October 30, 2007. As a result of the exchange of the
Future Now, Inc. common stock for our common stock, Future Now, Inc. became our
wholly owned subsidiary. We will continue to file annual and quarterly reports
based upon our fiscal year end of June 30.




In
connection with the consummation of the share exchange, we changed the address
of our principal executive offices effective October 30, 2007 from 650 - 1500
West Georgia Street, Vancouver, BC V6G 2Z6 to the Galleria Building, 61 Unquowa
Road, Fairfield, Connecticut 06824.  Our current executive offices are
located at 80 Mountain Laurel Road, Fairfield, CT 06824.


3





Overview
of Business





Through
our wholly-owned subsidiaries, we provide online marketing optimization services
and software solutions utilizing a proprietary methodology and supporting set of
software tools that help businesses improve their online marketing to generate
more sales, leads, and subscriptions. Our proprietary Persuasion Architecture®
framework delivers clients “blueprints” to plan, measure and improve their
online sales and marketing initiatives. Management believes that our methodology
and software tool set represents a truly accountable solution to three
multi-billion dollar problems;





1.
            Low customer conversion
      rates;1





2.
            High
      costs of customer acquisition;2and





3.
            Poor customer retention
      rates.3





1State of
Retailing Online 2007, conducted by Forrester Research for the Shop.org arm of
the National Retail Federation reports average conversion rates of 3.1%.
comScore, Inc. reports 2007 online commerce spending at $188B. For every
additional 1 percentage point retailers add to their overall conversion rate,
they stand to collectively add over $60B in revenue.


2Internet
Advertising Bureau reports, in a study conducted by PricewaterhouseCoopers LLP,
that 2007 online ad revenues will top $20B. Record revenues confirmed through
the first 3 quarters of 2007 total $15.2B. Online customer acquisition costs are
directly attributable to the cost of the media required to deliver
traffic.


3Poor
customer retention rates are most often measured by subscription businesses in
terms of their churn rate. One example company, Netflix, the leader in their
space reported a year end (6/30/07) churn of 63.4% of their customer base.
Netflix also reported total revenue of $1.25B. To this one company alone, their
problem with poor customer retention has an opportunity cost of over
$2B.




Our
business model is one of delivering software as a service complemented with
certain professional services and licensing options.




Alkemi International Pty
Ltd. Investment and Limited Term Licensing Agreement




On June
13, 2007, we entered into a licensing agreement, a shareholders agreement and a
call option deed (collectively, the “AIPL Agreements”) with Alkemi International
Pty Ltd (“AIPL”). Under the AIPL Agreements, AIPL received a limited term
exclusive licensing agreement for 17 months to resell and deliver our
intellectual property in Australia and New Zealand and we would have a right to
convert any monies owed pursuant to the AIPL Agreements from AIPL to an
ownership position in AIPL. On July 23, 2007, we delivered to AIPL notice to
issue shares that totaled the outstanding balance due from AIPL as of June 13,
2007, which, at the time, was approximately $84,000. A valuation opinion was
obtained whereby the value of AIPL was set at $959,300 AUD (or US $808,724) and
as such we received an amount equal to $97,268 AUD or 159,897 shares of AIPL. We
will continue to accrue monies owed from AIPL until a total of US$62,629 is due
from AIPL. At such time the amount will automatically be converted into
additional shares of AIPL and the total ownership percentage at that time of
AIPL by us will equal 15%. Payments to us will then commence based upon the
licensing agreement.





Share Exchange with
Elemental Business, Inc.





On May
28, 2008, we completed a share exchange with Elemental Business, Inc. (“EBI”)
whereby we purchased all the outstanding common stock of EBI in exchange for the
issuance of 3,700,000 shares of its Common Stock. EBI became our wholly owned
subsidiary. EBI is in the business of online marketing optimization using its
proprietary technology. The technology was actually built around the concepts of
the Persuasion Architecture® technology. Management believes that this
acquisition will accelerate our time to market whereby we can touch all small
businesses through a lower-priced subscription-based software
product.





Industry
Background




The
Internet has emerged as a powerful marketing medium that allows millions of
consumers and marketers to conduct business and interact with each other in
unprecedented ways. The Internet is particularly well suited to direct marketers
because of its ability to access both broad audiences, as well as precisely
defined groups. As a result, the Internet provides marketers with opportunities
to identify and attract customers, as well as target specific types of users and
collect data on their preferences. At the same time, we believe the Internet
appeals to consumers because it offers more individual control over marketing
messages. The growth of the Internet has encouraged companies to spend more of
their marketing budgets on Internet marketing. We believe there is a need for a
marketing infrastructure that could satisfy the objectives of both marketers and
consumers, which would enable businesses to acquire and retain customers, yet
operate from a consumer-centric approach that would provide relevant information
and meaningful value to the individual user.


4





Products




We derive
our revenue from the sale of products and services classified into the following
categories: (a) professional services, including custom and packaged consulting;
(b) software subscription licensing; (c) content and training; and (d)
product sales.





Custom
and Productized Consulting Services




These
services come in three primary service lines: (a) Conversion Optimization; (b)
Persuasion Scenario Analysis; and (c) Marketing Planning & Optimization with
Persuasion ArchitectureTM. All of these services are specific to the “flavor” of
a site (for example, business-to-business, business-to-consumer, self-service or
media). The services include three “sizes” per service line, which provides
simplicity and scalability. The price for these services ranges from $2,500 to
$500,000. The delivery time frame ranges from less than three months to beyond a
full year.




Methodology
Software Subscription and Licensing




Our
Persuasion Architecture® software suite, referred to as the Minerva
Architectural Process (“MAP Tool”) is available for licensing. This is a
valuable option for agencies as well as medium and larger companies that intend
to implement Persuasion ArchitectureTM across multiple clients, sites, products
and channels. Companies and individuals can also become certified Persuasion
Architecture partners under direct licensing and royalty programs.




Persuasion
Architecture® is a framework, methodology and software tool set we developed to
plan, build and optimize persuasive systems on-line and off-line, irrespective
of channel. The unique benefit of Persuasion ArchitectureTM is that it allows our
clients to scientifically plan marketing scenarios from a customer-centric
perspective and optimize them. Persuasion ArchitectureTM guides clients to
document every assumption based on their customers’ personal motivations. It
then asks the Persuasion ArchitectTM to predict the scenarios that those
customers will navigate. On-line, Persuasion ArchitectureTM uses its web
analytics scenario language (PAXML - Persuasion Architecture XML) to measure
scenarios and optimize against those predictions. This scenario optimization
process is a six sigma process that allows the Persuasion Architect to
understand whether it is the execution or the plan that needs
correction.




Content
and Training




We
continue to develop content and training programs from our thought leadership
and market awareness. Our principals and key employees have published many books
and white papers on topics pertaining to their respective areas of expertise. We
offer various training programs that cater to both business-to-business and
business-to-consumer operations. These workshops and seminars include:
Persuasive Online Copywriting, Call to Action: Design with Your Audience in Mind
and Wizards of Web, online strategy for increased ROI. Trainings are generally
held at rented room locations within conference resort or standard hotel
operations.




Product
Sales




We
recently launched a line of hard copy and downloadable products that may be
purchased directly from our websites. Such products are meant to educate the
user and move them into another revenue channel. The products currently include:
Conversion Expert’s Workbook; Future Now’s Self Service Guide to Website
Optimization; (created in conjunction with Google’s partnership with the launch
of the Website Optimizer Tool), Which Sells Best; A Quick Start Guide to Testing
for Retailers, and Principles of Online Copywriting.


5


Intellectual
Property




General




We rely
on trade secrets, prior client experience and the expertise of our team that we
seek to protect, in part, by confidentiality agreements. We require all current
and future employees, consultants, contractors, manufacturers, outside
collaborators, directors on our board, and other advisors to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. These agreements provide that all confidential
information developed or made known to the individual during the course of the
individual’s relationship with us is to be kept confidential and not disclosed
to third parties except in specific limited circumstances. We require signed
confidentiality or material transfer agreements from any company that receives
confidential information from us. We intend to ensure that, in the case of
employees, consultants and contractors, any agreements that we enter into with
such persons will generally provide that all inventions conceived by the person
while rendering services to us shall be assigned to us as our exclusive
property.





Trademarks




We have
the following registered trademark: Persuasion Architecture®.




Domain
Names




We own
and operate the following registered Internet domain names: futurenowinc.com,
grokdotcom.com, futurenowgroup.com and persuasionarchitectureinc.com. The
information contained on our websites does not form part of this
report.





Research
and Software Development




We
currently have dedicated research and software development costs. We anticipate
continued expenditures for such costs however over time the absolute dollar
amount will decline as a percentage of our gross revenue.




Competition




We
generally compete for the budgets that companies allocate to marketing. We
believe the market for interactive marketing optimization will rapidly evolve
and be intensively competitive. However, management believes that we have no
direct competitors that provide a one-stop service/product which improves
conversion rates and customer acquisition and retention. There are however
companies active in various segments of this sector. The “agency” group
(Organic, Inc., Critical Path, Inc., and Frog Internet Services) is concerned
with tactical implementation and strategic direction but utilizes only vaguely
defined micro-metrics. The “vendors group” (i.e., email marketers, search engine
marketers, word-of-mouth marketing, and affiliates) offers tactical
implementation and only pre-defined metrics without an overall strategic
guidance. Management believes that our competitive advantage lies in our
strategic marketing planning methodology and proprietary framework.




Our
ability to compete depends on many factors. Factors over which we have some
level of control include:




·
            ability
      to enter into relationships with
marketers;


·
            ability
      to provide simple, cost-effective and reliable
  solutions;


·
            timely
      development and marketing of new services;
and


·
            ability
      to manage rapidly changing technologies, frequent new service
      introductions and evolving industry
standards.




Factors
outside our control include:




·
            development,
      introduction and market acceptance of new or enhanced services by our
      competitors;


·
            changes
      in pricing policies of our
competitors;


·
            entry
      of new competitors in the market;


·
            ability
      of marketers to provide simple, cost-effective and reliable promotions;
      and


·
            market
      economy’s impact on our clients’ marketing
  budgets.




We expect
competition to intensify as more competitors enter our markets. However, as
referenced above, one of our most important assets is our intellectual property,
which we believe will help offset some of the competitive pressures for certain
of our services and products. Most of our existing competitors, as well as a
number of potential new competitors, have significantly greater financial,
technical, marketing and managerial resources than we do. Most of our
competitors also generate greater revenue. They may compete more effectively and
be more responsive to industry and technological change than we
are.


6




Major
Customers




We will
file an amendment to this annual report to provide the information under this
section.





Marketing




Prior to
the second quarter of our current fiscal year, we had not done any outbound
marketing or other advertising campaigns. Our revenues were solely due to
referrals, our reputation in the market and the increasing demand for our
services. In the future we plan to invest heavily in our marketing and
advertising expense both in absolute dollars and as an increasing percentage of
our operating expenses. Among other initiatives, our planned marketing efforts
will involve: hiring new direct sales personnel, affiliated marketing
arrangements, online advertising, and telemarketing.




Our
clients are generally familiar with our methodology and employees from the
numerous books written by our principals, Jeffrey and Bryan Eisenberg, our
industry publication GrokDotCom, as well as our frequent appearances at industry
conferences and events.





Government
Regulation




Our
products or services are not regulated by the government in any of our markets
and we do not need to obtain permits specific to our industry in order for us to
operate or to sell our products and services. Additionally, we are not subject
to any legislation specific to our industry, products and services.





Employees




We will
file an amendment to this annual report to provide the information under this
section.





Reports
to Security Holders





None.





ITEM 1A.
            RISK
    FACTORS





We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.





ITEM
      1B.
            UNRESOLVED
      STAFF COMMENTS




We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.




ITEM
      2.
            DESCRIPTION
      OF PROPERTY.




We
currently do not own any real property. Our corporate headquarters are located
at 80 Mountain Laurel Road, Fairfield, Connecticut 06824, which space is being
donated by our current interim chief executive officer.




ITEM
      3.
            LEGAL
      PROCEEDINGS.




We are
not a party to any pending legal proceedings.




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




None.


7


PART
II




ITEM
      5.
            MARKET
      FMARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND SMALL
      BUSINESS IISSUER PURCHASES OF EQUITY
SECURITIES.




We
received approval from the OTC Bulletin Board on March 23, 2007 for quotation
under the symbol “RPEX.OB.” Our trading symbol was changed from “RPEX.OB” to
“FUTR.OB” in July 2007 in connection with a 12-for-1 forward stock split and
company name change.




The
following table shows the high and low bid prices for our common stock for each
quarter since July 1, 2007 as reported by the OTC Bulletin Board.





We
consider our stock to be “thinly traded” and any reported sale prices may not be
a true market-based valuation of our stock.  Some of the bid quotations
from the OTC Bulletin Board set forth below may reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.




FINRA


OTC
Bulletin Board




Quarter Ended
                
                High
                
                
                LowSeptember
      30, 2008
                
                $
                0.29
                
                
                $
                0.08December
      31, 2008
                
                $
                0.09
                
                
                $
                0.01March
      31, 2009
                
                $
                0.04
                
                
                $
                0.01June
      30, 2009
                
                $
                0.02
                
                
                $
                0.01





Quarter Ended
                
                High
                
                
                LowSeptember
      30, 2007
                
                $
                0.61
                
                
                $
                0.15December
      31, 2007
                
                $
                1.01
                
                
                $
                0.15March
      31, 2008
                
                $
                0.50
                
                
                $
                0.26June
      30, 2008
                
                $
                0.40
                
                
                $
                0.17





Holders




As of
November 20, 2009 there were 33 holders of record of our common stock who held
an aggregate of 98,167,952 common shares.




Our
common shares are issued in registered form. Our registrar and transfer agent is
Island Stock Transfer, 100 Second Avenue South, Suite 104N, St. Petersburg,
Florida, 33701, Telephone: (727) 289-0010, Facsimile: (727)
289-0069.





Dividend
Policy




We have
not paid any cash dividends on our common stock and have no present intention of
paying any dividends on the shares of our common stock. Our current policy is to
retain earnings, if any, for use in our operations and in the development of our
business. Our future dividend policy will be determined from time to time by our
board of directors.




Equity
Compensation Plans




Under our
2007 Stock Option Plan (the “Plan”) 10,613,136 stock options were issued to the
grantees (the “Grantees”), 2,363,893 of which had been exercised (“Option
Exercises”) and 2,000 have expired. As part of the Option Exercises we received
promissory notes from William E. Schloth and Howard Kaplan totaling
$95,000.




Up to
13,674,370 shares of our common stock is available, as of June 30, 2009, for
future issuance under the Plan. The maximum aggregate number of shares of our
common stock that may be issued pursuant to the Plan is limited to 25% of the
shares of common stock outstanding, which calculation is made on the first
trading day of a new fiscal year; provided that, in any year no more than 8% of
our common stock or derivative securitization with our common stock underlying
8% of the common stock may be issued in any fiscal year.


8




Equity
Compensation Plan Information





Plan category
                
                Number of
                  securities to
                  be issued
                  upon exercise
                  of outstanding
                  options,
                  warrants and
                  rights
                  (a)
                
                
                Weighted-average
                  exercise price of
                  outstanding options,
                  warrants and rights(1)
                  (b)
                
                
                Number of
                  securities
                  remaining
                  available for
                  future issuance
                  under
                  equity
                  compensation
                  plans
                  (excluding
                  securities
                  reflected in
                  column (a))
                  (c)Equity
      compensation plans approved by security holders
                
                
                N/A
                
                
                
                N/A
                
                
                
                N/AEquity
      compensation plans not approved by security holders
                
                
                10,867,618
                
                
                $
                0.065
                
                
                
                13,674,370Total
                
                
                10,867,618
                
                
                $
                0.065
                
                
                
                13,674,370




Recent
Sales of Unregistered Securities





On
October 20, 2009, we issued 20,000,000 shares of our common stock to a single
accredited investor for an aggregate purchase price of $20,000.  The
proceeds were used for general corporate purposes.  The issuance was exempt
under Section 4(2) and/or Regulation D of the Securities Act of 1933, as
amended.





On
December 2, 2009, we issued a $20,567 secured promissory note to a single
accredited investor for a purchase price of $20,567.  This note was secured
by a pledge of all of our assets as well as the assets of our
subsidiaries.  In addition, payment of the note was secured by a guaranty
issued by our subsidiaries in favor of the secured party.  The issuance was
exempt under Section 4(2) and/or Regulation D of the Securities Act of 1933, as
amended.





ITEM
      6.
            SELECTED
      FINANCIAL DATA




We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this item.




ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION.




Overview




You
should read the following discussion of our financial condition and results of
operations together with the audited financial statements and the notes to the
audited financial statements included in this report. This discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results may differ materially from those anticipated in these
forward-looking statements.




We are
engaged in the business of in interactive marketing optimization with a primary
concentration on optimizing client online conversion rates. Our proprietary
Persuasion Architecture® framework provides clients “blueprints” to plan,
measure and improve their online sales and marketing efforts. The combination of
the proprietary methodology and related software suite allows clients to convert
more online traffic into leads, subscriptions and sales thereby improving the
return on investment related to money spent on marketing.


9





Basis
of Presentation of Financial Information




On
October 30, 2007, we completed a share exchange with Future Now, Inc. and the
former stockholders of Future Now, Inc. As a result of the share exchange, we
abandoned our previous business and commenced the business of online marketing
optimization and related software development. Because we are the successor
business to Future Now, Inc. and because the operations and assets of Future
Now, Inc. represent our entire business and operations from the closing date of
the share exchange agreement, our management’s discussion and analysis and
audited and unaudited financial statements are based on the consolidated
financial results of Future Now, Inc. and its wholly owned subsidiary,
Intellectual Property Licensing Group, Inc., for the relevant periods. Future
Now, Inc. used to report on a calendar year basis. Commencing on the date of the
share exchange, Future Now, Inc. has been reporting on a quarterly and year-end
basis along with our year-end June 30.




Trends
in Our Business and Results of Operations





The
market demand for our product offering continues to grow rapidly.  The down
turn in the economy should only increase the demand for offerings that can
improve the return on capital expenditures.  Since inception we have
serviced over 400 clients.   However, with the January 2009 launch of
our new software product, OntargetTM, which now puts our Company’s 10 years of
expertise in a simple application and a price point for every small business we
anticipate the number of clients to grow rapidly.   If our customer
base does grow at the pace we expect we will be required to continue making
upfront investments in personnel necessary to support this growth. 
 The rate at which we add new customers, along with the scale of new
customer implementations, will affect the level of these upfront
investments.




Summary
of Key Results





During
the year ended June 30, 2009 we signed on and billed 85 new OnTargetTM customers
versus 0 for the same periods prior year.   We still plan to deliver
custom professional services, however, our future growth plans are focused on
the rapid deployment of our software-as-a –service product.





Total
revenues, including revenues from professional services and software
subscription sales for the audited year ended June 30, 2009 were $1,705,734 as
compared to the revenues of $2,084,526 for the same period ending June 30,
2008.




Total
cost of revenues for the audited year ended June 30, 2009 were $463,020 as
compared to $638,697 for the same period ended June 30, 2008.   Total
operating expenses including sales and marketing expenses, stock based
compensation and general and administrative expenses for the audited year ended
June 30, 2009 were $3,248,262, as compared to $3,434,113 for the same period
ending June 30, 2008.




Results
of Operations




Twelve
Months Ended June 30, 2009 compared to the Twelve Months Ended June 30,
2008




Revenues
and Cost of Revenues




Total
revenue for the year ending June 30, 2009 was $1,705,734, as compared to revenue
of $2,084,526 for the same period ending June 30, 2008, representing a decrease
of $378,792 or 18.2%.  The decrease in revenues was primarily attributable
to the company’s shift to a subscription based software model from a
professional service offering.




Cost of
revenues for the year ending June 30, 2009 were $463,020, as compared to cost of
revenues of $638,697 for the same period ending June 30, 2008, representing a
decrease of $175,677, or 27.5%.    Cost of revenues as a percent of
total revenues for the year ending June 30, 2009 was 27.1%, compared with 30.6%
for the same period ending June 30, 2008.  Gross margins for the year
ending June 30, 2009 were 72.9%, as compared to 69.4% for the same period ending
June 30, 2008, representing a increase of 5%.  The increase in our gross
margins was primarily due to increased margins achieve on subscription based
business and cutbacks in our consulting staffing level.


10


Operating
Expenses





Total
operating expenses for the year ending June 30, 2009 were $3,248,262, as
compared to total operating expenses of $3,434,113 for the same period ending
June 30, 2008, representing a decrease of $185,851 or 5.4%.   Stock
based compensation of $1,115,262 was also recorded for the year ended June 30,
2009 versus $369,201 for the same period the prior year.




General
and administrative expenses for the year ended June 30, 2009 were $1,490,821, as
compared to general and administrative expenses of $2,188,440 for the same
period ending June 30, 2008, representing a decrease of $697,619 or 31.9%. The
decrease in general and administrative expenses was primarily due to
consolidation efforts and staff reductions.





Other
Income and Expenses




During
the year ending June 30, 2009 we earned interest of $7,606 compared to $19,500
of earned interest in the same period ending June 30, 2008. Interest expense for
the year ending June 30, 2009 was $1,176,397 versus $690,383 for the same period
ending June 30, 2008.   Included in interest expense we also have
recorded $411,059 and $420,622 for the amortization of debt discount for the
year ended June 30, 2009 and 2008, respectively. We also recorded amortization
of deferred offering costs for the year ended June 30, 2009 of $250,342 versus
$184,691 for the same period ended June 30, 2008.





Net
Income




Our net
loss for the year ending June 30, 2009 was $8,446,541, as compared to a net
income of $1,904,673 for the same period ending June 30, 2008, representing an
increase of $6,541,868.  Net loss as a percentage of total revenues was
-495.2.8% for the year ending June 30, 2009, as compared to net loss of 91.4%
for the same period ending June 30, 2008.




Liquidity
and Capital Resources




Cash
Provided by Financing Activities





On August
25, 2008, we entered into a securities purchase agreement (the “Purchase
Agreement”) with one investor pursuant to which we sold 555,556 shares of common
stock, $0.001 par value (the “Common Stock”), and warrants to purchase 277,778
shares of common stock (the “Warrants”) to the Buyer for total proceeds of
$100,000. The Warrants have an exercise price of $0.36 per share (the “Exercise
Price”). The Warrants may be exercised at any time on or after the issuance date
for a period of five (5) years. The Exercise Price may be adjusted upon stock
dividends, stock splits, subsequent equity sales by the Company, pro rata
distributions among our existing shareholders, the undertaking by us of a
fundamental transaction, or voluntarily at the discretion of our Board of
Directors.




Cash
Flow Used in Operating Activities




Operating
activities used cash of $294,329 for the year ended June 30, 2009, as compared
to cash used of $2,166,365 for the same period ending June 30, 2008. 
 The decrease in cash used for operating activities for the year ending
June 30, 2009 was primarily a result of cost reduction and consolidation
efforts.




Cash
Flow Used in Investing Activities




Investing
activities used cash of $0 for the year ending June 30, 2009, as compared to
cash used of $55,209 used for the year ending June 30, 2008. The cash used as of
June 30, 2008 represented the leasehold improvements done on the Company’s
offices at 55 Washington Street and certain computer and other office related
equipment.




Capital
Expenditures




We had no
material capital expenditures during the year ended June 30, 2009.




Off-Balance
Sheet Arrangements




We had no
outstanding derivative financial instruments, off-balance sheet guarantees,
interest rate swap transactions or foreign currency contracts. We do not engage
in trading activities involving non-exchange traded contracts.


11





Critical
Accounting Policies




Our
discussion and analysis of the financial condition and results of operations are
based upon Future Now Group Inc.’s financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States (“GAAP”). The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We believe that the estimates, assumptions and judgments
involved in the accounting policies described below have the greatest potential
impact on our financial statements, so we consider these to be our critical
accounting policies. Because of the uncertainty inherent in these matters,
actual results could differ from the estimates we use in applying the critical
accounting policies. Certain of these critical accounting policies affect
working capital account balances, including the policies for revenue
recognition, allowance for doubtful accounts, inventory reserves and income
taxes. These policies require that we make estimates in the preparation of our
financial statements as of a given date.





Within
the context of these critical accounting policies, we are not currently aware of
any reasonably likely events or circumstances that would result in materially
different amounts being reported.





Revenue
Recognition




The
Company derives its revenue from the sale of products and services that it
classifies into the following three categories: (1) professional services; (2)
software subscriptions, and (3) training and product sales.   The
Company utilizes written contracts as the means to establish the terms and
conditions upon which its products and services are sold to
customers.





The
Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2,
Software Revenue Recognition, and related interpretations, SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions, and Securities and Exchange Commission (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 104 — Revenue Recognition. For arrangements outside the
scope of SOP 97-2, the Company evaluates if multiple elements can be accounted
for separately in accordance with Emerging Issues Task Force (“EITF”) Issue No.
00-21, Accounting for Revenue Arrangements with Multiple
Deliverables.





Professional
service revenues -





Because
the Company provides its applications as services, it follows the provisions of
SAB No. 104, Revenue Recognition, and SOP 97-2, Software Revenue Recognition.
The Company recognizes revenue when all of the following conditions are
met:





§
            there
      is persuasive evidence of an
arrangement;





§
            the
      service has been provided to the
customer;





§
            the
      collection of the fees is reasonably assured;
  and





§
            the
      amount of fees to be paid by the customer is fixed or
      determinable.





Since the
Company cannot allocate a fair value to the various elements of its contracts
based on vendor-specific objective evidence, the Company recognizes revenue in
accordance with contract accounting under the percentage-of-completion method.
The professional service component of the monthly payment project is recognized
as the services are performed. The Company recognizes revenues resulting from
professional services sold separately from the licensing services as those
professional services are performed.





Software
Subscriptions





The
Company derives its licensing revenue from selling software and methodology
licenses to customers. The Company does not provide custom software development
services or create tailored products to sell to specific customers. The software
licenses are sold with certain post-contract services, installation and
training. As such, the combination of these products and services represent a
“multiple-element” arrangement for revenue recognition purposes. Since the
Company cannot allocate a fair value to the various elements of its contracts
based on vendor-specific objective evidence, the Company recognizes revenue in
accordance with contract accounting under the percentage-of-completion
method.


12





Deferred
revenues





Deferred
revenues consist of billings or payments received in advance of revenue
recognition for our professional services, licensing and training services
described above and we recognize them as revenue only when the revenue
recognition criteria are met.





Equity/revenue
sharing revenues





The
Company derives revenue through revenue and equity sharing arrangements
(“RSP/ESP Agreement”) whereby the Company participates in online revenue
(“Revenue Participation”) increases resulting from the Company’s recommendations
and in an effort to reduce the cash outlay by clients might take some fees as
equity ownership (“Equity Participation”) in clients. Along with all RSP/ESP
Agreements the Company will also take cash payments for licensing, training and
support services. The Company’s policy as it pertains to recognizing revenue
related to, such revenue is recorded as it is earned based upon stages outlined
in the RSP/ESP Agreement.





Deferred
Revenues




Deferred
revenues consist of billings or payments received in advance of revenue
recognition for our professional services, licensing and training services
described above and we recognize them as revenue only when the revenue
recognition criteria are met.




Research and Software
Development Costs





Costs
incurred in the research and development of new software products and
enhancements to existing software products are expensed as incurred until
technological feasibility has been established. The Company determines
technological feasibility when a working model has been completed. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, Accounting for the Costs of Computer Software to
Be Sold, Leased or Otherwise Marketed, until the product is available for
general release.   The Company will be considering the capitalization
of research and software development costs next quarter because technological
feasibility has almost been established for software being
developed.





Debt Obligations with
Warrants





Between
the period of March 2007 and August 15, 2007, pursuant to an investment
subscription agreement and closing documents (the “Offering”), we offered for
sale three year 10.5% convertible promissory notes (the “Notes”), convertible
into shares of our common stock. In the offering, we sold units consisting of
$50,000 in Notes and seven-year warrants to purchase 16,000 shares of our common
stock, at an exercise price of $0.75 per share (the “Warrants’). We issued Notes
with a face amount of $675,000 and 216,000 Warrants. Under a placement agent
agreement related to the Offering, we also issued placement agent warrants
(“Placement Warrants”) in the amount of $28,161





In
accordance with GAAP, we estimated the fair value of the Notes, Warrants and
Placement Warrants. The initial fair value of the Notes reflected a fair value
adjustment to the Notes for the estimated fair value of the Warrants issued in
connection with this debt. The estimated fair value of the Warrants at the date
of issuance, using the Black-Scholes valuation method, was $99,800, and has been
recorded as a debt discount against the face value of the $675,000 Notes. This
discount is being amortized as interest expense over the three-year term of the
Notes. The initial fair value of the Placement Warrants that we are obligated to
issue, using the Black Scholes valuation method, was $15,349, and has been
recorded as deferred offering costs on the Financial Statements. The amount is
being amortized over the three- year term of the Notes.





In
connection with the share exchange, we received additional funding of $2,000,000
through the issuance of two year 11% convertible notes (“New Notes”) and stock
purchase warrants (“New Warrants”) (both collectively referred to herein as, the
“New Financing”). Along with the $2,000,000 face value of the notes we issued
warrants to purchase 5,714,286 shares of our common stock, with one-half
exercisable at $0.35 per share, and the other half at $0.50 per share, and with
an expiration date that is five years from the date of issuance. Under a
placement agent agreement amendment related to the New Financing, we also issued
five-year placement agent warrants (“New Placement Warrants”) to purchase
571,429 shares of our common stock, at an exercise price of
$0.35.


13





In
accordance with GAAP, we estimated the fair value of the New Notes, New Warrants
and New Placement Warrants. The initial fair value of the New Notes reflected a
fair value adjustment to the New Notes for the estimated fair value of the New
Warrants issued in connection with this debt. The estimated fair value of the
New Warrants at the date of issuance, using the Black-Scholes valuation method,
was $1,213,086 and has been recorded as a debt discount against the face value
of the $2,000,000 New Notes. This discount is being amortized as interest
expense over the three-year term of the Notes. The initial fair value of the New
Placement Warrants that we are obligated to issue, using the Black Scholes
valuation method, was $308,315, and has been recorded as deferred offering costs
on the Financial Statements. The amount is being amortized over the two-year
term of the New Notes.




Stock-Based
Compensation





Stock-based
compensation is a critical accounting policy for us, due primarily to the
significant judgment required when estimating the fair value of stock-based
compensation awards, including the selection of a valuation method (e.g.,
Black-Scholes) and the underlying assumptions within such valuation (e.g.
estimated lives and volatility).





On
January 1, 2006, we adopted SFAS 123(R) using the modified-prospective
transition method. Under this transition method, compensation cost recognized
during the year ended December 31, 2006 includes: (a) compensation cost for all
share-based awards granted prior to, but not yet vested as of, January 1, 2006
(including awards granted prior to January 1, 2003), based on the grant-date
fair values and related service periods estimated in accordance with the
original provisions of SFAS 123, and (b) compensation cost for all share-based
awards granted subsequent to January 1, 2006, based on the grant-date fair
values and related service periods estimated in accordance with the provisions
of SFAS 123(R).





SFAS
123(R) clarifies and expands the guidance in SFAS 123 in several areas,
including measuring fair value and attributing compensation cost to reporting
periods. Changes prescribed by SFAS 123(R) include a requirement that we
estimate forfeitures of share-based awards at the date of grant, rather than
recognizing forfeitures as incurred as permitted by SFAS 123.





The fair
values of restricted share rights are determined using the closing price of our
common stock on the date of grant, while the fair values of stock options and
stock purchase awards are estimated at the date of grant using the Black-Scholes
option-pricing model. The estimated fair values of awards are amortized over the
vesting period of the applicable award.





Effective
July 17, 2007, FNI adopted the 2007 Stock Option Plan (the “Plan”). Subsequent
to June 30, 2007, we have issued stock options related to the Plan and have
accounted for such options as provided for above.





Allowances for Accounts
Receivable





We record
a sales allowance to provide for estimated future adjustments to receivables,
generally resulting from credits issued to customers in conjunction with
amendments or renewals of subscription service arrangements. We record
provisions for sales allowances as a reduction to revenues. Specific provisions
are made based on amendments or renewals associated with specific subscription
service arrangements, which are expected to result in the issuance of customer
credits. Additionally, provisions are made based on actual credits issued as a
percentage of our historical revenues. We evaluate the estimate of sales
allowances on a regular basis and adjust the amount reserved
accordingly.





We make
judgments as to our ability to collect outstanding receivables and provide
allowances when collection becomes doubtful. Specific provisions are made based
on an account-by-account analysis of collectability. Additionally, we make
provisions for non-customer-specific accounts based on our historical bad debt
experience and current economic trends. We record provisions in operating
expenses. We write off customer accounts receivable balances to the allowance
for doubtful accounts when it becomes likely that we will not collect the
receivable from the customer.


14


Income
Taxes





We make
estimates to determine our current provision for income taxes, as well as
deferred tax assets and liabilities, income taxes payable and any valuation
allowances. Our estimates related to our current provision for income taxes are
based on current tax laws. Changes in tax laws or our interpretation of tax laws
could impact the amounts provided for income taxes in our financial statements.
We assess the likelihood that we will be able to recover our deferred tax
assets. Realization of our deferred tax assets is dependent upon future taxable
income as well as our use of prudent and feasible tax planning strategies. Our
estimates regarding future profitability may change due to future market and
industry conditions, changes in tax laws and other factors. We consider all
available evidence, both positive and negative, including historical levels of
income, expectations and risks associated with estimates of future taxable
income, changes in tax laws, ongoing prudent and feasible profits and our stock
price. To the extent we believe it is more-likely-than-not that some portion or
all of our net deferred tax assets will not be realized, we establish a
valuation allowance against the deferred tax assets. To the extent we establish
or change a valuation allowance in a period, we reflect the change with a
corresponding increase or decrease to our tax provision in the consolidated
statement of operations.





Goodwill and Intangible
Assets





The
Company accounts for its goodwill and intangible assets pursuant to SFAS No.
142, Goodwill and Other Intangible Assets. Under SFAS 142, intangibles with
definite lives continue to be amortized on a straight-line basis over the lesser
of their estimated useful lives or contractual terms. Goodwill and intangibles
with indefinite lives are evaluated at least annually for impairment by
comparing the asset's estimated fair value with its carrying value, based on
cash flow methodology.





Intangibles
with definite lives are subject to impairment testing in the event of certain
indicators. Impairment in the carrying value of an asset is recognized whenever
anticipated future cash flows (undiscounted) from an asset are estimated to be
less than its carrying value. The amount of the impairment recognized is the
difference between the carrying value of the asset and its fair
value.




ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




We are a
smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are
not required to provide the information required under this
item.


15


ITEM 8. FINANCIAL
STATEMENTS.





Report
      of Independent Registered Public Accounting Firm
                17Consolidated
      Balance Sheets as of June 30, 2009 and 2008
                18Consolidated
      Statements of Operations for the years ended June 30, 2009 and
      2008
                19Consolidated
      Statement of Changes in Stockholders’ Equity (Deficit) for the years ended
      June 30, 2009 and 2008
                20Consolidated
      Statements of Cash Flows for the years ended June 30, 2009 and
      2008
                21Notes
      to Financial Statements
                22


16


REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the
Board of Directors and
 Stockholders
of Future Now Group, Inc.
  We have
audited the accompanying consolidated balance sheets of Future Now Group, Inc.
and Subsidiaries as of June 30, 2009 and 2008, and the related consolidated
statements of income, stockholders’ equity and cash flows for each of the years
then ended. Future Now Group, Inc.’s management is responsible for these
financial statements. 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). 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 audit 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 also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that 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 Future Now Group, Inc.
and Subsidiaries as of June 30, 2009 and 2008, and the consolidated results of
its operations and its cash flows for each of the years then ended in conformity
with accounting principles generally accepted in the United States of
America.
  The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated
financial statements, the Company has suffered recurring losses from operations
and is in a working capital deficit position that raises substantial doubt about
its ability to continue as a going concern. Management’s plans concerning these
matters are also described in Note 2. The consolidated financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
   /s/
Rosenberg, Rich, Baker Berman & Company
  Somerset,
New Jersey
 December
8, 2009


17


Future
Now Group Inc. and Subsidiaries


Consolidated
Balance Sheets


June
30, 2009 and 2008




6/30/09
                  
                  
                  6/30/08ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
                  
                  $
                  34,138
                  
                  
                  $
                  228,467Investment
      in available for sale marketable securities
                  
                  
                  39,212
                  
                  
                  
                  60,266Accounts
      receivable, net
                  
                  
                  10,650
                  
                  
                  
                  289,299Note
      receivable
                  
                  
                  58,132
                  
                  
                  
                  53,115Other
      current assets
                  
                  
                  -
                  
                  
                  
                  30,007Prepaid
      expenses
                  
                  
                  73,333
                  
                  
                  
                  219,996TOTAL
      CURRENT ASSETS
                  
                  
                  215,465
                  
                  
                  
                  881,150Fixed
      assets, net
                  
                  
                  -
                  
                  
                  
                  44,706Investment
      in unconsolidated subsidiary, at cost
                  
                  
                  -
                  
                  
                  
                  82,000Deferred
      offering costs, net
                  
                  
                  -
                  
                  
                  
                  250,342Deferred
      tax asset
                  
                  
                  -
                  
                  
                  
                  1,037,985Intangible
      asset, net
                  
                  
                  236,387
                  
                  
                  
                  398,611Goodwill
                  
                  
                  185,717
                  
                  
                  
                  185,717Security
      deposits and other assets
                  
                  
                  -
                  
                  
                  
                  41,603Prepaid
      expenses
                  
                  
                  -
                  
                  
                  
                  73,340TOTAL
      ASSETS
                  
                  $
                  637,569
                  
                  
                  $
                  2,995,454LIABILIATIES
      AND STOCKHOLDERS' EQUITYCURRENT
      LIABILITIES:Accounts
      payable and accrued expenses
                  
                  $
                  598,562
                  
                  
                  $
                  384,820Derivative
      liability
                  
                  
                  4,712,227Deferred
      revenue
                  
                  
                  41,477
                  
                  
                  
                  116,723Income
      tax payable
                  
                  
                  1,500
                  
                  
                  
                  1,350Current
      portion of convertible debentures, net of discount
                  
                  
                  1,442,103
                  
                  
                  
                  1,300,000TOTAL
      CURRENT LIABILITIES
                  
                  
                  6,795,869
                  
                  
                  
                  1,802,893Convertible
      debentures, net of discount
                  
                  
                  41,568
                  
                  
                  
                  262,319TOTAL
      LIABILITIES
                  
                  
                  6,837,437
                  
                  
                  
                  2,065,212STOCKHOLDERS'
      EQUITY(DEFICIT):Preferred
      stock, $.001 par value, 50,000,000 shares authorized, none issued and
      outstanding
                  
                  
                  -
                  
                  
                  
                  -Subscription
      receivable
                  
                  
                  -
                  
                  
                  
                  (95,000
                  )Common
      stock, $.001 par value, 900,000,000 shares authorized, 77,125,063 and
      75,463,952 shares issued and outstanding, as of June 30, 2009 and 2008,
      respectively
                  
                  
                  77,125
                  
                  
                  
                  75,464Additional
      paid-in capital
                  
                  
                  4,209,079
                  
                  
                  
                  2,933,258Retained
      earnings
                  
                  
                  (10,340,284
                  )
                  
                  
                  (1,893,743
                  )Accumulated
      other comprehensive loss
                  
                  
                  (145,788
                  )
                  
                  
                  (89,737
                  )TOTAL
      STOCKHOLDERS' EQUITY(DEFICIT)
                  
                  
                  (6,199,868
                  )
                  
                  
                  930,242TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
                  
                  $
                  637,569
                  
                  
                  $
                  2,995,454





See
Accompanying Notes to Audited Consolidated Financial Statements


18


Future
Now Group Inc. and Subsidiaries


Consolidated
Statements of Operations


For
the Twelve Months Ended June 30, 2009 and 2008





Twelve
                              Months Ended
                              June 30 , 2009
                            
                            
                            Twelve
                              Months Ended
                              June 30, 2008Revenues:Subscription
      revenues
                            
                            $
                            280,395
                            
                            
                            $
                            -Professional
      service revenues
                            
                            
                            1,425,339
                            
                            
                            
                            2,084,526Total
      Revenues
                            
                            
                            1,705,734
                            
                            
                            
                            2,084,526Cost
      of Revenues
                            
                            
                            463,020
                            
                            
                            
                            638,697Gross
      Profit
                            
                            
                            1,242,714
                            
                            
                            
                            1,445,829Operating
      expenses:Marketing
      and sales
                            
                            
                            336,197
                            
                            
                            
                            360,112Research
      and development
                            
                            
                            305,982
                            
                            
                            
                            516,360Stock
      based compensation
                            
                            
                            1,115,262
                            
                            
                            
                            369,201General
      and administrative
                            
                            
                            1,490,821
                            
                            
                            
                            2,188,440Total
      operating expenses
                            
                            
                            3,248,262
                            
                            
                            
                            3,434,113Loss
      from operations
                            
                            
                            (2,005,548
                            )
                            
                            
                            (1,988,283
                            )Other
      (income) expensesInterest
      expense and amortization of debt discount
                            
                            
                            1,254,482
                            
                            
                            
                            690,383Change
      in the fair value of derivative liability
                            
                            
                            3,861,262Amortization
      of deferred financing costs
                            
                            
                            172,257
                            
                            
                            
                            196,079Other
      expense
                            
                            
                            114,683
                            
                            
                            
                            84,389Realized
      capital gains
                            
                            
                            -
                            
                            
                            
                            (35,326
                            )Total
      other expenses
                            
                            
                            5,402,684
                            
                            
                            
                            935,525(Loss)
      before taxes
                            
                            
                            (7,408,232
                            )
                            
                            
                            (2,923,808
                            )Income
      tax provision (benefit)
                            
                            
                            1,038,309
                            
                            
                            
                            (1,019,135
                            )Net
      (loss) applicable to common shareholders
                            
                            $
                            (8,446,541
                            )
                            
                            $
                            (1,904,673
                            )Comprehensive
      (loss):Unrealized
      loss on available for sale marketable securities
                            
                            
                            (56,051
                            )
                            
                            
                            (89,737
                            )Total
      comprehensive (loss)
                            
                            $
                            (8,502,592
                            )
                            
                            $
                            (1,994,410
                            )Net
      (loss) per share – basic and diluted
                            
                            $
                            (0.11
                            )
                            
                            
                            (0.03
                            )Weighted
      number of shares outstanding - basic and diluted
                            
                            
                            78,108,595
                            
                            
                            
                            62,759,669





See
Accompanying Notes to Audited Consolidated Financial Statements


19


Future
Now Group Inc. and Subsidiaries


Consolidated
Statement of Changes in Stockholders’ Equity (Deficit)


for
the Years Ended June 30, 2009 and 2008





Preferred
                                                                          Stock
                                                                        
                                                                        
                                                                        Common
                                                                        
                                                                        
                                                                        Paid-In
                                                                        
                                                                        
                                                                        Accum
                                                                          Comp
                                                                        
                                                                        
                                                                        Sub
                                                                        
                                                                        
                                                                        Retained
                                                                        
                                                                        
                                                                        Stockholders'Shares
                                                                        
                                                                        
                                                                        Par
                                                                          Value
                                                                        
                                                                        
                                                                        Shares
                                                                        
                                                                        
                                                                        Par
                                                                          Value
                                                                        
                                                                        
                                                                        Capital
                                                                        
                                                                        
                                                                        (Loss)
                                                                        
                                                                        
                                                                        Rec'b
                                                                        
                                                                        
                                                                        (Deficit)
                                                                        
                                                                        
                                                                        Equity
                                                                          (Deficit)Balance,
      June 30, 2007
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        44,400,000
                                                                        
                                                                        
                                                                        $
                                                                        44,400
                                                                        
                                                                        
                                                                        $
                                                                        285,099
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        (800
                                                                        )
                                                                        
                                                                        $
                                                                        10,930
                                                                        
                                                                        
                                                                        $
                                                                        339,629Issuance
      of stock options
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        361,865
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        361,865Issuance
      of additional placement agent warrants
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        1,137
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        1,137Issuance
      of warrants with convertible debt
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        912,259
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        912,259Conversion
      of convertible note
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        675,939
                                                                        
                                                                        
                                                                        
                                                                        676
                                                                        
                                                                        
                                                                        
                                                                        225,418
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        226,094Exercise
      of warrants
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        1,110,000
                                                                        
                                                                        
                                                                        
                                                                        1,110
                                                                        
                                                                        
                                                                        
                                                                        88,890
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        90,000Exercise
      of stock options
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        2,363,893
                                                                        
                                                                        
                                                                        
                                                                        2,364
                                                                        
                                                                        
                                                                        
                                                                        112,635
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (95,000
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        19,999Issuance
      of additional warrants bridge notes
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        209,662
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        209,662Recapitalization
      due to reverse merger
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        22,785,548
                                                                        
                                                                        
                                                                        
                                                                        22,786
                                                                        
                                                                        
                                                                        
                                                                        (23,586
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        800
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (0
                                                                        )Issuance
      of stock for share purchase
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        428,572
                                                                        
                                                                        
                                                                        
                                                                        429
                                                                        
                                                                        
                                                                        
                                                                        149,571
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        150,000Elemental
      business acquisition
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        3,700,000
                                                                        
                                                                        
                                                                        
                                                                        3,700
                                                                        
                                                                        
                                                                        
                                                                        588,300
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        592,000Issuance
      of warrants for services
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        22,007
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        22,007Change
      in fair value of marketable securities
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        
                                                                        (89,737
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (89,737
                                                                        )Net
      loss for period
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (1,904,673
                                                                        )
                                                                        
                                                                        
                                                                        (1,904,673
                                                                        )-
                                                                        
                                                                        
                                                                        
                                                                        -Balance
      June 30, 2008
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        75,463,952
                                                                        
                                                                        
                                                                        $
                                                                        75,464
                                                                        
                                                                        
                                                                        $
                                                                        2,933,258
                                                                        
                                                                        
                                                                        $
                                                                        (89,737
                                                                        )
                                                                        
                                                                        $
                                                                        (95,000
                                                                        )
                                                                        
                                                                        $
                                                                        (1,893,743
                                                                        )
                                                                        
                                                                        $
                                                                        930,242Issuance
      of stock and warrants for share purchase
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        555,556
                                                                        
                                                                        
                                                                        
                                                                        556
                                                                        
                                                                        
                                                                        
                                                                        99,444
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        100,000Change
      in fair value of marketable services
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (56,051
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (56,051
                                                                        )Stock
      issued for prepaid consulting services
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        2,500,000
                                                                        
                                                                        
                                                                        
                                                                        2,500
                                                                        
                                                                        
                                                                        
                                                                        567,500
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        570,000Stock
      issued for quarterly Board compensation
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        44,444
                                                                        
                                                                        
                                                                        
                                                                        44
                                                                        
                                                                        
                                                                        
                                                                        11,956
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        12,000Employee
      stock options
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        321,522
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        321,522Modification
      of employee stock options
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        107,500
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        107,500Stock
      options issued for debt guaranty
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        82,052
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        82,052Reduction
      to subscription receivable with separation agreement
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        25,000
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        25,000Officer
      compensation waiver
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        154,408
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        154,408Reduction
      to subscription rceivable with share relinguishment
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (1,438,889
                                                                        )
                                                                        
                                                                        
                                                                        (1,439
                                                                        )
                                                                        
                                                                        
                                                                        (68,561
                                                                        )
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        70,000
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        0Net
      loss for period
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        (8,446,541
                                                                        )
                                                                        
                                                                        
                                                                        (8,446,541
                                                                        )Balance
      June 30, 2009
                                                                        
                                                                        
                                                                        0
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        77,125,063
                                                                        
                                                                        
                                                                        $
                                                                        77,125
                                                                        
                                                                        
                                                                        $
                                                                        4,209,079
                                                                        
                                                                        
                                                                        $
                                                                        (145,788
                                                                        )
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        (10,340,284
                                                                        )
                                                                        
                                                                        $
                                                                        (6,199,868
                                                                        )





See
Accompanying Notes to Audited Consolidated Financial Statements


20


Future
Now Group Inc. and Subsidiaries


Consolidated
Statements of Cash Flows


for
the Years ended June 30, 2009 and 2008


Year End
                            June 30,
                            2009
                          
                          
                          Year Ended
                            June 30,
                            2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss)
                          
                          $
                          (8,446,541
                          )
                          
                          $
                          (1,904,673
                          )Adjustments
      to reconcile net (loss) to cash used in operating
    activities:Change
      in deferred tax asset
                          
                          
                          1,037,985
                          
                          
                          
                          (1,020,484
                          )Realized
      gain on sales of investment
                          
                          
                          -
                          
                          
                          
                          (35,326
                          )Provision
      for doubtful accounts
                          
                          
                          55,500
                          
                          
                          
                          54,500Stock
      based compensation
                          
                          
                          1,115,262
                          
                          
                          
                          369,201Depreciation
                          
                          
                          44,706
                          
                          
                          
                          10,894Change
      in derivative liability
                          
                          
                          3,861,262Amortization
      of prepaid interest
                          
                          
                          220,000
                          
                          
                          
                          146,667Amortization
      of debt discount
                          
                          
                          446,507
                          
                          
                          
                          420,622Amortization
      of intangibles
                          
                          
                          162,223
                          
                          
                          
                          11,389Loss
      on impairment of asset
                          
                          
                          0Amortization
      of deferred offering costs
                          
                          
                          250,342
                          
                          
                          
                          184,691Change
      in operating assets and liabilities:Accounts
      and notes receivable
                          
                          
                          223,149
                          
                          
                          
                          (67,352
                          )Prepaid
      and other current assets
                          
                          
                          222,985
                          
                          
                          
                          (331,340
                          )Deferred
      offering costs
                          
                          
                          250,342
                          
                          
                          
                          (180,667
                          )Income
      tax receivables/payable
                          
                          
                          (150
                          )
                          
                          
                          8,831Accounts
      payable and accrued expenses
                          
                          
                          213,742
                          
                          
                          
                          149,765Deferred
      licensing fees
                          
                          
                          -
                          
                          
                          
                          (33,334
                          )Deferred
      revenue
                          
                          
                          (75,246
                          )
                          
                          
                          89,123Security
      deposit and other assets
                          
                          
                          123,603
                          
                          
                          
                          (38,872
                          )Net
      cash used in operating activities
                          
                          $
                          (294,329
                          )
                          
                          $
                          (2,166,365
                          )CASH
      FLOW FROM INVESTING ACTIVITIES:Issuance
      of revolving credit facility
                          
                          
                          -
                          
                          
                          
                          (45,115
                          )Proceeds
      from sale of investment
                          
                          
                          -
                          
                          
                          
                          35,326Cash
      acquired in EBI transaction
                          
                          
                          -
                          
                          
                          
                          4,880Equipment
      purchases and leasehold improvements
                          
                          
                          -
                          
                          
                          
                          (50,300
                          )Net
      cash used in investing activities
                          
                          $
                          -
                          
                          
                          $
                          (55,209
                          )CASH
      FLOW FROM FINANCING ACTIVITIES:Proceeds
      from stock option exercises
                          
                          
                          -
                          
                          
                          
                          20,000Proceeds
      from sale of common stock
                          
                          
                          100,000
                          
                          
                          
                          150,000Proceeds
      from warrant exercises
                          
                          
                          -
                          
                          
                          
                          90,000Proceeds
      from issuance of convertible debentures
                          
                          
                          -
                          
                          
                          
                          1,550,000Net
      cash provided by financing activities
                          
                          $
                          100,000
                          
                          
                          $
                          1,810,000NET
      (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
                          
                          
                          (194,329
                          )
                          
                          
                          (411,574
                          )CASH
      AND CASH EQUIVALENTS at beginning of period
                          
                          
                          228,467
                          
                          
                          
                          640,041CASH
      AND CASH EQUIVALENTS at end of period
                          
                          $
                          34,138
                          
                          
                          $
                          228,467Supplemental disclosure of cash flow
      informationCash
      paid for:Interest
                          
                          $
                          16,823
                          
                          
                          $
                          47,242Income
      Taxes
                          
                          $
                          500
                          
                          
                          $
                          1,250Supplemental schedule of non-cash investing and
      financing activitiesDeferred
      offering warrant costs
                          
                          $
                          -
                          
                          
                          $
                          172,341Issuance
      of stock for services to be provided
                          
                          $
                          550,000Debt
      discount on convertible notes
                          
                          $
                          -
                          
                          
                          $
                          611,971Issuance
      of stock for board of directors quarterly retainer
                          
                          $
                          12,000Contribution
      of deferred compensation to equity
                          
                          $
                          241,481Forgiveness
      of promissory note
                          
                          $
                          25,000Change
      in fair value of marketable securities for sale
                          
                          $
                          (56,051
                          )Conversion
      of convertible debt
                          
                          $
                          -
                          
                          
                          $
                          225,000Promissory
      notes issued for option purchases
                          
                          $
                          -
                          
                          
                          $
                          95,000Prepaid
      interest and deferred offering withheld from gross proceeds from theissuance
      of convertible debentures
                          
                          $
                          -
                          
                          
                          $
                          550,000Receipt
      of marketable securities for engagement terms
                          
                          $
                          -
                          
                          
                          $
                          150,000Acquisition
      of Elemental Business, Inc.
                          
                          $
                          -
                          
                          
                          $
                          592,000





See
Accompanying Notes to Audited Consolidated Financial Statements


21


FUTURE NOW GROUP, INC. and
SUBSIDIARIES


NOTES
TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS


AS
OF JUNE 30, 2009




Note
1. The Company and Nature of Business




Future
Now Group, Inc. (the “Company”) through its wholly-owned subsidiaries, Future
Now, Inc (“FNI”), Intellectual Property Licensing Group, Inc,(“IPLG”), Future
Now Consulting, Inc. (“FNCI”) and Elemental Business, Inc (“EBI”), provides
online marketing optimization services and software solutions utilizing a
proprietary methodology and supporting set of software tools that help
businesses improve their online marketing to generate more sales, leads, and
subscriptions. The Company’s proprietary Persuasion Architecture® framework
delivers clients “blueprints” to plan, measure and improve their online sales
and marketing initiatives.




On May
28, 2008, the Company completed a share exchange with EBI whereby the Company
purchased all the outstanding common stock of EBI in exchange for the issuance
of 3,700,000 shares of its Common Stock (See note 3).





Note
2.  Gong Concern




Liquidity. 
As of June 30, 2009, we had $34,138 in cash.   We had $39,212 in
marketable securities and $10,650 in accounts receivable, $6,580,404 in working
capital deficiency, and an accumulated deficit of $10,340,284.   Our
net loss and operating loss for the year ended June 30, 2009 was $8,446,541
and $2,005,548 million, respectively.   On April 13, 2009 an
investor with $1,800,000 principal amount of convertible notes issued a default
notice for non-payment.   These conditions raise substantial doubt
about our ability to continue as a going concern.





The
Company is presently in discussions with the investor that issued the default
notice and is also exploring other potential financial transaction to
restructure the Balance Sheet so as to continue to effectively pursue its
business plan.    Once restructured the Company plans to continuing to
look for additional capital as well as consider other strategic financial
transaction and partnering opportunities.   Until such a time the
Company plans to maintain its operations at bear minimum costs and management
will continue to defer compensation as required.   No adjustment has
been made in the accompanying financial statements to the carrying amount and
classification of recorded assets and liabilities should we be unable to
continue operations.





Note
3. Summary of Significant Accounting Policies




Use
of Estimates




The
consolidated financial statements of the Company have been prepared using
accounting principles generally accepted in the United States of America. These
principles require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and reported amounts of revenue and expenses. Actual results
could differ from those estimates.




Principles
of Consolidation




The
consolidated financial statements include the accounts of FNI, IPLG,
FNCI and EBI. All inter-company balances and transactions have been
eliminated in the consolidated financial statements.




Concentration
of Risk




The
Company’s financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents, short-term marketable
securities, long-term investments and trade accounts receivable. Although the
Company deposits its cash with multiple financial institutions, its deposits, at
times, may exceed federally insured limits. For the year ended June 30, 2008,
one customer represented 11% of our gross revenue.




Fixed
Assets




Fixed
assets consists of leasehold improvements and office equipment and is stated at
cost less accumulated depreciation. Depreciation is determined by using the
straight-line method over the estimated useful lives of the related assets,
generally two to five years or the lease term.


22





Revenue
Recognition




The
Company derives its revenue from the sale of products and services that it
classifies into the following three categories: (1) professional services,
including, custom & packaged consulting; (2) software subscriptions,
and (3) training and product sales. The Company has traditionally sold its
services, products and licenses through customer referrals. The Company utilizes
written contracts as the means to establish the terms and conditions upon which
its products and services are sold to customers.




The
Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) 97-2,
Software Revenue Recognition, and related interpretations, SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions, and Securities and Exchange Commission (“SEC”) Staff Accounting
Bulletin (“SAB”) No. 104 — Revenue Recognition. For arrangements outside the
scope of SOP 97-2, the Company evaluates if multiple elements can be accounted
for separately in accordance with Emerging Issues Task Force (“EITF”) Issue No.
00-21, Accounting for Revenue Arrangements with Multiple
Deliverables.




Professional
service revenues




Because
the Company provides its applications as services, it follows the provisions of
SAB No. 104, Revenue Recognition, and SOP 97-2, Software Revenue Recognition.
The Company recognizes revenue when all of the following conditions are
met:





§
            there
      is persuasive evidence of an
arrangement;





§
            the
      service has been provided to the
customer;





§
            the
      collection of the fees is reasonably assured;
  and





§
            the
      amount of fees to be paid by the customer is fixed or
      determinable.





The
Company recognizes revenue resulting from professional services sold with
licensing offerings (generally considered to be at the time of, or within 45
days of, sale of the licensing offering) over the term of the related
professional services contract as these services are considered to be
inseparable from the licensing service, and the Company has not yet established
objective and reliable evidence of fair value for the undelivered element. Since
the Company cannot allocate a fair value to the various elements of its
contracts based on vendor-specific objective evidence, the Company recognizes
revenue in accordance with contract accounting under the
percentage-of-completion method. The professional service component of the
monthly payment project is recognized as the services are performed. The Company
recognizes revenues resulting from professional services sold separately from
the licensing services as those professional services are
performed.




Software
Subscriptions




The
Company derives its licensing revenue from selling software and methodology
licenses to customers. The Company does not provide custom software development
services or create tailored products to sell to specific customers. The software
licenses are sold with certain post-contract services, installation and
training. As such, the combination of these products and services represent a
“multiple-element” arrangement for revenue recognition purposes. Since the
Company cannot allocate a fair value to the various elements of its contracts
based on vendor-specific objective evidence, the Company recognizes revenue in
accordance with contract accounting under the percentage-of-completion
method.





Deferred
revenues




Deferred
revenues consist of billings or payments received in advance of revenue
recognition for our professional services, licensing and training services
described above and we recognize them as revenue only when the revenue
recognition criteria are met.


23


Equity/revenue
sharing revenues





The
Company derives revenue through revenue and equity sharing arrangements
(“RSP/ESP Agreement”) whereby the Company participates in online revenue
(“Revenue Participation”) increases resulting from the Company’s recommendations
and in an effort to reduce the cash outlay by clients may take some fees as
equity ownership (“Equity Participation”) in clients. Along with all RSP/ESP
Agreements the Company will also take cash payments for licensing, training and
support services. The Company’s policy as it pertains to recognizing revenue
related to, such revenue is recorded as it is earned based upon stages outlined
in the RSP/ESP Agreement. During the years ended June 30, 2009 and 2008, the
Company entered into two RSP/ESP Agreements and has recorded the following
revenue; (i) licensing fees of $30,000 (ii) support/training fees of $19,000;
and (i) $150,000 worth of Equity Participation. The Company fully completed its
obligations under one arrangement and is ongoing with the other.





The
revenue booked for the Equity Participation was the market value of the Client’s
public stock (“Market Value of Services”). As such the Company received 882,353
of the client’s common stock that was than trading at $0.17 on the date the
RSP/ESP Agreement was executed. The Client launched the new website on January
17, 2008. The Company recorded the $150,000 market value of the Equity
Participation during the quarter ended March 31, 2008 in the professional
services revenue line of the statement of operations. As part of the RSP/ESP
Agreement a protection feature (“Restricted Share Adjustment”) was negotiated
whereby if at any time during the service period of this RSP/ESP Agreement the
market price (“Market Price”) of the publicly traded Common Stock (“Common
Stock”) times the shares held paid to the Company drops to 70% of the Total
Equity Based Compensation amount or less for ten (10) consecutive days then all
work shall cease. The Client will have the option to make up the difference in
cash or additional Restricted Shares to return the value paid to the Company to
the agreed upon original Market Value of Service level within 30 days. If the
Client chooses not to exercise this option then the default provisions of this
RSP/ESP Agreement shall be in force. If the default provision is made effective
or if the client fails to launch the new website, the Company would receive an
additional $50,000 penalty cash payment. Based upon the traded market price of
the client common stock in late February and early March, the client issued to
the Company an additional 1,172,442 restricted shares. The value of the
additional shares was marked at $85,588 and was reflected as an adjustment to
the value of the Equity Participation on the face of the Balance Sheet in equity
as accumulated comprehensive adjustment. During the quarter ended March 31, 2008
the Company recorded a loss adjustment of $119,186 to the equity section. The
Company will record any realized gains or losses in its Statement of Operation
related to the Equity Participation only when sold. The Company’s policy is to
recognize any additional shares received as part of the Restricted Share
Adjustment provision as an offset to unrealized losses as reflected in the
accumulated comprehensive loss amount in the equity section. Under the
Restricted Share Adjustment provision, the Company received an additional
7,991,902 restricted shares in June that had a market value at the time of
issuance of $119,879. As of June 30, 2008 the Company owed 10,046,697 restricted
common stock of the client





The
Company will recognize the Revenue Participation upon receipt of the
proceeds.  For the year ended June 30, 2009, the Company recognized $35,000
in revenue related to this provision.





Cash
and Cash Equivalents




The
Company considers all highly liquid investments with original maturities of
three months or less to be cash and cash equivalents. Cash and cash equivalents
are comprised of money market funds. The carrying amounts approximate fair value
due to the short maturities of these instruments.




Accounts
Receivable




The
Company’s accounts receivable are derived from a large number of direct
customers. Collateral is not required for accounts receivable. The Company
maintains an allowance for potential credit losses as considered necessary. The
allowance for potential credit losses was $160,000 and $104,500 as of June 30,
2009 and 2008, respectively. The Company performs ongoing reviews of all
customers that have breached their payment terms or for whom information has
become available indicating a risk of non-recoverability. The Company records an
allowance for bad debts for specific customers identified as well as an
allowance based on its historical collection experience. The Company’s
evaluation of the allowance for potential credit losses requires the use of
estimates and the actual results may differ from these estimates.





Research
and Software Development Costs




Costs
incurred in the research and development of new software products and
enhancements to existing software products are expensed as incurred until
technological feasibility has been established. The Company determines
technological feasibility when a working model has been completed. After
technological feasibility is established, any additional costs are capitalized
in accordance with SFAS No. 86, Accounting for the Costs of Computer Software to
Be Sold, Leased or Otherwise Marketed, until the product is available for
general release. The Company has not capitalized any research and software
development costs because technological feasibility has not been established for
software being developed during the period ended June 30, 2009.


24




Goodwill
and Intangible Assets





The
Company accounts for its goodwill and intangible assets pursuant to SFAS No.
142, Goodwill and Other Intangible Assets.  Under SFAS 142, intangibles
with definite lives continue to be amortized on a straight-line basis over the
lesser of their estimated useful lives or contractual terms. Goodwill and
intangibles with indefinite lives are evaluated at least
annually for impairment by comparing the asset's estimated  fair
value with its carrying  value,  based on cash flow methodology.





Intangibles
with definite lives are subject to impairment testing in the event of certain
indicators. Impairment in the carrying value of an asset is recognized whenever
anticipated future cash flows (undiscounted) from an asset are estimated to be
less than its carrying value.  The amount of the impairment recognized is
the difference between the carrying value of the asset and its fair
value.





Cost
of Revenues




The
Company’s cost of revenues primarily consists of personnel associated with the
Company’s professional services as well as network operations.




Income
Taxes




The
Company provides for income taxes using the asset and liability method. Under
this method, current income tax expense or benefit is the amount of income taxes
expected to be payable or refundable for the current year. A deferred income tax
asset or liability is computed for the expected future impact of differences
between the financial reporting and tax bases of assets and liabilities and for
the expected future tax benefit to be derived from tax credit and loss
carry-forwards. Deferred tax assets are reduced by a valuation allowance when,
in the opinion of management, it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization of
future income tax assets is dependent upon the generation of sufficient future
taxable income during the period in which the deferred tax assets are
recoverable. Management assesses the likelihood that the deferred tax assets
will be recovered from future taxable income and whether a valuation allowance
is required to reflect any uncertainty. Management has determined that a full
valuation allowance was necessary as of June 30, 2009.




Fair
Value of Financial Instruments




The
carrying amounts reported in the consolidated balance sheets for cash, accounts
receivable, income tax receivable, accounts payable and accrued expenses
approximate their fair values due to the short term maturities of these
financial instruments.




The fair
value of the Company’s debt obligations approximates its carrying value as it is
based on or about the current rates offered to the company for debt of the same
maturities with similar collateral.




Recent
Accounting Pronouncements





Effective
July 1, 2008, we adopted Statement of Financial Accounting Standards No. 157,
Fair Value Measurements (SFAS 157), which provides a framework for measuring
fair value under GAAP. SFAS 157 defines fair value as the exchange price that
would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. SFAS
157 requires that valuation techniques maximize the use of observable inputs and
minimize the use of unobservable inputs. SFAS 157 also establishes a fair value
hierarchy, which prioritizes the valuation inputs into three broad
levels.





Effective
January 1, 2009, the Company adopted FASB ASC Topic 805, Business Combinations(“ASC
805”). ASC 805 establishes principles and requirements for how the acquirer of a
business recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree. ASC 805 also provides guidance for recognizing and measuring the
goodwill acquired in the business combination and determines what information to
disclose to enable users of the financial statements to evaluate the nature and
financial effects of the business combination. ASC 805 also provides guidance
for recognizing changes in an acquirer’s existing income tax valuation
allowances and tax uncertainty accruals that result from a business combination
transaction as adjustments to income tax expense. The Company does not believe
ASC 805 will have a material impact on the Company’s financial
statements.


25





In April
2009, the FASB issued updated guidance related to business combinations, which
is included in the Codification in ASC 805-20, Business Combinations – Identifiable
Assets, Liabilities and Any Noncontrolling Interest(“ASC 805-20”). ASC
805-20 amends and clarifies ASC 805 to address application issues regarding
initial recognition and measurement, subsequent measurement and accounting and
disclosure of assets and liabilities arising from contingencies in a business
combination. In circumstances where the acquisition-date fair value for a
contingency cannot be determined during the measurement period and it is
concluded that it is probable that an asset or liability exists as of the
acquisition date and the amount can be reasonably estimated, a contingency is
recognized as of the acquisition date based on the estimated amount. ASC 805-20
is effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008. The
Company does not believe ASC 805-20 will have a material impact on the Company’s
future financial statements.





Effective
January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value Measurements and
Disclosures – Overall(“ASC 820-10”) with respect to its financial assets
and liabilities. In February 2008, the FASB issued updated guidance related to
fair value measurements, which is included in the Codification in ASC 820-10-55,
Fair Value Measurements and
Disclosures – Overall – Implementation Guidance and Illustrations. The
updated guidance provided a one year deferral of the effective date of ASC
820-10 for non-financial assets and non-financial liabilities, except those that
are recognized or disclosed in the financial statements at fair value at least
annually. Therefore, the Company adopted the provisions of ASC 820-10 for
non-financial assets and non-financial liabilities effective January 1, 2009,
and such adoption did not have a material impact on the Company’s results of
operations or financial condition.





Effective
April 1, 2009, the Company adopted FASB ASC 820-10-65, Fair Value Measurements and
Disclosures – Overall – Transition and Open Effective Date Information(“ASC 820-10-65”). ASC 820-10-65 provides additional guidance for
estimating fair value in accordance with ASC 820-10 when the volume and level of
activity for an asset or liability have significantly decreased. ASC 820-10-65
also includes guidance on identifying circumstances that indicate a transaction
is not orderly. The adoption of ASC 820-10-65 did not have an impact on the
Company’s consolidated results of operations or financial
condition.





Effective
April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial Instruments – Overall –
Transition and Open Effective Date Information(“ASC 825-10-65”). ASC
825-10-65 amends ASC 825-10 to require disclosures about fair value of financial
instruments in interim financial statements as well as in annual financial
statements and also amends ASC 270-10 to require those disclosures in all
interim financial statements. The adoption of ASC 825-10-65 did not have a
material impact on the Company’s results of operations or financial
condition.





Effective
April 1, 2009, the Company adopted FASB ASC 855-10, Subsequent Events – Overall(“ASC 855-10”). ASC 855-10 establishes general standards of accounting
for and disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued. It requires the
disclosure of the date through which an entity has evaluated subsequent events
and the basis for that date – that is, whether that date represents the date the
financial statements were issued or were available to be issued. This disclosure
should alert all users of financial statements that an entity has not evaluated
subsequent events after that date in the set of financial statements being
presented. Adoption of ASC 855-10 did not have a material impact on the
Company’s results of operations or financial condition.


Effective
July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820)(“ASU 2009-05”). ASU 2009-05 provided amendments
to ASC 820-10, Fair Value
Measurements and Disclosures – Overall,for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using certain techniques. ASU
2009-05 also clarifies that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in
an active market for the identical liability at the measurement date and the
quoted price for the identical liability when traded as an asset in an active
market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material
impact on the Company’s results of operations or financial
condition.


26





In
October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue
Arrangements,(amendments to FASB ASC Topic 605, Revenue Recognition) (“ASU
2009-13”) and ASU 2009-14, Certain Arrangements That Include
Software Elements, (amendments to FASB ASC Topic 985, Software) (“ASU 2009-14”).
ASU 2009-13 requires entities to allocate revenue in an arrangement using
estimated selling prices of the delivered goods and services based on a selling
price hierarchy. The amendments eliminate the residual method of revenue
allocation and require revenue to be allocated using the relative selling price
method. ASU 2009-14 removes tangible products from the scope of software revenue
guidance and provides guidance on determining whether software deliverables in
an arrangement that includes a tangible product are covered by the scope of the
software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a
prospective basis for revenue arrangements entered into or materially modified
in fiscal years beginning on or after June 15, 2010, with early
adoption.





Note
4. Business Acquisition





On May
28, 2008, the Company completed the acquisition of all the outstanding equity
securities of Elemental Business, Inc. (“EBI”) pursuant to a Share Exchange
agreement among the Company and EBI and EBI shareholders. As a result of this
transaction, EBI became a wholly owned subsidiary of the Company. The total
purchase price for the acquisition was $592,000, the fair value of the stock
issued for the acquisition, and included the repayment of EBI’s existing bank
credit facility at closing. The results of the operations of EBI from the date
of acquisition are included in the consolidated financial
statements.





EBI is in
the business of online marketing optimization utilizing its proprietary
technology. The technology was actually built on the concepts around the
Persuasion Architecture® methodology.





Purchase
Price Allocation: EBI’s results of operations are included in the Company’s
statement of operation from the acquisition date. In accordance with SFAS 141,
the total purchase price was allocated to EBI’s net tangible and intangible
assets and liabilities based upon their fair value as of May 28, 2008. The
Company employed the services of an independent valuation specialist to assist
in the valuation and allocation of goodwill resulting from the acquisition. The
following represents the allocation of the purchase price to the acquired net
assets of EBI and the associated estimated useful lives:





Amount
                
                
                Estimated Useful LifeNet
      Working Capital
                
                $
                (3,717
                )
                
                
                -Trade
      Name
                
                
                40,000
                
                
                3
      yearsProprietary
      Technology
                
                
                300,000
                
                
                3
      yearsCustomer
      Relationships
                
                
                70,000
                
                
                3
      yearsGoodwill
      & Going Concern Value
                
                
                185,717
                
                
                IndefiniteTotal
                
                $
                592,000


27






During
the year ended June 30, 2009 the Company wrote off the remaining unamortized
trade name in light of the new product release.  The total net written
off was $25,556.




The
following is unaudited pro forma information for the year ended June 30, 2008,
as if the acquisition of EBI were consummated on July 1, 2006. The pro forma
information is not necessarily indicative of the combined financial position or
results of operations, which would have been realized had the acquisition been
consummated during the period for which the pro forma financial information is
presented.




2008Revenue
                            
                            $
                            2,215,683Net
      (loss)
                            
                            $
                            (1,957,613
                            )Earnings
      per share – basic & diluted
                            
                            $
                            (0.03
                            )





Note
5. Notes Receivable




In
connection with one of the RSP/ESP Agreements, on February 25 th , 2008,
the Company entered into a Revolving Line of Credit Agreement (the “Revolver”)
whereby the Company granted the client a revolving credit line of $70,000. As of
the date the Revolver was signed, the Company had expended $41,245 in third
party design, programmer and ecommerce campaign efforts and such amount was
treated as drawn down from the Revolver. The Company advanced an additional
$3,870 to the client under the Revolver before its expiration. All sums advanced
pursuant to the Revolver shall bear interest from the date each advance is made
until paid in full at the rate of ten percent (10%) per annum, simple interest.
The client shall pay accrued interest on the outstanding principal balance on a
monthly basis commencing on April 15, 2008, and continuing on the fifteenth day
of each month thereafter. The entire unpaid principal balance, together with any
accrued interest and other unpaid charges or fees hereunder, shall be due and
payable on the maturity date of May 1, 2009 (“Maturity Date”). As of the date of
this report the note has not been paid and is accruing interest at the amount
noted in the Revolver agreement. The Company has reflected the amount of the
Revolver as a note receivable in the current asset section of the Balance Sheet.
For the year ended June 30, 2008, the Company recorded interest income of $345
related to the Revolver.   As of May 1, 2009 the note went into
default and started accruing interest at a rate of 18%.  During the
year ended June 30, 2009  the Company recorded interest income
of  $7,317.  However, the Company still has the option at
any time to convert all or a portion of the outstanding principal and interest
on the underlying promissory note (“Note”) related to the Revolver into a number
of shares of common stock, $0.001 par value per share (the “ Common Stock ”) equal
to a fraction, the numerator of which shall be the amount of principal and
interest being so converted and the denominator of which shall be equal to the
Conversion Price (the “ Conversion Shares ”).
The “ Conversion
Price ” shall be $0.05.  If at any time prior to
the Maturity Date and/or full repayment of the Note, the Market Price of the
Client’s Common Stock remains less than 75% of the Conversion Price for a ten
(10) consecutive trading days (“Average Trading Price”) then the Conversion
Price will be automatically adjusted down to the then calculated Average Trading
Price. The adjustment feature will continue to adjust down should the Market
Price continue to decline prior to repayment or conversion.





As part
of the Revolver the Company also received 250,000 Common Stock purchase
warrants. The warrants are exercisable at $0.25 for a period of five years from
issuance. As of June 30, 2009 all the warrants remain outstanding. The warrants
have a cashless exercise provision and are not redeemable by the client. The
warrants also have standard anti-dilution provisions as it related to amount and
price.





On April
15, 2008, the Company also entered into a promissory note arrangement with an
employee for $8,000. The note carries an interest rate of 5% and is repayable on
a monthly basis at $240.    The balance of the promissory
note as of June 30, 2009, and 2008 was $5,700 and $8,000,
respectively.





Note
6. Marketable Securities





We
classify our investments as “available-for-sale” in accordance with the
provisions of Statement of Financial Accounting Standards No. 115. “Accounting
for Certain Investments in Debt and Equity Securities” (SFAS 115). We do not
have any investments classified as “trading”. Investments that we intend to hold
for more than one year are classified as long-term investments.


28





Available-for-sale
securities are carried at fair value with the unrealized gain or loss, net of
tax, reported in other comprehensive income. Unrealized losses considered to be
“other-than-temporary” are recognized currently in earnings. The cost of
securities sold is based on the specific identifications method. The fair value
of most investment securities is determined by currently available market
prices. Where quoted market prices are not available, we use the market price of
similar types of securities that are traded in the market to estimate fair
value.





At June
30, 2009, we maintained a portfolio consisting of common stock of two publicly
traded entity.





Note
7. Investment in Unconsolidated Subsidiary




Alkemi
International Pty Ltd Investment & Limited Term Licensing
Agreement




On June
13, 2007, the Company entered into a licensing agreement, a stockholders
agreement and a call option deed (all collectively, the “AIPL Agreements”) with
Alkemi International Pty Ltd (“AIPL”). Under the AIPL Agreements, AIPL received
a limited term exclusive licensing agreement (17 months) to resell and deliver
the intellectual property of the Company in the Australian and New Zealand
Territories and the Company would have a right to covert any monies owed per the
Agreements from AIPL to ownership position in AIPL. On July 23, 2007, the
Company delivered to AIPL notice to issue shares that totaled the outstanding
balance due from AIPL as of June 13, 2007 to equity in AIPL (then amount was
$82,000). An independent valuation company issued an opinion whereby the value
of AIPL was set at $959,300 AUD (exchange rate 1.18619 or US$808,724) and as
such the Company received an amount equal to $97,268 AUD$ or 159,897 shares of
AIPL. The Company will continue to accrue monies owed from AIPL until a total of
US$62,629 is due from AIPL. At such a time the amount will automatically be
converted into additional shares of AIPL and the total ownership percentage at
that time of AIPL by the Company will equal 15% of AIPL. Payments to the Company
will then commence based upon the licensing agreement. The original agreement
with AIPL began in 2004. This investment is being accounted for under the cost
method.  For the year ended June 30, 2008, the Company was owed
$28,624 under the AIPL Agreements for licensing fees. The Company has recorded
such amount as an accounts receivable until such a time as it might convert or
collect.





Based
upon management review of the potential impairment of the asset, the Company
wrote off all asset values related to AIPL.  On numerous occasion
management requested financial information on the AIPL as well as status of the
investment.   No response could be gathered and contact
information on the AIPL was not valid any longer.  Accordingly, the
Company wrote off its investment as of June 30, 2009.




Note
8. Convertible Debentures and Warrants




Bridge
Convertible Notes




Between
the period from March 1, 2005 through August 15, 2007, pursuant to an investment
subscription agreement and closing documents, Future Now Inc. sold $675,000 in
face value of 10.5% convertible promissory notes, convertible into shares of
Future Now Inc.’s common stock (the “Offering”). Each $50,000 in notes included
the issuance of seven-year warrants to purchase 148,000 shares of Future Now
Inc.’s common stock, or like security issued in a qualified financing or
acquisition, at an exercise price of $0.08 per share. The notes are redeemable
at the earlier of either (i) repayment from the sales escrow redemption feature
(the “Redemption Feature”); (ii) three years from the date of issuance; (iii) a
financing transaction of at least $2,500,000 (the “Qualified Financing”); or
(iv) the closing of a material acquisition of Future Now Inc., whether by
merger, recapitalization, sale of assets or other similar material transaction
(an “Acquisition”). At the note holders’ option, all, or a portion of, the
principal and accrued interest on the notes may be converted into shares of the
Future Now Inc.’s common stock along with a Qualified Financing or Acquisition.
The number of shares into which the notes are convertible will equal the
quotient of the converted principal and interest divided by the lower of (i) the
price per share issued in a Qualified Financing or Acquisition, at a 20%
discount, or (ii) $0.35. If the holder elects the conversion option, the minimum
number of shares of common stock each warrant will convert into is 142,311. As
additional protection against repayment of the notes, under the Redemption
Feature, the Company will escrow three and one-half (3.5%) percent of its gross
revenues in a separate bank account and pay down the notes, on a semi-annual
basis, until such time as the total principal has been repaid (“Redemption
Escrow”). Unless the notes are fully paid off, the first payment under the
Redemption Feature will be due within thirty (“30”) days of the first
anniversary of the notes, and then on a semi-annual basis thereafter. The notes
were issued with warrants having expiration dates seven-years from issuance. The
investors were granted an aggregate of 1,998,000 warrants to purchase shares of
the Future Now Inc.’s common stock at an exercise price of $0.08 per share.
Prior to the share exchange, $200,000 of the face amount of the notes and
1,110,000 warrants were converted into Future Now Inc.’s common
stock.


29





As part
of the share exchange, the unconverted notes and warrants were assumed by the
Company. For amendments to the registration rights and conversion price of the
notes and warrants, the note holders received new warrants, with the same terms,
equal to 100% of their unconverted warrants. The only amendment to the note
holders’ registration rights was to grant the Company’s new investors in the New
Financing (described below), the first right of registration in front of the
existing note holders.




As
provide for with the Redemption Feature of the Notes, during April 2008, the
note holders received an aggregate principal payment of $75,891 which
represented 3.5% gross sales for the period April 1, 2007 through March 31,
2008.   The Company failed to make such payment of principal
during 2009.   Since April 2009, the Company has also failed to
interest payment to note holders.   As of June 30, 2009, the
principal balance of the bridge convertible notes was $356,625, net of $17,485
of unamortized debt discount and recorded $23,497 in accrued
interest.   The note holders will now accrued at an 18% interest
rate.




Share
Exchange Convertible Notes




Immediately
following the closing of the share exchange, the Company entered into two
convertible note agreements, a securities purchase agreement, four warrant
agreements, and a pledge and security agreement (collectively, the “Financing
Agreements”), by and between the Company and two purchasers named therein. The
Financing Agreements provide for the offering by the Company to the purchasers
of $2,000,000 (the “New Financing”) in 11% secured convertible notes maturing on
the second anniversary of the closing date of the New Financing. Interest on the
notes was prepaid.




The notes
will convert into shares of the Company’s common stock, at the option of the
Company, at the conversion price. The conversion price is equal to the lowest of
(a) the Fixed Conversion Price (as defined below), (b) the Lowest Fixed
Conversion Price (as defined below), and (c) the Default Conversion Price (as
defined below). The “Fixed Conversion Price” is $0.35 per share. The “Lowest
Fixed Conversion Price” is the lowest of any new transaction price from any
subsequent financing. The “Default Conversion Price,” applicable only after and
during events of default, is the amount equal to 70% of the three lowest closing
prices during the 20 days prior to a notice of conversion.  The
Company will have the right to prepay all or part of the outstanding principal
on the notes by giving the purchasers advance written notice of 10 trading days.
The prepayment amount will be 115% of the prepaid principal during year one and
125% of the prepaid principal during year two.




Beginning
on the first trading day of the sixth full month after the closing of the New
Financing and on the first day of each month thereafter, the notes will be
repaid in an amount equal to 5% of the principal amount of the notes. Prior to
the effective date of a registration statement covering the shares of common
stock issued in connection with the New Financing, such amount shall be paid in
cash at 120% of the principal amount due. After the effective date, the amount
shall be paid either in cash at 115% of the principal amount due or at the
option of the Company, in shares of common stock at the lesser of the Fixed
Conversion Price or 80% of the average of the closing bid prices of the common
stock for the five trading days prior to the monthly payment date. The Company’s
right to make payment in shares of its common stock is subject to a 4.99%
conversion cap. The purchasers, in their sole discretion, can defer any or all
monthly payments to any subsequent month.




The
purchaser received (a) warrants to purchase shares of the Company’s common
stock, equal to 50% of the issue date conversion shares exercisable at $0.35,
and (b) warrants to purchase 50% of the issue date conversion shares exercisable
at $0.50. 2,380,943 and 2,389,943 warrants were issued at $0.35 and $0.50,
respectively. The warrant prices are subject to adjustment if there is a
subsequent financing with a lower price. The expiration date will be the last
day of the month in which the fifth anniversary of the effective date of a
registration statement occurs. Warrant shares are to be included in the
registration statement. Additionally, there is a cashless exercise right if the
effective date has not occurred by the first anniversary of issuance or if the
registration statement is no longer effective during any time when the warrants
are still outstanding.




Additionally,
the Company must file a registration statement to cover the purchasers’ interest
shares of common stock, warrants and 200% of the number of shares of common
stock equal to all of the shares issued or issuable on conversion of the notes
and compensation stock no later than 60 days from the closing date of the New
Financing and shall have a registration statement declared effective no later
than 120 days from the closing date. Upon default of the above the Company shall
pay, as penalties, to the purchasers 2% per month, in cash, of the principal
amount of the notes for each 30-day period until the registration statement is
filed or declared effective, as the case may be. The Company’s registration
statement filed under Form S1 became effective on April 29, 2008. The Company
incurred penalties for not have the registration statement deemed effective of
$80,000. The penalty amount has been included in other expenses on the Statement
of Operations.


30




The
purchasers agreed not to convert its notes or exercise warrants, and the Company
will not be permitted to issue shares as interest, upon a payment date or
pursuant to a mandatory conversion, to the extent such conversion, exercise or
issuance would result in the purchasers’ beneficial ownership of more than 4.99%
of the outstanding shares of common stock of the Company at that time. The
Company will be authorized to rely on the purchasers’ representations as to the
net amount of such purchasers’ holdings at the time of conversion or exercise.
This limit will not apply under certain circumstances.




The first
principal payment under the notes became due on April 30, 2008. The Company paid
that amount and the May 30, 2008 payment in cash for a total of $240,000 which
represented $200,000 in principal pay down and $55,000 in a risk premium
expense.  For the payment due as of June 30, 2008 and beyond the
Company elected to pay the amount in common stock.  As provided for
the note documents the note holders elected to defer that stock
issuance.  However, on
April 13, 2009 the note holder issued a default notice for non-payment. The
Company is presently in discussions with the investor that issued the default
notice and is also exploring other potential financial transaction to
restructure the Balance Sheet so as to continue to effectively pursue its
business plan.    Based on the default, as of June 30, 2009,
the Company has recorded all obligations under this New Financing as a current
liability, $1,800,000 in principal and $195,000 in risk
premium.   The Company has also recorded a derivative liability
of $362,426 related to the default conversion feature of the New
Financing.   Also related to the default the Company accelerated
the debt discount amortization.   The remaining principal balance
on the note will now accrue additional interest at a rate of
7%.





Note
9. Stockholders’ Equity




Common
Stock




The
Company is authorized to issue up to 900,000,000 shares of common stock and
5,000,000 shares of preferred stock both with par value of $0.001. The Company
had 77,125,063 and 75,463,952 shares of common stock issued and outstanding as
of June 30, 2009 and 2008, respectively.




On August
25, 2008, the Company entered into a securities purchase agreement (the
“Purchase Agreement”) with one investor pursuant to which the Company sold
555,556 shares of common stock, $0.001 par value (the “Common Stock”), and
warrants to purchase 277,778 shares of common stock (the “Warrants”) to the
Buyer for total proceeds of $100,000. The Warrants have an exercise price of
$0.36 per share (the “Exercise Price”). The Warrants may be exercised at any
time on or after the issuance date for a period of five (5) years. The Exercise
Price may be adjusted upon stock dividends, stock splits, subsequent equity
sales by the Company, pro rata distributions among the Company’s existing
shareholders, the Company’s undertaking a fundamental transaction, or
voluntarily at the discretion of the Company’s Board of Directors.





On
January 30, 2009, the Board of Directors granted a total of 14,204,048 shares of
the Company’s common stock to a total of eight company personnel as compensation
for the retirement of a total of $214,481 in compensation that had been deferred
since August 2008 (“Salary Conversion”).    The Salary
Conversion included all compensation deferred up to and including January 31,
2009.   The number of shares received for the Salary Conversion
was priced at the then current market price of the Company’s common stock which
was $0.0151.    As part of the Salary Conversion, the
Company agreed to pay 20% cash to the personnel to assist with the coverage of
tax implications related to the conversion.   The total amount of
such payment will be $42,896 and is to be paid on or before December 31,
2009.    As part of the agreement, the participants further
agreed to defer all or a portion of their February salary as determined by the
Chief Executive and Financial Officer of the Company.





On March
30, 2009, the Board of Director, by the agreement of all personnel that
participated in the Salary Conversion, resolved to cancel the
grant.   Such shares will be returned to
Treasury.    Furthermore through written acknowledgement of
the participants in the Salary Conversion all $214,481 that was accrued was
waived by such participants.  Such amount was recorded in the Company
statement of operations as an expense with the corresponding credit to
paid-in-capital.   From February 1, 2009 through June 30, 2009
certain personnel again deferred their
compensation.    Through June 30, 2009, $75,000 has been
deferred and is recorded as a liability on the Balance Sheet.





Through a
settlement agreement with the Company’s chief operating officer in April 2009
and a share relinquishment arrangement with the Chief Financial Officer, the
Company has eliminated the subscription receivable of $95,000.


31





Note
10. Stock Based Compensation




On July
18, 2007, through written consent in lieu of a special meeting of the
stockholders and the Board of Directors (the “Board”) of FNI., the 2007 stock
incentive plan was adopted (the “Plan”). As part of the share exchange the Plan
was assumed by the Company. The Plan provides a maximum number of shares of the
Company’s common stock that may be issued there under, which amount shall be
equal to no more than 25% of the outstanding common stock of the Company,
determined on the first trading day of each fiscal year. On July 18, 2007, the
Board granted 5,337,250 options under the Plan to key employees and affiliated
personnel (both, the “Grantees”). The options granted had an exercise price of
$0.05 and were immediately vested. On September 15, 2007, the Board granted an
additional 2,208,438 options to Grantees. The options had an exercise price of
$0.06 and were immediately vested. Through written agreements, the Grantees
further agreed in writing that the exercise price would reset to the price of
the stock on the day the share exchange was completed. As consideration for this
amendment and as a result of the recapitalization of the Company due to the
reverse acquisition, the Company granted the Grantees additional options that
represented 25% of the Grantees’ original option grants with the same terms and
conditions upon the closing of the share exchange. The Company issued a total of
1,295,451 additional options. The Company considered the new options as part of
the reverse acquisition and recorded no additional compensation.





On August
8, 2008, as part of a financial consulting agreement, the Company issued
2,500,000 shares of restricted common stock. The agreement is for a period of
three years. The market value as of the date of issuance was $550,000. The
Company has recorded the initial amount as a Prepaid Expense on the Balance
Sheet with the corresponding credit to capital stock and additional paid in
capital. The Company is amortizing that amount on a monthly basis over the
three-year life of the agreement at a rate of $15,278 per
month.    During the year ended June 30, 2009 the Company
accelerated all the compensation related to this because the services are no
longer being utilized.





On August
31, 2008, the Company issued a total of 44,444 shares of Company stock to its
two independent board members as payment for their quarterly retainer fees. The
Company recorded $12,000 in stock based compensation related to this
issuance.





On
October 28, 2008, the Board of Directors granted a total of 2,515,000 stock
options to key employees of the Company. The newly issued options consisted of;
(i) 2,500,000 five-year stock options issued to the Company’s Chief Financial
Officer for a personal guarantee under a $500,000 working capital credit line
with a bank.  The options were issued at market and are exercisable at
$0.04 and vested immediately. Related to this grant the Chief Financial Officer
canceled 1,250,000 stock options previously received for a personal guarantee
that was executed related to an accounts receivable factor line of credit that
has since been cancelled; and (ii) 15,000 stock options that vest over a four
year period and are exercisable at $0.04.   In October 2008,
1,254,625 stock options were forfeited by certain employees related to the
termination of their employment with the Company. Additionally, on October 28,
2008, the Company’s Board of Directors authorized to reduce the exercise price
to $0.04 and extend the contractual term to five years from October 28, 2008 for
an aggregate 7,469,743 fully vested stock options held by key management of the
Company.  The revised terms of the stock options were accounted for as
a modification in accordance with SFAS 123R.   The modification
of the stock options was treated as an exchange of the original award for a new
award.  In connection with the modification the Company recognized
incremental compensation in the amount of $107,500 measured as the excess of the
fair value of the modified award over the fair value of the original award
immediately before its terms were modified.





Compensation
expense is amortized on a straight line basis over the requisite service period
for the entire award, which is generally the maximum vesting period of the
award, and if necessary, is adjusted to ensure that the amount recognized is at
least equal to the vested (earned) compensation. For the year ended June 30,
2009, the Company recorded total stock based compensation expense of
$1,115,262.  Related to the issuance of options, as of June 30, 2009
the total unrecognized compensation cost related to unvested stock options was
$82,599 which is expected to be recognized over a weighted average period of 3.4
years.




The
Company uses the Black-Scholes option-pricing model to estimate the fair value
of its stock option awards and warrant issuances. The calculation of the fair
value of the awards using the Black-Scholes option-pricing model is affected by
the Company’s stock price on the date of grant as well as assumptions regarding
the following:





·
            Estimated
      volatility is a measure of the amount by which the Company’s stock price
      is expected to fluctuate each year during the expected life of the award.
      The Company’s estimated volatility is an average of the historical
      volatility of peer entities whose stock prices were publicly available.
      The Company’s calculation of estimated volatility is based on historical
      stock prices of these peer entities over a period equal to the expected
      life of the awards. The Company uses the historical volatility of peer
      entities due to the lack of sufficient historical data of its stock
      price;




32





·
            The
      expected term represents the period of time that awards granted are
      expected to be outstanding and is currently the average of the contractual
      term and the vesting period. With the passage of time, actual behavioral
      patterns surrounding the expected term will replace the current
      methodology; and





·
            The
      risk-free interest rate is based on the yield curve of a zero-coupon U.S.
      Treasury bond on the date the stock option award is granted with a
      maturity equal to the expected term of the stock option award. An increase
      in the risk-free interest rate would result in an increase to the
      Company’s stock-based compensation
expense.




Current
stock option and warrant pricing assumptions:




For the Years Ended
                          June 302009
                        
                        2008Market
      prices
                        
                        $.012
      - $.05
                        
                        $.16
      - $.50Exercise
      prices
                        
                        $.04
      - $.06
                        
                        $.16
      - $.50Expected
      lives
                        
                        5
                        
                        5Expected
      volatility
                        
                        115
      %
                        
                        115
      %Expected
      dividends
                        
                        -
                        
                        -Risk-free
      rate of return (weighted average)
                        
                        3.0
      – 4.0%
                        
                        3.15
      – 4.91%





Options





The
following table sets forth all the Company’s common stock option activity and
weighted average prices for the year ended June 30, 2009:




Shares
                                  
                                  
                                  Weighted Average
                                    Exercise Prices
                                  
                                  
                                  Weighted Average
                                    Remaining
                                    Contractual TermStock
      OptionsOutstanding
      at beginning of the year
                                  
                                  
                                  8,247,243
                                  
                                  
                                  $
                                  0.33
                                  
                                  
                                  
                                  4.75Granted
                                  
                                  
                                  12,594,743
                                  
                                  
                                  $
                                  0.05
                                  
                                  
                                  
                                  5.00Exercised
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  0.00
                                  
                                  
                                  
                                  -Forfeited/Expired
                                  
                                  
                                  (9,974,368
                                  )
                                  
                                  $
                                  0.30
                                  
                                  
                                  
                                  -Outstanding
      at the end of the period
                                  
                                  
                                  10,867,618
                                  
                                  
                                  $
                                  0.065
                                  
                                  
                                  
                                  4.95Options
      exercisable at the end of the period
                                  
                                  
                                  10,450,000




Warrants





The
following table sets forth all the Company’s common stock warrant activity as of
June 30, 2009:





Warrants
                                        Outstanding
                                      
                                      
                                      Weighted
                                        Average
                                        Exercise Prices
                                      
                                      
                                      Weighted Average
                                        Remaining
                                        Contractual Term
                                        (years)Outstanding
      at the beginning of the year
                                      
                                      
                                      9,046,979
                                      
                                      
                                      $
                                      0.41
                                      
                                      
                                      
                                      5.6Issued
                                      
                                      
                                      277,778
                                      
                                      
                                      
                                      0.36
                                      
                                      
                                      
                                      4.7Exercised
                                      
                                      
                                      -
                                      
                                      
                                      
                                      0.00
                                      
                                      
                                      
                                      -Expired
                                      
                                      
                                      -
                                      
                                      
                                      
                                      0.00
                                      
                                      
                                      
                                      -Outstanding
      at the end of the period
                                      
                                      
                                      9,324,757
                                      
                                      
                                      $
                                      0.40
                                      
                                      
                                      
                                      4.7Vested
                                      
                                      
                                      9,324,757
                                      
                                      
                                      $
                                      0.40
                                      
                                      
                                      
                                      4.7Exercisable
      at the end of the period
                                      
                                      
                                      9,324,757
                                      
                                      
                                      $
                                      0.40
                                      
                                      
                                      
                                      4.7




33





Note
11. Income Taxes





Loss
before income taxes consisted of the following:





Twelve Months Ended June 30,2009
                                  
                                  
                                  2008Loss
      before income taxes
                                  
                                  $
                                  (7,589,111
                                  )
                                  
                                  $
                                  (2,923,808
                                  )





The
components of the provision (benefit) for income taxes are as
follows:





Twelve Months Ended June 30,2009
                            
                            
                            2008CurrentFederal
                            
                            
                            -
                            
                            
                            
                            -State
                            
                            
                            1,500
                            
                            
                            
                            1,100Local
      and franchise
                            
                            
                            
                            
                            
                            
                            250Total
      current tax provision
                            
                            
                            1,500
                            
                            
                            
                            1,350DeferredFederal
                            
                            
                            892,795
                            
                            
                            
                            (874,806
                            )State
                            
                            
                            145,339
                            
                            
                            
                            (145,679
                            )Local
      and franchise
                            
                            
                            -
                            
                            
                            
                            -Total
      deferred tax benefit
                            
                            
                            1,038,134
                            
                            
                            
                            (1,020,485
                            )Total
      tax provision (benefit)
                            
                            $
                            1,038,309
                            
                            
                            $
                            (1,019,135
                            )





Twelve Months Ended June 30,2009
                                
                                
                                2008Temporary differences:Deferred
      Tax Assets:Net
      operating loss carry-forward
                                
                                
                                1,836,349
                                
                                
                                
                                866,310Allowance
      for doubtful accounts
                                
                                
                                52,500
                                
                                
                                
                                36,576Stock
      based Compensation
                                
                                
                                336,611
                                
                                
                                
                                129,220Accrued
      interest
                                
                                
                                8,224
                                
                                
                                
                                5,879Less:
      valuation allowance
                                
                                
                                (2,233,684
                                )
                                
                                
                                -Deferred
      tax assets
                                
                                
                                0
                                
                                
                                
                                1,037.985Deferred
      tax liabilities
                                
                                
                                -
                                
                                
                                
                                -Net
      deferred tax asset
                                
                                $
                                0
                                
                                
                                $
                                1,037,985





The
Company had federal and state net operating tax loss carry forwards of
approximately $10,340,284 as of June 30, 2009.  The tax loss carry
forwards are available to offset future taxable income with the federal and
state carry forwards beginning to expire in 2023.


34


In 2009,
net deferred tax assets decreased by $1,037,985 primarily due to valuation
allowance established based upon the realization of the tax
benefits.   The Company periodically assesses the likelihood that
it will be able to recover its deferred tax assets. The Company considers all
available evidence, both positive and negative, including historical levels of
income, expectations and risks associated with estimates of future taxable
income and ongoing prudent and feasible profits. As a result of this analysis of
all available evidence, both positive and negative, the Company concluded that
it is not the deferred tax assets will ultimately be recovered and, accordingly,
a $2,233,684 valuation allowance was recorded as of June 30, 2009.




The
difference between the expected income tax expense (benefit) and the actual tax
expense (benefit) computed by using the Federal statutory rate of 35% is as
follows:




Twelve Months Ended June 30,2009
                      
                      
                      2008Expected
      income tax benefit(loss) at statutory rate of 35%
                      
                      $
                      (1,119,074
                      )
                      
                      $
                      (1,023,333
                      )State
      and local tax benefit, net of federal
                      
                      
                      (82,051
                      )
                      
                      
                      6,038Change
      in valuation account
                      
                      
                      2,233,684
                      
                      
                      
                      -Other:Meals
      & Entertainment
                      
                      
                      5,750
                      
                      
                      
                      10,236Income
      tax expense (benefit)
                      
                      $
                      1,038,309
                      
                      
                      $
                      (1,019,135
                      )




Note
12. Commitments and Contingencies




The
Company has a lease for office space of approximately 3,700 sq ft. The lease in
Brooklyn was entered into on September 1, 2007 and is for a period of three
years.  The Company moved out of the Brooklyn office in April
2009.  The Company has not made any rent payments on that lease since
February 2009 and the landlord has not pursued any actions as of the date of
this report.   The Company has reduced the security deposit on
the office space to zero and reflected it as rent expense.   Such
amount covers rent through May 2009.   Since May 2009, the
Company has been paying$1,900 on a month-to-month basis for office space in
Brooklyn.   No lease is in the Company’s name but rather the name
of an affiliated company, Eisenberg Holdings, LLC (“EHI”).  Management
withdrew $5,700 payable to EHI, to be utilized as a security deposit on the
office space.  The Company has reflected such amount as a due from
EHI.   Effective as of November 1, 2009, the Company informed EHI
that it will no longer cover any costs related to this space.





The
Company’s only office space is in Ogden Utah where by it has a month-to-month
arrangement.  Such space is approximately 1,000 square feet and the
rent is $800 per month.    Rent expense under these
arrangements totaled $158,928 and $100,483 for the years ended June 30, 2009 and
2008, respectively. The Company also has certain leases on office equipment and
computers. The lease expense recorded for these totaled $20,148 and $6,500 for
the year ended June 30, 2009 and 2008, respectively. Projected expenses related
to the above lease arrangements for the next five years is as
follows:





For
      the year ended
                        
                        TotalJune
      30, 2010
                        
                        $
                        94,410June
      30, 2011
                        
                        
                        37,333




Note
13. Fair Value Measurements




Effective
July 1, 2008, we adopted Financial Accounting Standards Board (“FASB”) 157, Fair
Value Measurements, which provides a framework for measuring fair value under
FASB 157 defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. FASB 157 requires that valuation
techniques maximize the use of observable inputs and minimize the use of
unobservable inputs. FASB 157 also establishes a fair value hierarchy, which
prioritizes the valuation inputs into three broad levels.




Financial
assets and liabilities valued using level 1 inputs are based on unadjusted
quoted market prices within active markets. Financial assets and liabilities
valued using level 2 inputs are based primarily on quoted prices for similar
assets or liabilities in active or inactive markets.  For certain long-term
debt, the fair value was based on present value techniques using inputs derived
principally or corroborated from market data. Financial assets and liabilities
using level 3 inputs were primarily valued using management’s assumptions about
the assumptions market participants would utilize in pricing the asset or
liability. Valuation techniques utilized to determine fair value are
consistently applied.


35





The table
below presents a reconciliation for liabilities measured at fair value on a
recurring basis at June 30, 2009 and 2008:




Fair Value Measurements Using SignificantUnobservable Inputs (Level 3)Derivative LiabilityJune 30, 2009
                        
                        
                        June 30, 2008Balance
      at July 1, 2008
                        
                        $
                        -
                        
                        
                        $
                        -Increase
      in Derivative Liability
                        
                        
                        3,861,262
                        
                        
                        
                        -Debt
      discounts
                        
                        
                        850,965
                        
                        
                        
                        -Balance
      at June 30, 2009
                        
                        $
                        4,712,227
                        
                        
                        $
                        -




Financial
instruments are considered Level 3 when their values are determined using
pricing models, discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is input is unobservable. 
Level 3 financial instruments also include those for which the determination of
fair value requires significant management judgment or estimation.





Note
14. Subsequent Events




On
September 9, 2009, Bryan Eisenberg, tendered his resignation to the Board of
Directors of Future Now Group, Inc (the “Company”) from his position as
Executive Vice President of the Company, effective September 9,
2009.   Mr. Eisenberg will remain a member of the Company’s Board
of Directors and act in an advisory role to certain areas of the business for a
period to be determined.





Effective
September 21, 2009, Roy Williams and William Schloth resigned as directors of
the Company.  On or about September 30, 2009, Bryan Eisenberg and
Jeffrey Eisenberg resigned as directors of the Company.





In
connection therewith, the board of directors reduced the number of authorized
directors to three and appointed Greg Goldberg to fill one of the newly created
vacancy on the board.  Mr. Goldberg was appointed as a nominee of
Professional Traders Fund and Professional Offshore Opportunity Fund, the
holders of senior secured convertible debentures that are currently in
default.





Upon the
successful restructuring of a majority of certain subordinated unsecured
convertible notes, the holders of these notes will be entitled to nominate a
third member to the board.





Mr. Alan
Hall remained a director.





On or
about September 30, 2009, Jeffrey Eisenberg resigned as our President and Chief
Executive Officer.





On
October 1, 2009, the board of directors appointed William Schloth as the
Company’s interim Chief Executive Officer and Chief Accounting
Officer.  In connection therewith, the Company engaged WMS Financial
Group, Inc., a company in which Mr. Schloth is a principal, as a transaction
manager to provide certain financial and business services for a period of three
months.  The Company has agreed to pay WMS a fee of $5,000 per month,
a success fee of $20,000, and other contingent remuneration.


36





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




No events occurred that require
disclosure under Item 304(b) of Regulation S-B.




ITEM
    9A
            CONTROLS AND
      PROCEDURES.





Evaluation
of Disclosure Controls and Procedures




In
connection with the preparation of our Annual Report on Form 10-K, an evaluation
was carried out by management, with the participation of our Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934 (Exchange Act) as of June 30, 2009.
Disclosure controls and procedures are designed to ensure that information
required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified,
and that such information is accumulated and communicated to management,
including the Chief Executive Officer and Chief Financial Officer, to allow
timely decisions regarding required disclosure.




During
evaluation of disclosure controls and procedures as of June 30, 2009 conducted
as part of our annual audit and preparation of our annual financial statements,
management conducted an evaluation, with the participation of our CEO and CFO,
of the effectiveness of the design and operations of our disclosure controls and
procedures and concluded that our disclosure controls and procedures were not
effective. The CFO and CEO determined that at June 30, 2009, we had a material
weakness that relates to the relatively small number of employees who have
bookkeeping and accounting functions and therefore prevents us from
segregating duties within our internal control system. Because of material
weakness, we reallocated certain operating personnel to handle certain tasks as
well as developed written policies to better segregate duties.





Management’s
Report on Internal Control over Financial Reporting




Management
is responsible for the preparation and fair presentation of the financial
statements included in this annual report. The financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America and reflect management’s judgment and estimates
concerning effects of events and transactions that are accounted for or
disclosed.




Management
is also responsible for establishing and maintaining adequate internal control
over financial reporting. Our internal control over financial reporting includes
those policies and procedures that pertain to our ability to record, process,
summarize and report reliable data. Management recognizes that there are
inherent limitations in the effectiveness of any internal control over financial
reporting, including the possibility of human error and the circumvention or
overriding of internal control. Accordingly, even effective internal control
over financial reporting can provide only reasonable assurance with respect to
financial statement presentation. Further, because of changes in conditions, the
effectiveness of internal control over financial reporting may vary over
time.




In order
to ensure that our internal control over financial reporting is effective,
management regularly assesses controls and did so most recently for its
financial reporting as of June 30, 2009. This assessment was based on criteria
for effective internal control over financial reporting described in the
Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission. Based on this assessment,
management has concluded that, as of June 30, 2009, we had a material weakness
that relates to the relatively small number of employees who have bookkeeping
and accounting functions and therefore prevents us from segregating duties
within our internal control system. The inadequate segregation of duties is a
weakness because it could lead to the untimely identification and resolution of
accounting and disclosure matters or could lead to a failure to perform timely
and effective reviews.




Remediation
of Material Weakness in Internal Controls Over Financial Reporting




Because
of the material weakness described above, we reallocated certain operating
personnel to handle certain operating tasks and established written procedures
to better segregate duties.  As out operations grows we need to hire
an senior accountant.


37





We
believe that the consolidated financial statements fairly present, in all
material respects, our consolidated balance sheet as of June 30, 2009 and the
related consolidated statement of operations, shareholder equity and cash flow
for the years ended June 30, 2009, and 2008, in conformity with GAAP,
notwithstanding the material weakness we identified.




This
annual report filed on Form 10-K 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 our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.




ITEM 9B.
            OTHER
      INFORMATION.




Effective
September 21, 2009, Roy Williams resigned as a director of the
Company.  On or about September 30, 2009, Bryan Eisenberg and Jeffrey
Eisenberg resigned as directors of the Company.  In September 2009,
William Schloth resigned as a director of the Company.  Their
resignations as directors were not based on any disagreement with us on any
matter relating to our operations, policies or practices.





In
connection therewith, the board of directors reduced the number of authorized
directors to three and appointed Greg Goldberg to fill one of the newly created
vacancy on the board.  Mr. Goldberg was appointed as a nominee of
Professional Traders Fund and Professional Offshore Opportunity Fund, the
holders of senior secured convertible debentures that are currently in
default.  Upon the successful restructuring of a majority of certain
subordinated unsecured convertible notes, the holders of these notes will be
entitled to nominate a third member to the board.





Mr. Alan
Hall also remains a director.





On or
about September 30, 2009, Jeffrey Eisenberg resigned as our President and Chief
Executive Officer.





On
October 1, 2009, the board of directors appointed William Schloth as the
Company’s interim Chief Executive Officer and Chief Accounting
Officer.  In connection therewith, the Company engaged WMS Financial
Group, Inc., a company in which Mr. Schloth is a principal, as a transaction
manager to provide certain financial and business services for a period of three
months.  The Company has agreed to pay WMS a fee of $5,000 per month,
a success fee of $20,000, and other contingent remuneration.





On or about October 1, 2009, Future
Now, Inc., a wholly-owned subsidiary of the Company, engaged a FINRA registered
broker dealer to act as its Company’s financial advisor for its planned
restructuring and as placement agent for capital raising
activities.


PART III




ITEM 10.
            DIRECTORS, EXECUTIVE OFFICERS,
      PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH
      SECTION 16(A) OF THE EXCHANGE
ACT.




Our
executive officers and directors and their respective ages and positions as of
the date of this prospectus are listed below.





Name
            
            Age
            
            Position Held with our
    CompanyWilliam
      Schloth
            
            45
            
            Interim
      Chief Executive and Accounting OfficerAlan
      Hall
            
            63
            
            DirectorGreg
      Goldberg
            
            46
            
            Director





William E.
Schloth served as our director from October 30, 2007 until September 21,
2009, and as our Chief Financial Officer and Chief Accounting Officer from
October 30, 2007 until June 19, 2009.  Mr. Schloth has been associated
with Future Now since its inception in 1997.  He has been investing in
and advising private and public startup and middle market companies for over
twenty years.  Mr. Schloth has been the CEO and head of investment
banking for a number of regional broker-dealers and has significant M&A,
business integration, and divestiture experience.  Mr. Schloth held
senior management positions with GE Capital’s M&A group and spent five years
with Coopers & Lybrand.  He also successfully co-founded, grew,
and sold his own full-service brokerage firm as well as founding a specialty
high-end financial and technology management consulting practice.  Mr.
Schloth is a certified public accountant and holds an MBA from New York
University’s Stern School of Business in Marketing and Finance.


38




Alan Hall
was nominated to the board of directors on May 28, 2008. In 1988, Mr. Hall
founded MarketStar Corporation, an outsourced global marketing and sales
organization which helps thirty of the world’s largest high technology companies
generate billions of dollars in revenues from the small to medium business
space.  Mr. Hall successfully grew the corporation to several thousand
employees with operational capabilities in one hundred countries.  In 1999,
the Omnicom Group purchased MarketStar and Mr. Hall served as CEO until
2005.  From 2005 to the present, Mr. Hall served as Chairman for
MarketStar. In 2004, Mr. Hall founded and is presently involved with Grow Utah
Ventures, a non-profit organization which fosters entrepreneurial development.
 He also is the general partner of Mercato Partners, a multimillion dollar
venture capital firm that focuses on investing in the marketing and sales growth
of US high technology companies.  Mr. Hall graduated from Weber State
University with a BA in 1969 and holds an MBA from Brigham Young
University.





Greg
Goldberg was appointed to the board of directors on October 1,
2009.  Mr.  Goldbergis a
manager and member of Professional Traders Management, LLC (“PTM”). PTM is the
manager of one of our significant stockholders.  Prior to joining PTM
in 2003. Mr. Goldberg was a Principal at Ocean View Capital LLC where he managed
a long/short equity fund from 1998 to 2003. Mr. Goldberg received his Bachelors
of Science in Business Administration, Marketing/Finance, cum laude, from Marist
College in 1984.





Term
of Office




Our
directors are appointed for a one-year term to hold office until the next annual
meeting of our stockholders or until removed from office in accordance with our
bylaws. Our officers are appointed by our board of directors and hold office
until removed by the board of directors.




Involvement
in Certain Legal Proceedings





None of
our directors or executive officers has, during the past five
years:





·
            been
      convicted in a criminal proceeding or been subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offences);





·
            had
      any bankruptcy petition filed by or against any business of which he was a
      general partner or executive officer, either at the time of the bankruptcy
      or within two years prior to that
time





·
            been
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring, suspending or otherwise limiting his
      involvement in any type of business, securities, futures, commodities or
      banking activities; or





·
            been
      found by a court of competent jurisdiction (in a civil action), the
      Securities and Exchange Commission or the Commodity Futures Trading
      Commission to have violated a federal or state securities or commodities
      law, and the judgment has not been reversed, suspended, or
      vacated.





Section
16(a) Beneficial Ownership Reporting Compliance





Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires our directors,
executive officers, and stockholders holding more than 10% of our outstanding
common stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in beneficial ownership of our
common stock.  Executive officers, directors and greater-than-10%
stockholders are required by SEC regulations to furnish us with copies of all
Section 16(a) reports they file.  To our knowledge, based solely
on review of the copies of such reports furnished to us for the period ended
June 30, 2009, no Section 16(a) reports required to be filed by our
executive officers, directors, and greater-than-10% stockholders were filed on a
timely basis.





ITEM 11.
              EXECUTIVE
      COMPENSATION.




The following table sets forth the
aggregate cash compensation paid by the Company to its Chief Executive Officer
and its named executive officers, as such term is defined in Item 402 of
Regulation SB promulgated under the Securities Act, for services performed
during the years ended June 30, 2009, 2008 and 2007:


39





Name and
                                                                                                          Principal Position
                                                                                                        
                                                                                                        Year
                                                                                                        
                                                                                                        Salary
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        Bonus
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        Stock
                                                                                                          Awards
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        Option
                                                                                                          Awards
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        Non-
                                                                                                          Equity Incentive
                                                                                                          Plan
                                                                                                          Compensation
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        Non-
                                                                                                          qualified
                                                                                                          Deferred
                                                                                                          Compensation
                                                                                                          Earnings
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        All Other
                                                                                                          Compensation
                                                                                                          ($)
                                                                                                        
                                                                                                        
                                                                                                        Total
                                                                                                          ($)William
      Schloth
                                                                                                        
                                                                                                        2009
                                                                                                        
                                                                                                        $
                                                                                                        30,711
                                                                                                        (1)
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        $
                                                                                                        30,711Interim
      Chief
                                                                                                        
                                                                                                        2008
                                                                                                        
                                                                                                        
                                                                                                        138,235
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        215,874
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        354,110Executive
      Officer
                                                                                                        
                                                                                                        2007
                                                                                                        
                                                                                                        
                                                                                                        120,000
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        120,000and
      ChiefAccounting
      Officer(since
      October 1,2009)Chief
      FinancialOfficer
      and Director(resigned
      asDirector
      onSeptember
      21,2009)Jeffrey
      Eisenberg
                                                                                                        
                                                                                                        2009
                                                                                                        
                                                                                                        
                                                                                                        64,890
                                                                                                        (2)
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        64,890Director,
      Chief
                                                                                                        
                                                                                                        2008
                                                                                                        
                                                                                                        
                                                                                                        157,520
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        21,364
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        178,884Executive
      Officer
                                                                                                        
                                                                                                        2007
                                                                                                        
                                                                                                        
                                                                                                        130,000
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        130,000and
      President(until
      September30,
      2009)Bryan
      Eisenberg
                                                                                                        
                                                                                                        2009
                                                                                                        
                                                                                                        
                                                                                                        64,890
                                                                                                        (2)
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        64,890Director
      and
                                                                                                        
                                                                                                        2008
                                                                                                        
                                                                                                        
                                                                                                        157,520
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        21,364
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        178,884Executive
      Vice
                                                                                                        
                                                                                                        2007
                                                                                                        
                                                                                                        
                                                                                                        130,000
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        130,000President
      ofIntellectualProperty(until
      September 9,2009)Howard
      Kaplan
                                                                                                        
                                                                                                        2009
                                                                                                        
                                                                                                        
                                                                                                        62,613
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        62,613Chief
      Operating
                                                                                                        
                                                                                                        2008
                                                                                                        
                                                                                                        
                                                                                                        119,423
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        118,864
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        238,287Officer
                                                                                                        
                                                                                                        2007
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -(until
      January 1,2009)John
      Quarto-vonTivadar
                                                                                                        
                                                                                                        2009
                                                                                                        
                                                                                                        
                                                                                                        37,194
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        3,600
                                                                                                        (3)
                                                                                                        
                                                                                                        
                                                                                                        40,794Chief
      Scientist
                                                                                                        
                                                                                                        2008
                                                                                                        
                                                                                                        
                                                                                                        100,000
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        21,364
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        0
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        121,364(until
      December 1,
                                                                                                        
                                                                                                        2007
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        -2009)


(1)  Mr.
Schloth had no W-2 payments during the fiscal year ended June 30,
2009.  Payments represent  those made to WMS Financial
Group, Inc. and FN Implementation Partners, two entities affiliated with Mr.
Schloth.


(2)  2009
payments represent both W-2 payments as well as payments made to Eisenberg
Holdings LLC, an entity owned by Bryan and Jeffrey
Eisenberg.  Payments also reflect those made for car insurance and car
payments as well as health benefits during the period which executive was not on
W-2 payment.  Specific payments that cannot be directly applied to an
executive have been split equally between Jeffrey and Bryan
Eisenberg


(3)  Car
allowance




For the fiscal year ended June 30, 2007,
the compensation of Jeffrey Eisenberg, Bryan Eisenberg, and William Schloth
reflects their compensation earned while employed by FNI, one of our operating
subsidiaries.


40





We do not
currently have any employment agreements with any of our executive
officers.





Separation
Agreement with John Quarto von Tivadar





On
December 1, 2009, we entered into a separation agreement with Mr. Quarto-von
Tivadar pursuant to which he resigned all officer, director and employment
positions with us and each of our subsidiaries and waived any and all rights
under his employment agreement dated October 30, 2007.  In
consideration of his resignation and release, we agreed to pay him between
$30,000 and $60,000 of which $10,000 was paid on the date of the agreement with
the remainder to be paid upon delivery of certain items and
services.





Stock
Option Plan




Prior to
the share exchange with Future Now, Inc., we did not have a stock option plan
for our employees. As a condition of the closing of the share exchange, we
agreed to adopt Future Now, Inc.’s 2007 Stock Option Plan under which 7,545,868
stock options were issued to the grantees (the “Grantees”), 2,363,893 of which
had been exercised (“Option Exercises”). As part of the Option Exercises we
received promissory notes from William E. Schloth and Howard Kaplan totaling
$95,000. The Grantees have all agreed to have the exercise price of their
options adjust to the closing price of our common stock on the closing date of
the share exchange (the “Price Amendment”). As consideration for the Price
Amendment, the Grantees will receive additional options equal to 25% of the
then-outstanding options. There were 80,361 pre-share exchange shares granted
under this provision. As of June 30, 2009, a total of 10,867,618 stock options
were issued and outstanding at a weighted average price of $0.065 per
share.   Through a settlement agreement with Howard Kaplan and a
share relinguishment with William Schloth the $95,000 was reduced to
zero.




Stock
Options/SAR Grants




During
the fiscal year ended June 30, 2009 the following options were issued, exercised
and/or expired:





Shares
                              
                              
                              Weighted Average
                                Exercise Prices
                              
                              
                              Weighted Average
                                Remaining
                                Contractual TermStock
      OptionsOutstanding
      at beginning of the year
                              
                              
                              8,247,243
                              
                              
                              $
                              0.33
                              
                              
                              
                              4.75Granted
                              
                              
                              12,594,743
                              
                              
                              $
                              0.05
                              
                              
                              
                              5.00Exercised
                              
                              
                              -
                              
                              
                              $
                              0.00
                              
                              
                              
                              -Forfeited/Expired
                              
                              
                              (9,974,368
                              )
                              
                              $
                              0.30
                              
                              
                              
                              -Outstanding
      at the end of the period
                              
                              
                              10,867,618
                              
                              
                              $
                              0.065
                              
                              
                              
                              4.95Options
      exercisable at the end of the period
                              
                              
                              10,450,000
                              
                              
                              
                              -
                              
                              
                              
                              -




Potential
Payments upon Termination





None





Directors
Compensation




We
reimbursed our directors for expenses incurred in connection with attending
board meetings. Non-management directors are also eligible to receive quarterly
retainer payments of $6,000 (“Retainer”). The directors have the right to accept
payment in cash or in fully vested shares of the Company’s Common Stock equal to
50% or 100% of the Retainer. If they elect to accept payment of all or a portion
of the Retainer in shares of the Company's Common Stock, the number of shares
issued each quarter will equal the dollar amount of the Retainer to be taken in
shares, divided by 100 percent of the closing sale price of the shares on the
first trading day after the end of each fiscal quarter for which the Retainer is
due. No fractional shares will be issued. The number of shares issued will be
rounded down to the nearest number of whole shares. The sale or transfer of the
shares purchased with a part or all of your Retainer will be restricted for a
period of six months after the date of purchase. In addition, we will pay the
directors a cash incentive equal to 20 percent of the Retainer. It will be paid
quarterly, in cash, at the time the quarterly installment of the Retainer is
payable in shares. No compensation was paid to directors for the year ended June
30, 2009.


41





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





The
following table sets forth, as of November 20, 2009, certain information with
respect to the beneficial ownership of the Company’s common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock, as well as by each of our current directors and executive officers and
the directors and executive officers as a group. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or investment power with respect to
securities. Shares of common stock underlying options or warrants which are
currently exercisable, or exercisable within 60 days, are deemed outstanding for
purposes of computing the percentage ownership of the person holding such option
or warrants, but are not deemed outstanding for purposes of computing the
percentage ownership of any other person.





Title of
                                Class
                              
                              Name and Address of Beneficial Owner
                              
                              Position with the
                                Company
                              
                              Amount and
                                Nature of
                                Beneficial
                                Ownership
                              
                              Percentage
                                of
                                Class(1)Common
                              
                              Eisenberg
      Holdings, LLC(2)(3)
                                c/o
      Jeffrey Eisenberg
                                2401
      East 23 rd
      Street
                                Brooklyn,
      NY 11235
                              
                              5%
      stockholder
                              
                              36,681,883
                              
                              
                              37.8
                              %Common
                              
                              Professional
      Offshore Opportunity Fund, Ltd.
                                1400
      Old Country Road, Suite 206
                                Westbury,
      NY 11590 (4)
                              
                              5%
      Stockholder
                              
                              20,000,000
                              
                              
                              20.6
                              %Common
                              
                              William
      Schloth (5)
                                80
      Mountain Laurel Road
                                Fairfield,
      CT 06824
                              
                              Interim
      CEO and CAO
                              
                              6,852,688
                              
                              
                              6.7
                              %Common
                              
                              Alan
      Hall(6)
                              
                              Director
                              
                              1,987,142
                              
                              
                              2.0
                              %Common
                              
                              Greg
      Goldberg (4)
                              
                              Director
                              
                              0
                              
                              
                              *Common
                              
                              Directors
      and Executive Officers as a Group
                                (3
      persons)
                              
                              
                              
                              8,839.830
                              
                              
                              8.6
                              %


*less
than 1%


(1)
            Based
      on 97,125,063 shares of common stock as of November 20, 2009. Except as
      otherwise indicated, we believe that the beneficial owners of the common
      stock listed above, based on information furnished by such owners, have
      sole investment and voting power with respect to such shares, subject to
      community property laws where
applicable.


(2)
            Eisenberg
      Holdings, LLC is wholly owned by Jeffrey Eisenberg, Bryan Eisenberg and
      Esther Eisenberg. Bryan and Jeffrey Eisenberg are the managing members of
      the LLC and have split voting and investment
  control.


(3)
            Eisenberg
      Holdings LLC pledged 36,681,883 shares of Common Stock to secure Future
      Now Group’s obligations under it October 30, 2007 Note issued to
      Professional Offshore Opportunity Fund (“POOF”).  Future Now
      Group, Inc. has defaulted on payment of the Note and accordingly, POOF has
      the right to foreclose on the pledged
shares.


(4)
            Mr.
      Goldberg is a manager and member of Professional Traders Management, LLC
      (“PTM”).  PTM is the manager of Professional Offshore
      Opportunity Fund, Ltd.


(5)
            Includes
      4,827,595 fully vested stock
options.


(6)
            Includes
      277,778 stock purchase warrants that are fully exercisable and were
      received as part of an investment made by Mr. Hall into the Company as
      well as 100,000 four year vesting stock options. The remaining balance of
      1,609,364 shares includes: (a) 1,031,586 shares received as part of the
      EBI acquisition; (ii) 555,556 shares issued as part of Mr. Hall’s $100,000
      investment in the Company, and (iii) 22,222 shares received as a quarterly
      retainer for being a member of the Board of
  Directors.




42





Changes
in Control




There are
no arrangements that may result in a change of control of us.





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





Transactions
with Related Persons





Other
than set forth below, we have not been a party to any transaction, proposed
transaction, or series of transactions during the last year in which the amount
involved exceeds the lesser of (a) $120,000 or (b) one percent (1%) of
the average of our total assets at year end for the last three completed fiscal
years, and in which, to our knowledge, any of the following persons had, or is
to have, a direct or indirect material interest: a director or executive
officer; a nominee for election as a director; a beneficial owner of more than
five percent of the outstanding shares of our common stock; or any member of the
immediate family of any such person.





Eisenberg
Holdings, LLC (“EHI”)




EHI was
established on September 22, 2003, and is presently owned 40% by Jeffrey
Eisenberg, our Chief Executive Officer, 40% by Bryan Eisenberg, the Executive
Vice President of the Company (collectively, the “Eisenbergs”), and 10% by
Esther Eisenberg. As of June 30, 2009, EHI held 36,681,884 shares of our common
stock, which equals 39.54% basic, and 31.04% fully diluted ownership. EHI
operates as a holding company for the Eisenberg’s investment portfolio as well
as an operating entity for individual speaking and other publishing activities
of the Eisenbergs.





Director
Independence




Our
determination of independence of directors is made using the definition of
‘‘independent director’’ contained under Rule 4200(a)(15) of the Rules of FINRA
and as such we have determined that Alan Hall qualifies as an independent
director





ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES.





The following table indicates the fees
paid by us for services performed in for the twelve month periods ended June 30,
2009 and June 30, 2008:




Year
                            Ended
                            June 30, 2009
                          
                          
                          Year
                            Ended
                            June 30, 2008Audit Fees
                          
                          $
                          25,000
                          
                          
                          $
                          25,000Audit-Related
      Fees
                          
                          
                          15,000
                          
                          
                          
                          15,000Tax Fees
                          
                          
                          0
                          
                          
                          
                          0All Other
    Fees
                          
                          
                          0
                          
                          
                          
                          0Total
                          
                          $
                          40,000
                          
                          
                          $
                          40,000





Audit
Fees.This category includes the aggregate
fees billed for professional services rendered by the independent auditors
during the year ended June 30, 2009 and 2008, respectively, for the audit of our
consolidated financial statements.




Audit-Related
Fees.This category includes the aggregate
fees billed for non-audit services, exclusive of the fees disclosed relating to
audit fees, during the years ended June 30, 2009 and 2008. These services
principally include the assistance and issuance of consents for various filings
with the SEC.


43





Tax
Fees.This category includes the aggregate
fees billed for tax services rendered in the preparation of our federal and
state income tax returns.




All
Other Fees.This category includes the aggregate
fees billed for all other services, exclusive of the fees disclosed above,
rendered during the years ending June 30, 2009 and 2008.


44





ITEM 15.
            EXHIBITS.





Exhibit
                      Number
                    
                    Description3.1
                    
                    Articles
      of Incorporation (previously filed as Exhibit 3.1 to the Company’s
      registration statement on Form SB-2, filed with the Securities and
      Exchange Commission (the “Commission”) on July 27,
  2006.)3.1a
                    
                    Certificate
      of Amendment to Articles of Incorporation (previously filed as Exhibit 3.1
      to the Company’s current report on Form 8-K filed with the Commission on
      July 24, 2007.)3.2
                    
                    Bylaws
      (previously filed as Exhibit 3.2 to the Company’s registration statement
      on Form SB-2, filed with the Commission on July 27,
  2006.)4.1
                    
                    Specimen
      Stock Certificate (previously filed as Exhibit 4.1 to the Company’s
      registration statement on Form SB-2, filed with the Commission on July 27,
      2006.)10.1
                    
                    Share
      Exchange Agreement, dated October 30, 2007, by and between Future Now
      Group, Inc., Future Now, Inc., and the former stockholders of Future Now,
      Inc. (previously filed as Exhibit 10.1 to the Company’s current report on
      Form 8-K filed with the Commission on November 6,
2007.)10.2
                    
                    Securities
      Purchase Agreement, dated October 30, 2007 (previously filed as Exhibit
      10.2 to the Company’s current report on Form 8-K filed with the Commission
      on November 6, 2007.)10.3
                    
                    Registration
      Rights Agreement, dated October 30, 2007 (previously filed as Exhibit 10.3
      to the Company’s current report on Form 8-K filed with the Commission on
      November 6, 2007.)10.4
                    
                    Security
      Agreement, dated October 30, 2007 (previously filed as Exhibit 10.4 to the
      Company’s current report on Form 8-K filed with the Commission on November
      6, 2007.)10.5
                    
                    Pledge
      Agreement, dated October 30, 2007 (previously filed as Exhibit 10.5 to the
      Company’s current report on Form 8-K filed with the Commission on November
      6, 2007.)10.6
                    
                    Warrant
      Agreement W1-1 with Professional Offshore Opportunity Fund Ltd.
      (previously filed as Exhibit 10.6 to the Company’s current report on Form
      8-K filed with the Commission on November 6, 2007.)10.7
                    
                    Warrant
      Agreement W1-2 with Professional Traders Fund LLC. (previously filed as
      Exhibit 10.7 to the Company’s current report on Form 8-K filed with the
      Commission on November 6, 2007.)10.8
                    
                    Warrant
      Agreement W2-1 with Professional Offshore Opportunity Fund Ltd.
      (previously filed as Exhibit 10.8 to the Company’s current report on Form
      8-K filed with the Commission on November 6, 2007.)10.9
                    
                    Warrant
      Agreement W2-2 with Professional Traders Fund LLC. (previously filed as
      Exhibit 10.9 to the Company’s current report on Form 8-K filed with the
      Commission on November 6, 2007.)10.10
                    
                    Secured
      Convertible Note Agreement with Professional Offshore Opportunity Fund
      Ltd. (previously filed as Exhibit 10.10 to the Company’s current report on
      Form 8-K filed with the Commission on November 6,
2007.)10.11
                    
                    Secured
      Convertible Note Agreement with Professional Traders Fund LLC. (previously
      filed as Exhibit 10.11 to the Company’s current report on Form 8-K filed
      with the Commission on November 6, 2007.)10.12
                    
                    Promissory
      Note - Howard Kaplan (previously filed as Exhibit 10.12 to the Company’s
      current report on Form 8-K filed with the Commission on November 6,
      2007.)


45





10.13
                            
                            Promissory
      Note - William Schloth (previously filed as Exhibit 10.13 to the Company’s
      current report on Form 8-K filed with the Commission on November 6,
      2007.)10.14
                            
                            Form
      of Original Investment Agreements with Bridge Investors (previously filed
      as Exhibit 10.14 to the Company’s current report on Form 8-K filed with
      the Commission on November 6, 2007.)10.15
                            
                            Form
      of Arrangement with Original Bridge Investors for Amendments to Original
      Investment Agreements (previously filed as Exhibit 10.15 to the Company’s
      current report on Form 8-K filed with the Commission on November 6,
      2007.)10.16
                            
                            Office
      Lease Agreement Dated September 1, 2007 for Occupancy December 15, 2007
      (previously filed as Exhibit 10.16 to the Company’s current report on Form
      8-K filed with the Commission on November 6, 2007.)10.17*
                            
                            Secured
      Note10.18*
                            
                            Security
      Agreement10.19*
                            
                            Guaranty21*
                            
                            Subsidiaries31.1*
                            
                            Rule 13a-14(a) Certification of
      the Chief Executive Officer.31.2*
                            
                            Rule 13a-14(a) Certification of
      the Chief Financial Officer.32.1*
                            
                            Section 1350 Certification of
      Chief Executive Officer.32.2*
                            
                            Section 1350 Certification of
      Chief Financial
Officer.





* Filed herewith




46


SIGNATURES




In accordance with Section 13 or 15(d)
of the Exchange Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.




FUTURE NOW GROUP
      INC.Dated: December 9,
      2009
                  By:
                  /s/ William E.
      SchlothWilliam E.
      SchlothPrincipal Executive
      Officer





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





Signature
                      
                      Title
                      
                      Date/s/ William E. Schloth
                      
                      Chief
      Executive Officer and Chief Accounting Officer
                      
                      December
      9, 2009William
      E. Schloth/s/ Greg Goldberg
                      
                      Director
                      
                      December
      9, 2009Greg
      Goldberg/s/ Alan Hall
                      
                      Director
                      
                      December
      9, 2009Alan
      Hall


47