UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31,
2012



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



For the transition period from ___________to __________



Commission file number: 333-168587



CONTINUITYX SOLUTIONS, INC.



(Exact name of registrant as specified in
its charter)



|Delaware                        |  | 27-2701563         
|------------------------------- |  | -------------------
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)



610 State Route 116, Metamora, IL 61548

(Address of principal executive offices,
including zip code)



Tel: 309-922-1400

(Registrant’s telephone number,
including area code)



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

YesxNo ̈



Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).

Yes ̈Nox



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



|Large accelerated filer |  ̈ | Accelerated filer         |  ̈
|----------------------- | - | ------------------------- | -
|Non-accelerated filer   |  ̈ | Smaller reporting company | x



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

Yes ̈Nox



As of May 11, 2012 there were issued and outstanding 136,480,000
shares of Common Stock, $.001 par value.











CONTINUITYX SOLUTIONS, INC.

FORM 10-Q



INDEX





|                               |                                                                                                      | Page  
|------------------------------ | ---------------------------------------------------------------------------------------------------- | ------
|                               |                                                                                                      | Number
|                               |                                                                                                      |       
|PART I.  FINANCIAL INFORMATION |                                                                                                     
|                               |                                                                                                      |       
|Item 1.                        | Unaudited Financial Statements for the three month and nine month periods ending March 31, 2012      |       
|                               |                                                                                                      |       
|                               | Consolidated Balance Sheets at June 30, 2011 and March 31, 2012                                      | 2     
|                               |                                                                                                      |       
|                               | Consolidated Statements of Operations for the three and nine month periods of March 31, 2012         | 3     
|                               |                                                                                                      |       
|                               | Consolidated Statements of Changes in Stockholders’ Equity for the nine months ending March 31, 2012 | 4     
|                               |                                                                                                      |       
|                               | Consolidated Statements of Cash Flows for the nine months ending March 31, 2012                      | 5-6   
|                               |                                                                                                      |       
|                               | Notes to Unaudited Consolidated Financial Statements                                                 | 7-15  
|                               |                                                                                                      |       
|Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations                | 16    
|                               |                                                                                                      |       
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                           | 20    
|                               |                                                                                                      |       
|Item 4.                        | Controls and Procedures                                                                              | 20    
|                               |                                                                                                      |       
|PART II. OTHER INFORMATION     |                                                                                                     
|                               |                                                                                                      |       
|Item 1.                        | Legal Proceedings                                                                                    | 20    
|                               |                                                                                                      |       
|Item 1A.                       | Risk Factors                                                                                         | 20    
|                               |                                                                                                      |       
|Item 2.                        | Unregistered Sales of Equity Securities and Use of Proceeds                                          | 20    
|                               |                                                                                                      |       
|Item 3.                        | Defaults Upon Senior Securities                                                                      | 21    
|                               |                                                                                                      |       
|Item 4.                        | Mine Safety Disclosure                                                                               | 21    
|                               |                                                                                                      |       
|Item 5.                        | Other Information                                                                                    | 21    
|                               |                                                                                                      |       
|Item 6.                        | Exhibits                                                                                             | 22    
|                               |                                                                                                      |       
|SIGNATURES                     |                                                                                                      | 23    





Page 1 of 23







CONTINUITYX SOLUTIONS, INC

CONSOLIDATED BALANCE SHEET

March 31, 2012 (Unaudited) and June 30,
2011



|                                                                                                                                                                         |  | March 31, 2012 |           |   |               |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | --------- | - | ------------- | -
|                                                                                                                                                                         |  | (Unaudited)    |           |   | June 30, 2011 |  
|ASSETS                                                                                                                                                                   |  |                |           |   |               |  
|CURRENT ASSETS                                                                                                                                                           |  |                |           |   |               |  
|Cash                                                                                                                                                                     |  | $              | 635,975   |   |               | $
|Accounts receivable                                                                                                                                                      |  |                | 31,220    |   |               |  
|Factored accounts receivable                                                                                                                                             |  |                | 4,933,195 |   |               |  
|Deposits                                                                                                                                                                 |  |                | -         |   |               |  
|Investment - convertible note receivable                                                                                                                                 |  |                | 75,000    |   |               |  
|Prepaid expenses                                                                                                                                                         |  |                | 28,134    |   |               |  
|Total Current Assets                                                                                                                                                     |  |                | 5,703,524 |   |               |  
|OTHER ASSETS                                                                                                                                                             |  |                |           |   |               |  
|Security deposits                                                                                                                                                        |  |                | 1,438,023 |   |               |  
|                                                                                                                                                                         |  |                |           |   |               |  
|FIXED ASSETS                                                                                                                                                             |  |                |           |   |               |  
|Property and equipment                                                                                                                                                   |  |                | 906,470   |   |               |  
|Accumulated depreciation                                                                                                                                                 |  |                | (112,853  | ) |               |  
|Net Fixed Assets                                                                                                                                                         |  |                | 793,617   |   |               |  
|TOTAL ASSETS                                                                                                                                                             |  | $              | 7,935,164 |   |               | $
|                                                                                                                                                                         |  |                |           |   |               |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                     |  |                |           |   |               |  
|                                                                                                                                                                         |  |                |           |   |               |  
|CURRENT LIABILITIES                                                                                                                                                      |  |                |           |   |               |  
|Accounts payable                                                                                                                                                         |  | $              | 247,531   |   |               | $
|Commission payable                                                                                                                                                       |  |                | 560,394   |   |               |  
|Accrued payroll                                                                                                                                                          |  |                | 383,751   |   |               |  
|Accrued interest - related party                                                                                                                                         |  |                | 22,226    |   |               |  
|Due to factor                                                                                                                                                            |  |                | 1,639,666 |   |               |  
|Capital lease payable - current portion                                                                                                                                  |  |                | 325,035   |   |               |  
|Sales tax payable                                                                                                                                                        |  |                | 2,110     |   |               |  
|Short-term notes payable                                                                                                                                                 |  |                | -         |   |               |  
|Short-term notes payable - related party                                                                                                                                 |  |                | 259,705   |   |               |  
|Income taxes payable                                                                                                                                                     |  |                | 696,078   |   |               |  
|Total Current Liabilities                                                                                                                                                |  |                | 4,136,496 |   |               |  
|                                                                                                                                                                         |  |                |           |   |               |  
|OTHER LIABILITIES                                                                                                                                                        |  |                |           |   |               |  
|Capital lease payable - net of current portion                                                                                                                           |  |                | 308,340   |   |               |  
|Deferred tax liability                                                                                                                                                   |  |                | 878,512   |   |               |  
|Total Other Liabilities                                                                                                                                                  |  |                | 1,186,852 |   |               |  
|                                                                                                                                                                         |  |                |           |   |               |  
|TOTAL LIABILITIES                                                                                                                                                        |  | $              | 5,323,348 |   |               | $
|                                                                                                                                                                         |  |                |           |   |               |  
|SHAREHOLDERS' EQUITY                                                                                                                                                     |  |                |           |   |               |  
|                                                                                                                                                                         |  |                |           |   |               |  
|Preferred stock - $.001 par value, 25,000,000 shares authorized, no shares issued and outstanding                                                                        |  |                | -         |   |               |  
|Common stock - $.001 par value, 200,000,000 shares authorized, 136,479,900 and 97,330,900 shares issued and outstanding atMarch 31, 2012 and June 30, 2011, respectively |  |                | 136,480   |   |               |  
|Additional paid-in capital                                                                                                                                               |  |                | 810,304   |   |               |  
|Retained Earnings                                                                                                                                                        |  |                | 1,665,032 |   |               |  
|Total Shareholders' Equity                                                                                                                                               |  |                | 2,611,816 |   |               |  
|                                                                                                                                                                         |  |                |           |   |               |  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                               |  | $              | 7,935,164 |   |               | $







Page 2 of 23









CONTINUITYX SOLUTIONS, INC.



CONSOLIDATED STATEMENTS OF
OPERATIONS

For the three months and nine
months ending March 31, 2012 (Unaudited)



|                                      |  |              |             |   |             |   |             | For The Period         | 
|------------------------------------- |  | ------------ | ----------- | - | ----------- | - | ----------- | ---------------------- | 
|                                      |  | Three months |             |   | Nine months |   |             | From Inception         | 
|                                      |  | March 31     |             |   | March 31    |   |             | (March 25, 2011)       | 
|                                      |  | (Unaudited)  |             |   | (Unaudited) |   |             | Through March 31, 2011 | 
|GROSS SERVICES                        |  | $            | 6,479,243   |   |             | $ | 10,933,600  |                        | 
|RESELLER COMMISSIONS                  |  |              | 225,736     |   |             |   | 936,110     |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|NET SERVICES                          |  |              | 6,253,507   |   |             |   | 9,997,490   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|COST OF SERVICES                      |  |              | 1,162,160   |   |             |   | 1,953,191   |                        | 
|GROSS PROFIT                          |  |              | 5,091,347   |   |             |   | 8,044,299   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|OPERATING EXPENSES                    |  |              |             |   |             |   |             |                        | 
|Salaries                              |  |              | 531,148     |   |             |   | 1,098,048   |                        | 
|Commissions                           |  |              | 432,054     |   |             |   | 1,032,490   |                        | 
|Payroll taxes                         |  |              | 147,136     |   |             |   | 239,084     |                        | 
|Rent                                  |  |              | 8,370       |   |             |   | 22,184      |                        | 
|Advertising and promotion             |  |              | 14,921      |   |             |   | 80,625      |                        | 
|Bank charges and factor fees          |  |              | 71,254      |   |             |   | 127,395     |                        | 
|Computer and internet                 |  |              | 60,014      |   |             |   | 122,158     |                        | 
|Depreciation                          |  |              | 112,355     |   |             |   | 112,853     |                        | 
|Insurance                             |  |              | 45,984      |   |             |   | 102,917     |                        | 
|Office expense                        |  |              | 28,345      |   |             |   | 96,168      |                        | 
|Outside services                      |  |              | 395,328     |   |             |   | 510,052     |                        | 
|Professional fees                     |  |              | 69,208      |   |             |   | 252,064     |                        | 
|Travel and entertainment              |  |              | 96,329      |   |             |   | 247,574     |                        | 
|Utilities                             |  |              | 19,593      |   |             |   | 33,997      |                        | 
|Other                                 |  |              | 15,525      |   |             |   | 54,342      |                        | 
|TOTAL OPERATING EXPENSES              |  |              | 2,047,564   |   |             |   | 4,131,951   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|INCOME FROM OPERATIONS                |  |              | 3,043,783   |   |             |   | 3,912,348   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|OTHER INCOME (EXPENSES)               |  |              |             |   |             |   |             |                        | 
|Interest income                       |  |              | 566         |   |             |   | 725         |                        | 
|Interest expense                      |  |              | (65,118     | ) |             |   | (150,645    | )                      | 
|TOTAL OTHER INCOME (EXPENSES)         |  |              | (64,552     | ) |             |   | (149,920    | )                      | 
|                                      |  |              |             |   |             |   |             |                        | 
|INCOME BEFORE INCOME TAXES            |  |              | 2,979,231   |   |             |   | 3,762,428   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|PROVISION FOR INCOME TAXES            |  |              |             |   |             |   |             |                        | 
|State                                 |  |              | 75,063      |   |             |   | 151,162     |                        | 
|Federal                               |  |              | 267,349     |   |             |   | 533,591     |                        | 
|Deferred tax                          |  |              | 878,512     |   |             |   | 878,512     |                        | 
|TOTAL PROVISION FOR INCOME TAXES      |  |              | 1,220,924   |   |             |   | 1,563,265   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|Net Income                            |  | $            | 1,758,307   |   |             | $ | 2,199,163   |                        | 
|                                      |  |              |             |   |             |   |             |                        | 
|Earnings per share, basic and diluted |  | $            | 0.01        |   |             | $ | 0.02        |                        | 
|Weighted average shares               |  |              | 129,957,213 |   |             |   | 111,981,693 |                        | 





Page 3 of 23







CONTINUITYX SOLUTIONS, INC.

CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS’ EQUITY

For the nine months ending
March 31, 2012 (unaudited)



|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   | Total         |  
|---------------------------------------------------------- |  | ------ | ----------- | - | ------- | - | ------- | -------- |  | - | ------- | - |  | -------- | ------- | - | ------------- | -
|                                                           |  |        |             |   | Capital |   |         | Treasury |  |   |         |   |  | Retained |         |   | Shareholders' |  
|                                                           |  | Shares |             |   | Stock   |   |         | Stock    |  |   | APIC    |   |  | Earnings |         |   | Equity        |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Balance at June 30, 2011                                   |  |        | 97,330,900  |   |         | $ | 97,331  |          |  | $ | -       |   |  | $        | (87,331 | ) |               | $
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Repurchase of stock                                        |  |        | (33,332,500 | ) |         |   |         |          |  |   | (33,333 | ) |  |          | -       |   |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Issuance of treasury stock                                 |  |        | 33,332,500  |   |         |   | -       |          |  |   | 33,333  |   |  |          | -       |   |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Issuance of stock for accrued compensation                 |  |        | 1,980,000   |   |         |   | 1,980   |          |  |   | -       |   |  |          | 245,520 |   |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Issuance of stock for services                             |  |        | 2,500,000   |   |         |   | 2,500   |          |  |   | -       |   |  |          | 100,000 |   |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Shares issued then existing shareholders in reorganization |  |        | 19,999,400  |   |         |   | 19,999  |          |  |   | -       |   |  |          | (19,999 | ) |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Stock dividend                                             |  |        | 14,669,600  |   |         |   | 14,670  |          |  |   | -       |   |  |          | 572,114 |   |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Net Income                                                 |  |        | -           |   |         |   | -       |          |  |   | -       |   |  |          | -       |   |               |  
|                                                           |  |        |             |   |         |   |         |          |  |   |         |   |  |          |         |   |               |  
|Balance at March 31, 2012 (unaudited)                      |  |        | 136,479,900 |   |         | $ | 136,480 |          |  | $ | -       |   |  | $        | 810,304 |   |               | $





Note: The shareholders' equity has been recapitalized
to give effect to the shares exchanged by the existing shareholders pursuant to the acquisition agreement dated November 8, 2011.
The shareholders equity section has further been retroactively restated to reflect a 13.333:1 forward stock split on December 28,
2011 and a stock dividend on January 27,2012 of 1.667 shares for every one share issued and outstanding immediately prior to the
forward stock split on December 28, 2011. These transactions are more fully described in Note 8 to these financial statements.



Page 4 of 23







CONTINUITYX SOLUTIONS, INC.



CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ending March 31, 2012 (Unaudited)



|                                                     |  |             |            |   | For The Period    |  
|---------------------------------------------------- |  | ----------- | ---------- | - | ----------------- | -
|                                                     |  | Nine Months |            |   | from Inception    |  
|                                                     |  | March 31    |            |   | (March 25, 2011)  |  
|                                                     |  | Unaudited   |            |   | To March 31, 2011 |  
|                                                     |  |             |            |   |                   |  
|CASH FLOWS FROM OPERATING ACTIVITIES                 |  |             |            |   |                   |  
|Net Income                                           |  | $           | 2,199,163  |   |                   | $
|Adjustments to reconcile net income tonet            |  |             |            |   |                   |  
|cash used by operating activities:                   |  |             |            |   |                   |  
|Stock issued for services                            |  |             | 102,500    |   |                   |  
|Deferred tax                                         |  |             | 878,512    |   |                   |  
|Depreciation                                         |  |             | 112,853    |   |                   |  
|Changes in assets and liabilities                    |  |             |            |   |                   |  
|Accounts receivable                                  |  |             | 506,659    |   |                   |  
|Factored accounts receivable                         |  |             | (4,933,195 | ) |                   |  
|Deposits                                             |  |             | 46,000     |   |                   |  
|Prepaid expenses                                     |  |             | (28,134    | ) |                   |  
|Security deposits                                    |  |             | (1,198,023 | ) |                   |  
|Accounts payable                                     |  |             | 199,621    |   |                   |  
|Commission payable                                   |  |             | 468,955    |   |                   |  
|Accrued payroll                                      |  |             | 473,105    |   |                   |  
|Sales tax payable                                    |  |             | 2,110      |   |                   |  
|Accrued interest - related party                     |  |             | 45,676     |   |                   |  
|Income taxes payable                                 |  |             | 684,753    |   |                   |  
|                                                     |  |             |            |   |                   |  
|NET CASH USED BY OPERATING ACTIVITIES                |  |             | (439,445   | ) |                   |  
|                                                     |  |             |            |   |                   |  
|CASH FLOWS FROM INVESTING ACTIVITIES                 |  |             |            |   |                   |  
|Increase in investment - convertible note receivable |  |             | (75,000    | ) |                   |  
|Purchase of property and equipment                   |  |             | (49,943    | ) |                   |  
|NET CASH USED BY INVESTING ACTIVITIES                |  |             | (124,943   | ) |                   |  
|                                                     |  |             |            |   |                   |  
|CASH FLOWS FROM FINANCING ACTIVITIES                 |  |             |            |   |                   |  
|Net proceeds from factor                             |  |             | 1,639,666  |   |                   |  
|Payments on short term debt                          |  |             | (108,750   | ) |                   |  
|Payments on related party notes payable              |  |             | (312,185   | ) |                   |  
|Proceeds from related party notes payable            |  |             | 55,000     |   |                   |  
|Payments on capital lease                            |  |             | (223,152   | ) |                   |  
|NET CASH PROVIDED BY FINANCING ACTIVITIES            |  |             | 1,050,579  |   |                   |  
|                                                     |  |             |            |   |                   |  
|NET INCREASE IN CASH                                 |  |             | 486,191    |   |                   |  
|CASH - Beginning                                     |  |             | 149,784    |   |                   |  
|Ending                                               |  | $           | 635,975    |   |                   | $
|                                                     |  |             |            |   |                   |  
|SUPPLEMENTAL CASH FLOW DISCLOSURES                   |  |             |            |   |                   |  
|Cash paid during the period:                         |  |             |            |   |                   |  
|Interest                                             |  | $           | 128,419    |   |                   | $
|Taxes                                                |  |             | -0-        |   |                   |  







Page 5 of 23







CONTINUITYX SOLUTIONS, INC.



CONSOLIDATED STATEMENT OF CASH FLOWS
For the nine months ending March 31, 2012 (Unaudited)



(CONTINUED)



|SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES             |  |   |         | 
|------------------------------------------------------------------- |  | - | ------- | 
|                                                                    |  |   |         | 
|Issuance of shares to reduce accrued payroll                        |  | $ | 247,500 | 
|Issuance of note payable to reduce accrued payroll                  |  |   | 50,000  | 
|Issuance of note payable to reduce accrued interest – related party |  |   | 40,640  | 
|Equipment acquired under capital lease                              |  |   | 856,527 | 



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





Page 6 of 23









Note 1 – BUSINESS



ContinuityX Solutions, Inc.,
formerly EDUtoons, Inc. (the “Company”), incorporated under the laws of the State of Delaware on March 18, 2010, provides
client solutions that ensure efficient business continuity and disaster relief through experienced planning, implementation, and
management with offices located in two cities: Marlborough, Massachusetts and Metamora, Illinois. The Company provides business
continuity, disaster recovery and managed network services and offers an approach for medium to large scale enterprise businesses
to address immediate needs without losing sight of their long term objective. The Company also provides virtual / cloud hosting,
managed equipment and storage, VoIP and voice connectivity and network and interconnection services through 23 colocation data
service facilities throughout the country. In addition, the Company provides advanced broadband communication and high performance
networks with strategic partners such as AT&T, XO Communications, Telx and others. The company also offers an extensive line
of products and services. Our unique combination of consultation and technical expertise affords the client faster delivery and
lower cost than larger consulting companies.



The Company changed its name
to ContinuityX Solutions, Inc. pursuant to a Certificate of Amendment of the Certificate of Incorporation of EDUtoons, Inc., which
was filed with the Secretary of State of the State of Delaware on December 28, 2011.



ContinuityX, Inc. entered
into a Stock Purchase Agreement with the Company, dated October 27, 2011, which closed on November 1,
2011.  Pursuant to the agreement, ContinuityX, Inc. acquired 3,250,000 shares of the Company’s common
stock.  On November 8, 2011, the Company and ContinuityX, Inc. entered into an Acquisition Agreement whereby the
Company acquired 100% of the issued and outstanding common shares of ContinuityX, Inc. for 7,300,000 shares of the
Company’s common stock issuable to its stockholders.  The Company filed a Certificate of Amendment to its
Certificate of Incorporation on December 28, 2011, to change its name to ContinuityX Solutions, Inc., increase the number of
authorized shares from 10,000,000 to 200,000,000 shares and implementing a forward stock split of 13.333 to 1. In addition,
on January 27, 2012, the Company approved a stock dividend of 1.667 common shares per common stock share that was outstanding
prior to the forward stock split.



The effect of the Acquisition
Agreement is such that effectively a reorganization of the entities has occurred for accounting purposes and is deemed to be a
reverse acquisition. Subsequent to the Closing pursuant to the Acquisition Agreement, ContinuityX, Inc. and its stockholders have
effective control of the Company, even though the Company has acquired ContinuityX, Inc. For accounting purposes, ContinuityX,
Inc. has been deemed to be the accounting acquirer in the transaction and, consequently, the transaction has been treated as a
recapitalization of the Company, i.e., a capital transaction involving the issuance of shares by the Company for the shares of
ContinuityX, Inc. Accordingly, the combined assets, liabilities and results of operations of ContinuityX, Inc. became the historical
financial statements of the Company at the closing of the Acquisition Agreement, and the Company’s assets, liabilities and
results of operations have been consolidated with those of ContinuityX, Inc. commencing as of November 8, 2011, the date of the
Closing. No step-up in basis or intangible assets or goodwill was recorded in this transaction. As this transaction is being accounted
for as a reverse acquisition, all direct costs of the transaction have been charged to additional paid-in capital. All professional
fees associated with the transaction have been charged to additional paid-in-capital. The Company has determined to continue
to utilize June 30 as the end of its fiscal year.



Page 7 of 23







Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES



Interim Reporting



The accompanying unaudited consolidated
financial statements include all adjustments of a normal and recurring nature which, in the opinion of Company’s management,
are necessary to present fairly the Company’s financial position as of March 31, 2012 and the results of its operations and
cash flows for the nine months then ended.



Certain information and footnote
disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles
have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated
financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the
Company’s consolidated financial statements for the period from March 25, 2011 through June 30, 2011. These consolidated
financial statements are included in a Form 8-K filed with the Securities and Exchange Commission on November 15, 2011 and on May
9, 2012.



Basis of Accounting



The consolidated financial statements
have been prepared on the accrual basis of accounting. The significant accounting policies are described below to enhance the usefulness
of the financial statements to the reader.



Fiscal Year



The Company’s fiscal year
ends on June 30.



Consolidation Policy



The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiary, ContinuityX, Inc. All significant inter-company balances and
transactions have been eliminated in consolidation.



Use of Estimates



The preparation of consolidated
financial statements in conformity with accounting principles generally accepted in the United States of America requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements, and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



Fair Value Measurements



The Company 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. Valuation
techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.



Page 8 of 23







Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)



Fair Value Measurements
(continued)



The fair value hierarchy is based
on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last
is considered unobservable.



Level 1: Quoted prices in active
markets for identical assets or liabilities.



Level 2: Inputs other than Level
1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially
the full term of the assets or liabilities.



Level 3: Unobservable inputs
that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.



The Company’s convertible
note receivable is classified as a Level 3 investment. The carrying value of the convertible note receivable approximates its fair
value due to the short maturity of the instrument.



Cash and Cash Equivalents



The Company considers all highly-liquid
financial instruments with a maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents
at financial institutions which periodically may exceed federally insured amounts.



Property and Equipment



Property and equipment are stated
at cost. It is management's policy to capitalize certain purchases with a useful life greater than one year and a value greater
than $2,000.



|Furniture and equipment         |  |  | 5 - 7 years  | 
|------------------------------- |  |  | ------------ | 
|Computer equipment and software |  |  | 2 - 5 years  | 
|Leasehold improvements          |  |  | 5 - 15 years | 



Depreciation is provided over
the estimated useful life of each class of depreciable assets and is computed using the straight-line method. Equipment under capital
lease obligations is amortized on the straight-line method over the shorter period of the lease term or the estimated useful life
of the equipment. Such amortization is included in depreciation and amortization in the accompanying statements of operations.



Accounts Receivable and Allowance
for Doubtful Accounts



Accounts receivable are uncollateralized
customer obligations due under normal trade terms requiring payment within 30 - 60 days from the invoice date. Unpaid accounts
receivable with invoice dates over 60 days old bear interest at 5% per month. Due to the uncertainty regarding collection, delinquency
fees are recognized as income when received. Accounts receivable are stated at the amounts billed to the customer plus any accrued
and unpaid interest.



Page 9 of 23







Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)



Accounts
Receivable and Allowance for Doubtful Accounts (continued)



Payments of accounts receivable
are allocated to the specific invoices identified on the customers’ remittance advice or, if unspecified, are applied to
the earliest unpaid invoices.



Trade accounts receivable are
stated at the amount management expects to collect from outstanding balances. The carrying amounts of accounts receivable are reduced
by an allowance for doubtful accounts that reflects management's best estimate of the amounts that will not be collected. Management
individually reviews all accounts receivable balances that exceed 90 days from invoice date and based on an assessment of current
creditworthiness, estimates the portion, if any, of the balance that will not be collected. Management provides for probable uncollectible
amounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the current
status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off
through a charge to the allowance for doubtful accounts and a credit to trade accounts receivable. Changes in the allowance for
doubtful accounts have not been material to the financial statements



No bad debt expense and no allowance
for doubtful accounts have been recorded as of March 31, 2012 or June 30, 2011.



Factored Accounts Receivable



The Company accounted for the
sale of accounts receivable under the Forest Capital Master Factoring Agreement as a secured borrowing with a pledge of the subject
receivables as collateral, in accordance with FASB ASC 860, the authoritative guidance for accounting for transfers and servicing
of financial assets. The caption “Factored accounts receivable” on the accompanying balance sheet in the amount of
$4,933,195 as of March 31, 2012 represents the gross accounts receivable that were designated as “sold” to Forest Capital,
LLC (the “Factor”). There were no factored receivables as of June 30, 2011.



Security Deposits



The Company has assumed
security deposits on systems and monthly recurring services from several customers. The deposits secure space on the
customer’s network which is necessary for the Company’s operations and amount to $1,438,023 at March 31, 2012 as
compared to $240,000 at June 30, 2011.



Page 10 of 23







Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Revenue Recognition



The Company recognizes revenue
when it is realized or realizable and earned, net of commissions paid to third parties. The Company’s current revenue generating
activities primarily involve compensation earnings from coordinating network and telecommunication needs with third parties and
maintaining a customer service relationship with those parties on behalf of the Company’s customers.



Depending on the nature of the
customer contract the timing of the Company’s revenue recognition occurs in two ways:



Type 1

The Company submits a contract
with a third party to its customer for services that the customer will provide (typically over a 36-month period). The customer
completes its review of the submitted contract and accepts the submitted contract by publishing an order number and releasing the
contract for provisioning. The amount is determined based on the agreed upon total contract value multiplied by the established
compensation rates and revenue is recognized. These sales result in a one-time incentive compensation fee.



In these lump-sum compensation
arrangements, the customer may not claw back – unreasonably withhold – or transfer these orders and must pay the Company
per agreement within 30-60 days depending on the type and timing of the contract.



Type 2

The Company submits a contract
with a third party to its customer for services that the customer will provide (typically over a 36-month period). The customer
completes set-up and installation services with the third party. The third party will provide acceptance to the customer at which
point the Company is also granted acceptance from its customer. The amount is based on the customer’s monthly billing to
the third party times an established compensation rate. These sales result in monthly recognition of the compensation fee.



Advertising



The Company expenses advertising
costs as they are incurred.



Income Taxes



The Company files income tax
returns in the U.S. Federal and Illinois jurisdictions.



Income taxes provide for the
tax effects of transactions reported in the financial statements. The provision for income taxes consists of taxes currently due
and, if material, deferred taxes resulting from differences in the accounting methods used for financial reporting purposes and
those used for income tax reporting. There are deferred tax items for the period ended March 31, 2012 based upon the company’s
intention to file its Federal tax return on the cash basis.



Page 11 of 23







Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)



Income Taxes (continued)



The Company follows the provisions
of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company recognized no liability
for unrecognized tax benefits. The Company has no tax position at March 31, 2012, for which the ultimate deductibility is highly
certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related
to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized
during the period presented. The Company had no accruals for interest and penalties at March 31, 2012.



Recent Accounting Pronouncements



Transfers and Servicing



In April 2011, the FASB issued
ASU No. 2011-03 “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreement.”
ASU 2011-03 removes from the assessment of effective control the criterion relating to the transferor’s ability to repurchase
or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The other criteria
to assess effective control were not changed. ASU 2011-03 is effective for the first interim or annual period beginning on or after
December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that
occur on or after the effective date. Early adoption is not permitted. The amendments were effective for the Company beginning
January 1, 2012, and do not have a material effect on the financial statements.



Fair Value Measurements



In May 2011, the FASB issued
ASU No. 2011-04, which amends ASC 820, Fair Value Measurements, and provides guidance related to fair value measurements and disclosures
in the financial statements.  This guidance conforms the wording to describe many of the requirements in U.S. GAAP to
International Financial Reporting Standards to ensure the related standards are consistently applied.  The guidance also
expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new
guidance is effective during interim and annual periods beginning after December 15, 2011 and is to be applied prospectively. The
adoption of this standard did not materially expand the Company’s consolidated financial statement footnote disclosures.



Reclassifications



Certain amounts in the prior
period consolidated financial statements have been reclassified to conform to current presentation.

.

Page 12 of 23







Note 3 – INVESTMENT – CONVERTIBLE NOTE RECEIVABLE



On December 22, 2011, the Company
made a loan to a private company in the sum of $75,000 which is evidenced by a convertible note. The note matures on the earliest
of (a) December 31, 2012 or (b) the date on which an Event of Default has occurred, at which time the private company shall pay
ContinuityX Solutions, Inc., in cash, the amount of the then outstanding principal balance of the Note plus all accrued and unpaid
interest thereon. The Note bears a simple interest rate of 4% per year; provided, however, that upon and during the continuance
of an Event of Default, the interest rate shall be increased to 7% per annum.



The Note has a mandatory conversion
upon the occurrence of qualified financing in the amount of $2,000,000 by November 30, 2012. The Note and all unpaid interest will
convert into a number of equity securities equal to the quotient of the aggregate amount of outstanding principal and accrued and
unpaid interest on this Note divided by the price per share paid in such financing. The payer also has the option to convert the
Note to common stock 30 days prior to the maturity date based upon a valuation of the payer of $7,000,000.



Note 4 - OPERATING LEASES



A subsidiary of the Company leased
office space in Marlborough, Massachusetts on July 28, 2011. The term of the lease is through September 30, 2012, and calls for
monthly rent of $840.



On September 1, 2011, a subsidiary
of the Company entered into a lease for office space in Metamora, Illinois. The term of the lease is through July 31, 2016, and
called for monthly rent of $1,200. On November 1, 2011 the same subsidiary of the Company leased additional space and the rent
was increased to $1,950 per month.



Total rent expense for the three
months and nine months ending March 31, 2012 was $8,370 and $22,184, respectively.



Minimum future lease payments
on operating leases for the fiscal years ending after March 31, 2012, are as follows:



|2012                                |  | $ | 8,370   | 
|----------------------------------- |  | - | ------- | 
|2013                                |  |   | 25,920  | 
|2014                                |  |   | 23,400  | 
|2015                                |  |   | 23,400  | 
|2016                                |  |   | 23,400  | 
|Thereafter                          |  |   | 1,950   | 
|                                    |  |   |         | 
|Total Minimum Future Lease Payments |  | $ | 106,440 | 



Page 13 of 23









Note 5 - CAPITAL LEASE



The Company leases data sales
equipment under a capital lease. The economic substance of the lease is that the Company is financing the acquisition of the assets
through the lease, and, accordingly, it is recorded in the Company’s assets in the amount of $856,527. The following is a
schedule by years of future minimum payments required under the lease together with their present value for the years ending June
30:



|2012                                    |  | $ | 399,965   |  
|--------------------------------------- |  | - | --------- | -
|2013                                    |  | $ | 391,668   |  
|2014                                    |  | $ | 227,887   |  
|Total Minimum Lease Payments            |  | $ | 1,019,520 |  
|Less Amount Representing Interest       |  |   | (162,993  | )
|Present Value of Minimum Lease Payments |  | $ | 856,527   |  



The assets held under the capital
lease have been placed in service over the course of the three months ended March 31, 2012 and depreciation has now been recorded
on those assets for the three months ended March 31, 2012, and regularly scheduled lease payments have commenced.



Note 6 - SIGNIFICANT CUSTOMERS AND CREDIT
RISK



Income for the period was derived
from three service providers, with 89% from one service provider, and accounts receivable and factored accounts receivable were
derived from two service providers. The 89% service provider is AT&T and there are 11 shared customers with AT&T including
MultiPoint, Telworx, AARMG, X Connect and Greenwave.



Note 7 - FACTORING AGREEMENT

The Company entered into a factoring
agreement of receivables on September 9, 2011 for up to $500,000, increasing on November 17, 2011 to $1,000,000, to $1,250,000
on January 19, 2012 and to $2,000,000 on March 30, 2012 to be payable immediately at 70%. Upon collections by the Factor, the Company
is remitted the balance, less applicable discount fees and 5% of the remaining uncollected assigned accounts to be used to establish
and maintain a “contingency account”. Fees per the agreement start at 1.30% for collections within 30 days, increasing
by 0.65% every 15 days. The factored receivables are secured by the assets and receivables of the Company and are with recourse
if the assigned account becomes the subject of a dispute, there exists any breach of representation under the agreement or an assigned
account is not paid within 90 days of its invoice. The Company had an outstanding principal balance of $1,639,666 as of March 31,
2012.



Note 8 – SHORT-TERM NOTES PAYABLE



On November 30, 2011, the Company
entered into a $116,250 non-interest bearing note payable. The note was secured by a security deposit and could be repaid at any
time. The Company paid the note in full as of December 31, 2011.



Related party notes payable



From May through July of
2011, a total of $127,000 of deferred compensation owed to the CEO, Mr. Godwin, was converted to three Notes payable. The
notes were combined into one Note in July 2011 which is secured by the assets and receivables held by the Company that may be
subject to subordination by third-party financiers. The Company received loans of an additional $109,026 from Mr. Godwin,
also from his deferred compensation, through March 31, 2012 and the total amount due at that date was $236,026. In addition,
all previously outstanding interest due has been forgiven and all such debt going forward is non-interest bearing. Interest
forgiven for amounts previously recorded is not material to these consolidated financial statements. Please see Note 10.



There is an outstanding note
due to Mr. Roth, the Executive Vice President of the Company for the amount of $48,565. The note is secured by the assets and receivables
held by the Company that may be subject to subordination by third-party financiers. Through March 31, 2012 an additional $244,028
was loaned to the Company by Mr. Roth and the total amount due on that date was $292,593. In addition, all previously outstanding
interest was forgiven and all such debt going forward is non-interest bearing. Interest forgiven for amounts previously recorded
is not material to these consolidated financial statements. Please see Note 10.



Page 14 of 23







Note 8 – SHORT-TERM NOTES PAYABLE (continued)



On July 27, 2011, a stockholder
of the Company advanced the Company $55,000. On October 1, 2011, three notes to this stockholder of the Company including the $55,000
and $40,640 of accrued interest were consolidated into a single note and is secured by the assets and receivables held by the Company
that may be subject to subordination by third-party financiers. At March 31, 2012, the Company had an outstanding principal balance
of $82,640 on the note and accrued interest of $21,726. Please see Note 10.



Note 9 – EQUITY TRANSACTIONS



A subsidiary of the Company entered
into a Consulting Agreement, dated July 5, 2011, with a third party to provide consulting services during a 12 month term. The
agreement provides that such party shall receive 34.25% of the issued and outstanding shares of the Company based upon the Company’s
then capitalization. To provide for the issuance of said shares the subsidiary repurchased 34,250 shares from the existing shareholders
for $0.10 per share and issued 34,250 pre-reorganization and pre-split shares to the consultant and/or its designees.



On December 28, 2011, the Company
authorized a 13.333-for-1 stock split (the "Stock Split”) of the Company's Common Stock.  All references to the
number of shares of Common Stock and per share amounts have been retroactively restated in the accompanying financial statements
to reflect the effect of the Forward Stock Split.



On January 24, 2012, Mr. Godwin
entered into an agreement with the Company to receive 1,800,000 shares of the Company’s common stock for the cancelation
of $225,000 of unpaid compensation.



On January 24, 2012, Mr. Roth
entered into an agreement with the Company to receive 180,000 shares of the Company’s common stock for the cancelation of
$22,500 of unpaid compensation.



On January 27, 2012 our Board
of Directors agreed to issue a stock dividend of 1.667 shares of Common Stock for every one (1) share of Common Stock which was
issued and outstanding immediately prior to the Forward Stock Split.



On February 20, 2012, the
Company agreed to issue to a consultant 2,500,000 shares of the Company’s restricted common stock as part of his
compensation. The consultant’s rights in such shares shall vest over the course of three years of services.



Note 10 – SUBSEQUENT EVENTS



On April 17, 2012, the Company
amended the Master Factoring Agreement with Forest Capital, LLC to increase the aggregate principal amount of advances at any time
to $2,550,000 and on April 24, 2012 such amount of advances was increased to $3,000,000.



The additional funds advanced
by Mr. Godwin mentioned in Note 8 will be placed under the same collateral as the $127,000 Note which will be amended to include
the additional funds for a total of $236,026 and the due date will be extended to December 31, 2012. Should funds be available
to repay a portion of the loan from Mr. Godwin such repayment may not exceed $25,000 per month and is subject to agreement at that
time between Mr. Godwin and Mr. Roth.



The additional funds advanced by Mr. Roth mentioned
in Note 8 will be placed under the same collateral as the $48,565 Note which will be amended to include the additional funds for
a total of $292,593 and the due date will be extended to December 31, 2012 Should funds be available to repay a portion of the
loan from Mr. Roth such repayment may not exceed $25,000 per month and is subject to agreement at that time between Mr. Godwin
and Mr. Roth.



The Stockholder note mentioned in Note
8, pursuant to an agreement with the stockholder, is presently due on or before June 30, 2012 with an effective annual
interest rate of 6% and with a minimum payment of $50,000 due on or before May 30, 2012. If the Company raises $3,000,000 or
more in any combination of equity or debt, the entire outstanding principal and interest will be due at that time. In
addition, the stockholder has the option of taking any portion of the debt in stock as part of a private placement offering
which shall be conducted by the Company.



Page 15 of 23







|ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



The following discussion should be read in conjunction with
our unaudited financial statements and the related notes that appear elsewhere in this Form 10-Q. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed
below and elsewhere in this Form 10-Q.



Our consolidated financial statements are stated in United States
dollars and are prepared in accordance with United States generally accepted accounting principles.



Application of Critical Accounting Estimates



The preparation of financial statements in conformity with United
States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the year. Management bases its estimates on historical experience and
on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.



General Organization and Business



ContinuityX Solutions, Inc. (the Company,” “we,”
“us” or “our”), formerly known as EDUtoons, Inc. (EDUtoons) was incorporated in the State of Delaware on
March 28, 2010. We are headquartered in Metamora, IL, and also maintain a satellite office in Marlborough, Massachusetts. In addition,
we have 23 data service centers throughout the country devoted to colocation and networks. The Company also hosts cloud computing,
manages equipment and storage and has relationships with strategic channel partners such as AT&T, Telx, XO Communications and
others.



We provide client solutions that ensure efficient business continuity
and disaster relief through experienced planning, implementation, and management. We provide reliability and recovery through a
methodology that strengthens its client’s business continuity and disaster relief framework and preparedness with certified
experts that specialize in security, risk management, and consultation for practical business solutions and network-IT visibility.



We offer an approach for medium to large scale enterprise businesses
to address immediate needs without losing sight of their long term objective. We provide consultation in the discovery acquisition,
implementation and management of network, disaster recovery, voice and voice over internet protocol (VOIP) and project design-management-monitoring
(virtual-hosted/managed-network). By specializing in finance, health, manufacturing, and large-scale distribution, we act as a
solutions provider and channel partner in that we will partner with manufacturers to market and sell the manufacturer's products,
services, and/or technologies. We afford clients the ability to have one-stop service at a fair price with responsive and efficient
solutions.



We have business relationships with many companies including,
but not limited to, being a “Premier Solutions Provider” for AT&T, an XO Communications “Business Partner”
and partnering with Telx in colocation facilities and many others. We also have a relationship with the St. Louis Rams wherein
we are replacing and upgrading their entire IT infrastructure including all of the hardware, software and networks. In addition,
we are installing a new IP and voice network and will assist them in completing compliance as set forth by the NFL for content,
Ticketmaster, Media and any other requirements.



Page 16 of 23







History



On November 1, 2011, we issued three million (3,000,000)
shares of our common stock pursuant to its Initial Public Offering (“IPO”) for an aggregate purchase price of
$150,000, pursuant to a Registration Statement on Form S-1 filed by us with the Securities and Exchange Commission
(“SEC”), having an effective date of May 5, 2011 (the “Registration
Statement”). Immediately after the Closing, we redeemed 3,250,000 shares of our common stock owned by our
existing stockholders excluding the stockholders who became stockholders pursuant to the IPO (the “Redemption”)
for an aggregate cost of $82,500, which was funded by the proceeds of the IPO. The balance of the proceeds of the IPO were
utilized to pay various expenses.



For a purchase price of twenty-five thousand ($25,000) dollars
we sold 3,250,000 shares of our common stock, par value of $0.001 per share, to ContinuityX, Inc.



Pursuant to an Acquisition Agreement with ContinuityX, Inc.,
Inc., dated November 8, 2011, we acquired ContinuityX, Inc. through a reverse acquisition which gave the stockholders of ContinuityX,
Inc. effective control of the Company.



We filed a Certificate of Amendment to its Certificate of Incorporation
changing our name to ContinuityX Solutions, Inc. on December 28, 2011.



Also, on December 28, 2011, we implemented a forward stock split
of 13.333 shares of Common Stock for every one (1) share of then existing Common Stock (the “Forward Stock Split”),
which resulted in a total of 117,330,400 issued and outstanding shares of our Common Stock on such date. On January 27, 2012, we
issued a stock dividend of 1.667 shares of common stock for every one share of common stock issued and outstanding prior to the
Forward Stock Split.



ContinuityX, Inc. since its formation has brought together a
collaboration of individuals in technical sales, marketing and operations, combined with engineers and technology specialists for
companies including, but not limited to, Microsoft, VMWare, Cisco, EMC, AT&T, XO Communications, AboveNet, Qwest, and Level
3 among others.



Business Strategy



By specializing in finance, health, manufacturing, large-scale
distribution, and leveraging long-term leading relationships with companies, which we consider “Channel Partners” such
as AT&T, Telx and XO Communications, we have been able to effectively market our company. Moreover, through anticipating the
needs of our clients to connect and communicate more effectively with employees, customers, partners and suppliers, we and our
Channel Partners have created a nationwide network of carrier and cloud service companies which are strategically positioned to
enable next-generation requirements that help manage, protect and optimize networked communications.



Marketing and Branding



We cooperatively market our services alongside AT&T, Telx,
XO Communications and other leading Carrier and Strategic Channel Partners. Our client base includes corporations such as: Playcast
Media (Playstation), Associated Network Providers, Inc., 1st USA Phone Cards, Inc., Blue City, the St. Louis Rams, and
Hutchison Global Communications Limited.



Intellectual Property



We recently filed for trademark
protection for the mark “ContinuityX” in various trademark classes in which we operate and a name search has been
completed. The name has been cleared and our Formal Application has been accepted by the US Patent and Trademark Office as of
April 12, 2012. We expect to receive official notification in the near future.



Competition

We believe our main competitors are
the companies set forth below:



| | · | Accenture Consulting
| | - | --------------------

| | o | Accenture is a global management consulting, technology consulting and technology outsourcing company headquartered
in New York City. According to its Yahoo Finance profile it is the largest consulting firm in the world and is a Fortune Global
500 company.  According to Accenture’s website, as of September 2011, Accenture had more than 211,000 employees
across 120 countries.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page 17 of 23







| | · | IBM Consulting
| | - | --------------

| | o | IBM Global Services is the information technology and business services arm of International Business Machines and operates
in approximately 170 countries, providing a comprehensive range of enterprise IT and consulting services to commercial and public
sector clients.  According to IBM’s website, IBM Global Services started in the spring of 1991, with the aim towards
helping companies manage their IT operations and resources.  IBM Global Business Services “GBS” is the professional
services arm of Global Services, including management consulting, systems integration, and application management services. GBS
is also the highest revenue earning division of IBM.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | Others
| | - | ------

| | o | Abovenet,which provides high bandwidth connectivity primarily for large corporate enterprises and communicationscarriers as well as an optician network that delivers key network and IP services throughout the United Statesand London;Rack Space,which provides cloud hosting, managed hosting, hybrid hosting, managed server configuration and managed colocation
servers and collaboration and Masergy,which provides managed, secure, and virtualized services to enterprises that have
complex needs across multiple locations.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Results of Operations



For the three months ending March
31, 2012 our gross revenues and services were $6,479,243, net revenues and services were $6,253,507 and net income was
$1,758,307 . There was an increase of $3,470,654 or approximately 225% in net revenues and an increase of $1,250,221 or
approximately 346% in net income compared to the three month period ending December 31, 2011 which reflected $2,782,853 in
net revenue and net income of $508,086.



Revenues and profits have increased
for the three months ending March 31, 2012 compared to the three months ended December 31, 2011 as a result of increased marketing
by our growing sales staff and Mr. Godwin which have produced additional shared customers, more than 10 resellers and an infrastructure
arrangement with the St. Louis Rams. We offer a three-tiered solutions package consisting of consulting, technology and outsourcing
at a more cost-effective rate than other consulting firms. We also have partnerships with AT&T, Telx and other carriers with
whom we share 23 colocation and interconnection facilities.



For the three months ending March 31,
2012 our total operating expenses were $2,047,564, an increase of $826,783 or approximately 168% compared to the three month period
ending December 31, 2011 during which our total operating expenses were $1,220,836.



For the nine months ended March 31,
2012 we recorded gross sales and services of $10,933,600, net sales and services of $9,997,490 and net income of $2,199,163. In
addition, our total Shareholders’ Equity was $2,611,816 at March 31, 2012 as compared to $503,509 at December 31, 2011 an
increase of $2,108,307 or approximately 584%.



Our assets and our
liabilities have increased. As of March 31, 2012 we have had an increase in total assets to the amount
of $7,935,164 compared to $973,663 as of June 30, 2011, an increase of approximately 815%. Our major asset is
accounts receivable and factored accounts receivable which were $4,964,415 at March 31, 2012 compared to $1,899,929 at
December 31, 2011, an increase of 261%. Our total liabilities as of March 31, 2012 were $5,323,348, compared to $911,010 at
June 30, 2011, an increase of approximately 584%.



Liquidity and Capital Resources



Net cash used by operating activities was $439,445 for
the nine months ended March 31, 2012.



Net cash used by investing activities was $124,943 for the nine
months ended March 31, 2012



Net cash provided by financing activities for the nine months
ended March 31, 2012 was $1,050,579.



We have working capital of $1,567,028
as of March 31, 2012. On June 30, 2011 we had cash in the amount of $149,784, and as of March 31, 2012 cash was $635,975, an increase
of approximately 424%. We finance our day to day operations through financing our accounts receivable and working capital from
revenues.  We intend to expand operations to generate cash flow and to raise funds through either borrowings and / or
selling equity.



Page 18 of 23







We also have 25,000,000 shares of preferred stock authorized
with a par value of $.001. No shares of preferred stock have been issued or are outstanding as of March 31, 2012.



Off Balance Sheet Arrangements



None.



Office Locations



We are headquartered in Metamora, IL, and we also maintain a
satellite office in Marlborough, Massachusetts.



Page 19 of 23







ITEM 3. 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.



ITEM 4. CONTROLS AND PROCEDURES



Evaluation of Disclosure Controls and Procedures

Limitations on the effectiveness of Internal Controls:



As a result of the Acquisition Agreement whereby EDUtoons, Inc.
acquired Continuity; ContinuityX Solutions, Inc. (the Company) has survived as the continuing entity (“Reorganization”).
Following this Reorganization, the Company, as the operating company and accounting acquirer has implemented a system of internal
controls over financial reporting.



Pursuant to the scope exception allowed under Item 308 of
Regulation S-K, the Company has not completed its assessment of the effectiveness of its internal control over financial
reporting and its disclosure controls and procedures. As management’s assessment was not required for
Continuity prior to the reverse merger, the Company, as the surviving private operating company, is working toward
completing its documentation and assessment to include such assessments and certifications in its June 30, 2012 Form
10-K.



Recently enacted accounting standards



During 2011, The Financial Accounting Standards Board (“FASB”)
issued ASU No. 2011-02 through ASU 2011-12, which are not expected to have a material impact on the consolidated financial statements
upon adoption.



PART II.  OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



There are no pending, nor to our knowledge threatened, legal
proceedings against us.



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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS



On November 1, 2011, we sold 3,250,000 shares of our common
stock, par value of $0.001 per share, to ContinuityX, Inc. for a purchase price of twenty five thousand ($25,000) dollars. These
shares were subsequently deemed canceled.



On November 8, 2011 we issued an aggregate of 7,300,000 shares
to 10 stockholders of ContinuityX, Inc. in exchange for 100% of the stock in ContinuityX, Inc.



A subsidiary of the Company entered
into a Consulting Agreement, dated July 5, 2011, with a third party to provide consulting services during a 12 month term. The
agreement provides that such party shall receive 34.25% of the issued and outstanding shares of the subsidiary based upon the subsidiary’s
then capitalization. To provide for the issuance of said shares the subsidiary repurchased 34,250 shares from the existing shareholders
for $0.10 per share and issued 34,250 shares to the consultant and/or its designees.



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On December 28, 2011, the Company authorized
a 13.333-for-1 stock split (the "Stock Split”) of the Company's Common Stock.  All references to the number of
shares of Common Stock and per share amounts have been retroactively restated in the accompanying financial statements to reflect
the effect of the Forward Stock Split.



On January 24, 2012, Mr. Godwin entered
into an agreement with the Company to receive 1,800,000 shares of the Company’s common stock for the cancelation of $225,000
of unpaid compensation.



On January 24, 2012, Mr. Roth entered into
an agreement with the Company to receive 180,000 shares of the Company’s common stock for the cancelation of $22,500 of unpaid
compensation.



On January 27, 2012 our Board of Directors
agreed to issue a stock dividend of 1.667 shares of Common Stock for every one (1) share of Common Stock which was issued and outstanding
immediately prior to the Forward Stock Split.



On February 20, 2012, the Company
agreed to issue 2,500,000 shares of the Company’s restricted common stock to a consultant as part of his compensation.
The consultant’s rights in such shares shall vest over the course of three years of services.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. MINE SAFETY DISCLOSURE



Not Applicable



ITEM 5. OTHER INFORMATION



None.



Page 21 of 23







ITEM 6. EXHIBITS



The following exhibits are filed herewith:



|Exhibit No. |  | Description                                                                                                             
|----------- |  | ------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                         
|3.1*        |  | Certificate of Incorporation of EDUtoons, Inc.                                                                          
|            |  |                                                                                                                         
|3.11**      |  | Amendment to Certificate of Incorporation filed on December 28, 2011.                                                   
|            |  |                                                                                                                         
|            |  |                                                                                                                         
|3.2*        |  | Bylaws of EDUtoons, Inc.                                                                                                
|            |  |                                                                                                                         
|4.1*        |  | Specimen Stock Certificate                                                                                              
|            |  |                                                                                                                         
|31.1        |  | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                  
|            |  |                                                                                                                         
|31.2        |  | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                  
|            |  |                                                                                                                         
|32.1        |  | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|            |  |                                                                                                                         
|32.2        |  | Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.



|* | Previously filed as exhibits to the registration statement on Form S-1 filed by the Company on August 6, 2010.
|- | --------------------------------------------------------------------------------------------------------------



|** | Amendment filed as an exhibit to Form 8-K filed by the Company on January 19, 2012.
|-- | -----------------------------------------------------------------------------------



Page 22 of 23







SIGNATURES



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



|                   | ContinuityX Solutions, Inc.
|------------------ | ---------------------------
|                   |                            
|Date: May 15, 2012 | By:                        
|                   |                            



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



|Date: May 15, 2012 | By: | /s/ Anthony Roth                                                                                                    
|------------------ | --- | --------------------------------------------------------------------------------------------------------------------
|                   |     | Anthony Roth                                                                                                        
|                   |     | Interim Chief Financial Officer, Principal Accounting Officer
        610 State Route 116
        Metamora, IL 61548



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