**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**FORM 10-KSB**

| x          | ** ** | **ANNUAL  REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**          |
|------------|------------|----------------------------------------------------------------------------------------------|
| ** ** | ** ** | ** **                                                                                   |
|       |       | **FOR THE FISCAL YEAR ENDED JUNE 30, 2007**                                                  |
|       |       | ** **                                                                                   |
| **o**      | ** ** | **TRANSITION  REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**For thetransition period from                to                **

**CommissionFile Number 001-10320**

**NETTIME SOLUTIONS, INC. (Formerly TIME AMERICA, INC.)**

(Name of smallbusiness issuer in its charter)

| **Nevada**                                                  | ** ** | **13-3465289**       |
|-------------------------------------------------------------|------------|----------------------|
| (State or other  jurisdiction of                            |       | (I.R.S. Employer     |
| incorporation of  organization)                             |       | Identification  No.) |
|                                                        |       |                 |
| **8840  East Chaparral Rd, Suite 100, Scottsdale, Arizona** | ** ** | **85250**            |
| (Address of  principal executive offices)                   |       | Zip Code             |

 

**(480)296-0400**

(Issuer’stelephone number)

Securitiesregistered under Section 12(b) of the Exchange Act:  **None**

Securities registeredunder Section 12(g) of the Exchange Act:

**CommonStock, $.005 par value**

Checkwhether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Exchange Act during the past 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days.  Yes xNo o

Checkif there is no disclosure of delinquent filers in response to Item 405 ofRegulation S-B contained in this form, and no disclosure will be contained, tothe best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or any amendmentto this Form 10-KSB. x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act)  Yes o  No x

The issuer’s revenuesfor the fiscal year ended June 30, 2007 were $5,377,207.

Theaggregate market value of the voting stock and non-voting common equity (basedon the closing price on that date) held by non-affiliates of the registrant asof September 28, 2007 was approximately $1,169,944.

AtSeptember 30, 2007, the issuer had outstanding 15,382,404 shares of CommonStock, par value $.005 per share.

Transitional SmallBusiness Disclosure Format:  Yes oNo x

 

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**PARTI**

# **Forward-Looking Information**

The statementscontained in this Annual Report on Form 10-KSB that are not historical fact areforward-looking statements (as such term is defined in the Private SecuritiesLitigation Reform Act of 1995), within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended.  Theforward-looking statements contained herein are based on current expectationsthat involve a number of risks and uncertainties.  These statements can be identified by the useof forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,”or “anticipates,” or the negative thereof or other variations thereon orcomparable terminology, or by discussions of strategy that involve risks anduncertainties.  The Company wishes tocaution the reader that its forward-looking statements that are not historicalfacts are only predictions.  Noassurances can be given that the future results indicated, whether expressed orimplied, will be achieved.  Whilesometimes presented with numerical specificity, these projections and otherforward-looking statements are based upon a variety of assumptions relating tothe business of the Company, which, although considered reasonable by theCompany, may not be realized.  Because ofthe number and range of assumptions underlying the Company’s projections andforward-looking statements, many of which are subject to significantuncertainties and contingencies that are beyond the reasonable control of theCompany, some of the assumptions inevitably will not materialize, andunanticipated events and circumstances may occur subsequent to the date of thisreport.  These forward-looking statementsare based on current expectations and the Company assumes no obligation toupdate this information.  Therefore, theactual experience of the Company and the results achieved during the periodcovered by any particular projections or forward-looking statements may differsubstantially from those projected. Consequently, the inclusion of projections and other forward-lookingstatements should not be regarded as a representation by the Company or anyother person that these estimates and projections will be realized. The Company’sactual results may vary materially. There can be no assurance that any of these expectations will berealized or that any of the forward-looking statements contained herein willprove to be accurate.

**Item1.  Description Of Business.**

# **General**

NETtime Solutions, Inc. is a Nevada corporation. Wechanged our name from Vitrix, Inc. to Time America, Inc. in December 2003. InMay 2007, we changed our name from Time America, Inc. to NETtime Solutions,Inc.  We develop and market a line of timeand labor management software and hardware products.  Our products are designed to improveproductivity by automating time and attendance, workforce scheduling andmanagement of labor resources. We target our product solutions at small tomid-sized companies from 25 to 2,000 or more employees. Our current productsolution is offered in a 100% web-based application service provider.

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The following bullet points provide a timeline andoverview of our development and corporate history:

·                                          June 6, 1988—Richard Barrie Fragrances, Inc.,a Nevada corporation, was formed on this date for the purpose of developing,manufacturing and marketing fragrances, cosmetics, skin treatment and personalcare products sold primarily through department and specialty stores anddrugstores.

·                                          June 30, 1996—Richard Barrie Fragrances sellssubstantially all of its properties and rights to Parlux Fragrances, Inc.During the period from this asset sale to April 1999, our operations werelimited to conducting administrative activities and discussions with thirdparties regarding possible business combinations.

·                                          July 1, 1996—Following the asset sale,Richard Barrie Fragrances changes its name to FBR Capital Corporation.

·                                          April 15, l999—FBR Capital Corporationacquires the outstanding capital stock of Vitrix Incorporated, a privately heldArizona corporation formed on April 26, 1996, pursuant to the terms of anExchange Agreement, dated as of such date, among FBR Capital Corporation,Vitrix Incorporated and certain of the Vitrix Incorporated shareholders. VitrixIncorporated becomes a majority owned subsidiary of FBR Capital Corporation asa result of this transaction. FBR Capital Corporation issued an aggregate of8,592,826 shares of common stock and 10,000,000 shares of preferred stock inconsideration for the purchase of Vitrix Incorporated. This transactionresulted in the shareholders of Vitrix Incorporated acquiring approximately 80%of the outstanding shares of common stock of FBR Capital Corporation, assumingconversion of the preferred stock into common stock and excluding outstandingoptions and warrants. The existing shareholders of FBR Capital Corporation heldthe remaining 20% of its outstanding common stock. This transaction wasaccounted for as a recapitalization of Vitrix Incorporated and the purchase ofFBR Capital Corporation by Vitrix Incorporated, since Vitrix Incorporatedbecame the controlling company after the transaction.

·                                          October 7, 1999—On this date we changed ourname from FBR Capital Corporation to Vitrix, Inc. in order to associate thename of the parent corporation to our operating subsidiary, VitrixIncorporated.

·                                          March 28, 2001—We acquired Time America,Inc., a private Arizona-based time and attendance software development company,in a merger transaction pursuant to which Time America was merged into ourwholly-owned subsidiary, Vitrix Incorporated. This transaction was accountedfor as a pooling of interests. As a condition to the merger, we sought andobtained the approval of our shareholders to effect a 1-for-10 reverse stocksplit, which occurred on April 5, 2001. We issued 3,147,914 shares of Vitrix,Inc. common stock, on a post reverse stock split basis, as consideration in themerger, which represented approximately 50% of Vitrix Inc.’s then issued andoutstanding capital stock.

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·                                          April 17, 2001—We changed the name of ourwholly-owned subsidiary from Vitrix Incorporated to Time America, Inc. in orderto capitalize on Time America’s name recognition gained from its 13 yearhistory in the time and attendance industry.

·                                          December 9, 2003—On this date we changed thename of our parent company, Vitrix, Inc., to Time America, Inc., to furthercapitalize on the name recognition of Time America as described above.

·                                          October 20, 2005 – On this date we formed asubsidiary, NetEdge Devices, LLC, an Arizona limited liability company (“NetEdgeDevices”), to manufacture and distribute a new line of advanced data collectiondevices (our TA7000 product series) that track and display critical laborinformation across a variety of industries. As of January 2007, weceased manufacturing or offering our TA7000 family of products through oursubsidiary, NetEdge Devices, or otherwise. The TA7000 product series was sold pursuant to the Asset PurchaseAgreement discussed below.

·                                          January 16, 2007—NETtime Solutions, Inc(formerly Time America, Inc.)., a Nevada corporation (the “Company”), along withits subsidiaries, NETtime Solutions, Inc., an Arizona corporation (formerlyTime America, Inc.), and NetEdge Devices entered into an Asset PurchaseAgreement with Synel Industries, Inc., an Israeli registered corporation (“Synel”).Under the agreement, Synel purchased the Company’s reseller sales channel,source code and related intellectual property for the Company’s GENESIS,HourTrack, and TA7000 product series, certain use rights associated with theCompany’s NETtime source code, and all of the Company’s rights associated withthe “Time America” name. The sale closed on January 22, 2007.  Subsequently, the Company filed aSecond Amendment to the Articles of Incorporation with the Arizona CorporationCommission to change the corporate name of its wholly-owned subsidiary, TimeAmerica, Inc., an Arizona corporation, to NETtime Solutions, Inc.  The effective date of the subsidiary corporatename change was January 22, 2007.  OnApril 20, 2007, the Company filed a Certificate of Amendment to the Articles ofIncorporation with the Nevada Secretary of State to change the corporate nameof Time America, Inc., a Nevada corporation, to NETtime Solutions, Inc.  The effective date of the corporate namechange was May 10, 2007.

Currently, wepurchase data collection devices from suppliers as the Company no longermanufactures hardware devices. The data collection devices purchased fromsuppliers are used in connection with our software solution NETtime. We marketour products to companies in U.S. and abroad through our Business AllianceProgram and direct sales team.

NETtime Solutions,Inc. is a holding corporation.  Ouroperations are conducted through our wholly-owned subsidiaries, one of which isalso named NETtime Solutions, Inc.  Ourother subsidiary is NetEdge Devices, LLC. Unless the context indicates otherwise, references to the Company inthis report shall include both NETtime Solutions, Inc. (the parent company 

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organized in Nevada),NETtime Solutions, Inc. (our wholly-owned subsidiary organized in Arizona) andNetEdge Devices, LLC.

# **Products and Services**

### **Summary**

We develop and market a line of time andlabor management hardware and software products targeting small, medium, andenterprise level companies. Our current solution is offered in a 100% web-basedlicensed or hosted model.  Our productsare internally developed, proprietary software applications that maintain andautomate the process of collecting time and human resource data.  We provide automated interfaces to mostpopular payroll, accounting and ERP software solutions in the marketplace andenable users to generate a variety of reports that track and analyze workforceproductivity. Our products also automatically accrue vacation, sick andpersonal time, and effectively replace the traditional punch clock with a fullyautomated system designed to improve workforce productivity and providesignificant time and cost savings to its users.

### **SoftwareSolutions**

We currently offera 100% web-based licensed or hosted model software solution to meet the needsof a wide variety of clients.  Featuresof this software solution include:

·                                          **Time Management** – Our products automate the management,collection, and distribution of employee time, eliminating the need for manualtimesheets.  Our products have flexiblerules engines that apply complex work and pay rules accurately and consistentlythroughout an organization.

·                                          **Attendance Management**–****Our productsallow organizations to automate and streamline the administration andenforcement of complex attendance policies. They provide management the tools to control absenteeism and reduce thecosts associated with it.

·                                          **Workforce Scheduling**– Our software suites’scheduling features help manage payroll costs and productivity concerns byminimizing the likelihood of expensive overstaffing and the negative effects ofunderstaffing. Schedule creation is performed with the assistance of a uniquevisual interface, allowing administrators to view employees’ schedules in aconvenient calendar format.

·                                          **Customization** – Our product architectureallows for the products to be easily customized to conform to an organization’sunique set of payroll policies and concerns.

·                                          **Accrual Management**– Leave records forvacation, sick and personal time are maintained by our software.  Our products also track hours that arespecific to a certain accrual type (i.e. PTO, jury duty, training, etc.), andautomate benefit 

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accruals by using a company’s policies to calculate how much benefittime an employee has earned.

·                                          **Strategic Reporting** – Our products alsofeature a multitude of standard reports. These reports allow users to transformbasic data into helpful information that enable managers and executives to gainvaluable insight and more effectively manage their organizations. Reports canalso be used to share information such as time tracking, benefit usage, jobcosting, human resource functionality and employee scheduling with third-partyapplications and/or service bureaus.

·                                          **Job and Task Tracking**– In addition totracking total time spent on the job, our products enable employers to trackthe time employees spend on specific jobs and tasks.  This powerful feature assists companies withjob costing, analysis and billing.

#### **NETtime**

NETtime is a 100% web-based software application providedto customers through both a licensed and hosted modelwhich allows for unique customization andflexibility.  Administrators andemployees determine which data NETtime will display for them, allowingcustomers to work at optimum efficiency. NETtime has the capability of working in any environment required byclients.  For example, clients with amobile workforce have the ability to access the NETtime pages using anyweb-enabled cellular phone.  BecauseNETtime is delivered via the Internet through any web browser, it brings theuser closer to our “anytime, anywhere” vision for performing or self-servicinghuman resources tasks.  Wherever clientshave Internet access, they have access to NETtime and the functionality andwealth of information it provides.

NETtime allowscustomer self service by giving users the ability to view their account statusonline. They can even order additional NETtime products, obtain system help, orcontact a support representative directly from our NETtime website.

With NETtime’sflexibility and scalability the product is used in all the market segments theCompany targets.  We believe thatweb-based software and the hosted model will continue to gain acceptance in themarketplace and, because of this belief we consider NETtime vital to ourfuture.

As of January 2007, the software solutions listed in our prior SECfilings (i.e., Genesis SQL, Genesis Pro, HourTrack, TA1000H Pro, TA50 PRO, andTA50XL)  were sold pursuant to the termsof the Asset Purchase Agreement described earlier in this Form 10-KSB.  Under the agreement, Synel Industries,Inc. purchased the Company’s reseller sales channel, source code and relatedintellectual property for the Company’s GENESIS, HourTrack, and TA7000 productseries, certain use rights associated with the Company’s NETtime source code,and all of the Company’s rights associated with the “Time America” name. Thesale closed on January 22, 2007.  Currently, NETtime is our sole customerproduct.

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### **DataCollection Products**

In November 2005, we formed a wholly-ownedsubsidiary, NetEdge Devices, LLC, to manufacture and distribute a new line ofadvanced data collection devices that track and display critical laborinformation across a variety of industries. NetEdge Devices, which is headquartered in Scottsdale, Arizona, offeredthe TA7000 family of data collection devices as a private label solution tosoftware application development companies, systems integration providers andvalue-added resellers.  The TA7000 devicetracks time and attendance information, and can easily be integrated into acompany’s existing human resources system, including payroll.  The device also integrates with othercorporate systems, such as employee self services, enterprise resourceplanning, manufacturing resource planning and security and access control.  As of January 2007, the TA7000 family ofproducts are no longer manufactured or offered through NetEdge Devices.  The TA7000 product series was sold pursuantto the Asset Purchase Agreement.

Our time and attendance product solutionstypically include hardware devices and/or software designed to collectemployees’ clock in and out times.  Thefollowing paragraphs summarize the various hardware devices and software toolswe have developed to meet the challenges of a diverse array of workenvironments:

·                                          **Badge Terminals** – Our badge readers arewell suited for a wide variety of environments, from doctors’ offices tomanufacturing plants. Employees clock in and out by simply sliding a badgethrough a scanner.

·                                          **Fingerprint Terminals**–****Ourfingerprint terminal uses one-to-one and one-to-many technology to verify theuser’s identity.  The use offingerprint technology eliminates losses due to buddy-punching (the practice ofone employee clocking in or out for another employee).

·                                          **HandPunch Biometric Terminals**–****Our devices analyze the biometricmeasurements of a user’s hand to verify their identity.  Instead of using a badge, an employee clocksin and out by placing his or her hand onto the scanner and awaitingverification.  This terminal eliminateslosses due to buddy-punching.

·                                          **Iris Technology Terminal**–****Ouriris technology devices use digital video imaging of the unique patternsfound in the iris of the eye and provide high integrity biometricauthentication of an employee without PIN numbers, passwords or ID cards.

·                                          **TelePunch**– Our TelePunch solution allowsemployees to clock in and out for the day, for jobs, or for departments usingany touch-tone telephone.  Clients whopurchase this solution receive a pre-configured, telephony server from us. Thisserver runs our software, and allows callers to interact with NETtime from aremote location.

·                                          **WebClock**– Our eWebClock partially reducesa user’s total time and attendance product investment by utilizing the Internetto collect employee clock in and out 

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times.  Employees can clock inand out by simply logging on to a web page (via the local network or the WorldWide Web).

·                                          **PC Time Clock**– PC Time Clock allowsemployees to clock in and out on a Windows-based computer.  This device is generally beneficial in officeenvironments where employees each have access to their own desktop computer.

·                                          **Web browser** – NETtime allows clients toaccess their time and attendance service through a standard web browser.  The full range of actions (clocking in andout, transferring jobs and departments, etc.) and information (hours worked,schedules, status board, etc.) are available.

·                                          **Web-enabled cell phone**– A streamlinedversion of NETtime is available to clients accessing the service through atext-only browser, such as those operating on cell phones with wireless accessprotocol (wap) capability.  Essentialservices such as clocking in and out are available.

·                                          **TCP/IP-enabled hardware** – Customers mayutilize TCP/IP-enabled hardware devices, such as badge readers, to collectclock in and out data from their employees.

·                                          **Wireless enabled hardware**– Our wirelessenabled hardware devices allow clients to connect their time clocks to a hostsystem without the inconvenience of wiring. The wireless units are small,reliable and easy to integrate into a user’s existing system.

# **Services and Support**

We maintain aprofessional service and technical support organization, which provides a suiteof maintenance and professional services. These services are designed to support our customers throughout the lifecycle of our products.  Our professionalservices include implementation, training, and technical consulting.  Maintenance service options are deliveredthrough our centralized support operation or through local service personnel.  Our educational services offer a full rangeof curriculums, which are delivered through local training at our Scottsdale,Arizona headquarters via the Internet. When necessary, we also provide software customization services to meeta customer’s unique requirements.

# **Marketing and Sales**

We market and sell our products to thesmall, medium and select enterprise markets in the United States and foreigncountries through our Business Alliance Program and direct sales team.  As discussed below, we sold substantially allof the assets of our Reseller channel in the January 2007 asset saletransaction.  We believe the market fortime and labor management products consist of the following three businesssegments:

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·                                          *Small Businesses*.  The small business segment is comprised ofcompanies with fewer than 250 employees and one to three administrator(s) whoperform time sheet edits and prepare employee hours for payroll.

·                                          *Medium Sized Businesses*.  The medium sized business segment iscomprised of companies with 250 to 1,000 employees.  These companies normally have two or moreadministrators who perform time sheet edits and prepare employee hours from asingle office.  In many cases multiplestations are necessary for clocking in and out, however, all data isadministered from a central location.

·                                          *Enterprise Businesses*.  Enterprise businesses generally have over1,000 employees with multiple field offices, each of which have one or moreadministrators.  Payroll is performed ateither distributed locations or centrally at a headquarters office.  An enterprise customer is analogous to acollection of mid-sized businesses requiring centralized data collection andstorage to ensure regulatory compliance and common application of pay rules.

***Direct Sales***

EffectiveMarch 31, 2006, we closed on the sale of certain of our direct sales assets toa third party pursuant to an asset purchase agreement.  Under the terms of such agreement, certainassets that were associated with our direct sales business were sold, includinga copy of the source code and other intellectual property relating to ourNETtime, HourTrack and GENESIS time and attendance software products, relatedASP and maintenance contracts, and certain specified direct channel salesopportunities.  Prior to this sale, weemployed five direct sales account managers responsible for designatedgeographic regions.  The primary marketsfor our direct sales were the upper mid-sized and enterprise markets.Generally, this is a horizontal market (i.e., the products are able to meet theneeds of more than one industry), however, there tends to be higherconcentrations of solution adopters in retail, financial institutions,manufacturing and service industries, and in the public and privatesectors.  City, state and localgovernments are also adopters of our solutions.

Subsequentto the March 31, 2006 asset sale, we only sell directly to a few selectaccounts.  Our direct sales group alsosells to companies that are referred to us through a member company in ourBusiness Alliance Program.

***Reseller Program***

EffectiveJanuary 22, 2007, we closed on the sale of our reseller channel to a thirdparty pursuant to an Asset Purchase Agreement. Under the terms of the agreement, certain assets that were associatedwith our reseller sales business were sold, including source code and relatedintellectual property for the Company’s GENESIS, HourTrack, and TA7000 productseries, certain use rights associated with the Company’s NETtime source code,and all of the Company’s rights associated with the “Time America” name. TheReseller Program is comprised of a network of approximately 250 value addedresellers located throughout the United States and in certain foreigncountries.  Prior to the asset sale,these resellers marketed our products along with their complementary productand service offerings and typically sell to the small and medium markets.

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***Business Alliance Program***

Our Business Alliance Program is aprogram that allows organizations to align with the Company through the use ofprivate label, OEM or referral programs.

***Growth Strategy***

We have a long history of providing high qualitytime and labor management products to our targeted markets. Our goal is tomaintain and strengthen our market position. We intend to pursue the followinggrowth strategies to attain this goal:

·                                          *Expand Business Alliance Program*.  Weplan to continue to add partners to our business alliance program.

·                                          *Leveraged Distribution*.  Weplan to continue to enter into relationships with strategic partners to enableus to do rapid and wide-scale private label distribution of our products.

·                                          *Introduction of New Technologies*.  Weintend to continue to introduce and expand into new technologies that willdifferentiate us from our competitors by making our products more scalable,easily customized and adding new features.

***Market Opportunity***

We believe themarket for time and labor management software and hardware products is largeand growing. Our belief is based on market data on associated markets, such aspayroll, which show that these markets are growing and we believe there is acorrelation between these markets and the time and labor managementmarket.  This belief is further bolsteredby the numerous competitors that exist in the time and attendance space.  There also exists opportunities to displace acurrent provider or an in-house solution. There are currently no definitivefigures on the market size of the time and attendance market.

***Backlog***

We believe thatthe dollar amount of our backlog is not material to an understanding of ourbusiness since substantially all of our product revenues in each quarter resultfrom orders received in that quarter. As of June 30, 2007, we had no backlog.

# **Manufacturing and Sources of Supply**

Theduplication of our software products is performed internally.  The printing of documentation is primarilyoutsourced to suppliers.

Ourdata collection devices are purchased from suppliers.  In July 2005, we began producing our own datacollection hardware device.  The majority of the assembly of the printed circuit boardsused in our data collection terminals is completed by approved suppliers.  All final assembly and testing of our datacollection terminals is completed at our Scottsdale, Arizona facility.  As of January 2007, the TA7000 family ofproducts are no longer manufactured or 

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offeredthrough our subsidiary, NetEdge Devices. The TA7000 product series was sold pursuant to an Asset PurchaseAgreement.

Althoughmost of the parts and components included within our products are availablefrom multiple suppliers, certain parts and components are purchased from singlesuppliers.  We have chosen to sourcethese items from single suppliers because we believe that the supplier chosenis able to consistently provide us with the highest quality product at acompetitive price on a timely basis. While to date we have been able to obtain adequate supplies of theseparts and components, the inability to transition to alternate supply sourceson a timely basis, if required in the future, could result in delays orreductions in product shipments, which could have a material adverse effect onour business and operating results.

# **Product Development**

Our productdevelopment efforts are focused on enhancing and increasing the performance ofour existing products. During fiscal 2007 and 2006, research and developmentexpenses were $1,610,360 and $1,496,686, respectively.  The increase in research and developmentexpenses in fiscal 2007 is primarily attributable to contract labor expensesattributable to the development of our new hardware device.  We intend to continue to commit resources toenhance and extend our product lines and develop interfaces to third partyproducts and expect to fund such efforts with our cash flow from our operationsand borrowings under our existing credit facilities.  Although we are continually seeking tofurther enhance our product offerings and to develop new products, there can beno assurance that these efforts will succeed, or that, if successful, suchproduct enhancements or new products will achieve widespread market acceptance,or that our competitors will not develop and market products that are superiorto our products or achieve greater market acceptance.  We also depend upon the reliability andviability of a variety of software development tools owned by third parties todevelop our products. If these tools prove inadequate or are not properlysupported, our ability to release competitive products in a timely manner couldbe materially adversely impacted.

# **Proprietary Rights**

We rely on a combination oftrademarks, trade secret law and contracts to protect our proprietarytechnology.  We generally providesoftware products to end-users under non-exclusive shrink-wrap licenses orunder signed licenses, both of which may be terminated by us if the end userbreaches the terms of the license.  Theselicenses generally require that the software be used only internally subject tocertain limitations, such as the number of employees, simultaneous users,computer model and serial number, features and/or terminals for which the enduser has paid the required license fee. We authorize our resellers to sublicense software products to end usersunder similar terms.  In certaincircumstances, we also make master software licenses available to end users,which permit either a specified limited number of copies or an unlimited numberof copies of the software to be made for internal use.  Some customers license software productsunder individually negotiated terms. Despite the precautions we have taken to protect our proprietarytechnology, it may be possible to copy or otherwise obtain and use our productsor technology without authorization.  Inaddition, effective copyright and******tradesecret protection may be unavailable or limited in certain foreign countries.

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# **Competition**

Weprovide time labor management and data collection solutions that enablebusinesses to optimize their labor resources. The labor management industry is highly competitive.  Competition is increasing as businesses inrelated industries, such as human resources management, payroll processing andenterprise resource planning (“ERP”), enter the time and attendancemarket.  Advances in software developmenttools have accelerated the software development process and, therefore, enablecompetitors to penetrate our markets more readily.  We believe we have certain technological andother competitive advantages over a number of our competitors.  These advantages include our productfeatures, our ability to customize our products quickly and our ability tointroduce and implement new technologies quickly.  Although we believe these advantages existtoday, maintaining them will require continued investment by us in research anddevelopment and marketing and sales initiatives.  There can be no assurance that we will havesufficient resources to make such investments or to achieve the technologicaladvances necessary to maintain our competitive advantages.  Increased competition could adversely affectour operating results through price reductions and/or loss of market share.

Wecompete primarily on the basis of price/performance, quality, reliability andcustomer service.  In the time andattendance market, we compete against firms that sell automated time andattendance products to many industries, firms that focus on specificindustries, and firms selling related products, such as payroll processing,human resources management, or ERP systems.  Many of ourcompetitors may be able to adapt more quickly to new or emerging technologiesor to devote greater financial and other resources to the promotion and sale oftheir products. Some of our competitors have significantly greater financial,technical and sales and marketing resources than we have, as well as moreexperience in delivering time and attendance solutions.  Our major competitor, Kronos Corporation, issubstantially larger and has access to significantly greater financialresources than we do.  Competitive marketconditions could have a material adverse effect on our business, financialcondition and results of operations.

# **Employees**

As of June 30, 2007, we employed 21individuals.  None of our employees arerepresented by a union or other collective bargaining agreement, and weconsider our relations with our employees to be good.  We have encountered competition forexperienced technical personnel for product development, technical support andsales and expect such competition to continue in the future.  Any inability to attract and retain asufficient number of qualified technical personnel could adversely affect ourability to produce, support and sell our products in a timely manner.

**Item 2.Description of Property.**

Our executive offices are located in Scottsdale,Arizona and consist of approximately 13,000 square feet under a lease thatexpires in April 2010.  Our annual rentalexpense for this 

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facility,facility, in fiscal 2007 was approximately $335,000. As a result of the January2007 asset sale transaction, we are actively looking to sublease a portion ofour office space.

**Item 3.Legal Proceedings.**

We are from timeto time involved in legal proceedings arising from the normal course ofbusiness.  As of the date of this report,we were not currently involved in any legal proceedings.

**Item 4.Submission Of Matters To A Vote Of Security Holders and Small Business Issuer Purchasesof Equity Securities.**

No matter wassubmitted to vote of our security holders during the fourth fiscal quartercovered by this report.

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**PARTII**

**Item 5.Market For Common Equity And Related Stockholder Matters and Small BusinessIssuer Purchases of Equity Securities.**

**Market for Common Stock**

Our common stockis quoted on the Over-The-Counter Bulletin Board maintained by the NASD underthe symbol “NTMS.OB.”  The high and lowbid prices of our common stock as reported for the periods presented, by fiscalquarter (i.e., 1st Quarter = July 1 through September 30), wereas follows.  The quotations reflectinter-dealer prices, without retail markup, mark-down or commission and may notrepresent actual transactions.
|                                   | ** ** | **High** | ** ** | **Low** | ** ** |
|-----------------------------------|------------|----------|------------|---------|------------|
| FISCAL YEAR  ENDED: June 30, 2005 |       |     |       |    |       |
| First Quarter                     |       | $        | 0.91       |    | $          | 0.51 |   |
| Second Quarter                    |       | 1.00     |       | 0.51    |       |
| Third Quarter                     |       | 1.00     |       | 0.55    |       |
| Fourth Quarter                    |       | 0.75     |       | 0.51    |       |
|                              |       |     |       |    |       |
| FISCAL YEAR  ENDED: June 30, 2006 |       |     |       |    |       |
| First Quarter                     |       | $        | 0.75       |    | $          | 0.51 |   |
| Second Quarter                    |       | 0.72     |       | 0.55    |       |
| Third Quarter                     |       | 0.63     |       | 0.45    |       |
| Fourth Quarter                    |       | 0.55     |       | 0.36    |       |
|                              |       |     |       |    |       |
| FISCAL YEAR  ENDED: June 30, 2007 |       |     |       |    |       |
| First Quarter                     |       | $        | 0.48       |    | $          | 0.29 |   |
| Second Quarter                    |       | 0.45     |       | 0.25    |       |
| Third Quarter                     |       | 0.48     |       | 0.30    |       |
| Fourth Quarter                    |       | 0.42     |       | 0.16    |       |

 

**Holders**

As of September30, 2007, there were approximately 209 holders of record of our commonstock.  We believe there were approximately900 beneficial owners as of such date.

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**DividendPolicy**

To date, we have not paid any cash dividends and our present policy isto retain earnings for use in our business.

**EQUITYCOMPENSATION PLAN INFORMATION**

The following table setsforth information regarding the number of shares of our common stock that maybe issued pursuant to our equity compensation plans or arrangements as of theend of fiscal 2007.
| **Plan Category**                                     | ** ** | **Number of Securities  To Be Issued Upon  Exercise of Outstanding  Options, Warrants  and Rights** | ** ** | **Weighted-Average  Exercise Price of  Outstanding Options,   Warrants and Rights** | ** ** | **Number of Securities   Remaining Available For   Future Issuance Under   Equity Compensation   Plans (Excluding   Securities Reflected  in First Column)** | ** ** |
|------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
|                                                       |       |                                                                                                                                             |       |                                                                                                              |       |                                                                                                                                                                                                                                         |       |
| Equity compensation  plans approved by securityholders     |       | 328,000                                                                                                                                          | (1)        | $                                                                                                                 | 2.95       |                                                                                                                                                                                                                                         | 272,000    | (2) |
|                                                       |       |                                                                                                                                             |       |                                                                                                              |       |                                                                                                                                                                                                                                         |       |
| Equity compensation  plans not approved by securityholders |       | 2,873,223                                                                                                                                        | (3)        | $                                                                                                                 | 0.66       |                                                                                                                                                                                                                                         | —     |   |
|                                                       |       |                                                                                                                                             |       |                                                                                                              |       |                                                                                                                                                                                                                                         |       |
| TOTAL                                                      |       | 3,201,223                                                                                                                                        |       | $                                                                                                                 | 1.01       |                                                                                                                                                                                                                                         | 272,000    |   |

 

----

| (1) | Represents shares of common stock that may be issued  pursuant to outstanding options granted under our 1999 Equity Compensation  Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Represents shares of common stock that may be issued  pursuant to options available for future grant under our 1999 Equity  Compensation Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| (3) | Represents (a) an aggregate of 1,961,489 shares of  common stock underlying non-statutory stock options approved by the Company’s  board of directors and granted to directors and employees of the Company (the  “Options”). The options have vesting schedules ranging from immediate vesting  to four year vesting and have an exercise price equal to the closing bid  price of the common stock on the date of grant and a ten year term; and (b)  an aggregate of 911,734 shares of common stock purchasable upon exercise of  warrants issued to various parties in connection with debt and equity  offerings and for services rendered by contractors. See Note 7 to our  Consolidated Financial Statements for a detailed description of the terms of  these warrants. |

 

**Recent Sales of Unregistered Securities**

Setforth below is information regarding securities sold by us since January 1,2003 which were not registered under the Securities Act.

InMarch 2003, we issued 47,797 shares of our common stock to certain resellers ofour products pursuant to an incentive sales program.  The program established the grant of commonstock based on the achievement of certain sales levels during the periodSeptember 1, 2002 to December 31, 2002. We did not receive any funds in consideration for the issuance of the 

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common stock.  We issued these shares in a transactionexempt from registration under Section 4(2) of the Securities Act.

InAugust 2003, we completed a private placement of 1,303,000 shares of commonstock at a price of $0.42 per share.  Wereceived net proceeds of $519,897 and used those funds primarily for additionalsales and engineering resources.  Weissued these shares in a transaction exempt from registration underSection 4(2) of the Securities Act.

InNovember 2003, we completed a private placement of 1,433,999 shares of commonstock at a price of $0.75 per share.  Wereceived net proceeds of $967,950 and used those funds primarily for additionalsales and engineering resources.  Weissued these shares in a transaction exempt from registration underSection 4(2) of the Securities Act.

InNovember 2003, we issued 143,400 warrants to brokers in connection with aprivate placement of our common stock. The exercise price of the warrants is $0.90 per share and is exercisablethrough November 2006.  We issued thesewarrants in a transaction exempt from registration under Section 4(2) ofthe Securities Act.

InMarch 2004, we consummated a private placement pursuant to which we issued a$2,000,000 principal amount secured convertible term note due March 22, 2007,together with a common stock purchase warrant entitling the holder to purchase280,000 shares of common stock.  The noteand the warrant were sold to a single “accredited investor”, as such term isdefined in the rules promulgated under the Securities Act, Laurus Master Fund,Ltd., for a purchase price of $2,000,000. The principal and unpaid interest on the note are convertible intoshares of our common stock at an original fixed conversion price of $1.17 pershare, which was based on the weighted average price of our common stock forthe twenty trading days immediately prior to the issuance of the note.  Such conversion price is subject toanti-dilution adjustments based on the occurrence of certain corporate events.  The note provides for monthly payments ofinterest at the prime rate, which is subject to reduction if the market priceof our common stock exceeds certain designated thresholds.  Under the terms of the note, if the averageprice of the stock for the five trading days preceding a scheduled payment is10% greater than the fixed conversion price, the scheduled payment is paid bythe conversion of common stock. If the scheduled payment is not made withcommon stock, the payment is made with cash. In June 2005, we amended the conversion price of the note. Theconversion price on the first $300,000 of the note was reduced to $0.50 pershare and the conversion price on the remainder of the note was reduced to$0.65 per share.  The warrant entitlesthe holder thereof to purchase, at any time through March 22, 2011, 200,000shares of our common stock at a price of $1.29 per share; 40,000 shares of ourcommon stock at a price of $1.35 per share; and 40,000 shares of our commonstock at a price of $1.40 per share.  We issuedthe note and the warrant in a transaction exempt from registration underSection 4(2) of the Securities Act.

Theprivate placement of the note and the warrant with Laurus in March 2004 wasfacilitated by The Oberon Group, LLC (Oberon) in consideration for which Oberonwas paid an advisory fee of $150,000, and granted a warrant to purchase, at anytime through March 22, 2007, 136,364 shares of our common stock at a per shareprice of $1.10.  We issued the warrant ina transaction exempt from registration under Section 4(2) of theSecurities Act.

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InApril 2004, the Company entered into a subordinated note agreement with ashareholder and existing debt holder. Under the terms of the agreement, an existing term note was refinancedas a five year term note with monthly principal and interest payments at15%.  In consideration for agreeing tosubordinate repayment of the note to the Laurus note, we issued 25,000 sharesof restricted common stock to the holder of the subordinated note.  We issued these shares in a transactionexempt from registration under Section 4(2) of the Securities Act.

InJune 2005, we entered into a security agreement with Laurus that provided thatwe may borrow from time to time revolving loans up to $1,500,000 subject to aborrowing base calculation based on our eligible accounts receivable.  Borrowings under the revolving facility,evidenced by notes, accrue interest at the prime rate payable monthly. Pursuantto the terms of the Agreement, Laurus shall have the right at any time untilthe maturity date, or during an event of default, to convert all or any portionof the outstanding notes into fully paid restricted shares of our common stockat a fixed conversion price of $0.65. The principal amount of all outstanding loans together with any accruedand unpaid interest is due as of June 23, 2008. We also issued Laurus a common stock purchase warrant entitling theholder to purchase 210,000 shares of common stock, at any time through June 23,2012, as follows:  150,000 shares of at aprice of $0.72 per share; 30,000 shares at a price of $0.75 per share; and30,000 shares at a price of $0.78 per share. We issued the notes and the warrant in a transaction exempt fromregistration under Section 4(2) of the Securities Act.

Theprivate placement of the credit facility and the warrant with Laurus in June2005 was facilitated by Oberon in consideration for which we agreed to payOberon an advisory fee of $112,500, and granted Oberon a warrant to purchase,at any time through June 23, 2008, 173,077 shares of the Company’s common stockat a per share price of $0.65.  InJanuary 2006, Oberon agreed to accept one-half of its advisory fee, or $56,250,in shares of our common stock, at a per share price determined by the averageprice at which our common stock trades in the five days following the date onwhich this registration statement is declared effective.  We issued the warrant, and will issue theshares, in transactions exempt from registration under Section 4(2) of theSecurities Act.

InJanuary 2006, we entered into a security and purchase agreement with Laurus torefinance our obligations to Laurus under our prior arrangements, and to obtainan additional $1,000,000 in new financing. Under the terms of the agreement, we issued a $2,000,000 convertibleterm note and a $1,500,000 non-convertible revolving note.  The term note was fully drawn, with$1,058,310 of the proceeds of the term note used to repay in full the March 22,2004 Laurus note. Under the revolving facility, we may borrow from time to timerevolving loans up to $1,500,000 subject to a borrowing base calculation basedon our eligible accounts receivable and eligible inventory.  Borrowings under the notes accrue interest atthe prime rate plus 2%, with a 7.25% minimum interest rate, payablemonthly.  Pursuant to the terms of theagreement, Laurus has the right to convert all or any portion of theoutstanding term note into fully paid restricted shares of the Company’s commonstock at a fixed conversion price of $0.65 if the average market price of suchstock for the five (5) days preceding the payment is 10% above the initialfixed conversion price of $0.65 per share. The revolving note matures on January 3, 2008 and the term note matureson January 3, 2009.  We also issued toLaurus a common stock purchase warrant entitling the holder to purchase 140,000shares of common stock, at any time 

17

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through January 3,2013, at a price of $0.65 per share.  Weissued the notes and the warrant in a transaction exempt from registrationunder Section 4(2) of the Securities Act.

Theprivate placement of the notes and the warrant with Laurus in January 2006 wasfacilitated by Oberon in consideration for which we agreed to pay Oberon anadvisory fee of $70,627, payable in shares of our common stock, at a per shareprice determined by the average price at which our common stock trades in thefive days following the date on which this registration statement is declaredeffective.  We also granted Oberon awarrant to purchase, at any time through January 3, 2009, 108,657 shares of ourcommon stock at a per share price of $0.65. We issued the warrant, and will issue the shares, in transactions exemptfrom registration under Section 4(2) of the Securities Act.

InDecember 2006, the Company entered into a subordinated note agreement with arelated party.  The note is a 90-day note with the principal due in 90days and monthly interest payments at an annual percentage rate of 10%. In consideration for agreeing to subordinate repayment of the note, the Companyissued 30,000 shares of restricted common stock to the holder of thesubordinated note.

InJanuary 2007, the Company issued 100,000 shares of restricted common stock toLaurus in consideration for Laurus’s consent to extending the maturity date ofthe Company’s existing revolving note with Laurus, the asset sale to Synel, andthe corporate name change.

InFebruary 2007, the Company issued 100,000 shares of restricted common stock toThomas Bednarik for consulting services following the January 2007 asset sale.

InFebruary 2007, the Company amended the terms of all its note agreements with arelated party to defer the monthly principal payments through December2007.  The amortization period of thenote was increased by 12 months to compensate for the deferred principalpayments.  The Company issued 100,000shares of restricted common stock in consideration for consent to interest onlypayments through December 2007.

Nounderwriters were involved in the foregoing sales of securities.  The securities described in the foregoingparagraphs were issued in reliance upon the exemption from the registrationrequirements of the Securities Act under Section 4(2) of the Securities Act andRule 506 of Regulation D promulgated thereunder relating to sales by an issuernot involving any public offering.  The purchasersof our securities represented to us in connection with their purchase that theywere accredited investors and were acquiring the shares for investment and notdistribution, that they could bear the risks of the investment and could holdthe securities for an indefinite period of time.  The purchasers received written disclosuresthat the securities had not been registered under the Securities Act and thatany resale must be made pursuant to an effective registration statement or anavailable exemption from such registration requirement.  We did not engage in any general solicitationor advertising in connection with the sales. Unless otherwise indicated, the proceeds from the private offering wereused for general working capital needs.

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**Item 6.  Management’s Discussion and Analysis Or PlanOf Operation.**

The followingdiscussion and analysis provides information that management believes isrelevant to an assessment and understanding of our results of operations andfinancial condition for the periods presented.  The following selectedfinancial information is derived from our historical financial statements andshould be read in conjunction with such financial statements and notes theretoset forth elsewhere herein and the “Forward-Looking Statements” explanationincluded herein.

**CriticalAccounting Policies**

The discussion and analysis of our financialcondition and results of operations is based upon our consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States.  The preparation of thesefinancial statements requires us to make estimates and judgments that affectthe reported amount of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamount of revenues and expenses for each period.  Critical accountingpolicies are defined as policies that management believes are (a) the mostimportant to the portrayal of our financial condition and results ofoperations; and (b) that require our most difficult, subjective or complexjudgments, often as a result of the need to make estimates about the effects ofmatters that are inherently uncertain.

Our significant accounting policies are described inthe audited consolidated financial statements and notes thereto includedherein.  We believe our most critical accounting policies are revenuerecognition, software development costs, allowance for potentiallyuncollectible accounts receivable, inventory valuation reserves, and valuationof stock-based compensation. This listing is not a comprehensive list of all ofour accounting policies.  Please refer to Note 1 in the notes to ourconsolidated financial statements incorporated by reference herein for furtherinformation.

We license software and sell data collectionhardware and related ancillary products to end-user customers through ourBusiness Alliance Program and our direct sales force. Our software licenserevenue is earned from perpetual licenses of off-the-shelf software requiringnone or minor modification or customization. The software license, datacollection hardware and related ancillary product revenues from our end-usercustomers are generally recognized when:

·                  Persuasive evidence of an arrangement exists,which is typically when a non-cancelable sales and software license agreementor purchase order has been signed;

·                  Delivery, which is typically FOB shippingpoint, is complete for the software (either physically or electronically), datacollection hardware and related ancillary products;

·                  The customer’s fee is deemed to be fixed ordeterminable and free of contingencies or significant uncertainties;

·                  Collectibility is probable; and

·                  Objectiveevidence of fair value exists for all undelivered elements, typicallymaintenance and professional services.

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Thefair value of the undelivered elements is deferred and the remaining portion ofthe arrangement fee is allocated to the delivered elements and is recognized asrevenue, assuming all other conditions for revenue recognition have beensatisfied. Substantially all of our sales agreements contain allocations of thepurchase price among the various elements of the arrangement.  If we cannot determine the fair value of anyundelivered element included in an arrangement, we will defer revenue until allelements are delivered, services are performed or until fair value can beobjectively determined.

Aspart of an arrangement, end-user customers typically purchase maintenancecontracts as well as professional services from us.  Maintenance services include telephone andweb-based support as well as rights to unspecified upgrades and enhancements,when and if we make them generally available. Professional services aretypically for implementation, installation of the software and data collectionhardware, training, building interfaces and custom features, and running testdata.

Revenuesfrom maintenance services are recognized ratably over the term of themaintenance contract period, which is usually one year.  Maintenance services are typically statedseparately in an arrangement. We have classified the value of revenuespertaining to the contractual maintenance obligations that exist for the12-month period subsequent to the balance sheet date as a current liability,and the contractual obligations with a term beyond 12 months, if present, as anon-current liability.

Revenuesfrom customer support services are recognized as the services aredelivered.  Revenues from professionalservices are generally recognized based on vendor specific objective evidenceof fair value when:

·                  A non-cancelable agreement for the serviceshas been signed or a customer’s purchase order has been received;

·                  The professional services have beendelivered;

·                  The customer’s fee is deemed to be fixed ordeterminable and free of contingencies or significant uncertainties; and

·                  Collectibilityis probable.

Vendorspecific objective evidence of fair value is based upon the price charged whenthese services are sold separately and are typically an hourly rate forprofessional services and a per-class rate for training. Based upon ourexperience in completing professional services, we have determined that theseservices are typically delivered within a 12-month period subsequent to the contractsigning and therefore classify deferred professional services as a currentliability.

Ourcontractual arrangements do not include any rights of return or priceprotection.  These arrangements generallyinclude our standard acceptance provision, which states that the customer’sacceptance of the products shall be deemed to occur upon completion of runningour standard diagnostic tests.

Atthe time we enter into an arrangement, we assess the probability of collectionof the fee and the terms granted to the customer.  The typical payment terms include a depositand subsequent payments, based on specific due dates, such that all paymentsfor the software 

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license, data collectionhardware and related ancillary products, as well as services included in theoriginal arrangement, are ordinarily due within one year of contract signing.

Ifthe arrangement includes a substantive acceptance provision, we defer revenuenot meeting the criterion for recognition under Statement of Position 97-2, “SoftwareRevenue Recognition,” and classify this revenue as deferred revenue, includingdeferred product revenue. This revenue is recognized, assuming all otherconditions for revenue recognition have been satisfied when the uncertaintyregarding acceptance is resolved as generally evidenced by written acceptanceor payment of the arrangement fee. If the payment terms for the arrangement areconsidered extended, we defer revenue on the arrangement until the payment ofthe arrangement fee becomes due. The deferred amounts related to arrangementswith extended payment terms are removed from deferred revenue and accountsreceivable, as we have determined that these amounts do not represent eitherreceivables or deferred revenue until the payment becomes due. We report theallocated fair value of revenues related to the product element of arrangementsas a current liability because of the expectation that these revenues will berecognized within 12 months of the balance sheet date.

Wecapitalize software development costs in accordance with Statement of FinancialAccounting Standards No. 86, “Accounting for the Costs of Computer Software tobe Sold, Leased, or Otherwise Marketed.” Capitalization of software developmentcosts begins upon the establishment of technological feasibility of theproduct.  The establishment of technological feasibility and the ongoingassessment of the recoverability of these costs requires considerable judgmentby management with respect to certain external factors including, but notlimited to, anticipated future gross product revenue, estimated economic life,and changes in software and hardware technology.  Amortization ofcapitalized software development costs begins when the products are availablefor general release to customers and is computed on a product-by-product basisusing straight-line amortization with useful lives of five years or, if less,the remaining estimated economic life of the product.  Amounts related tointernal software development that could be capitalized under this statement weredeemed immaterial for the years ended June 30, 2007 and 2006.

We provide for potentiallyuncollectible accounts receivable by use of the allowance method.  The allowance is provided based upon a reviewof the individual accounts outstanding, and our prior history of uncollectibleaccounts receivable.  It is our practice to record an estimated allowancefor sales returns and adjustments based on historical experience and to recordindividual charges for sales returns and adjustments directly to revenue asincurred.

**Resultsof Operations**

This analysis does notretroactively take into account the sale of the Company’s reseller activity inJanuary 2007 as discussed in Note 8 in the consolidated financialstatements.  The Company does not distinguish operationally or financiallyits activities other than gross product sales between its sales channels and assuch the Company has not accounted for the sale as discontinued operationsunder SFAS No. 144 “Accounting for the Impairment or Disposal of Long-LivedAssets”.  The Company expects to experience a significant decrease in bothrevenue and operating expenses as a result of the sale.

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**SELECTEDFINANCIAL INFORMATION**
| ** **                          | ** ** | **Fiscal Years Ended June 30,** | ** ** |
|-------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                          | ** ** | **2007**                                            | ** ** | **2006** | ** ** | **2005** | ** ** |
|                                |       |                                                |       |   |   |   |   |
| Total Revenues                      |       | $                                                   | 5,377,207  |   | $ | 6,716,150 |   | $ | 6,082,238 |   |
| Costs of Revenues                   |       | 2,536,956                                           |       | 3,255,645 |   | 2,575,742 |   |
| Gross Profit                        |       | 2,840,251                                           |       | 3,460,505 |   | 3,506,496 |   |
| Sales and Marketing  Expense        |       | 1,218,183                                           |       | 2,133,116 |   | 2,012,813 |   |
| Research and  Development Expense   |       | 1,610,360                                           |       | 1,496,686 |   | 1,405,477 |   |
| General and  Administrative Expense |       | 1,600,954                                           |       | 1,373,055 |   | 1,785,779 |   |
| Other Income (Expense)              |       | 1,729,682                                           |       | (403,383 | ) | (322,821 | ) |
| Net Income (Loss)                   |       | 140,436                                             |       | (1,945,735 | ) | (2,020,394 | ) |
| Basic Loss per Share                |       | 0.01                                                |       | (0.13 | ) | (0.15 | ) |
|                                     |            |                                                     |            |  |  |  |  |  |  |  |

*Revenues:*
| ** ** | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|       |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Revenues   |       | 5,377,207            |       | (20                                       | )%         | $                    | 6,716,150  |                                      | 10         | %                    | $          | 6,082,238 |   |
|            |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |

See “Product Sales” and “Service Revenue” below fordiscussion on the change.

*Product Sales:*
| ** **                                   | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|----------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                         |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Product sales                                |       | 3,623,326            |       | (25                                       | )%         | $                    | 4,802,715  |                                      | 9          | %                    | $          | 4,421,647 |   |
| Product sales as a percent of total revenues |       | 67                   | %          | —                                    |       | 72                   | %          | —                                    |       | 73                   | %          |
|                                              |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |

Product revenues decreased in fiscal year 2007 ascompared to fiscal year 2006. The decrease in product sales was primarilyattributable to a decrease in product sales as a result of the asset salecompleted in January 2007 whereby the reseller channel is no longer a salesmarket for us.   We anticipate asignificant decline in our product revenues in the future due to this assetsale.

The decline inproduct sales as a percent of total revenues was principally due to ourincreased focus on selling more services with each product sale prior to theasset sale.  We believe that increasingthe level of services in each sale leads to a better overall solution for ourcustomers.

*Service Revenue:*
| ** **                                     | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                           |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Service Revenue                                |       | $                    | 1,753,883  |                                      | (8         | )%                   | $          | 1,913,435                                 |       | 15                   | %          | $ | 1,660,591 |   |
| Service revenue as a percent of total revenues |       | 33                   | %          | —                                    |       | 28                   | %          | —                                    |       | 27                   | %          |
|                                                |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |  |

 

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The decrease inservice revenue in fiscal 2007 as compared to fiscal year 2006 was primarilyattributable to the decrease in product sales during this period due to theasset sale, as services are generally sold in conjunction with productsales.  As discussed above, we havefocused on selling more services with each product sale, therefore, as apercent of total revenue, the service sales have increased.

*GrossProfit*:
|                      | ** ** | **Fiscal 2007** | ** ** | **Fiscal 2006** | ** ** | **Fiscal 2005** | ** ** |
|----------------------|------------|----------------------|------------|----------------------|------------|----------------------|------------|
|                 |       |                 |       |                 |       |                 |       |
| Product gross margin |       | 48                   | %          | 50                   | %          | 59                   | %          |
|                 |       |                 |       |                 |       |                 |       |
| Service gross margin |       | 63                   | %          | 56                   | %          | 53                   | %          |
|                 |       |                 |       |                 |       |                 |       |
| Total gross margin   |       | 53                   | %          | 52                   | %          | 58                   | %          |

The overall gross margin in fiscal 2007 is slightlyhigher than the gross margin in fiscal 2006 primarily due to increasing ourutilization rate of our service personnel. In relation to the asset sale, wehave decreased the number of service personnel employed, reducing salaries forservice personnel by approximately $235,000, and therefore, there has been acorresponding decrease in our cost of sales, which contributed to the higheroverall gross margin.

The prior year decrease was primarily due to resellersales at lower margins making up a significant portion of total revenues and anoverall decrease in software sales that generally yield higher gross profitmargins.  Our gross profit percentage onproducts historically has been between 55% and 60% depending upon the mix ofsoftware versus hardware sales and the makeup of hardware sales.  Ourproduct revenue is comprised of software and hardware sales, with hardwaresales yielding a significantly lower gross profit than softwaresales.   Hardware revenue is principally comprised of two versions ofgeneral data collection terminals, badge terminals and biometric units. Our gross profit is greater on badge terminals than biometric units because themarket for our biometric units is very price sensitive and therefore constrainsthe margin on such terminals.  The marketfor badge terminals is not as price sensitive and, as a result, we are able toachieve higher margins on those units during fiscal year 2006.

Theincrease in the gross profit percentage on services revenue is due to thedecrease in cost of services while increasing our utilization rate of theservice personnel retained after the asset sale.

*TotalExpenses*:
| ** **                                              | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|---------------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                                    |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Total costs and  expenses                               |       | $                    | 4,429,497  |                                      | (11        | )%                   | $          | 5,002,857                                 |       | (4                   | )%         | $ | 5,204,069 |   |
| Total costs and expenses as a percent of total revenues |       | 82                   | %          | —                                    |       | 75                   | %          | —                                    |       | 86                   | %          |
|                                                         |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |  |

 

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See the belowdiscussion for details on the changes within the expense categories.

*Sales andMarketing Expense*:
| ** **                                                 | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|------------------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                                       |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Sales and marketing  expense                               |       | $                    | 1,218,183  |                                      | (43        | )%                   | $          | 2,133,116                                 |       | 6                    | %          | $ | 2,012,813 |   |
| Sales and marketing expense as a percent of total revenues |       | 23                   | %          | —                                    |       | 32                   | %          | —                                    |       | 33                   | %          |
|                                                            |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |  |

 

Sales andmarketing expenses decreased by 43% from fiscal 2006 to 2007, with the percentof revenue figure decreasing by 9% as revenues decreased by 20% over the prioryear.  We experienced a decrease ofapproximately $530,000 in payroll and commission expenses in fiscal 2007 as aresult of the sale of our reseller channel. We also experienced a decrease of approximately $320,000 in expensesassociated with marketing programs, travel and meals and entertainment.  The marketing programs consisted of tradeshows, advertising and lead generation programs.

Sales andmarketing expenses increased by 6% from fiscal 2005 to 2006, with the percentof revenue figure decreasing by 1% as revenues increased by 10% over the prioryear.  We experienced an increase ofapproximately $230,000 in payroll and commission expenses in fiscal 2006, whichwere offset by a decrease of approximately $155,000 in marketing programs.  These marketing programs consisted of trade shows,advertising and lead generation programs.

*Researchand Development Expense:*
| ** **                                                      | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|-----------------------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                                            |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Research and  development expense                               |       | $                    | 1,610,360  |                                      | 8          | %                    | $          | 1,496,686                                 |       | 6                    | %          | $ | 1,405,477 |   |
| Research and development expense as a percent of total revenues |       | 30                   | %          | —                                    |       | 22                   | %          | —                                    |       | 23                   | %          |
|                                                                 |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |  |

The increase in research and development expenses fromfiscal 2006 to 2007 is primarily due to increases of approximately $249,000 incontract labor, which were offset by a decrease of approximately $97,000 indevelopment costs attributable to hardware devices.  The increase in research and developmentexpenses from fiscal 2005 to 2006 is primarily due to increases ofapproximately $133,000 in payroll expense. We increased our payroll and contract labor over the last two years inorder to make significant improvements to our software products and develop ourown proprietary hardware device.  We arealso devoting resources for a significant contract for a customized solutionfor a Fortune 100 company.

*Generaland Administrative Expense*:
| ** **                                                        | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|-------------------------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                                              |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| General and  administrative expense                               |       | $                    | 1,600,954  |                                      | 17         | %                    | $          | 1,373,055                                 |       | (23                  | )%         | $ | 1,785,779 |   |
| General and administrative expense as a percent of total revenues |       | 30                   | %          | —                                    |       | 20                   | %          | —                                    |       | 29                   | %          |
|                                                                   |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |  |

The increase in general and administrative expensesfrom fiscal 2006 to fiscal 2007 is primarily attributable to bad debt expenseof approximately $310,000 associated with reserving

24

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for outstanding customeraccounts.  In the current year, payrollcosts decreased by approximately $76,000 over the prior year as a result of theJanuary 2007 sale of our reseller channel, which was offset by an increase inaccounting and legal fees of approximately $63,000.

The decrease ingeneral and administrative expenses from fiscal 2005 to fiscal 2006 isprimarily attributable to an expense of $729,500 associated with the inducedconversion on a convertible debt instrument in 2005.  The decrease in general and administrativeexpenses from fiscal 2005 to fiscal 2006 was partially offset by an increase infiscal 2006 payroll costs of approximately $113,000 over the prior year andapproximately $87,000 in general and administrative costs in fiscal 2006 as aresult of the adoption of FASB Statement No. 123(R).  We also incurred approximately $60,000 inexpenses associated with the preparation and filing of a registration statementin fiscal 2006.

*OtherIncome (Expense)*:
| ** **                                            | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|-------------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
|                                                  |       |                 |       |                                      |       |                 |       |                                      |       |                 |       |
| Other Income (Expense)                                |       | $                    | 1,729,682  |                                      | 529        | %                    | $          | (403,383                                  | )          | 25                   | %          | $ | (322,821 | ) |
| Other income (expense) as a percent of total revenues |       | 32                   | %          |                                      |       | 6                    | %          | —                                    |       | 5                    | %          |
|                                                       |            |                      |            |                                           |            |                      |            |                                           |            |                      |            |  |  |  |

 

Otherincome (expense) consists primarily of interest expense and other income on thegain on sale of assets.  The increase in other income is primarily due toan increase of approximately $2,012,000 in other income from the gain on assetsale in January 2007.  Interest expensehas decreased primarily because of the payoff of the Secured Convertible TermNote with Laurus in connection with the January 2007 asset sale.  Also included in other income in 2007 isincome which was related to assets which were sold in March 2006.  At that time, the Companyreceived in cash 100% of the total consideration for the existing customer ASPcontracts and 40% of the total consideration for the existing maintenancecontracts.  The remaining consideration for the maintenance contracts waspayable quarterly over the 14-months following the closing based on customermaintenance renewals which occurred during that period.

**Liquidityand Capital Resources**

CashFlow Highlights:
| ** **                                                | ** ** | **Fiscal 2007** | ** ** | **% Change  2007 to 2006** | ** ** | **Fiscal 2006** | ** ** | **% Change  2006 to 2005** | ** ** | **Fiscal 2005** | ** ** |
|-----------------------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|-------------------------------------------|------------|----------------------|------------|
| ** **                                                | ** ** | ** **           | ** ** | ** **                                | ** ** | ** **           | ** ** | ** **                                | ** ** | ** **           | ** ** |
| Net cash and cash  equivalents from operations            |       | $                    | 60,299     |                                      | (103       | )%                   | $          | (2,300,699                                | )          | (150                 | )%         | $ | (918,819 | ) |
| Purchase of property  and equipment                       |       | $                    | (27,693    | )                                         | (89        | )%                   | $          | (256,475                                  | )          | 2                    | %          | $ | (262,673 | ) |
| Proceeds from sale of  assets                             |       | $                    | 768,024    |                                      | 45         | %                    | $          | 530,428                                   |       | n/a                  |       | $ | — |   |
| Gross Proceeds from  debt                                 |       | $                    | 4,204,759  |                                      | 59         | %                    | $          | 2,650,797                                 |       | 77                   | %          | $ | 1,500,000 |   |
| Gross Repayment of debt                                   |       | $                    | (5,364,730 | )                                         | 291        | %                    | $          | (1,372,239                                | )          | (35                  | )%         | $ | (1,016,156 | ) |
| Proceeds from stock and  exercise of options and warrants |       | $                    | 9,000      |                                      | 437        | %                    | $          | 1,675                                     |       | 284                  | %          | $ | 436 |   |
| Net change in cash and  cash equivalents                  |       | $                    | (336,503   | )                                         | (55        | )%                   | $          | (746,513                                  | )          | (7                   | )%         | $ | (697,212 | ) |
| Cash and cash equivalents at end of year                  |       | $                    | 278,701    |                                      | (55        | )%                   | $          | 615,204                                   |       | (55                  | )%         | $ | 1,361,717 |   |

 

25

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As of June 30,2007, we had a working capital deficit of $1,046,988, as compared to workingcapital of $580,808 at June 30, 2006.

*Operations*.  Thenet cash provided by operations in fiscal 2007 was primarily attributable tothe net income of $140,436.  Alsocontributing to the net cash provided by operations were decreases in accountsreceivable of $1,467,938 and inventory of $238,835.  Net cash provided by operations during thisperiod was partially offset by an decrease in accounts payable of $137,521.

*InvestmentActivities*.  The net cash provided by investing activitiesin fiscal 2007 was primarily attributable to proceeds from the January 2007sale of assets of $768,024.  Net cashprovided by investing activites during the period was partially offset by cashused for the purchase of property and equipment which includes investments ininformation systems and infrastructure to support maintaining our operations.

On January 16,2007, NETtime Solutions, Inc (formerly Time America, Inc.)., a Nevadacorporation (the “Company”), along with its subsidiaries, NETtime Solutions,Inc., an Arizona corporation (formerly Time America, Inc.), and NetEdgeDevices, LLC, an Arizona limited liability company, entered into an AssetPurchase Agreement with Synel Industries, Inc., an Israeli registeredcorporation (“Synel”). Under the agreement, Synel purchased the Company’sreseller sales channel, source code and related intellectual property for theCompany’s GENESIS, HourTrack, and TA7000 product series, certain use rightsassociated with the Company’s NETtime source code, and all of the Company’srights associated with the “Time America” name. The sale closed on January 22,2007.  In relation to the sale, on April20, 2007, the Company filed a Certificate of Amendment to the Articles ofIncorporation with the Nevada Secretary of State to change the corporate nameof Time America, Inc., a Nevada corporation, to NETtime Solutions, Inc.  The effective date of the corporate namechange is May 10, 2007.

Under theagreement, the purchase price for the acquired assets is $2,500,000, $250,000of which was held in escrow pending resolution of certain post-closingobligations which have subsequently fulfilled. As of June 2007, $125,000 washeld in escrow and subsequently paid in July 2007. Other contingentconsideration under the agreement for the acquired assets consists of royaltypayments, payable to the Company quarterly over the four year period endingJanuary 15, 2011, equal to 5% of the revenue derived from Synel’s U.S. sales ofTA7000 units outside of Synel’s established U.S. customer base. Additionally,Synel purchased certain of the Company’s TA7000 inventory for $140,000. Aportion of the proceeds from the sale were used to repay the SecuredConvertible Term Note with Laurus, dated January 3, 2006.  In addition, the Company issued 100,000 sharesof its Common Stock to Laurus in consideration for Laurus’s consent to 

26

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extending the maturitydate of the Company’s existing revolving note with Laurus, the asset sale toSynel, and the corporate name change.

*Financing Activities.*  Cashflows used by financing activities was $1,150,971 for fiscal 2007 which wasprimarily the result of $5,364,730 in debt payments. The cash flows used byfinancing activities was partially offset by debt proceeds of  $4,204,759, of which $300,000 was from afinancing transaction completed during the second quarter of fiscal year 2007.Further information regarding this can be found in Note 4 in the accompanyingconsolidated financial statements.

Our liquidity isaffected by many factors, some based on the normal ongoing operations of ourbusiness and others related to the uncertainties of the time and attendanceindustry and global economies.  Althoughwe expect our cash requirements to continue to fluctuate based on the timing andextent of these factors, we believe that our current cash reserves, cashgenerated from operations, cash received from our asset sale (see “InvestmentActivities” above), recent financings, and our borrowing capacity under our twocredit facilities, will be sufficient to satisfy commitments for capitalexpenditures and other cash requirements for the next 6 months. At September30, 2007 we had no balance outstanding under our $1,500,000 revolving note (see“Recent Sales ofUnregistered Securities”).  We can borrowup to the $1,500,000 limit assuming we have sufficient eligible accountsreceivable and inventory balances.  Wealso have $250,000 in unused capacity under a line of credit with a shareholderof the Company (see “CertainRelationships and Related Transactions”).

The ability toraise additional capital in public or private markets will primarily bedependent upon prevailing market conditions and the demand for our products andservices.  No assurance can be given thatwe will be able to raise additional capital, when needed or at all, or thatsuch capital, if available, will be on acceptable terms. In the absence ofobtaining additional financing, the Company may be unable to fund itsoperations and may experience defaults under certain of its contractualagreements, including our credit facilities and lease agreements for ourcorporate headquarters.  Our leaseagreements are subject to termination in the event of a default.  Certain of the parties to these agreementscould take legal action against the Company to collect amounts owed to them.  Accordingly, the Company’s financialcondition could require that the Company seek the protection of applicablereorganization laws in order to avoid or delay actions by third parties, whichcould materially adversely affect, interrupt or cause the cessation of theCompany’s operations. As a result, the Company’s independent registered publicaccounting firm has issued a going concern opinion on the consolidatedfinancial statements of the Company for the fiscal year ended June 30, 2007.

**Certain Factors That May AffectFuture Operating Results**

Our actual operating results may differ from thoseindicated by forward-looking statements made in this Form 10-KSB and presentedelsewhere by management because of a number of factors, including thedemand for our software solutions, level of competition, success inestablishing and expanding our distribution channels, success in attracting andretaining 

27

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motivated andqualified personnel, ability to expand into existing and new domestic andinternational markets, development and marketing of new products and services,ability to control costs, our ability to develop and market our products andservices, competitive pricing pressure, ability to attract and retain strategicpartners, managing growth and capital and general economic conditions.  Our operating results will be materially andadversely affected if we do not successfully address these and otherrisks.  Many of these factors are beyondour control.

*Growth andCapital Needs.*** **Although we have sold certain ofour assets in transactions over the past 12-months, any future growth of ourbusiness will require us to expend funds in excess of the cash generated by ouroperations.  We may need to raiseadditional funds in the future in order to develop new and enhanced products;to increase customer support or technical staff; to respond to competitivepressures; and to acquire complimentary businesses, technologies, orservices.  We cannot predict the timingand amount of any such capital requirements at this time.  If we raise additional funds through theissuance of equity or convertible securities, existing stockholders mayexperience additional dilution and such securities may have rights,preferences, or privileges senior to those of the rights of our common stockholders.  There can be no assurance that we will beable to obtain additional financing on acceptable terms, or at all.  If adequate funds are not available onacceptable terms, we may not be able to fund expansion, promote our products,take advantage of acquisition opportunities, develop or enhance products andservices, or respond to competitive pressures.

*CompetitiveFactors*.  The marketfor software solutions is constantly evolving and extremely competitive.  We expect competition to intensify in thefuture. We compete with major domestic companies.  Many of these competitors have greater marketrecognition and substantially greater financial, technical, marketing,distribution, and other resources than we have, and we may be unable to competeeffectively against them. Emerging companies also may increase theirparticipation in the market for software applications such as that offered bythe Company.

*Product Development and Technological Change*.Our success depends in part upon our ability to enhance our existing productsand services on a timely and cost effective basis.  We cannot provide assurance that we will beable to successfully identify new opportunities and develop and bring to marketnew products and services in a timely and cost-effective manner.  In addition, we cannot provide assurance thatour products and services will not become obsolete, noncompetitive, or thatthey will sustain market acceptance.

We may not be able to adapt to rapidly changingtechnologies or we may incur significant costs in doing so.** **The softwareindustry is characterized by rapidly changing technologies, evolving industrystandards, frequent new product and service introductions, and changingcustomer demands.  New turn key businesssolution products and services based on new technologies or new industrystandards could render our existing products and services obsolete andunmarketable.  To be successful, we mustadapt to our rapidly evolving market by continually enhancing our products andservices and introducing new products and services to address our users’changing and increasingly sophisticated requirements.  We may use new technologies ineffectively orwe may fail to adapt our products and infrastructure to meet customerrequirements, competitive pressures, or emerging industry standards.  We could incur substantial costs if we needto modify our services or infrastructure. Our business could be 

28

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materially andadversely affected if we incur significant costs to adapt, or cannot adapt, tothese changes.

*StrategicPartners.*** **Our success depends on forming relationships with affiliates.** **The success of ourbusiness model depends upon a constant revenue stream generated by a highnumber of end-users.  Our business modelcontemplates attracting end-users by forming relationships with affiliates thatmarket our products and services.  Webelieve that it will be less costly and more efficient for us to attractend-users through Business Alliance Program than to attempt to attract theend-users directly. Our business, financial condition and results of operationswill be materially and adversely affected if we fail to establish and maintainrelationships with our affiliates on a cost-effective basis.

**Recent Accounting Pronouncements**

InJune 2006, the Financial Accounting Standards Board (FASB) issued FASBInterpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes—AnInterpretation of FASB Statement No. 109”, which prescribes a recognitionthreshold and measurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a tax return.The adoption of FIN 48 is not expected to have a material affect on ourfinancial position or results of operations.

In February 2006, the FASB issued SFASNo. 155, “Accounting for Certain Hybrid Financial Instruments, anamendment of FASB statements No. 133 and 140” (“SFAS 155”). SFASNo. 155 allows financial instruments that have embedded derivatives to beaccounted for as a whole (eliminating the need to bifurcate the derivative fromits host) as long as the entire instrument is valued on a fair value basis. Thestatement also resolves and clarifies other specific SFAS No. 133 and SFASNo. 140 related issues. SFAS No. 155 is effective for all financialinstruments acquired or issued after the beginning of an entity’s first fiscalyear that begins after September 15, 2006. The adoption of SFAS 155 is notexpected to have a material affect on our financial position or results ofoperations.

InMarch 2006, the FASB issued SFAS No. 156, “Accounting for Servicing ofFinancial Assets—an amendment of FASB Statement No. 140” (“SFAS 156”).SFAS 156 requires an entity to recognize a servicing asset or servicingliability each time it undertakes an obligation to service a financial asset byentering into a servicing contract in specific situations. Additionally, theservicing asset or servicing liability shall be initially measured at fairvalue, if practicable. SFAS 156 permits an entity to choose either theamortization method or fair value measurement method for subsequent measurementof the servicing asset or servicing liability. SFAS 156 is effective for ourfiscal year ending June 30, 2008. The adoption of SFAS 156 is not expectedto have a material affect on our financial position or results of operations.

InSeptember 2006, the FASB issued SFAS No. 157 (“SFAS 157”).The Statement defines fair value, establishes a framework for measuring fairvalue in generally accepted 

29

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accountingprinciples (GAAP), and expands disclosures about fair value measurements. ThisStatement is effective for financial statements issued for fiscal yearsbeginning after November 15, 2007, and interim periods within those fiscalyears. The adoption of SFAS 157 is not expected to have a material affect onour financial position or results of operations.

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities—Including an amendment of Statementof Financial Accounting Standards Statement No. 115” (“SFAS 159”), whichpermits entities to choose to measure many financial instruments and certainother items at fair value at specified election dates. A business entity isrequired to report unrealized gains and losses on items for which the fair valueoption has been elected in earnings at each subsequent reporting date. Thisstatement is expected to expand the use of fair value measurement. SFAS 159 iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years. TheCompany has not yet determined the impact of SFAS 159 on its financialposition.

**Inflation and Seasonality**

We do not believethat our operations are significantly impacted by inflation.  Our business is not typically seasonal innature.

**Item 7. Financial Statements.**

The financial statements and schedules are includedherewith commencing on page F-1.
| Report of Independent  Registered Public Accounting Firm                   |
|----------------------------------------------------------------------------|
|                                                                       |
| Consolidated Balance  Sheets                                               |
|                                                                       |
| Consolidated  Statements of Operations                                     |
|                                                                       |
| Consolidated  Statements of Changes in Stockholders’ Equity (Deficit) |
|                                                                       |
| Consolidated  Statements of Cash Flows                                     |
|                                                                       |
| Notes to  Consolidated Financial Statements                                |

 

30

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**Reportof Independent Registered Public Accounting Firm**

Boardof Directors and Stockholders ofNETtime Solutions, Inc. and Subsidiaries

We have audited the accompanying consolidated balancesheets of NETtime Solutions, Inc. and Subsidiaries as of June 30, 2007and 2006 and the related consolidated statements of operations, stockholders’equity (deficit), and cash flows for the years then ended. These financialstatements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. Our auditsinclude consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express nosuch opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements. An auditalso includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

In our opinion, the consolidated financial statementsreferred to above present fairly, in all material respects, the financialposition of NETtime Solutions, Inc. and Subsidiaries at June 30, 2007and 2006 and the results of its consolidated operations and its cash flows forthe years then ended, in conformity with accounting principles generally acceptedin the United States.

The accompanying consolidated financial statements have been preparedassuming that the Company will continue as a going concern. As discussed inNote 9 to the consolidated financial statements, the Company has suffered recurringlosses from operations and has a net capital deficiency that raises substantialdoubt about its ability to continue as a going concern. Management’s plans inregard to these matters are also described in Note 9. The consolidatedfinancial statements do not include any adjustments that might result from theoutcome of this uncertainty.

 

| /s/ Semple, Marchal & Cooper, LLP |   |
|---------------------------------------|--------|

 

Phoenix, Arizona

October12, 2007

F-1

----

**NETTIMESOLUTIONS, INC. AND SUBSIDIARIES**

CONSOLIDATED BALANCE SHEETS
| ** **                                                                                                             | ** ** | **June 30,** | ** ** | **June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-------------------|------------|
| ** **                                                                                                             | ** ** | **2007**          | ** ** | **2006**          | ** ** |
| **ASSETS**                                                                                                             | ** ** | ** **        | ** ** | ** **        | ** ** |
| **Current Assets:**                                                                                                    |       |              |       |              |       |
| Cash and cash  equivalents (Note 1)                                                                                    |       | $                 | 278,701    |              | $          | 615,204 |   |
| Accounts  receivable – trade, net (Notes 1 and 2)                                                                 |       | 501,078           |       | 2,289,678         |       |
| Inventory (Note  1)                                                                                                    |       | 66,966            |       | 653,159           |       |
| Deferred loan  costs and other current assets (Note 4)                                                                 |       | 427,136           |       | 315,226           |       |
|                                                                                                                   |       |              |       |              |       |
| **Total  Current Assets**                                                                                              |       | 1,273,881         |       | 3,873,267         |       |
|                                                                                                                   |       |              |       |              |       |
| **Property and Equipment, net  (Notes 1 and 3)**                                                                       |       | 293,644           |       | 502,309           |       |
| **Other Assets (Note 4)**                                                                                              |       | 35,183            |       | 202,952           |       |
|                                                                                                                   |       |              |       |              |       |
| **Total  Assets**                                                                                                      |       | $                 | 1,602,708  |              | $          | 4,578,528 |   |
|                                                                                                                   |       |              |       |              |       |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                               | ** ** | ** **        | ** ** | ** **        | ** ** |
|                                                                                                                   |       |              |       |              |       |
| **Current Liabilities:**                                                                                               |       |              |       |              |       |
| Current portion  of long-term debt (Note 4)                                                                            |       | $                 | —     |              | $          | 1,894,663 |   |
| Current portion  of long-term debt-related party (Note 4)                                                              |       | 610,716           |       | 186,459           |       |
| Accounts payable  (Note 1)                                                                                             |       | 551,102           |       | 688,623           |       |
| Accrued  liabilities                                                                                                   |       | 594,875           |       | 739,958           |       |
| Deferred revenue  (Note 1)                                                                                             |       | 564,176           |       | 944,372           |       |
|                                                                                                                   |       |              |       |              |       |
| **Total  Current Liabilities**                                                                                         |       | 2,320,869         |       | 4,454,075         |       |
|                                                                                                                   |       |              |       |              |       |
| Long-Term Debt, less  current portion (Note 4)                                                                         |       | —            |       | 1,361,411         |       |
| Long-Term Debt, less  current portion-related party (Note 4)                                                           |       | 909,442           |       | 831,061           |       |
|                                                                                                                   |       |              |       |              |       |
| **Total  Liabilities**                                                                                                 |       | 3,230,311         |       | 6,646,547         |       |
|                                                                                                                   |       |              |       |              |       |
| **Common Stock Subject to  Registration Rights** (351,923 shares)                                                      |       | 207,635           |       | 207,635           |       |
|                                                                                                                   |       |              |       |              |       |
| **Commitments: (Note 6)**                                                                                              |       | —            |       | —            |       |
|                                                                                                                   |       |              |       |              |       |
| **Stockholders’ Equity (Deficit):  (Note 7)**                                                                     |       |              |       |              |       |
| Common stock,  $.005 par value, 50,000,000 shares authorized, 15,030,481 and 14,652,481  shares issued and outstanding |       | 75,153            |       | 73,263            |       |
| Contributed  capital                                                                                                   |       | 9,889,188         |       | 9,591,098         |       |
| Accumulated  deficit                                                                                                   |       | (11,799,579       | )          | (11,940,015       | )          |
|                                                                                                                   |       |              |       |              |       |
| **Total  Stockholders’ Equity (Deficit)**                                                                         |       | (1,835,238        | )          | (2,275,654        | )          |
|                                                                                                                   |       |              |       |              |       |
| **Total  Liabilities and Stockholders’ Equity (Deficit)**                                                         |       | $                 | 1,602,708  |              | $          | 4,578,528 |   |

 

The Accompanying Notesare an Integral Part

of theConsolidated Financial Statements

F-2

----

#### **NETTIME SOLUTIONS, INC. AND SUBSIDIARIES**

CONSOLIDATED STATEMENTS OF OPERATIONS
| ** **                                                | ** ** | **Years Ended June 30,** | ** ** |
|-----------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                | ** ** | **2007**                                | ** ** | **2006** | ** ** |
| ** **                                                | ** ** | ** **                              | ** ** | ** ** | ** ** |
| **Revenues:**                                             |       |                                    |       |   |   |
| Product sales                                             |       | $                                       | 3,623,326  |   | $ | 4,802,715 |   |
| Services revenue                                          |       | 1,753,881                               |       | 1,913,435 |   |
|                                                      |       |                                    |       |   |   |
| **Total Revenues**                                        |       | 5,377,207                               |       | 6,716,150 |   |
|                                                      |       |                                    |       |   |   |
| **Cost of  Revenues:**                                    |       |                                    |       |   |   |
| Product                                                   |       | 1,891,660                               |       | 2,413,030 |   |
| Services                                                  |       | 645,296                                 |       | 842,615 |   |
|                                                      |       |                                    |       |   |   |
| **Total Cost of Revenues**                                |       | 2,536,956                               |       | 3,255,645 |   |
|                                                      |       |                                    |       |   |   |
| **Gross  Profit**                                         |       | 2,840,251                               |       | 3,460,505 |   |
|                                                      |       |                                    |       |   |   |
| **Costs  and Expenses:**                                  |       |                                    |       |   |   |
| Sales and marketing                                       |       | 1,218,183                               |       | 2,133,116 |   |
| Research and development                                  |       | 1,610,360                               |       | 1,496,686 |   |
| General and administrative                                |       | 1,600,954                               |       | 1,373,055 |   |
|                                                      |       |                                    |       |   |   |
| **Total Costs and Expenses**                              |       | 4,429,497                               |       | 5,002,857 |   |
|                                                      |       |                                    |       |   |   |
| **Net  Loss from Operations**                             |       | (1,589,246                              | )          | (1,542,352 | ) |
|                                                      |       |                                    |       |   |   |
| **Other  Income (Expense):**                              |       |                                    |       |   |   |
| Interest expense                                          |       | (675,804                                | )          | (691,835 | ) |
| Gain on sale of assets                                    |       | 2,012,035                               |       | — |   |
| Loss on debt extinguishment                               |       | —                                  |       | (298,108 | ) |
| Other                                                     |       | 389,012                                 |       | 573,022 |   |
| Interest income                                           |       | 4,439                                   |       | 13,538 |   |
|                                                      |       |                                    |       |   |   |
|                                                      |       | 1,729,682                               |       | (403,383 | ) |
|                                                      |       |                                    |       |   |   |
| **Net  Income (Loss)**                                    |       | $                                       | 140,436    |   | $ | (1,945,735 | ) |
|                                                      |       |                                    |       |   |   |
| **Basic  and Diluted Earnings (Loss) per Share (Note 1)** |       | $                                       | 0.01       |   | $ | (0.13 | ) |
|                                                      |       |                                    |       |   |   |
| **Basic  Weighted Average Shares Outstanding**            |       | 14,809,963                              |       | 14,553,152 |   |
| **Diluted  Weighted Average Shares Outstanding**          |       | 14,977,213                              |       | 14,553,152 |   |

 

The Accompanying Notes are an Integral Partof the Consolidated Financial Statements

F-3

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#### **NETTIME SOLUTIONS, INC. AND SUBSIDIARIES**CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’EQUITY (DEFICIT)FOR THE YEARS ENDED JUNE 30, 2007 AND 2006

| ** **                              | ** ** | **Common Stock** | ** ** | **Contributed** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|-----------------------------------------|------------|-----------------------|------------|-----------------|------------|-----------------|------------|-------------|------------|
| ** **                              | ** ** | **Shares**            | ** ** | **Amount**      | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Total** | ** ** |
|                                    |       |                  |       |            |       |            |       |        |       |   |   |
| Balance at June  30, 2005               |       | 14,251,552            |       | $               | 71,258     |            | $          | 9,269,497   |       | $ | (9,994,280 | ) | $ | (653,525 | ) |
|                                    |       |                  |       |            |       |            |       |        |       |   |   |
| Exercise of  stock options              |       | 4,500                 |       | 22              |       | 1,653           |       | —      |       | 1,675 |   |
| Conversion of  debt to common stock     |       | 446,429               |       | 2,233           |       | 247,767         |       | —      |       | 250,000 |   |
| Induced  conversion of debt             |       | —                |       | —          |       | 40,179          |       | —      |       | 40,179 |   |
| Transfer of  warrants to liability      |       | —                |       | —          |       | (102,900        | )          | —      |       | (102,900 | ) |
| Share-based  awards compensation        |       | —                |       | —          |       | 129,183         |       | —      |       | 129,183 |   |
| Recission of  common stock for services |       | (50,000               | )          | (250            | )          | (31,250         | )          | —      |       | (31,500 | ) |
| Issuance of  common stock warrants      |       | —                |       | —          |       | 36,969          |       | —      |       | 36,969 |   |
| Net loss                                |       | —                |       | —          |       | —          |       | (1,945,735  | )          | (1,945,735 | ) |
| Balance at June  30, 2006               |       | 14,652,481            |       | 73,263          |       | 9,591,098       |       | (11,940,015 | )          | (2,275,654 | ) |
|                                    |       |                  |       |            |       |            |       |        |       |   |   |
| Exercise of  stock options              |       | 23,000                |       | 115             |       | 5,135           |       | —      |       | 5,250 |   |
| Exercise of  stock warrants             |       | 25,000                |       | 125             |       | 3,625           |       | —      |       | 3,750 |   |
| Share-based  awards compensation        |       | —                |       | —          |       | 142,980         |       | —      |       | 142,980 |   |
| Issuance of  common stock for financing |       | 230,000               |       | 1,150           |       | 102,850         |       | —      |       | 104,000 |   |
| Issuance of  common stock for services  |       | 100,000               |       | 500             |       | 43,500          |       | —      |       | 44,000 |   |
| Net income                              |       | —                |       | —          |       | —          |       | 140,436     |       | 140,436 |   |
| Balance at June 30,  2007               |       | 15,030,481            |       | $               | 75,153     |            | $          | 9,889,188   |       | $ | (11,799,579 | ) | $ | (1,835,238 | ) |

 

The Accompanying Notes are an Integral Partof the Consolidated Financial Statements

F-4

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#### **NETTIME SOLUTIONS, INC. AND SUBSIDIARIES**CONSOLIDATEDSTATEMENTS OF CASH FLOWS

| ** **                                                    | ** ** | **Years Ended June 30,** | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                    | ** ** | **2007**                                | ** ** | **2006** | ** ** |
| **Increase  (Decrease) in Cash and Cash Equivalents:**        | ** ** | ** **                              | ** ** | ** ** | ** ** |
| **Cash flows from operating activities:**                     |       |                                    |       |   |   |
| Net Income (Loss)                                             |       | $                                       | 140,436    |   | $ | (1,945,735 | ) |
| Adjustments to reconcile net income (loss) to net             |       |                                    |       |   |   |
| cash provided (used) by operating activities:                 |       |                                    |       |   |   |
| Gain on sale of assets                                        |       | (2,012,035                              | )          | — |   |
| Depreciation                                                  |       | 141,996                                 |       | 128,435 |   |
| Amoritization of discounts and deferred financing  costs      |       | 320,731                                 |       | 296,210 |   |
| Share based compensation expense                              |       | 142,980                                 |       | 129,183 |   |
| Common stock, stock options and warrants issued for  services |       | 44,000                                  |       | (31,500 | ) |
| Induced conversion of debt charge                             |       | —                                  |       | 40,179 |   |
| Loss on debt extinguishment                                   |       | —                                  |       | 230,107 |   |
| Non-cash interest payment                                     |       | 8,309                                   |       | — |   |
| Non-operating cash reclass from sale of assets                |       | —                                  |       | (530,428 | ) |
| Allowance for doubtful accounts                               |       | 320,662                                 |       | 34,000 |   |
| Inventory allowance                                           |       | 8,000                                   |       | — |   |
| Inventory write off                                           |       | 54,284                                  |       | — |   |
| Changes in Assets and Liabilities:                            |       |                                    |       |   |   |
| Accounts receivable-trade                                     |       | 1,467,938                               |       | (844,152 | ) |
| Inventory                                                     |       | 238,835                                 |       | (175,440 | ) |
| Deferred loan costs and other current assets                  |       | (158,847                                | )          | (22,247 | ) |
| Other assets                                                  |       | 5,810                                   |       | (5,810 | ) |
| Accounts payable                                              |       | (137,521                                | )          | 265,227 |   |
| Accrued liabilities                                           |       | (145,083                                | )          | 64,682 |   |
| Deferred revenue                                              |       | (380,196                                | )          | 66,590 |   |
| **Net cash provided (used) by operating activities**          |       | 60,299                                  |       | (2,300,699 | ) |
|                                                          |       |                                    |       |   |   |
| **Cash flows from investing activities:**                     |       |                                    |       |   |   |
| Purchase of property and equipment                            |       | (27,693                                 | )          | (256,475 | ) |
| Payments for services for asset sale                          |       | (126,162                                | )          | — |   |
| Non-operating sale of inventory                               |       | 140,000                                 |       | — |   |
| Proceeds from sale of assets                                  |       | 768,024                                 |       | 530,428 |   |
| **Net cash provided (used) by investing activities**          |       | 754,169                                 |       | 273,953 |   |
|                                                          |       |                                    |       |   |   |
| **Cash flows from financing activities:**                     |       |                                    |       |   |   |
| Repayment of debt - related party                             |       | (25,842                                 | )          | (313,929 | ) |
| Proceeds from debt - related party                            |       | 300,000                                 |       | 500,000 |   |
| Repayment of debt                                             |       | (5,338,888                              | )          | (1,058,310 | ) |
| Proceeds from debt                                            |       | 3,904,759                               |       | 2,150,797 |   |
| Proceeds from exercise of options and warrants                |       | 9,000                                   |       | 1,675 |   |
| **Net cash provided (used) by financing activities**          |       | (1,150,971                              | )          | 1,280,233 |   |
|                                                          |       |                                    |       |   |   |
| Net change in  cash and cash equivalents                      |       | (336,503                                | )          | (746,513 | ) |
|                                                          |       |                                    |       |   |   |
| Cash and cash  equivalents at beginning of year               |       | 615,204                                 |       | 1,361,717 |   |
|                                                          |       |                                    |       |   |   |
| Cash and cash  equivalents at end of year                     |       | $                                       | 278,701    |   | $ | 615,204 |   |
|                                                          |       |                                    |       |   |   |
| **Supplemental  disclosure of cash flow information:**        |       |                                    |       |   |   |
| Interest paid                                                 |       | $                                       | 371,038    |   | $ | 332,183 |   |
| Income taxes paid                                             |       | $                                       | —     |   | $ | — |   |
|                                                          |       |                                    |       |   |   |
| **Non-cash  investing and financing activities:**             |       |                                    |       |   |   |
| Conversion of debt to equity                                  |       | $                                       | —     |   | $ | 250,000 |   |
| Disposal of fixed assets in asset sale                        |       | $                                       | 94,362     |   | $ | — |   |
| Stock issued for deferred loan costs                          |       | $                                       | 104,000    |   | $ | — |   |
| Repayment of debt with proceeds of asset sale                 |       | $                                       | 1,716,667  |   | $ | — |   |

 

#### The Accompanying Notes are an Integral Partof the Consolidated Financial Statements

F-5

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**NETTIMESOLUTIONS, INC. AND SUBSIDIARIES**

NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS

**Note 1**

**Summary ofSignificant Accounting Policies, Nature of Operations and Use of Estimates:**

***Nature of Business and Name Change:***

NETtime Solutions, Inc. (“NETtime Solutions”), a Nevada corporation,through its wholly owned subsidiary, NETtime Solutions, Inc., an Arizonacorporation, provides time and labor management solutions that we market tocompanies in the U.S. and abroad. NETtime Solutions’ products improveproductivity by automating time and attendance, workforce scheduling, and themanagement of labor resources, with features such as employee self-service,data capture technology, time sheet submittal, strategic reporting, andinterface tools for payroll, human resources, resource planning, and thirdparty application integration. NETtime Solutions’ time management solutions areoffered in a Web-based product.  Unlessthe context indicates otherwise, references to the Company in this report shallinclude NETtime Solutions (the parent company organized in Nevada), NETtimeSolutions, Inc. (our wholly-owned subsidiary organized in Arizona) and NetEdgeDevices, LLC, an Arizona limited liability company.

On April 20, 2007,the Company filed a Certificate of Amendment to its Articles of Incorporationwith the Nevada Secretary of State to change the corporate name of TimeAmerica, Inc., a Nevada corporation, to NETtime Solutions, Inc.  The effective date of the parent corporatename change is May 10, 2007.  The Companyfiled a Second Amendment to the Articles on Incorporation with the ArizonaCorporation Commission to change the corporate name of its wholly-ownedsubsidiary, Time America, Inc., an Arizona corporation, to NETtime Solutions,Inc.  The effective date of thesubsidiary corporate name change is January 22, 2007.

In November 2005,we formed a subsidiary, NetEdge Devices, LLC, an Arizona limited liabilitycompany, to manufacture and distribute a new line of advanced data collectiondevices that track and display critical labor information across a variety ofindustries.  NetEdge Devices, which isheadquartered in Scottsdale, Arizona, offers the TA7000 family of datacollection devices as a private label solution to software applicationdevelopment companies, systems integration providers and value-added resellers.As of January 2007, we ceased manufacturing or offering our TA7000 family ofproducts through our subsidiary, NetEdge Devices, or otherwise.  The TA7000 product series was sold pursuantto the Asset Purchase Agreement discussed in Note 8.

***Principlesof Consolidation:***

The consolidated financialstatements include the accounts of NETtime Solutions, Inc. and its wholly-ownedsubsidiaries (collectively, the “Company”). All intercompany accounts andtransactions have been eliminated in consolidation.

***Pervasiveness of Estimates:***

The preparation offinancial statements in conformity with generally accepted accountingprinciples in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.  Significant estimates include the allowancefor doubtful accounts and sales returns, inventory valuation reserves, deferredincome taxes, and fair value of stock-based compensation. It is at leastreasonably possible a change in these estimates may occur in the near term.Certain balances as of June 30, 2006 have been reclassified in the accompanyingconsolidated financial statements to conform to the current year presentation.These reclassifications had no effect on previously reported net income orstockholders’ equity.

F-6

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***Cash and Major Customer and SupplierConcentrations:***

The Company maintains cash and cash equivalents at afinancial institution.  Deposits not toexceed $100,000 at the financial institution are insured by the Federal DepositInsurance Corporation.  At June 30, 2007and 2006, the Company had uninsured cash and cash equivalents of approximately$228,000 and $533,000, respectively.

For the year endedJune 30, 2007, the Company had one (1) major customer representingapproximately twenty-four percent (24%) of revenues.  At June 30, 2007, the amount due from thiscustomer included in accounts receivable was approximately $54,000.

For the year endedJune 30, 2007, the Company had two (2) major suppliers representingapproximately fifty-two percent (52%) of cost of product revenues.  At June 30, 2007, the amount due to thesesuppliers included in accounts payable was $93,278.

For the year endedJune 30, 2006, the Company had one (1) major customer representingapproximately eleven percent (11%) of revenues. At June 30, 2006, the amount due from this customer included in accountsreceivable was approximately $752,000.

For the year endedJune 30, 2006, the Company had two (2) major suppliers representingapproximately fifty percent (50%) of cost of product revenues.  At June 30, 2006, the amount due to thesesuppliers included in accounts payable was $123,457.

***Allowance for**Doubtful Accounts and Sales Returns:***

The Company provides for potentially uncollectibleaccounts receivable by use of the allowance method. The allowance is providedbased upon a review of the individual accounts outstanding, and the Company’sprior history of uncollectible accounts receivable. It is the Company’spractice to record an estimated allowance for sales returns and adjustmentsbased on historical experience and to record individual charges for salesreturns and adjustments directly to revenue as incurred.

***Cash and Cash Equivalents:***

Cash and cash equivalents are considered to be allhighly liquid investments purchased with an initial maturity of three (3)months or less.

***Inventory:***

Inventory is stated at the lower of cost (first-in,first-out method) or market.  Obsolete orslow moving inventory reserves are established based upon our evaluation of thequantity of inventory on hand relative to demand. The inventory reserve atJune 30, 2007 and 2006 was $8,000 and zero, respectively.   At June30, 2007 and 2006 inventory consists of:
|                                                | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------------------|------------|----------|------------|----------|------------|
|                                           |       |     |       |     |       |
| Raw materials                                  |       | $        | —     |     | $          | 362,193 |   |
| Finished goods                                 |       | 74,966   |       | 290,966  |       |
| Gross inventory                                |       | $        | 74,966     |     | 653,159    |   |
| Reserve for  obsolete or slow moving inventory |       | (8,000   | )          | —   |       |
| Net inventory                                  |       | $        | 66,966     |     | $          | 653,159 |   |

 

F-7

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***Property and Equipment:***

Property and equipment are recorded at cost.Depreciation is provided for on the straight-line method over theestimated useful lives of the assets. The average lives of the assets rangefrom three to five years. Leasehold improvements are recorded at cost and areamortized using the straight-line method over the shorter of their estimateduseful lives or the term of the related lease, including any renewal options.Maintenance and repairs that neither materially add to the value of theproperty nor appreciably prolong its life are charged to expense as incurred.Betterments or renewals are capitalized when incurred.  Property and equipment are reviewed each yearto determine whether any events or circumstances indicate that the carryingamount of the assets may not be recoverable. Such review includes estimating future cash flows.  Property and equipment costs are expensedwhen determined not realizable.

***Software Development Costs:***

The Company capitalizes softwaredevelopment costs in accordance with Statement of Financial AccountingStandards No. 86, “Accounting for the Costs of Computer Software to be Sold,Leased, or Otherwise Marketed.” Capitalization of software development costsbegins upon the establishment of technological feasibility of the product.  The establishment of technologicalfeasibility and the ongoing assessment of the recoverability of these costsrequires considerable judgment by management with respect to certain externalfactors including, but not limited to, anticipated future gross productrevenue, estimated economic life, and changes in software and hardwaretechnology.  Amortization of capitalizedsoftware development costs begins when the products are available for generalrelease to customers and is computed on a product-by-product basis usingstraight-line amortization with useful lives of five years or, if less, the remainingestimated economic life of the product. Amounts related to internal software development that could becapitalized under this statement were deemed to be immaterial during the yearsended June 30, 2007 and 2006.

***Revenue Recognition andDeferred Revenue:***

TheCompany licenses software and sells data collection hardware and relatedancillary products to end-user customers through our Business AllianceProgram  and direct sales force. Softwarelicense revenue is earned from perpetual licenses of off-the-shelf softwarerequiring none or minor modification or customization. The software license,data collection hardware and related ancillary product revenues from end-usercustomers and reseller channel customers are generally recognized when:

·                  Persuasive evidence of an arrangement exists,which is typically when a non-cancelable sales and software license agreementor purchase order has been signed;

·                  Delivery, which is typically FOB shippingpoint, is complete for the software (either physically or electronically), datacollection hardware and related ancillary products;

·                  The customer’s fee is deemed to be fixed ordeterminable and free of contingencies or significant uncertainties;

·                  Collectibility is probable; and

·                  Objectiveevidence of fair value exists for all undelivered elements, typicallymaintenance and professional services.

Thefair value of the undelivered elements is deferred and the remaining portion ofthe arrangement fee is allocated to the delivered elements and is recognized asrevenue, assuming all other conditions

F-8

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forrevenue recognition have been satisfied. Substantially all of the Company’ssales agreements contain allocations of the purchase price among the variouselements of the arrangement.  If theCompany cannot determine the fair value of any undelivered element included inan arrangement, the Company will defer revenue until all elements aredelivered, services are performed or until fair value can be objectivelydetermined.

Aspart of an arrangement, end-user customers typically purchase maintenancecontracts as well as professional services. Maintenance services include telephone and Web-based support as well asrights to unspecified upgrades and enhancements, when and if we make them generallyavailable. Professional services are typically for implementation, installationof the software and data collection hardware, training, building interfaces andcustom features and running test data.

Revenuesfrom maintenance services are recognized ratably over the term of the maintenancecontract period, which is usually one year. Maintenance services are typically stated separately in an arrangement.The Company classifies the value of revenues pertaining to the contractualmaintenance obligations that exist for the 12-month period subsequent to thebalance sheet date as a current liability, and the contractual obligations witha term beyond 12 months, if present, as a non-current liability.

Revenuesfrom customer support services are recognized as the services aredelivered.  Revenues from professionalservices are generally recognized based on vendor specific objective evidenceof fair value when:

·                  A non-cancelable agreement for the serviceshas been signed or a customer’s purchase order has been received;

·                  The professional services have beendelivered;

·                  The customer’s fee is deemed to be fixed ordeterminable and free of contingencies or significant uncertainties; and

·                  Collectibilityis probable.

Vendorspecific objective evidence of fair value is based upon the price charged whenthese services are sold separately and are typically an hourly rate forprofessional services and a per-class rate for training. Based upon the Company’sexperience in completing professional services, the Company has determined thatthese services are typically delivered within a 12-month period subsequent tothe contract signing and therefore classify deferred professional services as acurrent liability.

Arrangementswith end-user customers and reseller channel customers do not include anyrights of return or price protection, nor do arrangements with reseller channelcustomers include any acceptance provisions. Our arrangements with end-usercustomers generally include our standard acceptance provision. Our standardacceptance provision states that the customer’s acceptance of the productsshall be deemed to occur upon completion of running our standard diagnostictests.

At thetime the Company enters into an arrangement, we assess the probability ofcollection of the fee and the terms granted to the customer.  For end-user customers, the typical paymentterms include a deposit and subsequent payments, based on specific due dates,such that all payments for the software license, data collection hardware andrelated ancillary products, as well as services included in the originalarrangement, are ordinarily due within one year of contract signing. Ourpayment terms for reseller channel customers are typically due within 30 daysof the invoice date.

F-9

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If thearrangement includes a substantive acceptance provision, the Company defersrevenue not meeting the criterion for recognition under Statement of Position97-2, “Software Revenue Recognition,” and classifies this revenue as deferredrevenue, including deferred product revenue. This revenue is recognized, assumingall other conditions for revenue recognition have been satisfied when theuncertainty regarding acceptance is resolved as generally evidenced by writtenacceptance or payment of the arrangement fee. If the payment terms for thearrangement are considered extended, we defer revenue on the arrangement untilthe payment of the arrangement fee becomes due. The deferred amounts related toarrangements with extended payment terms are removed from deferred revenue andaccounts receivable, as we have determined that these amounts do not representeither receivables or deferred revenue until the payment becomes due. We reportthe allocated fair value of revenues related to the product element ofarrangements as a current liability because of the expectation that theserevenues will be recognized within 12 months of the balance sheet date.

***Advertising Costs***

Advertising costs are charged to operations whenincurred. Advertising costs for the years ended June 30, 2007 and 2006 wereapproximately $11,000 and $47,000, respectively.

***Shipping and Handling Costs***

The cost of shippingproducts to customers is recognized at the time the products are shipped, andis included in**Cost of Sales.

***Deferred Income Taxes****:*

Deferred income taxes areprovided on an asset and liability method, whereby deferred tax assets arerecognized for deductible temporary differences and operating loss and taxcredit carryforwards and deferred tax liabilities are recognized for taxabletemporary differences. Temporary differences are the differences between thereported amounts of assets and liabilities and their tax basis. Deferred taxassets are reduced by a valuation allowance when, in the opinion of management,there is uncertainty of the utilization of these assets in future periods.Deferred tax assets and liabilities are adjusted for the effects of changes intax laws and rates on the date of enactment.

***Fair Value of Financial Instruments:***

Thecarrying values of cash, cash equivalents, accounts receivable, accountspayable, accrued liabilities and current notes payable approximate their fairvalues because of the short maturity of these instruments.  With respect to long-term debt, the amountsreported approximate the fair value of the respective financial instruments,based on the borrowing rates currently available to the Company for similarbank and equipment loans.

F-10

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***Income (Loss) Per Share:***

Diluted income (loss) per share is computed based onthe weighted average number of shares of common stock and dilutive securitiesoutstanding during the period.  Dilutivesecurities are options and warrants that are freely exercisable into commonstock at less than the prevailing market price. Dilutive securities are not included in the weighted average number ofshares when inclusion would increase the income per share or decrease the lossper share.  At June 30, 2007 and 2006,there were options and warrants outstanding to purchase 3,201,223 and3,954,931, respectively, shares of the Company’s common stock. In addition, atJune 30, 2006, there were also 3,076,923 shares of common stock issuable uponconversion of convertible debt. Of these potentially dilutive securities, atJune 30, 2007 167,250 options were included in the denominator for dilutedearnings per share as they are exercisable at less than the current marketprice. At June 30, 2006, there were no potentially dilutive securities includedin the calculation as they all had exercise prices above the then currentmarket price for the Company’s common stock, as such their effect wasanti-dilutive.

***Stock-Based Compensation:***

Priorto July 1, 2005, the Company accounted for stock-based compensationarrangements in accordance with the provisions of Accounting Principles BoardOpinion No. 25, “Accounting for Stock Issued to Employees,” (“APB 25”).Accordingly, compensation expense, if any, was measured as the excess of theunderlying stock price over the exercise price on the date of grant. TheCompany complied with the disclosure provisions of Statement of FinancialAccounting Standards Board No. 123 (“SFAS 123”) “Accounting for StockBased Compensation” as amended by SFAS 148 “Accounting for Stock-BasedCompensation-Transition and Disclosure,” which required pro-forma disclosure ofcompensation expense associated with stock options under the fair value method.

EffectiveJuly 1, 2005, the Company adopted the fair value recognition provisions ofStatement of Financial Accounting Standards Board No. 123(R), “Share–BasedPayment,” using the modified prospective-transition method. Under thistransition method, compensation expense recognized for the year ended June 30,2007 includes:  (a) compensation expense for all share-based paymentsgranted prior to, but not yet vested as of June 30, 2005 based on thegrant date fair value estimated and (b) compensation expense for allshare-based payments granted subsequent to June 30, 2005, based on thegrant date fair value estimated in accordance with the provisions of SFAS123(R). Results for prior periods have not been restated. The fair value ofoption grants is estimated as of the date of grant utilizing the Black-Scholesoption-pricing model and amortized to expense over the options’ vesting period.

*****Recent Accounting Pronouncements*****

In June 2006, theFinancial Accounting Standards Board (FASB) issued FASB Interpretation No.(FIN) 48, “Accounting for Uncertainty in Income Taxes - An Interpretation ofFASB Statement No. 109”, which prescribes a recognition threshold andmeasurement attribute for the financial statement recognition and measurementof a tax position taken or expected to be taken in a tax return. The adoptionof FIN 48 is not expected to have a material affect on our financial positionor results of operations.

In February 2006, theFASB issued SFAS No. 155, “Accountingfor Certain Hybrid Financial Instruments, an amendment of FASB statementsNo. 133 and 140”**(“SFAS155”). SFAS No. 155 allows financial instruments that have embeddedderivatives to be accounted for as a whole (eliminating the need to bifurcatethe derivative from its host) as long as the entire instrument is valued on afair value basis. The

F-11

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statement alsoresolves and clarifies other specific SFAS No. 133 and SFAS No. 140related issues. SFAS No. 155 is effective for all financial instrumentsacquired or issued after the beginning of an entity’s first fiscal year thatbegins after September 15, 2006. The adoption of SFAS 155 is not expectedto have a material affect on our financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, “Accountingfor Servicing of Financial Assets—an amendment of FASB Statement No. 140”(“SFAS 156”). SFAS 156 requires an entity to recognize a servicing asset orservicing liability each time it undertakes an obligation to service afinancial asset by entering into a servicing contract in specific situations.Additionally, the servicing asset or servicing liability shall be initiallymeasured at fair value, if practicable. SFAS 156 permits an entity to chooseeither the amortization method or fair value measurement method for subsequentmeasurement of the servicing asset or servicing liability. SFAS 156 iseffective for our fiscal year ending June 30, 2008. The adoption of SFAS156 is not expected to have a material affect on our financial position orresults of operations.

InSeptember 2006, the FASB issued SFAS No. 157 (“SFAS 157”).The Statement defines fair value, establishes a framework for measuring fairvalue in generally accepted accounting principles (GAAP), and expandsdisclosures about fair value measurements.  This Statement is effectivefor financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years. Theadoption of SFAS 157 is not expected to have a material affect on our financialposition or results of operations.

InFebruary 2007, the FASB issued SFAS No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities—Including an amendment of Statementof Financial Accounting Standards Statement No. 115” (“SFAS 159”), whichpermits entities to choose to measure many financial instruments and certainother items at fair value at specified election dates. A business entity isrequired to report unrealized gains and losses on items for which the fairvalue option has been elected in earnings at each subsequent reporting date.This statement is expected to expand the use of fair value measurement. SFAS159 is effective for financial statements issued for fiscal years beginningafter November 15, 2007, and interim periods within those fiscal years.The Company has not determined the impact of SFAS 159 on its financialposition.

**Note 2**

**Accounts Receivable - Trade:**

AtJune 30, 2007 and 2006 accounts receivable – trade consists of:
|                                  | ** ** | **2007** | ** ** | **2006** | ** ** |
|----------------------------------|------------|----------|------------|----------|------------|
|                             |       |     |       |     |       |
| Accounts  receivable - trade     |       | $        | 959,740    |     | $          | 2,427,678 |   |
| Less:                            |       |     |       |     |       |
| Allowance for  sales returns     |       | (62,616  | )          | (108,000 | )          |
| Allowance for  doubtful accounts |       | (396,046 | )          | (30,000  | )          |
|                             |       |     |       |     |       |
|                             |       | $        | 501,078    |     | $          | 2,289,678 |   |

 

F-12

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**Note 3**

**Property and Equipment:**

AtJune 30, 2007 and 2006 property and equipment consists of:
|                                    | ** ** | **2007** | ** ** | **2006** | ** ** |
|------------------------------------|------------|----------|------------|----------|------------|
| Computers,  software and equipment |       | $        | 486,677    |     | $          | 589,190 |   |
| Furniture and  fixtures            |       | 42,787   |       | 42,787   |       |
| Leasehold  improvements            |       | 122,181  |       | 122,181  |       |
|                               |       | 651,645  |       | 754,158  |       |
| Less:  accumulated depreciation    |       | (358,001 | )          | (251,849 | )          |
|                               |       | $        | 293,644    |     | $          | 502,309 |   |

 

Depreciation expense was$141,996 and $128,435, respectively, for the years ended June 30, 2007 and2006.

F-13

----

**Note 4**

**Long-term Debt:**

AtJune 30, 2007 and 2006 long-term debt consists of the following:
|                                                                                                                                                                                                                                                                                                                                                                                           | ** ** | **2007**  | ** ** | **2006**   | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------|------------|------------|------------|
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| 2% above prime  rate, currently 10.25%, convertible three-year term note, monthly interest  and thirty $66,667 monthly principal payments through January 2009;  Collateralized by all assets of the Company.                                                                                                                                                                             |       | —    |       | 1,945,397  |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| 2% above prime  rate, currently 10.25%, $1,500,000 credit facility, monthly interest  payments, advances on the facility are based on a percentage of the Company’s  outstanding accounts receivable and inventory, due July 2008; Collateralized  by all assets of the Company. Less unamortized discount of $34,300. The  Company had no outstanding advances as of June 30, 2007. |       | —    |       | 1,082,197  |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| 10% promissory  note to a related party, 60 monthly principal and interest payments of $8,919  through August 2010; Collateralized by all assets of the Company. In February  2007, the Company amended the terms of the note agreement to defer the  monthly principal payments through December 2007.                                                                                   |       | 249,613   |       | 256,395    |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| $400,000  revolving line of credit with a related party, expiring on December 31, 2007,  interest at 10%. Interest only payments due monthly. Collateralized by all  assets of the Company.                                                                                                                                                                                               |       | 150,000   |       | 150,000    |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| 10% promissory  note to a related party, 60 monthly principal and interest payments of  $10,562 through December 2011; Collateralized by all assets of the Company.  In February 2007, the Company amended the terms of the note agreement to  defer the monthly principal payments through December 2007.                                                                                |       | 402,187   |       | 409,337    |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| 15% promissory  note to a related party, 60 monthly principal and interest payments of $17,288  through July 2010; Collateralized by all assets of the Company. In February  2007, the Company amended the terms of the note agreement to defer the  monthly principal payments through December 2007.                                                                                    |       | 418,358   |       | 430,268    |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| 10% 90-day note  to a related party party, expiring March 2007, with principal due in 90 days  and monthly interest payments. In February 2007, the Company amended the  terms of the note agreement to defer the monthly principal payments through  December 2007.                                                                                                                      |       | 300,000   |       | —     |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
|                                                                                                                                                                                                                                                                                                                                                                                      |       | 1,520,158 |       | 4,273,594  |       |
| Less: current  portion                                                                                                                                                                                                                                                                                                                                                                    |       | (610,716  | )          | (2,081,122 | )          |
|                                                                                                                                                                                                                                                                                                                                                                                      |       |      |       |       |       |
| Long-term debt                                                                                                                                                                                                                                                                                                                                                                            |       | $         | 909,442    |       | $          | 2,192,472 |   |
|                                                                                                                                                                                                                                                                                                                                                                                           |            |           |            |            |            |  |  |

 

F-14

----

In March 2004, theCompany consummated a private placement pursuant to which the Company issued a$2,000,000 principal amount secured convertible term note due March 22, 2007(the “Laurus Note-March 04”), together with a common stock purchase warrantentitling the holder to purchase 280,000 shares of common stock (the “LaurusNote Warrant-March 04”).  The Laurus Note-March 04 and the Laurus NoteWarrant-March 04 were sold to a single “accredited investor” (as such term isdefined in the rules promulgated under the Securities Act of 1933, as amended(the “Act”)), Laurus Master Fund, Ltd. (“Laurus”), for a purchase price of$2,000,000.  The principal and unpaid interest on the Laurus Note-March 04are convertible into shares of the Company’s common stock at an original priceof $1.17 per share (the “Fixed Conversion Price”), which was based on theweighted average price of the Company’s common stock for the twenty tradingdays immediately prior to the issuance of the Laurus Note-March 04.  Suchconversion price is subject to antidilution adjustments based on the occurrenceof certain corporate events.  In June 2005, the Company amended the conversionprice of the Laurus Note-March 04. Theconversion price on the first $300,000 of the note was reduced to $0.50 pershare and the conversion price on the remainder of the note was reduced to$0.65 per share.  In connection with the amendment, the Companytook a non-cash charge of $729,500.

TheLaurus Note Warrant-March 04 entitles the holder thereof to purchase, at anytime through March 22, 2011; 200,000 shares of the Company’s common stock at aprice of $1.29 per share; 40,000 shares of the Company’s common stock at aprice of $1.35 per share; and 40,000 shares of the Company’s common stock at aprice of $1.40 per share.

The private placement of the Laurus Note-March 04 andthe Laurus Note Warrant-March 04 was facilitated by The Oberon Group, LLC(Oberon) in consideration for which Oberon was paid an advisory fee of$150,000, and granted a warrant to purchase, at any time through March 22,2007, 136,364 shares of the Company’s common stock at a per share price of$1.10.  As of March 2007, this warrant topurchase 136,364 shares of common stock has expired unexercised. The cash feeand fair value of the warrant had been recorded as a deferred loan issuecharge.

In March 2004, the Company entered into a subordinatednote agreement with a shareholder and existing debt holder.  Under the terms of the agreement, an existingterm note was refinanced as a five year term note with monthly principal andinterest payments at 15%.  In considerationfor agreeing to subordinate repayment of the note to the Laurus Note-March 04,the Company issued 25,000 shares of restricted common stock to the holder ofthe subordinated note.  The fair value ofthe stock has been recorded as a deferred loan issue charge.

In April 2004, the Company entered into a subordinatednote agreement with a shareholder and existing debt holder.  The note is a five year term note withmonthly principal and interest payments at 15%. In consideration for agreeing to subordinate repayment of the note tothe Laurus Note-March 04, the Company issued 25,000 shares of restricted commonstock to the holder of the subordinated note. The fair value of the stock has been recorded as a deferred loan issuecharge.

In June 2005, theCompany entered into a Security Agreement (the “Laurus Credit Facility-June 05”)together with a common stock purchase warrant entitling the holder to purchase210,000 shares of common stock (the “Laurus Credit Facility Warrant-June 05”)with Laurus.  Under the terms of theLaurus Credit Facility-June 05, the Company may borrow from time to timerevolving loans up to $1,500,000 subject to a borrowing base calculation basedon the Company’s eligible accounts receivable. Borrowings under the facilityaccrue interest at the prime rate, payable monthly.

F-15

----

Pursuant to the terms ofthe Agreements, the Company’s obligations are secured by a lien on all of theCompany’s assets. Moreover, Laurus shall have the right at any time until thematurity date, or during an event of default, to convert all or any portion ofthe outstanding principal amount into fully paid restricted shares of theCompany’s common stock at a fixed conversion price of $0.65.

The Laurus CreditFacility Warrant-June 05 entitles the holder thereof to purchase, at any timethrough June 23, 2012; 150,000 shares of the Company’s common stock at a priceof $0.72 per share; 30,000 shares of the Company’s common stock at a price of$0.75 per share; and 30,000 shares of the Company’s common stock at a price of$0.78 per share.

The private placement of the Laurus CreditFacility-June 05 and the Laurus Credit Facility Warrant-June 05 was facilitatedby The Oberon Group, LLC (Oberon) in consideration for which Oberon was paid anadvisory fee of $112,500, and granted a warrant to purchase, at any timethrough June 23, 2008, 173,077 shares of the Company’s common stock at a pershare price of $0.65.  The cash fee andfair value of the warrant has been recorded as a deferred loan issue charge.$56,250 of the advisory fee is to be paid through the issuance of common stock.  The number of shares to be issued will bebased on the market price of the common stock after a registration statementcovering the shares has been declared effective.  If the company is unable to have theregistration statement declared effective, then the amount will be paid incash.  As of June 30, 2007 the Companyhas agreed to pay the amount due of $56,250 in cash.

In November 2005, theCompany and a shareholder agreed to extend the term of its $400,000 line ofcredit facility to December 31, 2007. All other terms of the agreement remained unchanged.

In January 2006,the Company entered into a Security and Purchase Agreement with Laurus Master Fund, Ltd., a Cayman Islands company (“Laurus”).  Under the Security and Purchase Agreement,Laurus purchased from the Company a Secured Convertible Term Note (the “LaurusNote-January 06”) in the aggregate principal amount of $2,000,000, and aSecured Non-Convertible Revolving Note (the “Laurus Revolving Note-January 06”)in the aggregate principal amount of $1,500,000.  The transaction was a recapitalization ofexisting agreements with Laurus.  TheLaurus Note-January 06 replaced an existing secured convertible term note(Laurus Note-March 04) issued March 22, 2004 and a principal balance of $1,058,310that was paid in full with the proceeds of the Laurus Note-January 06.  Gross proceeds received by the Company underthe Laurus Note-January 06 were $941,690. The Laurus Revolving Note-January 06 replaced an existing $1,500,000revolving facility (Laurus Credit Facility-June 05)  that had an outstanding balance of $1,000,000that was paid in full with proceeds from the Laurus Revolving Note-January06.  The Company did not receive any ofthe proceeds from the Laurus Revolving Note-January 06.

The LaurusNote-January 06 has a three-year term, and bears interest at 2% above the primerate, with a minimum interest rate of 7.25%. The Laurus Note-January 06 provides for principal repayment, in cash orstock, in thirty (30) equal monthly installments of $66,666.67 commencing onJuly 1, 2006.  Monthly principal andinterest payments will be converted, subject to certain volume limitations,into shares of the Company’s common stock if the average market price of suchstock for the five (5) days preceding the payment is 10% above the initial fixedconversion price of $0.65 per share.  TheCompany may not convert any of its repayment obligations under the LaurusNote-January 06 to common stock unless either there exists an effectiveregistration statement covering the shares to be issued, or an exemption forthe resale of all of the common stock issued and issuable under the LaurusNote-January 06 is available under Rule 144 of the Securities Act of 1933, asamended.  The Company may redeem theLaurus Note-January 06 upon payment to Laurus of 115% of the outstandingprincipal under the Laurus Note-January 06 together with accrued but unpaidinterest.

In August 2006, the Company amended the terms of its term note withLaurus Master Funds, Ltd. (“Laurus”) to change the monthly principal paymentfor the period of September 2006 through February

F-16

----

2007from $66,667 to $30,000.  The deferredprincipal amount has been added as a balloon payment at the end of theterm.  In January 2007, the term note wasrepaid in full.

The LaurusRevolving Note-January 06 has a two-year term, and bears interest at 2% abovethe prime rate, with a minimum interest rate of 7.25%.  Availability under the Laurus RevolvingNote-January 06 is based on an advance rate equal to 90% of eligible accountsreceivable and 30% of inventory subject to a $1,000,000 cap.  The Laurus Revolving Note-January 06 issubject to an early termination fee of 5% of the face amount of the LaurusRevolving Note-January 06 in the first year, and 4% thereafter.  If an event of default occurs, Laurus may electto require the Company and its subsidiaries to make a default payment in theamount of 125% of the outstanding principal amount of the Revolving Note.

The Company’sobligations under Laurus Note-January 06 and the Laurus Revolving Note-January06 are secured by a first lien on all assets of the Company, and Laurus mayaccelerate all outstanding obligations under the notes upon the occurrence andcontinuation of an event of default.  Inaddition to the notes, the Company issued Laurus a seven-year warrant topurchase 140,000 shares of the Company’s common stock at an exercise price of$0.65 per share, subject to adjustment based on the occurrence of certaincorporate events.  On the closing of theLaurus Note-January 06 and the Laurus Revolving Note-January 06, the Companyissued an aggregate of 351,923 shares of common stock to Laurus for payment offees due.

The Companyconsidered the Laurus Note – January 2006 to be substantively modified (asdefined in EITF No. 96-19 “Debtor’s Accounting for a Modification or Exchangeof Debt Instruments”) and accounted for the transaction as an extinguishment ofthe prior outstanding term note and, as a result, recorded a loss onextinguishment in the amount of $298,108. The Company deemed that the Laurus Revolving Note-January 06 was notsubstantially modified and did not record the previous note as beingextinguished.

The private placement of the Laurus Note-January 06and the Laurus Revolving Note-January 06 was facilitated by The Oberon Group,LLC (“Oberon”) in consideration for which Oberon was paid an advisory fee of$70,627, and granted a warrant to purchase, at any time through January 3,2009, 108,657 shares of the Company’s common stock at a per share price of$0.65.  The fee and fair value of thewarrant has been recorded as a deferred loan issue charge.  The advisory fee is to be paid through theissuance of common stock.  The number ofshares to be issued is based on the market price of the common stock after aregistration statement covering the shares has been declared effective.  Since the registration statement has not yetbeen declared effective, the Company is required to make a payment in cash toOberon in the amount of $70,627.

Pursuantto a Registration Rights Agreement (the “Laurus Credit Facility RegistrationRights Agreement”) entered into between the Company and Laurus, the Company isobligated to: (a) file a registration statement under the Act to register theresale of the shares of the Company’s common stock issuable upon conversion ofthe Laurus Note-January 06, common stock issued for payment of fees, andexercise of the Laurus Warrants (the “Registration Statement”) within 30 daysof the date of the funding with respect to the Laurus Note-January 06; (b) useits best efforts to have the Registration Statement declared effective underthe Act as promptly as possible, but in any event prior to the 90th day following the filing day; and (c) maintainthe effectiveness of the Registration Statement until the earlier date of when(i) all registrable securities have been sold or (ii) all registrablesecurities may be sold immediately without registration under the Act andwithout volume restrictions pursuant to Rule 144(k).  Laurus, or otherholders of the Laurus Note-January 06 and the Laurus Warrants, are entitled tocertain specified remedies if the Company does not timely comply with itsregistration obligations.  Theregistration statement has been filed but not declared effective.

F-17

----

In July 2006, the Companyamended the terms of its note agreements with a related party to defer themonthly principal payments for the period of July 2006 through December2006.  The amortization period of thenote was increased by six months to compensate for the deferred principalpayments.

InDecember 2006, the Company entered into a subordinated note agreement with arelated party.  The note is a 90-day note with the principal due in 90days and monthly interest payments at an annual percentage rate of 10%. In consideration for agreeing to subordinate repayment of the note, the Companyissued 30,000 shares of restricted common stock at a price of $0.40 per shareto the holder of the subordinated note.  The fair value of the stock wasrecorded as a deferred loan issue charge. In February 2007, the Company amendedthe terms of this note agreement with a related party to defer the monthlyprincipal payments through December 2007.

In February 2007, the Company amended the terms of allits note agreements with a related party to defer the monthly principalpayments through December 2007.  Theamortization period of the note was increased by 12 months to compensate forthe deferred principal payments.  TheCompany issued 100,000 shares of restricted common stock at a price of$0.44 per share in consideration forconsent to interest only payments through December 2007.

The related party discussed above is a major shareholderof the Company and has the ability to influence management decisions.

As of June 30,2007 future minimum payments due under the debt agreements are as follows:
| Year Ending  | ** ** | ** ** | ** ** |
|-------------------|------------|------------|------------|
| **June 30,** | ** ** | ** ** | ** ** |
|              |       |       |       |
| 2008              |       | 610,716    |       |
| 2009              |       | 352,616    |       |
| 2010              |       | 364,542    |       |
| 2011              |       | 150,903    |       |
| 2012              |       | 41,381     |       |
|              |       |       |       |
| Total             |       | $          | 1,520,158  |   |
|                   |            |            |            |  |

 

The Company incurred loanissue costs associated with the issuance of the Laurus Note, Laurus CreditFacility and shareholder notes.  Thecosts are being amortized over the term of the notes. Included in other assetsat June 30, 2007 and 2006 are deferred costs in the amount of $175,780 and$418,976, respectively, net of accumulated amortization of $656,197 and$392,731, respectively.  Amortizationexpense charged to interest expense was $263,466 and $233,938, respectively,for the years ended June 30, 2007 and 2006.

The Laurus Note-January06 Warrants were valued at $65,800 and recorded as a discount to the LaurusNote-January 06. The Laurus Credit Facility Warrants were valued at $102,900and recorded as a discount to the Laurus Credit Facility.  The discounts are being amortized over theterms of the debt.  Amortization of thediscounts charged to interest expense was $45,267 and $62,272, respectively,for the years ended June 30, 2007 and 2006.

The approximateamortization expense for fiscal years 2008 and 2009 will be $199,000 and$11,000.  

F-18

----

**Note 5**

**Income Taxes:**

Asof June 30, 2007 and 2006 deferred tax assets consist of the following:
|                                  | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|----------------------------------|------------|------------|------------|------------|------------|
|                             |       |       |       |       |       |
| Federal loss  carryforwards      |       | $          | 2,321,000  |       | $          | 2,502,000 |   |
| State loss  carryforwards        |       | 313,000    |       | 412,000    |       |
| Other                            |       | 184,000    |       | 124,000    |       |
|                             |       | 2,818,000  |       | 3,038,000  |       |
| Less:  valuation allowances |       | (2,818,000 | )          | (3,038,000 | )          |
|                             |       |       |       |       |       |
|                             |       | $          | —     |       | $          | — |   |

 

The Company hasestablished a valuation allowance equal to the full amount of the deferred taxassets primarily because of uncertainty in the utilization of net operatingloss carryforwards.

As a result of stockownership changes, the Company’s ability to utilize net operating losses in thefuture could be limited, in whole or part, under Internal Revenue Code Section382.  The Company was treated as anS-Corporation for income tax purposes through May 13, 1997.  As of June 30, 2007 the Company’s federal andstate net operating loss carryforwards were approximately $7,254,000 and $3,910,000,respectively, and expire through 2026 as follows:
| Expiration  June 30, | ** ** | **Federal Net  Operating Loss  Carryforwards** | ** ** | **Expiration  June 30,** | ** ** | **State Net  Operating Loss  Carryforwards** | ** ** |
|---------------------------|------------|----------------------------------------------------------|------------|-------------------------------|------------|--------------------------------------------------------|------------|
| 2021                      |       | $                                                        | 2,010,635  |                          | 2009       |                                                   | $          | 684,558 |   |
| 2022                      |       | 687,018                                                  |       | 2010                          |       | 1,305,148                                              |       |
| 2023                      |       | 179,972                                                  |       | 2011                          |       | 1,919,918                                              |       |
| 2024                      |       | 1,135,796                                                |       |                          |       |                                                   |       |
| 2025                      |       | 1,335,057                                                |       |                          |       |                                                   |       |
| 2026                      |       | 1,905,260                                                |       |                          |       |                                                   |       |
|                      |       | $                                                        | 7,253,738  |                          |       |                                                   | $          | 3,909,624 |   |

 

The Company’s tax expense(benefit) differed from the statutory rate primarily due to the $220,000 changein the deferred tax asset valuation allowance since June 30, 2006 and theutilization of a portion of the net operating loss carryforward at June 30,2007.

F-19

----

**Note 6**

**Commitments:**

The Company currently leases a facility in Scottsdale,Arizona under non-cancelable operating lease agreement which expires in April2010. For the years ended June 30, 2007 and 2006, expense under non-cancelableoperating lease agreements was approximately $335,000 and $320,000,respectively.  We are actively looking tosublease office space due to the downsizing in connection with the reseller channelsale in January 2007.

Future minimum lease payments due under the operatinglease agreement are as follows:
| Year Ending  June 30, | ** ** | ** ** | ** ** |
|---------------------------------|------------|------------|------------|
| 2008                            |       | $          | 292,883    |   |
| 2009                            |       | 292,883    |       |
| 2010                            |       | 244,069    |       |
|                            |       | $          | 829,835    |   |

 

Underthe terms of the Company’s revolving debt, the Company has agreed to clear allcash receipts through a lender controlled lock box arrangement.  Under the terms of this agreement, theCompany’s operating cash flow could be retained by the lender in the event of adefault on the revolving debt.

**Note 7**

**Stockholders’ Equity:**

***Stock Options:***

On July 13, 1999, the Board of Directors authorized the implementationof the 1999 Equity Compensation Plan. The plan allows for the award of incentive stock options, non-statutorystock options or restricted stock awards to certain employees, directors,consultants and independent contractors. The Company has reserved an aggregate of 600,000 shares of common stockfor distribution under the plan. Incentive stock options granted under the plan may be granted toemployees only, and may not have an exercise price less than the fair marketvalue of the common stock on the date of grant. Options may be exercised on aone-for-one basis, with a maximum term of ten (10) years from the date ofgrant.  Incentive stock options grantedto employees generally vest annually over a four year period.

The fair value of option grants is estimated as of thedate of grant utilizing the Black-Scholes option-pricing model with thefollowing weighted average assumptions:
|                                       | ** ** | **Year Ended June 30,** | ** ** |
|---------------------------------------|------------|----------------------------------------|------------|
| ** **                            | ** ** | **2007**                               | ** ** | **2006** | ** ** |
| Expected volatility                   |       | 138.0                                  | %          | 138.0 | % |
| Weighted average  expected volatility |       | 138.0                                  | %          | 138.0 | % |
| Risk-free interest rate               |       | 4.0                                    | %          | 4.0 | % |
| Expected Dividends                    |       | 0                                      | %          | 0 | % |
| Expected lives (in years)             |       | 3.0                                    |       | 3.0 |   |

 

The weighted average fair value at date of grant foroptions granted during the years ended June 30, 2007 and 2006 approximated $.33and $.38, respectively.

F-20

----

A summary of the activity of options under the planand non-statutory options granted outside the plan follows:
|                               | ** ** | **Number of  Options** | ** ** | **Weighted Average  Exercise Price** | ** ** |
|-------------------------------|------------|-----------------------------|------------|------------------------------------------------|------------|
| ** **                    | ** ** | ** **                  | ** ** | ** **                                     | ** ** |
| Outstanding at June 30,  2005 |       | 2,257,975                   |       | $                                              | 0.89       |   |
|                          |       |                        |       |                                           |       |
| Granted                       |       | 498,500                     |       | 0.48                                           |       |
| Exercised                     |       | (4,500                      | )          | 0.37                                           |       |
| Forfeited                     |       | (88,500                     | )          | 1.29                                           |       |
|                          |       |                        |       |                                           |       |
| Outstanding at June 30,  2006 |       | 2,663,475                   |       | 0.80                                           |       |
|                          |       |                        |       |                                           |       |
| Granted                       |       | 215,000                     |       | 0.42                                           |       |
| Exercised                     |       | (23,000                     | )          | 0.23                                           |       |
| Forfeited                     |       | (565,986                    | )          | 0.68                                           |       |
|                          |       |                        |       |                                           |       |
| Outstanding at June 30, 2007  |       | 2,289,489                   |       | $                                              | 1.07       |   |

 

Additional informationabout outstanding options to purchase the Company’s common stock as of June 30,2007 is as follows:
| ** **          | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                               | ** ** |
|---------------------|------------|------------------------------|------------|----------------------------------------------------------------------------|------------|
| **Exercise  Price** | ** ** | **Number of  Shares**   | ** ** | **Weighted Avg.  Remaining  Contractural  Life (In Years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value** | ** ** | **Number of  Shares** | ** ** | **Weighted Avg.  Remaining  Contractural  Life (In Years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
| $9.40               |       | 100,000                      |       | 2.63                                                                       |       | $ | 9.40 |   | — |   | 100,000 |   | 2.63 |   | $ | 9.40 |   | — |   |
| $3.40 - $2.20       |       | 120,000                      |       | 3.04                                                                       |       | $ | 3.20 |   | — |   | 120,000 |   | 3.04 |   | $ | 3.20 |   | — |   |
| $1.40 - $1.00       |       | 179,969                      |       | 5.96                                                                       |       | $ | 1.04 |   | — |   | 166,969 |   | 5.88 |   | $ | 1.05 |   | — |   |
| $0.92 - $0.60       |       | 646,520                      |       | 6.51                                                                       |       | $ | 0.75 |   | — |   | 574,645 |   | 6.47 |   | $ | 0.76 |   | — |   |
| $0.57 - $0.40       |       | 826,000                      |       | 6.81                                                                       |       | $ | 0.43 |   | — |   | 675,500 |   | 6.32 |   | $ | 0.43 |   | — |   |
| $0.36 - $0.14       |       | 417,000                      |       | 5.33                                                                       |       | $ | 0.22 |   | — |   | 410,000 |   | 5.25 |   | $ | 0.22 |   | — |   |

 

F-21

----

A summary of the status of the Company’s nonvestedshares as of June 30, 2007 and changes during the year ended June 30, 2007 ispresented below:
|                                           | ** ** | ** ** | ** ** | **Weighted Average** | ** ** |
|-------------------------------------------|------------|------------|------------|---------------------------|------------|
| ** **                                | ** ** | ** ** | ** ** | **Grant-Date**            | ** ** |
| ** **                                | ** ** | **Shares** | ** ** | **Fair Value**       | ** ** |
|                                      |       |       |       |                      |       |
| Nonvested stock  options at July 1, 2006  |       | 550,125    |       | $                         | 0.35       |   |
| Granted                                   |       | 215,000    |       | 0.33                      |       |
| Vested                                    |       | (276,625   | )          | 0.33                      |       |
| Forfeited                                 |       | (246,125   | )          | 0.37                      |       |
| Nonvested stock options  at June 30, 2007 |       | 242,375    |       | $                         | 0.33       |   |

 

During the years ended June 30, 2007 and 2006 theCompany recognized compensation expense of $142,980 and $129,183,respectively.  As of June 30, 2007, therewas $80,410 of total unrecognized compensation cost related to nonvested sharestock options under the Plan.  That costis expected to be recognized over the weighted average period of 3.5 years.  The total fair value of the 276,625 optionsvested during the year ended June 30, 2007 was $92,129.

During the year ended June 30, 2007, the Companyextended the term of an employee’s option to purchase 839,000 shares for oneyear. In relation to the extension, $34,125 was recognized as expense in thecurrent year.

***Non-Employee Stock Options andWarrants:***

During the year ended June 30, 2002 the Company issued62,958 warrants to a related party in consideration for entering into apromissory note agreement with the Company. The exercise price of the warrant is $.25 per share and is exercisablethrough September 2006.  As ofSeptember  2006 none of the warrants hadbeen exercised and they have expired.

During the year ended June 30, 2002 the Company issued25,000 warrants to a related party in consideration for entering into arevolving line of credit agreement with the Company.  The exercise price of the warrant is $.15 pershare and is exercisable through November 2006. As of June 30, 2007 all of the warrants have been exercised.

In November 2003 the Company issued 143,400 warrantsto brokers in connection with a private placement of common stock of theCompany.  The exercise price of thewarrants is $.90 per share and is exercisable through November 2006.  As of November 2006 none of the warrants havebeen exercised and have expired.

In March 2004, the Company consummated a privateplacement pursuant to which the Company issued a $2,000,000 principal amountsecured convertible term note (the Laurus Note), together with a common stockpurchase warrant entitling the holder to purchase 280,000 shares of commonstock (the Laurus Note Warrant).  The Laurus Note Warrant entitles theholder thereof to purchase, at any time through March 22, 2011:  200,000shares of the Company’s common stock at a price of $1.29 per share; 40,000shares of the Company’s common stock at a price of $1.35 per share; and 40,000shares of the Company’s common stock at a price of $1.40 per share.  As of June 30, 2007 none of the warrants havebeen exercised.

F-22

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The private placement of the Laurus Note and theLaurus Warrant was facilitated by The Oberon Group, LLC (Oberon) inconsideration for which Oberon was granted a warrant to purchase, at any timethrough March 22, 2007, 136,364 shares of the Company’s common stock at a priceof $1.10.  As of June 30, 2007 none ofthe warrants have been exercised.

In June 2005, the Company entered into a SecurityAgreement (the “Laurus Credit Facility”) together with a common stockpurchase warrant entitling the holder to purchase 210,000 shares of commonstock (the “Laurus Credit Facility Warrant”) with Laurus.  The LaurusCredit Facility Warrant entitles the holder thereof to purchase, at any timethrough June 23, 2012:  150,000 shares of the Company’s common stock at aprice of $0.72 per share; 30,000 shares of the Company’s common stock at aprice of $0.75 per share; and 30,000 shares of the Company’s common stock at aprice of $0.78 per share.  As of June 30,2007 none of the warrants have been exercised.

The private placement of the Laurus Credit Facilityand the Laurus Credit Facility Warrant was facilitated by The Oberon Group, LLC(Oberon) in consideration for which Oberon was granted a warrant to purchase,at any time through June 23, 2008, 173,077 shares of the Company’s common stockat a per share price of $0.65.  As ofJune 30, 2007 none of the warrants have been exercised.

In January 2006, the Company entered into a Securityand Purchase Agreement (the “Laurus Note-January 06”) together with a common stockpurchase warrant entitling the holder to purchase 140,000 shares of commonstock (the “Laurus Note-January 06 Warrant”) with Laurus.  The LaurusNote-January 06 Warrant entitles the holder thereof to purchase, at any timethrough January 3, 2013, 140,000 shares of the Company’s common stock at aprice of $0.65 per share.  As of June 30,2007 none of the warrants have been exercised.

The private placement of the Laurus Note-January 06and the Laurus Note-January 06 Warrant was facilitated by Oberon inconsideration for which Oberon was granted a warrant to purchase, at any timethrough January 3, 2009, 108,657 shares of the Company’s common stock at a pershare price of $0.65.  As of June 30,2007 none of the warrants have been exercised.

**Note 8**

**Asset Sale:**

Effective March31, 2006 the Company closed on the sale of certain of the Company’s directsales assets pursuant to the terms of an Asset Purchase Agreement (the “PurchaseAgreement”). Under the terms of the Purchase Agreement, certain assetsassociated with the Company’s direct sales business were sold, including a copyof the source code and other intellectual property relating to the Company’sNETtime, HourTrack and GENESIS time and attendance software products, relatedASP and maintenance contracts, and certain specified direct channel salesopportunities.

The sale generated cash to the Company at closing ofapproximately $530,000. The purchase price under the Purchase Agreementincluded cash payable to the Company at the closing in consideration for a copyof the source code and related intellectual property. The consideration for theASP and maintenance contracts was determined based on multiples of theprojected annualized revenues under such contracts. At closing, the Companyreceived in cash 100% of the total consideration for the customer ASP contractsand 40% of the total consideration for the maintenance contracts.  The remaining consideration for the

F-23

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maintenance contracts is payable quarterly over thenext 14 months. The Company will also be transitioning over additional ASPcustomers over the next six months, which the Company will be paid for at thetime of such transfers.  Additionally,for the 12-month period following the closing, the Company will receive monthlyroyalty payments equal to 27.5% of the revenues in connection with directchannel sales opportunities specified at closing.

On January 16,2007, NETtime Solutions, Inc (formerly Time America, Inc.)., a Nevadacorporation (the “Company”), along with its subsidiaries, NETtime Solutions,Inc., an Arizona corporation (formerly Time America, Inc.), and NetEdgeDevices, LLC, an Arizona limited liability company, entered into an AssetPurchase Agreement with Synel Industries, Inc., an Israeli registeredcorporation (“Synel”). Under the agreement, Synel purchased the Company’sreseller sales channel, source code and related intellectual property for theCompany’s GENESIS, HourTrack, and TA7000 product series, certain use rightsassociated with the Company’s NETtime source code, and all of the Company’srights associated with the “Time America” name. The sale closed on January 22,2007.  In relation to the sale, on April20, 2007, the Company filed a Certificate of Amendment to the Articles ofIncorporation with the Nevada Secretary of State to change the corporate nameof Time America, Inc., a Nevada corporation, to NETtime Solutions, Inc.  The effective date of the corporate namechange is May 10, 2007.

Under theagreement, the purchase price for the acquired assets was $2.5 million,$250,000 of which is being held in escrow pending resolution of certainpost-closing obligations are fulfilled. Other contingent consideration underthe agreement for the acquired assets consists of royalty payments, payable tothe Company quarterly over the four year period ending January 15, 2011, equalto 5% of the revenue derived from Synel’s U.S. sales of TA7000 units outside ofSynel’s established U.S. customer base. Additionally, Synel purchased certainof the Company’s TA7000 inventory for $140,000. A portion of the proceeds fromthe sale were used to repay its Secured Convertible Term Note with Laurus,dated January 3, 2006.  In addition, theCompany issued 100,000 shares of its Common Stock to Laurus in considerationfor Laurus’s consent to extending the maturity date of the Company’s existingrevolving note with Laurus, the asset sale to Synel, and the corporate namechange.

The Company doesnot distinguish operationally or financially its activities other than grossproduct sales between its sales channels and as such the Company has notaccounted for the sale as discontinued operations under SFAS No. 144 “Accountingfor the Impairment or Disposal of Long-Lived Assets.”

**Note 9**

**Basis of Presentation and Going Concern:**

Through June 30, 2007, the Company had sustainedrecurring losses from operations, and as of September 30, 2007, the Companyestimates that its working capital and funds generated from operations aresufficient to fund the Company’s operations for the next three months.  These conditions raise substantial doubtabout the ability of the Company to continue as a going concern.  During fiscal 2007, the Company expects tomeet its working capital and other cash requirements with its current cashreserves, cash generated from operations, its borrowing capacity under its twocredit facilities, and other financing as required.  While the Company believes that it willsucceed in attracting additional capital, there can be no assurance that theCompany’s efforts will be successful. The Company’s continued existence is dependent upon its ability toachieve and maintain profitable operations by controlling expenses.  However, there can be no assurance that theCompany’s efforts to achieve and maintain 

F-24

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profitable operations will be successful.  The financial statements do not include anyadjustments that might result from the outcome of these uncertainties.

**Note 10**

**Subsequent Events:**

In September 2007, the Company filed an InformationStatement to inform its stockholder that the board of directors of the Companyand a majority of its shareholders had approved the sale of substantially allof the assets of the Company, including its wholly-owned subsidiaries, pursuantto the terms of a Memorandum of Understanding, dated as of September 24, 2007with NetEdge Devices, LLC.  The purchaseprice consists of $1,042,000 payable in shares of common stock of the Companyheld by NetEdge Devices, LLC (which were contributed to NetEdge Devices, LLC bycertain members of the board of directions and officers of the Company)and  the assumption of indebtedness ofthe Company consisting of $550,000 of trade payables and $1,500,000 of shortand long-term notes.  The effectivenessof this transaction is subject to the filing of a definitive proxy statement,which will occur following the receipt and clearance of any comments to thepreliminary filing made by the Securities and Exchange Commission, and thepassage of 20 days following such definitive filing.

F-25

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**Item8.  Changes In And Disagreements WithAccountants On Accounting And Financial Disclosure.**

None.

**Item 8A.Controls and Procedures.**

In accordance withRule 13a-15(b) of the Securities Exchange Act of 1934 as amended (the “ExchangeAct”), as of the end of the period covered by this *Annual Report on Form 10-KSB*, the Company’s managementevaluated, with the participation of the Company’s chief executive officer andprincipal accounting officer, the effectiveness of the design and operation ofthe Company’s disclosure controls and procedures (as defined inRule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosurecontrols and procedures are defined as those controls and other procedures ofan issuer that are designed to ensure that the information required to bedisclosed by the issuer in the reports it files or submits under the Act isrecorded, processed, summarized and reported, within the time periods specifiedin the Commission’s rules and forms. Disclosure controls and proceduresinclude, without limitation, controls and procedures designed to ensure thatinformation required to be disclosed by an issuer in the reports that it filesor submits under the Act is accumulated and communicated to the issuer’smanagement, including its chief executive officer and principal accountingofficer, or persons performing similar functions, as appropriate to allowtimely decisions regarding required disclosure. Based on their evaluation ofthese disclosure controls and procedures, the Company’s chairman of the boardand chief executive officer and the Company’s principal accounting officerhave concluded that the disclosure controls and procedures were effective as ofthe date of such evaluation to ensure that material information relating to theCompany, including its consolidated subsidiaries, was made known to them byothers within those entities, particularly during the period in which this *Annual Report on Form 10-KSB*wasbeing prepared.

**Item 8B.Other Information.**

None.

31

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**PART III**
| **Item 9.** | ** ** | **Directors, Executive Officers, Promoters and  Control Persons; Compliance With Section 16(a) of the Exchange Act.** |
|-------------|------------|-----------------------------------------------------------------------------------------------------------------------|

 

Information regarding our directors and executiveofficers is provided below.

BAHAN SADEGH.  Mr. Sadegh, age 34, has served as President,Chief Executive Officer and a director of the Company since April 2007.  Mr. Sadegh is the founder of the Company, andhas been responsible for the design and development of its flagship NETtimesoftware.  Before becoming CEO, Mr. Sadegh served as Vice President ofTechnology and Chief Technology Officer since 1995.  Prior to joiningNETtime Solutions, Mr. Sadegh served as an engineer consultant for a number ofFortune 500 semiconductor companies.  He has a Bachelor ofInterdisciplinary Sciences degree in Mathematics and Business from ArizonaState University.

THOMAS J. KLITZKE, CPA.  Mr. Klitzke, age 33, has served as theCompany’s Vice President of Finance and Administration and Principal AccountingOfficer since November 2006.  Mr. Klitzkehas served as Controller of Time America since September 2005.  Prior tojoining Time America, Mr. Klitzke served as Controller of ImproveNet, Inc. fromJanuary of 2003 through September 2005.  From September 2001 throughJanuary 2003, Mr. Klitzke was employed by Arthur Andersen, LLP and Woods &Dwyer, PLC as an auditor.  Mr. Klitzke is a Certified Public Accountantand holds a Bachelor of Science in Accounting degree from Arizona StateUniversity.

TODD P. BELFER.  Mr. Belfer, age 40, has served as a directorof the Company since March 1999 and Chairman of the Board of Directors sinceNovember 1999.  Mr. Belfer also served asChairman of the Board of Directors of our wholly-owned subsidiary, NETtimeSolutions, Inc. (formerly Time America, Inc and previously Vitrix Inc.), fromApril 1996 until March 1999.  Mr. Belferco-founded Employee Solutions, Inc. in May 1990, and served as its ExecutiveVice-President and as a director from 1991 to 1996.  Mr. Belfer earned a Bachelor of Science inFinance and Real Estate from the University of Arizona in 1989.

LISEM. LAMBERT.  Ms. Lambert, age 50, hasserved as a director of the Company since April 1999 and as director of ourwholly-owned subsidiary, Time America, Inc. (previously Vitrix Incorporated),from January 1998 to March 1999.  Since1996, Ms. Lambert has been President of Relevant, Inc., a consultingservices organization that provides strategic marketing and growth consultingto the healthcare and technology industries. From 2003 to 2006, Ms. Lambertserved as the Sr. Vice President of Strategy and Marketing for VistaCare, Inc.,a national health services provider. In 1986, Ms. Lambert co-foundedMastersoft, Inc., a software company which was sold to Adobe Corporation in1995. Ms. Lambert earned a Bachelor of Arts degree in Education and a Mastersdegree in Education and Deafness from Smith College.

ROBERT W. ZIMMERMAN.Mr. Zimmerman, age 55, has served as a director of the Company since March2001.  Mr. Zimmerman was one of theoriginal investors and directors of Time America, Inc. prior to its merger withthe Company.  Mr. Zimmerman is President, co-managing shareholder and attorney forMallery & Zimmerman, S.C., a general practice law firm with offices inMilwaukee, Cedarburg, Green Bay, Stevens Point and Wausau, Wisconsin.

32

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Mr. Zimmermangraduated from Marquette University in 1974 with majors in Accounting andFinance and from Marquette University Law School in 1977.  Following graduation from law school, Mr.Zimmerman worked in the Milwaukee office of Arthur Andersen & Co. in thetax department and received his Wisconsin CPA certificate.

TIMOTHY S.JEFFRIES.  Mr. Jeffries, 44, has served as a director of the Company sinceSeptember 2007.  Tim Jeffries is the Managing Partner of P7 Enterprises, amanagement consulting practice based in Scottsdale, Arizona. In addition, Mr.Jeffries serves as Chairman of the Board of Directors for Contractors Wire& Cable, LLC; Vice Chairman of the Board of Directors for MissionTechnology Group, Inc.; and Limited Partner for Carlisle Enterprises,LLC.  In the non-profit field, Mr. Jeffries serves on the ExecutiveCommittee of the Board of Directors for the Arizona Chamber of Commerce andIndustry, and as Vice Chairman of the Board of Directors for the Make-A-WishFoundation of Arizona.  Jeffries also serves on the Board of Directors forArizona Voice for Crime Victims, and as an Advisor to the National Board ofTrustees for Parents of Murdered Children, Inc.  Mr. Jeffries earned aBachelor of Science in Political Science from Santa Clara University in1985.  He also earned a Master of Business Administration in the GlobalExecutive MBA Program at the Duke University Fuqua School of Business in 2003.

**Compliance with Section 16(a) of the Securities Exchange Actof 1934**

Section 16(a) of the SecuritiesExchange Act of 1934, as amended, requires our directors and executiveofficers, as well as persons beneficially owning more than 10% of ouroutstanding common stock, to file reports of ownership and changes in ownershipwith the Securities and Exchange Commission (the “SEC”) within specified timeperiods.  Such officers, directors andshareholders are also required to furnish us with copies of all Section 16(a)forms they file.

Based solely on its review ofsuch forms received by us, or written representations from certain reportingpersons, we believe that all Section 16(a) filing requirements applicable toour officers, directors and 10% shareholders were complied with during thefiscal year ended June 30, 2007.

**Item 10.  ExecutiveCompensation.**

The following table setsforth the information required by SEC Regulation S-K Item 402 as to thecompensation paid or accrued by us for the year ended June 30, 2007 forservices rendered in all capacities, by our Chief Executive Officer, ourPrincipal Accounting Officer, the former Chief Excecutive Officer, the formerChief Financial Officer and the two other most highly compensated executiveofficers during the fiscal year ended June 30, 2007.

33

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**SUMMARYCOMPENSATION TABLE**
| Name and  Principal Position              | ** ** | **Year** | ** ** | **Salary  ($)** | ** ** | **Bonus ($)** | ** ** | **Stock  Awards  ($)(1)** | ** ** | **Option  Awards  ($)(2)** | ** ** | **Total ($)** | ** ** |
|-----------------------------------------------------|------------|----------|------------|-----------------|------------|--------------------|------------|---------------------------|------------|----------------------------|------------|--------------------|------------|
| Bahan Sadegh (3)   Chief Executive Officer          |       | 2007     |       | $               | 119,300    |               | —     |                      | —     |                       | $          | 6,375              |       | $ | 125,675 |   |
| Thomas S. Bednarik (4)                              |       |     |       |            |       |               |       |                      |       |                       |       |               |       |
| Former                                              |       | 2007     |       | 105,400         |       | —             |       | 112,250                   |       | —                     |       | 217,650            |       |
| Chief Executive Officer                             |       | 2006     |       | 148,400         |       | —             |       | —                    |       | —                     |       | —             |       |
| Jon Weiss (5)                                       |       |     |       |            |       |               |       |                      |       |                       |       |               |       |
| Interim                                             |       |     |       |            |       |               |       |                      |       |                       |       |               |       |
| Chief Executive Officer and                         |       | 2007     |       | 95,400          |       | 51,811             |       | —                    |       | 2,700                      |       | 149,911            |       |
| VP of Business Delopment                            |       | 2006     |       | 95,400          |       | 28,178             |       | —                    |       | 6,575                      |       | 130,153            |       |
| Thomas J. Klitzke (6)  Principal Accounting Officer |       | 2007     |       | 77,000          |       | 14,000             |       | —                    |       | 705                        |       | 91,705             |       |
| Craig Smith (7)                                     |       |     |       |            |       |               |       |                      |       |                       |       |               |       |
| Former                                              |       | 2007     |       | 39,700          |       | —             |       | —                    |       | —                     |       | 39,700             |       |
| Chief Financial Officer                             |       | 2006     |       | 95,400          |       | —             |       | —                    |       | 9,363                      |       | 104,763            |       |
| James Martin (8)                                    |       | 2007     |       | 90,000          |       | 86,700             |       | —                    |       | —                     |       | 176,700            |       |
| VP of Sales                                         |       | 2006     |       | 90,000          |       | 37,873             |       | —                    |       | 14,363                     |       | 142,236            |       |
|                                                     |            |          |            |                 |            |                    |            |                           |            |                            |            |                    |            |  |  |  |

 

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|        | (1)    | Reflects the dollar amount recognized for financial  statement reporting purposes in accordance with SFAS 123(R). Amounts are  calculated using the closing stock price of each award on the date of grant.                                                                                                                                                                                                                                                                                                         |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | (2)    | Reflects dollar amount expensed by us during  applicable fiscal years for financial statement reporting purposes pursuant  to SFAS 123(R). SFAS 123(R) requires us to determine the overall value of the  options as of the date of grant based upon the Black-Scholes method of  valuation, and to then expense that value over the service period over which  the options become exercisable (vest).See the assumptions made in the  valuation of the stock options in the footnotes of our financial statements. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | (3)    | Mr. Sadegh was appointed to serve as the Company’s  President and Chief Executive Officer effective April 16, 2007.                                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   | (4)    | Mr. Bednarik resigned effective January 22, 2007.  The Company extended the term to exercise all options by one year from Mr.  Bednarik’s resignation date. The Company also issue 100,000 shares of  restricted common stock at a per share price of $0.44.                                                                                                                                                                                                                                                   |

 

34

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|        | (5)    | Mr. Weiss assumed the  position of Interim CEO effective January 22, 2007.  The amounts in the Bonus column in fiscal  year 2007 and 2006 consists of sales commissions paid. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                               |
|   | (6)    | Mr. Klitzke was appointed  to serve as Principal Accounting Officer effective October 25, 2006.                                                                                    |
|   |   |                                                                                                                                                                               |
|   | (7)    | Mr. Smith resigned as  effective October 25, 2006                                                                                                                                  |
|   |   |                                                                                                                                                                               |
|   | (8)    | Mr. Martin resigned  effective January 22, 2007.  The  amounts in the Bonus column in fiscal year 2007 and 2006 consists of sales  commissions.                               |

 

**EmployementAgreement**

Asof April 16, 2007, the Board of Directors appointed Mr. Sadegh as the Company’sPresident and Chief Executive Officer and agreed to pay Mr. Sadegh a basesalary of $180,000.

35

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**OUTSTANDINGEQUITY AWARDS AT FISCAL YEAR-END**

The following table setsforth information concerning unexercised stock options held by each of theNamed Executive Officers as of June 30, 2007. 
|                                                  | ** ** | **Option Awards**                                                                      | ** ** |
|--------------------------------------------------|------------|---------------------------------------------------------------------------------------------|------------|
| **Name**                                         | ** ** | **Number of  Securities  Underlying  Unexer-  cised   Options  (#)  Exercisable** | ** ** | **Number of  Securities  Underlying  Options  (#)  UnExercisable** | ** ** | **Equity  Incentive  Plan  Awards:  Number of  Securities  Underlying  Unexer-  cised  Unearned  Options  (#)** | ** ** | **Option  Exercise  Price ($)** | ** ** | **Option  Expiration  Date** | ** ** |
| Bahan Sadegh                                     |       | 18,750                                                                                      |       | 6,250 |   | — |   | $ | 1.00 |   | 6/13/2014 |   |
| Chief Executive                                  |       | 40,000                                                                                      |       | — |   | — |   | 0.75 |   | 8/16/2013 |   |
| Officer                                          |       | 12,500                                                                                      |       | 37,500 |   | — |   | 0.40 |   | 4/17/2016 |   |
|                                                  |       | 25,000                                                                                      |       | — |   | — |   | 0.40 |   | 4/15/2011 |   |
|                                                  |       | 20,000                                                                                      |       | — |   | — |   | 0.24 |   | 4/13/2012 |   |
| Thomas S.                                        |       | 100,000                                                                                     |       | — |   | — |   | 9.40 |   | 2/14/2010 |   |
| Bednarik                                         |       | 100,000                                                                                     |       | — |   | — |   | 3.40 |   | 8/20/2010 |   |
| Former                                           |       | 25,000                                                                                      |       | — |   | — |   | 1.17 |   | 12/6/2013 |   |
| Chief Executive                                  |       | 75,000                                                                                      |       |   |   | — |   | 1.00 |   | 6/13/2014 |   |
| Officer                                          |       | 14,000                                                                                      |       |   |   | — |   | 0.63 |   | 4/18/2015 |   |
|                                             |       | 12,500                                                                                      |       | 37,500 |   | — |   | 0.40 |   | 4/17/2016 |   |
|                                             |       | 225,000                                                                                     |       |   |   | — |   | 0.40 |   | 4/15/2011 |   |
|                                             |       | 50,000                                                                                      |       | — |   | — |   | 0.18 |   | 12/28/2012 |   |
|                                             |       | 100,000                                                                                     |       | — |   | — |   | 0.17 |   | 12/29/2011 |   |
|                                             |       | 100,000                                                                                     |       | — |   | — |   | 0.17 |   | 4/12/2013 |   |
| Jon Weiss                                        |       |                                                                                        |       |   |   |   |   |   |   |   |   |
| Interim                                          |       | 18,750                                                                                      |       | 6,250 |   |   |   | 1.00 |   | 6/13/2014 |   |
| Chief Executive                                  |       | 40,000                                                                                      |       | — |   | — |   | 0.75 |   | 8/16/2013 |   |
| Officer and VP of                                |       | 12,500                                                                                      |       | 12,500 |   | — |   | 0.67 |   | 2/15/2015 |   |
| Business                                         |       | 12,500                                                                                      |       | 37,500 |   | — |   | 0.40 |   | 2/17/2016 |   |
| Delopment                                        |       | 20,000                                                                                      |       | — |   | — |   | 0.17 |   | 4/4/2013 |   |
| Thomas J. Klitzke  Principal  Accounting Officer |       | 1,500                                                                                       |       | 4,500 |   | — |   | 0.60 |   | 9/24/2015 |   |
| Craig Smith  Former  Chief Financial  Officer    |       | —                                                                                      |       | — |   | — |   | — |   | — |   |
| James Martin  VP of Sales                        |       | —                                                                                      |       | — |   | — |   | — |   | — |   |
|                                                  |            |                                                                                             |            |  |  |  |  |  |  |  |  |  |

 

36

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DIRECTOR COMPENSATION INFISCAL YEAR 2007

Our non-employee directorsreceived no cash compensation for serving as members of our board of directorsor any committee of our board of directors during the fiscal year ended June30, 2007.  During such period, we grantedoptions to purchase 40,000 shares of common stock to each of Messrs. Belfer,Novak, and Zimmerman and Ms. Lambert in connection with their service on theboard of directors.  Each of theseoptions has a term of 10 years, vested immediately, and was granted at the fairmarket value of the common stock on the grant date.

The following table setsforth information concerning compensation received by non-employee directorsfor their service on the board of directors of the Company during fiscal year2007.

| Name                  | ** ** | **Option  Awards  ($)(1)** | ** ** | **Total ($)** | ** ** |
|-----------------------|------------|----------------------------|------------|--------------------|------------|
|  Todd P. Belfer  |       | $                          | 29,100     |               | $          | 29,100 |   |
|  Lise M. Lambert |       | 13,600                     |       | 13,600             |       |
| Robert W.  Zimmerman  |       | 13,600                     |       | 13,600             |       |
| Robert J. Novak  (2)  |       | 13,600                     |       | 13,600             |       |
|                       |            |                            |            |                    |            |  |  |

 

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(1)          Reflectsthe dollar amount recognized for financial statement reporting in fiscal 2007in  accordance with SFAS 123(R).

(2)          RoberJ. Novak voluntarily resigned as a director of NETtime Solutions, Inc.,effective December 11, 2006.

**Item 11.  SecurityOwnership Of Certain Beneficial Owners And Management and Related StockholderMatters.**

The following table setsforth certain information, as of September 25, 2007, concerning the beneficialownership of shares of Common Stock of the Company by (i) each person known bythe Company to beneficially own more than 5% of the Company’s Common Stock;(ii) each Director; (iii) the Company’s Chief Executive Officer; and (iv) alldirectors and executive officers of the Company as a group.  To the knowledge of the Company, all personslisted in the table have sole voting and investment power with respect to theirshares, except to the extent that authority is shared with their respectivespouse under applicable law.

37

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| ** **                                                                 | ** ** | **Shares Beneficially Owned (1)** | ** ** |
|----------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| **Name and Address of Beneficial Owner (2)** | ** ** | **Number**                                       | ** ** | **Percent** | ** ** |
| Todd P. Belfer                                                             |       | 1,671,485                                        | (3)        | 10.9 | % |
| Lise M. Lambert                                                            |       | 325,163                                          | (4)        | 2.1 | % |
| Robert W.  Zimmerman                                                       |       | 405,175                                          | (5)        | 2.6 | % |
| Timothy S.  Jeffries                                                       |       | 32,767                                           | (6)        | 0.2 | % |
| Thomas J.  Klitzke                                                         |       | 1,500                                            | (7)        | 0.0 | % |
| Bahan Sadegh                                                               |       | 277,860                                          | (8)        | 1.8 | % |
| All directors  and executive officers as a group                           |       | 2,713,950                                        | (9)        | 17.6 | % |
| Thomas S.  Bednarik                                                        |       | 1,027,750                                        | (10)       | 6.7 | % |
| Laurus Capital  Management, LLC                                            |       | 1,081,923                                        | (11)       | 7.0 | % |
| Joseph L. Simek                                                            |       | 3,979,068                                        |       | 25.9 | % |
| Circle F.  Ventures LLC                                                    |       | 983,511                                          |       | 6.4 | % |
| Anthony Silverman                                                          |       | 1,687,000                                        |       | 11.0 | % |

 

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| (1)    |   | A person is deemed to be the beneficial owner of  securities that can be acquired within 60 days from the date set forth above  through the exercise of any option, warrant or right.  Shares of common stock subject to options,  warrants or rights that are currently exercisable or exercisable within 60  days are deemed outstanding for computing the percentage of the person  holding such options, warrants or rights, but are not deemed outstanding for  computing the percentage of any other person.   The amounts and percentages are based upon 15,382,404 shares of common  stock and mezzanine financing outstanding as of September 25, 2007. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (2)    |   | The address of each of the beneficial owners is c/o  NETtime Solutions, Inc., 8840 East Chaparral Road, Suite 100, Scottsdale,  Arizona 85250, except for Circle F. Ventures LLC whose address is 17797 North  Perimeter Drive, Suite 105, Scottsdale, Arizona 85255; Joseph L. Simek whose  address is 611 North Road, Medford, Wisconsin 54461; Laurus Capital  Management, LLC, whose address is 825 Third Avenue, 14th Floor, New York, NY  10022 and Anthony Silverman whose address  is 2747 Paradise Road, #1405, Las Vegas, Nevada  89109.                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (3)    |   | Includes 475,000 shares of common stock underlying  unexercised options that were exercisable on September 25, 2007, or within 60  days thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (4)    |   | Includes 290,969 shares of common stock underlying  unexercised options that were exercisable on September 25, 2007, or within 60  days thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (5)    |   | Includes 255,000 shares of common stock underlying  unexercised options that were exercisable on September 25, 2007, or within 60  days thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| (6)    |   | Includes 32,767 shares of common stock underlying  unexercised options that were exercisable on September 25, 2007, or within 60  days thereafter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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| (7)    |   | Includes 1,500 shares of common stock underlying  unexercised options that were exercisable on September 25, 2007, or within 60  days thereafter.  |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                               |
| (8)    |   | Includes 116,250 shares of common stock underlying  unexercised options that were exercisable September 25, 2007, or within 60  days thereafter.   |
|   |   |                                                                                                                                               |
| (9)    |   | Includes 1,171,486 shares of common stock underlying  unexercised options that were exercisable September 25, 2007, or within 60  days thereafter. |
|   |   |                                                                                                                                               |
| (10)   |   | Includes 789,000 shares of  common stock underlying unexercised options that were exercisable  September 25, 2007, or within 60 days thereafter.   |
|   |   |                                                                                                                                               |
| (11)   |   | Includes 630,000 shares of common stock underlying  warrants that were exercisable on September 25, 2007, or within 60 days  thereafter.           |

 

**Item 12.  CertainRelationships And Related Transactions, and****Director Independence.**

Except as set forth below, the Company did not haveany transactions during fiscal years 2007 and 2006 with any director, directornominee, executive officer, security holder known to the Company to own ofrecord or beneficially more than 5% of the Company’s common stock, or anymember of the immediate family of any of the foregoing persons, in which theamount involved exceeded $120,000.

On March 31, 2001, the Company borrowed $400,000 fromJoseph L. Simek, a significant stockholder of the Company.  The loan accrues interest at an annual rateof prime plus one percent (1%) and is secured by a subordinated lien on all ofthe Company’s assets.  Principal andinterest payments of approximately $8,500 are due monthly, with the outstandingprincipal balance due on October 1, 2004. On November 2, 2001, Mr. Simek agreed to provide the Company with a$200,000 line of credit, which is also secured by all of the Company’sassets.  On September 24, 2002, Mr. Simekagreed to provide the Company with an additional $200,000 revolving line ofcredit, which is also secured by all of the Company’s assets.  Borrowings under the lines of credit accrueinterest at an annual rate of 10%.  InJanuary 2004, Mr. Simek and the Company agreed to extend the maturity date ofthe line of credit facility to December 31, 2005.  InSeptember 2004, the Company and Mr. Simek agreed to extend the balloon paymenton the promissory note from October 1, 2004 to October 1, 2005. InNovember 2005, the Company and Mr. Simek agreed to extend the term of its$400,000 line of credit facility to December 31, 2007.   At June 30, 2007, the $400,000 loan hadbeen paid in full and $150,000 was outstanding under the line of credit.

On September 4, 2001, the Company borrowed $500,000from Francis Simek, the spouse of Mr. Simek, under a five year term note.  On March 22, 2004, the Company and Mrs. Simek entered into a subordinatednote agreement pursuant to which the obligations outstanding under this notewere subordinated to the obligations under our credit facilities with LaurusMaster Fund.  Under the terms of theagreement, the existing term note was refinanced as a five year term note withmonthly principal and interest payments at 15%. The Company issued 25,000shares of restricted common stock to Mrs. Simek in consideration for heragreement to

39

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subordinate the note.  InNovember 2004, the Company and Mrs. Simek amended the terms of the note tochange the interest rate to 10%. The loan is secured by a junior lien onall of the Company’s assets.  Principaland interest payments of $8,918 are due and payable monthly over a 60-monthperiod.  At June 30, 2007, $249,613 wasoutstanding under this loan.  In February2007, the Company amended the terms of this note agreement with a related partyto defer the monthly principal payments through December 2007.

InOctober 2003, the Company entered into a four year consulting servicesagreement with Mr. Belfer pursuant to which Mr. Belfer agreed to introduce theCompany to investment banking and investor relations firms and persons/entitiesinterested in doing business with the Company. In exchange for Mr. Belfer’s agreement to provide such consultingservices, Mr. Belfer was granted a non-statutory option to purchase 200,000shares of the Company’s common stock at $0.75 per share.  The options vest over four years and have aterm of four years.

On April 16, 2004, the Company borrowed $500,000 fromMrs. Simek.  The note is a five year termnote with monthly principal and interest payments at 15%.  In consideration for agreeing to subordinatethe note, the Company issued 25,000 shares of restricted common stock to Mrs.Simek.  The loan is secured by asubordinated lien on all of the Company’s assets.  InNovember 2004, the Company paid $456,100 to retire the remaining balance on thenote.  The Company and Mrs. Simek thenentered into a $500,000 revolving credit note agreement.  Borrowings under the note accrue interest atthe rate of 10% per annum with interest due monthly.  Unused borrowings are subject to a 2% perannum commitment fee payable quarterly. In May 2005, the Company borrowed $500,000 under this agreement.  Subsequently, the Company and Mrs. Simekamended the agreement to provide for a 60-month repayment period.  Principal and interest payments of $10,562are due and payable monthly. At June 30, 2007, $402,187 was outstanding underthis loan.  In February 2007, the Companyamended the terms of this note agreement with a related party to defer themonthly principal payments through December 2007.

On December 8, 2005, the Company borrowed $500,000from Francis Simek under a three year term note at an annual interest rate of15%.  The loan is secured by asubordinated lien on all of the Company’s assets.  Principal and interest payments of $17,288are due and payable monthly over a 36-month period.  At June 30, 2007, $418,358 was outstandingunder this loan.  In February 2007, theCompany amended the terms of this note agreement with a related party to deferthe monthly principal payments through December 2007.

In July 2006, the Company amended the terms of itsnote agreements with a related party to defer the monthly principal paymentsfor the period of July 2006 through December 2006.  The amortization period of the note wasincreased by six months to compensate for the deferred principal payments.

In December 2006, the Company entered into a $300,000subordinated note agreement with a related party.  The note is a 90-daynote with the principal due in 90 days and monthly interest payments at anannual percentage rate of 10%.  In consideration for agreeing tosubordinate repayment of the note, the Company issued 30,000 shares ofrestricted common stock to the holder of the subordinated note.  The fairvalue of the stock was recorded as a 

40

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deferred loan issuecharge. In February 2007, the Company amended the terms of this note agreementwith a related party to defer the monthly principal payments through December2007.

As discussed above, in February 2007, the Companyamended the terms of all its note agreements with a related party to defer themonthly principal payments through December 2007.  The amortization period of the note wasincreased by 12 months to compensate for the deferred principal payments.  The Company issued 100,000 shares of itsCommon Stock in consideration for consent to interest only payments throughDecember 2007.

**Director Independence**

Our directors consist ofBahan Sadegh, Todd P. Belfer, Lise M. Lambert, Robert W. Zimmerman and TimothyS. Jeffries.  Mr. Sadegh is also ourPresident and Chief Executive Officer and is therefore not consideredindependent.  While the OTC BulletinBoard does not prescribe independence requirements for board members, theCompany believes the remainder of its Board members are “independent” withinthe meaning of the listing standards of the NADAQ Stock Market.

“Independent director” means a person other than an executive officeror employee of the company or any other individual having a relationship which,in the opinion of the issuer’s board of directors, would interfere with theexercise of independent judgment in carrying out the responsibilities of adirector. The following persons shall not be considered independent:

(A)          adirector who is, or at any time during the past three years was, employed bythe company;

(B)           adirector who accepted or who has a Family Member who accepted any compensationfrom the company in excess of $100,000 during any period of twelve consecutivemonths within the three years preceding the determination of independence,other than the following:

(i)            compensation for board or board committee service;

(ii)           compensation paid to a Family Member who is an employee(other than an executive officer) of the company; or

(iii)          benefits under a tax-qualified retirement plan, ornon-discretionary compensation.

Provided, however, that in addition to the requirements contained inthis paragraph (B), audit committee members are also subject to additional,more stringent requirements under Rule 4350(d).

(C)           adirector who is a Family Member of an individual who is, or at any time duringthe past three years was, employed by the company as an executive officer;

(D)          adirector who is, or has a Family Member who is, a partner in, or a controllingshareholder or an executive officer of, any organization to which the companymade, or from which

41

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thecompany received, payments for property or services in the current or any ofthe past three fiscal years that exceed 5% of the recipient’s consolidatedgross revenues for that year, or $200,000, whichever is more, other than thefollowing:

(i)            payments arising solely from investments inthe company’s securities; or

(ii)           payments under non-discretionary charitable contribution matchingprograms.

(E)           a director of the issuer who is, or has aFamily Member who is, employed as an executive officer of another entity whereat any time during the past three years any of the executive officers of theissuer serve on the compensation committee of such other entity; or

(F)           a director who is, or has a Family Member whois, a current partner of the company’s outside auditor, or was a partner oremployee of the company’s outside auditor who worked on the company’s audit atany time during any of the past three years.

(G)           in the case of an investment company, in lieuof paragraphs (A)–(F), adirector who is an “interested person” of the company as defined in Section2(a)(19) of the Investment Company Act of 1940, other than in his or hercapacity as a member of the board of directors or any board committee.]

**Item13. Exhibits.**

Theexhibits as indexed immediately following the signature page of this Report areincluded as part of this Form 10-KSB.

**Item14. Principal Accountant Fees and Services.**

The following table sets forth fees billed to us byour auditors during the fiscal years ended June 30, 2007 and 2006 for: (i) servicesrendered for the audit of our annual financial statements and the review of ourquarterly financial statements, (ii) services by our auditors that arereasonably related to the performance of the audit or review of our financialstatements and that are not reported as Audit Fees, (iii) services rendered inconnection with tax compliance, tax advice and tax planning, and (iv) all otherfees for services rendered.  All otherfees consist primarily of fees incurred to review our registration statement filings.
|       | ** ** | ** **          | ** ** | **June 30, 2007** | ** ** | **June 30, 2006** | ** ** |
|-------|------------|---------------------|------------|-----------------------------|------------|-----------------------------|------------|
| (i)   |       | Audit Fees          |       | $                           | 63,900     |                        | $          | 45,000 |   |
| (ii)  |       | Audit Related  Fees |       | —                      |       | —                      |       |
| (iii) |       | Tax Fees            |       | $                           | 5,500      |                        | $          | 4,500 |   |
| (iv)  |       | All Other Fees      |       | $                           | 16,705     |                        | $          | 18,294 |   |

42

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**AuditCommittee Pre-Approval Policies and Procedures**

All audit and non-audit services are pre-approved by the Audit Committee,which considers, among other things, the possible effect of the performance ofsuch services on the auditors’ independence. The Audit Committee pre-approves the annual engagement of the principalindependent registered public accounting firm, including the performance of theannual audit and quarterly reviews for the subsequent fiscal year, andpre-approves specific engagements for tax services performed by such firm.  The Audit Committee has also establishedpre-approval policies and procedures for certain enumerated audit and auditrelated services performed pursuant to the annual engagement agreement,including such firm’s attendance at and participation at Board and committeemeetings; services associated with SEC registration statements approved by the Board of Directors; review of periodicreports and other documents filed with the SEC or other documents issuedin connection with securities offerings, such as comfort letters and consents;assistance in responding to any SEC comments letters; and consultations withsuch firm as to the accounting or disclosure treatment of transactions orevents and the actual or potential impact of final or proposed rules, standardsor interpretations by the SEC, Public Company Accounting Oversight Board(PCAOB), Financial Accounting Standards Board (FASB), or other regulatory orstandard-setting bodies.  The AuditCommittee is informed of each service performed pursuant to its pre-approvalpolicies and procedures.  The AuditCommittee has considered the role of Semple, Marchal & Cooper, LLP inproviding services to us for the fiscal year ended June 30, 2007 and hasconcluded that such services are compatible with such firm’s independence.

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**SIGNATURES**

Inaccordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, theRegistrant caused this Report to be signed on its behalf by the undersigned,thereunto duly authorized.
|        | NETTIME SOLUTIONS, INC.                                                             |
|--------|-------------------------------------------------------------------------------------|
|   |                                                                                |
|   | /s/ Bahan Sadegh                                                                    |   |
|   | Bahan Sadegh, President and Chief Executive   Officer (Principal Executive Officer) |

Dated: October 15,2007

Inaccordance with the Securities Exchange Act of 1934, this Report has beensigned below by the following persons on behalf of the Registrant and in thecapacities and on the dates indicated.

**POWER OFATTORNEY**

KNOWNALL MEN BY THESE PRESENTS, that each person whose signature appears belowconstitutes and appoints Bahan Sadegh and Thomas J. Klitzke, and each of them,his true and lawful attorneys-in-fact and agents, with full power ofsubstitution and resubstititon for him or her and in his or her name, place andstead, in any and all capacities, to sign any and all amendments to this AnnualReport on Form 10-KSB, and to file the same, with all exhibits thereto, andother documents in connection therewith with the Securities and ExchangeCommission, granting unto said attorneys-in-fact and agents, and each of them,full power and authority to do and perform each and every act and thingrequisite and necessary to be done in and about the premises, as fully and toall intents and purposes as he might or could do in person hereby ratifying andconfirming all that said attorneys-in-fact and agents, or his substitute orsubstitutes, may lawfully do or cause to be done by virtue hereof.
| Signatures              | ** ** | **Title**                     | ** **                   | **Date** |
|-------------------------|------------|-------------------------------|------------------------------|----------|
|                    |       |                          |                         |     |
| /s/ Bahan Sadegh        |       |                          | President, CEO and Director  |     | October 15, 2007 |
| Bahan Sadegh            |       | (Principal Executive Officer) |                         |     |
|                    |       |                          |                         |     |
| /s/ Thomas J. Klitzke   |       |                          | Principal Accounting Officer |     | October 15, 2007 |
| Thomas J. Klitzke       |       | (Principal Financial Officer) |                         |     |
|                    |       |                          |                         |     |
| /s/ Todd P. Belfer      |       |                          | Chairman of the Board        |     | October 15, 2007 |
| Todd P. Belfer          |       |                          |                         |     |
|                    |       |                          |                         |     |
| /s/ Lise M. Lambert     |       |                          | Director                     |     | October 15, 2007 |
| Lise M. Lambert         |       |                          |                         |     |
|                    |       |                          |                         |     |
| /s/ Robert W. Zimmerman |       |                          | Director                     |     | October 15, 2007 |
| Robert W. Zimmerman     |       |                          |                         |     |
|                    |       |                          |                         |     |
| /s/ Timothy S. Jeffries |       |                          | Director                     |     | October 15, 2007 |
| Timothy S. Jeffries     |       |                          |                         |     |
|                         |            |                               |                              |          |  |  |  |  |  |  |

 

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**EXHIBIT INDEX**
| Exhibit   Number | ** ** | **Description**                                                                                                          | ** ** | **By Reference   from   Document** | ** ** | **No. in   Document** |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------|
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1              |       | Registrant’s Articles of Incorporation                                                                              |       | A                                  |       | 3.1                   |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.1            |       | Registrant’s Amendment to its Articles of  Incorporation, dated November 7, 1988                                    |       | A                                  |       | 3.1.1                 |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.2            |       | Registrant’s Amendment to its Articles of  Incorporation, dated June 25, 1991                                       |       | B                                  |       | 3.1.2                 |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.3            |       | Registrant’s Certificate of Reverse Stock Split,  dated February 15, 1994                                           |       | C                                  |       | 3.1.3                 |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.4            |       | Registrant’s Certificate of Designation of Series A  Preferred Stock, dated June 27, 1996                           |       | D                                  |       | 3.1.4                 |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.5            |       | Registrant’s Amendment to Articles of Incorporation,  dated June 25, 1996                                           |       | D                                  |       | 3.15                  |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.6            |       | Registrant’s Certificate of Designation of Series B  Preferred Stock, dated March 31, 1999                          |       | E                                  |       | 3.1.6                 |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.7            |       | Registrant’s Amendment to Articles of Incorporation,  dated October 7, 1999.                                        |       | F                                  |       | 3.1                   |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.8            |       | Certificate of Correction to Certificate of  Amendment to Articles of Incorporation of Vitrix, Inc., dated June 16, 2005 |       | O                                  |       | 3.1.8                 |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.1.9            |       | Registrant’s Amendment to Articles of Incorporation,  dated April 20, 2007                                          |       | S                                  |       | 3.1                   |
|             |       |                                                                                                                     |       |                               |       |                  |
| 3.2              |       | Amended Bylaws of the Registrant                                                                                         |       | C                                  |       | 3.2                   |
|             |       |                                                                                                                     |       |                               |       |                  |
| 4.1              |       | Registrant’s Form of Common Stock Certificate                                                                       |       | A                                  |       | 4.1                   |
|             |       |                                                                                                                     |       |                               |       |                  |
| 10.6             |       | 1999 Equity Compensation Plan                                                                                            |       | E                                  |       | 10.7                  |
|             |       |                                                                                                                     |       |                               |       |                  |
| 10.7.1           |       | Lease Agreement, dated September 3, 1999, between  LAFP Phoenix, Inc., as lessor, and the Registrant, as lessee.         |       | F                                  |       | 10.1                  |

 

45

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| Exhibit   Number | ** ** | **Description**                                                                                                                                                                                                                                        | ** ** | **By Reference   from   Document** | ** ** | **No. in   Document** |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------|
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.7.2           |       | First Amendment to Office Lease Agreement, dated  March 28, 2000, between LAFP Phoenix, Inc., as lessor and the Registrant, as  lessee.                                                                                                                |       | G                                  |       | 10.1                  |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.8             |       | Securities Purchase Agreement, dated September 21,  1999, between Circle F Ventures, LLC and the Registrant.                                                                                                                                           |       | F                                  |       | 10.2                  |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.10            |       | Merger Agreement, dated March 28, 2001 by and among  Vitrix, Inc., Vitrix Incorporated, and Time America, Inc.                                                                                                                                         |       | H                                  |       | 2.1                   |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.12            |       | Letter from BDO Seidman, LLP, dated June 4, 2001,  regarding its concurrence or disagreement with the statements made by the  registrant in the current report concerning the resignation or dismissal as  the registrants’ principal accountant. |       | I                                  |       | 16                    |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.13            |       | Promissory Note Agreement, dated September 4, 2001 between  Vitrix, Inc. and Frances L. Simek                                                                                                                                                          |       | J                                  |       | 10.13                 |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.14            |       | Security Agreement dated September 4, 2001 between  Vitrix, Inc. and Frances L. Simek                                                                                                                                                                  |       | J                                  |       | 10.14                 |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.15            |       | Warrant to purchase common stock agreement dated  September 4, 2001 between Vitrix, Inc. and Frances L. Simek                                                                                                                                          |       | J                                  |       | 10.15                 |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.16            |       | Promissory Note Agreement, dated March 31, 2001  between Time America, Inc and Joseph L. Simek                                                                                                                                                         |       | K                                  |       | 10.16                 |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.17            |       | Revolving Credit Agreement, dated November 2, 2001  between Vitrix, Inc and Joseph L. Simek                                                                                                                                                            |       | K                                  |       | 10.17                 |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.18            |       | Securities Purchase Agreement, dated March 22, 2004,  among Time America, Inc. and Laurus Master Fund, Ltd.                                                                                                                                            |       | L                                  |       | 10.1                  |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.19            |       | Secured Convertible Term Note, dated March 22, 2004,  among Time America, Inc. and Laurus Master Fund, Ltd.                                                                                                                                            |       | L                                  |       | 10.2                  |
|             |       |                                                                                                                                                                                                                                                   |       |                               |       |                  |
| 10.20            |       | Common Stock Purchase Warrant, dated March                                                                                                                                                                                                             |       | L                                  |       | 10.3                  |

 

46

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| Exhibit   Number | ** ** | **Description**                                                                                                                                                                                                | ** ** | **By Reference   from   Document** | ** ** | **No. in   Document** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------|
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
|             |       | 22, 2004, issued to Laurus Master Fund, Ltd.                                                                                                                                                                   |       |                               |       |                  |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.21            |       | Security Agreement, dated March 22, 2004, among Time  America, Inc. and Laurus Master Fund, Ltd.                                                                                                               |       | L                                  |       | 10.4                  |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.22            |       | Subordination Agreement, dated March 22, 2004, among  Time America, Inc., Laurus Master Fund, Ltd and Joseph and Frances Simek                                                                                 |       | L                                  |       | 10.5                  |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.23            |       | Registration Rights Agreement, dated March 22, 2004,  among Time America, Inc. and Laurus Master Fund, Ltd.                                                                                                    |       | L                                  |       | 10.6                  |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.24            |       | Guarantee, dated March 22, 2004, issued by Time  America, Inc. in favor of Laurus Master Fund, Ltd.                                                                                                            |       | L                                  |       | 10.7                  |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.25            |       | Stock Pledge Agreement, dated March 22, 2004, among  Time America, Inc. and Laurus Master Fund, Ltd.                                                                                                           |       | L                                  |       | 10.8                  |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.26            |       | Note Purchase Agreement, dated April 16, 2004  between Time America, Inc. and Frances L. Simek                                                                                                                 |       | M                                  |       | 10.26                 |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.27            |       | Promissory Note Agreement, dated April 16, 2004  between Time America, Inc. and Frances L. Simek                                                                                                               |       | M                                  |       | 10.27                 |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.28            |       | Security Agreement, dated April 16, 2004 between  Time America, Inc. and Frances L. Simek                                                                                                                      |       | M                                  |       | 10.28                 |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.29            |       | Consulting Services Agreement, dated October 15,  2003, between Vitrix, Inc. and Todd P. Belfer                                                                                                                |       | O                                  |       | 10.29                 |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.30            |       | Bonus Plan Document with Tom Bednarik, effective as  of January 1, 2005                                                                                                                                        |       | O                                  |       | 10.30                 |
|             |       |                                                                                                                                                                                                           |       |                               |       |                  |
| 10.31            |       | Equipment Purchase, License and Services Agreement,  dated as of August 29, 2005, between FedEx Corporate Services, Inc. and Time  America, Inc. (certain portions deleted pursuant to confidential treatment) |       | O-N                                |       | 10.31                 |

 

47

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| Exhibit   Number | ** ** | **Description**                                                                                                                                                                                                                                                      | ** ** | **By Reference   from   Document** | ** ** | **No. in   Document** |
|------------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------|
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.32            |       | Amendment, dated as of August 29, 2005, between  Federal Express Corporation and Time America, Inc. (certain portions deleted  pursuant to confidential treatment)                                                                                                   |       | O-N                                |       | 10.32                 |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.33            |       | Professional Services Agreement, dated as of August  29, 2005, between FedEx Corporate Services, Inc. and Time America, Inc.  (certain portions deleted pursuant to confidential treatment)                                                                          |       | O-N                                |       | 10.33                 |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.34            |       | Amendment, dated as of August 29, 2005, between  Federal Express Corporation and Time America, Inc. (certain portions deleted  pursuant to confidential treatment)                                                                                                   |       | O-N                                |       | 10.34                 |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.35            |       | Letter Agreement, dated February 17, 2000, between  Vitrix Incorporated and Thomas S. Bednarik                                                                                                                                                                       |       | O                                  |       | 10.35                 |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.36            |       | Security and Purchase Agreement, dated January 3,  2006, by and among Laurus Master Fund, Ltd., Time America, Inc., a Nevada  corporation, Time America, Inc, an Arizona corporation, and NetEdge Devices,  LLC, an Arizona limited liability company.               |       | P                                  |       | 10.1                  |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.37            |       | Secured Convertible Term Note, dated January 3,  2006, made by Time America, Inc., a Nevada corporation, Time America, Inc.,  an Arizona corporation and NetEdge Devices, LLC, an Arizona limited liability  company, in favor of Laurus Master Fund, Ltd.           |       | P                                  |       | 10.2                  |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.38            |       | Secured Non-Convertible Revolving Note, dated  January 3, 2006, made by Time America, Inc., a Nevada corporation, Time  America, Inc., an Arizona corporation, and NetEdge Devices, LLC, an Arizona  limited liability company, in favor of Laurus Master Fund, Ltd. |       | P                                  |       | 10.3                  |
|             |       |                                                                                                                                                                                                                                                                 |       |                               |       |                  |
| 10.39            |       | Common Stock Purchase Warrant, dated January 3,  2006, issued to Laurus Master Fund, Ltd.                                                                                                                                                                            |       | P                                  |       | 10.4                  |

 

48

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| Exhibit   Number | ** ** | **Description**                                                                                                                                                                                                                                                                             | ** ** | **By Reference   from   Document** | ** ** | **No. in   Document** |
|------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|-----------------------|
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.40            |       | Registration Rights Agreement, dated January 3,  2006, between Time America, Inc., a Nevada corporation, and Laurus Master  Fund, Ltd.                                                                                                                                                      |       | P                                  |       | 10.5                  |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.41            |       | Amended and Restated Subordination Agreement, dated  January 3, 2006, among Time America, Inc., a Nevada corporation, Time  America, Inc., an Arizona corporation, and NetEdge Devices, LLC, an Arizona  limited liability company, Laurus Master Fund, Ltd. and Joseph and Frances  Simek. |       | P                                  |       | 10.6                  |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.42            |       | Reaffirmation and Ratification Agreement, dated  January 3, 2006, among Laurus Master Fund, Ltd., Time America, Inc., a Nevada  corporation, Time America, Inc., an Arizona corporation, and NetEdge Devices,  LLC, an Arizona limited liability company.                                   |       | P                                  |       | 10.7                  |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.43            |       | Letter Agreement with Oberon Securities, LLC, dated  January 13, 2006.                                                                                                                                                                                                                      |       | P                                  |       | 10.8                  |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.44            |       | Asset Purchase Agreement, dated April 12, 2006  between Time America, Inc. and Unitime Systems, Inc.                                                                                                                                                                                        |       | Q                                  |       | 10.1                  |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.45            |       | Asset Purchase Agreement, dated January 16, 2007,  among Time America, Inc. (Nevada), Time America, Inc. (Arizona), NetEdge  Devices, LLC, and Synel Industries, Inc.                                                                                                                       |       | R                                  |       | 10.1                  |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 10.46            |       | Master Agreement, dated June 19, 2007, between  NETtime Solutions, Inc. and Synel Industries, Inc.                                                                                                                                                                                          |       | *                                  |       | —                |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 31.1             |       | Certification pursuant to Rules 13a-14(a) and  15d-14(a)(5) of the Securities Exchange Act of 1934                                                                                                                                                                                          |       | *                                  |       | —                |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 31.2             |       | Certification pursuant to Rules 13a-14(a) and  15d-14(a)(5) of the Securities Exchange Act of 1934                                                                                                                                                                                          |       | *                                  |       | —                |
|             |       |                                                                                                                                                                                                                                                                                        |       |                               |       |                  |
| 32               |       | Certification pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                     |       | *                                  |       | —                |

 

49

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| *  |   | Filed herewith.                                                                                                                                                                |
|----|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| A. |   | Form S-18 Registration Statement No. 33-25704-NY.                                                                                                                              |
| B. |   | Form 10-K Annual Report of the Registrant for the  fiscal year ended June 30, 1991.                                                                                            |
| C. |   | Form 10-KSB Annual Report of the Registrant for the  fiscal year ended June 30, 1994.                                                                                          |
| D. |   | Form 8-K Current Report reporting event on June 28,  1996.                                                                                                                     |
| E. |   | Form 10-KSB Annual Report of the Registrant for the  fiscal year ended June 30, 1999.                                                                                          |
| F. |   | Form 10-QSB Quarterly Report of the Registrant for  the fiscal quarter ended September 30, 1999.                                                                               |
| G. |   | Form 10-QSB Quarterly Report of the Registrant for  the fiscal quarter ended March 31, 2000.                                                                                   |
| H. |   | Form 8-K Current Report reporting event on April 13,  2001.                                                                                                                    |
| I. |   | Form 8-K Current Report reporting event on June 6,  2001.                                                                                                                      |
| J. |   | Form 10-KSB Annual Report of the Registrant for the  fiscal year ended June 30, 2001.                                                                                          |
| K. |   | Form 10-KSB Annual Report of the Registrant for the  fiscal year ended June 30, 2002.                                                                                          |
| L. |   | Form 8-K Current Report reporting event on March 22,  2004.                                                                                                                    |
| M. |   | Form 10-KSB Annual Report of the Registrant for the  fiscal year ended June 30, 2004.                                                                                          |
| N. |   | Portions of the referenced exhibit have been omitted  pursuant to a request for confidential treatment filed with the Securities  and Exchange Commission.                     |
| O. |   | Form 10-KSB Annual Report of the Registrant for the  fiscal year ended June 30, 2005.                                                                                          |
| P. |   | Form 10-QSB Quarterly Report of the Registrant for  the quarter ended December 31, 2005.                                                                                       |
| Q. |   | Form 10-QSB Quarterly Report of the Registrant for  the quarter ended March 31, 2006. Form 10-QSB Quarterly Report of the  Registrant for the quarter ended December 31, 2006. |
| R. |   | Form 10-QSB Quarterly Report of the Registrant for  the quarter ended December 31, 2006.                                                                                       |
| S. |   | Form 8-K Current Report reporting event on May 10,  2007.                                                                                                                      |

 

50

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