**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C.  20549**





**Form
      10-KSB/A**





**(Mark
      One)**


**[X]
      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**





For
      Fiscal Year Ended:**March 31, 2007**





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





For
      the
      transition period from __________ to __________





Commission
      file number:0-17304





**Cistera
      Networks, Inc.**


(Name
      of
      small business issuer in its charter)





Nevada
            91-1944887State
                or other jurisdiction of
            (I.R.S.
                Employerincorporation
                or organization
            Identification
                No.)





17304
      Preston Road, Suite 975, Dallas,
      Texas         75252


(Address
      of principal executive offices)  (zip code)





Issuer's
      telephone
      number                              (972) 381-4699





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


Securities
      registered under Section 12(g) of the Act:





Common
      Stock Par Value $0.001


(Title
      of
      class)





Check
      whether the issuer is not
      required to file reports pursuant to Section 13 or 15(d) of the Exchange Act
      [  ]





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.   Yes
      [X]  No [ ]





Check
      if there is no disclosure of
      delinquent filers pursuant to Item 405 of Regulation S-B  contained in
      this form, and no disclosure will be contained, to the best of registrant's
      knowledge, in definitive proxy or information statements incorporated by
      reference in Part III of this Form 10-KSB or any amendment to this form 10-KSB.
      [  ]





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





Total
      revenues for fiscal year ended
      March 31, 2007: $1,932,838.





At
      March
      31, 2007, the aggregate market value of all shares of voting and non-voting
      common equity held by non-affiliates was approximately $8,748,254.  In
      determining this figure the issuer has assumed that all directors and executive
      officers are affiliates.   This assumption shall not be deemed
      conclusive for any other purpose.





The
      number of shares outstanding of each class of the issuer's common equity, as
      of
      March 31, 2007, was as follows: 8,292,022common shares, $.001 par value per share.





Transitional
      Small Business Disclosure Format (check one): Yes [  ] No
      [X]














TABLE
                OF CONTENTSItem
                Number and Caption
            PagePART
                IItem
                1.     Description of
                Business
            2Item
                2.     Description of
                Property
            8Item
                3.     Legal
                Proceedings
            9Item
                4.     Submission of Matters to
                a Vote of Security Holders
            9PART
                IIItem
                5.     Market for Common Equity
                and Related Stockholder Matters
            9Item
                6.     Management's Discussion
                and Analysis or Plan of Operations
            10Item
                7.      Financial
                Statements
            15Item
                8.      Changes in and
                Disagreements With Accountants on Accounting and Financial
                Disclosure
            15Item
                8A.    Controls and
                Procedures
            15PART
                IIIItem
                9.     Directors, Executive
                Officers, Promoters and Control Persons; Compliance with Section
                16(a) of
                the Exchange Act
            17Item
                10.   Executive
                Compensation
            19Item
                11.   Security Ownership of Certain
                Beneficial Owners and Management
            21Item
                12.   Certain Relationships and Related
                Transactions
            22Item
                13.   Exhibits and Reports on Form
                8-K
            25Item
                14.   Principal Accountant Fees &
                Services
            26








**PART
      I**





**ITEM
      1:  DESCRIPTION OF BUSINESS**





**History**




CNH
      Holdings Company, a Nevada corporation (the Company) was incorporated in
      Delaware on April 15, 1987, under the name of I.S.B.C. Corp.  The
      Company subsequently changed its name first to Coral Companies, Inc., and then
      to CNH Holdings Company.  Domicile was changed to Nevada in
      1997.  The Company conducted an initial public and secondary offerings
      during the 1980's.  On June 15, 1998, the Company acquired Southport
      Environmental and Development, Inc.  This acquisition however was
      subsequently rescinded by agreement between the parties and made a formal order
      of the court effective April 19, 2000.  This order put the Company in
      the position that it occupied at June 14, 1998, as if none of the actions that
      had occurred from that time to the date of rescission had
      transpired.




On
      May 5,
      2003, Corvero Networks, Inc., a Florida corporation, was formed by CNH Holdings
      Company as a wholly owned subsidiary to acquire the use of certain technology
      known as the XBridge Technology.  This technology has as its principal
      component the Corvero Convergence Platform.  The acquisition was
      accomplished by entering into a license agreement with XBridge Software, Inc.,
      a
      Delaware corporation.




The
      Company was in the development stage from January 1, 1992 to May 5,
      2003.  Since May 5, 2003, the Company has commenced planned principal
      operations and is no longer in the development stage.




On
      August
      31, 2004, CNH Holdings Company absorbed its wholly owned subsidiary Corvero
      Networks, and began doing business as Cistera Networks.  All Corvero
      products adopted the Cistera name.




On
      May
      19, 2005, the Company entered into a merger agreement with XBridge Software,
      Inc., pursuant to which XBridge Software would be acquired through a merger
      with
      a wholly owned subsidiary formed by the Company.    The
      merger was completed on May 27, 2005.




On
      September 27, 2005, we changed our name to Cistera Networks, Inc.




**Business
      Overview**




We
      provide IP network-based application appliances and services that add features
      and enhanced functionality to the telecommunications services used by large
      enterprises, small and mid-sized organizations, both in the commercial and
      public sector.  Our objective is to be the leading provider of IP
      communications platforms and advanced application engines for businesses
      worldwide.  Our software-based and hardware-based solutions are
      delivered on our open-architecture, component-based platform known as the
      Cistera ConvergenceServerTM, which allows administrators to centrally manage
      advanced applications for IP telephony environments across large single-site
      and
      multi-site private voice/data networks.   Because our solutions
      improve customer responsiveness, employee productivity and efficiencies for
      customers using IP telephony systems, we believe that our convergence solutions
      complement the efforts of IP telephony solution providers such as Cisco, Nortel,
      Sylantro and Avaya to increase the overall return on investment and value
      contribution associated with IP telephony systems.  This has allowed
      us to establish cooperative relationships with IP telephony solution providers,
      as well as large value added resellers (VARs) and systems integrators (SIs)
      focused on delivering IP telephony systems and services.




We
      began
      operations in May 2003, and first introduced our convergence solutions in
      September 2003.  We initially offered our solutions at discounted
      prices, to seed the market and to establish a referenceable customer
      base.  From May 2003 through June 2005, we staffed our operations,
      grew our reseller channel, built our infrastructure, created, marketed and
      delivered our solutions and obtained an initial base of paying
      customers.  From January 2005 to the present time, we increased
      expansion efforts into Canada and Europe.  Our revenues grew from
      $1,322,675 in fiscal 2005 to $1,932,838 in fiscal 2007.




2


We
      cannot
      be certain that our revenues will continue to grow or that we will achieve
      profitability in the future.  We cannot accurately predict our future
      growth rate, if any, or the ultimate size of our market. Our ability to increase
      revenues and achieve profitability depends on a number of factors outside of
      our
      control, including the extent to which:




Þ
            our
                solutions are able to gain market acceptance, particularly as IP
                telephony
                increases penetration in the mainstream
                market;




Þ
            we
                are able to acquire and retain customers on a cost-effective
                basis;




Þ
            we
                are able to establish strategic relationships with IP telephony platform
                and services providers;




Þ
            we
                are able to successfully identify, develop and market enhanced
                applications for the mainstream
                market;




Þ
            IP
                telephony platform and service providers develop or bundle competing
                applications; and




Þ
            we
                become subject to increased regulatory
                burdens.




Currently,
      we offer new customers a variety of packaged applications, and platform tools
      for customized solutions.  We market our software and hardware
      solutions through a VAR channel, and directly in some cases to Fortune 500
      customers.  To ensure growth scalability, our VAR channel is being
      trained to deliver professional services for standard installations, which
      we
      believe will allow us to focus on advanced professional services for complex
      installations.




We
      plan
      to reinvest our earnings for the foreseeable future in the following ways:
      hiring additional personnel, particularly in sales and engineering; expanding
      our domestic and international selling and marketing activities; increasing
      our
      research and development activities to upgrade and extend our solution offerings
      and to develop new solutions and technologies; growing our VAR and systems
      integration channel; adding to our infrastructure to support our growth; and
      expanding our operational and financial systems to manage a growing
      business.




**Key
      Terms and Definitions**




Þ
            **Enterprise
                Voice** is defined as the combination of Enterprise Telephony and
                Enterprise VoIP Gateways.





Þ
            **Enterprise
                Telephony** is defined as the combination of Enterprise IP
                Telephony and traditional telephony
                (PBX/KTS).





Þ
            **Enterprise
                IP Telephony** is defined as the combination of LAN Telephony,
                Converged Telephony, and IP Phones.





Þ
            **Enterprise
                VoIP Gateway** is defined as a Layer 3 network device which
                provides the interconnection of CPE-based voice and data traffic
                across a
                WAN network or the PSTN, also refereed to as trunks. This device
                is
                typically a modular or standalone router specially equipped with
                voice DSP
                resources.





Þ
            **LAN
                Telephony (IP-Only)** is defined as those ports and systems which
                provide Enterprise Voice services over a LAN whereby both call control
                and
                voice traffic traverse a packet network, in most cases IP running
                over
                Ethernet. The use of a traditional PBX or KTS is not required. In
                most
                cases the three fundamental elements to this network architecture
                include
                a server running call control software, Ethernet switches, and IP
                Phones.





Þ
            **Converged
                Telephony (TDM/IP)** is defined as those lines and systems which
                provide voice services whereby voice traffic traverses TDM lines
                but call
                control is packet based.  In most cases this enables a
                traditional Enterprise Voice network to migrate its infrastructure
                to IP
                incrementally with the prime advantage of maintaining prior capital
                investment in PBXs and traditional phones. In most cases call control
                resides on a server, connected to a LAN, running call control software
                which provides call control to a PBX.  In this case, the
                end-points remain TDM but the call control is IP. Also, other form
                factors
                of this segment may not include traditional phone systems, but an
                integrated standalone device which integrates the functions of TDM
                and IP
                at a systems level. These standalone solutions are targeted to smaller
                deployments as found at branch offices or small
                offices.


3


Þ
            **IP
                Phone** is defined as a packet based telephone that has a Layer
                3
                IP address and a Layer 2 network connection (in most cases Ethernet
                or
                Voice over Ethernet). The functions of an IP Phone mirror that of
                a
                traditional phone. Technically, an IP Phone transmits voice traffic
                by
                first taking the Voice Payload and adding an RTP header, then a UDP
                header, then an IP header and finally an Ethernet header per frame.
                An IP
                Phone is an IP appliance, which has been optimized for voice applications.
                Given that it is more than a traditional telephone, other network
                services
                may be available to the IP Phone such as Internet browsing or other
                network services. An IP Phone can be a hard phone, soft phone, or
                wireless
                device.





**Industry
      Background**




The
      term
      "IP telephony" covers a range of technologies, including voice-over-IP (VoIP)
      and fax-over-IP services, which are carried over both the Internet and private
      IP-based networks. IP telephony connects across combinations of PCs, Web-based
      telephones, and phones connected via public telephone lines to remote voice
      gateways. Because information traveling through an IP-based network travels
      in
      discrete packets, it does not need to rely on a continuously available switched
      circuit as does information traveling in the analogue format used in traditional
      telephony.  Consequently, IP-based services are very bandwidth and
      cost-efficient.




Users
      of
      IP telephony typically can save money because IP telephony operates more
      efficiently than ordinary plain old telephone service (POTS) and because it
      currently avoids most of the tariffs and tolls applicable when using POTS,
      especially with respect to international telephone service.  IP-based
      voice conversations require less than 10% of the bandwidth of
      POTS.  This efficiency of bandwidth results from two factors: First,
      compression techniques, such as G.723.1, a standard IP compression technique,
      compresses a standard POTS transmission resulting in an overall bandwidth
      reduction generally in the range of 6-to-1.  Second, POTS requires
      full duplex—a simultaneous transmission in both directions—to support a
      telephone conversation.  Tying up bandwidth in this fashion is
      wasteful because in conversations, typically only one person is speaking at
      a
      time.  Voice-over-IP (VoIP) products have the ability to sense the
      silence and cease transmitting when one party is quiet.  This
      technique almost halves the required bandwidth of a typical telephone
      conversation.  As a result, IP telephony commonly consumes as little
      as one-twelfth the bandwidth of POTS to transmit conversations.  In
      addition, IP telephony provides carriers with the ability to lower costs by
      consolidating both voice and data in one network instead of necessitating the
      two separate networks required for traditional POTS and data.




VoIP
      technologies convert digitized voice into data packets that are encapsulated
      in
      Internet protocol, thus allowing IP Phone calls, faxes and voice traffic to
      be
      relayed over corporate intranets or across the Internet.  As a result,
      VoIP presents an opportunity for exciting new uses for IP-based phone systems,
      such as: IP multicast conferencing and telephony distance learning applications,
      phone directories and customer service monitoring and playback of calls via
      IP,
      and “voice web browsing” where the caller can interact with a web page by
      speaking commands.  The ability to access enterprise data and
      applications through a device such as a web-browser enabled IP Phone has
      presented an opportunity to position the IP Phone as a peer to the personal
      computer in many work environments - especially where PC's are not appropriate
      user interfaces for employees.  Apart from the economies provided by
      moving a firm’s communications onto one network, it is IP convergence, the
      uniting of voice, video and data that has provided many companies with a
      compelling reason to replace legacy phone systems with IP
      telephony.




Market
      Highlights:




·
            Total
                IP phone annual shipments are expected to grow from 10 million units
                in
                2006 to 164 million units in 2010 (Still less than 5% of all communication
                devices sold) (According to research firm,
                In-Sat)




·
            Enterprise
                converged mobile device (SmartPhone) shipments were 7.3 million in
                2005,
                and are projected to reach 63 million units worldwide by 2010 (According
                to research firm, IDC)




·
            Computer-Telephony
                Integration (CTI) was $5 Billion in 2005, and projected to be $12
                Billion
                by 2010 (Telecommunication Industry Association - North
                America)




·
            $7.5
                Billion in revenue is expected to be reached by 2010 for the Land
                Mobile
                Radio market (LMR) (Venture Development Corporation – North
                America)




4


**Limitations
      of Existing IP Telephony Solutions**




Existing
      IP telephony solutions have been criticized for lacking the broad set of
      features, or applications, such as voicemail, call transfer, and three-way
      calling, that traditional PBX phone systems have developed over the past
      century.  As an application development company for the IP telephony
      market, we bridge the feature/function gap currently present in many major
      IP
      telephony platforms like those provided by Cisco, Avaya, Nortel, Siemens and
      others.  We believe that, just as happened with POTS, application
      providers will flourish alongside the equipment providers as the IP telephony
      market develops and matures.




**The
      Opportunity for Convergence of Voice, Video and Data**




IP
      telephony refers to the technology used in transmitting voice over a network
      using open, standards-based IP.  Our Convergence IP telephony
      solutions leverage a single network infrastructure for the transmission of
      data,
      voice, and video traffic to deliver high-quality voice and fully integrated
      communications and enable enterprises to realize the business benefits of a
      converged network.  These benefits include increased productivity,
      business flexibility, and reduced operational costs.




With
      the
      mainstream adoption of enterprise IP communications, businesses are now
      embracing the operational benefits of convergence at an accelerated
      pace.  While the infrastructure benefits of IP telephony are well
      documented, the user-level benefits are only now starting to
      emerge.  Today, businesses deploying IP telephony are looking for
      benefits that extend beyond VoIP into ways to integrate existing business data
      into the telephony environment.




Collaboration
      tools like video conferencing and multicasting can be delivered to every
      desktop, enabling up-to-the minute information sharing between employees,
      partners, suppliers and customers - improving the company's ability to respond
      and collaborate at a fraction of the cost of other point solutions.




Unified
      views of customer data also become a reality with the true integration of voice,
      video and data.  Combined with the use of intelligent communication
      devices like IP-based phones, critical information and important messages can
      travel to the employees to enable them to work smarter and faster.




Finally,
      a converged network is more capable of supporting a mobile
      workforce.  By offering remote access to a corporate network and its
      information, geographically dispersed locations or traveling employees can
      access the tools they need to perform and interact with customers, thereby
      increasing per capita efficiency.




The
      movement towards incorporating voice, video and data into a single network
      is
      referred to as "convergence".  IP telephony now allows the telephone
      to serve up data in a manner similar to a PC or any other web-enabled
      device.




Before
      the introduction of our Cistera ConvergenceServerTM, most IP data-based
      applications offered via IP Phones were limited by the phone's own ability
      to
      navigate and/or manipulate data in a meaningful way.  The Cistera
      ConvergenceServerTM, coupled with XML, other standard protocols and an IP
      telephony environment, allows an enterprise to achieve unique client-application
      integration through its IP Phones.  This integration is accomplished
      in the network as a peer with other user interface devices such as PCs, PDAs,
      wireless phones and point-of-sale devices, among others.  By coupling
      an XML browser with voice services, we are able to combine voice, video and
      powerful data query applications and deliver them through IP communications
      devices.




**Our
      Strategy**




Our
      objective is to be the leading provider of IP communications Application
      Platforms and advanced application engines for businesses worldwide. To achieve
      this objective, we are pursuing the following strategies:




5


*Extend
      Our Product and Technological Leadership.* We believe our solution supports
      more communications and data format standards across the broadest range of
      communications systems than most other competing solutions, allowing us to
      provide improved interoperability within a customer’s existing network
      infrastructure.  We intend to build upon our IP communications
      technology and improve our solution's functionality and ease of use for rapidly
      designing, deploying and maintaining our communications solutions in a
      customer’s environment.  We may also seek to enhance our products
      through licensing or acquiring complementary technologies or
      businesses.  We believe that we are also unique in delivering a full
      suite of application engines to an IP communications end point and plan to
      extend our application engine portfolio.




*Expand
      Sales and Distribution Channels.*  We intend to pursue a
      multi-channel, distribution strategy by expanding our key relationships with
      system integrators, VARs, OEMs and distributors.  We intend to
      increase our domestic distribution by adding channel sales
      personnel.  We also plan to continue to expand our indirect
      distribution through alliances with additional system integrators, VARs and
      OEMs.  We intend to launch our international distribution by
      developing additional relationships with international distributors and creating
      strategic alliances with international system integrators.  We
      anticipate that our primary means of addressing the market will be through
      our
      indirect sales force.




*Capitalize
      on Our Professional Services Capabilities.*  We have established
      what we believe to be highly successful relationships with customers and VARs
      by
      assisting them in designing, developing and deploying our convergence
      solutions.  Our professional services range from strategic and
      architectural planning to complete integration and deployment of our
      products.  While we encourage our indirect channel partners to build
      out professional services practices to support the Cistera solutions, we will
      continue to extend our professional services expertise in applying emerging
      standards, especially XML standards, to create additional solutions that
      capitalize on our technologies.  By offering a full range of
      professional services, we believe we can strengthen our existing customer and
      VAR relationships and foster new relationships, creating opportunities to sell
      additional products.  Our current expectation is for our VAR channel
      to handle the standard installation and configuration requirements, thereby
      enabling us to focus on the more advanced customer services requirements and
      to
      scale rapidly to meet the anticipated demand for our convergence
      solutions.




**Products**




Our
      convergence products consist of application appliances—hardware and software
      combined to deliver a broad suite of feature-sets on a scalable
      architecture:




**Hardware
      platforms** The Cistera platforms combine advanced software engines with
      hardware devices that have been optimized and in some cases, specifically
      designed to deliver the performance and scalability required for IP telephony
      application environments.




Þ
            **Cistera
                ConvergenceServerTM (CCSTM)**the foundation of a Cistera IPT
                solution is available in six form factors—the CCS 1000, the CCS 1500, the
                CCS 2500, the CCS 5500 and the CCS 7500 are designed to
                support  “small”, “medium”, “large” and “service provider”
                performance requirements for specific customer locations.  The
                servers are rack-mountable, open standards-based hardware
                systems.





Þ
            **Cistera
                ZoneControllerTM(CZCTM)**enables IP phone systems to work with
                existing or newly installed overhead speakers to create a unified
                paging
                system.  Cistera’s solution is the only one that supports
                simultaneous broadcasting to IP phones and
                speakers.





**Cistera
      1.7 Software Platform**.  The Cistera 1.7 software platform is
      a component-based architecture that enables enhanced scalability and management
      of advanced IP Phone applications.  This platform has built in media
      management engines that enable third-party application developers to leverage
      our pre-built components—a voice recording engine, a broadcast engine, a content
      streaming engine, a pin code and authentication engine, a ruleset engine and
      a
      grouping engine—without having to create each component from the ground
      up.  Our authorized developers can use our published APIs to invoke
      many of these services and therefore focus their development efforts on the
      workflow components critical for specific industries.  This platform
      also provides configurable administration and management tools.




6


**Cistera
      Advanced IP Phone Applications.**  We believe that we have
      developed the broadest suite of advanced IP Phone applications available in
      the
      market today.  These applications include:




Þ
            ***Quick*****RecordTM**
                - an IP telephony on-demand voice recorder and media management service
                designed to allow phone users to record important or malicious calls
                when
                needed and play them back from the phone.  The entire call is
                recorded regardless of when the user presses the record button during
                the
                call.





Þ
            ***CallCenter*****RecordTM
                -** an IP telephony continuous voice recorder and media management
                service with remote monitoring and quality reporting
                features.  It supports standard storage and archival
                systems.





Þ
            ***Rapid*****BroadcastTM**
                - an IP telephony messaging and broadcast system. Instantly transmit
                text
                or voice messages or schedule pre-recorded broadcasts to a defined
                group
                or to an entire organization through IP Phones or external
                speakers.





Þ
            ***Virtual*****DirectoryTM****-
                a centralized directory system that allows telephone users, both
                internal
                and external to traverse corporate information quickly without time
                consuming tree-based systems. Callers can use their touchtone or
                voice to
                request information or to be directed to the appropriate
                extension.  It supports LDAP integration into popular contact
                management systems.





Þ
            ***Content*****StreamerTM
                -** an IP telephony streaming solution that delivers audio,
                graphics, music, and data streaming capabilities to the IP Phone
                network.  It enables targeted music/messaging for on-hold
                callers as well. Cistera’s solution uses Real Simple Syndication (RSS) to
                deliver targeted messaging that is delivered as it is
                updated





Þ
            ***Phone*****AssistTM
                -**integrates the PC and the IP Phone, enabling access to CRM
                application directories from the phone, or “click-to-dial” from the
                computer.





Þ
            ***Phone*****VerifyTM
                -**provides cost effective account code authentication, client
                matter codes, and forced code authorization that integrate with leading
                call detail reporting systems.





Þ
            ***RuleSet*****ManagerTM
                -**enables control of behavior of IP Phone applications, IP
                Phones
                and other IP devices from a central administration point.
                It**allows quick configuration to apply rule-based call
                management for an IPT system.





Þ
            ***Group*****ManagerTM
                -**enables the organization and management of designated groups
                of
                IP Phone users from a central administration point.  It allows
                the system administrator to assign rights and services based upon
                group
                association.





Our
      convergence solutions utilize several key technologies to provide integration
      into IP communications environments, including XML, JTAPI, J2EE, SIP, H.323,
      and
      others.




Our
      convergence solutions have been designed to interoperate seamlessly within
      network environments, by aligning with key industry standards.  There
      are occasions where integration with certain legacy platforms requires that
      our
      solutions interact with some proprietary protocols.  In these
      situations, our convergence solution works to maintain open protocols for the
      broad network functions, while supporting the proprietary codecs for the
      specific areas of interoperability.  An example of this would be in
      the way our products currently support Cisco’s proprietary SCCP
      protocol.




We
      have
      designed our solution to provide support for many of the emerging industry
      XML
      standards with minimal impact to existing business applications.
******We believe this non-intrusive architecture is a
      key in enabling integration of IP based voice, video and data; and will enable
      content to be delivered to a wide array of devices, like IP Phones, wireless
      phones, PDAs, etc.




7


**Product
      Development**




We
      released our first convergence products in September 2003 at Cisco’s Innovation
      Through Convergence Expo in California.  Using the technology
      developed for our Cistera ConvergenceServerTM, we recently introduced additional
      convergence products, extending the breadth and depth of our solution
      footprint.  We continue to enhance our convergence products with
      particular emphasis on providing improved interoperability, increased
      functionality, enhanced security and scalability and simplified ease of
      use.  Our product development efforts currently focus on enhancing our
      existing products and technologies and on developing additional products to
      extend our position in the growing voice, video and data convergence
      market.




On
      May 5,
      2003, we retained the services of XBridge Software to perform a substantial
      portion of our product development.  XBridge continued to perform
      these services for us until May 27, 2005, when we acquired XBridge.




**Competition**




As
      one of
      the first movers, Cistera competes with a broad number of companies that extract
      revenues from the telecommunications capital budgets of SMB and Enterprise
      companies. Currently, 100% of Cistera’s revenues are derived from equipment
      purchased as part of an enterprise's telecommunications infrastructure, also
      referred to as customer premise equipment (CPE) and aligned computer-telephony
      integration (CTI) applications. In 2005, this was a $5.7B market with about
      20%
      specifically associated with IP Communications.





The
      company’s solutions are delivered through indirect channel partners that
      primarily focus on the professional services associated with the installation
      and management of IP Communications solutions. Cistera faces competitors in
      three primary categories: Traditional TDM application vendors transitioning
      to
      IP; PBX vendors extending functionality to core systems; and, alternative
      application platforms focused on “custom” application development
      capabilities.





We
      have
      been successful in building comprehensive value propositions for channel
      partners that allow them to compete more effectively by offering broader
      functionality without having to invest in alternative engineering resources.
      Secondly, with an expanded value proposition in the market, channel partners
      can
      increase their margins, which have traditionally suffered in the
      networking/hardware market and ranged between 10 to 15%.





While
      we
      continue to increase our ability to propagate our value proposition directly
      into the reseller channel, we are conscious of the need to complement the PBX
      vendors’ messaging rather than compete with their positions, as the PBX vendors
      hold considerable influence.





Cistera’s
      principle competitors are companies that have for a number of years manufactured
      telephony application products for traditional Time Division Multiplex (TDM)
      based phone systems and are currently transitioning their products to support
      IP
      based (VoIP) phone systems otherwise known as IP Telephony.  Examples
      of companies that we compete with include Verint, Interactive Intelligence
      and
      Nice Systems in the Quality Assurance and Compliance category; Raytheon,
      Alcatel-Lucent and Motorola in the Event Alerting and Notification
      category.





While
      the
      management of the company believes the business plan provides competitive
      advantage over competitors, many of the existing and potential competitors
      have
      stronger brand recognition, longer operating histories, larger customer bases
      and greater financial resources.  As a result, they may be able to use
      these advantages to take market share from Cistera. They may also be able to
      respond more effectively to changing technologies, conditions or customer
      demands, especially during market downturns.








**ITEM
      2:  DESCRIPTION OF PROPERTY**





Our
      corporate offices are located at 17304 Preston Road, Suite 975, Dallas,
      Texas.  We lease this office space, which contains approximately 4,264
      square feet, from CMD Realty Investment Fund, L.P.  Our rent under
      this lease is approximately $7,626 per month and the lease expires November
      30,
      2009.




8


**ITEM
      3:  LEGAL PROCEEDINGS**





The
      Company, and certain of its current and former officers and directors are
      defendants in litigation pending in Dallas, Texas, styled KINGDON R. HUGHES
      VS.
      GREGORY T. ROYAL, CYNTHIA A. GARR, JAMES T. MILLER, JR., CHARLES STIDHAM, CNH
      HOLDINGS COMPANY D/B/A CISTERA NETWORKS AND XBRIDGE SOFTWARE, INC.; Cause No.
      DV05-0600-G; G-134th District Court, Dallas County, Texas.  The
      plaintiff has alleged a number of complaints against the defendants, including
      breach of fiduciary duty, misappropriation of corporate opportunities, fraud,
      fraudulent inducement, breach of contract, tortuous interference with contract,
      fraudulent transfer, and shareholder oppression arising in connection with
      the
      license agreement between the Company and XBridge in May 2003 and the
      acquisition of XBridge by the Company in May 2005.  The parties held a
      mediation conference in April 2006 and have come to an understanding with
      respect to the principle elements of a potential settlement.  We are
      currently in the process of negotiating definitive settlement
      agreements.




The
      Company is a defendant in litigation pending in Dallas, Texas, styled
      Collaborative Search Partners, Inc. vs. Xbridge Software, Inc., and Cistera
      Networks, Inc., Cause No. 07-03189;J191st District Court, Dallas County,
      Texas.  The plaintiff has alleged a number of complaints against the
      defendants, including breach of contract, promissory estoppel, and quantum
      meruitt arising in connection with two separate employment search agreements.
      In
      May 2007, the parties came to an understanding with respect to the principle
      elements of a potential settlement, and a Rule 11 letter agreement has been
      filed with the Court, however, a definitive settlement agreement is still being
      negotiated among the parties. The Rule 11 letter agreement provides for payment
      by the defendants of $44,000 to the plaintiff over a period of six months,
      and
      in the event the defendants fail to make such payments, a default judgment
      may
      be rendered against the defendants.




**ITEM
      4:  SUBMISSION OF MATTERS TO A**


**VOTE
      OF SECURITY HOLDERS**





None.





**PART
      II**





**ITEM
      5:  MARKET FOR COMMON EQUITY
      AND**


**RELATED
      STOCKHOLDER MATTERS**





Our
      common stock is presently traded in
      the over-the-counter market and is listed on the Pink Sheets maintained by
      the
      National Quotation Bureau, Inc., and on the Bulletin Board maintained by the
      National Association of Securities Dealers, Inc. (NASD), under the symbol CNWT.
      The following table sets forth the range of high and low bid quotations for
      the
      common stock during each calendar quarter beginning April 1, 2005, and ending
      March 31, 2007.  The figures have been rounded to the nearest whole
      cent.





**High**
            
            
            **Low**June
                30, 2005
            
            $
            3.40
            
            
            $
            2.39September
                30, 2005
            
            $
            2.55
            
            
            $
            1.80December
                31, 2005
            
            $
            2.45
            
            
            $
            1.10March
                31, 2006
            
            $
            1.35
            
            
            $
            1.01June
                30, 2006
            
            $
            1.32
            
            
            $
            1.13September
                30, 2006
            
            $
            2.15
            
            
            $
            0.65December
                31, 2006
            
            $
            0.80
            
            
            $
            0.64March
                31, 2007
            
            $
            1.50
            
            
            $
            1.35


The
      above quotations reflect
      inter-dealer prices, without retail mark-up, mark-down, or commission and may
      not necessarily represent actual transactions.   The number of
      shareholders of record of the Company's issued and outstanding common stock
      as
      of March 31, 2007 was approximately 574.





9


The
      Company has not paid any cash
      dividends to date and does not anticipate paying cash dividends in the
      foreseeable future.  It is the present intention of management to
      utilize all available funds for the development of the Company's
      business.





**Recent
      Sales of Unregistered Securities**





On
      July 1, 2006, the Company issued
      70,803 shares of common stock in connection with the exercise of warrants issued
      in the merger of the Company with XBridge Software, Inc.  The exercise
      price of the warrants was $.46 per share.  The warrants were exercised
      for notes payable totaling $32,594.





On
      August 1, 2006, the Company issued
      4,034 shares of common stock upon conversion of the principal and accrued
      interest on a previously issued convertible note.  The principal
      amount of the note converted was $1,000 and the amount of accrued interest
      converted $3,034.  The notes converted at $1.00 per
      share.





On
      October 25, 2006, the Company issued 122,028 shares of common stock in
      connection with the exercise of options issued in the merger of the Company
      with
      XBridge Software, Inc.  The exercise price for these options was $.01
      per share.





On
      December 13, 2006, the Company issued 17,931 shares of common stock upon
      conversion of certain outstanding notes.  The amount of principal of
      notes converted was $15,000 and the amount of accrued interest converted was
      $2,391.  These notes were converted at $1.00 per share.





The
      foregoing issuance of the shares of our common stock described above were made
      in private transactions or private placements intending to meet the requirements
      of one or more exemptions from registration.  In addition to any noted
      exemption below, we relied upon Regulation D and Section 4(2) of the Securities
      Act of 1933, as amended (the “Act”).  The investors were not solicited
      through any form of general solicitation or advertising, the transactions being
      non-public offerings, and the sales were conducted in private transactions
      where
      the investor identified an investment intent as to the transaction without
      a
      view to an immediate resale of the securities; the shares were “restricted
      securities” in that they were both legended with reference to Rule 144 as such
      and the investors identified they were sophisticated as to the investment
      decision and in most cases we reasonably believed the investors were “accredited
      investors” as such term is defined under Regulation D based upon statements and
      information supplied to us in writing and verbally in connection with the
      transactions.  We never utilized an underwriter for an offering of our
      securities and no sales commissions were paid to any third party in connection
      with the above-referenced sales.  Other than the securities mentioned
      above, we have not issued or sold any securities during the period covered
      by
      this Report.




**ITEM
      6:  MANAGEMENT’S DISCUSSION
      AND**


**ANALYSIS
      OR PLAN OF OPERATIONS**





The
      following discussion and analysis
      of our financial condition and results of operations should be read in
      conjunction with our consolidated financial statements and related notes that
      appear in this filing.  In addition to historical financial
      information, the following discussion contains forward-looking statements that
      reflect our plans, estimates and beliefs.  Our actual results could
      differ materially from those discussed in the forward-looking
      statements.  Factors that could cause or contribute to these
      differences have been included throughout the public filings from the
      company.





**Overview**




We
      provide IP network-based application appliances and services that add features
      and enhanced functionality to the telecommunications services used by large
      enterprises, small and mid-sized organizations, both in the commercial and
      public sector.  Our software- and hardware-based solutions are
      delivered on our open-architecture, component-based platform known as the
      Cistera ConvergenceServerTM, which allows administrators to centrally manage
      advanced applications for IP telephony environments across large single-site
      and
      multi-site private voice/data networks. Because our solutions improve
      productivity and efficiencies for customers using IP telephony systems, we
      believe that our convergence solutions complement the efforts of IP telephony
      solution providers to increase the overall return on investment and value
      contribution associated with IP telephony systems.  This has allowed
      us to establish cooperative relationships with IP telephony solution providers,
      as well as large VARs and systems integrators focused on delivering IP telephony
      systems and services.




10


Currently,
      we offer new customers a robust IP-based applications platform pre-loaded with
      a
      variety of packaged applications (we refer to them as application
      engines).  We market our software and hardware solutions through a VAR
      channel, and in some cases directly to Fortune 500 customers.  To
      ensure growth scalability, our VAR channel is being trained to deliver
      professional services for standard installations, which we believe will allow
      us
      to focus on advanced professional services for complex
      installations.




Our
      objective is to be the leading provider of IP communications application
      platforms and advanced IP-based applications for businesses
      worldwide.  To address our market opportunity, our management team is
      focused on a number of short and long-term challenges including: strengthening
      and extending our solution offerings; adding new customers and expanding our
      sales efforts into new territories; deepening our relationships with our
      existing customers, VARs, and SIs; and encouraging the development of
      third-party applications on our platform.




In
      order
      to increase our revenues and take advantage of our market opportunity, we will
      need to add substantial numbers of customer installations. We plan to reinvest
      our earnings for the foreseeable future in the following ways: hiring additional
      personnel, particularly in sales and engineering; expanding our domestic and
      international selling and marketing activities; increasing our research and
      development activities to upgrade and extend our solution offerings and to
      develop new solutions and technologies; growing our VAR and systems
      implementation channel; adding to our infrastructure to support our growth;
      and
      expanding our operational and financial systems to manage a growing
      business.




**Fiscal
      Year**




Our
      fiscal year ends on March 31.  References to fiscal 2007, for example,
      refer to the fiscal year ended March 31, 2007.




**Sources
      of Revenues**




We
      derive
      our revenues from three sources: (1) product revenues, which are comprised
      of
      software and hardware solutions; (2) professional services revenues, consisting
      primarily of installation, configuration, integration, training and VAR support
      services; and (3) support and maintenance, which is comprised of tiered
      technical support levels.  Product revenues accounted for
      approximately 75.6 percent of total revenues during fiscal year 2006 and 72.0
      percent of total revenues during fiscal year 2007.  Professional
      services revenues accounted for approximately 12.5 percent of total revenues
      during fiscal 2006 and 11.8 percent of total revenues during fiscal year
      2007.  Revenues for our support and maintenance services made up
      approximately 11.9 percent of total revenues during fiscal 2006 and 16.2 percent
      of total revenues in fiscal 2007.




The
      Company changed its revenue recognition policy in the third fiscal quarter
      ending December 31, 2006, to reflect a more conservative accounting
      practice.




On
      November 9, 2007, the Company determined that it needed to restate the financial
      statements that accompanied the Company’s original Annual Report for the fiscal
      year ended March 31, 2007, filed by the Company with the Commission on June
      29,
      2007, and subsequently amended on August 3, 2007.  The restatements
      were required because of errors made in applying the Company’s new revenue
      recognition.  Under this policy revenues are recognized after
      installation rather than upon shipment.




The
      restatements did not affect reported cash balances or liquidity. The effect
      on
      the third quarter of fiscal year 2007 was a decrease in recognized revenue
      of
      $33,452 from $635,323 to $601,871.  The effect on total fiscal year
      2007 was a decrease in recognized revenue of $113,481 from $2,046,319 to
      $1,932,838, as reported below.




In
      addition, reported cost of goods sold was restated to maintain proper matching
      of sales and cost of sales. Cost of goods sold for the third quarter of fiscal
      year 2007 was decreased by $5,363 from $97,922 to $92,559. Cost of goods sold
      for total fiscal year 2007 was decreased $3,376 from $316,648 to $313,272,
      also
      reported below.




The
      Company does not intend to file an amended 10-QSB for the third quarter of
      fiscal year 2007 as this Annual Report includes the restated financial results
      for the full year.




11


Rigorous
      new financial and accounting
      processes and procedures that have been implemented as a result of the internal
      review by management in the second quarter of fiscal year 2008 and are intended
      to ensure consistent application of the revenue recognition policy in the
      future.




**Cost
      of Revenues and Operating Expenses**




Cost
      of Revenues




Cost
      of
      convergence solutions and support revenues primarily consists of expenses
      related to depreciation expense associated with computer equipment, allocated
      overhead and amortization expense associated with capitalized software, and
      employee-related costs associated with professional services and support and
      maintenance.  To date, the expense associated with capitalized
      software has not been material to our cost of revenues.  We allocate
      overhead such as rent and occupancy charges, employee benefit costs and
      depreciation expense to all departments based on headcount.  As such,
      general overhead expenses are reflected in each cost of revenue and operating
      expense category.  Cost of professional services and other revenues
      consists primarily of employee-related costs associated with these services
      and
      allocated overhead.  The cost associated with providing professional
      services is significantly higher as a percentage of revenue than for our
      convergence solutions due to the labor costs associated with providing
      professional services.




To
      the
      extent that our customer base grows, we intend to continue to invest additional
      resources in building the channel infrastructure to enable our VARs and SIs
      to
      provide the professional services associated with the standard convergence
      solutions installation, configuration and training.  The timing of
      these additional expenses could affect our cost of revenues, both in terms
      of
      absolute dollars and as a percentage of revenues, in a particular quarterly
      period.  For example, we plan to increase the number of employees who
      are fully dedicated to supporting and enabling the reseller and implementation
      partner channel.




Research
      and Development




Research
      and development expenses consist primarily of salaries and related expenses,
      and
      allocated overhead.  We have historically focused our research and
      development efforts on increasing the functionality and enhancing the ease
      of
      use of our convergence platform and applications. Because of our open, scalable
      and secure component-based architecture, we are able to provide our customers
      with a solution based on a single version of our software application platform.
      As a result, we do not have to maintain multiple versions, which enables us
      to
      have relatively low research and development expenses as compared to traditional
      enterprise software business models. We expect that in the future, research
      and
      development expenses will increase in absolute dollars as we support additional
      IP telephony platforms, extend our solution offerings and develop new
      technologies.




Marketing
      and Sales




Marketing
      and sales expenses are typically one of our largest costs, accounting for
      approximately 33.7 percent of total revenues for fiscal 2006 and only 17.4
      percent of total revenues in fiscal 2007.  In fiscal 2007 the company
      reduced spending by leveraging some of the marketing programs funded by large
      technology and VAR partners.  It is expected that the company will
      increase spending in this area, as the market is beginning to show signs of
      momentum.  Marketing and sales expenses consist primarily of salaries
      and related expenses for our sales and marketing staff, including commissions,
      payments to VARs, marketing programs, which include advertising, events,
      corporate communications, public relations, and other brand building and product
      marketing expenses, and allocated overhead. Since the beginning of fiscal 2005,
      our sales and marketing costs as a percentage of total expenses have increased
      as a result of increased market coverage in the U.S., Canada and the
      U.K.




As
      our
      revenues increase, we plan to continue to invest heavily in marketing and sales
      by increasing the number of national account sales and channel management
      personnel in order to add new customers and increase penetration within our
      existing customer base, expanding our domestic and international selling and
      marketing activities, building brand awareness and sponsoring additional
      marketing events. We expect that in the future, marketing and sales expenses
      will increase in absolute dollars and continue to be our largest
      cost.




12


General
      and Administrative




General
      and administrative expenses consist of salaries and related expenses for
      executive, finance and accounting, and management information systems personnel,
      professional fees, other corporate expenses and allocated overhead. We expect
      that in the future, general and administrative expenses will increase in
      absolute dollars as we add personnel and incur additional professional fees
      and
      insurance costs related to the growth of our business and our
      operations.




We
      expect
      that general and administrative expenses associated with executive compensation
      will increase in the future.   Although the current executive
      team has foregone full salary payment during the initial stages of the business,
      during 2007 the team began to receive full compensation.  In addition,
      we believe over the next fiscal year that the compensation packages required
      to
      attract the senior executives the Company requires to execute against its
      business plan will increase our total general and administrative
      expenses.




**Intellectual
      Property Exclusive Licensing Agreement**




In
      May
      2003, we entered into an exclusive licensing agreement with XBridge
      Software.  This agreement provided us with the exclusive worldwide
      rights to market, sell and deliver the convergence solutions based upon the
      XBridge technology.  We also retained XBridge to provide additional
      development and engineering resources necessary to build, maintain and service
      the convergence solutions.




As
      a
      continuation of a restructuring plan we implemented in August 2004, we entered
      into discussions to acquire XBridge and obtain ownership of the intellectual
      property upon which our products are based. The XBridge Software acquisition
      was
      consummated on May 27, 2005.




**Critical
      Accounting Policies**




Our
      consolidated financial statements are prepared in accordance with accounting
      principles generally accepted in the United States.  The preparation
      of these consolidated financial statements requires us to make estimates and
      assumptions that affect the reported amounts of assets, liabilities, revenues,
      costs and expenses, and related disclosures.  On an ongoing basis, we
      evaluate our estimates and assumptions.  Our actual results may differ
      from these estimates under different assumptions or conditions.




We
      believe that of our significant accounting policies, which are described in
      the
      notes to our consolidated financial statements, the following accounting
      policies involve a greater degree of judgment and complexity. Accordingly,
      these
      are the policies we believe are the most critical to aid in fully understanding
      and evaluating our consolidated financial condition and results of
      operations.




Revenue
      Recognition




In
      an
      effort to establish an accounting policy that provides shareholders with the
      most accurate representation of the company's performance, the company has
      instated a new policy that only declares revenue from software, hardware and
      services once fully installed and implemented. This method of revenue reporting
      will not reflect all orders received and shipped during the reporting period,
      but only those orders received, shipped and completely installed within the
      reporting period.  Prior to the adoption of this policy, the Company
      recognized revenues when orders for our products and solutions were received
      and
      shipped.




In
      future
      earnings reporting, the Company will continue to provide the "booked" revenue
      figures -- the amount based upon purchase orders (POs) received from customers
      and delivered to resellers -- during the reporting period in addition to the
      new
      recognized revenue reporting policy.




The
      Company recognizes revenue according to SOP 97-2 (Software Revenue Recognition)
      as defined by paragraphs 07-14 in SOP 97-2 and as amended by SOP 98-9
      (Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain
      Transactions).  This SOP provides guidance on when revenue should be
      recognized and in what amounts for licensing, selling, leasing or otherwise
      marketing computer software (including computer hardware and support
      services).




13


Our
      total
      deferred revenue for products and services was $240,167 as of March 31, 2007.
      Technical support services revenue is deferred and recognized ratably over
      the
      period during which the services are to be performed, which is typically from
      one to three years. Advanced services revenue is recognized upon delivery or
      completion of performance.




We
      make
      sales to distributors and retail partners and recognize revenue based on a
      sell-through method using information provided by them.




Accounting
      for Deferred Commissions




We
      defer
      commission payments to our direct and channel sales force for the professional
      services and support and maintenance portions of our contracts.  These
      commissions are deferred and amortized to sales expense over the life of the
      related contracts, which typically last 12 to 36 months.  The
      commission payments, which are paid the month after the service is delivered
      to
      the customer, are a direct and incremental cost of the revenue
      arrangements.  The deferred commission amounts are recoverable through
      the future revenue streams under the customer support and maintenance
      contracts.  We believe this is the preferable method of accounting as
      the commission charges are so closely related to the revenue from the
      non-cancelable customer support and maintenance contracts that they should
      be
      recorded as an asset and charged to expense over the same period that the
      subscription revenue is recognized.




For
      the
      fiscal year 2006 and 2007, the Company did not pay sales commissions except
      in
      select agent arrangements.  Sales commissions are generally paid on
      sales meeting the criteria for sales commission payment.




**Results
      of Operations**




The
      following discussion should be read in conjunction with the consolidated
      statements of financial operations, in their entirety.




Overview
      of Results of Operations for: Fiscal 2006, Ended March 31, 2006, and Fiscal
      2007, Ended March 31, 2007.




Our
      revenues have grown from $1,587,900 in fiscal 2006 to $1,932,838 in fiscal
      2007,
      a growth year-over-year of 21.7% on a recognized revenue basis.  The
      Company instituted a new revenue recognition policy in the third quarter of
      fiscal 2007, causing the last half of the fiscal year to be reported differently
      than the first half of the year.  Had the Company continued to report
      on a non-GAAP “booked” revenue basis for the entire fiscal year 2007, the
      revenue would have been reported as $2,169,903, or 36.7% on a non-GAAP “booked”
revenue basis.




Our
      gross
      profit during the fiscal year 2006 was $1,251,351 or approximately 78.8 percent
      of revenues, and the operating loss for the same period was
      $2,324,552.  Gross profit for fiscal year 2007 was $1,619,566 or
      approximately 83.8% of revenues, and our operating loss for the same period
      was
      $1,284,443.




During
      the fiscal year 2007, we continued to incur substantial costs and operating
      expenses related to the expansion of our business.  We added support
      services personnel to focus on adding new customers and increasing penetration
      within our existing customer base, professional services personnel to support
      our implementation and support services, and developers to broaden and enhance
      our convergence solutions.




**Liquidity
      and Capital Resources**




At
      March
      31, 2007, we had cash, cash equivalents and short-term marketable securities
      of
      $534,871, as compared to $60,990 at March 31, 2006.  Accounts
      receivable at March 31, 2007 were $314,178, as compared to $198,319 at March
      31,
      2006.  Deferred revenue was $550,147 as of March 31, 2007, as compared
      to $229,159 at March 31, 2006.




From
      our
      start of operations in May 2003 through the end of fiscal 2007, we funded our
      operations primarily through financing obtained in two private placements—the
      first in the third quarter of fiscal 2005 and the second initiated in the fourth
      quarter of fiscal 2007.




14


We
      do not
      have any special purpose entities, and other than operating leases for office
      space and computer equipment, which are described below, we do not engage in
      off-balance sheet financing arrangements. We currently have a bank line of
      credit with JPMorgan Chase Bank in the amount of $50,000.  In
      addition, we have a factoring agreement with Allied Capital Partners, L.P.
      tied
      to accounts receivable with a credit line of up to $750,000.




The
      Company recently completed a private placement to support current and future
      growth requirements.  Through this offering the Company raised
      aggregate of $3,625,754.00 through the issuance of Senior Unsecured Convertible
      Promissory Notes, and warrants to purchase 3,625,754 shares of our common
      stock.  Of the $3,625,754.00 in Notes, $2,815,000.00 in principal
      amount of Notes were issued for cash, and $810,754 in principal amount of Notes
      were issued in connection with the cancellation of an equal amount of the
      Company's outstanding obligation.




Our
      future capital requirements will depend on many factors including: our rate
      of
      revenue growth; the expansion of our marketing and sales activities; the timing
      and extent of spending to support product development efforts and expansion
      into
      new territories; the timing of introductions of new services and enhancements
      to
      existing services; and the continuing market acceptance of our
      services.  To the extent that existing cash and securities and cash
      from operations are insufficient to fund our future activities, we will need
      to
      raise additional funds through public or private equity or debt financing.
      Although we are currently not a party to any agreement or letter of intent
      with
      respect to potential investments in, or acquisitions of, complementary
      businesses, services or technologies, we may enter into these types of
      arrangements in the future, which could also require us to seek additional
      equity or debt financing.  Additional funds may not be available on
      terms favorable to us or at all.  If the Company cannot obtain needed
      funds, it may be forced to curtail or cease its activities.




**ITEM
      7:  FINANCIAL STATEMENTS**





The
      financial statements of the Company
      and supplementary data are included beginning immediately following the
      signature page to this report.  See Item 13 for a list of the
      financial statements and financial statement schedules included.




**ITEM
      8:  CHANGES IN AND DISAGREEMENTS WITH
      ACCOUNTANTS**


**ON
      ACCOUNTING AND FINANCIAL DISCLOSURE**





None.





**ITEM
      8A:  CONTROLS AND PROCEDURES**





The
      Company's Chief Executive Officer and Chief Financial Officer are responsible
      for establishing and maintaining disclosure controls and procedures for the
      Company.




(a)           Evaluation
      of Disclosure Controls and Procedures




As
      of the
      end of the period covered by this report, the Company carried out an evaluation,
      under the supervision and with the participation of the Company's management,
      chief executive and chief financial officers, of the effectiveness of the design
      and operation of the Company's disclosure controls and procedures pursuant
      to
      Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange
      Act").  Based upon the evaluation, the Company's chief executive and
      chief financial officers concluded that, as of the end of the period, the
      Company's disclosure controls and procedures were effective in timely alerting
      them to material information relating to the Company required to be included
      in
      the reports that the Company files and submits pursuant to the Exchange
      Act.




(b)           Changes
      in Internal Controls




There
      were no significant changes subsequent to the evaluation described in
      subparagraph (a) above, in the Company's internal controls over financial
      reporting or in any other areas that could significantly affect the Company's
      internal controls subsequent to the date of his most recent evaluation,
      including any corrective actions with regard to significant deficiencies and
      material weaknesses.




15


(c)           Limitations.




The
      Company's management, including its chief executive and chief financial
      officers, do not expect that the disclosure controls will prevent all errors
      or
      all instances of fraud.  A control system, no matter how well designed
      and operated, can provide only reasonable, not absolute, assurance that the
      control system's objectives will be met.  Further, the design of a
      control system must reflect the fact that there are resource constraints, and
      the benefits of controls must be considered relative to their
      costs.  Because of the inherent limitations in all control systems, no
      evaluation of controls can provide absolute assurance that all control issues
      and instances of fraud, if any, within the Company have been
      detected.  These inherent limitations include the realities that
      judgments in decision-making can be faulty, and that breakdowns can occur
      because of simple error or mistake.  Controls can also be circumvented
      by the individual acts of some persons, by collusion of two or more people,
      or
      by management override of the controls.  The design of any system of
      controls is based in part upon certain assumptions about the likelihood of
      future events, and any design may not succeed in achieving its stated goals
      under all potential future conditions.  Over time, controls may become
      inadequate because of changes in conditions or deterioration in the degree
      of
      compliance with policies or procedures.  Because of the inherent
      limitation of a cost-effective control system, misstatements due to error or
      fraud may occur and not be detected.




(d)           Weakness
      in Disclosure Controls.




During
      an
      examination of the Company’s disclosure controls conducted during the second
      quarter of fiscal 2008, the Company became aware of errors made in applying
      the
      Company’s new deferred revenue recognition policy adopted in the third quarter
      of fiscal year 2007.  On November 9, 2007, the Company determined that
      it needed to restate the financial statements that accompanied the Company’s
      original Annual Report for the fiscal year ended March 31, 2007, filed by the
      Company with the Commission on June 29, 2007, and subsequently amended on August
      3, 2007.




The
      restatements did not affect reported cash balances or liquidity. The effect
      on
      the third quarter of fiscal year 2007 was a decrease in recognized revenue
      of
      $33,452 from $635,323 to $601,871.  The effect on total fiscal year
      2007 was a decrease in recognized revenue of $113,481 from $2,046,319 to
      $1,932,838, as reported below.




In
      addition, reported cost of goods sold was restated to maintain proper matching
      of sales and cost of sales. Cost of goods sold for the third quarter of fiscal
      year 2007 was decreased by $5,363 from $97,922 to $92,559. Cost of goods sold
      for total fiscal year 2007 was decreased $3,376 from $316,648 to $313,272,
      also
      reported below.




Rigorous
      new financial and accounting processes and procedures that have been implemented
      as a result of these discoveries and the internal review by management in the
      second quarter of fiscal year 2008 and are intended to ensure consistent
      application of the revenue recognition policy in the future.







16


**PART
      III**





**ITEM
      9   DIRECTORS EXECUTIVE OFFICERS, PROMOTERS
      AND**


**CONTROL
      PERSONS; COMPLIANCE WITH SECTION 16(a) OF**


**THE
      EXCHANGE ACT**





**Executive
      Officers and Directors**




The
      following table sets forth the name, age, and position of each executive officer
      and director of the Company as of the period ending March 31, 2007:







**Director's   Name
                (1)**
            **Age**
            **Position
                with Company**Derek
                P. Downs
            38
            President,
                Interim Chief Executive Officer and DirectorGreg
                T. Royal
            41
            Executive
                Vice-President/Chief Technology Officer and DirectorCynthia
                A. Garr
            46
            Interim
                Chief Financial Officer, Executive Vice-President of Corporate Development
                and Director








Our
      directors hold office until the next annual meeting of shareholders and until
      their respective successors have been duly elected and qualified.  Our
      officers are elected by the Board of Directors at the board meeting held
      immediately following the shareholders' annual meeting and hold office until
      their death or until they either resign or are removed from office. There are
      no
      written or other contracts providing for the election of directors or term
      of
      employment for executive officers, all of whom serve on an at will
      basis.




**Derek
      Downs**has served as President since May 31, 2004 and became our Interim
      CEO for the Company in June 2005.  Mr. Downs has been a member of the
      Board of Directors since October 1, 2004.  Prior to becoming President
      and Interim CEO, Mr. Downs served as the Company’s Vice President of Sales
      Marketing and Business Development.   From January 2003 to May
      2003, Mr. Downs held the same position with XBridge Software,
      Inc.  From December 2000 to September 2002, Mr. Downs held senior
      executive roles in marketing, alliances, product marketing, and business
      development at i2 Technologies (NASDAQ:ITWO), a $1 billion supply chain software
      company.  Before joining i2 Technologies, he served from December 1999
      to December 2000 as VP of Business Development and Strategic Alliances for
      BSI
      Consulting, a midsized technology strategy firm.  From May 1995 to
      December 1999, Mr. Downs held the position of Director of Strategic Alliances
      at
      Baan Company, a $1+ billion enterprise software company.  Mr. Downs
      graduated from the University of Eastern New Mexico in 1990 with a BBA degree
      in
      Marketing and a BBA degree in Business Administration.




**Gregory
      T. Royal** has served as Executive Vice President and Chief Technology
      Officer, and as a member of the Board of Directors since May
      2003.  Mr. Royal is the original founder of XBridge Software, and the
      inventor of the Convergence ServerTM technology.  Mr. Royal has over 18
      years of IT Sales, Marketing and Management experience in New Zealand, Australia
      and the United States.  He has held Senior Sales and Marketing
      positions at Sycom Office Equipment, Eagle Technology, Network General Corp.
      (NASDAQ:NETG) and Network Associates Inc (NASDAQ:NETA). Mr. Royal has system
      certification with Compaq, IBM, Novell and Hewlett Packard. He also has
      significant experience in designing and deploying large scale IT systems
      including experience in Banking and Finance, Government, and Retail and Property
      Services.  Mr. Royal graduated from Victoria University in 1986 and
      holds an MBA from Rushmore University.




17


**Cynthia
      A.
      Garr**has served as Interim CFO and Executive Vice President of Corporate Development
      since June of 2004.  She has been a member of the Board of Directors
      since May 2003.  She is one of the founders of XBridge Software, and
      has served as its President and as a Director from its inception in 1999 to
      the
      present.  She was also Director of Sales for Identify Software, a
      leader in application problem resolution software, from January 2003 to June
      2004.  From January 2000 to August 2001, Ms Garr served as a Regional
      Sales Manager for Mercury Interactive, the leading provider of enterprise
      testing and performance management solutions.   Ms. Garr was
      President of U.S. Operations and Executive Director of Qronus Interactive,
      a
      provider of automated testing solutions software, which was ultimately acquired
      by Mercury Interactive from November 1997 to January 2000. She graduated fromBrookhavenCollegein 1985 with a degree in
      Business Management.




**Board
      Composition and Committees**




Our
      Board
      of Directors currently consists of three members, Gregory T. Royal, Cynthia
      A.
      Garr, and Derek P. Downs.  We are planning to expand the number of
      members constituting our Board of Directors and will seek persons who are
“independent” within the meaning of the rules and regulations of NASDAQ to fill
      vacancies created by any expansion.  Because of our current stage of
      development, we do not have any standing audit, nominating or compensation
      committees, or any committees performing similar functions.  The Board
      meets periodically throughout the year as necessity dictates.  No
      current director has any arrangement or understanding whereby they are or will
      be selected as a director or nominee.




Audit
      Committee Financial Expert




The
      Company's board of directors does not have an "audit committee financial
      expert," within the meaning of such phrase under applicable regulations of
      the
      Securities and Exchange Commission, serving on its audit committee. The board
      of
      directors believes that all members of its audit committee are financially
      literate and experienced in business matters, and that one or more members
      of
      the audit committee are capable of (i) understanding generally accepted
      accounting principles ("GAAP") and financial statements, (ii) assessing the
      general application of GAAP principles in connection with our accounting for
      estimates, accruals and reserves, (iii) analyzing and evaluating our financial
      statements, (iv) understanding our internal controls and procedures for
      financial reporting; and (v) understanding audit committee functions, all of
      which are attributes of an audit committee financial expert. However, the board
      of directors believes that there is not any audit committee member who has
      obtained these attributes through the experience specified in the SEC's
      definition of "audit committee financial expert." Further, like many small
      companies, it is difficult for the Company to attract and retain board members
      who qualify as "audit committee financial experts," and competition for these
      individuals is significant. The board believes that its current audit committee
      is able to fulfill its role under SEC regulations despite not having a
      designated "audit committee financial expert."




Indebtedness
      of Directors and Executive Officers




None
      of
      our directors or officers or their respective associates or affiliates is
      indebted to us.




Family
      Relationships




There
      are
      no family relationships among our directors or executive officers.




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




Section
      16(a) of the Exchange Act, requires the Company's officers, directors and
      persons who beneficially own more than ten percent of the Common Stock to file
      reports of securities ownership and changes in such ownership with the
      Securities and Exchange Commission. Officers, directors and greater than ten
      percent beneficial owners also are required by rules promulgated by the
      Securities and Exchange Commission to furnish the Company with copies of all
      Section 16(a) forms they file.




18


**ITEM
      10: EXECUTIVE COMPENSATION**





**Summary
      Compensation**




The
      following table sets forth, for our last two fiscal years, certain information
      concerning the compensation paid by the Company to our Chief Executive Officer
      and our other most highly paid executive officers who received in excess of
      $100,000 in compensation during these periods.




**SUMMARY
                  COMPENSATION TABLE**(a)
              (b)
              (c)
              
              (d)
              (e)
              
              (f)
              (g)
              
              (h)
              (i)NonqualifiedYear
              
              
              
              
              
              
              Non-Equity
              
              Deferred
              All
                  OtherEnded
              
              
              
              Stock
              
              Option
              Incentive
                  Plan
              
              Compensation
              Compen-Name
                  and
              March
              Salary
              
              Bonus
              Awards
              
              Awards
              Compensation
              
              Earnings
              sation
              TotalPrincipal
                  Position
              31
              ($)
              
              ($)
              ($)
              
              ($)
              ($)
              
              ($)
              ($)
              ($)**Derek
                  P. Downs**
              2007
              $127,500
              
              -
              -
              
              -
              -
              
              -
              -
              $127,000President/Interim
                  CEO/Director
              2006
              $125,000
              
              -
              $369,396
                (1)
              
              -
              -
              
              -
              -
              $494,396**Cynthia
                  A. Garr**
              2007
              $10,417
              -
              -
              -
              
              -
              -
              
              -
              -
              $10,417Interim
                  CFO/ Executive V.P./ Director
              2006
              $125,000
              
              -
              -
              
              -
              -
              
              -
              -
              $125,000**Greg
                  T. Royal**
              2007
              $130,500
              
              -
              -
              
              -
              
              
              -
              -
              $130,500Executive
                  V.P./Director
              2006
              $130,000
              
              -
              -
              
              -
              -
              
              -
              -
              $130,000


(1)  Represents
      the grant of 123,132 restricted shares of our common stock on January 3,
      2005.  This grant is still subject to the approval by our shareholders
      of our long term incentive plan.




Except
      as
      described below under “Employment Contracts,” there are no compensatory plans or
      arrangements, with respect to any of our executive officers, which result or
      will result from the resignation, retirement or any other termination of such
      individual’s employment with us or from a change in control of the Company or a
      change in the individual’s responsibilities following a change in
      control.  No stock options, stock appreciation rights or other stock
      based incentives were awarded to any of our named executive officers during
      fiscal 2006 and 2007.




**Employment
      Contracts**




On
      January 1, 2005, we entered into an employment agreement with Mr. Downs pursuant
      to which we agreed to employ him as President at an annual salary of
      $125,000.  Although the initial term of the agreement has expired, if
      we terminate our employment relationship with Mr. Downs agreement (a) without
      cause, or (b) for any reason within twelve months of a change in control; or
      Mr.
      Downs terminates the agreement with just cause, then Mr. Downs shall be entitled
      to receive two times his then current salary, payable in equal installments
      over
      the course of the immediately following eighteen months.




On
      October 1, 2004, Cistera Networks Canada, one of our subsidiaries, entered
      into
      an employment agreement with Mr. Royal pursuant to which Cistera Networks Canada
      has agreed to employ him as its President at an annual salary of
      $130,000.  Although the initial term of the agreement has expired, if
      Cistera Networks Canada terminates its employment relationship with Mr. Royal
      (a) without cause, or (b) for any reason within twelve months of a change in
      control; or Mr. Royal terminates the agreement with just cause, then Mr. Royal
      shall be entitled to receive two times his then current salary, payable in
      equal
      installments over the course of the immediately following eighteen
      months.




19


The
      employment agreements for both Mr. Downs and Mr. Royal were terminated by the
      parties, effective March 31, 2007.  The employment agreement for Ms.
      Garr, with terms similar to that of Mr. Downs, was terminated effective April
      1,
      2006.




**Outstanding
      Equity Awards at Fiscal Year End**




Outstanding
                Equity Awards at Fiscal Year-EndOption
                AwardsName
            Number
                of Securities Underlying Unexercised Options
              (#)
              Exercisable
            Number
                of Securities Underlying Unexercised Options
              (#)
              Unexercisable
            Number
                of Securities Underlying Unexercised Unearned Options
              (#)
            Option
                Exercise Price
              ($)
            Option
                Expiration DateDerek
                Downs
            0
            0
            275,000(3)
            1.30
            2/6/2009Cynthia
                Garr
            41,831(1)
            0
            0
            0.46
            4/1/2009275,000(3)
            1.10
            10/1/2009Gregory
                Royal
            271,174(2)
            0
            0
            0.46
            5/3/2009275,000(3)
            1.10
            10/1/2009


(1)  Prior
      to the Company’s acquisition of XBridge, XBridge awarded Ms. Garr options to
      purchase shares of 15,426 shares of XBridge Software at an exercise price of
      $1.25 per share.  As part of the acquisition of XBridge by the
      Company, these options were converted into options to purchase shares of our
      common stock, on a basis of 2.71174 shares of our common stock for each share
      of
      XBridge.  This conversion ratio was the same ratio received by all
      other XBridge stockholders.




(2)  Prior
      to the Company’s acquisition of XBridge, XBridge awarded Mr. Royal options to
      purchase shares of 100,000 shares of XBridge Software at an exercise price
      of
      $1.25 per share.  As part of the acquisition of XBridge by the
      Company, these options were converted into options to purchase shares of our
      common stock, on a basis of 2.71124 shares of our common stock for each share
      of
      XBridge.  This conversion ratio was the same ratio received by all
      other XBridge stockholders.




(3)  Granted
      pursuant to the Company’s 2004 Long Term Incentive Plan.  These
      options are subject to shareholder approval of the plan.  The options
      for 275,000 shares for each Messrs. Downs and Royal and Ms. Garr were terminated
      effective April 1, 2007.




None
      of
      our executive officers exercised options to purchase our common stock during
      fiscal 2006 or 2007.




20


**Director
      Compensation**




We
      do not
      pay our directors a fee for attending scheduled and special meetings of our
      board of directors.  We intend to reimburse each director for
      reasonable travel expenses related to such director’s attendance at board of
      directors and committee meetings.  In the future we might have to
      offer some compensation to attract the caliber of independent board members
      the
      Company is seeking.




**ITEM
      11:  SECURITY OWNERSHIP OF BENEFICIAL
      OWNERS**


**AND
      MANAGEMENT**





**Principal
      Shareholders**





The
      table
      below sets forth, as of March 31, 2007, certain information with respect to
      the
      beneficial ownership of our common stock by (i) each of our directors and
      executive officers, (ii) each person known to us to be the beneficial owner
      of
      five percent or more of the outstanding shares of our common stock, and (iii)
      all of our officers and directors as a group.  Unless otherwise
      indicated, the person or entity listed in the table is the beneficial owner
      of,
      and has sole voting and investment power with respect to, the shares
      indicated.




Title
                of
            Name
                and Address
            Nature
                and AmountClass
            Of
                Beneficial Owners
            of
                Beneficial Ownership
            PercentCommon
            Derek
                P. Downs(1)
            125,199(2)
            1.3%Common
            Cynthia
                A. Garr(1)
            1,330,191(3)
            13.9%Common
            Gregory
                T. Royal(1)
            1,396,159(4)
            14.6%Common
            Kingdon
                Hughes
            1,465,593(5)
            15.2%16475
                Dallas Pkwy, Suite 440Addison,
                TX 75001Common
            Artis
                Capital Management
            560,250
            5.85%One
                Market PlazaSpear
                Street Tower, Suite 1700San
                Francisco, CA  94105Common
            Roaring
                Fork Capital Management
            1,000,000(6)
            10.45%5350
                South Roslyn St., Suite 380Greenwood
                Village, CO 80111All
                Officers and Directors as a Group
            2,851,549
            29.8%





(1)  The
      business address for each Ms. Garr and Messrs. Downs and Royal is 17304 Preston
      Road, Suite 975, Dallas, Texas 75252.


(2)  Includes
      123,132 shares granted to Mr. Downs pursuant to the Company’s long term
      incentive plan.  This grant is still subject to shareholder approval
      of the plan.


(3)  Includes
      options to purchase 41,831 shares resulting from the post merger conversion
      of
      options to purchase shares of XBridge common stock that are presently
      exercisable.


(4)  Includes
      options to purchase 271,174 shares resulting from the post merger conversion
      of
      options to purchase shares of XBridge common stock that are presently
      exercisable..


(5)  Includes
      189,822 shares subject to warrants that are presently exercisable.


(6)
      Consists of warrants to purchases shares of common stock exercisable within
      60
      days.


21


**ITEM
      12: CERTAIN RELATIONSHIPS AND RELATED
      TRANSACTIONS**





On
      May 5,
      2003, the Company, Corvero Networks, Inc., a Florida corporation formed by
      CNH
      Holdings as a wholly owned subsidiary (Corvero), and XBridge Software, Inc.,
      a
      Delaware corporation, entered into a license agreement pursuant to which Corvero
      agreed to license from XBridge Software, Inc. all rights, title, and interest
      of
      XBridge in and to certain technologies and intellectual properties (the “XBridge
      Technology”).  The exclusive license was worldwide in scope and had a
      term of twenty years, and included, but was not limited to, the right to make
      alternations and/or derivative works and to license, sublicense, cross-license
      or otherwise transfer the XBridge Technology for commercial purposes, and all
      rights to derivative works would be the Company’s sole and exclusive
      property.  This license did not, however, give the Company the right
      to transfer or resell the XBridge Technology without the consent of
      XBridge.




As
      consideration for the license, the Company agreed to issue to XBridge 500,000
      shares of our common stock, immediately upon Corvero obtaining $250,000 in
      equity financing for its operations and the implementation of the business
      plan.  These 500,000 shares were equal to 25% of our total outstanding
      shares at the execution date of the agreement.




In
      addition to the 500,000 shares of our common stock, Corvero agreed to pay
      royalties to XBridge royalties based on the following sliding
      scale:




Cumulative
                Corvero Networks Revenue
            Royalty
                Payments$1
                Million
            No
                Royalties$2
                Million
            5%
                of Gross Revenue$3
                Million
            4%
                of Gross Revenue$4
                Million
            3%
                of Gross Revenue$5
                Million
            2%
                of Gross RevenueCumulative
                > $5 Million
            1%
                of Gross Revenue





In
      addition, when cumulative gross revenue for Corvero Networks reached
      $10,000,000, XBridge was then to receive an additional 1,500,000 shares of
      our
      common stock.




On
      May 7,
      2003, in lieu of the required $250,000 in equity financing, XBridge agreed
      to
      accept a lesser sum of equity financing without penalties in exchange for the
      immediate issuance of 500,000 shares of our common stock.  In
      connection with this modification of the license agreement, the Company and
      XBridge also entered into a letter agreement whereby we agreed to purchase
      from
      XBridge certain assets at a purchase price of $125,500.  At May 7,
      2003, the purchase price of our common stock was $.75 a share.  At
      $.75 a share, the 500,000 shares of common stock issued to XBridge would have
      a
      value of approximately $375,000.  This value equates to the sum of the
      proposed equity raise and the asset purchase price of approximately $375,000
      at
      the time the agreements were executed.




On
      June
      20, 2003, we entered into a second amendment pursuant to which XBridge agreed
      to
      formally accept a lower equity financing amount and cancel the asset purchase
      obligation, in exchange for 1,500,000 shares of our common
      stock.  This amendment also released us from any and all further
      responsibilities under the license agreement.  The shares, however,
      were subject to a three-year trading restriction.  The net effect of
      this amendment was to place the parties in the same position they would have
      been had all the terms and conditions in the original license agreement been
      fulfilled, the $125,500 asset purchase obligation was cancelled and XBridge
      received an aggregate of 2,000,000 shares of our common stock.




When
      the
      second amendment was executed, our shares were trading at $1.65 per
      share.  At that time, the 1,500,000 shares issued to XBridge had a
      market value of $2,475,000.  Subsequent to the second amendment, the
      officers and directors of XBridge became our officers and
      directors.




22


Prior
      to
      our acquisition of XBridge, XBridge still maintained ownership of all
      intellectual property licensed to us.  XBridge also continued to hire
      software developers to expand product lines in the IP Telephony suite of
      services.  On June 30, 2003, Corvero and XBridge entered an agreement
      pursuant to which Corvero agreed to retain XBridge on a task by task basis
      to
      perform consulting services.  Both parties would agree upon statements
      of work to be performed and the appropriate billing rates.  The
      following tables summarize the work performed and the fees
      applicable:




Agreement
            Execute
                Date
            Agreement
                PurposeMaster
                Contracting Agreement
            6/30/03
            Framework
                for Future Statement of Work (SOW) AgreementsSOW
                #1
            6/30/03
            Software
                Development and Support for Recording, Broadcast, Directory and Ruleset
                EnginesSOW
                #2
            8/1/03
            Software
                Development and Support for Dynamic Dialer and Security
                ManagerSOW
                #3
            10/1/03
            Software
                Development and Support for Conference BridgeSOW
                #4
            1/1/04
            Software
                Development and Support for Phone Verify, Content Streamer and Phone
                ModelerSOW
                #5
            3/1/04
            Software
                Development and Support for CCS Platform O/S Software and CCX O/S
                SoftwareSOW
                #6
            04/1/04
            Support
                Services for Corporate Operations and Financial
                ServicesSOW
                #7
            7/1/04
            Software
                Development and Support for Cistera Screen CaptureSOW
                #8
            10/1/04
            Replacement
                Support Agreement to Cover all Previous Agreements (SOW #1 – SOW
                #7)SOW
                #9
            1/3/05
            Software
                Development and Support for CCS Property Manager, Phone Modeling
                and Web
                Infrastructure tools







The
      following table details the financial breakdown of each SOW under the Master
      Services Agreement:




Agreement
            Execute
                Date
            Amount
                Invoiced to CNHSOW
                #1
            06/30/03
            $  85,813SOW
                #2
            08/01/03
            $171,625SOW
                #3
            10/01/03
            $257,438SOW
                #4
            01/01/04
            $617,426SOW
                #5
            03/01/04
            (see
                note below)SOW
                #6
            04/01/04
            $280,800SOW
                #7
            07/01/04
            $  15,000SOW
                #8
            10/01/04
            $285,000SOW
                #9
            01/03/05
            $130,500Totals
            
            $1,843,602


(note:  SOW
      #5 was paid through the issuance of 150,000 shares of our common
      stock)


23


Effective
      May 27, 2005, we acquired XBridge through a merger transaction in exchange
      for
      4,150,000 shares of our common stock (which after the cancellation of the
      2,150,000 originally issued to XBridge resulted in the issuance of only
      2,000,000 new shares) and the elimination of approximately $1.86 million on
      inter-company payables owed to XBridge.  The Company believes that the
      structure of the merger agreement with XBridge and the issuance of shares were
      comparable to what the Company would have received through arms-length
      negotiations with an unaffiliated party.  At the time of the services
      agreement and the issuance of the shares, XBridge owned approximately 51% of
      our
      outstanding shares of common stock, and a majority of our officers and directors
      were also officers and directors of XBridge.  This transaction enabled
      us to obtain outright ownership of the XBridge intellectual property upon which
      our products are based and eliminate future product development and maintenance
      payments to XBridge.  Costs associated with maintenance and support
      related to the license agreement totaled $1.86 million during the first two
      years of the twenty-year life of the agreement.  In addition, we
      believed that the Company’s ownership of the XBridge intellectual property would
      prove to be invaluable in both securing agreements with tier-one channel
      reseller partners and in giving the Company flexibility for future growth and
      product line expansion.  Based upon client driven product acceptance
      and sales order growth, the Company also believed that funding maintenance
      efforts through its research and development facility in India and eliminating
      potential royalty commitments were in the best interest of the Company's
      shareholders.





Including
      the new shares issued in the merger, the elimination of the $1.86 million in
      inter-company payables and XBridge’s outstanding debt of approximately $200,000
      at the time of the merger, the total purchase price for the XBridge acquisition
      was approximately $5,500,000.  Subsequent to the merger transaction,
      Cistera Networks commissioned Navigant Capital Advisors to issue a fairness
      opinion regarding the merger with XBridge Software.  As part of its
      portfolio of financial services, Navigant Capital provides valuation services
      and fairness opinions on large financial transactions.  Navigant
      Capital’s position on the merger supported the Company’s assertion around the
      fairness of the equity merger transaction.




Prior
      to
      entering into the agreement governing the merger, (a) Ms. Cynthia Garr, the
      Company's Executive Vice President, acting Chief Financial Officer and a
      director, was also the President and a director of XBridge, (b), Mr. Gregory
      Royal, the Company's Chief Technology Officer and a director, was also a Vice
      President and a director of XBridge, (c) Mr. Derek Downs the Company's acting
      Chief Executive Officer and a director, was also a consultant to
      XBridge.




At
      the
      time of the merger, Ms. Garr owned 451,000 shares of XBridge common stock and
      held options to purchase another 15,426 shares, and Mr. Royal owned 375,000
      shares of XBridge common stock and held options to purchase another 100,000
      shares.  At an exchange ratio of 2.71174 shares of our common stock
      for each share of XBridge stock outstanding, post merger, (1) Ms. Garr owned
      1,222,997 shares of our common stock and held options to purchase another 41,831
      shares; (2) Mr. Royal owned 1,016,904 shares of our common stock and held
      options to purchase an additional 271,174 shares.  Ms. Garr's options
      expire April 1, 2009, and Mr. Royal’s options expire May 3, 2009. With regard to
      these stock options and all other outstanding options to purchase XBridge shares
      at the time, the original provisions for the XBridge stock options were applied
      in a carry-forward manner to the options to purchase shares of our
      stock.




Ms.
      Garr
      and Mr. Royal did not have employment agreements with XBridge and were employed
      on an at-will basis.  Subsequent to the acquisition of XBridge,
      employment agreements were entered into by Messrs. Downs and Royal and Ms.
      Garr
      reflecting the company as their employer.  See “Executive Compensation
– Employment Contracts” for a description of the terms and conditions of these
      employment agreements.




At
      the
      time of the XBridge acquisition, there was one additional significant
      shareholder of XBridge, Kingdon Hughes, who held 390,461 shares of XBridge’s
      common stock and warrants to purchase another 82,217 shares.  As a
      result of the merger, Mr. Hughes owned 1,058,831 shares of our common stock
      and
      warrants to purchase another 222,951 shares.  Mr. Hughes's warrants
      expire in 2009.




24


**ITEM
      13: EXHIBITS**





(a)     The
      following documents are filed as part of this report.





**1.             
                   Financial Statements**
            **Page**Report
                of Independent Registered Public Accountants
            F-1Consolidated
                Balance SheetsMarch
                31, 2007, and 2006
            F-3Consolidated
                Statements of OperationsFor
                the Years Ended March 31, 2007 and 2006
            F-5Consolidated
                Statement of Stockholders' EquityFor
                the Years Ended March 31, 2007 and 2006
            F-6Consolidated
                Statements of Cash FlowsFor
                the Years Ended March 31, 2007 and 2006
            F-7Notes
                to Consolidated Financial Statements
            F-8





**2.**
            **Exhibits**





The
      following exhibits are included as
      part of this report:





Exhibit
                Number
            Title
                of Document31.1
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.31.2
            Certification
                Pursuant to Section 302 of the Sarbanes-Oxley Act of
                2002.32.1
            Certification
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.32.2
            Certification
                Pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





(b)
            **Reports
                Filed on Form 8-K**





On
      February 8, 2007, the Company filed
      on Form 8-K under Item 7.01, Regulation FD Disclosure.


On
      April 12, 2007, the Company filed on
      Form 8-K under Item 3.02, Sales of Unregistered Securities.








25


**ITEM
      14: PRINCIPAL ACCOUNTANT FEES &
SERVICES**





The
      following is a summary of the fees
      billed to us by Robison, Hill & Company for professional services rendered
      for the years ended March 31, 2007 and 2006:





Service
            
            2007
            
            
            2006Audit
                Fees
            
            $
            32,885
            
            
            $
            28,212Audit-Related
                Fees
            
            
            -
            
            
            
            -Tax
                Fees
            
            
            615
            
            
            
            288All
                Other Fees
            
            
            -
            
            
            
            -Total
            
            $
            33,500
            
            
            $
            28,500





*Audit
      Fees*. Consists of fees billed for professional services rendered for the
      audits of our consolidated financial statements, reviews of our interim
      consolidated financial statements included in quarterly reports, services
      performed in connection with filings with the Securities & Exchange
      Commission and related comfort letters and other services that are normally
      provided by Robison, Hill & Company in connection with statutory and
      regulatory filings or engagements.





*Tax
      Fees*. Consists of fees billed for professional services for tax compliance,
      tax advice and tax planning. These services include assistance regarding
      federal, state and local tax compliance and consultation in connection with
      various transactions and acquisitions.





Audit
      Committee Pre-Approval of Audit and Permissible Non-Audit Services of
      Independent Auditors





As
      there
      is no separately designated Audit Committee, the entire Board of Directors
      serves as the Audit Committee.  A function of the Audit Committee is
      to pre-approve all audit and non-audit services provided by the independent
      auditors. These services may include audit services, audit-related services,
      tax
      services and other services as allowed by law or
      regulation.  Pre-approval is generally provided for up to one year and
      any pre-approval is detailed as to the particular service or category of
      services and is generally subject to a specifically approved
      amount.  The independent auditors and management are required to
      periodically report to the Audit Committee regarding the extent of services
      provided by the independent auditors in accordance with this pre-approval and
      the fees incurred to date. The Audit Committee may also pre-approve particular
      services on a case-by-case basis.







26







**CISTERA
        NETWORKS, INC. & SUBSIDIARY**
 
 **-:-**
 
 **INDEPENDENT
        REGISTERED PUBLIC ACCOUNTANTS REPORT**
 
 
 **MARCH
        31, 2007 AND 2006**
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 CONTENTS
 
 
 PageReport
                  of Independent Registered Public
                  Accountants
              F
                  - 1Consolidated
                  Balance SheetsMarch
                  31, 2007 and 2006
              F
                  - 2Consolidated
                  Statements of Operations for
                  theYears
                  Ended March 31, 2007 and
                  2006
              F
                  - 4Consolidated
                  Statement of Stockholders' Equity for
                  theYears
                  Ended March 31, 2007 and
                  2006
              F
                  - 5Consolidated
                  Statements of Cash Flows for
                  theYears
                  Ended March 31, 2007 and
                  2006
              F
                  - 6Notes
                  to Consolidated Financial
                  Statements
              F
                  - 8
 
 
  
   **Robison,
                Hill & Co.**
              **Certified
                Public Accountants**A
                PROFESSIONAL CORPORATIONBrent
                M. Davies, CPADavid
                O. Seal, CPAW.
                Dale Westenskow, CPABarry
                D. Loveless, CPA
  INDEPENDENT
          AUDITOR'S REPORT
 
 To
        the
        Board of Directors and Shareholders
 Cistera
        Networks, Inc. & Subsidiary
 
 We
        have audited the accompanying
        consolidated balance sheets of Cistera Networks, Inc. & Subsidiary as of
        March 31, 2007 and 2006, and the related consolidated statements of operations,
        stockholders’ equity and cash flows for the years ended March 31, 2007 and
        2006.  These consolidated financial statements are the responsibility
        of the Company's management.  Our responsibility is to express an
        opinion on these consolidated financial statements based on our
        audits.
 
 We
        conducted our audits in accordance
        with the standards of the Public Company Accounting Oversight Board (United
        States).  Those standards require that we plan and perform the audit
        to obtain reasonable assurance about whether the financial statements are
        free
        of material misstatement.  The Company is not required to have, nor
        were we engaged to perform, an audit of its internal control over financial
        reporting.  Our audit included consideration of internal control over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the company’s internal control over financial
        reporting.  Accordingly, we express no such opinion.  An
        audit also includes examining, on a test basis, evidence supporting the amounts
        and disclosures in the financial statements, assessing the accounting principles
        used and significant estimates made by management, as well as evaluating
        the
        overall financial statement presentation.  We believe that our audits
        provide a reasonable basis for our opinion.
 
 In
        our opinion, the consolidated
        financial statements referred to above present fairly, in all material respects,
        the financial position of Cistera Networks, Inc. as of March 31, 2007 and
        2006,
        and the results of its operations and its cash flows for the years
        ended  March 31, 2007 and 2006 in conformity with accounting
        principles generally accepted in the United States of America.
 
 The
        accompanying consolidated financial
        statements have been prepared assuming that the Company will continue as
        a going
        concern. As discussed in Note 1 to the financial statements, the Company
        has
        suffered recurring losses from operations and has a net capital deficiency
        that
        raise substantial doubt about its ability to continue as a going
        concern.  The financial statements do not include any adjustments that
        might result from the outcome of this uncertainty.
 
 Respectfully
                  submitted,/s/
                  Robison Hill & Co.Certified
                  Public Accountants
 
 Salt
        Lake
        City, Utah
 June
        26,
        2007, except for Note 15, as to which the date is November 12,
        2007
   F
              - 1
  CISTERANETWORKS, INC. & SUBSIDIARY
 CONSOLIDATED
          BALANCE SHEETS
 
 
 **(Restated)**March
                    31,
                
                
                March
                    31,2007
                
                
                2006Current
                    Assets:Cash
                
                $
                534,871
                
                
                $
                60,990Accounts
                    Receivable
                
                
                314,178
                
                
                
                198,319Other
                    Receivable
                
                
                23,927
                
                
                
                23,927Inventory
                
                
                75,743
                
                
                
                23,127Prepaid
                    Expenses
                
                
                10,143
                
                
                
                41,626Total
                    Current Assets
                
                
                958,862
                
                
                
                347,989Fixed
                    Assets:Computer
                    Equipment
                
                
                123,035
                
                
                
                117,725Trade
                    Show Booth & Fixtures
                
                
                10,641
                
                
                
                8,774Office
                    Equipment
                
                
                129,064
                
                
                
                72,622Property
                    held under capital leases
                
                
                10,205
                
                
                
                10,205Less
                    Accumulated Depreciation
                
                
                (150,899
                )
                
                
                (115,524
                )Net
                    Fixed Assets
                
                
                122,046
                
                
                
                93,802Intangible
                    Assets:Intellectual
                    property
                
                
                2,717,755
                
                
                
                2,717,755Software
                    development
                
                
                366,040
                
                
                
                366,040Less
                    Amortization
                
                
                (788,802
                )
                
                
                (477,091
                )Net
                    Intangible Assets
                
                
                2,294,993
                
                
                
                2,606,704Total
                    Assets
                
                $
                3,375,901
                
                
                $
                3,048,495
 
 
  F
              - 2
  CISTERA
          NETWORKS, INC. & SUBSIDIARY
 CONSOLIDATED
          BALANCE SHEETS
 (continued)
 
 **(Restated)**March
                    31,
                
                
                March
                    31,2007
                
                
                2006Current
                    Liabilities:Accounts
                    payable
                
                $
                544,796
                
                
                $
                1,015,596Accrued
                    liabilities
                
                
                598,023
                
                
                
                623,361Related
                    party payables
                
                
                24,038
                
                
                
                84,938Short-term
                    notes payable
                
                
                -
                
                
                
                36,000Line
                    of credit
                
                
                62,094
                
                
                
                -Convertible
                    promissory notes
                
                
                144,000
                
                
                
                230,000Current
                    portion of long-term debt
                
                
                2,415
                
                
                
                3,581Current
                    portion of deferred income
                
                
                465,179
                
                
                
                110,008Total
                    Current Liabilities
                
                
                1,840,545
                
                
                
                2,103,484Long-Term
                    LiabilitiesLease
                    obligation payable
                
                
                -
                
                
                
                2,415Convertible
                    promissory notes
                
                
                1,900,606
                
                
                
                45,000Deferred
                    income
                
                
                84,968
                
                
                
                119,151Total
                    Long-Term Liabilities
                
                
                1,985,574
                
                
                
                166,566Total
                    Liabilities
                
                
                3,826,119
                
                
                
                2,270,050Stockholders’
                    Equity:Common
                    Stock, Par Value $.001Authorized
                    50,000,000 shares,Issued
                    8,292,022 shares at March 31, 2007 andIssued
                    8,077,226 shares at March 31, 2006
                
                
                8,292
                
                
                
                8,077Paid-In
                    Capital
                
                
                8,739,970
                
                
                
                8,684,405Retained
                    Deficit
                
                
                (9,198,480
                )
                
                
                (7,914,037
                )Total
                    Stockholders’ Equity
                
                
                (450,218
                )
                
                
                778,445Total
                    Liabilities and Stockholders’ Equity
                
                $
                3,375,901
                
                
                $
                3,048,495
 The
          accompanying notes are an integral part of these financial
          statements.
 
 
 
 
 F
              - 3
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 CONSOLIDATED
          STATEMENTS OF OPERATIONS
 
 
 
 
 **(Restated)**For
                    the Year
                
                
                For
                    the YearEnded
                
                
                EndedMarch
                    31,
                
                
                March
                    31,2007
                
                
                2006Revenues
                
                $
                1,932,838
                
                
                $
                1,587,900Cost
                    of goods sold
                
                
                313,272
                
                
                
                336,549Gross
                    Profit
                
                
                1,619,566
                
                
                
                1,251,351Expenses:Sales
                    and marketing
                
                
                335,817
                
                
                
                538,290Research
                    and development
                
                
                510,025
                
                
                
                587,302Software
                    consulting
                
                
                1,036,612
                
                
                
                992,125Professional
                    fees
                
                
                201,512
                
                
                
                487,142General
                    and administrative
                
                
                736,005
                
                
                
                971,044Total
                    Expenses
                
                
                2,819,971
                
                
                
                3,575,903Other
                    Income (Expense)Interest
                    income
                
                
                714
                
                
                
                1,466Interest
                    expense
                
                
                (84,752
                )
                
                
                (114,187
                )Write-off
                    of goodwill
                
                
                -
                
                
                
                (2,134,821
                )Total
                    Other Income (Expense)
                
                
                (84,038
                )
                
                
                (2,247,542
                )Net
                    Loss
                
                $
                (1,284,443
                )
                
                $
                (4,572,094
                )Basic
                    & Diluted loss per share
                
                $
                (0.16
                )
                
                $
                (0.72
                )Weighted
                    Average Shares
                
                
                8,190,123
                
                
                
                6,393,718
 
 
 
 The
          accompanying notes are an integral part of these financial
          statements.
 
 
 F
              - 4
  CISTERA
          NETWORKS, INC. & SUBSIDIARY
 CONSOLIDATED
          STATEMENT OF STOCKHOLDERS' EQUITY
 FOR
          THE TWO YEARS ENDED MARCH 31, 2007 AND 2006
 
 Preferred
                    Stock
                
                
                Common
                    Stock
                
                
                Paid-In
                
                
                RetainedShares
                
                
                Par
                    Value
                
                
                Shares
                
                
                Par
                    Value
                
                
                Capital
                
                
                DeficitBalance
                    at March 31, 2005
                
                
                -
                
                
                $
                -
                
                
                
                4,467,938
                
                
                $
                4,468
                
                
                $
                1,245,325
                
                
                $
                (3,341,943
                )Stock
                    issued for accrued liabilities
                
                
                -
                
                
                
                -
                
                
                
                173,511
                
                
                
                174
                
                
                
                482,190
                
                
                
                -Stock
                    issued for acquisition of Xbridge
                
                
                -
                
                
                
                -
                
                
                
                2,000,000
                
                
                
                2,000
                
                
                
                5,298,000
                
                
                
                -Stock
                    issued from exercise of stock options
                
                
                -
                
                
                
                -
                
                
                
                100,000
                
                
                
                100
                
                
                
                199,900
                
                
                
                -Stock
                    issued for conversion of notes payable
                
                
                -
                
                
                
                -
                
                
                
                1,325,777
                
                
                
                1325
                
                
                
                1,417,932
                
                
                
                -Stock
                    issued for services
                
                
                -
                
                
                
                -
                
                
                
                2,000
                
                
                
                2
                
                
                
                1,998
                
                
                
                -Stock
                    issued for legal settlement
                
                
                -
                
                
                
                -
                
                
                
                8,000
                
                
                
                8
                
                
                
                -
                
                
                
                -Contributed
                    capital
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                39,060
                
                
                
                -Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,572,094
                )Balance
                    at March 31, 2006
                
                
                -
                
                
                
                -
                
                
                
                8,077,226
                
                
                
                8,077
                
                
                
                8,684,405
                
                
                
                (7,914,037
                )Stock
                    issued in connection with exercise ofwarrants
                    for conversion of notes payable
                
                
                -
                
                
                
                -
                
                
                
                70,803
                
                
                
                71
                
                
                
                32,524
                
                
                
                -Stock
                    issued for conversion of notes payable
                
                
                -
                
                
                
                -
                
                
                
                21,965
                
                
                
                22
                
                
                
                21,943
                
                
                
                -Stock
                    issued for cash in connection withexercise
                    of warrants
                
                
                -
                
                
                
                -
                
                
                
                122,028
                
                
                
                122
                
                
                
                1,098
                
                
                
                -Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (1,284,443
                )Balance
                    at March 31, 2007 - **Restated**
                
                
                -
                
                
                $
                -
                
                
                
                8,292,022
                
                
                $
                8,292
                
                
                $
                8,739,970
                
                
                $
                (9,198,480
                )
 
 The
          accompanying notes are an integral part of these financial
          statements
   F
              - 5
  CISTERA
          NETWORKS, INC. & SUBSIDIARY
 CONSOLIDATED
          STATEMENTS OF CASH FLOWS
 
 **(Restated)**For
                    the Year
                
                
                For
                    the YearEnded
                
                
                EndedMarch
                    31,
                
                
                March
                    31,2007
                
                
                2006CASH
                    FLOWS FROM OPERATINGACTIVITIES:Net
                    Loss
                
                $
                (1,284,443
                )
                
                $
                (4,572,094
                )Adjustments
                    used to reconcile net loss to net cashprovided
                    by (used in) operating activities:Write-off
                    of goodwill
                
                
                -
                
                
                
                2,134,821Depreciation
                    and amortization
                
                
                347,086
                
                
                
                318,120Deferred
                    income
                
                
                320,988
                
                
                
                125,384Stock
                    issued for accrued interest
                
                
                13,060
                
                
                
                98,177Stock
                    issued for accrued liabilities
                
                
                -
                
                
                
                543,004Stock
                    issued for services
                
                
                -
                
                
                
                2,000Stock
                    issued for legal settlement
                
                
                -
                
                
                
                8(Increase)
                    Decrease in accounts receivable
                
                
                (115,859
                )
                
                
                147,467(Increase)
                    Decrease in inventory
                
                
                (52,616
                )
                
                
                (5,433
                )(Increase)
                    Decrease in prepaid expenses
                
                
                31,483
                
                
                
                (34,284
                )(Increase)
                    Decrease in Xbridge receivable
                
                
                -
                
                
                
                (569,525
                )Increase
                    (Decrease) in accrued liabilities
                
                
                (25,338
                )
                
                
                431,342Increase
                    (Decrease) in accounts payable
                
                
                (470,800
                )
                
                
                778,440Net
                    Cash Used in operating activities
                
                
                (1,236,439
                )
                
                
                (602,573
                )CASH
                    FLOWS FROM INVESTINGACTIVITIES:Cash
                    acquired from Xbridge
                
                
                -
                
                
                
                2,834Purchase
                    of equipment
                
                
                (63,619
                )
                
                
                (23,475
                )Net
                    cash provided by investing activities
                
                
                (63,619
                )
                
                
                (20,641
                )CASH
                    FLOWS FROM FINANCINGACTIVITIES:Payments
                    on capital lease
                
                
                (3,581
                )
                
                
                (2,961
                )Sale
                    of common stock
                
                
                1,220
                
                
                
                583,500Proceeds
                    from line of credit
                
                
                62,094
                
                
                
                -Cash
                    received from convertible debt
                
                
                1,805,606
                
                
                
                45,000Proceeds
                    from loans
                
                
                16,434
                
                
                
                56,400Payments
                    on loans
                
                
                (107,834
                )
                
                
                (36,367
                )Net
                    Cash Provided by Financing Activities
                
                
                1,773,939
                
                
                
                645,572Net
                    (Decrease) Increase in cash and cash equivalents
                
                
                473,881
                
                
                
                22,358Cash
                    and Cash Equivalents at beginning of period
                
                
                60,990
                
                
                
                38,632Cash
                    and Cash Equivalents at end of period
                
                $
                534,871
                
                
                $
                60,990
 
 
 
 F
              - 6
 
 
 CISTERA
          NETWORKS, INC. & SUBSIDIARY
 CONSOLIDATED
          STATEMENTS OF CASH FLOWS
 (continued)
 
 
 **(Restated)**For
                    the Year
                
                
                For
                    the YearEnded
                
                
                EndedMarch
                    31,
                
                
                March
                    31,2007
                
                
                2006SUPPLEMENTAL
                    DISCLOSURE OF CASH FLOW INFORMATION:Cash
                    paid during the year for:Interest
                
                $
                35,574
                
                
                $
                57,312Franchise
                    and income taxes
                
                $
                -
                
                
                $
                -SUPPLEMENTAL
                    DISCLOSURE OF NON-CASH INVESTING AND FINANCINGACTIVITIES:
 
 On
          May 27, 2005, the Company issued
          4,150,000 shares of common stock to the shareholders of XBridge Software,
          Inc.
          and cancelled 2,150,000 shares then held by XBridge, in connection with
          the
          Company’s merger with XBridge Software, Inc.  In the merger, the
          Company acquired all of the assets and liabilities of XBridge Software,
          valued
          at a net of $782,245, and intellectual property valued at
          $2,717,755.  Goodwill of $2,134,821 was also acquired and subsequently
          expensed.
 
 On
          December 31, 2005, the Company
          issued 946,392 shares of stock due to the conversion of note principal
          and
          interest from private placement fund holders.  The amount of principal
          represented by these shares was $859,000.  The amount of accrued
          interest represented by these shares was $87,392.
 
 On
          March 31, 2006, the Company issued
          67,785 shares of stock due to the conversion of note principal and interest
          from
          private placement fund holders.  The amount of principal represented
          by these shares was $57,000.  The amount of accrued interest
          represented by these shares was $10,785.
 
 On
          July 1, 2006, the Company issued
          70,893 shares of stock in connection with the exercise of warrants issued
          in the
          merger of the Company with Xbridge Software, Inc. at $.46 per
          share.  The warrants were exercised for notes payable totaling
          $32,594.
 
 On
          August 31, 2006, the Company issued
          4,034 shares of stock due to the conversion of note principal and interest
          from
          private placement fund holders.  The amount of principal represented
          by these shares was $1,000.  The amount of accrued interest
          represented by these shares was $3,034 due to the conversion of a portion
          of the
          note at an earlier date.  These notes converted at $1.00 per
          share.
 
 On
          December 13, 2006, the Company
          issued 17,931 shares of stock upon conversion of certain outstanding notes
          issued in the 2004 private placement.  The amount of principal
          represented by these shares was $15,000.  The amount of accrued
          interest represented by these shares was $2,931.  These notes were
          converted at $1.00 per share.
 
 
 
 The
          accompanying notes are an integral part of these financial
          statements.
 
 
 F
              - 7
 
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE
          1
          - NATURE OF OPERATIONS AND GOING CONCERN
 
 The
          accompanying consolidated financial
          statements have been prepared in conformity with accounting principles
          generally
          accepted in the United States, which contemplate the Company as a going
          concern.  However, the Company has sustained substantial operating
          losses in recent years and has used substantial amounts of working capital
          in
          its operations.  Realization of a major portion of the assets
          reflected on the accompanying balance sheet is dependent upon continued
          operations of the Company which, in turn, is dependent upon the Company's
          ability to meet its financing requirements and succeed in its future
          operations.  Management believes that actions presently being taken to
          revise the Company’s operating and financial requirements provide them with the
          opportunity for the Company to continue as a going concern.
 
 These
          consolidated financial statements
          do not reflect adjustments that would be necessary if the Company were
          unable to
          continue as a “going concern”.  While management believes that the
          actions already taken or planned, will mitigate the adverse conditions
          and
          events which raise doubt about the validity of the “going concern” assumption
          used in preparing these financial statements, there can be no assurance
          that
          these actions will be successful.
 
 If
          the Company were unable to continue
          as a “going concern”, then substantial adjustments would be necessary to the
          carrying values of assets, the reported amounts of its liabilities, the
          reported
          revenues and expenses, and the balance sheet classifications used.
 
 Organization
          and Basis of Presentation
 
 CNH
          Holdings Company, Inc., a Nevada
          corporation (the Company), was incorporated in Delaware on April 15, 1987,
          under
          the name of I.S.B.C. Corp.  The Company subsequently changed its name
          first to Coral Companies, Inc., and then to CNH Holdings
          Company.  Domicile was changed to Nevada in 1997.  The
          Company conducted an initial public and secondary offerings during the
          1980's.
 
 On
          June 15, 1998, the Company acquired
          Southport Environmental and Development, Inc.  This acquisition,
          however, was subsequently rescinded by agreement between the parties and
          made a
          formal order of the court effective April 19, 2000.  This order put
          the Company in the position which it occupied at June 14, 1998, as if none
          of
          the actions which had occurred from that time to the date of rescission
          had
          transpired.
 
 On
          May 5, 2003, Corvero Networks, Inc.,
          a Florida corporation, was formed by CNH Holdings Company as a wholly-owned
          subsidiary to acquire the use of certain technology known as the XBridge
          Technology.  This technology has as its principal component the
          Corvero Convergence Platform.  The acquisition was accomplished by
          entering into a license agreement with XBridge Software, Inc., a Delaware
          corporation.  See Note 9, for detailed description of
          acquisition.
 
 
 
 
 
 
 
 F
              - 8
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          1
          - NATURE OF OPERATIONS AND GOING CONCERN (continued)
 
 On
          August 31, 2004, CNH Holdings
          Company absorbed its wholly-owned subsidiary Corvero Networks, and began
          doing
          business as Cistera Networks.  All Corvero products
          adopted  the Cistera name.
 
 The
          Company was in the development
          stage from January 1, 1992 to May 5, 2003.  Since May 5, 2003, the
          Company has commenced planned principal operations and is no longer in
          the
          development stage.
 
 On
          May 27, 2005, the Company acquired
          XBridge Software, Inc. through a merger between XBridge and a Company
          subsidiary.  XBridge will continue to be a wholly-owned subsidiary of
          the Company.
 
 On
          September 27, 2005, the Company
          changed its name from CNH Holdings Company to Cistera Networks,
          Inc.
 
 Nature
          of Operations
 
 Cistera
          Networks, Inc. provides
          IP-based advanced application platforms and engines for the enterprise
          VoIP
          communications market.  The Cistera Convergence Server (TM) (CCS) uses
          the Cistera Enterprise Platform for IPT to provide Unified Application
          Administration as well as Fault and Performance Management for enterprise
          IPT
          Application deployments.  The Company provides next-generation
          solutions for numerous vertical markets including education, finance, healthcare
          and government.  The Company maximizes IP phone capabilities - taking
          the communications platform.
 
 NOTE
          2
          - SUMMARY OF ACCOUNTING POLICIES
 
 This
          summary of accounting policies for
          Cistera Networks, Inc. is presented to assist in understanding the Company's
          consolidated financial statements.  The accounting policies conform to
          generally accepted accounting principles and have been consistently applied
          in
          the preparation of the consolidated financial statements.
 
 Principles
          of Consolidation
 
 The
          consolidated financial statements
          for the years ended March 31, 2007 and 2006 include the accounts of Cistera
          Networks, Inc. and its wholly-owned subsidiary XBridge Software,
          Inc.  XBridge Software, Inc. was acquired by the Company on May 27,
          2005.
 
 The
          results of subsidiaries acquired or
          sold during the year are consolidated from their effective dates of acquisition
          through their effective dates of disposition.
 
 All
          significant intercompany balances
          and transactions have been eliminated.
 
 
 
 
 F
              - 9
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          2
          - SUMMARY OF ACCOUNTING POLICIES (continued)
 
 Use
          of
          Estimates
 
 The
          financial statements are prepared
          in conformity with accounting principles generally accepted in the United
          States
          of America.  In preparing the financial statements, management is
          required to make estimates and assumptions that affect the reported amounts
          of
          assets and liabilities and disclosure of contingent assets and liabilities
          as of
          the date of the balance sheet and statement of operations for the year
          then
          ended.  Actual results may differ from these
          estimates.  Estimates are used when accounting for allowance for bad
          debts, collectibility of accounts receivable, amounts due to service providers,
          depreciation and litigation contingencies, among others.
 
 Cash
          and Cash Equivalents
 
 For
          purposes of the statement of cash
          flows, the Company considers all highly liquid debt instruments purchased
          with a
          maturity of three months or less to be cash equivalents to the extent the
          funds
          are not being held for investment purposes.
 
 Concentration
          of Credit Risk
 
 The
          Company has no significant
          off-balance sheet concentrations of credit risk such as foreign exchange
          contracts, options contracts or other foreign hedging arrangements.
 
 Revenue
          Recognition
 
 The
          Company’s revenue is comprised of
          three main sources: (1) product sales, (2) professional services and (3)
          support
          and maintenance contracts.  The Company recognizes revenue according
          to SOP 97-2 (Software Revenue Recognition) as defined by paragraphs 07-14
          in SOP
          97-2 and as amended by SOP 98-9 (Modification of SOP 97-2, Software Revenue
          Recognition, With Respect to Certain Transactions).  This SOP provides
          guidance on when revenue should be recognized and in what amounts for licensing,
          selling, leasing or otherwise marketing computer software (including computer
          hardware and support services).  Product sales revenues are recognized
          when a valid purchase order has been received from a client and the product
          has
          been shipped and installed at the client site.  Product revenue is
          fixed and determinable at the time of shipment as clients are engaged with
          the
          Company in a two-tier distribution model with no refund/return
          rights.  Professional services revenue and costs are recognized when
          an installation project has been completed and client sign-off
          received.  Professional services revenue is fixed and determinable
          only at the time of client approval as typical client install projects
          involve
          several vendors working against shifting deadlines to install multiple
          solutions.  Support and maintenance contracts are executed on an
          annual basis and the revenue from these contracts is recognized on a monthly
          basis as the support fees are earned.
 
 
 F
              - 10
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          2
          - SUMMARY OF ACCOUNTING POLICIES (continued)
 
 Inventory
 
 Inventory
          consists of equipment that has been shipped but not yet installed and equipment
          that has been returned to the Company because the customer has quit the
          project
          or there were problems with the hardware.  The machines are
          refurbished and used in future sales.  The inventory assets are
          recorded at cost.
 
 Depreciation
          and Amortization
 
 Fixed
          assets are recorded at cost and
          depreciated using straight-line and accelerated methods over the estimated
          useful lives of the assets which range from three to seven
          years.  Fixed assets consisted of the following at March 31, 2007 and
          2006:
 
 March
                    31,2007
                
                
                2006Computer
                    Equipment
                
                $
                123,035
                
                
                $
                117,725Trade
                    Show Booth & Fixtures
                
                
                10,641
                
                
                
                8,774Office
                    Equipment
                
                
                129,064
                
                
                
                72,622Property
                    held under capital leases
                
                
                10,205
                
                
                
                10,205Less
                    accumulated depreciation
                
                
                (150,899
                )
                
                
                (115,524
                )Total
                
                $
                122,046
                
                
                $
                93,802
 
 Maintenance
          and repairs are charged to
          operations; betterments are capitalized.  The cost of property sold or
          otherwise disposed of and the accumulated depreciation thereon are eliminated
          from the property and related accumulated depreciation accounts, and any
          resulting gain or loss is credited or charged to income.
 
 Total
          depreciation expense for the
          years ended March 31, 2007 and 2006 was $36,181 and $46,106,
          respectively.
 
 Intangible
          Assets
 
 The
          Company has adopted the Financial
          Accounting Standards Board SFAS No., 142,  “Goodwill and Other
          Intangible Assets.”  SFAS 142 requires, among other things, that
          companies no longer amortize goodwill, but instead test goodwill for impairment
          at least annually.  In addition, SFAS 142 requires that the Company
          identify reporting units for the purposes of assessing potential future
          impairments of goodwill, reassess the useful lives of other existing recognized
          intangible assets, and cease amortization of intangible assets with an
          indefinite useful life.  An intangible asset with an indefinite useful
          life should be tested for impairment in accordance with the guidance in
          SFAS
          142.
 
 
 
 F
              - 11
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          2
          - SUMMARY OF ACCOUNTING POLICIES (continued)
 
 Intangible
          Assets consisted of the
          following at March 31, 2007 and 2006:
 
 March
                    31,Intangible
                    Asset
                
                2007
                
                
                2006
                
                Amortization
                    PeriodIntellectual
                    Property
                
                $
                2,717,755
                
                
                $
                2,717,755
                
                10
                    YearsSoftware
                    Development
                
                
                366,040
                
                
                
                366,040
                
                4
                    YearsLess
                    accumulated amortization
                
                
                (788,802
                )
                
                
                (477,091
                )Total
                
                $
                2,294,993
                
                
                $
                2,606,704
 
 Software
          development costs include all
          development costs incurred after the Company’s software became “technologically
          feasible”.  Prior to the software reaching that stage, all development
          costs were expensed as incurred.  Once the software was developed to
          the point of being ready for sale, the Company began amortizing the costs
          over
          the term of the license agreement it entered into which was four
          years.  The software development costs were acquired in the
          acquisition of XBridge Software, Inc.
 
 On
          May 27, 2005, the Company issued
          2,000,000 shares of common stock to acquire the assets and liabilities
          of
          XBridge Software, Inc.  The shares were valued at the market price on
          the effective date of the acquisition, which was $2.65 per share.  The
          Company acquired net assets valued at $782,245 and intellectual property
          valued
          at $2,717,755.  The Company has determined that the intellectual
          property has a useful life of 10 years, and is using straight-line
          amortization.
 
 Total
          amortization expense for the
          years ended March 31, 2007 and 2006 was $311,710 and $265,492,
          respectively.
 
 The
          estimated amortization for the next
          five years is as follows:
 
 2008
                
                $
                271,7762009
                
                
                271,7762010
                
                
                271,7762011
                
                
                271,7762012
                
                
                271,776Total
                
                $
                1,358,880
 
 
 
 
 
 
 F
              - 12
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          2
          - SUMMARY OF ACCOUNTING POLICIES (continued)
 
 Earnings
          (Loss) per Share
 
 Basic
          earnings (loss) per share has
          been computed by dividing the earnings for the period applicable to the
          common
          stockholders by the weighted average number of common shares outstanding
          during
          the years.
 
 Diluted
          loss per common share for the
          years  ended March 31, 2007 and 2006 is not presented as it would be
          anti-dilutive.  At March 31, 2007, the total number of potentially
          dilutive common stock equivalents was 6,428,197.  At March 31, 2006,
          the total number of potentially dilutive common stock equivalents was
          2,907,019.
 
 Reclassification
 
 Certain
          reclassifications have been
          made in the 2006 financial statements to conform with the 2007
          presentation.
 
 Deferred
          Income
 
 Deferred
          income represents contracts
          for certain revenue to be received in the future and come from support
          and
          maintenance contracts as well as product sales and professional services
          which
          have been shipped and billed but not installed.  Support and
          maintenance contracts are executed on an annual basis and the revenue from
          these
          contracts is recognized on a monthly basis as the support fees are
          earned.
 
 Research
          and Development
 
 Research
          and development expenses
          consist primarily of salaries and related expenses, and allocated overhead
          related to increasing the functionality and enhancing the ease of use of
          the
          convergence platform and applications.
 
 Stock
          Options
 
 Effective
          April 1, 2006, the company
          adopted the provisions of SFAS No. 123(R). SFAS No. 123(R) requires
          employee equity awards to be accounted for under the fair value method.
          Accordingly, share-based compensation is measured at grant date, based
          on the
          fair value of the award. Prior to April 1, 2006, the company accounted
          for
          awards granted to employees under its equity incentive plans under the
          intrinsic
          value method prescribed by Accounting Principles Board (APB) Opinion
          No. 25, “Accounting for Stock Issued to Employees” (APB 25), and related
          interpretations, and provided the required pro forma disclosures prescribed
          by
          SFAS No. 123, “Accounting for Stock-Based Compensation” (SFAS
          No. 123), as amended.  No stock options were granted to employees
          during the years ended March 31, 2007 or 2006 and accordingly, no compensation
          expense was recognized under APB No. 25 for the years ended March 31, 2007
          or
          2006. In addition, no compensation expense is required to be recognized
          under
          provisions of SFAS No. 123(R) with respect to employees.
 
 
 
 
 F
              - 13
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          2
          - SUMMARY OF ACCOUNTING POLICIES (continued)
 
 Under
          the modified prospective method
          of adoption for SFAS No. 123(R), the compensation cost recognized by the
          company beginning on April 1, 2006 includes (a) compensation cost for all
          equity incentive awards granted prior to, but not yet vested as of April
          1,
          2006, based on the grant-date fair value estimated in accordance with the
          original provisions of SFAS No. 123, and (b) compensation cost for all
          equity incentive awards granted subsequent to April 1, 2006, based on the
          grant-date fair value estimated in accordance with the provisions of SFAS
          No. 123(R). The company uses the straight-line attribution method to
          recognize share-based compensation costs over the service period of the
          award.
          Upon exercise, cancellation, forfeiture, or expiration of stock options,
          or upon
          vesting or forfeiture of restricted stock units, deferred tax assets for
          options
          and restricted stock units with multiple vesting dates are eliminated for
          each
          vesting period on a first-in, first-out basis as if each vesting period
          was a
          separate award. To calculate the excess tax benefits available for use
          in
          offsetting future tax shortfalls as of the date of implementation, the
          company
          followed the alternative transition method discussed in FASB Staff Position
          No. 123(R)-3.
 
 Fair
          Value of Financial Instruments
 
 The
          carrying value of the Company's
          financial instruments, including accounts payable and accrued liabilities
          at
          March 31, 2007 and 2006 approximates their fair values due to the short-term
          nature of these financial instruments.
 
 NOTE
          3
          - CONCENTRATION OF RISK
 
 As
          of March 31, 2007, the Company
          receives approximately 31% of its gross revenues from its top three
          re-sellers.  This represents a decrease in concentration of business
          from the 48% reported for the year ended March 31, 2006.  The loss of
          these re-sellers would not adversely impact the business of the
          Company.
 
 NOTE
          4
          - INCOME TAXES
 
 As
          of March 31, 2007, the Company had a
          net operating loss carry forward for income tax reporting purposes of
          approximately $6,935,000 that may be offset against future taxable income
          through 2027.  Current tax laws limit the amount of loss available to
          be offset against future taxable income when a substantial change in ownership
          occurs.  Therefore, the amount available to offset future taxable
          income may be limited.  Due to the uncertainty with respect to
          ultimate realization, the Company has established a valuation allowance
          for all
          deferred income tax assets.
 
 March
                    31,2007
                
                
                2006Net
                    Operating Losses
                
                $
                2,357,900
                
                
                $
                1,912,500Valuation
                    Allowance
                
                
                (2,357,900
                )
                
                
                (1,912,500
                )$
                -
                
                
                $
                -
 
 
 F
              - 14
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          4
          - INCOME TAXES (continued)
 
 The
          provision for income taxes differs
          from the amount computed using the federal US statutory income tax rate
          as
          follows:
 
 March
                    31,2007
                
                
                2006Provision
                    (Benefit) at US Statutory Rate
                
                $
                445,400
                
                
                $
                868,576Increase
                    (Decrease) in Valuation Allowance
                
                
                (445,400
                )
                
                
                (868,576
                )$
                -
                
                
                $
                -
 
 The
          Company evaluates its valuation
          allowance requirements based on projected future operations.  When
          circumstances change and causes a change in management's judgment about
          the
          recoverability of deferred tax assets, the impact of the change on the
          valuation
          is reflected in current income.
 
 NOTE
          5
          - LEASE COMMITMENT
 
 The
          Company currently leases
          approximately 4,264 square feet of office space at 17304 Preston Road,
          Suite
          975, Dallas, Texas from Memshalah Realty.  The lease payments are
          approximately $7,626 per month and the lease expires November 30,
          2009.  This office space is used as the Corporate
          Headquarters.
 
 The
          minimum future lease payments under
          this lease for the next five years are:
 April
                    1, 2007 - March 31, 2008
                
                $
                92,225April
                    1, 2008 - March 31, 2009
                
                
                94,357April
                    1, 2009 - March 31, 2010
                
                
                63,852April
                    1, 2010 - March 31, 2011
                
                
                -April
                    1, 2011 - March 31, 2012
                
                
                -Total
                    minimum future lease payments
                
                $
                250,434
 
 NOTE
          6
          - CAPITAL LEASE
 
 On
          October 20, 2004, the Company
          entered into an agreement with Dell Financial Services to lease five laptop
          computers and a laser printer.  The lease is for a period of
          thirty-six months with a payment of approximately $369 per month.  The
          Company has an end of lease purchase option of $1.  The Company has
          capitalized a total of $10,205 under capital leases for the computers and
          printer in the financial statements.  The assets are depreciated over
          their related lease terms.  Depreciation of assets under capital
          leases is included in depreciation expense for the years ended March 31,
          2007
          and 2006.
 
 
 
 
 F
              - 15
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          6
          - CAPITAL LEASE (continued)
 
 The
          minimum future lease payments under
          this capital lease for the next five years are:
 April
                    1, 2007 - March 31, 2008
                
                $
                2,952April
                    1, 2008 - March 31, 2009
                
                
                -April
                    1, 2009 - March 31, 2010
                
                
                -April
                    1, 2010 - March 31, 2011
                
                
                -April
                    1, 2011 - March 31, 2012
                
                
                -Total
                    minimum lease payments
                
                
                2,952Less:
                    Amount representing interest
                
                
                (537
                )Present
                    value of net minimumlease
                    payment
                
                $
                2,415
 
 NOTE
          7
          - COMMON STOCK
 
 On
          April 29, 2005, the Company issued
          173,511 shares of common stock for accrued liabilities of $482,364.
 
 On
          May 27, 2005, the Company issued
          4,150,000 shares of common stock to the shareholders of XBridge Software,
          Inc.
          and cancelled 2,150,000 shares then held by XBridge, in connection with
          the
          Company’s merger with XBridge Software, Inc.  In the merger, the
          Company acquired all of the assets and liabilities of XBridge Software,
          valued
          at a net of $782,245, and intellectual property valued at
          $2,717,755.  Goodwill of $2,134,821 was also acquired and subsequently
          expensed.
 
 On
          June 24, 2005, the Company issued
          100,000 shares of common stock from the exercise of outstanding stock options
          at
          $2 per share.
 
 Effective
          September 21, 2005, the
          Company’s authorized shares were increased from 10 million shares to 50 million
          shares.
 
 On
          December 31, 2005, the Company
          issued 311,600 shares of stock in connection with the exercise of warrants
          issued in the 2004 private placement of notes and warrants at $1.30 per
          share.
 
 On
          December 31, 2005, the Company
          issued 946,392 shares of stock upon conversion of certain outstanding notes
          issued in the 2004 private placement.  The amount of principal
          represented by these shares was $859,000.  The amount of accrued
          interest represented by these shares was $87,392.  These notes
          converted at $1.00 per share.
 
 On
          March 31, 2006, the Company issued
          67,785 shares of stock upon conversion of certain outstanding notes issued
          in
          the 2004 private placement.  The amount of principal represented by
          these shares was $57,000.  The amount of accrued interest represented
          by these shares was $10,785.  These notes converted at $1.00 per
          share.
 
 
 
 F
              - 16
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          7
          - COMMON STOCK (continued)
 
 One
          March 31, 2006 the Company issued
          2,000 shares of stock to a former contractor for providing project management
          services valued at $2,000.  As part of the initial agreement with this
          contractor, these shares were to be issued upon the delivery of services
          defined
          by the agreement.
 
 On
          March 31, 2006, the Company issued
          68,000 shares of stock as part of a legal settlement.  60,000 of the
          shares had been previously issued as restricted and in settlement of the
          legal
          issue, the shares were returned, cancelled and reissued as free
          trading.  8,000 shares were newly issued.
 
 On
          July 1, 2006, the Company issued
          70,803 shares of stock in connection with the exercise of warrants issued
          in the
          merger of CNH with XBridge at .46 per share.  These warrants were
          exercised to satisfy certain outstanding notes payable.
 
 On
          August 31, 2006, the Company issued
          4,034 shares of stock upon conversion of certain outstanding notes issued
          in the
          2004 private placement.  The amount of principal represented by these
          shares was $1,000.  The amount of accrued interest represented by
          these shares was $3,034 due to the conversion of a portion of the note
          earlier.  These notes converted at $1.00 per share.
 
 On
          October 25, 2006, the Company issued
          122,028 shares of common stock in connection with the exercise of options
          issued
          in the merger of the Company with Xbridge at $.01 per share.
 
 On
          December 13, 2006, the Company
          issued 17,931 shares of stock upon conversion of certain outstanding notes
          issued in the 2004 private placement.  The amount of principal
          represented by these shares was $15,000.  The amount of accrued
          interest represented by these shares was $2,931.  These notes were
          converted at $1.00 per share.
 
 NOTE
          8
          - NOTES PAYABLE
 
 In
          June 2005, the Company received
          loans totaling $50,000.  The notes are due May 30, 2006 and carry an
          interest rate of 8% per annum.  Due to the loan being unpaid at
          maturity, the interest rate increased to 12%.  At March 31, 2007, the
          total amount of principal and interest due on this note was $0.
 
 NOTE
          9
          - LINE OF CREDIT
 
 On
          September 21, 2006, the Company
          entered into a factoring agreement with Allied Capital Partners, L.P.,
          whereby
          Allied Capital provides a revolving line of credit to the Company up to
          $750,000
          that is secured by the Company’s accounts receivable.  At March 31,
          2007, the total amount due on the line of credit was $62,094.
 
 On
          May 18, 2007, the Company secured a
          line of credit with JPMorgan Chase Bank in the amount of $50,000.  The
          line of credit carries an interest rate of prime plus one half
          point.  The line of credit is secured with a deposit guarantee of
          $50,000.
 
 
 
 F
              - 17
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          10 - RELATED PARTY TRANSACTIONS
 
 On
          March 5, 2003,  we (1)
          obtained an exclusive  license to certain XML
          technology  from XBridge in exchange  for the issuance of
          500,000  shares of our common  stock,  and
          (2)  entered  into an
          asset  purchase  agreement  to acquire certain of
          XBridge's assets. On June 20, 2003, we issued an additional 1,500,000 shares
          of
          our common  stock to XBridge in  settlement  of
          certain CNH  Holdings' obligations under the license agreement and
          asset purchase agreement. Subsequent to the settlement
          transaction,  the officers and directors of XBridge became our
          officers and directors.
 
 Subsequent  to  March  2003,  the  Company  had  entered  into
          a master services  agreement with XBridge  pursuant to which
          XBridge provided the Company with
          certain  development  and  maintenance  services.  In
          connection  with this
          master  services  agreement,  the  Company
          had  previously  issued to XBridge an
          additional  150,000  shares of its common stock and
          had  incurred  approximately $1,860,000 in past due service
          fee debt.
 
 Effective  May  27,  2005,  we  acquired   XBridge   through  a  merger
          transaction  and obtained  ownership of the
          XBridge  intellectual  property upon which our products are
          based. Prior to entering into the agreement governing the merger,  (a)
          Ms. Cynthia Garr, the Company's  Executive Vice
          President,  interim Chief Financial Officer and a director, was also
          the President and a director of XBridge,  (b), Mr. Gregory Royal, the
          Company's Chief  Technology  Officer and a
          director,  was also a Vice  President  and a
          director of XBridge,  (c) Mr. Derek Downs the
          Company's  acting Chief Executive  Officer and a
          director,  was also a consultant to Xbridge.
 
 On
          May 31, 2004, the Company received a
          loan from an officer of $55,755.  The note carries an interest rate of
          8% and was due December 31, 2005.  At March 31, 2007, the total amount
          of principal and interest due on this note was $39,609.
 
 On
          March 31, 2006, the Company received
          a loan from an officer of $6,400.  The note carries an interest rate
          of 8% and is due March 31, 2007.  At March 31, 2007, the total amount
          of principal and interest due on this note was $0.
 
 On
          June 30, 2006, the Company received
          a loan from an officer of $16,434.  Currently, this note is considered
          short term and has no loan provisions.  At March 31, 2007, the balance
          of the loan was $0.
 
 In
          July 2003, XBridge Software, Inc.
          received loans totaling $33,000 from shareholders.  The loans were due
          on demand and carried an interest rate of 8% per annum.  The Company
          acquired these loans as part of the acquisition of XBridge Software in
          May
          2005.  At March 31, 2007, total principal and interest due on these
          loans was $0.
 
 Pursuant
          to an employment agreement
          dated January 1, 2005, the Company agreed to pay $125,000 per year to Derek
          Downs, an officer and director of the Company.
 
 
 F
              - 18
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          10 - RELATED PARTY TRANSACTIONS (continued)
 
 Pursuant
          to an employment agreement
          dated October 1, 2004, the Company agreed to pay $130,000 per year to Gregory
          Royal, an officer and director of the Company.
 
 NOTE
          11 - ACQUISITIONS
 
 On
          May 5, 2003, a License Agreement was
          entered into principally between Corvero Networks and XBridge Software,
          although
          CNH Holdings Company was party to certain provisions.  The License
          Agreement resulted in XBridge licensing to Corvero all of XBridge's right,
          title
          and interest in, and to a software program (and concomitant hardware platforms)
          which had been developed by XBridge and which were, collectively known
          as the
          "XBridge Technology."  This technology principally allows for the
          development, implementation and commercialization of XML integration solutions
          in the EBI and IP Telephony markets.  CNH Holdings Company
          subsequently issued 2,000,000 "restricted" common shares of its stock to
          XBridge
          as a licensing fee.
 
 On
          August 31, 2004, CNH Holdings
          Company absorbed its wholly-owned subsidiary Corvero Networks, Inc., and
          began
          operating as Cistera Networks.  As of that date, all Corvero products
          adopted the Cistera name.  All of Corvero's rights under the License
          Agreement dated May 5, 2003 passed to Cistera Networks, Inc.
 
 On
          May 27, 2005, the Company issued
          2,000,000 new shares of common stock to acquire the assets and liabilities
          of
          XBridge Software, Inc. The shares were valued at the market price on the
          effective date of the acquisition, which was $2.65 per share.  The
          Company acquired net assets valued at $782,245 and intellectual property
          valued
          at $2,717,755.  Goodwill of $2,134,821 was also acquired and
          subsequently expensed.
 
 NOTE
          12 - CONVERTIBLE DEBT
 
 Effective
          December 13, 2004, the
          Company issued and sold an aggregate of $1,146,000  in principal
          amount of Senior Unsecured Convertible Promissory Notes (the “notes”), and
          issued  warrants to purchase 1,146,000 shares of our common stock, par
          value $0.001 per share (the “warrants”).  Of the $1,146,000 in notes,
          $1,004,000 in principal amount of notes were issued for cash, and $142,000
          in
          principal amount of notes were issued in connection with the cancellation
          of an
          equal amount of the Company’s outstanding obligations.  At December
          31, 2005, a number of note holders opted to convert their debt as provided
          in
          their note agreements.  The total number of shares issued due to this
          conversion was 946,392.  The amount of principal represented by these
          shares was $859,000.  The amount of accrued interest represented by
          these shares was $87,392.  At March 31, 2006, three note holders opted
          to convert their debt as provided in their note agreements.  The total
          number of shares issued due to this conversion was 67,785.  The amount
          of principal represented by these shares was $57,000.  The amount of
          accrued interest represented by these shares was $10,785.  These notes
          converted at $1.00 per share.  The total amount of principal and
          interest due at December 13, 2006 was $196,088.  At August 31, 2006,
          one note holder who had previously converted most of his outstanding debt
          opted
          to convert the outstanding balance.  The total number of shares issued
          due to this conversion was 4,034.  The remaining amount of principal
          represented by these shares was $1,000.  The amount of interest earned
          on his original note represented by these shares was $3,034.  At
          December 13, 2006, one note holder opted to convert their outstanding
          balance.  There were 17,931 shares issued at $1.00 per shares to
          convert principal of $15,000 and accrued interest of $2,931.  At
          December 13, 2006, two note holders opted to convert their outstanding
          balance
          to the second private placement.  The total amount converted was
          $56,071.  At March 31, 2007, there was $144,000 of principal and
          $22,138 of interest due on these notes.
 
 
 F
              - 19
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          12 - CONVERTIBLE DEBT (continued)
 
 The
          notes bear interest at the rate of
          8% per annum, compounded quarterly on each March 31, June 30, September
          30 and
          December 31 that the notes are outstanding (each, an interest compounding
          date).  The outstanding principal on the notes and all accrued
          interest become due and payable on the earlier of (a) December 9, 2006,
          or (b)
          the date on which a change in control of the Company occurs.
 
 The
          outstanding principal and accrued
          interest on the notes are convertible into shares of  common stock at
          a conversion rate equal to the lesser of (a) $1.30 per share, or (b) a
          25%
          discount to the average closing bid price of the Company’s common stock for the
          five days including and immediately preceding the interest compounding
          date,
          provided that in no event shall the conversion price per share be less
          than
          $1.00 per share.  The notes may be converted, in whole or in part, at
          the option of the note holder on any interest compounding date occurring
          after
          the effective date of a registration statement covering the resale of shares
          of
          common stock to be issued upon conversion of the notes.
 
 In
          addition, if the Company
          subsequently issues or sells any new securities convertible, exercisable
          or
          exchangeable into shares of our common stock (“convertible securities”) in a
          private transaction and receives gross proceeds of at least $500,000, the
          notes
          may be converted, in whole or in part at the option of the noteholders,
          into the
          convertible securities, upon the same terms and conditions governing the
          issuance of the convertible securities in the private
          transaction.  The right of the note holders to convert the note into
          convertible securities does not apply to any convertible securities issued
          by
          the Company (a) in connection with a merger, acquisition or consolidation
          of the
          Company, (b) in connection with strategic license agreements and other
          partnering arrangements so long as such issuances are not for the purpose
          of
          raising capital, (c) in connection with bona fide firm underwritten public
          offerings of its securities, (d) pursuant to the Company’s incentive and stock
          option plans, (e) as a result of the exercise of options or warrants or
          conversion of convertible notes or preferred stock which were granted or
          issued
          as of December 13, 2004.
 
 The
          Company may prepay the notes in
          whole or in part, upon thirty days prior written notice to note holders;
          provided that partial prepayments may be made only in increments of $10,000
          and,
          provided further, that the note holders may convert the amount of the proposed
          prepayment into shares of our common stock, regardless of the period of
          time
          that the notes have then been outstanding.
 
 The
          warrants have a term of five years
          and are exercisable at an exercise price of $1.30 per share.  Subject
          to an effective registration statement covering the resale of the shares
          of
          common stock issuable upon exercise of the Warrants, the Company may, upon
          thirty days prior written notice, redeem the warrants for $0.10 per share,
          in
          whole or in part, if our common stock closes with a bid price of at least
          $3.50
          for any ten (10) out of fifteen (15) consecutive trading
          days.  Because at that price it would be profitable for the warrant
          holders to exercise their warrants rather than to allow the redemption
          to
          proceed, we assume they would choose to exercise. However, there is no
          assurance
          that our stock price will rise to the $3.50 per share redemption trigger
          price,
          or that all of the warrants will be exercised.
 
 The
          Company is currently seeking to
          issue and sell a second offering of Senior Unsecured Convertible Promissory
          Notes.  This second offering will mirror the terms of the previous
          Private Placement Funding as stated above, except for the conversion of
          stock
          and interest is set at a fixed rate of $1.00 per share.  The notes and
          accrued interest are due and payable two years from the date of the
          note.  As of March  31, 2007, $1,900,606 had been received
          by the Company from this offering.
 
 In
          April 2007, the Company received an
          additional $1,225,000 from this offering.
   F
              - 20
 
 CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          13 - STOCK OPTIONS
 
 During
          the year ended March 31, 2005,
          the Company issued 1,815,000 stock options to employees, contractors and
          other
          service providers to the Company.  At March 31, 2006, no compensation
          expense had been recorded as the exercise price of the options was equal
          or
          greater than the fair market value of the stock.  As of December 31,
          2006, 1,015,000 of the total stock options are not exercisable, as they
          are not
          yet approved or registered.
 
 The
          following table sets forth the
          options outstanding as of March 31, 2006:
 
 WeightedOption
                    /
                
                
                Average
                
                
                WeightedWarrants
                
                
                Exercise
                
                
                AverageShares
                
                
                Price
                
                
                Fair
                    ValueOptions
                    outstanding, March 31, 2005
                
                
                1,815,000
                
                
                $
                1.29
                
                
                $
                1.43Options
                    outstanding from Xbridge merger
                
                
                529,945
                
                
                
                0.23
                
                
                
                0.34Warrants
                    outstanding from Xbridge merger
                
                
                312,439
                
                
                
                0.46
                
                
                
                0.46Warrants
                    outstanding from Private Placement
                
                
                1,146,000
                
                
                
                1.30
                
                
                
                1.30Outstanding
                    warrants from early exercise ofPrivate
                    Placement Warrants
                
                
                155,800
                
                
                
                1.30
                
                
                
                1.30Granted,
                    Exercise price more than fair value
                
                
                -
                
                
                
                -
                
                
                
                -Granted,
                    Exercise price less than fair value
                
                
                -
                
                
                
                -
                
                
                
                -Expired
                
                
                -
                
                
                
                -Exercised
                
                
                (411,600
                )
                
                
                1.47
                
                
                
                -Options
                    and warrants outstanding, March 31, 2006
                
                
                3,547,584
                
                
                $
                1.04
 
 The
          following table sets forth the
          options outstanding as of March 31, 2007:
 
 WeightedOption
                    /
                
                
                Average
                
                
                WeightedWarrants
                
                
                Exercise
                
                
                AverageShares
                
                
                Price
                
                
                Fair
                    ValueOptions
                    and warrants outstanding, March 31, 2006
                
                
                3,547,584
                
                
                $
                1.29
                
                
                $
                1.43Warrants
                    outstanding from Private Placement
                
                
                1,842,690
                
                
                
                1.00
                
                
                
                1.00Granted,
                    Exercise price more than fair value
                
                
                -
                
                
                
                -
                
                
                
                -Granted,
                    Exercise price less than fair value
                
                
                -
                
                
                
                -
                
                
                
                -Expired
                
                
                (51,814
                )
                
                
                -Exercised
                
                
                (192,831
                )
                
                
                0.18
                
                
                
                -Options
                    and warrants outstanding, March 31, 2007
                
                
                5,145,629
                
                
                $
                1.04
 
 
 
 F
              - 21
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          13 - STOCK OPTIONS(continued)
 
 Exercise
          prices for optioned shares
          outstanding as of March 31, 2007 ranged from $0.23 to $2.00. A summary
          of these
          options by range of exercise prices is shown as follows:
 
 Weighted-
                
                Weighted-Weighted-
                
                Shares/
                
                Average
                
                AverageShares
                    /
                
                Average
                
                Warrants
                
                Exercise
                    Price
                
                ContractualExercise
                
                Warrants
                
                Exercise
                
                Currently
                
                Currently
                
                RemainingPrice
                
                Outstanding
                
                Price
                
                Exercisable
                
                Exercisable
                
                Life$               1.101.10
                
                635,000
                
                $        1.101.10
                
                613,750
                
                $                  1.101.10
                
                3
                    years1.30
                
                380,000
                
                1.30
                
                285,000
                
                1.30
                
                3
                    years2.00
                
                700,000
                
                2.00
                
                700,000
                
                2.00
                
                2
                    years.23
                
                81,352
                
                .23
                
                81,352
                
                .23
                
                3
                    years.46
                
                326,565
                
                .46
                
                326,565
                
                .46
                
                3
                    years.46
                
                189,822
                
                .46
                
                189,822
                
                .46
                
                3
                    years1.30
                
                990,200
                
                1.30
                
                990,200
                
                1.30
                
                5
                    years1.00
                
                1,842,690
                
                1.00
                
                1,842,690
                
                1.00
                
                5
                    years
 
 In
          September 2005, although the stock
          price had not achieved the levels necessary to allow the Company to redeem
          the
          warrants, warrant holders were offered an incentive of one-half warrant
          for each
          warrant exercised.  This incentive expired on December 31,
          2005.  The Company raised an additional $405,080 from the exercise of
          311,600 warrants and issued 155,800 incentive warrants.
 
 NOTE
          14 - CONTINGENCIES
 
 In
          2005, the Company was made a
          third-party defendant to litigation that was originally filed on June 5,
          2001 in
          Longview, Texas, styled J. David Bolton, Joanna Bolton, Whitney Gaidry,
          Virginia
          Ille and Kenneth Ille vs. Larry V. Tate, Gerald Pybas, E. Robert Barbee,
          H. Paul
          Estey, and Robert A. Baker; Case No. 2001-1196-A; 188th District Court,
          Gregg
          County, Texas.  Plaintiffs sued Defendants and the Company for breach
          of contract and sought approximately $975,000 in damages.  The
          Defendants had sued the Company for indemnification of Plaintiffs'
          claims.
 
 On
          February 7, 2006, the parties
          reached an agreement to settle this case at mediation and signed a binding
          agreement which settles the disputes between them.  As part of that
          settlement, the Company agreed to deliver 68,000 unrestricted stock certificates
          of the Company's stock to Plaintiffs.  The Plaintiffs held 60,000
          shares of restricted stock prior to the settlement.  Those 60,000
          shares were cancelled and reissued as unrestricted shares.  The
          Plaintiffs received 8,000 newly issued shares.  The settlement should
          not be taken as an admission of liability and the Company expressly denies
          any
          such liability.
 
 
 
 F
              - 22
  CISTERA
          NETWORKS, INC.& SUBSIDIARY
 NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS
 (continued)
 
 NOTE
          14–CONTINGENCIES(continued)
 
 The
          Company, and certain of its current
          and former officers and directors are defendants in litigation pending
          in
          Dallas, Texas, styled *KINGDON R. HUGHES VS. GREGORY T. ROYAL, CYNTHIA A.
          GARR, JAMES T. MILLER, JR., CHARLES STIDHAM, CNH HOLDINGS COMPANY D/B/A
          CISTERA
          NETWORKS AND XBRIDGE SOFTWARE, INC.;*Cause No. DV05-0600-G; G-134th
          District Court, Dallas County, Texas.  The plaintiff has alleged a
          number of complaints against the defendants, including breach of fiduciary
          duty,
          misappropriation of corporate opportunities, fraud, fraudulent inducement,
          breach of contract, tortuous interference with contract, fraudulent transfer,
          and shareholder oppression arising in connection with the license agreement
          between the Company and XBridge in May 2003 and the acquisition of XBridge
          by
          the Company in May 2005.  The parties held a mediation conference in
          April 2006 and have come to an understanding with respect to the principle
          elements of a potential settlement.  We are currently in the process
          of negotiating definitive settlement agreements.
 
 The
          Company is a defendant in
          litigation pending in Dallas, Texas, styled Collaborative Search Partners,
          Inc.
          vs. Xbridge Software, Inc., and Cistera Networks, Inc., Cause No.
          07-03189;J191st District Court, Dallas County, Texas.  The plaintiff
          has alleged a number of complaints against the defendants, including breach
          of
          contract, promissory estoppel, and quantum meruitt arising in connection
          with
          two separate employment search agreements.  In May 2007, the parties
          came to an understanding with respect to the principle elements of a potential
          settlement, and a Rule 11 letter agreement has been filed with the Court,
          however, a definitive settlement agreement is still being negotiated among
          the
          parties.  The Rule 11 letter agreement provides for payment by the
          defendants of $44,000 to the plaintiff over a period of six months, and
          in the
          event the defendants fail to make such payments, a default judgment may
          be
          rendered against the defendants.
 
 NOTE
          15 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
 
 We
          have
          restated our balance sheet at March 31, 2007, and statements of operations,
          stockholders’ equity and cash flows for the year ended March 31,
          2007.  The restatement impacts the year ended March 31, 2007, but has
          no effect on the financial statements issued in prior fiscal
          years.  The restatement isrequired because
          of an
          errors made in applyingCompany’snew  the new deferred revenue
          recognition policy adopted in the third quarter of fiscal year
          2007.  Under this policy revenues are recognized after installation
          rather than upon shipment.
  The
          impact of the restatement on the balance sheet was to increase inventory
          $3,376
          from $72,367 to $75,743, which in turn increased current assets from $955,486
          to
          $958,862.  The restatements also increased the current portion of
          deferred income $113,481 from $351,698 to $465,179, which in turn increased
          current liabilities from $1,727,064 to $1,840,545.  Retained deficit
          also increased $110,105 from $9,088,375 to $9,198,480.  The impact of
          the restatement on the statements of operations was to decrease recognized
          revenue $113,481 from $2,046,319 to $1,932,838, and decrease cost of goods
          sold
          $3,376 from $316,648 to $313,272, which in turn decreased gross profit
          $110,105
          from $1,729,671 to $1,619,566.  The impact of the restatement on net
          loss was an increase of $110,105 from $1,174,338 to $1,284,443.  Loss
          per share increased $.02 from $.14 to $.16 per share.
  F
            - 23


**SIGNATURES**





Pursuant
      to the requirements of section
      13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant
      has duly caused this report to be signed on its behalf by the undersigned,
      thereunto duly authorized.





**CISTERA
      NETWORKS, INC.**





Dated:
                November 19, 2007
            By  /S/     Derek
                P. DownsDerek
                P. DownsPresident(Principal
                Executive Officer)





Pursuant
      to the requirements of the
      Securities Exchange Act of 1934, as amended, this report has been signed below
      by the following persons on behalf of the Registrant and in the capacities
      indicated on this 19th day of November 2007.





Signatures
            Title/S/     Derek
                P. Downs
            PresidentDerek
                P. Downs
            (Principal
                Executive Officer)/S/     Cynthia
                A. Garr
            Interim
                C.F.O., Executive Vice- PresidentCynthia
                A. Garr
            of
                Corporate Development, and Director (Principal Financial
                Officer)/S/   Gregory
                T. Royal
            Executive
                Vice-President/Chief TechnologyGregory
                T. Royal
            Officer
                and Director