**UNITED
STATES**


**SECURITIES
AND EXCHANGE COMMISSION**


Washington,
D.C. 20549







**FORM
10-QSB**





x**QUARTERLY REPORT UNDER SECTION 13 OR
15(d)**


**OF
THE SECURITIES EXCHANGE ACT OF 1934**


For the
quarterly period ended March 31, 2005





-OR-





o**TRANSITION REPORT UNDER SECTION 13 OR
15(d)**


**OF
THE SECURITIES EXCHANGE ACT OF 1934**


For the
transition period from ________ to ________





**Commission
file number 333-111378**







**CENTERGISTIC
SOLUTIONS, INC.**


(Name of
small business issuer as specified in its charter)









**CALIFORNIA**
    **95-2873122**(State or other jurisdiction of incorporation or
      organization)
    (IRS
      Employer identification No.)





**2045
West Orangewood Avenue, Orange, California 92868-1944**


(Address
of principal executive offices)




**(714)
935-9000**


(Issuer's
telephone number)









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


Yes x  No o





**As
of April 30, 2005, there were 10,699,312 shares of the issuer’s Common Stock
outstanding.**




**Traditional
Small Business Disclosure Format. Yes** ****o  **No**x























CENTERGISTIC
SOLUTIONS, INC.


QUARTERLY
REPORT ON FORM 10-QSB


FOR
THE PERIOD ENDED MARCH 31, 2005





TABLE
OF CONTENTS





**Page**Part I.
    FINANCIAL INFORMATIONItem 1. Financial Statements:Condensed
      Consolidated Balance Sheet at March 31, 2005 (Unaudited)
    3Condensed
      Consolidated Statements of Operations and Comprehensive Income
      (Loss)For
      the Nine and Three Months Ended March 31, 2005 and 2004
      (Unaudited)
    4Condensed
      Consolidated Statements of Cash Flows For
      the Nine Months Ended March 31, 2005 and 2004 (Unaudited)
    5Notes to
      Unaudited Condensed Consolidated Financial Statements
    7Item 2. Management's Discussion and Analysis
      of Financial Condition
      and Results of Operations
    22Item 3. Controls and Procedures
    33Part II.
    OTHER INFORMATIONItem 1. Legal Proceedings
    34Item 2. Unregistered Sales of Equity
      Securities and Use of Proceeds
    34Item 3. Defaults Upon Senior
      Securities
    34Item 4. Submission of Matters to a Vote of
      Security Holders
    34Item 5. Other Information
    34Item 6. Exhibits
    34SIGNATURES
    35EXHIBIT INDEX
    36









**CENTERGISTIC
SOLUTIONS**







**Condensed
Consolidated Balance Sheet**


March
      31,2005(Unaudited)**ASSETS****Current**Cash
      and cash equivalents
    
    $
    27,761Trade
      receivables, less allowance for doubtful accounts of
    $53,200
    
    
    739,638Inventories
    
    
    197,131Prepaid
      expenses
    
    
    110,906Miscellaneous
      receivables
    
    
    36,865Total
      current assets
    
    
    1,112,301**Property,
      equipment, and leasehold **improvements**,
      net of accumulated depreciation of
$660,993**
    
    
    128,926**Capitalized
      software development costs**,
      net
      of accumulated amortization of $1,720,593
    
    
    132,558**Other
      assets**Deferred
      offering costs
    
    
    554,334Other
    
    
    36,693Total
      other assets
    
    
    591,027$
    1,964,812


-3-




**CENTERGISTIC
SOLUTIONS**





**Condensed
Consolidated Balance Sheet (continued)**


March
      31,2005(Unaudited)**LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)****Current
      liabilities**Notes
      payables - related parties
    
    $
    45,247Line
      of credit-related party
    
    
    285,000Accounts
      payable
    
    
    468,278Accrued
      expenses
    
    
    113,019Deferred
      income
    
    
    204,626Total
      liabilities, all current
    
    
    1,116,170**Commitments
      and contingencies** (Notes
      4 through 7)**Stockholders’
      equity (deficit)**Common
      stock, 80,000,000 shares authorized; 10,699,312 shares issued and
      outstanding
    
    
    3,058,510Additional
      paid-in capital
    
    
    284,392Accumulated
      deficit
    
    
    (2,465,531
    )Unearned
      stock compensation
    
    
    (15,517
    )Common
      stock to be redeemed
    
    
    (12,574
    )849,280Less
      notes receivable
    
    
    (638
    )Total
      stockholders’ equity (deficit)
    
    
    848,642Total
      liabilities and stockholders’equity
      (deficit)
    
    $
    1,964,812




-4-




**CENTERGISTIC
SOLUTIONS**


**Condensed
Consolidated Statements of Operations and Comprehensive Income
(Loss)**


**Nine
      Months Ended**
    
    **Three
      Months Ended****March
      31,**
    
    **March
      31,****2005**
    
    ******2004**
    
    **2005**
    
    **2004****(Unaudited)**
    
    **(Unaudited)****Revenues:**Software
      and service revenues
    
    $
    2,329,705
    
    $
    2,152,064
    
    
    755,331
    
    
    675,883Professional
      services
    
    
    16,560
    
    
    115,040
    
    
    -
    
    
    20,640Hardware
      sales
    
    
    329,921
    
    
    678,968
    
    
    134,915
    
    
    135,375Total
      revenues
    
    
    2,676,186
    
    
    2,946,072
    
    
    890,246
    
    
    831,898**Cost
      of revenues:**Software
      and service costs
    
    
    442,487
    
    
    407,237
    
    
    152,482
    
    
    134,325Professional
      services
    
    
    4,780
    
    
    96,260
    
    
    -
    
    
    14,450Hardware
      costs
    
    
    291,901
    
    
    514,203
    
    
    127,992
    
    
    119,036Total
      cost of revenues
    
    
    739,168
    
    
    1,017,700
    
    
    280,474
    
    
    267,811Gross
      profit
    
    
    1,937,018
    
    
    1,928,372
    
    
    609,772
    
    
    564,087**Operating
      expenses:**Selling
      and marketing
    
    
    552,256
    
    
    598,549
    
    
    188,337
    
    
    179,882Research
      and development
    
    
    306,997
    
    
    323,528
    
    
    101,346
    
    
    102,071General
      and administrative
    
    
    1,431,088
    
    
    1,296,843
    
    
    498,145
    
    
    479,937Total
      operating expenses
    
    
    2,290,341
    
    
    2,218,920
    
    
    787,828
    
    
    761,890**Operating
      loss**
    
    
    (353,323
    )
    
    (290,548
    )
    
    (178,056
    )
    
    (197,803
    )**Other
      expense**
    
    
    (4,725
    )
    
    (4,019
    )
    
    (43
    )
    
    90**Interest
      expense**
    
    
    (12,185
    )
    
    (162,271
    )
    
    (9,775
    )
    
    (33,111
    )Loss
      before income taxes
    
    
    (370,233
    )
    
    (456,838
    )
    
    (187,874
    )
    
    (230,824
    )**Income
      tax provision**
    
    
    (3,200
    )
    
    (3,200
    )
    
    -
    
    
    -**Net
      loss**
    
    
    (373,433
    )
    
    (460,038
    )
    
    (187,874
    )
    
    (230,824
    )**Other
      comprehensive income, net of tax**
    
    
    -
    
    
    3,834
    
    
    -
    
    
    -**Comprehensive
      loss**
    
    $
    (373,433
    )
    $
    (456,204
    )
    
    (187,874
    )
    
    (230,824
    )Basis
      and diluted net loss per share
    
    $
    (0.04
    )
    $
    (0.05
    )
    
    (0.02
    )
    
    (0.03
    )Weighted-average
      number ofcommon
      shares outstanding
    
    
    10,507,590
    
    
    9,201,135
    
    
    10,699,312
    
    
    9,186,504


-5-




**CENTERGISTIC
SOLUTIONS**


**Condensed
Consolidated Statements of Cash Flows**


****
    
    
    
    **Nine
      Months Ended******
    
    
    
    **March
      31,****2005**
    
    
    **2004******
    
    
    
    **(Unaudited)****Cash
      flows from operating activities**Net
      loss
    
    
    $
    (373,433
    )
    $
    (460,038
    )Adjustments
      to reconcile net loss to net
      cash used by operating activities:Depreciation
      and amortization
    
    
    
    134,561
    
    
    168,187Provision
      for doubtful accounts
    
    
    
    (7,000
    )
    
    28,374Stock
      compensation
    
    
    
    5,589
    
    
    88,198Non-cash
      interest expense
    
    
    
    -
    
    
    55,719Loss
      on sale of securities available for sale
    
    
    
    -
    
    
    2,657Increase
      (decrease) from changes in
      assets and liabilities:Trade
      receivables
    
    
    
    (68,519
    )
    
    (164,613
    )Inventories
    
    
    
    (18,504
    )
    
    (20,459
    )Prepaid
      expenses
    
    
    
    (34,388
    )
    
    (73,265
    )Miscellaneous
      receivables
    
    
    
    (12,706
    )
    
    (78
    )Deposits
    
    
    
    -
    
    
    (1,126
    )Patent
      costs
    
    
    
    -
    
    
    (6,423
    )Accounts
      payable
    
    
    
    54,440
    
    
    191,644Accrued
      expenses
    
    
    
    (25,378
    )
    
    59,600Deferred
      income
    
    
    
    47,244
    
    
    33,466Net
      cash used by operating activities
    
    
    
    (298,094
    )
    
    (98,157
    )**Cash
      flows from investing activities**Proceeds
      from sale of securities
    
    
    
    -
    
    
    4,798Additions
      to capitalized software development costs
    
    
    
    -
    
    
    (11,065
    )Purchase
      of equipment
    
    
    
    (18,867
    )
    
    (28,545
    )Net
      cash used by investing activities
    
    
    
    (18,867
    )
    
    (34,812
    )


-6-




**CENTERGISTIC
SOLUTIONS**


**Condensed
Consolidated Statements of Cash Flows (continued)**


****
    
    
    
    **Nine
      Months Ended******
    
    
    
    **March
      31,****2005**
    
    
    **2004******
    
    
    
    **(Unaudited)****Cash
      flows from financing activities**Deferred
      offering costs
    
    
    
    (86,463
    )
    
    (210,797
    )Principal
      payments on term loan and notes
      payable
    
    
    
    -
    
    
    (60,000
    )Borrowings
      on short-term debt
    
    
    
    285,000
    
    
    460,000Repurchase
      of common stock
    
    
    
    (5,363
    )
    
    (15,787
    )Loan
      against distribution
    
    
    
    (500
    )
    
    -Payments
      received on note receivable
    
    
    
    2,202
    
    
    1,953Net
      cash provided by financing
      activities
    
    
    
    194,876
    
    
    175,369**Net
      (decrease) increase in cash and cash equivalents**
    
    
    
    (122,085
    )
    
    42,400**Cash
      and cash equivalents,**beginning
      of period
    
    
    
    149,846
    
    
    32,012**Cash
      and cash equivalents,**end
      of period
    
    
    $
    27,761
    
    $
    74,412*Supplemental
      Disclosures of Cash Flow *Information:**Cash
      payments for:Interest
    
    
    $
    19,410
    
    $
    4,990Income
      tax payments
    
    
    $
    3,200
    
    $
    3,997




-7-




**CENTERGISTIC
SOLUTIONS**


**Condensed
Consolidated Statements of Cash Flows (continued)**





*Supplemental
Disclosures of Non-Cash Investing and Financing Activities:*





During
the nine months ended March 31, 2004, in conjunction with the private debt
offering discussed in Note 7, a vendor converted $30,000 of accounts payable
owed to a convertible promissory note.





During
the nine months ended March 31, 2004, the Company issued warrants to purchase
common stock as part of a private placement of debt. The estimated fair value of
the warrants was $12,533. In connection with the private placement, the Company
reclassified $53,616 of deferred offering costs to debt discount as these costs
were previously incurred for a pending financing transaction. The cost of the
debt discount is being accreted as non-cash interest expense over the term of
the notes payable.





During
the nine months ended March 31, 2004, the Company agreed to purchase its common
stock from a shareholder (Note 4). The Company issued a note payable for $44,200
and recorded common stock to be redeemed as an offset to stockholders’ equity
(deficit). During that period, the Company paid down the note payable and
redeemed a total of $8,061 of common stock.







-8-
 **CENTERGISTIC
SOLUTIONS, INC.**
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*





**1.**
    **Organization
      and Nature of Business**





Centergistic
Solutions, Inc. (the “Company”) was incorporated in the State of California on
March 10, 1972.





The
Company provides integrated information distribution and reporting systems,
serving both general business and contact center environments. The products
provide critical information throughout the enterprise to help companies improve
performance and increase personnel productivity.





Affinitec
Corporation, a wholly owned subsidiary, manufacturers and distributes software
that enables automatic call distribution management system users to obtain
sophisticated reporting and communications tools to help manage their work
force, forecast staffing requirements, and schedule their agents.





Substantially
all of the remaining operations are conducted by the Company’s Mexican
subsidiary, Centergistic Solutions, S. DE R.L. DE D.V. (formerly known as AAC de
Latin America). The Mexican operations distribute products of its parent, as
well as other telecommunications products from third parties.





LYA,
Inc., a wholly owned subsidiary, is a consulting business for call centers and
the telecommunications industry. The operations of this entity were merged into
that of the parent company during fiscal year 2005, and management stopped
viewing it as an operating segment.





**2.**
    **Summary
      of Significant Accounting Policies**





*Basis
of Presentation*





The
accompanying unaudited consolidated financial statements as of March 31, 2005
and for the three and nine month periods ended March 31, 2005 and 2004 have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and in accordance
with the instructions per Item 310(b) of Regulation SB. Accordingly, they do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, considered necessary for a fair presentation have been
included. Operating results for the three and nine month period ended March 31,
2005 are not necessarily indicative of the results that may be expected for the
year ending June 30, 2005. These condensed consolidated financial statements and
notes thereto should be read with the consolidated financial statements for the
year ended June 30, 2004 included in the Company’s Form 10-KSB filed with the
Securities and Exchange Commission.







-9-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*




**2.**
    **Summary
      of Significant Accounting Policies
(continued)**


*Principles
of Consolidation*





The
accompanying condensed consolidated financial statements as of March 31, 2005
and for the three and nine months ended March 31, 2005 and 2004 include the
accounts of the Company and its wholly owned subsidiaries, Affinitec Corporation
(“Affinitec”), Centergistic Solutions, S. DE R.L. DE D.V. (“Centergistic
Solutions - Mexico”) and LYA, Inc. (“LYA”). All significant intercompany
accounts and transactions have been eliminated.





*Management’s
Plans / Liquidity*





During
the nine months ended March 31, 2005, the Company incurred a net loss of
$373,433 and an operating loss of $353,323, which includes depreciation and
amortization of $134,561, and, as of March 31, 2005, the Company had a working
capital deficit of $(3,869). The Company demonstrated improved margins during
the nine months ended March 31, 2005, as the margin percentage increased to 72%
from 65% in the prior period. This was achieved on a 9% decrease in revenue, of
$269,886. The Company has improved margins through increased sales of software
and services and reduced hardware sales. The Company anticipates revenue growth
through an improved economy, increased sales of new software products to our
European distributor, targeted sales and marketing efforts, addition of
strategically placed sales personnel, and expects the increased software sales
trend to continue this fiscal year and produce operating profits throughout the
next fiscal year.





Additionally,
the Company has signed a letter of intent with an underwriter for the purpose of
a private placement debt/equity conversion offering of $3,000,000 anticipated to
commence in May 2005. While there is no assurance such an offering will be
successful, the Company has seen interest in the offering in the marketplace and
anticipates the proceeds will be raised. However, the Company has created
several different cost cutting measures and will reduce expenses as necessary
should the offering not be successful and operating conditions necessitate such
actions.





On
November 30, 2004, the Company entered into a line of credit agreement with
Venture Communications Corporation, a shareholder and related party. The terms
of the agreement call for a maximum advance of $300,000 secured by a lien on all
the assets of the Company. The maximum amount under the line was subsequently
increased to $400,000 on March 31, 2005. The Company believes that this line of
credit will provide sufficient working capital to sustain operations through the
remainder of the fiscal year.





-10-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*


**2.**
    **Summary
      of Significant Accounting Policies
(continued)**





*Segment
Reporting*





The
Company adopted Statement of Financial Accounting Standard (“SFAS”) No. 131,
“Disclosures About Segment of an Enterprise and Related Information,” beginning
July 2003. SFAS No. 131 establishes standards for the way to report information
about operating segments and related disclosures about products and services,
geographic areas, and major customers in financial statements. As of and for the
three and nine months ended March 31, 2005, the Company views its operations and
manages its business in two segments: Centergistic Solutions and Centergistic
Solutions - Mexico. For the three and nine months ended March 31, 2004, the
Company also viewed LYA as a segment.





The
following represents the total assets by segment:


March 31, 2005Centergistic
      Solutions
    
    $
    4,432,433Centergistic
      Solutions - Mexico
    
    
    660,8715,093,304Eliminations
    
    
    (3,128,492
    )Total
      consolidated assets
    
    $
    1,964,812
 
 The
following represents the revenues, gross profit and net income (loss) by
segment:


Nine Months Ended
      March
      31,
    
    
    Three Months Ended
      March
      31,2005
    
    
    2004
    
    
    2005
    
    
    2004Centergistic
      SolutionsRevenues
    
    $
    1,688,201
    
    $
    2,014,764
    
    $
    557,227
    
    $
    527,786Gross
      profit
    
    $
    1,391,520
    
    $
    1,500,561
    
    $
    424,455
    
    $
    408,698Net
      income (loss)
    
    $
    (445,502
    
    $
    (460,401
    )
    $
    (189,048
    
    $
    (239,620
    )Centergistic
      Solutions - MexicoRevenues
    
    $
    987,985
    
    $
    816,268
    
    $
    333,019
    
    $
    283,472Gross
      profit
    
    $
    545,498
    
    $
    409,031
    
    $
    185,317
    
    $
    149,199Net
      income (loss)
    
    $
    72,071
    
    $
    (13,265
    )
    $
    1,176
    
    $
    4,423LYARevenues
    
    $
    --
    
    $
    115,040
    
    $
    --
    
    $
    20,640Gross
      profit
    
    $
    --
    
    $
    18,780
    
    $
    --
    
    $
    6,190Net
      income (loss)
    
    $
    --
    
    $
    13,628
    
    $
    --
    
    $
    4,373





-11-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*





**2.**
    **Summary
      of Significant Accounting Policies
(continued)**





*Net
Loss Per Share*





In
accordance with the provisions of SFAS No. 128, “Earnings Per Share,” the
Company is required to disclose basic and diluted earnings (loss) per share.
Basic earnings (loss) per share is computed by dividing net income (loss), by
the weighted average number of common shares outstanding during each period.
Diluted earnings (loss) per share is similar to basic earnings (loss) per share,
except that the weighted average number of common shares outstanding is
increased to reflect the dilutive effect of potential common shares, such as
those issuable upon the exercise of stock or warrants, as if they had been
issued.





For all
periods presented, there is no difference between basic and diluted loss per
common share, as the effects of stock options or warrants are anti-dilutive,
given the net loss applicable to common shares for each period.





*Concentrations*





Financial
instruments that potentially subject the Company to concentrations of credit
risk consist principally of temporary cash investments and trade accounts
receivable.





The
Company maintains its cash balances at financial institutions that management
believes possess high-credit quality, and related cash balances are insured by
the Federal Deposit Insurance Corporation up to $100,000 and the Securities
Investor Protection Corporation up to $500,000. At March 31, 2005, the Company
did not have any amounts held in the bank in excess of federally insured
limits.





Management
believes that concentrations of credit, with respect to trade receivables, are
minimized by the Company’s customer base. As of March 31, 2005, the Company’s
largest customer accounted for 30% of total trade receivables. For each of the
nine months ended March 31, 2005 and 2004, the Company’s largest customer
accounted for 21% and 27% of total Company net revenues, respectively. There
were no other customers that exceeded 10% of such amounts as of each respective
period-end.





As of
March 31, 2005, customers of the Company’s Mexican subsidiary accounted for 45%
of total trade receivables. For each of the nine months ended March 31, 2005 and
2004 sales to customers of the Company’s Mexican subsidiary account for 37% and
28%, respectively, of total Company net revenues.





-12-
 **CENTERGISTIC
SOLUTIONS, INC.**
 
 **Notes
to Condensed Consolidated Financial Statements**
 *(Information
with Respect to the Nine Months Ended*
 *March
31, 2005 and 2004 is Unaudited)*




**2.**
    **Summary
      of Significant Accounting Policies
(continued)**





*Deferred
Offering Costs*





The
Company has engaged the services of investment bankers to assist with the
potential funding of future operations through private investors. As of March
31, 2005, the Company capitalized a net amount of $554,334 for these and related
services and such are included in the accompanying condensed consolidated
balance sheets as deferred offering costs. During the year ended June 30, 2004,
the Company completed a debt offering (Note 7). As part of this transaction, the
Company reclassified $53,615 from deferred offering costs to a contra-liability
account. Such amount represented that portion of the balance that related
directly to the costs of issuing the notes payable discussed in Note 7. The
remaining capitalized deferred offering costs relate to a pending equity
transaction. There can be no assurance that the Company will receive funding
from private investors. If the Company is able to receive private funding, the
deferred offering costs will be offset against the proceeds received; otherwise,
such will be expensed when the offering efforts are terminated.





*Accounting
for Stock-based Compensation*





The
Company has adopted SFAS No. 123, “Accounting for Stock-based Compensation,” as
amended by SFAS No. 148, “Accounting for Stock-based Compensation-Transition and
Disclosure,” which establishes financial accounting and reporting standards for
stock-based compensation. SFAS No. 123 generally suggests, but does not require,
stock-based employee compensation transactions be accounted for based on the
fair value of the consideration received, or the fair value of the equity
instruments issued, whichever is more reliably measurable. Companies that do not
elect to change their accounting for stock-based employee compensation are
required to disclose the effect on net income as if the provisions of SFAS No.
123 were followed. The Company has decided to retain the provisions of APB
Opinion No. 25, and related interpretations thereof, for recognizing stock-based
employee compensation expense, which includes members of the board of directors.
Non-employee stock compensation is recorded at fair value in accordance with
SFAS No. 123.




-13-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*




**2.**
    **Summary
      of Significant Accounting Policies
(continued)**





*Accounting
for Stock-based Compensation (continued)*





In
accordance with APB Opinion No. 25, the Company has incurred compensation
cost aggregating $65,616 through March 31, 2005 for stock option grants, of
which $5,589 was recognized during the nine-month periods ended March 31, 2005
and 2004. Had compensation cost for the stock-based compensation plan been
determined based on the fair value of awards (the method described in SFAS No.
123), the reported net loss would have been as shown below:


Nine MonthsEnded
      March 31,2005
    
    
    2004Net
      loss, as reported
    
    $
    (373,433
    )
    $
    (460,038
    )Add:
      Stock compensation expense recorded in accordance with APB Opinion No.
      25
    
    
    5,589
    
    
    5,589Deduct:
      Total stock-based employee compensation expense determined under fair
      value based method for all stock options, net of related tax
      effects
    
    
    (34,859
    )
    
    (46,469
    )Pro
      forma net loss
    
    $
    (402,703
    )
    $
    (500,918
    )Pro
      forma net loss per share
    
    $
    (0.04
    )
    $
    (0.05
    )





The fair
value of each grant is estimated at the grant date using the following
assumptions: no stock price volatility; no dividends for all years; risk-free
interest rates of 3.75% and 2.00% for the nine month periods ended March 31,
2005 and 2004, respectively, and expected lives of ten years for all
grants.




-14-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*




**2.**
    **Summary
      of Significant Accounting Policies
(continued)**





Revenue
Recognition





The
Company typically provides bundled software and services through a distributor
network. Each component of a bundled solution is separately identified based
upon vendor specific objective evidence. The components of revenue are
recognized as follows:





§
    Software
      license fees for site licenses and master license agreements are
      recognized as revenue upon delivery of the software, and when remaining
      obligations are not significant. The Company’s software licensing
      agreement provides the customer with a 90-day warranty and return
      provision, including a limited time to test the software. If the customer
      can prove that the software is not functioning, the Company has the
      opportunity to remedy the problem and, if not resolved, the customer may
      return the software. The Company considers the need for a reserve for
      warranty and returns on a quarterly basis; however, such occurrences have
      historically not been significant.





§
    Advance
      contract payments for software services, consisting primarily of software
      maintenance and support, are recorded as deferred income until the
      services are provided. After the expiration of the software license
      warranty period, the Company commences recognition of the contract
      payments ratably over the term of the maintenance period. All subsequent
      software maintenance and support is billed separately and recognized
      ratably over the life of the maintenance period.





§
    Revenues
      from software sold to distributors are recognized upon delivery since
      title passes upon delivery. The distributor is subject to a restocking fee
      of 10%-25% if an order is returned; however, historically, such returns
      have been insignificant. Special orders are
  non-cancelable.





§
    Software
      and service revenues include services related to maintenance, time and
      materials contracts, installation and training. Such revenues are
      recognized as the services are rendered.





§
    Revenues
      from the sale of computer and display hardware are recognized upon
      shipment, which is generally concurrent with the passage of
      title.





§
    Professional
      services revenues are derived from the services provided by the Company’s
      consulting business. Such revenues are recognized as the services are
      rendered.




-15-
 **CENTERGISTIC
SOLUTIONS, INC.**
 
 **Notes
to Condensed Consolidated Financial Statements**
 *(Information
with Respect to the Nine Months Ended*
 *March
31, 2005 and 2004 is Unaudited)*





**3.**
    ****Capitalized
      Software Development
  Costs****


Research
and development, which includes design, development, and testing of new
software, software maintenance, and enhancement costs, is expensed as incurred
until technological feasibility has been established for the product.
Technological feasibility is defined as a completion of detail program design.
Thereafter, certain costs, such as coding and testing, are capitalized until the
product is available for general release to customers.





Software
costs are amortized on a product-by-product basis using the straight-line method
over the remaining estimated economic life of the software product, which is
typically six to five years. Actual future sales and remaining economic life of
the product could differ significantly from these estimates. Amortization of
software costs for the nine months ended March 31, 2005 and 2004 was $61,375 and
$95,065, respectively, and is included general and administrative expenses in
the accompanying condensed consolidated statements of operations and
comprehensive income (loss).





The
following describes the components of capitalized software development costs as
of March 31, 2005 and the related estimated lives:




Date TechnologicalFeasibilityEstablished
    
    Estimated LifeCenterStats
    
    December
      2001
    
    5
      yearsAgentView
    
    June
      1999
    
    5
      years
  The
following summarizes the costs capitalized by product as of March 31,
2005:
 CenterStats
    
    $
    398,998AgentView
      (fully amortized)
    
    
    307,476Fully
      amortized products
    
    
    1,146,6771,853,151Accumulated amortization
    
    
    (1,720,593
    )$
    132,558
  **4.**
    **Notes
      Payable - Related Parties**


On
November 30, 2004, the Company entered into a line of credit agreement with
Venture Communications Corporation, a shareholder and related party. The terms
of the agreement call for a maximum advance of $300,000 secured by a lien on all
the assets of the Company. Interest on the advances are payable monthly at 10%
per annum. Advances and unpaid interest on the line are due on July 1, 2005.
Advances on the line are personally guaranteed in equal amounts by the
President/CEO and Vice President/COO/CFO of the Company. The maximum amount
available under the line was increased to $400,000 on March 31, 2005. The
balance of the line at March 31, 2005 is $285,000.




-16-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*




**4.**
    **Notes
      Payable - Related Parties
(continued)**





On
December 31, 2002, the Company entered into two notes payable to two of its
officers for an aggregate $24,975. Such notes bear interest at 6% and the
principal and interest are due and payable on demand. These notes are secured by
all of the assets of the Company.





In April
2004, the Company entered into a note payable with an employee of the Company
for $5,000. The note bears interest at 6% and the principal and interest are due
on demand. The note is secured by all of the assets of the Company.





In July
2003, the Company agreed to purchase 148,328 shares of Company common stock from
a former employee for $44,220 and issued a secured promissory note payable in
such amount. The note bears interest at 5% per annum, and monthly payments in
the amount of $2,750 are due and payable on the note commencing after December
31, 2003. As each payment is made, the Company cancels and retires 8,728 shares.
Payment of the note is secured by substantially all of the Company’s assets. The
balance of the note at March 31, 2005 is $15,272.





**5.**
    **Commitments
      and Contingencies**





*Consulting
Agreement*





As of
October 1, 2003, the Company entered into an Independent Consulting Agreement
(the “Agreement”) with a firm whereby the firm is to assist the Company in the
listing of its shares on a stock exchange, the sale of its business or other
debt or equity financings. Pursuant to the Agreement, the Company is obligated
to pay a success fee of up to $37,500 in stock upon receipt by the Company of up
to $3,000,000 in aggregate financing under the terms of the Agreement.





*Off-Balance
Sheet Arrangement*





The
Company provides indemnifications of varying scope and size to certain customers
against claims of intellectual property infringement made by third parties
arising from the use of the Company’s products. Management evaluates estimated
losses for such indemnifications under SFAS No. 5, “Accounting for
Contingencies,” as interpreted by FASB Interpretation No. 45, “Guarantor’s
Accounting and Disclosure Requirements for Guarantees.” Management considers
such factors as the degree of probability of an unfavorable outcome and the
ability to make a reasonable estimate of the amount of the loss. As of March 31,
2005, the Company has not encountered material costs as a result of such
obligations and has not accrued any liabilities related to such indemnifications
in the accompanying condensed consolidated financial statements.





-17-
 ****CENTERGISTIC
SOLUTIONS, INC.****
**Notes
to Condensed Consolidated Financial Statements**
*(Information
with Respect to the Nine Months Ended*
*March
31, 2005 and 2004 is Unaudited)*




**6.**
    **Stockholders’
      Equity**





*Stock
Option Plans*





The
stockholders of the Company have approved the Centergistic Solutions, Inc.
Incentive Stock Option Plan (the “Plan”), which provides for the issuance of up
to 2,800,000 shares of its common stock. Options granted under the Plan are not
exercisable until two years after they are issued and expire ten years after the
date of issue. The options vest at a rate of 25% per year over a four-year
period. At March 31, 2005, 322,000 shares were available for grant under
the terms of this Plan.





In
January 1998, the stockholders of the Company approved a nonqualified stock
option plan for the directors of the Company. The plan provides for issuance of
up to 800,000 shares of its common stock to directors. Options are granted based
on attendance at board meetings. At March 31, 2005, 515,200 shares were
available for grant under the terms of this plan.





A summary
of the status of the plans, and changes during the nine months ended March 31,
2005 is as follows:





Fixed
      Options
    
    Shares
    
    Weighted
      Average Exercise
      PriceOutstanding
      at beginningof
      period
    
    2,418,800
    
    $0.54Expired
    
    (183,600
    )
    (0.44
    )Granted
    
    
    527,600
    
    
    0.42Outstanding
      at end of period
    
    
    2,762,800
    
    $
    0.52Exercisable
      at end of period
    
    
    1,472,000
    
    $
    0.64Weighted
      average fair value of options granted during the period
    
    
    
    
    $
    0.42
 A
summary of stock options outstanding at March 31, 2005 is as
follows:


Options
      Outstanding
    
    Options
      ExercisableFixed
      Options
    
    
    
    
    Number
      Outstanding
    
    
    Weighted
      Average
      Remaining
      Contractual Life
    
    Weighted
      AverageExercise
      Price
    
    Number
      Exercisable
    
    
    Weighted
      AverageExercise
      Price$0.30
      to $0.47
    
    
    
    
    1,550,000
    
    
    8.28
    
    $
      0.39
    
    261,600
    
    $
    0.40$0.52
      to $0.79
    
    
    
    
    1,212,800
    
    
    2.95
    
    0.69
    
    1,210,400
    
    
    0.692,762,800
    
    
    
    
    $
      0.52
    
    1,472,000
    
    $
    0.64
   -18-
 
 **CENTERGISTIC
SOLUTIONS, INC.**
 **Notes
to Condensed Consolidated Financial Statements**
 *(Information
with Respect to the Nine Months Ended*
 *March
31, 2005 and 2004 is Unaudited)*


**6.**
    **Stockholders’
      Equity (continued)**





*Common
Stock Purchase Warrants*





In
conjunction with a subordinated debt financing with a related party in 1998, the
Company issued warrants to purchase 480,000 shares of common stock at $0.676 per
share, which are exercisable at any time prior to September 2005. All of these
warrants were outstanding at March 31, 2005.





In
connection with the agreement to sell the rights to the proceeds from an
outstanding lawsuit in fiscal year 2001, the Company issued warrants (the
“Fiscal 2001 Warrants”) to purchase 4,528,000 shares of common stock at $0.4375
per share, which are exercisable at any time prior to September 2005. Pursuant
to the terms of the Fiscal 2001 Warrants, should the Company issue a warrant or
stock option to any person or entity who is not an employee, director or
consultant of the Company providing for an exercise price of less than $0.654
per share, then the exercise price of the Fiscal 2001 Warrants shall be reduced
to 110% of the lowest such exercise price (the “Anti-dilution Provision”). In
accordance with the provisions of SFAS No. 123, the value of the lawsuit
warrants was estimated to be $101,332. All of these warrants were outstanding as
of March 31, 2005.





In
connection with the line of credit agreement (Note 4), the Company issued
warrants to its CEO and CFO to purchase 111,110 shares of common stock at $0.36
per share, which are exercisable any time prior to January 2010. All of these
warrants were outstanding as of March 31, 2005.


**7.**
    **Private
      Placement of Debt**


Subsequent
to June 30, 2003 and through March 31, 2004, the Company entered into a total of
16 Note and Warrant Purchase Agreements (the “Agreements”). Under the
Agreements, the lenders agreed to loan the Company an aggregate $490,000
($30,000 of which was issued upon conversion of accounts payable) in exchange
for convertible subordinated promissory notes (the “Notes”). The Notes,
excluding all accrued interest, were convertible into shares of common stock of
the Company. The principal amount of the Notes were converted at a price of
$0.3975 per share effective June 15, 2004. Interest accrued at a rate of 6% per
annum and was paid in full in September 2004. The notes contained a beneficial
conversion feature, the value of which was determined to be $8,618. Such was
recorded as a component of the debt discount and was accreted as non-cash
interest expense over the term of the Notes.





In
consideration for entering into the Notes, the Company also issued warrants (the
“Notes Warrants”) entitling the note holder to purchase shares up to an
aggregate of 74,016 shares of the Company’s common stock that will be received
by the note holder upon conversion of the Notes discussed above. The Notes
Warrants are exercisable in whole, but not in part, at any time from the date of
issuance of the Notes Warrants and ending on August 31, 2005 at a price of
$0.3975 per share of common stock. The Company estimated the value of these
warrants at $8,618, which was accreted as non-cash interest expense over the
term of the Notes.





-19-
 **CENTERGISTIC
SOLUTIONS, INC.**
 
 **Notes
to Condensed Consolidated Financial Statements**
 *(Information
with Respect to the Nine Months Ended*
 *March
31, 2005 and 2004 is Unaudited)*




**7.**
    **Private
      Placement of Debt (continued)**


Of the
aggregate loan amount of $490,000, an aggregate $70,000 was loaned by two
officers and a relative of an officer with an aggregate of 10,576 warrants being
issued to such individuals.





In
connection with the above-described transactions, the Company paid, as a
financial consulting fee, $20,750 in cash and issued warrants, exercisable at a
price of $0.466 per share to purchase 44,512 shares of common stock. The Company
estimated the value of the warrants at $3,915 which was recorded as a debt
discount. The financial consulting fee and warrants were accreted as non-cash
interest expense over the term of the Notes.





Upon
issuance of the Notes, the Company reclassified $53,615 of related costs from
deferred offering costs to a contra-liability account. Such was accreted as
non-cash interest expense over the term of the Notes.





Upon
conversion of the Notes, the remaining discount recorded was fully amortized as
non-cash interest expense.





Pursuant
to the Anti-dilution Provision of the Fiscal 2001 Warrants discussed in Note 6,
such warrants were repriced to $0.4375 upon issuance of the Notes Warrants. As
such, the Fiscal 2001 Warrants were revalued in accordance with SFAS No. 123,
resulting in additional expense of $82,609. Such amount was recorded as
effective interest expense .





On July
1, 2003, the Company also entered into two consulting agreements with Hanover
Capital Corp. (“Hanover”) pursuant to which the Company agreed to pay to Hanover
a monthly retainer of $5,000 for a period of 12 months, but cancelable by either
party at any time with ten days written notice prior to the end of each monthly
period. The Company also issued shares of common stock to Hanover as follows:
(i) 200,000 shares upon filing of the Company’s proposed registration statement
or Form SB-2; (ii) 50,000 shares upon completion of a forward split of the
Company’s common stock; and (iii) 100,000 shares upon approval of the Form SB-2.
These shares were issued in August 2004.







-20-
 **CENTERGISTIC
SOLUTIONS, INC.**




**ITEM
2.**  **MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS**





**A
NOTE ABOUT FORWARD-LOOKING STATEMENTS**





The
statements, other than statements of historical fact, included in this report
are forward-looking statements.  Forward-looking statements generally can
be identified by the use of forward-looking terminology such as “may,” “will,”
“expect,” “intend,” “estimate,” “anticipate,” “plan,” “seek,” or
“believe.”  We believe that the expectations reflected in such
forward-looking statements are accurate.  However, we cannot assure you
that such expectations will occur.  Our actual future performance could
differ materially from such statements. These forward-looking statements are
subject to risks and uncertainties that could cause actual results and events to
differ materially. For a detailed discussion of these risks and uncertainties
please see the “Factors That May Affect Future Results” section of this report.
You should not unduly rely on these forward-looking statements, which speak only
as of the date of this report.  Except as required by law, we are not
obligated to release publicly any revisions to these forward-looking statements
to reflect events or circumstances occurring after the date of this report or to
reflect the occurrence of unanticipated events.




**General**




We are a
provider of business performance and intelligence management software that
enables companies to translate data into critical and meaningful metrics
allowing for improved financial and operational performance. Our software
provides managers with customizable reporting and analysis tools. These tools
allow for real-time monitoring of and reporting against crucial benchmarks in an
organization. This enables constant monitoring of a company’s progress against
financial and operational goals, and helps achieve optimal operational
performance.




Business
performance and intelligence management software uses historical and real-time
data and metrics to provide managers with visibility on the business operations
in real-time. We provide call/contact center managers with powerful reporting
and analytic tools allowing the constant monitoring of the operational
effectiveness and efficiency. While our current market focus is on the
call/contact center, we offer software to all operational areas of the
enterprise to gauge performance and profitable improvement. We also offer
consulting, training, technical support and programming services for our
customers and partners.





Our
company operates through its domestic headquarters and our wholly-owned Mexican
subsidiary located in Mexico City, Mexico. Our domestic operation sells
AgentView, CenterStats, and the related hardware necessary to run these
applications or display statistics derived from these applications, training and
educational services, installation, custom programming and support services. Our
Lynch Young & Company Professional Services Group wound up operations in
June 2004 and was subsequently merged into the operations of
Centergistic.




Centergistic
Solutions, Inc., Inc. was incorporated in Los Angeles, California on
March 13, 1972. Lynch Young Inc. (dba Lynch Young & Company) was
incorporated in California on October 16, 1980. Centergistic Solutions,
Inc. Latina America S. de R.L. de C.V., a limited liability partnership, was
formed in Mexico City, Mexico on May 19, 2000. This partnership was a
successor to Centergistic Solutions, Inc. Latina America S.A. de C.V., a Mexican
corporation originally formed July 1, 1993.




Our
Lynch Young & Company Professional Services Group operated as a consulting
firm selling consulting services to the call/contact center market. We ended our
separate operations of Lynch Young & Company in June 2004. Our Mexican
subsidiary acts as a distribution company selling our AgentView and CenterStats
products along with other vendor sourced products to a variety of distributors
and end-users in Latin and South America. They also sell training and
educational services, installation and product support packages.





In
2001, we completed development on our main product, CenterStats. During fiscal
year (“FY”) 2002 and 2003, we devoted what little internally generated capital
was available (approximately $100,000 in each of these fiscal years) to actively
promote, market, and sell CenterStats. The money was spent on a salesperson
focusing on selling CenterStats, and various marketing initiatives intended to
promote market awareness of CenterStats. However, due to limited resources, we
have never conducted a formal product launch and kickoff for CenterStats. In
addition, during FY 2004 and 2005, there has been a global economic slowdown,
and particularly, a decrease in corporate spending on infrastructure and
technology. These factors have had an adverse impact on our ability to market
and sell CenterStats, as well as the results of our operations.




We
face several significant challenges common in our industry: continued revenue
growth; market segment risk; technological changes; and liquidity and capital
resources.





-21-
 **CENTERGISTIC
SOLUTIONS, INC.**




We
face challenges in growing our revenues because our CenterStats product has not
been installed in a large number of clients to date, and has not achieved wide
customer acceptance due to limited marketing and sales activities. We are
dependent upon the sale of CenterStats to substantially grow our revenues. We
have developed a sales and marketing plan to achieve this revenue growth, but
need capital necessary to implement the plan.




We
currently sell our products and services into the call/contact center market. We
generally sell in two different types of environments. In one instance, our
products are part of a bundled sale at the time of a new call/contact center
purchase and installation. We are dependent on our distributors for a majority
of these types of sales. In the other instance, we sell to established
call/contact centers that perceive a lack of data, statistics, and metrics to
effectively manage and monitor the performance of their centers. We generate
revenue in this arena through both direct end-user sales and distribution
channel sales. We face challenges that our distributors could find new sources
of this type product or even internally develop their own product. We also face
challenges that the call/contact center market undergoes significant changes,
restructuring, contraction, or evolution into different technologies.




We
are subject to a rapidly changing technological environment. Our ability to keep
current with the demands of technology is critical to our success. Each time the
data flow of a particular application in the call/contact center changes or new
applications are created, we must be able to retrieve that data. Our products
must be changed also so that we may retrieve that data. If we cannot continue to
stay atop the technology curve, we will not be able to compete effectively in
this market space. To combat this challenge, we have developed technology
partnerships with many of the industry application providers such as Avaya,
Cisco, Concerto, Genesys, Microsoft, and Nortel to name a few. These
partnerships allow us the environment to test our products and certify that our
products work with a specific vendor application and to get updates as their
technology changes.




**Current
Conditions**




In
May 2003 we opened a development center in Delhi, India. We hired three
developers and currently have a staff of five. India was chosen as the site of
our center because of its available base of skilled and technological competent
developers and a lower cost structure. We plan to increase the staffing level to
ten upon a successful raise of capital. Primarily, these developers will develop
interfaces to enable our products to work with “best of breed” call/contact
center applications. Best-of-Breed (BOB) software can be defined as the use of a
specific software program or package for each specific application or
requirement. Many companies prefer, as policy, to incorporate a Best-of-Breed
software approach to make sure they are using the most highly developed and
tested solution for each application. The India development center currently
costs approximately $6,000 to $7,000 per month to maintain.




We
derive a substantial portion of our revenues from sales to customers in Mexico,
Latin America and South America. For the nine month periods ended March 31,
2005 and 2004, these customers represented approximately 37% and 28%,
respectively, of our total net revenues.




Our
revenues in these countries are derived from our subsidiary, Centergistic
Solutions, Inc. Latin America S. R. L. de C.V., a limited liability partnership.
Its office is located in Mexico City and houses 18 employees. This company acts
primarily as a distributor, selling our AgentView and CenterStats products along
with others sourced from third party vendors such as PC call accounting,
voicemail products, data collection devices, and LED display boards. This
company sells its products primarily to companies such as Avaya, Siemens and
Alcatel.




On
September 30, 2003, we completed a private funding round of convertible
promissory notes. The gross proceeds generated from this raise was $490,000, the
net cash received was $460,000. The proceeds were used to begin to implement our
sales and marketing plan for bringing CenterStats to the market and to pay the
fees and costs associated with the preparation and processing of a registration
statement filed with the SEC relating to a selling stockholder offering. We used
$100,000 towards the implementation of our sales and marketing strategy. The
remaining $360,000 was used as follows: $100,000 for accounting fees and related
services, $100,000 for consulting and advisory fees, $65,000 for principal
payments of notes payable, $55,000 for legal fees, $20,000 for printing expenses
(including EDGARizing expenses) and $20,000 for general working capital.




On
November 30, 2004, we entered into a line of credit agreement with Venture
Communications Corporation, a shareholder and related party. The terms of the
agreement call for a maximum advance of $300,000 secured by a lien on all the
assets of the Company. On March 31, 2005, the maximum amount under this line was
increased to $400,000. Advances on the line are personally guaranteed in equal
amounts by the President/CEO and Vice President/COO/CFO of the Company. We
believe that this line of credit will provide sufficient working capital to
sustain operations through the remainder of the fiscal year.




We intend
to raise up to an additional $3,000,000 in a private offering. If this raise is
successful, as to which there is no assurance, those proceeds will be used to
more fully implement our sales and marketing strategy. We intend to begin the
capital raise in May 2005. This capital raise is critical to the implementation
of our sales and marketing strategy described in this report. If the raise is
not successful, management has created several cost cutting strategies and will
implement them as business conditions necessitate.




-22-
 **CENTERGISTIC
SOLUTIONS, INC.**




We
must have capital to successfully implement our sales and marketing strategy. We
are not likely to see significant revenue growth without the sales and marketing
activities we intend to initiate with the proceeds of our intended capital
raise.




**Critical
Accounting Policies**




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities and
equity and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual results may differ from these estimates under different
assumptions or conditions.




***Revenue
Recognition***




Our
revenue recognition policy is significant because revenue is a key component of
our results of operations. We derive our revenue primarily from sales of our
various products. As described below, significant management judgments and
estimates must be made and used in connection with revenue recognized in any
accounting period. If our management makes different judgments or uses different
estimates, material differences may result in the amount and timing of our
revenue for any period. We recognize revenue from the sale of our products when:




•
    
    we
      have persuasive evidence that an arrangement exists. For all sales, we use
      a binding purchase order and sales order confirmation as evidence of an
      arrangement. Sales through certain of our distributors are evidenced by a
      master agreement governing the relationship, together with binding
      purchase orders on a transaction by transaction basis;•
    
    the
      product is delivered to the customer under the terms of the arrangement
      and title passes. Passage of title generally occurs when the product is
      delivered to a common carrier, but in some cases occurs when the customer
      receives the product;•
    
    the
      revenue is fixed and determinable. At the time of the transaction, we
      assess whether the fee associated with our revenue transactions is fixed
      and determinable based on the payment terms associated with the
      transaction. If a significant portion of a fee is due after our normal
      payment terms, which are 30 to 75 days from invoice date, then we
      account for the fee as not being fixed and determinable. In these cases,
      we recognize revenue as the fees become due; and•
    
    collection
      of the resulting receivable is reasonably assured. We assess collection
      based on a number of factors, including past transaction history with the
      customer and the credit-worthiness of the customer. We do not request
      collateral from our customers. If we determine that collection of a fee is
      not reasonably assured, then we defer the fee and recognize revenue at the
      time collection becomes reasonably assured, which generally is upon
      receipt of cash.




We
derive revenues from licensing our software products, selling computer and
display hardware, and providing customer support, training, installation, and
consulting services. Software license fees for site licenses and master license
agreements are recognized as revenue upon delivery of the software, and when
remaining obligations are not significant. Sales to distributors are recognized
upon delivery as our distributors generally have customer orders in hand before
ordering from us. Should orders be cancelled, our distributors are subject to
restocking charges of 10%-25% except for custom orders which are non-cancelable.




Our
software licensing agreement provides the customer with certain warranty
provisions, including a limited time to test the software. If the customer can
prove the software is not functioning, we have the opportunity to remedy the
problem, and if not resolved, the customer can return the software.
Historically, returns and warranty costs have not been significant.





Advance
contract payments for services, consisting primarily of software customer
support, are recorded as deferred income until after the expiration of the
software warranty period, at which time the revenue is recognized ratably over
the term of the maintenance period. All subsequent software support is billed
separately and recognized ratably over the life of the support period.




Revenue
from computer and display hardware is recognized upon shipment, and consulting
service revenue is recognized as services are rendered.




***Allowance
for Doubtful Accounts***




Our
management estimates the uncollectability of our accounts receivable for losses
that may result from the inability of our customers to make required payments.
Management specifically analyzes accounts receivable and historical bad debts,
customer concentrations, customer credit-worthiness, current economic trends and
changes in customer payment terms when evaluating the adequacy of the allowance
for doubtful accounts. If our customers’ financial condition deteriorates such
that it impairs their ability to make payments to us, additional allowances may
be required. As of March 31, 2005 and June 30, 2004, our accounts
receivable balances were $740,000 and $876,000, respectively, net of our
estimated allowances for doubtful accounts of $53,000 and $36,000, respectively.




-23-
 **CENTERGISTIC
SOLUTIONS, INC.**




The
accounts receivable balance decreased during the nine month period ended
March 31, 2005. The Company achieved lower revenue volumes during this
period and received collections on several older accounts. We do expect the
accounts receivable balance to grow as we increase our sales of CenterStats. The
payment cycle on these types of sales will stretch to 75-90 days from our
typical experience of 45-60 days.




We
have taken steps to address this trend by requiring staged payments on these
contracts when milestones are completed. We now typically require 25% of the
contract amount due upon signing, 50 to 65% upon delivery, and the remaining
balance due 30 days thereafter. We do not expect this trend to
significantly impact us as we believe revenues will continue to grow
sufficiently to enable us to generate enough cash flow to sustain operations.




The
accounts receivable turnover at March 31, 2005 has declined to 99 days. We
attribute this decline to lower sales volume and several older invoices. We do
expect the turnover to slow down as we increase sales of CenterStats with larger
invoice amounts and longer payment cycle.




***Capitalized
Software Development Costs***




We
account for software development costs in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer
Software to be Sold, Leased, or Otherwise Marketed.” SFAS No. 86 specifies
that software development costs incurred internally should be expensed as
incurred until technological feasibility has been established. Once
technological feasibility has been established, all software development costs
should be capitalized until the product is available for general release to
customers. Technological feasibility is defined as a completion of detail
program design. Amortization of capitalized software costs totaled $61,000 and
$95,000 for the nine month periods ended March 31, 2005 and 2004,
respectively.




***Long-Lived
Assets***




During
fiscal year 2003, we adopted SFAS No. 144, “Accounting for the Impairment
of Disposal of Long-Lived Assets,” which addresses significant issues relating
to the implementation of SFAS No. 121 and develops a single accounting
model, based on the framework established in SFAS No. 121 for long-lived
assets to be disposed of by sale, whether such assets are or are not deemed to
be a business. SFAS No. 144 also modifies the accounting and disclosure
rules for discontinued operations. Implementation of such standard has not had a
material effect on the accompanying consolidated financial statements. As of
March 31, 2005, no such indicators of impairment were identified by
management.




***Stock-Based
Compensation***




From
time to time, we provide compensation in the form of shares of our common stock
as well as options or warrants to acquire shares of our common stock.




We
derive the value of rights to acquire our common stock granted to non-employees,
such as options or warrants, from pricing models that consider current market
and contractual prices for our stock, as well as time value and yield curve or
volatility factors. Pricing models and their underlying assumptions impact the
amount and timing of unrealized gains and losses we recognize, and use of
different pricing models or assumptions could produce different financial
results.




Options
granted to employees are valued using the intrinsic value method which bases
compensation on the difference between the market value of the underlying shares
of common stock and the exercise price at the date of grant.




**Results
of Operations for the Nine Months Ended March 31, 2005 as Compared to the Nine
Months Ended March 31, 2004**




We
believe there is some relatively minor improvement in the economy in general,
but a weakness in corporate infrastructure technology spending in specific. We
saw decreases in revenue in almost all lines of business this past quarter, but
expect to see improvement in our revenue when corporate infrastructure
technology spending increases. Our biggest risks continue to be revenue growth,
and the capital raise necessary to implement our sales and marketing strategy.




-24-
 **CENTERGISTIC
SOLUTIONS, INC.**


******


***Revenues***


**Nine
      Month Period Ended March 31,**
      **(In
      thousands)****2005**
    
    
    
    
    
    %
    
    
    
    
    
    **2004**
    
    
    
    
    
    %Centergistic
      (U.S.)
    
    
    
    
    $
    1,688
    
    
    
    
    
    63.1
    
    
    
    
    $
    2,015
    
    
    
    
    
    68.4Mexico
      and Latin America
    
    
    
    
    $
    988
    
    
    
    
    
    36.9
    
    
    
    
    $
    816
    
    
    
    
    
    27.7Lynch
      Young & Company
    
    
    
    
    $
    -
    
    
    
    
    
    0.0
    
    
    
    
    $
    115
    
    
    
    
    
    3.9Total
    
    
    
    
    $
    2,676
    
    
    
    
    
    100.0
    
    
    
    
    $
    2,946
    
    
    
    
    
    100.0





Total
net revenues decreased by $270,000 or 9% for the nine month period ended
March 31, 2005 (“PE 2005”) as compared to the nine month period ended
March 31, 2004 (“PE 2004”). Revenues from U.S. based operations decreased
by $327,000 or 16% from the PE 2004. Revenues from Lynch Young & Company
also decreased as compared to the prior period as we concluded our operations in
this company in June 2004. Revenues from Mexico increased by $172,000 or 21%
during PE 2005.




In
the U.S. based operations, direct sales of AgentView decreased $433,000 or 58%
compared to PE 2004. This decease is consistent with the weakness in corporate
technology spending and to one large ($150,000) purchase during PE 2004. We are
starting to see increased interest from customers requiring multiple data
sources and a high number of agents. This will help our revenue in the future as
one of our AgentView products is priced on a “per agent” basis. We also charge
additional amounts for multiple data sources. As corporate infrastructure
technology spending begins to increase, we expect our revenue to increase.




Distribution
revenue in the U.S. increased by $80,000 or 9% from PE 2004. Revenue from our
largest distributor, Dacon, fell by $175,000 or 32% from PE 2004, but we saw
increases from another U.K based distributor and another here in the U.S. We
have begun a concentrated effort to drive products through our distribution
channels. We expect this increasing revenue trend to continue. We also sold our
first software order for CenterStats to British Telecom in the quarter ended
March 31, 2005. We expect business from Dacon to increase during the next nine
months as we hope to see increased volume as an upgrade program will soon be
introduced to the British Telecom (“BT”) installed base, and an expected roll
out of our CenterStats product to that base as well.




Installation
and training revenues remained flat. We expect these revenues to increase as
more Agent View and CenterStats products are sold.




Mexico
and Latin America revenues increased by $172,000 or 21% as compared to PE 2004.
The Mexican economy has stabilized and we except this trend to continue through
the remainder of the fiscal year. We expect to see our revenues begin to
steadily improve through the remainder of our fiscal year, with an improving
trend as the economy improves.




Lynch
Young revenues decreased by $115,000 as compared to PE 2004. The drop in revenue
is related to the completion of the Department of Water and Power contract
during the fiscal year ended June 30, 2004. The revenues from PE 2004 were
substantially derived from the Department of Water and Power contract. We
completed that contract in June 2004. After the completion of the contract, we
did not foresee a need to operate Lynch Young as an independent consulting
company any longer, and combined its operations with Centergistic Solutions,
Inc. U.S. based operations. This caused an impairment of the remaining amount of
goodwill in our balance sheet of $23,600 associated with Lynch Young and such
amount was written off at the conclusion of our fiscal year ended June 30,
2004 as the contract concluded. We expect to see a decline in the Lynch Young
revenues in this 2005 fiscal year, but this decline should be partially offset
by consulting revenues produced under the Centergistic Solutions, Inc. U.S.
based operations.




**Cost
of Revenues**




Cost
of revenues decreased to $739,000 or 28% of revenues as compared to $1,018,000
or 35% of revenues in PE 2004. Costs associated with hardware and third party
products sales decreased by nearly $222,000 and consulting expenses related to
the Lynch Young contract with Department of Water and Power decreased $91,000.
As a lesser portion of our revenue over this past nine months ended
March 31, 2005 was derived from hardware sales, our costs related to
hardware sales decreased accordingly. We are at risk of hardware and third party
vendors passing on price increases that will affect our profitability. We expect
this trend of declining hardware revenues and costs to continue throughout this
fiscal year resulting in improved cost of revenue percentages.




**Gross
Profit**




Gross
profit improved to 72% of revenues in PE 2005, or $1,937,000, as compared to
65%, or $1,928,000, in PE 2004. The improvement is gross profit percentage is
attributable to the mix of revenue away from hardware and third-party sourced
products to software products. We expect this trend to continue as we sell more
AgentView and CenterStats to direct end-users.




-25-
 **CENTERGISTIC
SOLUTIONS, INC.**




**Operating
Expenses**




*Sales
and Marketing*




Sales
and marketing expenses decreased $46,000 or 8% as compared to PE 2004. We spent
less on commissions due to the decreased sales volume. Commission expense was
lower by $38,000 due to the lower sales volume, trade show expenses were lower
by $21,000, and travel expenses were lower by $14,000. This decrease was offset
by increases in advertising ($15,000), partner program fees ($15,000), and sales
salaries ($9,000). We face the risk of not having the necessary capital
($3,000,000) to fully implement our sales and marketing strategy next fiscal
year. If we do not receive the capital, we will scale back our implementation of
the sales and marketing strategy, and this will adversely affect our revenue and
profitability in our future fiscal periods.




Our
strategy is to continue to slowly fund our sales and marketing programs by
investing any cash generated by operations. Absent any outside funding, we will
continue this process for the foreseeable future. However, we are planning to
raise capital through the financing contemplated to begin in May 2005, and will
use the funds to hire sales and marketing professionals, development staff, and
implement marketing programs for CenterStats. We plan to hire up to 10 sales
professionals and up to 10 developers. If we are not successful in raising the
capital, we will reduce our planned hires to the level that can be sustained
from our existing operational cash flow.




*General
and Administrative*




General
and administrative expenses increased by $134,000 or 10% as compared to PE 2004.
Our telephone expense increased $6,000 due to a refund received in PE 2004 for
prior overcharging. Salaries increased by $115,000 due to adding an operations
management position and some administrative help in Mexico. Fringe benefits
(insurance and payroll related costs) increased by $22,000. Professional fees
also increased by $21,000 due to our public reporting company status.




We
anticipate general and administrative expenses to increase as we add staff. As a
result of obtaining public reporting company status, our professional fees in
upcoming fiscal years are expected to greatly increase. We anticipate general
and administrative costs to increase by $100,000 to $150,000 per year due to
increased professional fees, director and officer liability insurance, and
increased employee benefit costs.




*Research
and Development*




Research
and development expenses decreased by $16,000 or 5% over the same period as last
year primarily due to decreased use of an outside consultant ($9,000) and
decreased travel to India this fiscal year ($7,000) as the office was set up
last year. The costs for running this office averaged $4,000 a month for the PE
2004 as we ramped up to a staff of five. We saw the monthly cost grow to
approximately $6,000 per month during PE 2005. By the end of our fiscal year in
June 2005, we expect these costs to rise to approximately $7,000 per month.




We
plan to increase the staffing level to ten upon a successful raise of additional
capital. Primarily, these developers will develop interfaces to enable our
products to work with “best of breed” call/contact center applications.




**Other
(Expense) Income**




The
interest expense during PE 2004 was related to interest on the convertible debt,
amortization of the debt issuance costs and beneficial conversion feature, and
repricing of certain existing warrants. This expense will decrease as the
warrant repricing was a one-time occurrence, certain debt was converted to
common stock, and the debt issuance costs and beneficial conversion feature were
fully amortized by June 2004. We had interest expense during PE 2005, primarily
related to the line of credit, and we did incur approximately $7,000 in exchange
rate losses from funds in Mexico and the U.K.




**Net
Income (Loss)**




Net
loss decreased to $373,000 as compared to $460,000 in PE 2004, a $87,000 or 19%
improvement. The improvement was primarily due to a decrease in interest expense
offset by lower revenue levels achieved in the quarter.




We
anticipated generating an operating loss given that we planned to invest any
excess cash flow back into operations through increased sales and marketing and
development expenditures.




**Liquidity
and Capital Resources**




Prior
to fiscal year 2003, we were primarily financed through cash flow from
operations, sale of company assets, and to a lesser extent, limited bank
financing. During PE 2003, we received approximately $25,000 in loans from
officers and gross proceeds of $490,000 through a private offering of
convertible subordinated debt. We used the proceeds from the convertible debt to
primarily fund the legal, accounting, and promotion fees associated with our
attempted capital raise, and spent $100,000 to fund sales and marketing
programs.




-26-
 **CENTERGISTIC
SOLUTIONS, INC.**




Net
cash used in operating activities was $298,000 in PE 2005 and $98,000 in PE
2004. The net cash used for operations in PE 2005 was comprised primarily of
loss from operations of $373,000 offset by depreciation and amortization of
$135,000, and a net decrease from changes in assets and liabilities of $60,000.
The net cash used for operations in PE 2004 was comprised primarily of the loss
from operations of $460,000 offset by non-cash interest expenses of $56,000,
depreciation and amortization of $168,000, repricing of warrants of $89,000 and
a net increase from changes in assets and liabilities of $20,000.




Net
cash from investing activities used $19,000 in PE 2005 as compared to a use of
$35,000 in PE 2004. The cash used in both period ends were primarily due to
purchase of fixed assets.




Net
cash provided from financing activities was $195,000 in PE 2005 as compared to
$175,000 in PE 2004. The amount provided in PE 2005 was primarily due to
borrowings of $285,000 offset by additions to deferred offering costs of
$86,000. The PE 2004 amount came from a net $460,000 in borrowings (which were
subsequently converted to equity) partially offset by a pay down of $60,000 in
debt and deferred offering costs of $211,000.




We
had a deficit working capital of ($4,000) at March 31, 2005.




In
March 2002, we received two loans from our officers and directors, Ricardo
Brutocao and David Cunningham. The total of these two loans is $24,975. The
loans are payable on demand and bear interest at 6%. As of March 31, 2005,
the balance of these loans is $24,975.




In
July 2003, we agreed to purchase 148,328 shares of our common stock from Al
Wild, a former employee, for $44,220 and issued our secured promissory note
payable to Mr. Wild in such amount. Our note bears interest at the rate of
5% per annum, and monthly payments of principal and interest in the amount of
$2,700 are due and payable on the note commencing September 30, 2003. As
each monthly payment is made on our note, we may cancel and retire 8,728 of the
shares. Mr. Wild may cancel our note at any time and elect to receive the
remainder of the shares we purchased from him that have not been cancelled and
retired by us in accordance with our agreement. Payment of our note to Mr. Wild
is secured by all of our assets.




In
November 2004, we entered into a line of credit agreement with Venture
Communications Corporation, a shareholder and related party. The agreement calls
for a maximum advance of $300,000 secured by a lien on all the assets of the
Company. On March 31, 2005, the maximum amount of borrowings under the line was
increased to $400,000. The balance of this line at March 31, 2005 was $285,000.




As
of March 31, 2005, including the results of operations for the nine months
then ended, our working capital decreased to a deficit of ($4,000).
Approximately $45,000 of that deficit is related party notes payable which we do
not anticipate repaying. We believe that we will be able to convert the
remainder of the working capital, along with the advances available under our
line of credit, into the cash necessary to continue operations for the balance
of fiscal year 2005.




We intend to raise up to an additional $3,000,000 in a private offering
tentatively commencing in May 2005. We intend to begin the capital raise
approximately 30 days after our stock commences trading on the OTC Bulletin
Board. If this raise is successful, as to which there is no assurance, we intend
to use the proceeds to add sales management and staff, conduct a marketing
launch of CenterStats, form strategic partnerships with consulting organizations
such as Accenture, EDS, IBM Global Services and Perot Systems, and heavily
advertise and promote our products and services during our next two fiscal
years. As of the date of this filing, we have not entered into any agreement or
had any material discussions with any such consulting organizations regarding
the formation of a strategic partnership.




We
face the risk that we will not be able to raise the necessary capital to fully
fund our sales and marketing plan. If we are not successful on our $3,000,000
capital raise, we will have to scale back our plans for the future. This will
impact our future revenue growth and profitability.




If
the capital raise is not successful, we will reduce our planned hires to the
level that can be sustained from our existing operational cash flow. We will
also scale back our future product launch and marketing of CenterStats to the
level that they will be funded by operational cash flow. We will also implement,
necessitated on business conditions, several cost cutting strategies identified
by management.




We
have entered into consulting agreements with Hanover Capital and The Bosphorous
Group. These consultants were hired to act as financial advisors. Hanover
received 350,000 shares of our common stock for achieving certain milestones.
The Bosphorous Group agreement calls payment of a success fee upon completion of
certain financing transactions.




We
currently have not entered into any agreements nor are we currently in
discussions with any potential merger or acquisition candidate. However, we
intend to pursue an acquisition strategy upon successful completion of a capital
raise and the listing of our stock on the OTC Bulletin Board. As we believe our
current market space has a number of relatively small companies, our strategy
will be to increase market share, customer base, and technology by acquiring
these companies. We also believe that acquiring certain key distributors,
thereby securing our sales channels, makes sound business sense. We may possibly
seek to acquire one or more distributors in the future.




-27-
 **CENTERGISTIC
SOLUTIONS, INC.**


****


**Results
of Operations for the Three Months Ended March 31, 2005 as Compared to the Three
Months Ended March 31, 2004**




We
believe there is some minor improvement in the economy in general, but a
weakness in corporate infrastructure technology spending in specific. We saw
increases in revenue in most lines of business this past quarter, and expect to
see improvement in our revenue as long as corporate infrastructure technology
spending increases. Our biggest risks continue to be revenue growth, and the
capital raise necessary to implement our sales and marketing strategy.




***Revenues***


**Three
      Month Period Ended March 31,**
      **(In
      thousands)****2005**
    
    
    **%**
    
    
    **2004**
    
    
    **%**Centergistic
      (U.S.)
    
    $
    557
    
    
    62.6
    
    $
    528
    
    
    63.5Mexico
      and Latin America
    
    $
    333
    
    
    37.4
    
    $
    283
    
    
    34.0Lynch
      Young & Company
    
    $
    -
    
    
    0.0
    
    $
    21
    
    
    2.5Total
    
    $
    890
    
    
    100.0
    
    $
    832
    
    
    100.0




Total
net revenues increased by $58,000 or 7% for the three month period ended
March 31, 2005 (“PE 2005”) as compared to the three month period ended
March 31, 2004 (“PE 2004”). Revenues from U.S. based operations increased
by $29,000 or 5% from the PE 2004. Revenues from Lynch Young & Company
decreased as compared to the prior period as we concluded our operations in this
company in June 2004. Revenues from Mexico increased by $50,000 or 18% during PE
2005.




In
the U.S. based operations, direct sales of AgentView decreased $210,000 or 87%
compared to PE 2004. The decrease is due weakness in corporate technology
spending and due to one large ($150,000) purchase during PE 2004. We are
starting to see increased interest from customers requiring multiple data
sources and a high number of agents. This will help our revenue in the future as
one of our AgentView products is priced on a “per agent” basis. We also charge
additional amounts for multiple data sources. As corporate infrastructure
technology spending is increasing, we expect our revenue to increase.




Distribution
revenue in the U.S. increased by $214,000 or 131% from PE 2004. Revenue from our
largest distributor, Dacon, increased by $60,000 or 40% from PE 2004. Most of
the increase was due to the first sale of our CenterStats product to British
Telecom during PE 2005. We expect business from Dacon to increase as an expected
roll out of our CenterStats product to the BT installed base will begin. We also
saw a rise in sales to another U.K distributor ($103,000) during PE 2005. We
expect this trend of increasing revenues from distribution to continue as we are
focusing on selling through our existing channels.




Installation
and training revenues decreased by $5,000 or 20% from PE 2004 due to the
decreased sales of AgentView. We expect these revenues to increase as more Agent
View and CenterStats products are sold.




Mexico
and Latin America revenues increased by $50,000 or 18% as compared to PE 2004.
The Mexican economy has stabilized and we except this increasing revenue trend
to continue through the remainder of the fiscal year. We expect to see our
revenues continue to steadily improve through the remainder of this fiscal year,
and continue through the next fiscal year.




Lynch
Young revenues decreased by $21,000 as compared to PE 2004. The drop in revenue
is related to the completion of the Department of Water and Power contract
during the fiscal year ended June 30, 2004. The revenues from PE 2004 were
substantially derived from the Department of Water and Power contract. We
completed that contract in June 2004. After the completion of the contract, we
did not foresee a need to operate Lynch Young as an independent consulting
company any longer, and have combined its operations with Centergistic
Solutions, Inc. U.S. based operations. This caused an impairment of the
remaining amount of goodwill in our balance sheet of $23,600 associated with
Lynch Young and such amount was written off at the conclusion of our fiscal year
ended June 30, 2004 as the contract concluded. We expect to see a decline
in the Lynch Young revenues in this 2005 fiscal year, but this decline should be
partially offset by consulting revenues produced under the Centergistic
Solutions, Inc. U.S. based operations.




-28-
 **CENTERGISTIC
SOLUTIONS, INC.**




**Cost
of Revenues**




Cost
of revenues increased slightly to $280,000 or 31% of revenues as compared to
$268,000 or 32% of revenues in PE 2004. Costs associated with hardware and third
party products sales increased by $9,000 and consulting expenses related to the
Lynch Young contract with Department of Water and Power decreased $14,000.
Software and service cost of sales increased by $18,000 or 13% from PE 2004. As
a greater portion of our revenue over this past three months ended
March 31, 2005 was derived from software and service, our costs related to
this type increased accordingly. We are at risk of hardware and third party
vendors passing on price increases that will affect our profitability. We expect
this trend of declining hardware revenues and costs to continue throughout this
fiscal year resulting in improved cost of revenue percentages.




**Gross
Profit**




Gross
profit improved to 69% of revenues in PE 2005, or $610,000, as compared to 68%,
or $564,000, in PE 2004. The improvement is gross profit percentage is
attributable to the mix of revenue away from hardware and third-party sourced
products to software products. We expect this trend to continue as we sell more
AgentView and CenterStats to direct end-users.




**Operating
Expenses**




*Sales
and Marketing*




Sales
and marketing expenses increased $8,000 or 4% as compared to PE 2004. We spent
more on commissions due to the increased sales volume. Commission expense was
higher by $16,000 due to the higher sales volume. Trade show expenses were
reduced by $5,000, travel expenses were lower by $6,000, and salaries were lower
by $3,000. These decreases were offset by an increase in dues and subscriptions
($8,000). We are spending more on partner and relationship fees as we rely more
on distribution channels. We face the risk of not having the necessary capital
($3,000,000) to fully implement our sales and marketing strategy next fiscal
year. If we do not receive the capital, we will scale back our implementation of
the sales and marketing strategy, and this will adversely affect our revenue and
profitability in our future fiscal periods.




Our
strategy will continue to slowly fund our sales and marketing programs by
investing any cash generated by operations. Absent any outside funding, we will
continue this process for the foreseeable future. However, we are planning to
raise capital through the financing contemplated to begin in May 2005, and will
use the funds to hire sales and marketing professionals, development staff, and
implement marketing programs for CenterStats. We plan to hire up to 10 sales
professionals and up to 10 developers. If we are not successful in raising the
capital, we will reduce our planned hires to the level that can be sustained
from our existing operational cash flow.




*General
and Administrative*




General
and administrative expenses increased by $18,000 or 4% as compared to PE 2004.
We increased commission by $25,000 due to bonus plan for an operations manager
and Mexico administrative staff performance. Salaries increased by $25,000 due
to additional Mexico personnel. Our telephone expense decreased by $5,000 due to
lower negotiated rates in PE 2005. Professional fees also decreased by $5,000
due to a timing difference in our Mexico operational audit. Insurance premiums
were reduced by $10,000 due to lower U.S. personnel.




We
anticipate general and administrative expenses to increase as we add staff. As a
result of obtaining public reporting company status, our professional fees in
upcoming fiscal years are expected to greatly increase. We anticipate general
and administrative costs to increase by $100,000 to $150,000 per year due to
increased professional fees, director and officer liability insurance, and
increased employee benefit costs.




*Research
and Development*




Research
and development expenses decreased by $1,000 or 1% over the same period as last
year. The costs basically remained flat, and we expect this trend to continue
throughout the remainder of our fiscal year. We saw the monthly cost of
maintaining the India center grow to approximately $5,000 per month during PE
2004. By the end of our fiscal year in June 2005, we expect these costs to rise
to approximately $7,000 per month.




We
plan to increase the staffing level to ten upon a successful raise of additional
capital. Primarily, these developers will develop interfaces to enable our
products to work with “best of breed” call/contact center applications.




-29-
 **CENTERGISTIC
SOLUTIONS, INC.**




**Other
(Expense) Income**




The
interest expense during PE 2004 was related to interest on the convertible debt,
amortization of the debt issuance costs and beneficial conversion feature. This
expense will decrease as certain debt was converted to common stock, and the
debt issuance costs and beneficial conversion feature were fully amortized by
June 2004. We had interest expense during PE 2005 due to our line of credit. We
expect this interest to remain throughout the remainder of our fiscal year.




**Net
Income (Loss)**




Net
loss decreased to $188,000 as compared to $231,000 in PE 2004, a $43,000 or 19%
improvement. The improvement was primarily due to higher revenue levels and
improved margins achieved in the quarter.




We
anticipated generating an operating loss given that we planned to invest any
excess cash flow back into operations through increased sales and marketing and
development expenditures.




**Factors
That May Affect Future Results**




**We
have experienced losses in the past, anticipate losses for the foreseeable
future and may never achieve profitability.**




We
incurred a net loss of $373,000 during the nine months ended March 31, 2005, and
as of such date our accumulated deficit was $2,465,000. We expect that our
operating expenses will increase significantly as we continue to expand our
business. As a result, we will need to generate significantly more revenues from
sales of our CenterStats product to achieve profitability. We have a limited
operating history with our CenterStats product and we are not able to estimate
when, if ever, our revenues will increase sufficiently to cover these expenses.
We cannot assure you that our revenue will grow in the future or that additional
capital will be made available to us. If revenues grow slower than we
anticipate, or if operating expenses exceed our expectations or cannot be
reduced accordingly, or if we cannot obtain additional capital, our business,
operating results and financial condition will be materially and adversely
affected, which could cause our investors to lose all or part of their
investment in our common stock.




**We
have not generated any significant revenues from the sale of our CenterStats
product and if we are unable to increase sales, our business, operating results
and financial condition will be materially adversely affected.**




We began
marketing our CenterStats product in March 2002. Our marketing efforts to date
have been very limited because we lack sufficient capital to implement our sales
and marketing strategy. Revenues for the nine month periods ended March 31,
2005 and 2004 were $2,676,000 and $2,946,000, respectively.




Our
future revenues will depend significantly on our ability to penetrate the
call/contact center or business intelligence software market space. We have
developed a sales and marketing strategy to achieve revenue growth, but we need
additional capital to implement it. If we are not successful in selling our
products in our targeted market due to insufficient additional capital or other
factors including competitive pressures or technological advances by others, our
business, operating results and financial condition will be materially and
adversely affected.




**We
need additional capital to implement our current business strategy, which may
not be available to us, and if we raise additional capital, it may dilute our
investors’ ownership in us.**





We
believe that the proceeds of our anticipated private placement offering,
together with cash generated from operations, will be sufficient to meet our
anticipated needs for business expansion, capital expenditures, working capital
and general corporate purposes for the foreseeable future, but no less than a
period of 12 months after the date of this report. Thereafter, we may need to
raise additional funds.





If
additional funds are raised through the issuance of equity or convertible debt
securities, the percentage ownership of our shareholders will be reduced,
shareholders may experience additional dilution and such securities may have
rights, preferences and privileges senior to those of the Common Stock and may
have covenants which impose restrictions on our operations. There can be no
assurance that any necessary additional financing will be available on terms
favorable to us or at all. If adequate funds are not available or are not
available on acceptable terms, we may not be able to fund our marketing needs or
expansion, to take advantage of unanticipated acquisition opportunities, to
develop or enhance services or products or to respond to competitive pressures.
This inability could have a material adverse effect on our value, prospects,
business, results of operations and financial condition.




-30-
 **CENTERGISTIC
SOLUTIONS, INC.**


****


**Our
quarterly operating results, revenues and expenses may fluctuate significantly
which could have an adverse effect on the market price of our common stock.**




Our
operating results, revenues and expenses may fluctuate significantly from
quarter to quarter due to a variety of factors including:




•
    
    market
      acceptance of our CenterStats product,•
    
    the
      timing, size and execution of orders and shipments,•
    
    lengthy
      and unpredictable sales cycles,•
    
    the
      timing of introduction and market acceptance of new products or product
      enhancements by us or our competitors,•
    
    Product
      and price competition,•
    
    the
      relative proportions of revenues derived from license fees and services,•
    
    Changes
      in our operating expenses,•
    
    our
      success in increasing our direct sales force,•
    
    our
      success in maintaining relationships with our third-party distributors and
      adding new ones, and•
    
    fluctuations
      in general economic conditions.




We
believe that period-to period comparisons of our results of operations are not a
good indication of future performance. There can be no assurance that future
revenues and results of operations will not vary substantially. It is also
possible that in future quarters; our operating results will be below the
expectations of public market analysts and investors. In that event, the trading
price of our common stock may fall.




**The
loss of Dacon PLC as a customer would materially adversely affect our business,
operating results and financial condition.**




We
sell a substantial portion of our products to Dacon PLC, which is based in the
United Kingdom and has been a distributor of our products for the past
12 years. For the nine month periods ended March 31, 2005 and 2004,
Dacon accounted for 21% and 27%, respectively, of net revenues, and 30% of total
trade receivables as of March 31, 2005. The loss of Dacon PLC as a customer
would have a material adverse effect on our business, operating results and
financial condition.




**We
face risks associated with operations in Mexico, Latin America and South America
which could adversely affect our business, operating results and financial
condition.**




We
derive a substantial portion of our revenues from sales to customers in Mexico,
Latin America and South America. For the nine month periods ended March 31,
2005 and 2004, these customers represented approximately 37% and 28%,
respectively, of our total net revenues.




We
face certain risks inherent in conducting business internationally, and such
specific risks in Mexico, Latin America and South America as languages and
cultural differences, legal and governmental regulatory requirements and
potential political and economic unrest. Any of these factors could seriously
harm our ability to generate future revenues from these customers, and,
consequently, our business, operating results and financial condition.




**We
operate in a competitive business environment and if we cannot compete
effectively, we may face price reductions and decreased demand for our products.**




The
market for our products and services is intensely competitive and subject to
technological change. Competitors vary in size and in the scope and breadth of
the products and services they offer. We encounter competition from a number of
sources, all of which offer performance management reporting systems to the
call/contact center market. We expect additional competition from other
established and emerging companies as the market for performance management
reporting solutions and complementary products continues to develop and expand.
We encounter competition in the United States from a number of sources,
including Symon and Innova, all of which offer performance management reporting
systems to the call/contact center market. Some of our current and many of our
potential competitors have longer operating histories, greater name recognition,
larger client bases and significantly greater financial, engineering, technical,
marketing and other resources than we do. As a result, these companies may be
able to respond more quickly to new or emerging technologies and changes in
customer demands or to devote greater resources to the development, promotion
and sale of their products than we can.




-31-
 **CENTERGISTIC
SOLUTIONS, INC.**




In
addition, current potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address the needs of our prospective customers.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and acquire significant market share. We expect that the call/contact
center market will continue to attract new competitors and new technologies,
possibly involving alternative technologies that are more sophisticated and
cost-effective than our technology. New product introductions by our competitors
could cause a decline in sales, a reduction in the sales price, or a loss of
market acceptance of our existing products. There can be no assurance that we
will be able to compete successfully against current or future competitors or
that competitive pressures faced by us will not materially adversely affect our
business, financial condition and results of operations.




**We
rely in part, on third-party distributors to market and distribute our products,
and their failure to do so successfully could significantly harm our ability to
maintain and expand our customer base, which would adversely affect our
operating results and financial condition.**




Our
sales and marketing strategy includes channels of third party distributors. We
have developed a number of these relationships and intend to develop new ones.
Our inability to attract new distributors or their inability to penetrate their
respective market segments or the loss of any of our third-party distributors as
a result of competitive products offered by other companies, or products similar
to ours that are developed internally by them or otherwise, could harm our
ability to maintain and expand our customer base. Our ability to achieve revenue
growth in the future will depend in part on our success in developing and
maintaining successful relationships with these third-party distributors. If we
are unable to develop or maintain our relationships with these third-party
distributors, our operating results and financial condition will suffer.




**We
must increase our direct sales force to sell our products, and if we are unable
to hire and train new sales personnel, our future growth will be impaired.**




Our
direct sales force currently consists of three persons. Our sales and marketing
strategy includes increasing the level of direct sales. Our ability to achieve
revenue growth in the future will depend on our ability to recruit, train, and
retain qualified direct sales personnel. If we are not able to obtain additional
capital, we will not be able to increase the size of our direct sales force.
Even if we are successful in obtaining additional capital, there is no assurance
that we will be successful in recruiting and retaining qualified sales
personnel. Our inability to increase the size and productivity of our direct
sales force could impair our growth and adversely affect our operating results
and financial condition.




**If
we fail to keep pace with rapid technological changes in our industry, we could
lose existing customers and be unable to attract new business.**




Our
market is characterized by rapidly changing technologies, frequent new product
and service introductions and evolving industry standards. The introduction of
products embodying new technologies and the emergence of new industry standards
can render our existing products obsolete and unmarketable in short periods of
time. We expect new products and services, and enhancements to existing products
and services to continue to be developed and introduced by others, which will
compete with, and reduce the demand for, our products and services. Our future
success will depend, in part, on our ability to enhance the performance features
and reliability of our current products and introduce new products that keep
pace with technological developments and emerging industry standards and to
address the increasingly sophisticated needs of our customers. We may have to
raise additional capital to successfully improve the features and reliability of
our products and services. We may not be able to obtain the capital or obtain it
on terms acceptable to us. There can be no assurance that we will be successful
in developing, marketing and selling new products or product enhancements that
meet these changing demands, that we will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of these
products or that our new products and product enhancements will adequately meet
the demands of the marketplace and achieve market acceptance.




**We
may lose sales, or sales may be delayed, due to the long sales cycle for our
products, which would reduce our revenues.**




Our
customers generally involve many people in the decision to purchase our products
and consulting and other services. As a result, we may wait many months before a
sale can actually be completed. During this long sales cycle, events may occur
that affect the size or timing of the order or even cause it to be canceled. For
example, our competitors may introduce new products, or the customer’s own
budget and purchasing priorities may change. If these events were to occur,
sales of our products may be cancelled or delayed, which would reduce our
revenues.




-32-
 **CENTERGISTIC
SOLUTIONS, INC.**


****


**If
we do not retain our senior management and other key employees, we may not be
able to successfully implement our business strategy.**




Our
future success depends to a significant extent on the continued services of our
senior management, particularly, Ricardo Brutocao, Chief Executive Officer, and
David Cunningham, Chief Operating and Financial Officer, and other key
personnel, particularly, Rama Iyer, Vice President, Technology and Product
Management. The loss of the services of any of these persons could have a
material adverse effect on our business, results of operations and financial
condition. We have no employment agreements with Mr. Cunningham or
Mr. Iyer. We do not maintain “key person” life insurance for any of our
personnel at this time but may decide to in the future. Competition for
qualified personnel in our industry is intense and we compete for these
personnel with other companies that have greater financial and other resources
than we do. Our future success will depend in large part upon on our ability to
attract, retain and motivate highly qualified personnel, and there can be no
assurance that we will be able to do so. If we have any difficulty in hiring
needed qualified personnel, our business, financial condition and results of
operations could be materially adversely affected.




**Our
success depends on growth in the telecommunications industry.**




While
the Company as a whole is not dependent upon the telecommunications industry,
our AgentView legacy products are substantially positioned in the sector. Our
business would be adversely affected to the extent that the telecommunications
industry continues to contract through consolidation and advances in technology,
or does not achieve sustainable growth particularly usage by companies who use
multiple software applications. A number of factors may inhibit the
telecommunications industry’s growth, including:




•
    
    financial
      difficulties and recent bankruptcies of major providers such as Global
      Crossing and Worldcom;•
    
    competitive
      concerns centered around large-scale price cutting;•
    
    reluctance
      of industry companies to place purchase orders for capital expenditures;
      and•
    
    lack
      of increasing customer demand for premium and high-speed services.




If
these conditions continue to occur in the future, the telecommunications
industry, as well as the purchase of our products by it, could grow more slowly
or decline.




**Our
limited ability to protect our proprietary technology and other rights may
adversely affect our ability to compete.**




We
rely on a combination of trademarks, copyrights, trade secret laws and
contractual provisions to protect our intellectual rights. We also have a patent
pending for an information management system. We cannot assure our investors
that our patent application will result in any patent being issued to us or, if
issued, that any patent claims will be of sufficient scope or strength to
provide any meaningful protection or any competitive advantage to us. There can
be no assurance that these protections will be adequate to prevent our
competitors from misappropriating our technology or that our competitors will
not independently develop technologies that are substantially equivalent or
superior to our technology. To protect our trade secrets and other proprietary
information, we require employees, consultants and others to enter into
confidentiality agreements. We cannot assure our investors that these agreements
will provide meaningful protection for our trade secrets, know-how or other
proprietary information in the event of any unauthorized use, misappropriation
or disclosure of such trade secrets, know-how or other proprietary information.




**If
we are found to infringe the proprietary rights of others, we could be required
to redesign our products, pay royalties or enter into license agreements with
third parties.**




Although
we have never been the subject of a material intellectual property dispute,
there can be no assurance that a third party will not assert that our technology
violates its intellectual property rights in the future. As the number of
software products in our target market increases and the functionality of these
products further overlap, we believe that software developers may become
increasingly subject to infringement claims. Any claims, whether with or without
merit, could:




•
    
    be
      expensive and time consuming to defend,•
    
    cause
      us to cease making, licensing or using products that incorporate the
      challenged intellectual property,•
    
    require
      us to redesign our products, if feasible,•
    
    divert
      management’s attention and resources, and•
    
    require
      us to enter into royalty or licensing agreements in order to obtain the
      right to use necessary technologies.




-33-
 **CENTERGISTIC
SOLUTIONS, INC.**




There
can be no assurance that third parties will not assert infringement claims
against us in the future with respect to our current or future products or that
any such assertion will not require us to enter into royalty arrangements (if
available) or litigation that could be costly to us.




**A
large percentage of our stock is owned by relatively few people, including
officers and directors, and their interest may be different from and conflict
with yours.**




As
of March 31, 2005 our officers and directors beneficially owned a total of
11,834,518 shares (including shares issuable upon exercise of options,
warrants or convertible securities beneficially owned by them that are
exercisable or convertible within 60 days after March 31, 2005), or
approximately 71% of our outstanding common stock. You may be subject to certain
risks due to the concentrated ownership of our common stock. For example, these
stockholders, if acting together, would be able to influence or control matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers, acquisitions or other extraordinary transactions. They
may also have interests that differ from yours and may vote in a way with which
you disagree and which may be adverse to your interests. The concentration of
ownership may have the effect of delaying, preventing or deterring a change of
control of our company, could deprive our stockholders of an opportunity to
receive a premium for their common stock as part of a sale of our company and
might ultimately affect the market price of our common stock.




**Future
sales of shares of our common stock which are eligible for sale by our
stockholders may decrease the price of our common stock.**




We
had 10,699,312 shares of common stock outstanding on March 31, 2005.
All of these shares are “restricted securities” under Rule 144 of the
Securities Act of 1933. An additional 7,990,438 shares underlying options
and warrants outstanding on March 31, 2005 will be restricted securities if
and when they are issued. Restricted securities may be sold only if they are
registered under the Securities Act or if an exemption from the registration
requirements of the Securities Act is available. Generally, stockholders may
sell restricted securities without registration after holding them for one year
and subject to certain volume limitations. Actual sales or the prospect of sales
by our present stockholders or by future holders of restricted securities,
pursuant to a registration statement, under Rule 144, or otherwise, may, in
the future, have a depressive effect on the market price of our common stock. A
decline in the price of shares of our common stock might impede our ability to
raise capital through the issuance of additional shares of our common stock or
other equity securities.




**There
is no market for our common stock and we cannot assure you that a market will
develop or what the market price of our common stock will be.**




Although
our common stock has not yet begun trading in the over-the-counter market on the
OTC Electronic Bulletin Board, we expect, but can give no assurance, that
trading will commence by the end of June 2005. If an active trading market does
not develop or is not sustained, it may be difficult for you to sell your shares
of common stock at an attractive price or at all. We cannot predict the prices
at which our common stock will trade. It is possible that in future quarters our
operating results may be below the expectations of public market analysts and
investors and, as a result of these and other factors, the price of our common
stock may decline.




**Our
common stock will be deemed to be penny stock which may make it difficult for
investors to sell their shares.**




If
a market ever develops for our common stock, our common stock will be deemed to
be penny stock as that term is defined in Rule 3a51-1 of the Securities
Exchange Act of 1934 (the “Exchange Act”). Penny Stocks are stocks:
(i) with a price of less than five dollars per share; (ii) that are
not traded on a recognized national exchange; (iii) whose prices are not
quoted on the NASDAQ automated quotation system (NASDAQ listed stocks must still
meet requirement (i) above); or (iv) in issuers with net tangible
assets less than $2,000,000 (if the issuer has been in continuous operation for
at least three years) or $5,000,000 (if in continuous operation for less than
three years) or, with average revenues of less than $6,000,000 for the last
three years.




Section 15(g)
of the Exchange Act and Rule 15g-2 of the Exchange Act require
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a
penny stock for the investor’s account. Potential investors in our common stock
are urged to obtain and read such disclosures carefully before purchasing any
shares that are deemed to be penny stock.




Moreover,
Rule 15g-9 of the Exchange Act requires broker-dealers in penny stocks to
approve the account of any investor for transactions in such stocks before
selling any penny stock to that investor. This procedure requires the
broker-dealer to: (i) obtain from the investor information concerning his
or her financial situation, investment experience and investment objectives;
(ii) reasonably determine, based on that information, that transaction in penny
stocks are suitable for the investor and that the investor has significant
knowledge and experience to be reasonably capable of evaluating the risks of
penny stock transactions; (iii) provide the investor with a written
statement setting forth the basis on which the broker-dealer made the
determination in (ii) above; and (iv) receive a signed and dated copy
of such statement from such investor, confirming that it accurately reflects the
investor’s financial situation, investment experience and investment objects.
Compliance with these requirements may make it more difficult for investors in
our common stock to resell the shares to third parties or to otherwise dispose
of them.




-34-
 **CENTERGISTIC
SOLUTIONS, INC.**




**No
dividends anticipated to be paid** .




We
have never paid any cash dividends on our common stock and we do not anticipate
paying cash dividends on our common stock in the future. The future payment of
dividends is directly dependent upon our future earnings, capital requirements,
financial requirements and other factors to be determined by our Board of
Directors. It is anticipated that future earnings, if any, which may be
generated from our operations will be used to finance our growth, and that cash
dividends will not be paid to our stockholders.





**ITEM
3. CONTROLS AND PROCEDURES**





As of the
last day covered by this report, the Company carried out an evaluation, under
the supervision and with the participation of the Company’s management,
including the Company’s Chief Operating Officer who is also the Company’s Chief
Financial Officer, of the effectiveness of the design, and operation of the
Company’s disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that
evaluation, the Chief Operating Officer concluded that the Company’s disclosure
controls and procedures are effective in timely alerting him to material
information relating to the Company (including its consolidated subsidiary)
required to be included in the Company’s Exchange Act filings.





There has
not been any change in the Company’s internal controls over financial reporting
during the quarter covered by this report that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.





Under
current SEC guidelines, the requirements of Section 404 of the Sarbanes-Oxley
Act of 2002 (the “Act”) will be effective for the Company’s year ending June 30,
2007. In order to comply with the Act, the Company must undertake a
comprehensive effort, which includes documentation and testing of the design and
operation of its internal control using the guidelines establishes by *Internal
Control-Integrated Framework* issued
by the Committee of Sponsoring Organizations of the Treadway Commission. During
the course of these activities, the Company may identify certain internal
control matters that management believes should be improved. These improvements,
if necessary, will likely include further formalization of existing policies and
procedures, improved segregation of duties, additional information technology
system controls and additional monitoring controls. Although management does not
believe that any of these matters will result in material weaknesses being
identified in the Company’s internal control as defined by the Public Company
Oversight Board (United States), no assurances can be given regarding the
outcome of these efforts at the present time.





-35-
 **CENTERGISTIC
SOLUTIONS, INC.**





**PART
II. OTHER INFORMATION**





**(UPDATE
AS APPROPRIATE)**





**ITEM
1. LEGAL PROCEEDINGS**





None.





**ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





None.


****


**ITEM
3. DEFAULTS UPON SENIOR SECURITIES**





As of the
date of this report, the Company is in default on two separate notes payable to
two of its officers that aggregate $24,975. Related borrowings were not repaid
by the Company when due pursuant to their contractual terms, and accordingly,
such amounts are due on demand. These notes are secured by all of the assets of
the Company.





The
Company also has a note payable to a former employee in connection with a stock
repurchase agreement that requires monthly payments of $2,750 pursuant to
contractual terms. The current balance of the note payable is $15,272 and the
Company’s most recent payment under the note agreement was in August 2004. The
note is secured by substantially all of the Company’s assets.


****


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





None.





**ITEM
5. OTHER INFORMATION**





None.





**ITEM
6. EXHIBITS**





None.





-36-
 **CENTERGISTIC
SOLUTIONS, INC.**




**SIGNATURES**





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










**CENTERGISTIC
      SOLUTIONS, INC.******Date: May 13, 2005
    
    /s/ Ricardo G.
    BrutocaoRicardo G. Brutocao,President




Date: May 13, 2005
    
    /s/ David M.
    CunninghamDavid M. Cunningham,Chief
      Operating Officer and Chief FinancialOfficer
      (Principal Accounting Officer)







-37-
 **CENTERGISTIC
SOLUTIONS, INC.**




**EXHIBIT
      INDEX**No.
    Description31.1
    Certification
      of CEO - Rule 13a - 14(a) or 15d - 14(a)*31.2
    Certification
      of CFO - Rule 13a - 14(a) or 15d - 14(a)*32
    Certification
      pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002+*Filed
      herewith+Furnished
      herewith




-38-