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United States
Securities and Exchange Commission
 Washington, D.C. 20549
 Form 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period endedMarch 31, 2007o
    
    Transition report under Section 13 or 15(d) of the Exchange ActFor the transition period fromto.Commission file number: 002-41703
 THE X-CHANGE CORPORATION
 (Exact name of small business issuer as specified in its charter)
 Nevada
    
    90-0156146(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 710 Century Parkway, Allen, TX 75013
 (972) 747-0051
 þ o
 o þ
 APPLICABLE ONLY TO CORPORATE ISSUERS
 April 30, 2007 29,964,500
 o þ




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THE X-CHANGE CORPORATION
FORM 10-QSB
TABLE OF CONTENTS
 
 PART I  FINANCIAL INFORMATION
 Item 1
    
    Financial StatementsUnaudited Consolidated Balance Sheets at March 31, 2007 and December 31, 2006
    
    
    3Unaudited Consolidated Statements of Operations for the three months ended March 31, 2007
and 2006
    
    
    4Unaudited
Consolidated Statement of Stockholders Equity for the three months ended March
31, 2007
    
    
    5Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2007
and 2006
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7-11Item 2
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    12-18Item 3
    
    Controls and Procedures
    
    
    19PART II OTHER INFORMATIONItem 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 6
    
    Exhibits
    
    
    21Signatures
    
    
    22Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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THE X-CHANGE CORPORATION
UNAUDITED CONSOLIDATED BALANCE SHEETS
 March 31, 2007
    
    
    December 31, 2006(Restated)ASSETSCurrent Assets:Cash
    
    $
    8,583
    
    
    $
    1,955Accounts Receivable
    
    
    117,359
    
    
    
    119,053Prepaid Expenses
    
    
    61,000
    
    
    
    61,000Deposits
    
    
    10,770
    
    
    
    15,885Total Current Assets
    
    
    197,712
    
    
    
    197,894Fixed Assets:Computer Equipment
    
    
    36,082
    
    
    
    36,082Furniture and Fixtures
    
    
    65,685
    
    
    
    64,845Less Accumulated Depreciation
    
    
    (37,908
    )
    
    
    (31,918
    )Total Fixed Assets
    
    
    63,859
    
    
    
    69,009TOTAL ASSETS
    
    $
    261,570
    
    
    $
    266,903LIABILITIES AND STOCKHOLDERS DEFICITCurrent Liabilities:Related Party Loans Payable
    
    $
    
    
    
    $
    120,000Accounts Payable
    
    
    420,019
    
    
    
    297,557Accrued Expenses
    
    
    217,301
    
    
    
    139,933Deferred Revenue
    
    
    
    
    
    
    27,000Customer Deposits
    
    
    30,000
    
    
    
    Total Current Liabilities
    
    
    667,320
    
    
    
    584,490Long-Term Liabilities:Long-Term Related Party Note Payable, net of unamortized debt
discount of $532,759 and $629,331 at March 31, 2007 and
December 31, 2006, respectively
    
    
    265,035
    
    
    
    168,463TOTAL LIABILITIES
    
    
    932,355
    
    
    
    752,953Commitments
and ContingenciesStockholders Deficit:Preferred Stock, Par Value $.001, Authorized 10,000,000 Shares
none Issued at March 31, 2007 and December 31, 2007
    
    
    
    
    
    
    Common Stock, Par value $.001, Authorized 100,000,000 Shares,
Issued
28,964,500 and 27,764,500 at March 31, 2007 and December 31, 2006
    
    
    28,965
    
    
    
    27,765Paid-In Capital
    
    
    2,541,667
    
    
    
    1,992,867Accumulated Deficit
    
    
    (3,241,417
    )
    
    
    (2,506,682
    )Total Stockholders Deficit
    
    
    (670,785
    )
    
    
    (486,050
    )TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT
    
    $
    261,570
    
    
    $
    266,903
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THE X-CHANGE CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
 For the Three Months Ended March 31,2007
    
    
    2006(Restated)Revenues
    
    $
    316,053
    
    
    $
    308,223ExpensesResearch & Development
    
    
    253,497
    
    
    
    189,838Sales & Marketing
    
    
    63,405
    
    
    
    36,119General & Administrative
    
    
    617,035
    
    
    
    287,541Total Expenses
    
    
    933,937
    
    
    
    513,497Operating Loss
    
    
    (617,884
    )
    
    
    (205,274
    )Other Income (Expense)Interest Expense
    
    
    (117,828
    )
    
    
    (4,262
    )Interest Income
    
    
    978
    
    
    
    28Net Loss
    
    $
    (734,734
    )
    
    $
    (209,508
    )Loss per Share, Basic & Diluted
    
    
    (0.03
    )
    
    
    (0.01
    )Weighted Average Shares
Outstanding, Basic and Diluted
    
    
    28,427,000
    
    
    
    27,191,400
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THE X-CHANGE CORPORATION
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Common StockPaid-In
    
    
    AccumulatedShares
    
    
    Par Value
    
    
    Capital
    
    
    DeficitBalance at December 31, 2006 (Restated)
    
    
    27,764,500
    
    
    $
    27,765
    
    
    $
    1,992,867
    
    
    $
    (2,506,682
    )Shares issued for cash and related fees
    
    
    1,200,000
    
    
    
    1,200
    
    
    
    548,800
    
    
    
    Net Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (734,734
    )Balance at March 31, 2007
    
    
    28,964,500
    
    
    $
    28,965
    
    
    $
    2,541,667
    
    
    $
    (3,241,417
    )
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THE X-CHANGE CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months Ended March 31,2007
    
    
    2006(Restated)CASH FLOWS FROM OPERATING ACTIVITIES:Net Loss
    
    $
    (734,734
    )
    
    $
    (209,508
    )Adjustments to reconcile net loss to net cash
used (provided) by operating activities:Depreciation
    
    
    5,990
    
    
    
    4,760Amortization of Deferred Cost
    
    
    
    
    
    
    124,284Stock Issued for Services
    
    
    
    
    
    
    750Deferred Revenue
    
    
    (27,000
    )
    
    
    101,429Amortization of Debt Discounts
    
    
    96,572
    
    
    
    Change in Operating Assets and Liabilities:Accounts Receivable
    
    
    1,695
    
    
    
    (16,964
    )Deposits
    
    
    5,115
    
    
    
    Accounts Payable
    
    
    120,692
    
    
    
    16,155Accrued Expenses
    
    
    79,138
    
    
    
    (20,190
    )Customer Deposits
    
    
    30,000
    
    
    
    Net Cash Used by Operations
    
    
    (422,532
    )
    
    
    715CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of Fixed Assets
    
    
    (840
    )
    
    
    (30,868
    )Net Cash Provided by Investing Activities
    
    
    (840
    )
    
    
    (30,868
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from Common Stock Issued
    
    
    550,000
    
    
    
    Proceeds from Related Party Note
    
    
    
    
    
    
    25,000Payments on Debt
    
    
    (120,000
    )
    
    
    Net Cash Provided by Financing Activities
    
    
    430,000
    
    
    
    25,000Net (Decrease) Increase in Cash
    
    
    6,628
    
    
    
    (5,153
    )Cash at Beginning of Period
    
    
    1,955
    
    
    
    5,847Cash at End of Period
    
    $
    8,583
    
    
    $
    694
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THE X-CHANGE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  ORGANIZATION AND BASIS OF PRESENTATION
     Going Concern
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Loss per Share
    Reclassifications
  NOTE 2  DEFERRED COSTS
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NOTE 3  RELATED PARTY PAYABLES
 Long-term related party payables
    Short-term related party payables
   NOTE 4  STOCK TRANSACTIONS
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NOTE 5  NEW PRONOUNCEMENTS
  NOTE 6  RESTATEMENT
  
    
    Revenue Recognition  The Company recognized revenue at the time of invoicing for
development contract scheduled payments, which should be recognized over the life of
the project.
    
    Deferred Costs Amortization  In connection with the issuance of 500,000 shares to
Hexion, $290,000 was previously recorded as a long-term asset. The Company determined
that the issuance of the shares is a deferred cost. The Company has amortized the fair
value of the shares over the life of the related contract period from January to July
2006.
    
    Debt Discount  The Company established that its related party note payable had an
embedded beneficial conversion feature that had not been recorded properly. This
beneficial conversion feature was recorded and amortized over the term of the note.
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Statement of Operations Data
 Quarter Ending
    
    
    Quarter EndingMarch 31, 2006
    
    
    March 31, 2006Restated
    
    
    Previously FiledRevenue
    
    $
    308,223
    
    
    $
    395,000Expenses
    
    
    513,497
    
    
    
    411,402Net Loss
    
    
    (209,508
    )
    
    
    (16,402
    )Loss per Share
    
    
    (0.01
    )
    
    
    (0.00
    )
 Balance Sheet Data
 As of December 31,
    
    
    As of December 31,2006
    
    
    2006Restated
    
    
    Previously FiledAssets
    
    $
    266,903
    
    
    $
    483,347Liabilities
    
    
    752,953
    
    
    
    1,359,030Stockholders Deficit
    
    
    (486,050
    )
    
    
    (875,683
    )
  11




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Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Risk Factors
  
    
    We need capital to avoid insolvency, sustain our operations and grow our business.
    
    Our near-term financial performance depends on the success of our strategic relationships with Hitachi America,
Ltd.; Hexion Specialty Chemicals, Inc.; Carinthian Tech Research; SECURUS Technologies, Inc.; and Graco Childrens
Products, Inc.
    
    We will not be successful unless there is widespread acceptance of RFID and other wireless technologies in the
vertical markets we are targeting.
    
    We expect that almost all of our projected 2007 recurring revenue will relate to products under development that
we have not yet sold in volume to customers. As a result, we have limited visibility regarding the length of our
sales cycle, which makes projecting revenue difficult and could otherwise adversely affect our business.
    
    Our success depends on our ability to generate recurring revenue streams, which depends in large part on our
ability to scale our sales and marketing efforts.
    
    The volatility of our stock price could subject us to an increased risk of securities litigation.
    
    The market in which we operate is highly competitive, which could adversely affect our ability to meet our
financial objectives.
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
    
    Our current financial position may deter potential customers and strategic relationships.
    
    We have a history of losses, expect to incur additional losses in the future and may not be able to achieve or
sustain profitability.
    
    We will likely need to enter into additional strategic relationships to meet our customer needs.
    
    To meet our financial objectives, we must grow rapidly. If we are unable to manage this growth, we could incur
costs that could adversely affect our operating results and financial condition.
    
    If we overestimate customer demand, we may increase our cost structure unnecessarily.
    
    Although we are not targeting the supply chain RFID market, public perceptions of the viability of RFID
applications in the supply chain could adversely affect acceptance of RFID in the vertical markets we are
targeting.
    
    Widespread adoption of our RFID solutions depends on declines in selling prices for RFID tags such as Hitachis
μ-Chip tag.
    
    Our products are new and evolving and our business model is unproven, which makes it difficult to evaluate our
current business and future prospects.
    
    Most of our products are part of larger solutions that are offered to end customers, and we must work with third
parties to ensure that our products inter-operate correctly.
    
    If our products and systems do not meet our customers needs or otherwise malfunction, our business will be
adversely affected.
    
    Fluctuations in quarterly and annual operating results may adversely affect our business, and these fluctuations
make evaluating our business difficult.
    
    If we are unsuccessful in developing and introducing new products and enhancements, we may be unable to meet our
financial goals.
    
    Our GenuDot System is a closed loop application, meaning it does not comply with the EPCglobal standards and is
not intended to work with third party readers. This could adversely affect market acceptance of the GenuDot
System.
    
    We rely on patents, trademarks, copyrights and trade secrets to protect our proprietary rights, which may not be
sufficient to protect all of our intellectual property.
    
    We do not own several key technologies that we are developing for third parties such as Hexion Specialty
Chemicals, Inc., which may make us a less attractive acquisition candidate.
    
    We may need to license RFID-related patents from third parties, and we may not be able to obtain these licenses on
acceptable terms, or at all.
    
    We may become subject to intellectual property infringement claims and other litigation that might be costly to
resolve and, if resolved adversely, may harm our business.
    
    Complying with applicable governmental regulations could adversely affect our ability to sell our products and
impair operating results.
    
    We expect to depend on a limited number of suppliers and assemblers of our products.
    
    We expect to rely on third party manufacturers.
    
    If unauthorized access is obtained to our customers data as a result of our products, including through breach of
security measures or unauthorized encoding of RFID tags, we could be
subject to related legal claims, and customers may curtail or stop their use of our
products, which would harm the business, operating results and financial
condition.
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
    
    Privacy concerns relating to elements of RFID
technology could damage our reputation and deter
current and potential customers from using our
products and systems.
    
    We depend on key personnel, including our chief
executive officer, chief operations officer, and
chief financial officer to manage our business
effectively. If we are unable to hire, retain or
motivate qualified personnel, we will have trouble
meeting our financial goals.
    
    Complying with Section 404 of the Sarbanes-Oxley Act,
which we must do in connection with our financial
statements for the year ending December 31, 2007,
will entail substantial cost, expense, effort, and
management distraction.
    
    If we fail to maintain proper and effective internal
controls, our ability to produce accurate financial
statements could be impaired.
    
    Until recently, no members of our board of directors
were independent within the meaning of federal
securities laws.
    
    The costs being a public company can be significant.
    
    Our stock is not listed on a major stock market.
    
    If securities or industry analysts do not publish
research or reports about us, we may not be able to
generate significant trading volume in our stock.
    
    Future sales of shares by existing stockholders, or
perceptions of these sales, could cause the stock
price to decline.
 Plan of Operation
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Results of Operations
    15




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Liquidity and Capital Resources
      17




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Off-Balance Sheet Arrangements
  18




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Item 3 Controls and Procedures
  Evaluation of Disclosure Controls and Procedures
     Changes in Internal Controls
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PART II  OTHER INFORMATION
 
 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
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Item 6 Exhibits
  Exhibits
 3.1
    
    Notice of Unregistered Sales
of Equity Securities
    
    Incorporated by reference to
Form REGDEX March 12, 2007 File
No.: 021-10153410.1
    
    February 20, 2007 Entry into
Material Agreement for the
initial closing of a private
placement
    
    Incorporated by reference to
Form 8-K February 23, 2007 File
No.: 002-4170317.1
    
    January 5, 2007 Appointment
of interim Chief Executive
Officer during CEOs leave of
absence
    
    Incorporated by reference to
Form 8-K January 29, 2007 File
No.: 002-4170317.2
    
    January 24, 2007 Return of
Chief Executive Officer
following a leave of absence
replacing interim Chief
Executive Officer
    
    Incorporated by reference to
Form 8-K January 29, 2007 File
No.: 002-4170317.3
    
    February 6, 2007 Resignation
of Director Barbee and
Appointment of new Director
Friedman
    
    Incorporated by reference to
Form 8-K February 12, 2007 File
No.: 002-4170331.1
    
    Certification of Chief
Executive Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Included in this filing31.2
    
    Certification of Chief
Financial Officer pursuant to
Section 302 of the
Sarbanes-Oxley Act of 2002
    
    Included in this filing32.1
    
    Certification of Chief
Executive Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Included in this filing32.2
    
    Certification of Chief
Financial Officer pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002
    
    Included in this filing
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SIGNATURES
  THE X-CHANGE CORPORATION
(Registrant)DATE:May 14 2007By:
    /s/     Michael  L, SheriffMichael L. Sheriff, President, ChiefExecutive Officer , and Chairman
(Principal Executive Officer)DATE:May 14 2007By:
    /s/     Karey Y. DanielsKarey Y. Daniels, ChiefFinancial Officer
(Principal Financial Officer) 22