---

|UNITED STATES                                
|---------------------------------------------
|SECURITIES AND EXCHANGE
    COMMISSION       
|Washington, D.C. 20549                       
|FORM 10-Q                                    
|(Mark One)                                   
|                                             
|[X]                                          
|                                             
|For the quarterly period ended: June 30, 2011
|                                             
|[   ]                                        
|                                             
|                                             

Commission File Number: 000-53364

KRANEM CORPORATION(Exact Name of Registrant as Specified in Its Charter)

|Colorado                        | 000-53563                | 02-0585306                       
|------------------------------- | ------------------------ | ---------------------------------
|(State or other jurisdiction of | (Commission File Number) | (IRS Employer Identification No.)
|incorporation or organization)  |                          |                                  

1080 OBrien DriveMenlo Park, CA 94025(Address of principal executive offices)

(650) 319-6743(Registrants telephone number,
including area code)

2700 Cherry Creek South Drive #406, Denver, CO 80209 (Former
name or former address, if changed since last report)

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

Yes [ X ]  No [   ]

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

Yes [   ]  No [ X ]

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

|Large accelerated filer  [   ]                                                   |  | Accelerated filer  [   ]         | 
|-------------------------------------------------------------------------------- |  | -------------------------------- | 
|Non-accelerated filer   [   ]  (Do not check if a
    smaller reporting company) |  | Smaller reporting company  [ X ] | 

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

Yes [    ]  No [ X ]

The number of shares outstanding of each of the issuers
classes of common stock, as of August 19, 2011 is as follows:

Class of Securities
      Shares OutstandingCommon Stock, no par value
      39,888,750




i

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|KRANEM CORPORATION                  
|------------------------------------
|                                    
|Quarterly Report on Form 10-Q       
|Quarterly Period Ended June 30, 2011
|                                    
|TABLE OF CONTENTS                   
|PART I   FINANCIAL INFORMATION      
|ITEM 1.                             
|ITEM 2.                             
|                                    
|ITEM 3.                             
|ITEM 4.                             
|                                    
|PART II  OTHER INFORMATION          
|                                    
|ITEM 1.                             
|ITEM 1A.                            
|ITEM 2.                             
|ITEM 3.                             
|ITEM 4.                             
|ITEM 5.                             
|ITEM 6.                             

---

|                                                                                         
|-----------------------------------------------------------------------------------------
|PART I FINANCIAL INFORMATION                                                             
|ITEM 1. **FINANCIAL
    STATEMENTS.**                                                    
|                                                                                         
|KRANEM CORPORATION
      CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2011
      (Unaudited)
|                                                                                         
|                                                                                         
|                                                                                         
|ASSETS                                                                                   
|Current
    Assets:                                                                      
|Cash and cash equivalents                                                                
|Available for Sale Financial Assets                                                      
|Financial Assets                                                                         
|Accounts receivable, net of allowance for doubtful debts                                 
|Accounts receivable - related parties                                                    
|Inventories                                                                              
|Deferred tax assets, net                                                                 
|Current tax assets net of provision for income tax                                       
|Prepaid Expenses and Other current assets                                                
|Total Current Assets                                                                     
|Non-Current Assets:                                                                      
|Property, plant and equipment, net                                                       
|Intangible assets, net                                                                   
|Financial assets                                                                         
|Deferred tax assets, net                                                                 
|Other non-current assets                                                                 
|Total Non-Current Assets                                                                 
|TOTAL ASSETS                                                                             
|LIABILITIES AND
    STOCKHOLDER'S EQUITY                                                 
|Current
    Liabilities:                                                                 
|Accounts payable                                                                         
|Accounts payable - related parties                                                       
|Deferred revenues                                                                        
|Short-term note                                                                          
|Short-term loan - related parties                                                        
|Other Current liabilities                                                                

4

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|                                                                                                  |  |    |  |  |            |   |  |          |  
|------------------------------------------------------------------------------------------------- |  | -- |  |  | ---------- | - |  | -------- | -
|                                                                                                  |  |    |  |  |            |   |  |          |  
|Total Current Liabilities                                                                         |  |    |  |  | 3,911,960  |   |  | 124,292  |  
|Non-Current Liabilities:                                                                          |  |    |  |  | -          |   |  | -        |  
|Long-term debt                                                                                    |  |    |  |  | -          |   |  | -        |  
|Deferred tax liability                                                                            |  |    |  |  | -          |   |  | -        |  
|Long- term provisions                                                                             |  | 6E |  |  | 94,466     |   |  | -        |  
|Total non-current liabilities                                                                     |  |    |  |  | 94,466     |   |  | -        |  
|STOCKHOLDERS' EQUITY                                                                              |  |    |  |  | -          |   |  | -        |  
|Preferred Stock, no par value,
    10,000,000 shares authorized, no shares issued and outstanding |  | 7  |  |  | -          |   |  | -        |  
|Common Stock, no par value, 50,000,000
    shares authorized, 7,977,750                           |  |    |  |  |            |   |  |          |  
|shares issued and
    outstanding                                                                 |  | 7  |  |  | 5,629,784  |   |  | 74,230   |  
|Additional Paid-in-Capital                                                                        |  |    |  |  | 1,169,414  |   |  | 161,210  |  
|Retained Earnings                                                                                 |  |    |  |  | (294,925   | ) |  | (359,589 | )
|Currency Translation Reserve                                                                      |  |    |  |  | 8,465      |   |  | -        |  
|Accumulated Other Comprehensive Income                                                            |  |    |  |  | 788        |   |  | -        |  
|Total Stockholders' Equity                                                                        |  |    |  |  | 6,513,526  |   |  | (124,149 | )
|TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY                                                        |  |    |  |  | 10,519,952 |   |  | 143      |  

The accompanying Notes are an integral part of the
Financial Statements

5

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|KRANEM CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS AS OF JUNE 30, 2011
      (Unaudited)
|---------------------------------------------------------------------------------------------
|                                                                                             
|                                                                                             
|                                                                                             
|REVENUES                                                                                     
|Income
    from Operations                                                                   
|COST OF REVENUES                                                                             
|GROSS PROFIT                                                                                 
|OPERATING EXPENSES                                                                           
|Research & Development                                                                       
|Selling and Marketing                                                                        
|General and Administrative Expenses                                                          
|Total Operating Expenses                                                                     
|OPERATING LOSS                                                                               
|Finance Costs                                                                                
|Non Operating Income                                                                         
|Income before Income Taxes                                                                   
|Tax Expenses                                                                                 
|Net Income                                                                                   
|Earnings per Equity share                                                                    
|Basic                                                                                        
|Diluted                                                                                      
|Weighted average number of equity shares used in computing earnings per equity share         
|Basic                                                                                        
|Diluted                                                                                      

The accompanying Notes are an integral part of the
Financial Statements

6

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KRANEM CORPORATION 
CONSOLIDATED STATEMENTS OF CASH FLOWS AS OF JUNE 30, 2011 
(Unaudited)

|                                                        |  | SIX MONTHS ENDED |  
|------------------------------------------------------- |  | ---------------- | -
|                                                        |  | 30-Jun-11        |  
|                                                        |  | US $             |  
|Cash flows from Operating Activites:                    |  |                  |  
|Net Income                                              |  | (64,663          | )
|Adjustments:                                            |  |                  |  
|Depreciation and amortization                           |  | 14,140           |  
|Loss/(Profit) on sale of Property, Plant and Equipment  |  | (11,636          | )
|Provision
    for Taxation                              |  | 48,205           |  
|Dividend Income                                         |  | (3,915           | )
|Deferred
    Taxes                                      |  | (2,209           | )
|Currency Translation Reserve                            |  | -                |  
|Fair value
    Adjustments                              |  | (8,157           | )
|Others , net                                            |  | -                |  
|Interest
    (Accrual) / Reversal on Fixed Deposits     |  | (844             | )
|Provision for Gratuity and Leave Encashment             |  | 7,000            |  
|Amortization of Prepaid Rent                            |  | 1,254            |  
|Gain on liabilities w/o in acquisition                  |  | (124,292         | )
|Changes in Asset / Liabilities                          |  |                  |  
|(Increase)/Decrease in other Non current Assets         |  | -                |  
|(Increase)/Decrease in Inventories                      |  | (129             | )
|(Increase)/Decrease in Trade Receivables                |  | (376,935         | )
|Increase/(Decrease) in Tax Assets                       |  | (49,566          | )
|(Increase)/Decrease in Financial Assets                 |  | (7,846           | )
|(Increase)/Decrease in Prepaid and other current Assets |  | 26,985           |  
|Increase/(Decrease) in Long term Provisions             |  | 3,755            |  
|Increase/(Decrease) in Trade Payable                    |  | 4,237            |  
|Increase/(Decrease) in Deferred Revenues                |  | 413,370          |  
|Increase/(Decrease) in Other Current Liabilities        |  | 68,618           |  
|Net Cash from Operating Activities                      |  | 51,224           |  
|Cash flows from Investing Activities:                   |  |                  |  
|Investment in Mutual Fund Units                         |  | (111,882         | )
|Redemption
    of Mutual Fund Units                     |  | 134,258          |  

7

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|                                                                             |  |         |   |  |       | 
|---------------------------------------------------------------------------- |  | ------- | - |  | ----- | 
|                                                                             |  |         |   |  |       | 
|Proceeds from Sale of Fixed Assets                                           |  | -       |   |  | -     | 
|Expenditure on property, plant and equipment                                 |  | (17,705 | ) |  | -     | 
|Acquisition of Assets                                                        |  | (36,091 | ) |  | -     | 
|Net Cash from Investing Activities                                           |  | 76,157  |   |  | -     | 
|Cash flows from
    Financing Activities:                                    |  |         |   |  |       | 
|Donated Capital                                                              |  | 4,000   |   |  | 9,600 | 
|Increase/(Decrease) in Short Term Loans                                      |  | 50,344  |   |  |       | 
|Net Cash from Financing Activities                                           |  | 54,344  |   |  | 9,600 | 
|Net Increase / (decrease) in
    cash and cash equivalents during the period |  | 181,725 |   |  | 46    | 
|Cash and cash equivalents at the beginning of the period                     |  | 143     |   |  | -     | 
|Effect of exchange rate changes on cash and cash equivalents                 |  | -       |   |  | -     | 
|Cash and Cash Equivalents at the end of the period                           |  | 181,868 |   |  | 46    | 

The accompanying Notes are an integral part of the
Financial Statements

8

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Kranem Corporation 
Notes to Condensed Financial Statements


KRANEM CORPORATION 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
(Unaudited)

Note 1  Basis of presentation

The interim financial statements included herein, presented in accordance with
United States generally accepted accounting principles and stated in US dollars,
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (SEC). Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading.

These statements reflect all adjustments, consisting of normal recurring
adjustments, which, in the opinion of management, are necessary for fair
presentation of the information contained therein. The Company follows the same
accounting policies in the preparation of interim reports.

Results of operations for the interim periods are not indicative of annual
results.

Note 2  History and organization of the Company

The Company was incorporated in the State of Colorado on April 18, 2002 under
the name Kranem Corporation. The Company previously offered high-quality office
and office supply products to businesses, educational institutions, government
agencies and individuals through the Companys website, www.learningwire.com. The Company operated its business under the
Learningwire trade name, which is registered with the Colorado Secretary of
State. However, the Company ceased its online operations in January 2006 and
from that time until the acquisition of Xalted Networks described below, the
Company did not engage in any active operations, other than its search for a
privately owned corporation to merge with or acquire.

On May 13, 2011, The Company completed the acquisition of Xalted Networks, Inc.,
or Xalted Networks, a Delaware holding company with an operating subsidiary in
India. Since the closing of that acquisition, the Company has been engaged in
the provision of advanced software solutions that enable companies and public
organizations, including governments and law enforcement agencies, to capture,
manage and analyze structured and unstructured data to enhance business and
operational performance and address security threats. The two principal markets
that our software solutions address are the telecom security market and the
homeland security market. Xalted includes law enforcement as part of the
homeland security market. Xalteds current and past geographic focus is on India
and the surrounding countries in Asia, Africa, and the Middle East.

The Companys acquisition of Xalted Networks and its operating subsidiary,
Xalted Information Systems (Pvt.) Ltd., or Xalted Information, was accomplished
by our purchase of $2,500,000 of debt issued by Xalted Networks parent, Xalted
Holding Corporation, or Xalted Holding, which we acquired from three note
holders in exchange for the issuance to them of an aggregate of 14,958,280 shares
of our common stock; the issuance to Xalted Holding of 11,634,220 shares of our
common stock; and the cancellation of an aggregate of 14,687,500 outstanding
shares of our common stock held by three individuals. As a result of, and
immediately after the closing of these transactions, the former Xalted Holding
note holders held directly 45% of our issued and outstanding stock and a further
9.1% indirectly through their combined shareholding of Xalted Holding, for total
direct and indirect ownership interest of 54.1% . Xalted Holding held directly
35% of our issued and outstanding common stock. The remaining 20% was held by
the shareholders of Kranem Corporation of record immediately before the closing
of the transactions.

Asset Purchase Agreement

As consideration for the Transferred Assets, we issued to Investco 6,648,125
shares of our common stock, representing 20% of our then-issued and outstanding
capital stock, and a one-year convertible promissory note, or the Note, in the
principal amount of $400,000. The Note bears simple interest at the annual rate
of five percent and is due and payable, together with accrued interest, on June
29, 2012 or earlier in the event of our insolvency or bankruptcy. The Note may
be prepaid at any time without penalty. The Note is convertible at the option of
the Note holder, in whole but not in part, into shares of our common stock, at
the per share price paid by, and on the same terms and conditions extended to,
the investors during our next round of financing. The shares and the Note were
issued in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933. We relied on these exemptions from registration
based in part on representations made by Investco. The securities issuable upon
conversion of the Note have not been registered under the Securities Act. The
shares of common stock, the Note and the securities issuable upon any conversion
of the Note, may not be offered or sold absent registration or an applicable
exemption from registration requirements.

For more information on this transaction, please see our current report on
Form 8-K filed with the SEC on July 7, 2011, which is incorporated herein by
reference.

9

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Kranem Corporation 
Notes to Condensed Financial Statements


For more information on this transaction, please see our current report on Form
8-K filed with the SEC on July 7, 2011, which is incorporated herein by
reference.

Note 3 -Significant Accounting Policies:

There have been no changes to the Companys significant accounting policies from
those described in Notes to the Financial Statements of the Company for the year
ended December 31, 2010. These unaudited financial statements should be read in
conjunction with such financial statements for the year ended December 31, 2010
filed in 8K.

Note 4 - Recent Accounting Pronouncements:

The Company evaluated all recent accounting pronouncements issued and determined
that the adoption of these pronouncements would not have a material effect on
the financial position, results of operations or cash flows of the Company.

Note 5 - Use of estimates:

The preparation of the financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities as on the date
of the financial statements and the reported amount of revenues and expenses
during the reported period. Examples of such estimates include: project
completion dates, time and cost required to complete projects for purposes of
revenue recognition and future revenue, expense and cash flow estimates for
purposes of impairment analysis and loss contract evaluation, allowance for
doubtful debts, obligations under employee benefit plans, valuation allowances
on deferred tax assets, useful lives of premises and equipment (fixed assets)
and income taxes. Actual results could differ materially from those estimates.

Note 6 - Other disclosures:

A. Financial Assets:

10

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Kranem Corporation 
Notes to Condensed Financial Statements


The components of financial assets are given hereunder:

|                                                   |  | As at June 30, 2011 | 
|-------------------------------------------------- |  | ------------------- | 
|                                                   |  | $                   | 
|1. Financial Assets-Current                        |  |                     | 
|Interest free Loan given to Director
    (Note a)  |  | 448,700             | 
|Fixed Deposits placed with Banks with residual     |  |                     | 
|maturity less than one year (Note b)               |  | 26,449              | 
|Krishil TechPark Private Limited (Note c)          |  | 539,021             | 
|                                                   |  | 1,014,170           | 
|2. Financial Assets-Non-Current                    |  |                     | 
|Fixed Deposits placed with Banks with
    residual |  | 87,757              | 
|maturity more than one year(Note d)                |  |                     | 
|Krishil TechPark Private Limited (Note
    e)      |  | 202,401             | 
|                                                   |  | 290,158             | 
|Total Financial Assets                             |  | 1,304,328           | 

Note a: The Companys subsidiary Xalted Information has given
Interest free loan to a Director of the Xalted Information, which is repayable
in 2011. The Board of Directors of Xalted Information has decided that no
further loan will be granted to any of the Directors of the Company in the
future.

Note b: Current Fixed Deposits amounting to $ 26,449 as on June
30, 2011 are placed through Xalted Information with an Indian Bank as margin for
performance /financial guarantees given by the company, as such not considered
as cash equivalents.

Note c: The amount due from Krishil Tech Park Private Limited
is on account of sale of Land which is recoverable by December 2011.

Note d: Entire amounts of Non-current Fixed Deposits as on June
30, 2011 are placed with an Indian Bank as margin for performance/ financial
guarantees given by the company.

Note e: The amount due from Krishil Tech Park Private Limited
is on account of sale of Land which is recoverable after September 2012 based on
net present value.

11

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Kranem Corporation 
Notes to Condensed Financial Statements


B. Accounts receivable, net of
allowance for doubtful debts

|Accounts Receivables consists of:                     |  |                     |  
|----------------------------------------------------- |  | ------------------- | -
|                                                      |  | As at June 30, 2011 |  
|                                                      |  | **$**               |  
|Accounts Receivables                                  |  |                     |  
|-From customer                                        |  | 3,524,055           |  
|-From Related Parties                                 |  | 1,490,000           |  
|Accrued Income (Refer Note a)                         |  | 1,463,004           |  
|Total Accounts Receivables (Gross)                    |  | 6,477,059           |  
|Less: Allowance for Doubtful Debts (Refer
    Note b) |  | (216,284            | )
|Accounts Receivable, Net                              |  | 6,260,775           |  

Note a: Accrued income consists of amounts representing the
recognized sales value of performance and such amounts that had not been billed
and were not billable to customers as the respective milestones were not
achieved at the date of the balance sheet.

Note b: The Company had invoiced a customer in Africa amounting
to $ 216,284. In view of the uncertainty in realization of this amount from the
Customer, the Company as a prudent and conservative measure had made a provision
in the books for the entire amount in the year ended December 31, 2009.

The Company is exposed to foreign currency risk on its Account
Receivables in India. Foreign currency risk is market risk due to effect of
changes in foreign currency exchange rates. The contracts with the Companys
Indian clients are typically priced in Indian Rupees, which represents a foreign
exchange exposure. As the Company has significant operations in India, which are
based in Indian Rupees, the Company views the risk as manageable. The Net
Foreign currency receivable aggregated was $ 3,268,274 as at June 30, 2011.

The allowance for doubtful debts are established at amounts
considered to be appropriate based primarily upon Xalted's past credit loss
experience with the customers and an evaluation of potential losses on the
outstanding receivable balances.

The activity in the allowance for doubtful accounts receivable
is given below:

|                               |  | Period May 13, 2011 to | 
|------------------------------ |  | ---------------------- | 
|                               |  | June 30, 2011          | 
|                               |  | **$**                  | 
|As on beginning of the quarter |  | 216,284                | 
|Additions                      |  | -                      | 
|Deductions                     |  | -                      | 
|As on the end of the quarter   |  | 216,284                | 

12

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Kranem Corporation 
Notes to Condensed Financial Statements


|                                          |  |                     |  
|----------------------------------------- |  | ------------------- | -
|C. Property, plant and equipment, net     |  |                     |  
|                                          |  |                     |  
|Property, plant and equipment consist of: |  |                     |  
|                                          |  | As at June 30, 2011 |  
|                                          |  | **$**               |  
|Computer & Peripherals                    |  | 1,134,441           |  
|Communication Equipments                  |  | 31,817              |  
|Electrical Equipments                     |  | 138,162             |  
|Lab Equipment                             |  | 78,546              |  
|Office Equipment                          |  | 9,136               |  
|Motor Vehicle                             |  | 18,426              |  
|Air Conditioner                           |  | 76,866              |  
|Furniture and Fittings                    |  | 95,844              |  
|Digital Loop Carriers                     |  | 73,997              |  
|Leasehold improvements                    |  | 33,978              |  
|Total                                     |  | 1,691,213           |  
|Less: Accumulated Depreciation            |  | (1,521,560          | )
|Property, plant and equipment, net.       |  | 169,653             |  

Net Depreciation expense aggregated to $ 11,709 for the
period May 13, 2011 to June 30, 2011.

|D. Intangible Assets, net                                                     |  |            |  |  |              |  |  |              | 
|----------------------------------------------------------------------------- |  | ---------- |  |  | ------------ |  |  | ------------ | 
|                                                                              |  |            |  |  |              |  |  |              | 
|The following table presents details of
    Xalted's total Intangible assets: |  |            |  |  |              |  | 
|                                                                              |  |            |  |  |              |  | 
|                                                                              |  | Gross Cost |  |  | Accumulated  |  |  | Net carrying | 
|As at June 30, 2011                                                           |  |            |  |  | amortization |  |  | value        | 
|                                                                              |  | **$**      |  |  | **$**        |  |  | **$**        | 
|Software (Note a)                                                             |  | 305,225    |  |  | 266,432      |  |  | 38,793       | 
|Software, IP  Acquired June 30, 2011 (Note b)                                |  | 1,511,109  |  |  | 0            |  |  | 1,511,109    | 

Note a, Amortization of intangible assets aggregated to $
2,431 for the period May 13, 2011 to June 30, 2011.

Note b, On June 30, 2011, we entered into and consummated an
Asset Purchase Agreement, or the Purchase Agreement, with Investco, a British
Virgin Islands corporation, pursuant to which we acquired certain software,
source code, intellectual property rights and other materials relating to the
Data Retention, Man in the Middle, Man in the Middle Detector and
nCrypto products and product families. We refer to these items as the
Transferred Assets. We assumed no liabilities of Investco in connection with
this transaction.

As consideration for the Transferred Assets, we issued to
Investco 6,648,125 shares of our common stock, representing 20% of our
then-issued and outstanding capital stock, and a one-year convertible promissory
note, or the Note, in the principal amount of $400,000. The Note bears simple
interest at the annual rate of five percent and is due and payable, together
with accrued interest, on June 29, 2012 or earlier in the event of our
insolvency or bankruptcy. The Note may be prepaid at any time without penalty.
The Note is convertible at the option of the Note holder, in whole but not in
part, into shares of our common stock, at the per share price paid by, and on
the same terms and conditions extended to, the investors during our next round
of financing. For more information on this transaction, please see our Note 2 or
the current report on Form 8-K filed with the SEC on July 7, 2011.

13

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Kranem Corporation 
Notes to Condensed Financial Statements


E.Long Term Provisions

Long Term Provisions consists of:

|                               |        | As at June 30, 2011 | 
|------------------------------ | ------ | ------------------- | 
|                               |        | $                   | 
|Liability Accrual for Gratuity | 39,462 |                    
|                               |        |                     | 
|(Compensated Absences)         | 55,004 |                    
|                               |        | 94,466              | 

F.Income taxes

Income taxes consist of:

|                              |  | Period May 13, 2011 to |  
|----------------------------- |  | ---------------------- | -
|                              |  | June 30, 2011          |  
|                              |  | **$**                  |  
|Indian Income Taxes           |  |                        |  
|Current taxes                 |  | 48,295                 |  
|Deferred taxes                |  | (2,208                 | )
|Aggregate Indian Income taxes |  | 46,087                 |  

Under Section 80-IC on the Indian Income Tax Act, 1961, Kranem
Corporation through its subsidiary Xalted Information is entitled to tax
holidays for its Software units located at Himachal Pradesh. 100% tax holidays
of profits are available for a period of first five consecutive fiscal years
from the date of commencement of operations and 30% exemption of profits for the
next five consecutive fiscal years respectively. These holidays expire in fiscal
2015 for the first unit and fiscal 2019 for the second unit.

14

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Kranem Corporation 
Notes to Condensed Financial Statements


|                                                             |  |                     | 
|------------------------------------------------------------ |  | ------------------- | 
|The components of net deferred tax asset are as
    follows: |  |                     | 
|                                                             |  |                     | 
|                                                             |  | As at June 30, 2011 | 
|                                                             |  | **$**               | 
|Deferred tax assets:                                         |  |                     | 
|Employee benefits                                            |  |                     | 
|Gratuity                                                     |  | 7,115               | 
|Leave Encashment                                             |  | 18,339              | 
|Salaries Payable                                             |  | -                   | 
|Rent Payable                                                 |  | 6254                | 
|Provision for Doubtful Accounts                              |  | 72,755              | 
|MAT credit available as per Income Tax Act, 1961             |  | 18,537              | 
|Fair Value of Directors Loan                                |  | 11,262              | 
|Fair Value of Receivables towards sale of land               |  | 7,046               | 
|Fair Value of Rental Deposits                                |  | 8,110               | 
|Gross deferred tax assets                                    |  | 149,418             | 
|Less: Valuation allowance                                    |  | -                   | 
|Total deferred tax assets                                    |  | 149,418             | 
|Deferred tax liabilities:                                    |  |                     | 
|Property, plant and equipment                                |  | 20,533              | 
|Prepaid Rent                                                 |  | 6,457               | 
|Total deferred tax liabilities                               |  | 26,990              | 
|Net deferred income tax assets/(liabilities)                 |  | 122,428             | 

G.Earnings per share

Basic earnings per share and Diluted earnings per share are
computed on the basis of the weighted average number of shares outstanding.

The components of basic and diluted earnings per share were as
follows:

|                                                                 |  |  |  |  | Period May 13, 2011 | 
|---------------------------------------------------------------- |  |  |  |  | ------------------- | 
|                                                                 |  |  |  |  | to June 30, 2011    | 
|Net income attributable to Kranem Corporations shareholders ($) |  |  |  |  | 68,693              | 
|Average outstanding shares                                       |  |  |  |  |                     | 
|Basic                                                            |  |  |  |  | 33,379,130          | 
|Diluted                                                          |  |  |  |  | 33,379,130          | 
|Earnings per share                                               |  |  |  |  |                     | 
|Basic
    ($)                                                    |  |  |  |  | 0.00                | 
|Diluted ($)                                                      |  |  |  |  | 0.00                | 

15

---

Kranem Corporation 
Notes to Condensed Financial Statements


H.Segmental reporting

ASC Topic 715, "Disclosure about Segments of an Enterprise and
Related Information" establishes standards for the way that public business
enterprises report information about business segments and related disclosures
about products and services, geographical areas and major customers.

The Chief Executive Officer (CEO) of the Company has been
identified as the Chief Operating Decision Maker (CODM) as defined by ASC Topic
280. The CEO of the Company evaluates the segments based on their revenue
growth, operating income and return on capital employed. Management of the
Company is of the view that Kranem has only one business vertical, i.e. Telecom
Industry and hence the disclosure requirements as per ASC Topic 715 are not
applicable to the Company.

Geographic segment

The revenues that are attributable to countries based on
location of customers are as follows:

|             |  | Period May 13, 2011 | 
|------------ |  | ------------------- | 
|             |  | to                  | 
|             |  | June 30, 2011       | 
|             |  | **$**               | 
|India        |  | 93,077              | 
|USA          |  | 417,656             | 
|Nepal        |  | 674                 | 
|South Africa |  | 15,257              | 
|Total        |  | 526,664             | 

**I. Related Party Transactions**

List of related parties where control exists and related
parties with whom transactions have taken place and relationships:

|Sr  |                                                                        |                                                   
|--- | ---------------------------------------------------------------------- | --------------------------------------------------
|No. | Name of the Related Party                                              | Relationship                                      
|1   | Xalted Networks Inc                                                    | Subsidiary                                        
|2   | Xalted Holding Corporation (formerly known as
    Xalted Networks Inc) | Holding Company                                   
|3   | Mr. Pratap Kondamoori                                                  | Key Managerial Personnel
    of Xalted Information
|4   | Mr. Ajay Batheja                                                       | Key Managerial Personnel of Xalted
    Information

16

---

Kranem Corporation 
Notes to Condensed Financial Statements


Transactions with related parties during the period May 13,
2011 to June 30, 2011.

|Sr |  | Nature of Transactions                                                                            |  |  | Holding |  |  | Entities over   |  |  | Key        |  |  | Total   | 
|-- |  | ------------------------------------------------------------------------------------------------- |  |  | ------- |  |  | --------------- |  |  | ---------- |  |  | ------- | 
|No |  |                                                                                                   |  |  | Company |  |  | which Directors |  |  | Managerial |  |  |         | 
|   |  |                                                                                                   |  |  |         |  |  | are able to     |  |  | Personnel  |  |  |         | 
|   |  |                                                                                                   |  |  |         |  |  | exercise        |  |  |            |  |  |         | 
|   |  |                                                                                                   |  |  |         |  |  | significant     |  |  |            |  |  |         | 
|   |  |                                                                                                   |  |  |         |  |  | influence       |  |  |            |  |  |         | 
|   |  |                                                                                                   |  |  | $       |  |  | $               |  |  | $          |  |  | $       | 
|1  |  | Revenue Transactions-                                                                             |  |  |         |  |  |                 |  |  |            |  |  |         | 
|   |  | - Service Fees                                                                                    |  |  | -       |  |  | 403,496         |  |  | -          |  |  | 403,496 | 
|2  |  | Fair value Adjustments-                                                                           |  |  |         |  |  |                 |  |  |            |  |  |         | 
|   |  | - Fair Value Income on interest free Loan to
    Director                                         |  |  | -       |  |  | -               |  |  | 4,784      |  |  | 4,784   | 
|   |  | - Fair Value Income on amounts recoverable from
    Krishil TechPark Limited towards sale of Land |  |  | -       |  |  | 2,158           |  |  | -          |  |  | 2,158   | 
|3  |  | Loans and Advances Repaid Accounts Payable                                                        |  |  | -       |  |  | 11,814          |  |  | -          |  |  | 11,814  | 
|4  |  |                                                                                                   |  |  | -       |  |  | 30,597          |  |  | -          |  |  | 30,597  | 
|5  |  | Consultancy Charges                                                                               |  |  | -       |  |  | 1,805           |  |  | 5,414      |  |  | 7,219   | 

Closing Balance of Related Parties as at June 30, 2011

|Sr | Nature of Transactions | Holding | **Entities**
      **over**   | Key        | Total    
|-- | ---------------------- | ------- | ----------------------------- | ---------- | ---------
|No |                        | Company | which Directors               | Managerial |          
|   |                        |         | **are**
      **able** **to** | Personnel  |          
|   |                        |         | **exercise**                  |            |          
|   |                        |         | s**ignificant**               |            |          
|   |                        |         | **influence**                 |            |          
|   |                        | $       | $                             | $          | $        
|1  | Financial Assets       | -       | 741,422                       | 448,700    | 1,190,122
|2  | Other Current Assets   | -       | 3,681                         | 16,016     | 19,697   
|3  | Accounts Payable       | -       | 1,022,393                     | 3,019      | 1,025,412
|4  | Accounts Receivable    | -       | 1,490,000                     | -          | 1,490,000
|5  | Short-term Loan        | -       | 364,420                       | -          | 364,420  

Disclosure in respect of Material Related Party Transactions
during the period May 13, 2011 to June 30, 2011:

|1. | Revenue transactions (Service fees) include Xalted
      Holding Corporation (formerly known as Xalted Networks Inc) $ 403,496
      for the period May 13, 2011 to June 30, 2011
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                  
|2. | Fair Value Income Include Directors Loan (Pratap
      Kondamoori) $4,784for the period May 13, 2011 to June 30, 2011.                                                          
|   |                                                                                                                                                                                  
|3. | Loan and Advances repaid include Xalted Holding
      Corporation (formerly known as Xalted Networks Inc) $ 30,597 for the
      period May 13, 2011 to June 30, 2011.           
|   |                                                                                                                                                                                  
|4. | Consultancy Charges include Ajay Batheja $ 5,414 and Prabhas Consulting $ 1,805 for the period May 13, 2011 to June 30, 2011                                                     

17

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Kranem Corporation 
Notes to Condensed Financial Statements


J. Contingencies and commitments

Contingencies

The Indian Income Tax Assessing Officer has raised a demand for additional Tax
liability for A.Y. 06-07, AY 07-08 and AY 08-09. The Company is contesting the
order of denial of section 10A benefits claimed by the Company in AY 2006-07,
07-08 and 08-09 under the Income Tax Act, 1961. The estimated contingency
amounts to $ 225,755 as of June 30, 2011. Management believes that it has strong
merits for this petition and hence it will not have material adverse affect on
Kranem's results of operations, liquidity or financial position and has filed an
Appeal to the Commissioner of Income Tax.

Legal Proceedings:

|(a) | The Company has an ongoing dispute with one of its Customers
in Africa due to the SOW (Statement of Work) changing at regular intervals and
new requirements being added regularly against what has been agreed as per
Contract by the Customer. The Company had received a Notice from the Customer
about the cancellation of the Contract nine (9) months back and has not heard
from the Customer thereafter. In view of the uncertainty in realization of the
amount of $ 216,284 due from this Customer, the Company as a prudent and
conservative measure had made a Provision in the books for the entire amount of
$ 216,284.                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(b) | Arasor Corporation.In April 2010, a petition was
filed against Xalted Information in the High Court of Karnataka at Bangalore by
Arasor Corporation, a Delaware company. The High Court is the principal civil
court of original jurisdiction in the Indian state of Karnataka, sitting in the
city of Bangalore. The petition sought an order under Sections 433 and 434 of
the Companies Act of 1956 for the winding up of Xalted Information, based on
allegations that Xalted Information did not pay for communications equipment
sold and shipped to Arasor. We maintain the Company never received the equipment
which is alleged to have been shipped to us. This type of claim, and the type of
relief sought, is not unusual in India.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The petition was heard by a single judge, sometimes also
called a single bench judge, in the High Court in Karnataka. Any judicial
panel comprised of fewer than all the judges in a given court is referred to in
India as a Division Bench. The single-judge court found in favor of Arasor and
against Xalted Information on November 10, 2010. On December 14, 2010, Xalted
Information filed an appeal of that decision before a two- judge panel, or
Bench, of the same High Court. On January 19, 2011, the two-judge panel stayed
the November 10, 2010 order of the single judge and all further proceedings in
the action filed by Arasor, pending the appeal.                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | After submission of written arguments, a hearing on the
appeal was conducted in March 2011, a further hearing was set for June 9, 2011,
and the earlier stay was continued during the pendency of the appeal. In June
2011, Xalted Information filed an additional application with the two-judge
panel to request dismissal of the claims against it on the basis that Arasors
corporate status was void in Delaware and forfeited in California, and that
Arasor therefore was without corporate power and authority to maintain or
prosecute the action. The matter is expected to be heard during
August/September, 2011.                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    | The Company's lawyers have informed the Company that they
believe the Company has a reasonably strong legal position and a good chance of
success in the present proceedings before the appellate court. However, if we
are unsuccessful in defending ourselves against the claim, Xalted Information
could be subject to judicial liquidation in India                                                                                                                                                                                                                                                                                                                                                                                         

Note 7  Stockholders Equity:

The Company is authorized to issue 50,000,000 shares of its common stock, with
no par value, and up to 10,000,000 shares of its preferred stock, with no par
value.

On May 13, 2011, the Company acquired Xalted Networks and its operating
subsidiary, Xalted Information, which was accomplished through the issuance of
common shares in the Company. The initial transaction was the purchase of
$2,500,000 of debt issued by Xalted Networks parent, Xalted Holding
Corporation, or Xalted Holding, which the Company acquired from three note
holders in exchange for the issuance to them of an aggregate of 14,958,280 shares
of our common stock. The second transaction was the issuance to Xalted Holding
of 11,643,220 shares of our common stock. The third transaction was the
cancellation of an aggregate of 14,687,500 outstanding shares of our common stock
held by three individuals. As a result of, and immediately after the closing of
these transactions, the former Xalted Holding note holders held directly 45% of
our issued and outstanding stock and a further 9.1% indirectly through their
combined shareholding of Xalted Holding, for total direct and indirect ownership
interest of 54.1% . Xalted Holding held directly 35% of our issued and
outstanding common stock. The remaining 20% was held by the shareholders of
Kranem Corporation of record immediately before the closing of the transactions.

18

---

Kranem Corporation 
Notes to Condensed Financial Statements


On June 30, 2011, we entered into and consummated an Asset Purchase Agreement,
or the Purchase Agreement, with Investco, a British Virgin Islands corporation,
pursuant to which we acquired certain software, source code, intellectual
property rights and other materials relating to the Data Retention, Man in
the Middle, Man in the Middle Detector and nCrypto products and product
families. We refer to these items as the Transferred Assets. We assumed no
liabilities of Investco in connection with this transaction. As consideration
for the Transferred Assets, we issued to Investco 6,648,125 shares of our common
stock, representing 20% of our then-issued and outstanding capital stock, and a
one-year convertible promissory note, or the Note, in the principal amount of
$400,000. For more information on this transaction, please see our current
report on Form 8-K filed with the SEC on July 7, 2011, which is incorporated
herein by reference.

As of the close of business of June 30, 2011, the Company had a total of
39,888,750 common shares outstanding. There were no preferred shares of the
Company outstanding. The Companyhas not paid any cash dividends on
common stock. There is no current anticipation of paying cash dividends in
future.

Note 8  Subsequent Events:

As discussed in Note 1 and Note 7, the Company acquired
Xalted Networks, Inc. on May 13, 2011. The Company has accounted for this
transaction as an acquisition under ASC Topic 805.10.25 "Business Combination".
The Companys management is further evaluating this accounting treatment with
its outside auditors to ensure that such treatment is appropriate under ASC
Topic 805.10.25. In the event that our evaluation of the accounting treatment
for the acquisition of Xalted Networks, Inc. does not meet the criterias under
ASSC Topic 805.10.25 these financial statements will be revised accordingly.

|(a) | Stock Dividend.On July 14, 2011, the Companys Board
of Directors declared a four-for-one stock dividend on our shares of common
stock. The record date for the dividend was July 25, 2011, and the dividend was
paid on July 28, 2011. As a result of the stock dividend, the number of issued
and outstanding shares of our capital stock increased from 7,977,750 to
39,888,750.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(b) | Stock Incentive Plan.Effective August 1, 2011, the
Companys Board of Directors adopted the Kranem Corporation Stock Incentive
Plan, or the Stock Incentive Plan. The purpose of the Stock Incentive Plan is to
promote the Companys success and the interests of its stockholders by providing
a means through which we may grant equity-based incentives to attract, motivate
and retain certain officers, employees, directors and other eligible persons and
to further link the interests of the recipients with those of the Companys
stockholders generally. A total of 2,000,000 shares of common stock were made
available for issuance under the Stock Incentive Plan.                                                                                                                                                                                                                                                                                                                                            
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | The Stock Incentive Plan provides for the grant of incentive
stock options and non-qualified stock options. Incentive stock options granted
under the Stock Incentive Plan are those intended to qualify as incentive stock
options as defined under Section 422 of the Internal Revenue Code. The Stock
Incentive Plan must be approved by the Companys stockholders within 12 months
of its adoption. The Stock Incentive Plan has not been approved by the Companys
stockholders. Non-qualified stock options granted under the Stock Incentive Plan
are option grants that do not qualify as incentive stock options under Section
422 of the Internal Revenue Code. Each option will expire not more than 10 years
after its date of grant.                                                                                                                                                                                                                                                                          
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | Concurrent with the adoption of the Stock Incentive Plan, the
Companys Board resolved on the grant of incentive stock options on an aggregate
of 1,074,500 shares and non-qualified stock options on an aggregate of 166,000
shares, of the Companys common stock, to the Companys current employees, as
well as eligible consultants. These stock options are exercisable at a price to
be determined by the administrator as designated pursuant to the Stock Incentive
Plan at the time of the grant of the option and set forth in the applicable
agreement. In no case will the exercise price be less than the greater of: (a)
the par value of our common stock, (b) 100% of the fair market value of the
Companys common stock on the date of grant; or (c) in the case of an option
granted to a recipient who at the time of the grant possesses more than 10% of
the total combined voting power of all classes of our stock, 110% of the fair
market value of the Companys common stock on the date of grant.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | For more information on the adoption of our Stock Incentive
Plan and on the grants described above, please see the Companys current report
on Form 8-K filed with the SEC on August 5, 2011, which is incorporated herein
by reference.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

19

---

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

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We
use words such as believe, expect, anticipate, project, target,
plan, optimistic, intend, aim, will or similar expressions which are
intended to identify forward-looking statements. Such statements include, among
others, those concerning any projections of earnings, revenue, margins or other
financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements regarding future economic
conditions or performance; as well as all assumptions, expectations,
predictions, intentions or beliefs about future events. You are cautioned that
any such forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, as well as assumptions, which, if they were to
ever materialize or prove incorrect, could cause the results of the Company to
differ materially from those expressed or implied by such forward-looking
statements.

Readers are urged to carefully review and consider the various disclosures made
by us in this report and our other filings with the SEC. These reports attempt
to advise interested parties of the risks and factors that may affect our
business, financial condition and results of operations and prospects. The
forward-looking statements made in this report speak only as of the date hereof
and except as required by federal securities laws, we disclaim any obligation to
provide updates, revisions or amendments to any forward-looking statements to
reflect changes in our expectations or future events.

Use of Terms

Except where the context otherwise requires and for the purposes of this report
only, references to:

- the Company, we, us, and our
are to the combined business of Kranem Corporation, a Colorado corporation, and
its consolidated subsidiaries, Xalted Networks and Xalted Information;
- Xalted Holding are to Xalted
Holding Corporation, a Delaware corporation, formerly known as Xalted Networks,
Inc., which changed its name to Xalted Holding Corporation on March 14, 2011;
- Xalted is the combination of
Xalted Networks and Xalted Information;
- Xalted Networks are to Xalted
Networks, Inc., a Delaware corporation, incorporated on March 14, 2011;
- Xalted Information are to Xalted
Information Systems (Pvt.) Ltd., an Indian company;
- India are to the Republic of
India;
- SEC are to the Securities and
Exchange Commission;
- Securities Act are to the
Securities Act of 1933, as amended;
- Exchange Act are to the Securities
Exchange Act of 1934, as amended;
- Rupees and Rs. are to the legal
currency of India; and
- U.S. dollars, dollars and $
are to the legal currency of the United States.

Our Company History

We were incorporated in the State of Colorado on April 18, 2002 under the name
Kranem Corporation. We previously offered high-quality office and office supply
products to businesses, educational institutions, government agencies and
individuals through our website, www.learningwire.com. We operated our business
under our Learningwire trade name, which is registered with the Colorado
Secretary of State. However, we ceased our online operations in January 2006 and
from that time until the acquisition of Xalted Networks described below, we did
not engage in any active operations, other than our search for a privately owned
corporation to merge with or acquire.

On May 13, 2011, we completed the acquisition of Xalted Networks, Inc., or
Xalted Networks, a Delaware holding company with an operating subsidiary in
India. Since the closing of that acquisition, we have been engaged in the
provision of advanced software solutions that enable companies and public
organizations, including governments and law enforcement agencies, to capture,
manage and analyze structured and unstructured data to enhance business and
operational performance and address security threats. The two principal markets
that our software solutions address are the telecom security market and the
homeland security market. Xalted includes law enforcement as part of the
homeland security market. Our current and past geographic focus is on India and
the surrounding countries in Asia, Africa, and the Middle East.

20

---

Our acquisition of Xalted Networks and its operating
subsidiary, Xalted Information Systems (Pvt.) Ltd., or Xalted Information, was
accomplished by the forgiveness of $2,500,000 of debt issued by Xalted Networks
parent, Xalted Holding Corporation, or Xalted Holding, which we acquired from
three note holders in exchange for the issuance to them of an aggregate of
14,958,280 shares of our common stock; the issuance to Xalted Holding of
11,634,220 shares of our common stock; and the cancellation of an aggregate of
14,687,500 outstanding shares of our common stock held by three individuals. As
a result of, and immediately after the closing of these transactions, the former
Xalted Holding note holders held directly 45% of our issued and outstanding
stock and a further 9.1% indirectly through their combined shareholding of
Xalted Holding, for total direct and indirect ownership interest of 54.1%.
Xalted Holding held directly 35% of our issued and outstanding common stock. The
remaining 20% was held by the shareholders of Kranem Corporation of record
immediately before the closing of the transactions. Our new subsidiary, Xalted
Networks, holds 45.87%% of its operating subsidiary directly, and the balance
through two nominees, Rajendra Manikonda (13.55%) and Pratap (Bob) Kondamoori
(40.58%).

Recent Developments

Asset Purchase Agreement. On June 30, 2011, we
entered into and consummated an Asset Purchase Agreement with Investco, a
British Virgin Islands corporation, pursuant to which we acquired certain
software, source code, intellectual property rights and other materials relating
to the "Data Retention," "Man in the Middle," "Man in the Middle Detector" and "nCrypto"
products and product families. We refer to these items as the Transferred
Assets. We assumed no liabilities of Investco in connection with this
transaction.

As consideration for the Transferred Assets, we issued to
Investco 6,648,125 shares of our common stock, representing 20% of our
then-issued and outstanding capital stock, and a one-year convertible promissory
note, or the Note, in the principal amount of $400,000. The Note bears simple
interest at the annual rate of five percent and is due and payable, together
with accrued interest, on June 29, 2012 or earlier in the event of our
insolvency or bankruptcy. The Note may be prepaid at any time without penalty.
The Note is convertible at the option of the Note holder, in whole but not in
part, into shares of our common stock, at the per share price paid by, and on
the same terms and conditions extended to, the investors our next round of
financing. The shares and the Note were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. We relied
on these exemptions from registration based in part on representations made by
Investco. The securities issuable upon conversion of the Note have not been
registered under the Securities Act. The shares of common stock, the Note and
the securities issuable upon any conversion of the Note, may not be offered or
sold absent registration or an applicable exemption from registration
requirements.

Stock Dividend.On July 14, 2011, our Board of Directors declared a
four-for-one stock dividend on our shares of common stock. The record date for
the dividend was July 25, 2011, and the dividend was paid on July 28, 2011. As a
result of the stock dividend, the number of issued and outstanding shares of our
capital stock increased from 7,977,750 to 39,888,750.1

Stock Incentive Plan.Effective August 1, 2011, our Board of
Directors adopted the Kranem Corporation Stock Incentive Plan, or the Stock
Incentive Plan. The purpose of the Stock Incentive Plan is to promote our
success and the interests of its stockholders by providing a means through which
we may grant equity-based incentives to attract, motivate and retain certain
officers, employees, directors and other eligible persons and to further link
the interests of the recipients with those of our stockholders generally. A
total of 2,000,000 shares of common stock were made available for issuance under
the Stock Incentive Plan. Each option will expire not more than 10 years after
its date of grant.

Concurrent with the adoption of the Stock Incentive Plan, the Board resolved on
the grant of incentive stock options on an aggregate of 1,074,500 shares and
non-qualified stock options on an aggregate of 166,000 shares, of our common
stock, to our current employees, as well as eligible consultants. These stock
options are exercisable at a price to be determined by the administrator as
designated pursuant to the Stock Incentive Plan at the time of the grant of the
option and set forth in the applicable agreement. In no case will the exercise
price be less than the greater of: (a) the par value of our common stock, (2)
100% of the fair market value of our common stock on the date of grant; or (c)
in the case of an option granted to a recipient who at the time of the grant
possesses more than 10% of the total combined voting power of all classes of our
stock, 110% of the fair market value of our common stock on the date of grant.

21

---

Overview of Our Business

Through our operating subsidiary, Xalted Information, we provide advanced
software solutions that enable companies and public organizations, including
governments and law enforcement agencies, to capture, manage and analyze
structured and unstructured data to enhance business and operational performance
and address security threats. The two principal markets that our software
solutions address are the telecom security market and the homeland security
market. Xalted includes law enforcement as part of the homeland security market.
Our current and past geographic focus is on India and the surrounding countries
in Asia, Africa, and the Middle East.

Our software products are developed internally. In some cases we incorporate
software licensed from Oracle Corporation, BMC Corporation or other third-party
suppliers specified by our customers. Our software is licensed to our customers
and is not integrated with hardware products at the time of sale.

In the telecom security market, we provide four software modules that address
different aspects of the telecom security market: revenue maximization, revenue
assurance, fraud management and OSS/BSS (short for operations support systems
and business support systems). The revenue maximization module allows a telecom
service provider to identify trends in the usage of various services provided,
so that it can tailor its service offering to maximize revenue. Revenue
assurance locates potential users that are trying to use portions of the telecom
service providers system capabilities without being a valid user of those
services. The software module identifies illegal users, allowing the telecom
service provider to take appropriate measures, generally comprised of locking
the user out of a specific service or service package within the service
network. The fraud management system module, or FMS, identifies a larger scale
attempted use of the telecom service providers network by an individual or
individuals who are not valid network users. The operations support systems, or
OSS, and business support systems, or BSS, are business management tools that
allow a telecom service provider to develop and deploy a new service offering
more rapidly. The module automatically accounts for potential equipment
limitations in the roll-out of a new service offering. The term OSS is commonly
used to describe network systems dealing with the telecom network itself, as
well as supporting processes such as maintaining network inventory, provisioning
services, configuring network components and managing faults.

Our telecom security customers include major telecom companies and organizations
in India, such as Bharat Sanchar Nigam Ltd., or BSNL, Mahanagar Telephone Nigam
Limited, or MTNL, and the Centre for Development of Telematics, or CDOT, the
telecom technology development center of the Government of India. BSNL is
Indias oldest and largest communications service provider and one of its
largest cellular service providers. It has footprints throughout India, except
for the metropolitan cities of Mumbai and New Delhi, which are managed by MTNL.
Telecom customers outside of India include Mozambique Cellular, or Mcel, Nepal
Telecom, Nepal Satellite Telecom, Telecom Italia and Hutchison 3G.

In the homeland security market, our security solutions are used by governments
and law enforcement agencies in their efforts to protect people and property and
combat terrorism and crime. Our homeland security customers include the national
Government of India and local and regional law enforcement agencies and bodies
in India, such as the Anti-Terrorist Squads in Mumbai, Maharashtra and Goa, the
STF or special task force in Uttarakand, and the Cyber Crime division of the
Thane District Police.

Our sales consist of licenses of software, as well as, in some cases, service
fees for installation, commissioning, testing, training and/or ongoing technical
support for our software modules. The terms of our licenses with our customers
vary widely, but typically include progress payments based on performance
benchmarks and a final payment after commissioning, testing and acceptance by
the customer.

Our corporate headquarters are located in Menlo Park, CA. We also have two
operational centers in India. The telecom security operations group is located
in Bangaluru, India. The homeland security operations are located in Mumbai,
India. The Companys sales offices are located in Delhi, India.

Principal Factors Affecting Our Financial Performance

Our operating results are primarily affected by the following factors:

22

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- Information technology spending. We are heavily dependent on our
customers decisions with regard to spending on information technology. As a
general proposition, spending in this area is considered important by our
customers, including our government customers, but can be affected adversely by
changes in national, regional and global economic conditions.
- Product offering and pricing. Our business depends, in large part,
on our ability to successfully introduce new products, services and technologies
to consumers, the frequency of such introductions, the level of consumer
acceptance, and the related impact on the demand for existing products, services
and technologies. We strive to offer new products to address changing consumer
tastes and preferences and intend to maintain competitive pricing in order to
gain additional market share and revenue growth.
- Market acceptance of our homeland security solutions. Our homeland
security solutions are in an early market stage where the value of our products
and services is still in the process of gaining market acceptance. We believe
that our future growth depends in part on the continued and increasing
acceptance of the value of our homeland security solutions.
- Global and regional security concerns.Much of our business
consists of providing software solutions to government and private agencies to
deal with security and law enforcement concerns, including domestic and
international terrorism. To the extent our customers are located in regions
around the world where crime, terrorism and other national security concerns are
on the rise, we would anticipate an increased demand for our products and
services.
- Political instability.In many regions of the world, political
instability is accompanied by heightened concerns relating to domestic and
international security. To the extent our customers are located in these
regions, we would anticipate an increased demand for our products.

Taxation

Kranem Corporation and Xalted Networks are subject to United States tax. No
provision for income taxes in the United States has been made as these companies
have no income taxable in the United States.

In India the corporate income tax rate for an Indian company is a flat rate of
30%. For companies with a gross revenue in excess of Rs. 10,000,000
(approximately $226,400), there is a 5% surcharge. There is also an education
fee of 3%, which is applied to both the corporate tax and surcharge. The
combination of these three corporate taxation items produces an effective tax
rate for Indian companies with gross revenue in excess of Rs. 10,000,000 of
32.5% . Due to the various tax holidays enjoyed by Xalted Information Systems,
Xalted is currently paying a corporate tax rate of approximately 12%. However,
the current tax rate will begin to increase during 2011 as the first of the tax
holidays begins to expire. Based on the Indian corporate tax rate and the
distribution of income among our business units, we believe that our average tax
rate across all our Indian business units will rise gradually from about 20% in
2011 to 30% in 2019.

Xalted Information has ongoing disputes with Indian income tax authorities
relating to tax treatment of certain items. These mainly include disallowed
expenses, tax treatment of certain expenses claimed by Xalted Information as
deductions, and computation of, or eligibility for certain tax incentives or
allowances. Xalted Information is contesting the Income Tax Officers order for
the denial of Section 10A benefits claimed by the Company under the Indian
Income Tax Act, 1961. The estimated contingency amounts to $224,949 as of
December 31, 2010 and $141,592 as on December 31, 2009. We believe Xalted
Information has strong merits for this petition and hence it will not have the
material adverse affect on Xalted Informations results of operations, liquidity
or financial position.

Results of Operations

Three and Six Months Ended June 30, 2011 and 2010

We recorded net income of $68,693 and $64,663 for the three and six months ended
June 30, 2011, respectively, compared to net loss of ($6,304) for the three
months ended June 30, 2010 and ($7,304) for the six months ended June 30, 2010.
On a basic and diluted per share basis, net income was $0.01 and $0.01 for the
three and six months ended June 30, 2011, respectively, compared to net loss
of ($0.00) and ($0.00) for the three and six months ended June 30, 2010,
respectively. We may incur net losses in future periods due to future spending
and fluctuations in our business, and we may not achieve or maintain sustained
profitability in the future.

23

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|Revenues                                                                         |   |                            |   |   |                          |   |   |         |   |   |        |  
|-------------------------------------------------------------------------------- | - | -------------------------- | - | - | ------------------------ | - | - | ------- | - | - | ------ | -
|                                                                                 |   |                            |   |   |                          |   |   |         |   |   |        |  
|Comparison of the Three- and Six-Month
    Periods Ending June 30, 2011 and 2010 |   |                            |   |   |                          |   |  
|                                                                                 |   | For the Three Months Ended |   |   | For the Six Months Ended |  
|                                                                                 |   | June 30,                   |   |   | June 30,                 |  
|                                                                                 |   | 2011                       |   |   | 2010                     |   |   | 2011    |   |   | 2010   |  
|Revenue                                                                          | $ | 526,664                    |   | $ | 0                        |   | $ | 526,664 |   | $ | 0      |  
|Cost of Revenue                                                                  |   | 166,749                    |   |   | 0                        |   |   | 166,749 |   |   | 0      |  
|Gross Profit                                                                     |   | 359,915                    |   |   | 0                        |   |   | 359,915 |   |   | 0      |  
|Operating Expenses                                                               |   | 391,618                    |   |   | 6,304                    |   |   | 395,648 |   |   | 7,304  |  
|Operating Loss                                                                   | $ | (31,703                    | ) | $ | (6,304                   | ) | $ | (35,733 | ) | $ | (7,304 | )
|Other Income/Expense                                                             |   | 22,304                     |   |   | 0                        |   |   | 22,304  |   |   | 0      |  
|Income before Income Taxes                                                       | $ | (9,399                     | ) | $ | (6,304                   | ) | $ | (13,429 | ) | $ | (7,304 | )

Revenues.We generate revenues from
sales of our integrated information security products and through the related
after-sales services. Our revenues were $526,664 and $526,664 for the three and
six months ended June 30, 2011, respectively, compared to $0.00 and $0.00 for
the three and six months ended June 30, 2010, respectively. The increase was
primarily due to the acquisition of Xalted Networks, Inc. on May 13, 2011

Cost of revenue. Our cost of revenue primarily
consists of the purchase of third party software and deployment costs. Cost of
revenue increased $166,749, for the three months ended June 30, 2011, compared
to the three months ended June 30, 2010. Cost of revenue increased $166,749 for
the six months ended June 30, 2011, compared to the six months ended June 30,
2010. These increases were mainly due to the increase was primarily due to the
acquisition of Xalted Networks, Inc. on May 13, 2011

Gross profit and gross margin. Our gross profit
is equal to the difference between our revenues and our cost of revenue. Our
gross profit increased $359,915 for the three months ended June 30, 2011,
compared to the three months ended June 30, 2010. Our gross profit increased
$359,915 for the six months ended June 30, 2011, compared to the six months
ended June 30, 2010. The increase in the gross margin was primarily due to the
acquisition of Xalted Networks, Inc. on May 13, 2011

Selling and marketing expenses. Our selling and
marketing expenses consist primarily of compensation and benefits to our sales
and marketing staffs, business travels after-sale support, transportation costs
and other sales related costs. Selling and marketing expenses increased by
$46,231for the three months ended June 30, 2011, compared to the three months
ended June 30, 2010. Our selling and marketing expenses increased by $46,231 for
the six months ended June 30, 2011, compared to the six months ended June 30,
2010. The increase was primarily due to the acquisition of Xalted Networks, Inc.
on May 13, 2011.

General and administrative expenses. General and
administrative expenses consist primarily of compensation and benefits to our
general management, finance and administrative staff, professional advisor fees,
audit fees and other expenses incurred in connection with general operations.
General and administrative expenses increased by $229,719 for the three months
ended June 30, 2011, compared to the three months ended June 30, 2010; and
increased by $229,749, for the six months ended June 30, 2011, compared to the
six months ended June 30, 2010. As a percentage of total operating expenses,
general and administrative expenses decreased to 56.9% for the three months
ended June 30, 2011, from 100.0% for the three months ended June 30, 2010; and
decreased to 57.4% for the six months ended June 30, 2011, from 100.0% for the
six months ended June 30, 2010. The decrease was due to the acquisition of Xalted Networks, Inc. on May 13, 2011.

Total other income (expenses). We had $22,304 in
total other income in the three months ended June 30, 2011, as compared to $0.00
in total other income in the three months ended June 30, 2010; and had $22,304
in total other income in the six months ended June 30, 2011, as compared to
$0.00 in total other income in the six months ended June 30, 2010.

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Income before income taxes. Our income before
income taxes decreased by $3,095 to ($9,399) for the three months ended June
30, 2011, compared to ($6,304) for the three months ended June 30, 2010. Our
income before income taxes decreased by $6,125 to $13,429 for the six months
ended June 30, 2011, compared to ($7,304) for the six months ended June 30,
2010.

Income tax expense. Income tax expense increased
by $46,087 to $46,087 for the three months ended June 30, 2011, compared to
$0.00 for the three months ended June 30, 2010. Income tax expense increased by
$46,087 to $46,087 for the six months ended June 30, 2011, compared to $0.00 for
the six months ended June 30, 2010. The increase was mainly due to the
acquisition of Xalted Networks, Inc. on May 13, 2011

Net income. As a result of the factors described
above, net income decreased by $49,182 to $55,486 for the three months ended
June 30, 2011, compared to ($6,304) for the three months ended June 30, 2010.
Net income decreased by $52,212 to ($59,516) for the six months ended June 30,
2011, compared to ($7,304) for the six months ended June 30, 2010.

Liquidity and Capital Resources

As of June 30, 2011, we had cash and cash equivalents of
$181,868, compared to $143 as of December 31, 2010. In addition, we had other
financial assets available for sale of $410,614 at June 30, 2011, compared to
$0.00 at June 30, 2010. To date, we have financed our operations primarily
through cash flows from operations, augmented by equity contributions by our
stockholders. As of June 30, 2011, $181,868 of cash and cash equivalents were
held in India. We do not anticipate the need to repatriate any material amounts
of the cash, cash equivalents and financial assets to the United States, but to
the extent amounts are repatriated, we would become subject to tax in the United
States on such amounts.

|The following table sets forth a summary of our cash
    flows for the periods indicated: |   |                |  |   |        |  
|----------------------------------------------------------------------------------------- | - | -------------- |  | - | ------ | -
|Cash Flow                                                                                 |  
|                                                                                          |   | As of June 30, | 
|                                                                                          |   | 2011           |  |   | 2010   |  
|Net cash provided by (used in)
    operating activities                                   | $ | 51,224         |  | $ | (9,554 | )
|Net cash provided by (used in) investing activities                                       |   | 76,157         |  |   | 0      |  
|Net cash provided by (used in)
    financing activities                                   |   | 54,344         |  |   | 9,600  |  
|Effect of exchange rate changes on cash balance                                           |   | 0              |  |   | 0      |  
|Net increase in cash and cash
    equivalents                                             |   | 181,725        |  |   | 46     |  
|Cash and cash equivalents at beginning of the period                                      |   | 143            |  |   | 0      |  
|Cash and cash equivalents at end of
    the period                                        |   | 181,868        |  |   | 46     |  

Operating Activities

In March 2010, Xalted Information sold certain assets relating
to its former hardware business, having a value of $10,537,722, to Xalted
Technologies Pvt. Ltd., or Xalted Technologies, in exchange for the payment to
Xalted Technologies of $170,088 and the assumption by Xalted Technologies of
certain related liabilities of Xalted Information in the amount of $10,707,810.
Because our business no longer needed the assets which were transferred, and
because the net cost of the disposal of the assets was not material, we do not
believe this transaction had or will have a material impact on our business.

The Company currently has $3,900,248 and $0.00 of accounts
receivable that have been outstanding for more than a year as on June 30, 2011
and June 30, 2010, respectively, out of which $216,284 and $0.00 is covered by
the allowance for doubtful accounts as on June 30, 2011 and June 30, 2010,
respectively. Our accounts receivable in India are entirely from customers which
government agencies or government-owned entities. The age of our receivables is
not unusual in government-related commercial transactions in India, although it
would be unusual in purely private situations. We do not anticipate the age of
these receivables and this pattern in government contracting in India to have an
adverse impact on our growth because we have taken these patterns into account
in our forward planning.

Net cash used in operating activities was $113,204 in the six
months ended June 30, 2011, as compared to ($9,554) in the six months ended June
30, 2010. The increase in net cash used by the operating activities was mainly
due to the Companys acquisition of Xalted Networks, Inc. on May 13, 2011.

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Investing Activities

Net cash used by investing activities was $64,521 in the six
months ended June 30, 2011, as compared to $0.00 in the six months ended June
30, 2010. The decrease in net cash from investing activities in 2011 is
attributed to acquisition of Xalted Networks, Inc. on May 13, 2011.

Financing Activities

Net cash used by investing activities was $4,000 in the six
months ended June 30, 2011, as compared to $9,600 in the six months ended June
30, 2010. The decrease in net cash from financing activities in 2011 is
attributed to decrease in capital contributions as a result of the acquisitiono
f Xalted Networks, Inc. on May 13, 2011.

Loan Commitments

The Company does not have any loan commitments, except for a one-year
convertible promissory amount in the principal amount of $400,000, held by
Investco, a British Virgin Islands company, having a maturity date of June 29,
2012.

We anticipate that our cash on hand and cash flow from operations will meet our
present ongoing cash needs. The Company may require additional cash resources,
including loans, to meet its working capital needs for the next 12 months;
should the Company decide to pursue a potential acquisition. We may, however, in
the future, require additional cash resources due to changed business
conditions, implementation of our strategy to ramp up our marketing efforts and
increase brand awareness, or acquisitions we may decide to pursue. If our own
financial resources are insufficient to satisfy our capital requirements, we may
seek to sell additional equity or debt securities or obtain additional credit
facilities. The sale of additional equity securities could result in dilution to
our stockholders. The incurrence of indebtedness would result in increased debt
service obligations and could require us to agree to operating and financial
covenants that would restrict our operations. Financing may not be available in
amounts or on terms acceptable to us, if at all. Any failure by us to raise
additional funds on terms favorable to us, or at all, could limit our ability to
expand our business operations and could harm our overall business prospects.

Obligations under Material Contracts

We have no other long term debt, capital or operating lease or fixed purchase
obligations.

Inflation

Inflation and changing prices have not had a material effect on our business and
we do not expect that inflation or changing prices will materially affect our
business in the foreseeable future. However, our management will closely monitor
price changes in our industry and continually maintain effective cost control in
operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity or
capital expenditures or capital resources that is material to an investor in our
securities.

Seasonality

Our operating results and operating cash flows historically have not been
subject to seasonal variations. This pattern may change, however, as a result of
new market opportunities or new product introduction.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires our management to make
assumptions, estimates and judgments that affect the amounts reported, including
the notes thereto, and related disclosures of commitments and contingencies, if
any. We have identified certain accounting policies that are significant to the
preparation of our financial statements. These accounting policies are important
for an understanding of our financial condition and results of operation.
Critical accounting policies are those that are most important to the portrayal
of our financial condition and results of operations and require managements
difficult, subjective, or complex judgment, often as a result of the need to
make estimates about the effect of matters that are inherently uncertain and may
change in subsequent periods. Certain accounting estimates are particularly
sensitive because of their significance to financial statements and because of
the possibility that future events affecting the estimate may differ
significantly from managements current judgments. We believe the following
critical accounting policies involve the most significant estimates and
judgments used in the preparation of our financial statements:

26

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Basis of preparation: The financial statements of Xalted are prepared in
accordance with Generally Accepted Accounting Principles in the United States
(US GAAP). The financial statements are presented in United States Dollars
($). The financial statements are prepared for the quarter ended June 30, 2011
with comparatives for the previous calendar year (2010). The purpose of
preparation of these financial statements is for submission to the parent
company for consolidation purpose. It being the first time that the quarterly
financial statements are prepared as per US GAAP, the balances of assets and
liabilities as on June 30, 2011 have been reinstated to conform with the
recognition and measurement principles of US GAAP.

Use of estimates: The preparation of the financial statements in
conformity with US GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities as on the date of the financial statements and the
reported amount of revenues and expenses during the reported period. Examples of
such estimates include: project completion dates, time and cost required to
complete projects for purposes of revenue recognition and future revenue,
expense and cash flow estimates for purposes of impairment analysis and loss
contract evaluation, allowance for doubtful debts, obligations under employee
benefit plans, valuation allowances on deferred tax assets, useful lives of
premises and equipment (fixed assets) and income taxes. Actual results could
differ materially from those estimates.

Foreign Currency:

Initial measurement: The transactions in foreign currency are recorded in
functional currency at the exchange rates between foreign currency and
functional currency prevailing as on the date of the transactions.

Subsequent measurement: Foreign Currency monetary Assets and liabilities are
translated into functional currency at year end exchange rates. Gains or losses
resulting from foreign exchange transactions are recorded in the Statements of
Comprehensive Income (Loss) within other income (expense), net.

As the functional currency of the company is Indian Rupee (Rs), to present the
financial statement in United States Dollars ($), the results and financial
position are translated as follows:

- Assets and liabilities except equity
and retained earnings are translated at the closing exchange rate at the date of
the Balance Sheet.
- Income and expenditure for each
income statement are translated at quarterly average exchange rate during each
period.
- Equities are translated at the rate
of date of acquisition.

All resulting exchange differences are recognized as a component of equity.

Revenue Recognition:Revenue from software services consist of revenues
earned from services performed either on a time-and-material basis or under
fixed price contracts. Revenues earned from services performed on a time and
material basis are recognized as services are performed on the basis of
billable time spent by employees working on the project, priced at the
contracted rate. Revenue from Software development on fixed-price, where there
is no uncertainty as to the measurement or collectability of consideration that
will be derived on completion of the contract, is recognized as per the
percentage of completion method as determined based on the certification of the
Technical Head of the respective project. Revenue recognition using the
percentage of-completion method in conformity with ASC Topic 605, is based on
the guidance in ASC Topic 985, Software Revenue Recognition, to account for
revenues under fixed price arrangements for software development and related
services. Losses on such contracts are recognized when probable. Revenues in
excess of billings are recognized as accrued income in the balance sheet; to the
extent billings are in excess of revenues recognized, the excess is reported as
deferred revenues in the balance sheet.

In accordance with ASC Topic 605, Income Statement Characterization of
reimbursements received for Out-of-Pocket Expenses Incurred, Xalted accounts
for reimbursements for out-of-pocket expenses incurred as revenues in the
Statement of Income.

All revenues are recognized only when collectability of the resulting receivable
is reasonably assured, and are reported net of discounts and indirect and
service taxes.

Deferred revenue includes payments that have been received and recorded prior to
performance.

27

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Cost of revenues and R&D, selling, general and
administrative expenses: Cost of revenues primarily include the compensation
cost of technical staff, consultancy charges, depreciation and amortization on
dedicated assets and system software, application software costs, travel costs,
data communication expenses and other attributable expenses incurred that are
related to the generation of revenue. R&D, selling, general and administrative
expenses generally include the compensation costs of software development,
sales, management and administrative personnel, travel costs, advertising,
professional charges, rent, repairs, electricity, office maintenance expenses
and other general expenses not attributable to cost of revenues.

Cash and cash equivalents: We consider investments
in highly liquid instruments that are purchased with remaining maturities, of
three months or less to be cash equivalents. Cash and claims to cash that are
restricted as to withdrawal or use in the ordinary course of business is
classified separately under other current and non-current assets.

Fair value of financial instruments: Effective April 1,
2009, Xalted adopted ASC Topic 820 limited to financial assets and liabilities,
which primarily relate to Xalteds investments. The fair value hierarchy is
based on inputs to valuation techniques that are used to measure fair value that
are either observable or unobservable and consists of the following three
levels:

Level 1- Inputs are quoted prices in active markets for
identical assets or liabilities.

Level 2- Inputs are quoted prices for similar assets or
liabilities in an active market, quoted prices for identical or similar assets
or liabilities in markets that are not active, inputs other than quoted prices
that are observable and market-corroborated inputs which are derived principally
from or corroborated by observable market data.

Level 3- Inputs which are unobservable reflecting internal
assumptions are used in pricing assets or liabilities.

Accounts Receivable: Accounts receivable represent trade
receivables, net of allowance for doubtful accounts. The allowance for doubtful
accounts represents the Companys best estimate of receivables that are doubtful
of recovery based on a specific identification basis. The Company currently has
$3,900,248 and $0.00 of accounts receivable that have been outstanding for more
than a year as on June 30, 2011 and December 31, 2010, respectively, out of
which $216,284 and $0.00 is covered by the allowance for doubtful accounts as on
June 30, 2011 and December 31, 2010, respectively.

Inventories:Inventories are work in progress, which are
valued based on the percentage of work completed / consumption. Cost includes
cost of hardware / software, related employees costs and overhead costs up to
the date of financial statement.

Premises, equipment and depreciation:
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives. The estimated useful lives of assets are as follows:

Estimated Useful LifeComputer & Peripherals
    3 to 5 yearsCommunication Equipments
    3 to 7 yearsLab Equipment
    5 to 10 yearsOffice Equipment
    5 yearsMotor Vehicle
    6 yearsAir Conditioner
    7 yearsFurniture and Fittings
    10 yearsDigital Loop Carriers
    3 yearsLeasehold improvements
    Shorter of Lease
    period or estimated useful life


28

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Intangible Assets: Xalted amortizes intangible assets over their
estimated useful life on a straight-line basis unless such life is deemed
indefinite. The intangible asset of the Company is comprised of software that is
for internal use. Software product development costs are expensed as incurred
unless technical and commercial feasibility of the project is demonstrated,
future economic benefits are probable, we have the intention and ability to
complete and use or sell the software and the costs can be measured reliably.
The costs which can be capitalized include the cost of material, direct labor,
overhead costs that are directly attributable to preparing the asset for its
intended use. Research and development costs and software development costs
incurred under contractual arrangements with customers are accounted as cost of
sales.. Amortization of internal use software begins when the software is placed
in use and continues on the straight-line method generally over a life of five
years.

Amortizable intangible assets are amortized over their estimated useful lives in
proportion to the economic benefits consumed in each period. The estimated
useful life of the Intangible assets is 5 years.

Impairment of long-lived assets: Long-lived assets and assets group,
including certain identifiable intangible assets, to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable. Such assets are
considered to be impaired if the carrying amount of the assets is higher than
the future undiscounted net cash flows expected to be generated from the assets.
The impairment amount to be recognized is measured by the amount by which the
carrying value of the assets exceeds its fair value. Assets held-for-sale is
reported at the lower of the carrying value or the fair value less costs to
sell. However, based on the above exercise no adjustment on account of
impairment is required.

Investments:Xalted classifies investments in mutual funds with readily
determinable fair market values as available-for-sale securities and is recorded
at fair value. Accordingly, such securities are carried at fair value. Realized
gains and losses and decline in value considered to be other-than-temporary are
included in other income. The cost of securities sold is determined on the
first-in-first-out (FIFO) method. Interest and dividends on securities
classified as available-for-sale are included in other income. The company does
not have any securities classified as trading.

Borrowing Cost:Borrowing costs directly attributable to the acquisition
of qualifying asset are capitalized, till the asset is put to use, as part of
the cost of the asset. Other borrowing costs are recognized as an expense in the
period in which they are incurred.

Income taxes: Income tax expense comprises current tax expense and the
net change in the deferred tax asset or liability during the year.

Current income taxes: The current income tax expense includes Indian
income taxes payable for Xalted after taking credit for benefits available for
operations in Software Technology Parks (or STPs) and export earnings, and after
offsetting benefits under tax avoidance treaties for foreign taxes payable in
overseas jurisdictions. Current income tax payable is computed in accordance
with the tax laws applicable in India. The amounts paid are generally available
for offset as tax credits in India towards the income tax liability.

Payments of advance taxes and income taxes payable in the same tax jurisdictions
are offset.

Deferred income taxes: Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statements carrying amounts of assets and liabilities and their
respective tax bases, operating loss carry forwards and tax credits. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. Valuation allowances are recorded to reduce
deferred tax assets when it is more likely than not that a tax benefit will not
be realized. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the Statements of Operations in the period of change.

Uncertain tax positions are recognized using the more likely-than-not threshold
determined solely based on technical merits that the tax positions will sustain
upon examination. Tax positions that meet the recognition threshold are measured
as the largest amount of benefit that is greater than fifty percent likely of
being realized upon settlement with relevant taxing authority that has full
knowledge of all relevant information.

Earnings per share:In accordance with the provisions of ASC Topic 260,
Earnings per Share, basic earnings per share are computed by dividing net
income attributable to shareholders of Xalted by the weighted average number of
shares outstanding during the period. Diluted earnings per share are computed on
the basis of the weighted average number of common and dilutive common
equivalent shares outstanding during the period.

Cash flow statement : The cash flow statement has been drawn up in
accordance with the indirect method, classifying cash flows as cash flows from
operating, investing and financing activities. The effect of currency
translation has been given to various items of cash flow statement. The
difference between the net cash flow and the change in Cash and cash equivalents
in the balance sheet due to exchange rate differences are disclosed separately
as part of the reconciliation of the net cash flow and the balance sheet change
in Cash and cash equivalents.

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Employment benefits:

Provident fund: In accordance with Indian law, all employees are entitled
to receive benefits under the Provident Fund, which is a defined contribution
plan. Both the employee and the employer make monthly contributions to the plan
at a predetermined rate (presently 12%) of the employees basic salary. Xalted
has no further obligations under the plan beyond its monthly contributions.
These contributions are made to fund administered and managed by the Government
of India. Xalteds monthly contributions are charged to income in the period it
is incurred.

Employees state insurance fund: In addition to the above benefit, all
employees in India who are drawing gross salary of less than Rs. 15,000 per
month are entitled to receive benefit under employee state insurance fund
scheme. The employer makes contribution to the scheme at a predetermined rate
(presently 4.75%) of employees gross salary. Xalted has no further obligations
under the scheme beyond its monthly contributions. These contributions are made
to fund administered and managed by the Government of India. Xalteds monthly
contributions are charged to income in the year it is incurred.

Gratuity plan: In addition to the above benefits, Xalted provides for a
gratuity obligation, a defined benefit retirement plan (the Gratuity Plan)
covering all its employees in India. The Gratuity Plan provides a lump sum
payment to vested employees at retirement or termination of employment based on
the respective employees salary, and the years of employment with Xalted.
Xalted provides for the Gratuity Plan on the basis of actuarial valuation.
Xalted makes yearly contributions under the gratuity plan administered and
managed by the Life Insurance Corporation of India (LIC). Gratuity payable is
recognized in the Balance Sheet. Gratuity payable is measured as the difference
between the fair value of plan assets with LIC and the projected benefit
obligation at December 31, the measurement date. (Gains)/losses arise as a
result of differences between actual experience and assumptions or as a result
of changes in actuarial assumptions. These are recognized as and when they
arise. Net periodic gratuity cost is recorded in the Statement of Income and
includes service cost, interest cost, and return on plan assets. Actuarial
gains/losses are recognized in Other Comprehensive Income statement.

Leave Encashment: The Company has other long term employee benefits in
the nature of leave encashment (Compensated Absences). The liability in respect
of leave encashment is provided for on the basis of actuarial valuation made at
end of the calendar year, as the said schemes meet the requirement of relevant
ASC.

Dividends:Final dividend on the common stock is recorded as a liability
on the date of declaration by the stockholders. Interim dividends are recorded
as a liability on the date of declaration by the board of directors.

Warranty Costs: The Company provides for the estimated costs of
fulfilling their obligations for contracts under warranties at the time the
related revenue is recognized. The Company regularly evaluates the estimates to
assess the adequacy of the recorded warranty liabilities and adjust the amount
as necessary.

Recent Accounting Pronouncements

The Company has evaluated all the recent accounting
pronouncements issued and has concluded that none of them will have a material
impact on the Companys financial position, results of operations or cash-flows.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports
that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that
disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have
been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure
controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective
at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting.

There was no change in our internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal
proceedings which arise in the ordinary course of business. However, litigation
is subject to inherent uncertainties, and an adverse result in these or other
matters may arise from time to time that may harm our business.

In April 2010, a petition was filed against Xalted Information Systems in the
High Court of Karnataka at Bangalore by Arasor Corporation, a Delaware company.
The High Court is the principal civil court of original jurisdiction in the
Indian state of Karnataka, sitting in the city of Bangalore. The petition sought
an order under Sections 433 and 434 of the Companies Act of 1956 for the winding
up of Xalted Information Systems, based on allegations that Xalted Information
Systems did not pay for communications equipment sold and shipped to Arasor. We
maintain the Company never received the equipment which is alleged to have been
shipped to us. This type of claim, and the type of relief sought, is not unusual
in India.

The petition was heard by a single judge, sometimes also called a single bench
judge, in the High Court in Karnataka. Any judicial panel comprised of fewer
than all the judges in a given court is referred to in India as a Division
Bench. The single-judge court found in favor of Arasor and against Xalted
Information on November 10, 2010. On December 14, 2010, Xalted Information filed
an appeal of that decision before a two-judge panel, or Bench, of the same High
Court. On January 19, 2011, the two-judge panel stayed the November 10, 2010
order of the single judge and all further proceedings in the action filed by
Arasor, pending the appeal.

After submission of written arguments, a hearing on the appeal was conducted in
March 2011, a further hearing was set for June 9, 2011, and the earlier stay was
continued during the pendency of the appeal. In June 2011, Xalted Information
filed an additional application with the two-judge panel to request dismissal of
the claims against it on the basis that Arasors corporate status was void in
Delaware and forfeited in California, and that Arasor therefore was without
corporate power and authority to maintain or prosecute the action. Arasor has
not objected to this request. The matter was expected to be heard during the
summer of 2011, but has not yet been heard.

Our India lawyers have informed us that they believe Xalted Information has a
reasonably strong legal position and a good chance of success in the present
proceedings before the appellate court. However, if we are unsuccessful in
defending ourselves against the claim, Xalted Information could be subject to
judicial liquidation in India.

We are currently not aware of any other legal proceedings or claims that we
believe will have a material adverse effect on our business, financial condition
or operating results.

ITEM 1A. RISK FACTORS.

Not applicable.

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

Please see our current report on Form 8-K, filed with the SEC on July 7, 2011,
which is incorporated herein by reference.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form
8-K during the period covered by this report, but was not reported. There have
been no material changes to the procedures by which security holders may
recommend nominees to our board of directors.

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ITEM 6. EXHIBITS.

Except as noted below, the following exhibits are filed as part
of this report or incorporated by reference:

|Exhibit No. | Description                                                                                                                                                         
|----------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1        | Certifications of Principal Executive Officer filed pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.                                                  
|31.2        | Certifications of
    Principal Financial Officer filed pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.                                              
|32.1(1)     | Statement of Principal Executive Officer furnished pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.
|32.2(1)     | Statement of Principal
    Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

|(1) | The material contained in Exhibit 32.1 and Exhibit 32.2
      is not deemed filed with the SEC and is not to be incorporated by
      reference into any filing of the Company under the Securities Act of 1933
      or the Securities Exchange Act of 1934, whether made before or after the
      date hereof and irrespective of any general incorporation language
      contained in such filing, except to the extent that the registrant
      specifically incorporates it by reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

Date: August 22, 2011

KRANEM CORPORATION

By: /s/ Ajay Batheja

Ajay Batheja, Chief Executive Officer(Principal Executive Officer)

By: /s/ Edward Miller

Edward Miller, Chief Financial Officer (Principal Financial and Accounting Officer)

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