UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549


___________________________________




FORM
10-Q




(Mark
One)




[X]     Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934




For
the quarterly period ended March 31, 2009




OR




[   ]    Transition
report under Section 13 or 15(d) of the Securities Exchange Act of
1934




Commission
file number: 0-23391





XFORMITY TECHNOLOGIES,
INC.


(Exact
name of registrant as specified in its charter)





Colorado
            84-1434313(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer
              Identification
      No.)





4100
Spring Valley Road, Suite 800,  Dallas, Texas 75244


(Address
of principal executive offices, including zip code)


Issuer's
Telephone No., including area code: (972)
661-1200





Indicate
by check mark whether Registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act  during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.   YesX       No





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.





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 
NoX




The
number of shares outstanding of the Issuer’s Common stock, $0.0001 par value, at
May 13, 2009 is 51,931,553.










1















PART
      I.
            FINANCIAL
      INFORMATION
            PAGEItem
      1.
            Financial
      statementsConsolidated Balance Sheets – March 31, 2009 (Unaudited) and
      June 30, 2008
            3Unaudited Consolidated Statements of Operations – Three Months
      and Nine Months Ended March 31, 2009 and 2008
            4Unaudited Consolidated Statements of Cash Flows –
      Nine Months Ended March 31, 2009 and 2008
            5Notes
      to Unaudited Consolidated Financial Statements
            6-8Item
      2.
            Management's Discussion and Analysis and Results of
      Operations
            8-10Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            10Item
      4.
            Controls and Procedures
            11PART
      II.
            OTHER
      INFORMATIONItem
      1.
            Legal Proceedings
            11Item
      2.
            Unregistered Sales of Securities and Use of
      Proceeds
            11Item
      3.
            Defaults
      upon Senior Securities
            11Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            11Item
      5.
            Other
      Information
            11Item
      6.
            Exhibits
      and Reports on Form 8-K
            11





2







XFormity
Technologies, Inc. and Subsidiary


Consolidated
Balance Sheets





(Unaudited)March
      31,
              
              
              June
      302009
              
              
              2008ASSETSCurrent
      AssetsCash
      and cash equivalents
              
              $
              122,993
              
              
              $
              87,117Accounts
      receivable
              
              
              45,496
              
              
              
              10,812Deferred
      commission expense - current
              
              
              36,762
              
              
              
              36,762Prepaid
      expenses
              
              
              35,132
              
              
              
              27,609Total
      current assets
              
              
              240,383
              
              
              
              162,300Property
      and equipment, net of accumulated depreciation
              
              
              46,708
              
              
              
              37,055Other
      assetsSecurity
      deposit
              
              
              26,120
              
              
              
              26,120Deferred
      commission expense –long term
              
              
              45,953
              
              
              
              73,524Total
      Assets
              
              $
              359,164
              
              
              $
              298,999LIABILITIES
      AND STOCKHOLDERS’ DEFICITCurrent
      LiabilitiesObligation
      under debt reduction agreement – current portion
              
              $
              120,000
              
              
              $
              -Accounts
      payable
              
              
              70,322
              
              
              
              1,637,327Loan
      payable
              
              
              100,000
              
              
              
              100,000Accrued
      expenses
              
              
              179,538
              
              
              
              97,812Current
      portion - deferred revenue
              
              
              141,749
              
              
              
              130,423Current
      portion – deferred credits
              
              
              14,283
              
              
              
              13,758Convertible
      debentures - net of unamortized discount of beneficial conversion
      featureRelated
      parties
              
              
              573,544
              
              
              
              563,544All
      other debenture holders
              
              
              158,802
              
              
              
              160,091Total
      Current Liabilities
              
              
              1,358,238
              
              
              
              2,702,955Obligation
      under debt reduction agreement – net of current portion
              
              
              560,000
              
              
              
              -Deferred
      revenues – net of current portion
              
              
              88,611
              
              
              
              168,667Deferred
      credits – net of current portion
              
              
              165,547
              
              
              
              176,326Total
      liabilities
              
              
              2,172,396
              
              
              
              3,047,948Stockholders'
      DeficitPreferred
      stock, $0.01 par value, 100,000,000 shares authorized, none issued and
      outstanding at March 31, 2009 and June 30, 2008
              
              
              -
              
              
              
              -Common
      stock, $0.0001 par value, 125,000,000 shares authorized, 51,931,553 and
      50,931,553 shares issued and outstanding at
                March
      31, 2009 and June 30, 2008, respectively
              
              
              5,193
              
              
              
              5,093Additional
      paid-in capital
              
              
              6,915,627
              
              
              
              6,773,227Accumulated
      deficit
              
              
              (8,734,052
              )
              
              
              (9,527,269
              )Total
      Stockholders' Deficit
              
              
              (1,813,232
              )
              
              
              (2,748,949
              )Total
      Liabilities and Stockholders' Deficit
              
              $
              359,164
              
              
              $
              298,999





The
accompanying notes are an integral part of these consolidated financial
statements.








3





XFormity
Technologies, Inc. and Subsidiary
 Consolidated
Statements of Operations
 
 (Unaudited)
                
                
                (Unaudited)Three
      Months Ended March 31,
                
                
                Nine
      Months Ended March 31,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenue
                
                $
                484,320
                
                
                $
                368,292
                
                
                $
                1,562,185
                
                
                $
                1,045,250Cost
      of revenue
                
                
                133,044
                
                
                
                146,112
                
                
                
                408,708
                
                
                
                410,788Research
      and development
                
                
                145,513
                
                
                
                338,769
                
                
                
                415,982
                
                
                
                635,414Marketing
      and selling
                
                
                82,760
                
                
                
                174,612
                
                
                
                241,297
                
                
                
                371,223General
      and administrative
                
                
                100,789
                
                
                
                369,867
                
                
                
                341,363
                
                
                
                726,765Total
      operating expenses
                
                
                462,106
                
                
                
                1,029,360
                
                
                
                1,407,350
                
                
                
                2,144,190Income
      (loss) from operations
                
                
                22,214
                
                
                
                (661,068
                )
                
                
                154,835
                
                
                
                (1,098,940
                )Interest
      expense, net
                
                
                (19,950
                )
                
                
                (31,152
                )
                
                
                (60,387
                )
                
                
                (106,777
                )Income
      (loss) before other income and provision for income taxes
                
                
                2,264
                
                
                
                (692,220
                )
                
                
                94,448
                
                
                
                (1,205,717
                )Other
      income – Gain on debt reduction
                
                
                -
                
                
                
                -
                
                
                
                698,769
                
                
                
                -Income
      (loss) before provision for income taxes
                
                
                2,264
                
                
                
                (692,220
                )
                
                
                793,217
                
                
                
                (1,205,717
                )Provision
      for income taxes
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Net
      Income (loss)
                
                $
                2,264
                
                
                $
                (692,220
                )
                
                $
                793,217
                
                
                $
                (1,205,717
                )Net
      Income (loss) per share – basic
                
                $
                0.00
                
                
                $
                (0.01
                )
                
                $
                0.02
                
                
                $
                (0.02
                )Weighted
      average number of shares – basic and diluted
                
                
                51,931,553
                
                
                
                50,931,553
                
                
                
                51,511,845
                
                
                
                50,664,091
 
 The
accompanying notes are an integral part of these consolidated financial
statements.


4








XFormity Technologies, Inc. and
Subsidiary


Consolidated
Statements of Cash Flows





(Unaudited)Nine Months Ended March31,2009
              
              
              2008Operating
      activities:Net
      income (loss)
              
              $
              793,217
              
              
              $
              (1,205,717
              )Depreciation
              
              
              16,506
              
              
              
              15,880Amortization
      of deferred commission
              
              
              27,572
              
              
              
              -Non-cash
      transactions for:Compensation
      from share-based payment arrangements
              
              
              -
              
              
              
              915,191Gain
      on debt reduction agreement
              
              
              (698,769
              )
              
              
              -Interest
      charge for beneficial conversion feature in convertible
      debentures
              
              
              1,211
              
              
              
              49,239Issuance
      of common stock in payment of license fees
              
              
              -
              
              
              
              15,659Changes
      in:Accounts
      receivable
              
              
              (34,684
              )
              
              
              (152,563
              )Prepaid
      expenses and other assets
              
              
              (7,523
              )
              
              
              25,031Accounts
      payable
              
              
              11,763
              
              
              
              (62,241
              )Accrued
      expenses
              
              
              81,726
              
              
              
              28,452Deferred
      revenue
              
              
              (68,730
              )
              
              
              210,080Deferred
      credits
              
              
              (10,254
              )
              
              
              (9,756
              )Net
      cash provided (used) in operating activities
              
              
              112,035
              
              
              
              (170,745
              )Investing
      activities:Purchases
      of property and equipment
              
              
              (26,159
              )
              
              
              (14,411
              )Net
      cash used in investing activities
              
              
              (26,159
              )
              
              
              (14,411
              )Financing
      activities:Payment
      under debt reduction agreement
              
              
              (60,000
              )
              
              
              -Proceeds
      from issuance of convertible debentures
              
              
              10,000
              
              
              
              -Net
      cash (used) provided by financing activities
              
              
              (50,000
              )
              
              
              -Increase
      (decrease) in cash and cash equivalents
              
              
              35,876
              
              
              
              (185,156
              )Cash
      and cash equivalents, beginning of period
              
              
              87,117
              
              
              
              216,834Cash
      and cash equivalents, end of period
              
              $
              122,993
              
              
              $
              31,678Supplemental
      disclosure of non-cash financing and investing activitiesInterest
      paid
              
              $
              10,081
              
              
              $
              386Additional
      paid-in capital from beneficial conversion feature in convertible
      debenture
              
              $
              2,500
              
              
              $
              -Gain
      on debt reduction agreement
              
              $
              698,769
              
              
              $
              -Decrease
      in accounts payable due to debt reduction agreement
              
              $
              (1,578,769
              )
              
              $
              -Increase
      in short term and long term debt
              
              $
              740,000
              
              
              $
              -Issuance
      of common stock in payment of debt reduction agreement
              
              $
              140,000
              
              
              $
              -Issuance
      of common stock in payment of deferred commission
              
              $
              -
              
              
              $
              147,048





The
accompanying notes are an integral part of these consolidated financial
statements.


5








XFormity
Technologies, Inc. and Subsidiary


Notes
to Consolidated Financial Statements


March
31, 2009


(Unaudited)





Note
1   Organization and Nature of Business.





The
reporting entity in this form 10-Q is XFormity Technologies, Inc. (a Colorado
Corporation) ("XFormity" or the "Company") and includes the operations of
XFormity, Inc. (a Texas Corporation) (“XFM”), the wholly owned subsidiary of the
Company.  XFormity provides technology and services to multi-unit
business operators.  The Company’s core products are hosted Business
Intelligence (BI) and Balanced Scorecard solutions.  These solutions
help customers with operational data analysis, trend reporting, issue
identification and tracking.  The Company provides data integration
and management services which feed the BI and Scorecard solution with data from
many key data sources.  The Company’s solutions are provided to
customers as a hosted (software-as-a-service) model, which allows the Company to
rapidly configure and implement solutions for new customers in an affordable,
cost-effective manner.




The
Company identified a significant need for data integration and analytical tools
within the quick-service restaurant (QSR) segment of the food service industry
and has deployed BI solutions for multi-unit QSR owners and operators across
many brands and of all sizes.  Customers utilizing these solutions
range from single-unit owners to large multi-national franchisors. The Company
has a balanced customer portfolio with both franchisees and franchisors that
license its products and services, and includes restaurants from Taco Bell,
Pizza Hut, KFC, Burger King, Arby’s, Cosi’s, Domino’s, Long John Silver’s and
A&W.  The Company provides Burger King Corporate (BKC) with its BI
solution for all corporate owned and operated restaurants in the United States
and Canada.




Note
2    Basis of Financial Statement
Presentation.




The
accompanying unaudited consolidated financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
consolidated or omitted in accordance with such rules and regulations. The
information furnished in the interim consolidated financial statements includes
normal recurring adjustments and reflects all adjustments which, in the opinion
of management, are necessary for a fair presentation of such consolidated
financial statements.




Although
management believes the disclosures and information presented are adequate to
not make the information misleading, it is suggested that these interim
consolidated financial statements be read in conjunction with the Company's most
recent audited financial statements and notes thereto included in its June 30,
2008 Annual Report on Form 10-K/A-1. Operating results for the three months and
nine months ended March 31, 2009 are not necessarily indicative of the results
that may be expected for the entire year or any other period.




The
Company's financial statements are prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The ability of the Company to
continue as a going concern is dependent on the Company; (1) to obtain adequate
capital from outside sources, or (2) to fund itself through profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going
concern.




Note
3   Going Concern




As shown
in the accompanying consolidated financial statements, the Company has incurred
an operating deficit of $8,734,052 through the fiscal quarter ended March
31, 2009. The Company is continually reviewing its operations and attempting to
improve operating results and its balance sheet.  The Company's ability to
continue as a going concern is dependent on its ability to improve operating
results and increase its financing cash flows, if any.  The consolidated
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.




Note
4   Property and Equipment




Property
and equipment are stated at cost.  Depreciation of property and
equipment is computed for financial statement purposes using accelerated methods
over a five year estimated useful life of the assets.


Accumulated
depreciation at March 31, 2009 was $141,544 and $125,038 at June 30,
2008.




Note
5   Deferred Commission




In August
2007, the Company renegotiated a previous commission agreement that now provides
for monthly payments of $3,000 for four years commencing July 1, 2007 and the
issuance of 1 million shares of the Company’s common stock.  The
determination of the amount was based on the fair value of the issued common
stock at the commitment date under SFAS No. 123R, Share-Based Payment, and
Emerging Issues Task Force 96-18, Accounting for Equity Instruments
That Are Issued To
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Servicesand is amortized over the life of the contract.





Three Months Ended March 31,
      2009
              
              
              Nine Months Ended March 31,
      2009Long
      term portion of deferred commission in other assets
              
              
              
              
              $
              45,953Current
      portion of deferred commission in prepaid expenses
              
              
              
              
              $
              36,762Amount
      of commission expensed
              
              $
              9,191
              
              
              $
              27,572







6




Note
6    Deferred Credits




In
January 2006, the Board of Directors, agreed to offer then seven major
customers, (“consortium members”) the following options in exchange for any
further billing credits: (1) a right to receive $150,000 in billing credits
applied against their monthly business intelligence software billings at a rate
of 25% of the billings commencing July 1, 2006, or (2) a right to receive an
additional 833,333 shares of the Company’s common stock per consortium member.
These shares would be in addition to the shares issued to consortium members in
exchange for their original $100,000 investment in fiscal 2004.





Two
consortium members elected option (1), one commencing January 1, 2006, and the
other commencing July 1, 2006.  The five remaining consortium members
elected option (2) and in May 2006, the Company issued 4,166,665 shares under
this agreement. The deferred credits at March 31, 2009 in the respective amounts
of $91,487 and $88,343, net of amortization, are expected to be utilized over a
12 to 13 year period based on their current billing rates using a 5% discount
rate that approximated the risk-free rate in effect during the offered option
period.




Note
7    Debt Reduction Obligation




In
October 2008, the Company signed an agreement with its patent counsel to issue
1,000,000 shares of XFMY’s common stock issued on October 24, 2008 at the
closing price of $0.14 per share for a total value of $140,000, to pay cash
payments of $10,000 that extend over 48 months for a total of $480,000 and four
additional debt reduction payments of $65,000 each contingent upon the Company
achieving certain revenue targets for a total of $260,000. This represents a
maximum payout value of $880,000 in full settlement of the Company’s obligation
of $1,578,769 resulting in a gain of $698,769 according to SFAS 5, Accounting for Contingencies,
and SFAS 15, Accounting by
Debtors and Creditors for Troubled Debt Restructurings. As of March 31,
2009, the Company has paid $60,000 and reflected the remaining $680,000 on its
balance sheet.




Note
8   Accounts Payable





Accounts
payable represents balances due to trade creditors and fees for professional
services incurred for legal, and audit services.  Of the approximate
$1,582,000 reflected in the June 30, 2008 balance of $1,637,327, $1,578,769, the
legal fees incurred in the defense of a patent infringement suit, was settled in
October 2008 for a combination of cash payments and the issuance of one million
shares of the Company’s common stock.  The Company recorded the
difference between the previously accrued obligation and the maximum settlement
amount as non-operating income of $698,769 (See Note 7 above).




Note
9   Accrued Expenses





March 31,
              
              
              June 30,2009
              
              
              2008401
      (K) obligation
              
              $
              35,050
              
              
              $
              21,584Accrued
      interest on convertible debentures and note payable
              
              
              100,298
              
              
              
              55,719Other
              
              
              44,190
              
              
              
              20,509Totals
              
              $
              179,538
              
              
              $
              97,812





Note
10   Convertible Debentures





As of
March 31, 2009 and June 30, 2008, the Company has outstanding an aggregate of
$733,635 and $723,635, respectively, of the 9% convertible debentures that
mature between January 31 and October 31, 2009. In October 2008, the Company
sold an additional $10,000 to one of its employees.  Of that amount,
$573,544 is held by stockholders who are also customers of the Company and
employees of the Company. Accrued interest on the debentures was
$83,381.  All debenture holders with maturities prior to April 1, 2009
have extended their notes for one year, and the Company is in discussions with
the remaining debenture holders and expects all of them to extend their notes
for one year.  There were no discounts or commissions incurred on the
sale The Company has no assurance as to how much in additional subscriptions
will be received in the private offering.




Note
11    Earnings per Share





Basic
earnings per share is calculated based on the weighted-average number of
outstanding common shares.  As of March 31, 2009, the Company
had 51,931,553shares outstanding, with
no shares payable outstanding.  The Company uses the treasury stock
method to determine whether any convertible debentures, outstanding options or
warrants are to be included in the diluted earnings per share calculation.
 As of March 31, 2009, the Company had convertible debentures of 733,635
convertible at a conversion price of the lesser of (i) 70% of the price per
share of common stock or common stock equivalent paid by investors in the
Company’s next round of equity or debt financing consisting of at least
$1,000,000 in cumulative gross proceeds, or (ii) $0.12, warrants outstanding of
4,802,642 consisting of 2,401,321 with an exercise price of $0.14 and 2,401,321
with an exercise price of $0.18, and options outstanding of
6,775,000.  For the three months and nine months ended March 31,
2009, the conversion of all of the above would result in a possible dilution of
17,582,934 shares.  However, as the convertible
debentures, options, and warrants have a strike price in excess of the market
price, $0.06 at March 31, 2009, and are considered not “in the money”, they are
excluded from the calculation of diluted earnings per share due to their
anti-dilutive effect.







7




Note
12    Related Party Transactions





Seven of
our customers who are also stockholders in the Company, generated revenues
approximating $83,200 and $250,800 in the three months and nine months ended
March 31, 2009.  In the same periods in the prior year, revenues
approximated $85,100 and $250,700. A former customer and one current customer
had served as members of the Board of Directors and the Audit Committee in
2007.




Of the
total 9% convertible debentures issued through March 31, 2009, $478,554 is held
by stockholders who are also customers of the Company and $20,000 is held by
senior management of the Company.  Interest expense accrued to related
parties was $11,064 and $44,676 for the three months and nine months ended March
31, 2009.




In March
2009, the Company terminated its arrangement for office space with a company
controlled by a major stockholder of the Company and moved to a new
location.  In the respective three months and nine months ended March
31, 2009, and 2008, the Company paid rent of $2,975 and $8,975 in 2009 and
$3,000 and $9,000, respectively during 2008, to that stockholder. The previous
rent agreement included space and administrative services provided to the
Company.




Note
13    Commitmentsand
Contingencies




The
Company entered into a 65 month net lease at its Dallas, Texas office,
commencing June 1, 2008, approximating $4,300 per month and a one year lease,
commencing March 1, 2009,  for $650 per month at its Northbrook,
Illinois office. Total rent expense for the three months and nine months ended
March 31, 2009 was $15,961 and $47,932 respectively.  In the same
periods in 2008, rent expense was $11,665, and $48,420, respectively. The
Company accounts for these leases as operating leases in accordance with FAS 13,
Accounting for Leases.






ITEM 2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS







Safe Harbour - Forward
Looking Statements




When used
in this Quarterly Report on Form 10-Q, in documents incorporated herein and
elsewhere by us from time to time, the words "believes," "anticipates,"
"expects" and similar expressions are intended to identify forward-looking
statements concerning our business operations, economic performance and
financial condition, including in particular, our business strategy and means to
implement the strategy, our objectives, the amount of future capital
expenditures required, the likelihood of our success in developing and
introducing new products and expanding the business, and the timing of the
introduction of new and modified products or services. These forward looking
statements are based on a number of assumptions and estimates which are
inherently subject to significant risks and uncertainties, many of which are
beyond our control and reflect future business decisions which are subject to
change.




A variety
of factors could cause actual results to differ materially from those expected
in our forward-looking statements, including those set forth from time to time
in our press releases and reports and other filings made with the Securities and
Exchange Commission. We caution that such factors are not exclusive.
Consequently, all of the forward-looking statements made in this document are
qualified by these cautionary statements and readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date of this Quarterly Report on Form 10-Q. We undertake no obligation to
publicly release the results of any revisions of such forward-looking statements
that may be made to reflect events or circumstances after the date hereof, or
thereof, as the case may be, or to reflect the occurrence of unanticipated
events.




8




RESULTS OF
OPERATIONS





REVENUE   The
Company’s primary revenue is derived by delivering software as a service, or
hosted solutions for its clients billed on a monthly basis for each location
serviced.  For the three months and nine months ended March 31, 2009,
the Company generated $484,320 and $1,562,185, respectively, in revenues
compared to $368,292 and $1,045,250, respectively, in the comparable prior
year’s periods.  This increase in revenues is primarily attributable
to the licensing of the Company’s solutions by additional customers and
professional service fees.  In 2008 and 2007, the Company received
payments under
contracts for the development of various solutions, subject to multi-year
licensing agreements. The revenue under these contracts is recognized, under
Statement of Position 97-2 (as amended), Software Revenue
Recognition,over a 3 year period to
coincide with the terms of the related licensing fees. The Company recognized
$21,000 and $63,000, respectively, in the three months and nine months ended
March 31, 2009 for the development work and $75,000 and $225,000 under the
license agreements.  In 2008, in the comparable periods, the Company
recognized $9,000 and $27,000 for the development work and $37,500 and $112,500
under the license agreement.   As of March 31, 2009, the Company
included $149,000 from the development fees in deferred revenues on its balance
sheet.




COST OF
REVENUE   The cost of revenue for the three months and
nine months ended March 31, 2009, consist primarily of personnel, related
payroll costs and support service costs in the respective amounts of $133,044
and $408,708.  Other costs include travel, data hosting services,
telecommunication costs and depreciation of computer equipment used in the
maintenance and processing of customers' data.  The three months and
nine months periods ended March 31, 2009 include higher costs for new personnel
and increased time allocated to operations of $24,456 and $37,002, respectively,
increased license fees due to increased revenues of $1,970 and $6,816,
respectively, offset by a decrease in data hosting and telecommunications
services of $6,153 and $3,099, respectively.  The costs for the three
month and nine month periods in the comparable periods of the prior year were
$146,112 and $410,788 including non-cash compensation expense under SFAS 123R,
Share-Based Payments of
$15,818 resulting from option grants in the quarter ended December 31, 2007 and
$31,636 in the quarter ended March 31, 2008.




RESEARCH AND
DEVELOPMENT   Research and development costs are charged
to operations as incurred and consist primarily of personnel, related benefit
costs and outside contracted services. The costs for the three months and nine
months ended March 31, 2009 were $145,513 and $415,982, respectively. In the
current year’s periods, the Company allocated additional time to development,
increased the executive’s salary, incurred higher payroll and related costs of
$14,970 and $47,358, respectively, and incurred increased travel expenses of
$825 and $6,945 respectively.  In the nine months ended March 31,
2009, the Company increased outside contractor use in the amount of $55,700 to
assist in the integration of various systems with our business intelligence
solution for new franchise operations. The costs for the three month and nine
month periods in the comparative periods of the prior year were $338,769 and
$635,414 including non-cash compensation expense under SFAS 123R, Share-Based Payments of
$119,766 resulting from option grants in the quarter ended December 31, 2007 and
$209,402 in the quarter ended March 31, 2009.  The Company’s research
and development is part of its strategic plan to provide enhancements and
integration into new and existing franchise operations in the retail
market.




MARKETING AND
SELLING   The costs for the three months and nine months
ended March 31, 2009 were $82,760 and $241,297, respectively, compared to
$174,612 and $371,223 in the comparable periods of the prior year. In those
comparable prior periods, the Company recorded non-cash compensation expense of
$97,921 and $154.415, respectively, under SFAS 123R, Share-Based Payments
resulting from option grants. The
Company’s marketing and selling expenses in the current periods included
increased compensation for its executives and outside consultant and a greater
allocation of time, personnel and related costs of $5,473 and $17,426,
respectively.  The Company incurred higher costs for marketing, trade
shows and related travel of $7,063 as compared to the nine month period of the
prior year.  For the current fiscal year, the Company continues to
expand its customer base through direct sales, trade shows and referrals from
its relationship with existing clients.




GENERAL AND
ADMINISTRATIVE   The Company’s general and administrative
costs consist primarily of executive salaries and related benefits, professional
fees for attorneys, our independent auditor, rent, expenses related to being a
public company and other operating costs.    The costs for
the three months and nine month periods ended March 31, 2009 were $100,789 and
$341,363, respectively, compared to $369,867 and $726,765 in the comparable
periods of the prior year. The Company’s decrease in the current periods was
primarily due to reduced professional fees of $3,071 and $38,694, respectively,
and reduced insurance costs of $2,762 and $6,833, respectively. The Company
incurred increased costs of $3,493 to report as a public company, and increased
costs for travel and administrative expenses of $26,979.  In the
quarters ended December 31, 2007 and March 31, 2008, the Company recorded
non-cash compensation expense under SFAS 123R, Share-Based Payments of
$112,987 and $248,571, respectively, resulting from option grants.




INTEREST
EXPENSE   Interest expense consists of the
following:




Three
      Months Ended
                March 31,
              
              
              Nine
      Months Ended
                March31,Interest
      expense
              
              
              
              
              2009
              
              
              2008
              
              
              2009
              
              
              2008Accrued
      interest on convertible debentures
              
              $
              16,284
              
              
              $
              16,236
              
              
              $
              49,332
              
              
              $
              49,068Amortization
      of the discount of the beneficial conversion feature in the convertible
      debentures
              
              
              616
              
              
              
              11,115
              
              
              
              1,211
              
              
              
              49,239Accrued
      interest on loan payable
              
              
              1,750
              
              
              
              1,750
              
              
              
              5,250
              
              
              
              5,250Interest
      incurred from the deferred credits issued to consortium
      members
              
              
              2,288
              
              
              
              2,458
              
              
              
              7,020
              
              
              
              7,445Interest
      income earned on cash and cash equivalents
              
              
              (988
              )
              
              
              (407
              )
              
              
              (2,426
              )
              
              
              (4,225
              )Net
      interest expense
              
              $
              19,950
              
              
              $
              31,152
              
              
              $
              60,387
              
              
              $
              106,777







NET INCOME
(LOSS)The net income for the three months and nine
months ended March 31, 2009 was $2,264 and $793,217, respectively, compared to a
net loss of $692,220 and $1,205,717 for the comparable periods in
2008.  The increase in the net income for the current year’s periods
was primarily the result of increased revenue resulting from the licensing of
the Company’s solutions by additional customers and professional service fees
and the non-operating income resulting from the debt forgiveness obligation
settled in October 2008. The Company was able to reduce its professional fees
and other expenses but incurred increased costs in the use of outside
consultants for development work, increased compensation for executives,
employees and sales consultants, and increased marketing and sales
costs.




The net
income per share for the three months and nine months ended March 31, 2009 was
$0.00 and $0.02 per share in the respective periods on 51,931,553 and 51,511,845
weighted average common shares outstanding. This compares with net losses per
share for the three month and nine month periods ended March 31, 2008 of $(0.01)
and $(0.01) per share, on 50,931,553 and 50,664,091 weighted average common
shares outstanding, respectively.




9




LIQUIDITY
AND CAPITAL RESOURCES




The Company continued to achieve another profitable quarter since it
commenced operations.  The Company had incurred operating losses and
negative cash flows from operations in each quarter since it commenced
operations through June 30, 2008.  As of March 31, 2009, there was an
accumulated deficit of $8,734,052 and the Company’s cash position is
$122,993.  While there can be no assurances that the Company will
continue to increase its customer base and related revenues necessary to cover
its operating costs; the Company’s management believes the opportunities
identified in its pipeline are achievable to continue generating operating
profitability and positive cash flow in the near future.




The
Company may need additional financing and there is no assurance that such
financing will be available, if at all, at terms acceptable to the
Company.  If additional funds are raised by the issuance of equity
securities, existing stockholders may experience dilution of their ownership
interests and these securities may have rights senior to those of holders of the
common stock.  If adequate funds are not available or not available on
acceptable terms, it could have a material adverse effect on the Company's
financial condition and results of operations.




Item
3.    Quantitative and Qualitative Disclosures about Market
Risk




Not
applicable




Item
4.    Controls and Procedures




Evaluation of Disclosure
Controls and Procedures




The
Company's Principal Executive Officer and Principal Financial Officer have
established and are currently maintaining disclosure controls and procedures for
the Company.  The disclosure controls and procedures have been
designed to provide reasonable assurance that the information required to be disclosed
by the Company in reports that it files under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the SEC and to ensure that information required to be
disclosed by the Company is accumulated and communicated to the Company's
management as appropriate to allow timely decisions regarding required
disclosure.




We  carried
out an evaluation, under the supervision and with the
participation   of  our  management,  including   our   principal
executive  officer  and  principal  financial  officer,  of   the
effectiveness  of  our  disclosure
controls  and  procedures  (as
defined  in  Rules  13a-15(e) and 15d-15(e) of
the  Exchange  Act).   Based  upon
that evaluation,  our  principal executive officer and
principal financial officer concluded that,
as  of  the  end  of  the  period
covered  in  this  report,  our
disclosure controls and procedures were effective to ensure  that
information required to be disclosed in reports
filed  under  the Securities Exchange Act of 1934, as
amended (the "Exchange  Act")
is  recorded,  processed,  summarized  and  reported  within  the
required time periods and is accumulated and communicated to  our
management,   including  our  principal  executive  officer   and
principal  financial  officer,
as  appropriate  to  allow  timely
decisions regarding required disclosure.




Our
management, including our principal executive officer and principal financial
officer, does not expect that our disclosure controls and procedures or our
internal controls will prevent all error or fraud.  A control system,
no matter how well conceived
and   operated,  can  provide  only  reasonable,  not   absolute,
assurance   that  the  objectives  of  the  control  system   are
met.   Further, the design of a control system must reflect the
fact that there are resource constraints and the benefits of controls must be
considered relative to their costs.  Due to the inherent limitations
in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, have been detected.
Accordingly, management believes that the financial statements included in this
report fairly present in all material respects our financial condition, results
of operations and cash flows for the periods presented.




Changes
in Internal Control over Financial Reporting




In
addition, our management with the participation of our Principal Executive
Officer and Principal Financial Officer have determined that no change in our
internal control over financial reporting occurred during or subsequent to the
quarter ended March 31, 2009 that has materially affected, or is (as that term
is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act
of 1934) reasonably likely to materially affect, our internal control over
financial reporting.




10




PART
II - OTHER INFORMATION




ITEM
1       LEGAL
PROCEEDINGS




As of the
date of this report, there are no pending legal proceedings in which the Company
or any of its officers, directors or affiliates is a party, and the Company is
not aware of any threatened legal proceedings.





ITEM
2      UNREGISTERED SALES OF
SECURITIES AND USE OF PROCEEDS




None,
except as previously reported.




ITEM
3    DEFAULTS UPON SENIOR SECURITIES




None,
except as previously reported.




ITEM
4   SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY
HOLDERS




The
Company did not submit any matters to a vote of security holders during the
three months ended March 31, 2009




ITEM
5     OTHER INFORMATION




None




ITEM
6      EXHIBITS AND REPORTS ON Form
8-K




Exhibits31.
              
              Certification32.
              
              Certification
      pursuant to USC Section 1350Reports on 8-KNone


SIGNATURES




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




XFormity
      Technologies, Inc.Date:May 13, 2009
            /s/ Christopher
      Ball
              Christopher
      Ball
              Chief
      Executive OfficerDate:May 13, 2009
            /s/ Jack
      Rabin
              Jack
      Rabin
              Chief
      Financial Officer












11