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 December 31, 2010 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)  Colorado84-1434313(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, $0.0001 par value, at February 9, 2011 is 51,931,553.    1       PART I.FINANCIAL INFORMATIONPAGEItem 1.Financial statementsConsolidated Balance Sheets  December 31, 2010 (Unaudited) and June 30, 20103Unaudited Consolidated Statements of Operations  Three Months and Six Months Ended December 31, 2010 and 20094Unaudited Consolidated Statements of Cash Flows  Six Months Ended December 31, 2010 and 20095Notes to Unaudited Consolidated Financial Statements6-10Item 2.Management's Discussion and Analysis and Results of Operations11-14Item 3.Quantitative and Qualitative Disclosures About Market Risk14Item 4.Controls and Procedures14PART II.OTHER INFORMATIONItem 1.Legal Proceedings15Item 2.Unregistered Sales of Securities and Use of Proceeds15Item 3.Defaults upon Senior Securities15Item 4.Submission of Matters to a Vote of Security Holders15Item 5.Other Information15Item 6.Exhibits and Reports on Form 8-K15         2    XFormity Technologies, Inc. and Subsidiary Consolidated Balance Sheets  December 31,June 30,20102010ASSETS(Unaudited)Current AssetsCash and cash equivalents$              92,142$               76,952Accounts receivable58,76354,861Deferred commission expense18,38136,762Prepaid expenses22,2475,492Total current assets191,533174,067Property and equipment, net of accumulated depreciation29,79833,569Security deposit8,7078,707Total Assets$              230,038$              216,343LIABILITIES AND STOCKHOLDERS DEFICITCurrent LiabilitiesObligation from debt reduction agreement$             490,000$              490,000Note payable-related party-118,667Accounts payable112,729147,407Accrued expenses229,901181,439Current portion - deferred revenue63,671106,332Current portion  deferred credits12,15115,202Convertible debentures  related parties771,554573,554Convertible debentures160,081160,081Derivative liabilities debentures and warrants501,410357,242Total Current Liabilities2,341,4972,149,924Deferred revenues  net of current portion-2,778Deferred credits  net of current portion143,357146,661Total liabilities2,484,8542,299,363Stockholders' DeficitPreferred stock, $0.01 par value, 100,000,000 shares authorized, none issued and outstanding at December 31, 2010 and June 30, 2010--Common stock, $0.0001 par value, 125,000,000 shares authorized, 51,931,553 shares issued and outstanding at December 31, 2010 and  June 30, 20105,1935,193Additional paid-in capital6,933,3006,933,300Accumulated deficit(9,193,309)(9,021,513)Total Stockholders' Deficit(2,254,816)(2,083,020)Total Liabilities and Stockholders' Deficit$               230,038$              216,343
  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 December 31,Six Months Ended December 31,20102009As Restated20102009As RestatedRevenue$              455,031$              485,036$              932,702$              986,124Cost of revenue165,662158,060337,011303,995Research and Development102,380117,820207,704247,447Marketing and selling90,64376,208152,392134,772General and administrative111,24393,635215,594223,014Total operating expenses469,928445,723912,701909,228Income (loss) from operations(14,897)39,31320,00176,896Interest expense, net(22,608)(20,814)(43,112)(41,627)Income (loss) before other income and provision for income taxes(37,505)18,499(23,111)35,269Change in fair value - derivatives(161,597)319,061(144,168)281,787Income (loss) before provision for income taxes(199,102)337,560(167,279)317,056Provision for state income taxes2,2202,4784,5179,394Net Income (loss)$           (201,322)$            335,082$           (171,796)$                307,662Net Income (loss) per share  basic and diluted$                  0.00$                  0.01$                  0.00$                   0.01Weighted average number of shares  basic and diluted51,931,55351,931,55351,931,55351,931,553           The accompanying notes are an integral part of these consolidated financial statements.        .   4     XFormity Technologies, Inc. and Subsidiary Consolidated Statements of Cash Flows  (Unaudited)Six Months Ended December 31,20102009 As RestatedOperating activities:Net income$               (171,796)$               307,662Depreciation7,7169,780Amortization of deferred commission18,38118,381Non-cash transactions for:Change in fair value - derivatives144,168(281,787)Compensation from share-based payment arrangements-17,673Changes in:Accounts receivable(3,902)(67,611)Prepaid expenses( 16,755)6,752Accounts payable(34,679)26,059Accrued expenses48,46342,863Deferred revenue(45,438)(33,398)Deferred credits(6,356)(7,141)Net cash provided (used) in operating activities(60,198)39,233Investing activities:Purchases of property and equipment(3,945)(2,605)Net cash used in investing activities(3,945)(2,605)Financing activities:Issuance of convertible debentures198,000-Retirement of note payable  related party(118,667)-Payments under debt obligation-(30,000)Net cash used in financing activities79,333(30,000)(Decrease) in cash and cash equivalents15,1906,628Cash and cash equivalents, beginning of period76,95214,262Cash and cash equivalents, end of period$                   92,142$              20,890Supplemental disclosure of non-cash financing and investing activitiesInterest paid$                    7,068$                  26,767      The accompanying notes are an integral part of these consolidated financial statements. .  5   XFormity Technologies, Inc. and Subsidiary
Notes to Consolidated Financial StatementsDecember 31, 2010 (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), Balanced Scorecard and Benchmarking 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 provides services for franchisors and franchisees in a growing list of customers across the United States and Canada.  XFormity is the provider of Burger King Corporation's (BKC) operational reporting for all company owned and operated restaurants in the US and Canada. In addition to this deployment, the Company's success in delivering solutions on a big scale is demonstrated by the use of its balanced scorecard and financial benchmarking tools for all Burger King Corporate restaurants in the United States and Canada, totalling nearly 6,500 restaurants. The Company has expanded its services to customers in both fine and casual dining.  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. The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operation, financial position or cash flow. 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, 2010 Annual Report on Form 10-K. Operating results for the three months and six months ended December 31, 2010 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  6   going concern is dependent on the Companys ability; (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. Reclassification In 2010, certain prior period items have been reclassified from convertible debentures to convertible debentures-related party in order to correct disclosure and presentation. This reclassification did not affect total current liabilities nor accumulated deficit. Note 3   Going Concern As shown in the accompanying consolidated financial statements, the Company has incurred an accumulated deficit of $9,193,309 and a working capital deficit of $2,149,964 through the period ended December 31, 2010. The Company is continually reviewing its operations and attempting to improve operating results and its balance sheet.  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 December 31, 2010 was $165,385 and $157,665 at June 30, 2010.  Management has evaluated the difference between the straight line and accelerated method used and has deemed the difference immaterial. Note 5   Deferred Commission  In August 2007, the Company renegotiated a previous commission agreement that provides for monthly payments of $3,000 for four years commencing July 1, 2007 and the issuance of 1 million shares of the Companys common stock.  The determination of the amount was based on the fair value of the issued common stock at the commitment date and is amortized over the life of the contract.   Six Months Ended
December 31, 2010Deferred commission in prepaid expenses$  18,381Amount of commission expensed in this period$  18,381  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.   7   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 December 31, 2010 in the respective amounts of $80,400 and $75,108, 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 litigation counsel to issue 1,000,000 shares of the Companys common stock issued on October 24, 2008 valued at the closing price of $0.14 per share for a total value of $140,000, to pay cash payments of $10,000 per month that extend over 48 months for a total of $480,000 and four contingent additional debt reduction payments of $65,000 over a 3 year period, each contingent upon the Company achieving revenue targets of $2 million, $3 million and $4 million, respectively, for a total of $260,000. This resulted in a gain of $763,769 in full settlement of the Companys obligation of $1,578,769. In fiscal 2010, the Company did not achieve the revenue targets and thus further reduced the maximum payout by $65,000 to $490,000 at June 30, 2010 resulting in a further gain of $65,000 in 2010.  The Company did not make any further payments under this agreement after September 2009 and as of December 31, 2010 the agreement was in default and the obligation included in current liabilities.  Note 8   Accounts Payable  Accounts payable represents balances due to trade creditors, licensors and fees for professional services incurred for legal, and audit services.  Note 9   Accrued Expenses December 31,June 30,20102010401 (K) obligation$         26,994$         26,285Accrued interest on convertible debentures110,32286,630Other92,58568,524Totals$       229,901$       181,439  Note 10   Convertible Debentures  In August and September 2010, as part of its plan to raise additional working capital, the Company sold an additional $198,000 of its 9% convertible debentures to management, other related parties and an employee, all accredited investors.  The proceeds were used to retire existing note payablerelated party and as working capital for operations.  As of December 31, 2010 and June 30, 2010, the Company had outstanding an aggregate of $931,635 and $733,635, respectively, of the 9% convertible debentures that convert at thelesser 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 and mature between January 31, 2011 and September 15, 2011. Of the total outstanding debentures, $771,554 is held by related parties. As of December 31, 2010 and June 30, 2010, accrued interest on the debentures was $110,322 and $78,323, respectively.  In December 2010, the holder of a $465,000 debenture that matured on July 31, 2010 and was then in default called its note and has filed a lawsuit for collection of principal and interest.  The Company is  8   defending the matter.  As of December 31, 2010, the amount of the default is included in the convertible debentures in the current liabilities section of the Balance Sheet. Note 11    Derivative Liabilities  The Companys warrants and its Convertible Notes have reset provisions to the exercise price and conversion price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This ratchet provision results in a derivative liability in our financial statements. As of July 1, 2009, the fair value of these derivatives of $766,163 was recognized and resulted in a cumulative adjustment to accumulated deficit.  Our derivative liabilities increased to $501,410 at December 31, 2010, from $339,813 at September 30, 2010 and from $357,242 at June 30, 2010. During the three months and six months ended December 31, 2010, the Company recorded losses of $161,597 and $144,168, respectively, for the change in fair value.  During the three months and six months ended December 31, 2009, the Company recorded gains of $319,061 and $281,787, respectively, for the change in fair value.  The following tabular presentation reflects the components of derivative financial instruments on the Companys balance sheet at December 31, 2010 and June 30, 2010:  December 31, 2010June 30,
2010Common stock warrants$         336,185$           43,870Embedded conversion features165,225313,372Total$         501,410$         357,242   Note 12    Earnings per Share  Basic earnings per share are calculated based on the weighted-average number of outstanding common shares.  As of December 31, 2010, the Company had 51,931,553 shares 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 December 31, 2010, the Company had convertible debentures of $931,635 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 7,025,000.  For the six months ended December 31, 2010, the conversion of all of the above would result in a possible dilution of 24,259,349 shares.  However, as the convertible debentures, options, and warrants have a strike price equal to or in excess of the market price of $0.07 at December 31, 2010, and are considered not in the money, they are excluded from the calculation of diluted earnings per share due to their anti-dilutive effect.     9   Note 13    Income Taxes As of July 1, 2007, the Company adopted the current accounting guidance for theAccounting for Uncertainty in Income Taxes,which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions.  The Company believes it does not have any uncertain tax positions taken or expected to be taken in its income tax returns.  At December 31, 2010, the Company had net operating loss carry-forwards approximating $5,114,000 that begin to expire in 2018 through 2029.  The carry-forward losses and the related deferred tax benefit are significantly limited by the provisions of Internal Revenue Code Section 382. The Companys taxable losses, as determined by an independent tax advisor, have created a deferred tax benefit of approximately $1,928,000 which is fully reserved.  Note 14   Related Party Transactions Seven of our customers who are also stockholders in the Company, generated revenues approximating $48,900 and $116,600 in the three months and six months ended December 31, 2010.  In the same periods in the prior year, revenues approximated $92,700 and $185,500. A principal in one current customer serves as a member of the Board of Directors and the Audit Committee.  Of the total 9% convertible debentures issued through December 31, 2010, $771,554 is held by related parties. Of that amount, $198,000 was purchased in the quarter ended September 30, 2010. Interest expense accrued to related parties for the three months and six months ended December 31, 2010 was $17,503 and $24,736, respectively.  Note 15    Commitments and Contingencies  The Company entered into a 65 month net lease at its Dallas, Texas office, commencing June 1, 2008, with rent approximating $4,300 per month. The Company also has a one year lease for $700 per month at its Northbrook, Illinois office.  Total rent expense for the three months and six months ended December 31, 2010 was $15,086 and $30,208, respectively. The Company accounts for these leases as operating leases.  Note 16   Subsequent Events  Management reported that there are no reportable events through the date of this filing.  Note 17    Restatement of the Quarter ended December 31, 2009  The Company has restated its quarterly unaudited financial statements to reflect the current accounting guidance, Determining Whether an Instrument (or imbedded Feature) is Indexed to an Entitys Own Stock. The Companys 9% Convertible Debentures and the Warrants previously issued  have reset provisions to the exercise price if the Company issues equity or other derivatives at a price less than the exercise price set forth in such warrants and notes. This provision required a reclassification to the liability based on the reset feature of both the debentures and warrants if the Company sells equity or derivatives at a price below the exercise price of the notes and warrants.  The Company previously restated the financial statements for the quarters ended September 30, 2009, December 31, 2009, and March 31, 2010. Please refer to the June 30, 2010 Form 10-K filed on October 13, 2010 for detail of adjustments.  10    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.  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 six months ended December 31, 2010, the Company generated $455,031 and $932,702, respectively, in revenues compared to $485,031 and $986,124 in the comparable prior years periods.  This decrease in revenues was attributable to a decrease in professional service contracts for special projects, competitive pricing adjustments and other revenue sources but was offset by an increase primarily attributable to the licensing of the Companys solutions by additional customers.  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 over a 3 year period to coincide with the terms of the related licensing fees. The Company recognized the development work in the amounts of $11,000 and $22,000 in the respective three months and six months ended December 31, 2010 as compared to $21,000 and $42,000 in the comparable prior years periods.In the three months and six months ended December 31. 2010 and 2009, the Company reflected $37,500 and $75,000, respectively, under the license agreements.  As of December 31, 2010, the Company included $22,000 from the development fees in deferred revenues on its balance sheet.  COST OF REVENUE   The cost of revenue for the three months and six months ended December 31, 2010 and 2009, consist primarily of personnel, related payroll costs and support service costs in the respective amounts of $165,662 and $337,011. 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 six months ended December 31, 2010 include increased time allocated to operations of $5,460 and $28,685 respectively, with minimal increases in other operating costs of $2,143 and $4,331, respectively.  11    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 six months ended December 31, 2010 were $102,380 and $207,704, respectively, as compared to $117,820 and $247,447 in the comparable periods in the prior year.In the current years periods, the Company re-allocated personnel time from development to operations, thus total payroll and related costs decreased $16,289 and $ 28,158 respectively.  In the current year six month period, the Company reduced the use of outside contractors by $10,000 and further reduced other costs by $1,586. 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   Marketing and selling costs for the three months and six months ended December 31, 2010 were $90,643 and $152,392, respectively, compared to $76,208 and $134,772 in the comparable periods of the prior year. The Companys marketing and selling expenses in the current periods increased due to higher compensation to an outside sales resource and re-allocated personnel time to marketing and sales from administration in the respective amounts of $6,761 and $10,923, a higher cost for commissions of $9,000 in the six month period, offset by reduced costs for advertising, travel, and trade shows in the respective periods of $1,325 and $2,303. For the current fiscal year, the Company continues to expand its customer base through direct sales, related business partnerships, 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 administrative costs.  The costs for the three month and six month periods ended December 31, 2010 were $111,243 and $215,594, respectively, compared to $93,635 and $223,014 in the comparable periods of the prior year. On August 12, 2009, the Company authorized the issuance of 250,000 stock option grants to its latest Board of Directors member and recorded non-cash compensation expense of $17,673 resulting from that option grant.  The options to purchase the Companys shares were granted at the closing price on the date of the grant at $0.08, using the Black Sholes method for calculating the charge and vested immediately upon the grant. In the current periods, payroll and related costs increased by $6,897 and $9,194 excluding the non-cash compensation expense. The Company incurred modest increases in other operating costs of $6,495 and $1,058.   12   INTEREST EXPENSE   Interest expense consists of the following: Interest expenseThree Months EndedDecember 31,Six Months EndedDecember 31,2010200920102009Accrued interest on convertible debentures$    21,134$   16,642$  38,991$  33,285Accrued interest on loan payable-2,0771,0264,153Interest incurred from the deferred credits issued to consortium members1,6582,3283,5044,472Interest income earned on cash and cash equivalents(184)(233)(409)(283)Net interest expense$   22,608$   20,814$   43,112$     41,627  NET INCOME (LOSS)The net loss for the three months and six months ended December 31, 2010 was $201,322 and $171,796, respectively, compared to net income of $335,082 and $307,662 for the comparable periods in 2009.  The decrease in the net income was primarily the result of the following: the change in fair value of the derivatives compared to the prior year, decreased revenue from professional service fees offset by an increase of the licensing of the Companys solutions to additional customers. Reduced costs for outside contractors were offset by additional costs for our marketing and sales consultant and overall minimal changes in most other categories as noted above. In the comparable six months of the prior fiscal year, the Company also incurred a non-cash compensation expense of $17,673 resulting from an option grant to the newest member of its Board of Directors.  The net income per share for the three months and six months ended December 31, 2010 and 2009 was $0.00 and $0.00 per share, respectively, on 51,931,553 weighted average common shares outstanding in both periods as compared to $0.01 and $0.01 per share on 51,681,553 and 51,931,553, respectively,  in the comparable periods in the prior year.  LIQUIDITY AND CAPITAL RESOURCES    As of December 31, 2010, there was an accumulated deficit of $9,193,309 and the Companys cash position was $92,142.  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.  In the quarter ended December 31, 2010, the holder of an outstanding debenture in the approximate amount of $465,000 commenced a civil lawsuit to collect the amount due.  The Company is defending the matter.   The cost of such defence will have an adverse effect on the Companys working capital, the magnitude of which cannot be predicted. Should an adverse judgment be entered against the Company, the Company does not expect to have sufficient capital with which to satisfy it.  The outcome of this matter could have a material adverse effect on the Companys ability to continue as a going concern.   13   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 Our management has evaluated, under the supervision and with the participation of our chief executive officer and chief  financial  officer, 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 ineffective 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 December 31, 2010 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.     14   PART II - OTHER INFORMATION  Item 1       Legal Proceedings   The Company is a named defendant in a civil action captioned Tacala, Inc. v. XFormity Technologies, Inc. et. al. Case No.10-CV-03158-CMA-MEH, currently pending in the United States District Court for the District of Colorado (the Tacala Lawsuit).  The Tacala Lawsuit seeks collection of its debenture in the approximate amount of $465,000.  The Company is defending the matter. 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 and in Note 10 to the financial statements and PART II, Item 1 above. 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 December 31, 2010. ITEM 5     Other information  None ITEM 6      Exhibits and Reports on Form 8-K Exhibits31.Certification32.Certification pursuant to USC Section 1350  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:February 9, 2011/s/ Christopher BallChristopher Ball
Chief Executive OfficerDate:  February 9, 2011/s/ Jack RabinJack Rabin
Chief Financial Officer   15