** **

**U.S. SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM10-QSB**

 
| **x** | **QUARTERLY REPORT UNDER  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------|

** **

**For the quarterly period ended September 30, 2007**

 
| **o** | **TRANSITION REPORT UNDER SECTION  13 OR 15(d) OF THE EXCHANGE ACT** |
|-------|----------------------------------------------------------------------|

 

**For thetransition period from                    to                 **

 

**CommissionFile number 001-10320**

 
| **NETtime  Solutions, Inc.**                                                        |
|-------------------------------------------------------------------------------------|
| (Exact name of  small business issuer as specified in its charter)                  |
|                                                                                |   |
| **Nevada**                                                                          | **13-3465289** |
| (State or other  jurisdiction of  incorporation of organization)                    | (I.R.S. Employer   Identification No.) |
|                                                                                |
| **8840  East Chaparral Road, Suite 100, Scottsdale, AZ 85250**                      |
| (Address of  principal executive offices)                                           |
|                                                                                |
| **(480)  296-0400**                                                                 |
| (Issuer’s  telephone number)                                                   |
|                                                                                |
| **Time  America, Inc.**                                                             |
| (Former name,  former address and former fiscal year, if changed since last report) |

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.     Yes x    No o

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct).      Yes o    No x

 

State the number ofshares outstanding of each of the issuer’s classes of common equity, as of thelatest practicable date: At November 14, 2007, the issuer had outstanding15,382,404 shares of Common Stock, par value $.005 per share.

 

Transitional SmallBusiness Disclosure Format:      Yes o    No x

 

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**PART I — FINANCIAL INFORMATION**

 

**Item 1 — FinancialStatements.**

**NETTIME SOLUTIONS, INC. ANDSUBSIDIARIES**CONSOLIDATEDBALANCE SHEETS

 
| ** **                                                                                                             | ** ** | **September 30,** | ** ** | **June 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|--------------|------------|
| ** **                                                                                                             | ** ** | **2007**          | ** ** | **2007**     | ** ** |
| ** **                                                                                                             | ** ** | **(Unaudited)**   | ** ** | ** **   | ** ** |
| **ASSETS**                                                                                                             | ** ** | ** **        | ** ** | ** **   | ** ** |
| **Current  Assets:**                                                                                                   | ** ** | ** **        | ** ** | ** **   | ** ** |
| Cash and cash  equivalents                                                                                             |       | $                 | 247,984    |         | $          | 278,701 |   |
| Accounts  receivable — trade, net                                                                                 |       | 520,975           |       | 501,078      |       |
| Inventory                                                                                                              |       | 57,099            |       | 66,966       |       |
| Deferred loan  costs and other current assets                                                                          |       | 141,246           |       | 427,136      |       |
|                                                                                                                   |       |              |       |         |       |
| **Total  Current Assets**                                                                                              |       | 967,304           |       | 1,273,881    |       |
|                                                                                                                   |       |              |       |         |       |
| **Property  and Equipment, net**                                                                                       |       | 256,702           |       | 293,644      |       |
| **Other  Assets**                                                                                                      |       | 29,907            |       | 35,183       |       |
|                                                                                                                   |       |              |       |         |       |
| **Total  Assets**                                                                                                      |       | $                 | 1,253,913  |         | $          | 1,602,708 |   |
|                                                                                                                   |       |              |       |         |       |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)**                                                                |       |              |       |         |       |
|                                                                                                                   |       |              |       |         |       |
| **Current  Liabilities:**                                                                                              | ** ** | ** **        | ** ** | ** **   | ** ** |
| Current portion  of long-term debt-related party                                                                       |       | $                 | 694,848    |         | $          | 610,716 |   |
| Accounts payable                                                                                                       |       | 496,488           |       | 551,102      |       |
| Accrued  liabilities                                                                                                   |       | 665,638           |       | 594,875      |       |
| Deferred revenue                                                                                                       |       | 471,143           |       | 564,176      |       |
|                                                                                                                   |       |              |       |         |       |
| **Total  Current Liabilities**                                                                                         |       | 2,328,117         |       | 2,320,869    |       |
|                                                                                                                   |       |              |       |         |       |
| **Long-Term  Debt, less current portion-related party**                                                                |       | 825,310           |       | 909,442      |       |
|                                                                                                                   |       |              |       |         |       |
| **Total  Liabilities**                                                                                                 |       | 3,153,427         |       | 3,230,311    |       |
|                                                                                                                   |       |              |       |         |       |
| **Common  Stock Subject to Registration Rights (351,923 shares)**                                                      |       | 207,635           |       | 207,635      |       |
|                                                                                                                   |       |              |       |         |       |
| **Commitments:**                                                                                                       |       | —            |       | —       |       |
|                                                                                                                   |       |              |       |         |       |
| **Stockholders’  Equity (Deficit):**                                                                              | ** ** | ** **        | ** ** | ** **   | ** ** |
| Common stock,  $.005 par value, 50,000,000 shares authorized; 15,030,481 and 15,030,481  shares issued and outstanding |       | 75,153            |       | 75,153       |       |
| Contributed  capital                                                                                                   |       | 9,926,151         |       | 9,889,188    |       |
| Accumulated  deficit                                                                                                   |       | (12,108,453       | )          | (11,799,579  | )          |
|                                                                                                                   |       |              |       |         |       |
| **Total  Stockholders’ Equity (Deficit)**                                                                         |       | (2,107,149        | )          | (1,835,238   | )          |
|                                                                                                                   |       |              |       |         |       |
| **Total  Liabilities and Stockholders’ Equity (Deficit)**                                                         |       | $                 | 1,253,913  |         | $          | 1,602,708 |   |

#### ** **

#### **SeeNotes to Consolidated Financial Statements**

 

2

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** **

**NETTIME SOLUTIONS, INC. ANDSUBSIDIARIES**CONSOLIDATEDSTATEMENTS OF OPERATIONS(UNAUDITED)

** **
| ** **                                                 | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                 | ** ** | **September 30,**      | ** ** |
| ** **                                                 | ** ** | **2007**               | ** ** | **2006** | ** ** |
| ** **                                                 | ** ** | **(unaudited)**        | ** ** | **(unaudited)** | ** ** |
| **Revenues:**                                              | ** ** | ** **             | ** ** | ** ** | ** ** |
| Product sales                                              |       | $                      | 203,019    |   | $ | 1,056,035 |   |
| Services revenue                                           |       | 477,223                |       | 394,557 |   |
|                                                       |       |                   |       |   |   |
| **Total  Revenues**                                        |       | 680,242                |       | 1,450,592 |   |
|                                                       |       |                   |       |   |   |
| **Cost of  Revenues:**                                     | ** ** | ** **             | ** ** | ** ** | ** ** |
| Product                                                    |       | 68,044                 |       | 521,415 |   |
| Services                                                   |       | 127,140                |       | 178,641 |   |
|                                                       |       |                   |       |   |   |
| **Total  Cost of Revenues**                                |       | 195,184                |       | 700,056 |   |
|                                                       |       |                   |       |   |   |
| **Gross  Profit**                                          |       | 485,058                |       | 750,536 |   |
|                                                       |       |                   |       |   |   |
| **Costs  and Expenses:**                                   | ** ** | ** **             | ** ** | ** ** | ** ** |
| Sales and  marketing                                       |       | 195,275                |       | 349,045 |   |
| Research and  development                                  |       | 285,601                |       | 465,302 |   |
| General and  administrative                                |       | 202,978                |       | 376,154 |   |
|                                                       |       |                   |       |   |   |
| **Total  Costs and Expenses**                              |       | 683,854                |       | 1,190,501 |   |
|                                                       |       |                   |       |   |   |
| **Net  Loss from Operations**                              |       | (198,796               | )          | (439,965 | ) |
|                                                       |       |                   |       |   |   |
| **Other  Income (Expense):**                               | ** ** | ** **             | ** ** | ** ** | ** ** |
| Interest expense                                           |       | (124,973               | )          | (197,532 | ) |
| Other                                                      |       | 14,596                 |       | 109,672 |   |
| Interest income                                            |       | 299                    |       | 2,681 |   |
|                                                       |       |                   |       |   |   |
|                                                       |       | (110,078               | )          | (85,179 | ) |
|                                                       |       |                   |       |   |   |
| **Net  Loss**                                              |       | $                      | (308,874   | ) | $ | (525,144 | ) |
|                                                       |       |                   |       |   |   |
| **Basic  and Diluted Loss per Share**                      |       | $                      | (0.02      | ) | $ | (0.04 | ) |
|                                                       |       |                   |       |   |   |
| **Basic  and Diluted Weighted Average Shares Outstanding** |       | 15,030,481             |       | 14,652,481 |   |

 

See Notes toConsolidated Financial Statements

 

3

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**NETTIME SOLUTIONS, INC. ANDSUBSIDIARIES**CONSOLIDATEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)FOR THE YEAR ENDED JUNE 30, 2007 ANDTHE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2007 (Unaudited)

 
| ** **                                 | ** ** | **Common Stock** | ** ** | **Contributed** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
|--------------------------------------------|------------|------------------|------------|-----------------|------------|-----------------|------------|-------------|------------|
| ** **                                 | ** ** | **Shares**       | ** ** | **Amount**      | ** ** | **Capital**     | ** ** | **Deficit** | ** ** | **Total** | ** ** |
| ** **                                 | ** ** | ** **       | ** ** | ** **      | ** ** | ** **      | ** ** | ** **  | ** ** | ** ** | ** ** |
| Balance at June  30, 2006                  |       | 14,652,481       |       | $               | 73,263     |            | $          | 9,591,098   |       | $ | (11,940,015 | ) | $ | (2,275,654 | ) |
|                                       |       |             |       |            |       |            |       |        |       |   |   |
| Exercise of  stock options                 |       | 23,000           |       | 115             |       | 5,135           |       | —      |       | 5,250 |   |
| Exercise of  stock warrants                |       | 25,000           |       | 125             |       | 3,625           |       | —      |       | 3,750 |   |
| Share-based  awards compensation           |       | —           |       | —          |       | 142,980         |       | —      |       | 142,980 |   |
| Issuance of  common stock for financing    |       | 230,000          |       | 1,150           |       | 102,850         |       | —      |       | 104,000 |   |
| Issuance of  common stock for services     |       | 100,000          |       | 500             |       | 43,500          |       | —      |       | 44,000 |   |
| Net income                                 |       | —           |       | —          |       | —          |       | 140,436     |       | 140,436 |   |
| Balance at June  30, 2007                  |       | 15,030,481       |       | 75,153          |       | 9,889,188       |       | (11,799,579 | )          | (1,835,238 | ) |
|                                       |       |             |       |            |       |            |       |        |       |   |   |
| Share-based  awards compensation           |       | —           |       | —          |       | 36,963          |       | —      |       | 36,963 |   |
| Net loss                                   |       | —           |       | —          |       | —          |       | (308,874    | )          | (308,874 | ) |
| Balance at  September 30, 2007 (unaudited) |       | 15,030,481       |       | $               | 75,153     |            | $          | 9,926,151   |       | $ | (12,108,453 | ) | $ | (2,107,149 | ) |

 

See Notes to Consolidated Financial Statements

#### ** **

4

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**NETTIME SOLUTIONS, INC. ANDSUBSIDIARIES**

CONSOLIDATED STATEMENTSOF CASH FLOWS (UNAUDITED)

 
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                  | ** ** | **September 30,**      | ** ** |
| ** **                                                                  | ** ** | **2007**               | ** ** | **2006** | ** ** |
| ** **                                                                  | ** ** | **(unaudited)**        | ** ** | **(unaudited)** | ** ** |
| **Increase  (Decrease) in Cash and Cash Equivalents:**                      | ** ** | ** **             | ** ** | ** ** | ** ** |
| **Cash  flows from operating activities:**                                  | ** ** | ** **             | ** ** | ** ** | ** ** |
| Net Loss                                                                    |       | $                      | (308,874   | ) | $ | (525,144 | ) |
| Adjustments to  reconcile net loss to netcash used by operating activities: |       |                   |       |   |   |
| Depreciation                                                                |       | 30,010                 |       | 41,147 |   |
| Amortization of  discounts and deferred financing costs                     |       | 80,748                 |       | 75,618 |   |
| Share based  compensation expense                                           |       | 36,963                 |       | 56,785 |   |
| Loss on disposal  of fixed assets                                           |       | 10,404                 |       | — |   |
| Changes in  Assets and Liabilities:                                         |       |                   |       |   |   |
| Accounts  receivable-trade                                                  |       | (19,897                | )          | 543,045 |   |
| Inventory                                                                   |       | 9,867                  |       | (97,845 | ) |
| Deferred loan  costs and other current assets                               |       | (5,933                 | )          | (23,491 | ) |
| Accounts payable                                                            |       | (54,614                | )          | 10,133 |   |
| Accrued  liabilities                                                        |       | 70,763                 |       | (7,300 | ) |
| Deferred revenue                                                            |       | (93,033                | )          | (113,081 | ) |
| **Net  cash used by operating activities**                                  |       | (243,596               | )          | (40,133 | ) |
|                                                                        |       |                   |       |   |   |
| **Cash  flows from investing activities:**                                  | ** ** | ** **             | ** ** | ** ** | ** ** |
| Purchase of  property and equipment                                         |       | (3,472                 | )          | (4,442 | ) |
| Proceeds from  sale of assets                                               |       | 216,351                |       | — |   |
| **Net  cash provided (used) by investing activities**                       |       | 212,879                |       | (4,442 | ) |
|                                                                        |       |                   |       |   |   |
| **Cash  flows from financing activities:**                                  | ** ** | ** **             | ** ** | ** ** | ** ** |
| Repayment of  debt                                                          |       | —                 |       | (163,333 | ) |
| Proceeds from  debt                                                         |       | —                 |       | 18,341 |   |
| **Net  cash used by financing activities**                                  |       | —                 |       | (144,992 | ) |
|                                                                        |       |                   |       |   |   |
| Net change in  cash and cash equivalents                                    |       | (30,717                | )          | (189,567 | ) |
|                                                                        |       |                   |       |   |   |
| Cash and cash  equivalents at beginning of period                           |       | 278,701                |       | 615,204 |   |
|                                                                        |       |                   |       |   |   |
| Cash and cash  equivalents at end of period                                 |       | $                      | 247,984    |   | $ | 425,637 |   |
|                                                                        |       |                   |       |   |   |
| **Supplemental  disclosure of cash flow information:**                      | ** ** | ** **             | ** ** | ** ** | ** ** |
| Interest paid                                                               |       | $                      | 43,233     |   | $ | 117,968 |   |
| Income taxes  paid                                                          |       | $                      | —     |   | $ | — |   |

 

See Notes toConsolidated Financial Statements

 

5

 

#### **NETTIMESOLUTIONS, INC. AND SUBSIDIARIES**

NOTES TOCONSOLIDATED FINANCIAL STATMENTS

## ** **

## ** **

## **SUMMARY OF SIGNIFICANTACCOUNTING POLICIES**

 

**Note A - Basis of Presentationand Interim Consolidated Financial Statements**

 

On April 20, 2007,the Company filed a Certificate of Amendment to its Articles of Incorporationwith the Nevada Secretary of State to change the corporate name of TimeAmerica, Inc., a Nevada corporation, to NETtime Solutions, Inc.  The effective date of the parent corporatename change was May 10, 2007.  TheCompany filed a Second Amendment to the Articles of Incorporation with theArizona Corporation Commission to change the corporate name of its wholly-ownedsubsidiary, Time America, Inc., an Arizona corporation, to NETtime Solutions,Inc.  The effective date of thesubsidiary corporate name change was January 22, 2007.

 

NETtime Solutions, Inc., a Nevada corporation, is aholding corporation (formerly Time America, Inc.).  Our operations are conducted through ourwholly-owned subsidiaries, one of which is also named NETtime Solutions, Inc.(formerly Time America, Inc., an Arizona corporation).  Our other wholly-owned subsidiary is NetEdgeDevices, LLC.  Unless the context indicatesotherwise, references to the Company in this report shall include NETtimeSolutions (the parent company organized in Nevada), NETtime Solutions, Inc.(our wholly-owned subsidiary organized in Arizona) and NetEdge Devices, LLC, anArizona limited liability company.

The accompanying unaudited consolidated financialstatements of NETtime Solutions, Inc. and subsidiaries have been prepared inaccordance with generally accepted accounting principles (“GAAP”), pursuant tothe rules and regulations of the Securities and Exchange Commission, and areunaudited.  Accordingly, they do notinclude all the information and footnotes required by GAAP for completefinancial statements.  In the opinion ofmanagement, all adjustments (which include only normal recurring adjustments)necessary for a fair presentation of the results for the interim periodspresented have been made.  The resultsfor the three month period ended September 30, 2007, may not be indicative ofthe results for the entire year.  Thesefinancial statements should be read in conjunction with the Company’s AnnualReport on Form 10-KSB for the fiscal year ended June 30, 2007.

 

The preparation of financial statements in conformity withGAAP requires management to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assetsand liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from theseestimates.

 

**Note B -Loss Per Share:**

 

Basicloss per share of common stockwas computed by dividing the net loss by the weighted average number of sharesof common stock outstanding during the period.

 

Dilutedloss per share is computed based on the weighted average number of shares ofcommon stock and dilutive securities outstanding during the period.  Dilutive securities are options and warrantsthat are freely exercisable into common stock at less than the prevailingmarket price. Dilutive securities are not

 

6

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includedin the weighted average number of shares when inclusion would increase theearnings per share or decrease the loss per share.

 

**Note C - Stock Based Compensation:**

 

Prior to July 1, 2005,the Company accounted for stock-based compensation arrangements in accordancewith the provisions of Accounting Principles Board Opinion No. 25, “Accountingfor Stock Issued to Employees,” (“APB 25”). Accordingly, compensation expense, if any, was measured as the excess ofthe underlying stock price over the exercise price on the date of grant.  The Company complied with the disclosureprovisions of Statement of Financial Accounting Standards Board No. 123 (“SFAS123”) “Accounting for Stock Based Compensation” as amended by SFAS 148 “Accountingfor Stock-Based Compensation-Transition and Disclosure,” which requiredpro-forma disclosure of compensation expense associated with stock optionsunder the fair value method.

 

Effective July 1, 2005,the Company adopted the fair value recognition provisions of Statement ofFinancial Accounting Standards Board No. 123(R), “Share—Based Payment,” usingthe modified prospective-transition method. Under this transition method, compensation expense recognized for thethree months ended September 30, 2007 includes: (a) compensation expense for all share-based payments granted prior to,but not yet vested as of June 30, 2005 based on the grant date fair valueestimated and (b) compensation expense for all share-based payments grantedsubsequent to June 30, 2005, based on the grant date fair value estimated inaccordance with the provisions of SFAS 123 (R). The fair value of option grants is estimated as of the date of grantutilizing the Black-Scholes option-pricing model and amortized to expense overthe options’ vesting period net of estimated forfeitures.

 

**Note D - Long-term Debt:**

 

In August 2006, the Company amended the terms ofits term note with Laurus Master Funds, Ltd. (“Laurus”) to change the monthlyprincipal payment for the period of September 2006 through February 2007 from$66,667 to $30,000.  The deferredprincipal amount has been added as a balloon payment at the end of theterm.  In January 2007, the term note waspaid in full (see Note F — Asset Sales).

 

In July 2006, the Company amended the terms ofits note agreements with Frances Simek to defer the monthly principal paymentsfor the period of July 2006 through December 2006.  The amortization period of the note wasincreased by six months to compensate for the deferred principal payments.

In December 2006, the Company entered into asubordinated note agreement with Frances Simek.  The note is a 90-day notewith the principal due in 90 days and monthly interest payments at an annualpercentage rate of 10%.  In consideration for agreeing to subordinaterepayment of the note, the Company issued 30,000 shares of restricted commonstock to the holder of the subordinated note.  The fair value of the stockwas recorded as a deferred loan issue charge. The Company amended the terms of this note agreement withFrances Simek to defer the monthly principal payments through December 2007 asdiscussed below.

InFebruary 2007, the Company amended the terms of all its note agreements withFrances Simek to defer the monthly principal payments through December2007.  The amortization period of

7

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thenote was increased by 12 months to compensate for the deferred principalpayments.  The Company issued 100,000shares of its common stock to Frances Simek in consideration for consent tointerest only payments through December 2007.

**Note E - New Accounting Pronouncements:**

In February 2007, the FinancialAccounting Standards Board issued Statement of Financial Accounting StandardsNo. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities—Including an amendment of Statement of Financial AccountingStandards Statement No. 115” (“SFAS 159”), which permits entities tochoose to measure many financial instruments and certain other items at fairvalue at specified election dates. A business entity is required to reportunrealized gains and losses on items for which the fair value option has beenelected in earnings at each subsequent reporting date. This statement isexpected to expand the use of fair value measurement. SFAS 159 is effective forfinancial statements issued for fiscal years beginning after November 15,2007, and interim periods within those fiscal years. The Company has notdetermined the impact of SFAS 159 on its financial position or results ofoperations.

 

In September 2006, the Financial AccountingStandard Board issued a Statement of Financial Accounting StandardsNo. 157, “Fair Value Measurements” (“SFAS 157”). The Statementdefines fair value, establishes a framework for measuring fair value inaccordance with GAAP, and expands disclosures about fair valuemeasurements.  This Statement iseffective for financial statements issued for fiscal years beginning afterNovember 15, 2007, and interim periods within those fiscal years. The adoptionof SFAS 157 is not expected to have a material affect on our financial positionor results of operations.

 

**Note F — Asset Sales**

 

**               **On January 16,2007, NETtime Solutions, Inc (formerly Time America, Inc.)., a Nevadacorporation (the “Company”), along with its subsidiaries, NETtime Solutions,Inc., an Arizona corporation (formerly Time America, Inc.), and NetEdgeDevices, LLC, an Arizona limited liability company, entered into an AssetPurchase Agreement with Synel Industries, Inc., an Israeli registeredcorporation (“Synel”). Under the agreement, Synel purchased the Company’sreseller sales channel, source code and related intellectual property for theCompany’s GENESIS, HourTrack, and TA7000 product series, certain use rightsassociated with the Company’s NETtime source code, and all of the Company’srights associated with the “Time America” name. The sale closed on January 22,2007.  In connection with the sale, onApril 20, 2007, the Company filed a Certificate of Amendment to its Articles ofIncorporation with the Nevada Secretary of State to change the corporate nameof Time America, Inc., a Nevada corporation, to NETtime Solutions, Inc.  The effective date of the corporate namechange was May 10, 2007.

Under the Synel agreement, thepurchase price for the acquired assets was $2.5 million, $250,000 of which wasbeing held in escrow pending resolution of certain post-closing obligations.Other contingent consideration under the agreement for the acquired assetsconsisted of royalty payments, payable to the Company quarterly over the fouryear period ending January 15, 2011, equal to 5% of the revenue derived fromSynel’s U.S. sales of TA7000 units outside of Synel’s established U.S. customerbase. Additionally,

8

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Synel purchased certain of the Company’s TA7000inventory for $140,000. A portion of the proceeds from the sale were used torepay our Secured Convertible Term Note with Laurus, dated January 3,2006.  In addition, the Company issued100,000 shares of its common stock to Laurus in consideration for Laurus’sconsent to extending the maturity date of the Company’s existing revolving notewith Laurus, the asset sale to Synel, and the corporate name change.

The Company does notdistinguish operationally or financially its activities other than grossproduct sales between its sales channels and, as such, the Company has notaccounted for the sale as discontinued operations under SFAS No. 144 “Accountingfor the Impairment or Disposal of Long-Lived Assets.”

 

Effective March 31, 2006, the Company closed on the sale of certain ofthe Company’s direct sales assets pursuant to the terms of an Asset PurchaseAgreement (the “Purchase Agreement”). Under the terms of the PurchaseAgreement, certain assets associated with the Company’s direct sales businesswere sold, including a copy of the source code and other intellectual propertyrelating to the Company’s NETtime, HourTrack and GENESIS time and attendancesoftware products, related ASP and maintenance contracts, and certain specifieddirect channel sales opportunities.

 

The sale generated cash to the Company at closing of approximately$530,000. The purchase price under the Purchase Agreement included cash payableto the Company at the closing in consideration for a copy of the source codeand related intellectual property. The consideration for the ASP andmaintenance contracts was determined based on multiples of the projectedannualized revenues under such contracts. At closing, the Company received incash 100% of the total consideration for the existing customer ASP contractsand 40% of the total consideration for the existing maintenance contracts.  The remaining consideration for themaintenance contracts was payable quarterly over the 14-month period followingthe closing. The Company was also required to transition additional ASPcustomers during the six month period following the closing, which the Companywas paid for at the time of such transfers. Additionally, for the 12-month period following the closing, the Companywas to receive monthly royalty payments equal to 27.5% of the revenues inconnection with the direct channel sales opportunities specified at closing.Subsequently, there were no royalties payments received in connection with thedirect channel sales opportunities specified at closing.

 

In September 2007, wefiled an Information Statement to inform our stockholders that the Board ofDirectors of the Company and a majority of our shareholders had approved thesale of substantially all of the assets of the Company, including our wholly-ownedsubsidiaries, pursuant to the terms of a Memorandum of Understanding (“MOU”),dated as of September 24, 2007 with NETtime Solutions, LLC.  The purchase price consists of $1,042,000payable in shares of common stock of the Company held by NETtime Solutions, LLC(which were contributed to NETtime Solutions, LLC by certain members of theBoard of Directors and officers of the Company) and the assumption ofindebtedness of the Company consisting of $550,000 of trade payables and$1,500,000 of short and long-term notes. The effectiveness of this transaction, if ever, is subject to the filingof a definitive proxy statement, which will occur following the receipt andclearance of any comments to the preliminary filing made by the Securities andExchange Commission, and the passage of 20 days following such definitivefiling pursuant to the terms of the MOU. If this transaction closes, the Company will be debt free and will haveno operations.  In other

 

9

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words, the Company willbe a shell until such time, if ever, as a new business is merged with oracquired by the Company in the future. No assurance can be given that such a transaction will be consummatedor, if consummated, will be on terms favorable to the Company.

 

**Note G — Basis of Presentation and Going Concern:**

 

Through September 30,2007, the Company had sustained recurring losses from operations, and as ofSeptember 30, 2007, the Company estimates that its working capital and fundsgenerated from operations are sufficient to fund the Company’s operations forthe next three months.  These conditionsraise substantial doubt about the ability of the Company to continue as a goingconcern.  During fiscal 2008, the Companyexpects to meet its working capital and other cash requirements with itscurrent cash reserves, cash generated from operations, its borrowing capacityunder its two credit facilities, and other financing as required.  While the Company believes that it willsucceed in attracting additional capital, there can be no assurance that theCompany’s efforts will be successful. The Company’s continued existence is dependent upon its ability toachieve and maintain profitable operations by controlling expenses.  However, there can be no assurance that theCompany’s efforts to achieve and maintain profitable operations will besuccessful.  The financial statements donot include any adjustments that might result from the outcome of theseuncertainties.

 

**Note H — Subsequent Events:**

 

On October 26, 2007,the Company filed a Form RW with the Securities and Exchange Commission towithdraw its existing Form SB-2 Registration Statement (SEC File No.333-132146).

 

**Item2. Management’s Discussion and Analysis or Plan of Operation.**

 

### **Critical AccountingPolicies**

 

Our significantaccounting policies are described in the audited consolidated financialstatements and notes thereto includedin our Annual Report on Form 10-KSB for the year ended June 30, 2007.  We believe our most critical accountingpolicies are revenue recognition, software development costs, allowance forpotentially uncollectible accounts receivable and valuation of stock-basedcompensation.

We license software and sell data collectionhardware and related ancillary products to end-user customers through ourdirect sales force. Our software license revenue is earned from perpetuallicenses of off-the-shelf software requiring no or minor modification orcustomization. The software license, data collection hardware and relatedancillary product revenues from our customers are generally recognized when:

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•                  Persuasiveevidence of an arrangement exists, which is typically when a non-cancelablesales and software license agreement or purchase order has been signed;

•                  Delivery, whichis typically FOB shipping point, is complete for the software (eitherphysically or electronically), data collection hardware and related ancillaryproducts;

•                  The customer’sfee is deemed to be fixed or determinable and free of contingencies orsignificant uncertainties;

•                  Collectibilityis probable; and

•                  Objective evidence of fairvalue exists for all undelivered elements, typically maintenance andprofessional services.

Thefair value of the undelivered elements is deferred and the remaining portion ofthe arrangement fee is allocated to the delivered elements and is recognized asrevenue, assuming all other conditions for revenue recognition have beensatisfied. Substantially all of our sales agreements contain allocations of thepurchase price among the various elements of the arrangement.  If we cannot determine the fair value of anyundelivered element included in an arrangement, we will defer revenue until allelements are delivered, services are performed or until fair value can beobjectively determined.

Aspart of an arrangement, customers typically purchase maintenance contracts aswell as professional services from us. Maintenance services include telephone and web-based support as well asrights to unspecified upgrades and enhancements, when and if we make themgenerally available. Professional services are typically for implementation,installation of the software and data collection hardware, training, buildinginterfaces and custom features, and running test data.

 

Revenuesfrom maintenance services are recognized ratably over the term of themaintenance contract period, which is usually one year.  Maintenance services are typically statedseparately in an arrangement. We have classified the value of revenues pertainingto the contractual maintenance obligations that exist for the 12-month periodsubsequent to the balance sheet date as a current liability, and thecontractual obligations with a term beyond 12 months, if present, as anon-current liability.

Revenuesfrom customer support services are recognized as the services aredelivered.  Revenues from professionalservices are generally recognized based on vendor-specific objective evidenceof fair value when:

•                  Anon-cancelable agreement for the services has been signed or a customer’spurchase order has been received;

•                  Theprofessional services have been delivered;

•                  The customer’sfee is deemed to be fixed or determinable and free of contingencies orsignificant uncertainties; and

•                  Collectibility is probable.

Vendor-specificobjective evidence of fair value is based upon the price charged when theseservices are sold separately and are typically an hourly rate for professionalservices and a per-class rate for training. Based upon our experience incompleting professional services, we have determined that these services aretypically delivered within a 12-month period subsequent to the contract signingand therefore we classify deferred professional services as a currentliability.

Ourarrangements with customers do not include any rights of return or priceprotection. Our arrangements with customers generally include our standardacceptance provision. Our standard acceptance 

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provisionstates that the customer’s acceptance of the products shall be deemed to occurupon completion of running our standard diagnostic tests.

Atthe time we enter into an arrangement, we assess the probability of collectionof the fee and the terms granted to the customer.  The typical payment terms include a depositand subsequent payments, based on specific due dates, such that all paymentsfor the software license, data collection hardware and related ancillaryproducts, as well as services included in the original arrangement, are ordinarilydue within one year of contract signing.

Ifthe arrangement includes a substantive acceptance provision, we defer revenuenot meeting the criterion for recognition under Statement of Position 97-2, “SoftwareRevenue Recognition,” and classify this revenue as deferred revenue, includingdeferred product revenue. This revenue is recognized, assuming all otherconditions for revenue recognition have been satisfied, when the uncertaintyregarding acceptance is resolved as generally evidenced by written acceptanceor payment of the arrangement fee. If the payment terms for the arrangement areconsidered extended, we defer revenue on the arrangement until the payment ofthe arrangement fee becomes due. The deferred amounts related to arrangementswith extended payment terms are removed from deferred revenue and accountsreceivable, as we have determined that these amounts do not represent eitherreceivables or deferred revenue until the payment becomes due. We report theallocated fair value of revenues related to the product element of arrangementsas a current liability because of the expectation that these revenues will berecognized within 12 months of the balance sheet date.

Wecapitalize software development costs in accordance with Statement of FinancialAccounting Standards No. 86, “Accounting for the Costs of Computer Software tobe Sold, Leased, or Otherwise Marketed.” Capitalization of software developmentcosts begins upon the establishment of technological feasibility of theproduct.  The establishment of technological feasibility and the ongoingassessment of the recoverability of these costs requires considerable judgmentby management with respect to certain external factors including, but notlimited to, anticipated future gross product revenue, estimated economic life,and changes in software and hardware technology.  Amortization ofcapitalized software development costs begins when the products are availablefor general release to customers and is computed on a product-by-product basisusing straight-line amortization with useful lives of five years or, if less,the remaining estimated economic life of the product.  Amounts related tointernal software development that could be capitalized under this statementwere deemed immaterial for the periods presented.

We provide for potentially uncollectible accountsreceivable by use of the allowance method. The allowance is provided based upon a review of the individual accountsoutstanding, and our prior history of uncollectible accounts receivable. It is our practice to record an estimated allowance for sales returns andadjustments based on historical experience and to record individual charges forsales returns and adjustments directly to revenue as incurred.

  Determining the appropriate fair valuemodel and calculating the fair value of share-based payment awards requires theinput of highly subjective assumptions, including the expected life of theshare-based payment awards and stock price volatility. The assumptions used incalculating the fair value of share-based payment awards represent management’sbest estimates, but these estimates involve inherent uncertainties and theapplication of management judgment. As a result, if factors change and we usedifferent assumptions, our stock-based compensation expense could be materiallydifferent in the future. In addition, we are required to estimate the expectedforfeiture rate and only recognize expense for those shares expected to vest.If our actual forfeiture rate is materially different from our estimate, the

12

 

stock-basedcompensation expense could be significantly different from what we haverecorded in the current period.

### **Resultsof Operations for the Three Months Ended September 30, 2007 and 2006**

 

This analysis does not retroactively take into accountthe sale of our reseller activity in January 2007 as discussed in Note F in thenotes to consolidated financial statements. We do not distinguish operationally or financially its activities otherthan gross product sales between our sales channels and as such we have notaccounted for the sale as discontinued operations under SFAS No. 144“Accounting for the Impairment or Disposal of Long-Lived Assets”.  We expect to experience a significantdecrease in both revenue and operating expenses as a result of the sale.

 

*Revenues:*

 

| ** ** | ** ** | **Three  Months Ended**  | ** ** | ** **               | ** ** |
|------------|------------|--------------------------|------------|--------------------------|------------|
| ** ** | ** ** | **September  30,  2007** | ** ** | **September  30,  2006** | ** ** | **Percent  Change** | ** ** |
| Revenues   |       | $                        | 680,242    |                     | $          | 1,450,592 |   | (53 | )% |
|            |            |                          |            |                          |            |  |  |  |  |

 

See “Product Sales”and “Service Revenue” below for a discussion regarding the change.

 

*Product Sales:*

 

| ** **                                    | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| Product sales                                 |       | $                       | 203,019    |                    | $          | 1,056,035 |   | (81 | )% |
| Product sales as  a percent of total revenues |       | 30                      | %          | 73                      | %          | — |   |
|                                               |            |                         |            |                         |            |  |  |  |  |

 

Productsales revenue was approximately $203,000 and $1,056,000 for the three monthsended September 30, 2007 and 2006, respectively, a decrease of $853,000 or81%.  The decrease in product sales forthe three months ended September 30, 2007, as compared to the same period inthe prior year, was primarily attributable to a decrease of approximately$926,000 in reseller product sales as a result of the asset sale in January2007, as discussed in Note F in the notes to consolidated financialstatements.  The decline in product salesas a percent of total revenues was principally due to our increased focus onselling more services with each product sale. We believe that increasing thelevel of services in each sale leads to a better overall solution for ourcustomers.

 

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* *

*Service Revenue:*

* *

| ** **                                      | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                      | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| Service revenue                                 |       | $                       | 477,223    |                    | $          | 394,557 |   | 21 | % |
| Service revenue  as a percent of total revenues |       | 70                      | %          | 27                      | %          | — |   |
|                                                 |            |                         |            |                         |            |  |  |  |  |

 

The increase in our service revenue in the currentquarter was primarily attributable to an approximately $31,000 increase in ourNETtime software service revenue and a $61,000 increase in maintenance revenueover the prior year period.  Thisincrease in service revenue was partially offset by a decrease of approximately$9,000 in implementation and training revenue. As discussed above, we have focused on selling more services with eachproduct sale, therefore, as a percent of total revenue, the service sales have increased.

 

*Gross Profit:*

* *

| ** **           | ** ** | **Three Months Ended**  | ** ** |
|----------------------|------------|-------------------------|------------|
| ** **           | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** |
| Product gross margin |       | 66%                     |       | 51% |   |
| Service gross margin |       | 73%                     |       | 55% |   |
| Total gross margin   |       | 71%                     |       | 52% |   |

 

                Prior to the assetsale in January 2007, our gross profit margin on products has typically between50% to 60% depending upon the mix of software versus hardware sales and themakeup of hardware sales.  Our grossprofit margin on products is higher than the gross profit margin in the priorperiod primarily due to sales to end user customers having greater profitmargins than resale customers. Our product revenue is comprised of software andhardware sales, with hardware sales yielding a significantly lower gross profitthan software sales.   Hardware revenueis primarily derived from the sale of two versions of general data collectionterminals, badge terminals and biometric units. The gross profit margin is greater on badge terminals than biometricunits because we add value to our badge terminals by installing software on theterminals.

 

                Our gross profit percentage on services revenueincreased as we were able to increase our NETtime software service revenue andmaintenance revenue while also reducing our labor costs.

 

The overall gross margin in the current period ishigher than the gross margin in the prior period primarily due to increasingour utilization rate of our service personnel. In relation to the asset sale,we have decreased the number of service personnel employed, reducing salariesfor service personnel by approximately $35,000 and, therefore, there has been acorresponding decrease in our cost of sales.

 

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*Operating Expenses:*

* *

| ** **                                               | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|----------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                               | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| Total costs and  expenses                                |       | $                       | 683,854    |                    | $          | 1,190,501 |   | (43 | )% |
| Total costs and  expenses as a percent of total revenues |       | 101                     | %          | 82                      | %          | — |   |
|                                                          |            |                         |            |                         |            |  |  |  |  |

 

See the discussionbelow for details on the changes within the expense categories.

 

*Sales and Marketing Expense:*

* *

| ** **                                                  | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|-------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                  | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| Sales and  marketing expense                                |       | $                       | 195,275    |                    | $          | 349,045 |   | (44 | )% |
| Sales and  marketing expense as a percent of total revenues |       | 29                      | %          | 24                      | %          | — |   |
|                                                             |            |                         |            |                         |            |  |  |  |  |

 

                The decrease insales and marketing expenses in the current quarter is primarily attributableto lower costs as the result of the asset sales as discussed in Note F in thenotes to consolidated financial statements. As a result of these sales, our sales and marketing labor expensedecreased by approximately $122,000, advertising and promotion expensesdecreased by approximately $23,000, and office expense decreased byapproximately $23,000.

 

*Research and Development Expense:*

 

| ** **                                                       | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                       | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| Research and  development expense                                |       | $                       | 285,601    |                    | $          | 465,302 |   | (39 | )% |
| Research and  development expense as a percent of total revenues |       | 42                      | %          | 32                      | %          | — |   |
|                                                                  |            |                         |            |                         |            |  |  |  |  |

 

The decrease inresearch and development expenses in the current quarter is primarilyattributable to a decrease in research and development labor expense ofapproximately $95,000 as the result of the asset sale in January 2007, asdiscussed in Note F in the notes to consolidated financial statements.  Also contributing to the decrease in researchand development expenses is a decrease in hardware and equipment costsassociated with the development of our custom solution for a Fortune 100company.

 

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*General and AdministrativeExpense:*

 

| ** **                                                        | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|-------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                        | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| General and administrative expense                                |       | $                       | 202,978    |                    | $          | 376,154 |   | (46 | )% |
| General and administrative expense as a percent of total revenues |       | 30                      | %          | 26                      | %          |   |   |
|                                                                   |            |                         |            |                         |            |  |  |  |  |

 

The decrease ingeneral and administrative expenses in the current quarter is primarilyattributable to a decrease in our general and administrative labor expense ofapproximately $124,000 as a result of the asset sale in January 2007, asdiscussed in Note F in the notes to consolidated financial statements. Alsocontributing to the decrease in general and administrative expenses in thecurrent quarter is a decrease in our allowance for doubtful accounts.

 

Other Expense:

 

| ** **                                    | ** ** | **Three Months Ended**  | ** ** | ** **              | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **September 30,  2007** | ** ** | **September 30,  2006** | ** ** | **Percent  Change** | ** ** |
| Other expense                                 |       | $                       | (110,078   | )                       | $          | (85,179 | ) | 29 | % |
| Other expense as  a percent of total revenues |       | 16                      | %          | 6                       | %          |   |   |
|                                               |            |                         |            |                         |            |  |  |  |  |

 

Other income(expense) consists primarily of interest expense and other income on the gain on sale of assets.  The increase in other expense isprimarily due to a decrease in other income from the gains on asset sales.

 

# **Liquidity and CapitalResources**

 

Cash Flow Highlights:

 

| ** **                         | ** ** | **Three Months Ended September  30,** | ** ** | **Percentage** | ** ** |
|------------------------------------|------------|---------------------------------------|------------|----------------|------------|
| ** **                         | ** ** | **2007**                              | ** ** | **2006**       | ** ** | **Change** | ** ** |
| Net cash used by operations        |       | $                                     | (243,586   | )              | $          | (40,133 | ) | 507 | % |
| Purchase of property and equipment |       | $                                     | (3,472     | )              | $          | (4,442 | ) | 22 | % |
| Repayment of debt                  |       | —                                |       | $              | (163,333   | ) | 100 | % |
| Proceeds from debt                 |       | —                                |       | $              | 18,341     |   | 100 | % |
| Net change in cash                 |       | $                                     | (30,717    | )              | $          | (189,567 | ) | 84 | % |
| Cash at end of period              |       | $                                     | 247,984    |           | $          | 425,637 |   | (42 | )% |
|                                    |            |                                       |            |                |            |  |  |  |  |  |

 

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At September 30,2007, we had a working capital deficit of $1,360,813, compared to workingcapital deficit of $1,046,988 at June 30, 2007. Cash and cash equivalents at those dates amounted to $247,984 and$278,701, respectively.  We have fundedour operations for the past six years primarily through a combination of salesof equity securities and debt financing.

 

*OperatingActivities*.  The net cash used from operations in thecurrent period was primarily attributable to the net loss of $308,874. Includedin the net loss was a total of $158,125 of non-cash charges. Also contributingto the net cash used was a decrease in accounts payable and deferred revenue of$54,614 and $93,033.  Net cash usedduring this period was partially offset by an increase in accrued liabilitiesof $70,763.

 

*InvestmentActivities*. Thenet cash provided by investing activities was $212,879 and was primarilyattributable to proceeds from the asset sale as discussed in Note F in thenotes to consolidated financial statements. Our use of cash for property andequipment includes investments in information systems and infrastructure tosupport operations.

 

*FinancingActivities*.   The net cash flows provided (used) byfinancing activities was zero for the current period.

 

Our liquidity isaffected by many factors, some based on the normal ongoing operations of ourbusiness and others related to the uncertainties of the time and attendanceindustry and global economies.  Althoughwe believe our cash requirements will continue to fluctuate based on the timingand extent of these factors, we believe that our current cash reserves, cashgenerated from operations, cash received from recent asset sales, recentfinancings, and our borrowing capacity under our two credit facilities, will besufficient to satisfy commitments for capital expenditures and other cashrequirements for the next three months. At September 30, 2007, we had zerooutstanding under our $1,500,000 revolving note.  We can borrow up to the $1,500,000 limit,provided we have sufficient eligible accounts receivable and inventorybalances.  We also have $250,000 inunused capacity under a line of credit with a shareholder of the Company.

 

The ability to raise additional capital in public orprivate markets will primarily be dependent upon prevailing market conditionsand the demand for our products and services. No assurance can be given that we will be able to raise additionalcapital, when needed or at all, or that such capital, if available, will be onacceptable terms. In the absence of obtaining additional financing, the Companymay be unable to fund its operations and may experience defaults under certainof its contractual agreements, including our credit facilities and leaseagreements for our corporate headquarters. Our lease agreements are subject to termination in the event of adefault.  Certain of the parties to theseagreements could take legal action against the Company to collect amounts owedto them.  Accordingly, the Company’sfinancial condition could require that the Company seek the protection ofapplicable reorganization laws in order to avoid or delay actions by thirdparties, which could materially adversely affect, interrupt or cause thecessation of the Company’s operations. As a result, the Company’s independentcertified public accountants have issued a going concern opinion on theconsolidated financial statements of the Company for the fiscal year ended June30, 2007.

# ** **

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# **Subsequent Events**

 

On October 26, 2007, the Company filed a Form RW with the Securities andExchange Commission to withdraw its existing Form SB-2 Registration Statement(SEC File No. 333-132146).

 

**Item3. Controls and Procedures.**

 

Anevaluation as of the end of the period covered by this report was carried outunder the supervision and with the participation of our management, includingour Chief Executive Officer and Principal Accounting Officer, of theeffectiveness of the design and operation of our disclosure controls andprocedures (as defined in Rule 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934). Based upon that evaluation, the Chief Executive Officerand Principal Accounting Officer concluded that those disclosure controls andprocedures were effective in providing reasonable assurance that informationrequired to be disclosed by us in the reports that we file or submit under theSecurities Exchange Act of 1934, as amended, is recorded, processed, summarizedand reported within the time periods specified in the Commission’s rules andforms. In addition, there has been no change in our internal control overfinancial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under theSecurities Exchange Act of 1934) that occurred during the period covered bythis report that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

Itshould be noted that any system of controls, however well designed andoperated, can provide only reasonable, not absolute, assurance that theobjectives of the system are met.  Inaddition, the design of any control system is based in part upon certainassumptions about the likelihood of future events.  Because of these and other inherentlimitations of control systems, there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions,regardless of how remote.

 

# **FORWARD-LOOKINGINFORMATION**

 

The statementscontained in this Quarterly Report on Form 10-QSB that are not historical factare forward-looking statements (as such term is defined in the PrivateSecurities Litigation Reform Act of 1995), within the meaning of Section 27A ofthe Securities Act of 1933, as amended, and Section 21E of the Securities ExchangeAct of 1934, as amended.  Theforward-looking statements contained herein are based on current expectationsthat involve a number of risks and uncertainties.  These statements can be identified by the useof forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,”or “anticipates,” or the negative thereof or other variations thereon orcomparable terminology, or by discussions of strategy that involve risks anduncertainties.  The Company wishes tocaution the reader that these forward-looking statements that are nothistorical facts are only predictions. No assurances can be given that the future results indicated, whetherexpressed or implied, will be achieved. While sometimes presented with numerical specificity, these projectionsand other forward-looking statements are based upon a variety of assumptionsrelating to the business of the Company, which, although considered reasonableby the Company, may not be realized. Because of the number and range of assumptions underlying the Company’sprojections and forward-looking statements, many of which are subject tosignificant uncertainties and contingencies that are beyond the reasonable controlof the Company, some of

 

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the assumptionsinevitably will not materialize, and unanticipated events and circumstances mayoccur subsequent to the date of this report. These forward-looking statements are based on current expectations andthe Company assumes no obligation to update this information.  Therefore, the actual experience of theCompany and the results achieved during the period covered by any particularprojections or forward-looking statements may differ substantially from those projected.  Consequently, the inclusion of projectionsand other forward-looking statements should not be regarded as a representationby the Company or any other person that these estimates and projections will berealized, and actual results may vary materially.  There can be no assurance that any of theseexpectations will be realized or that any of the forward-looking statementscontained herein will prove to be accurate.

##### ** **

##### **PARTII — OTHER INFORMATION**

 

**Item1. Legal Proceedings.**

 

The Company is from timeto time involved in legal proceedings arising from the normal course ofbusiness.   As of the date of thisreport, the Company is not currently involved in any legal proceedings.

 

**Item6. Exhibits**

 

(a)       Thefollowing exhibits are filed herewith pursuant to Regulation S-B.

 

| 31.1   |   | Section 302 Certification  of Chief Executive Officer      |
|--------|--------|------------------------------------------------------------|
|   |   |                                                       |
| 31.2   |   | Section 302  Certification of Principal Accounting Officer |
|   |   |                                                       |
| 32     |   | Section 906  Certifications                                |

 

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**SIGNATURES**

 

In accordance with therequirements of the Securities Exchange Act of 1934, the registrant caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|                      | NETTIME  SOLUTIONS, INC.              |
|---------------------------|---------------------------------------|
|                      |                                  |
|                      |                                  |
| Dated: November  14, 2007 |                                  |
|                      | By/s/ Bahan Sadegh                    |
|                      | Bahan Sadegh                          |
|                      | President and Chief Executive Officer |
|                      | (Principal Executive Offices)         |

 

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