UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended October 31, 2013
	For the Quarterly Period Ended January 31, 2014
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from_________ to _______

Commission File Number: 333-128614

CORNERWORLD CORPORATION

(Exact name of registrant as specified in its charter)


Nevada		98-0441869
(State of incorporation)		(I.R.S. Employer Identification No.)

13101 Preston Road, Suite 510
Dallas, Texas 75240
(Address of principal executive offices)

(888) 837-3910

(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ____

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

Large accelerated filer ____ Accelerated filer ____ Non-accelerated filer ____ Smaller reporting company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ____ No X

The number of shares outstanding of the registrant’s common stock, $0.001 par value per share, as of ~~December~~March 1614, ~~2013~~2014 was 156,813,704.

CORNERWORLD CORPORATION

INDEX

Item Number		Page
	PART I. FINANCIAL INFORMATION
1	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of October 31, 2013 and April 30, 2013 (Audited)	1
	Condensed Consolidated Balance Sheets as of January 31, 2014 and April 30, 2013 (Audited)	1
	Condensed Consolidated Statements of Operations for the Three and Six Month Periods Ended October 31, 2013 and 2012	2
	Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended January 31, 2014 and 2013	2
	Condensed Consolidated Statement of Stockholders’ Deficit for the Six Months Ended October 31, 2013	3
	Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Nine Months Ended January 31, 2014	3
	Condensed Consolidated Statements of Cash Flows for the Six Month Periods Ended October 31, 2013 and 2012	4
	Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended January 31, 2014 and 2013	4
	Notes to Condensed Consolidated Financial Statements	5
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
3	Quantitative and Qualitative Disclosures about Market Risk	18
4	Controls and Procedures	18
	PART II. OTHER INFORMATION
1	Legal Proceedings	19
1A	Risk Factors	19
2	Unregistered Sales of Equity Securities and Use of Proceeds	19
3	Defaults Upon Senior Securities	19
4	Mine Safety Disclosures	19
5	Other Information	19
6	Exhibits	20
	Signatures	20

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CornerWorld Corporation

Condensed Consolidated Balance Sheets

	October 31, 2013			April 30, 2013
	January 31, 2014			April 30, 2013
	(unaudited)			(audited)
Assets
Current assets:
Cash	$	~~587~~732,~~057~~623		$	1,150,880
Accounts receivable (net of allowance for doubtful accounts of $51,425 and $61,349 at October 31, 2013 and April 30, 2013, respectively)		72,707			117,440
Accounts receivable (net of allowance for doubtful accounts of $38,860 and $61,349 at January 31, 2014 and April 30, 2013, respectively)		163,788			117,440
Other receivable		800,000			—
Prepaid expenses and other current assets		118,715			79,761
Prepaid expenses and other current assets		136,775			79,761
Assets of discontinued operations held for sale		—			6,536,369
Total current assets		1,~~596~~015,~~539~~126			7,884,450
Property and equipment, net		2616,~~407~~103			53,551
Other assets		2728,~~994~~013			28,032
TOTAL ASSETS	$	1,~~650~~059,~~940~~242		$	7,966,033
Liabilities and Stockholders’ Deficit
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	~~828~~159,~~913~~419		$	1,185,947
Accrued expenses		~~372~~343,~~177~~805			523,741
Notes payable, current portion		~~16,316~~—			16,316
Notes payable related parties, current portion net of unamortized discount of $0 and $7,045 at October 31, 2013 and April 30, 2013, respectively		77,359			133,161
Notes payable related parties, current portion net of unamortized discount of $0 and $7,045 at January 31, 2014 and April 30, 2013, respectively		114,714			133,161
Lease payable, current portion		10,704			10,704
Deferred revenue		4470,~~124~~072			60,735
Liabilities of discontinued operations held for sale		—			8,246,288
Total current liabilities		1698,~~349,593~~714			10,176,892
Long-term liabilities:
Notes payable related parties, net of current portion		~~261~~224,~~599~~244			198,752
Lease payable, non-current portion		41,~~086~~528			9,139
Total liabilities		1924,~~615,278~~486			10,384,783
Commitments and Contingencies
Stockholders’ equity (deficit):
Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, $0.001 par value, 250,000,000 shares authorized; 156,813,704 and 157,313,704 shares issued and outstanding, at October 31, 2013 and April 30, 2013, respectively		156,813			157,313
Common stock, $0.001 par value, 250,000,000 shares authorized; 156,813,704 and 157,313,704 shares issued and outstanding, at January 31, 2014 and April 30, 2013, respectively		156,813			157,313
Additional paid-in capital		11,~~798~~802,~~714~~479			11,783,945
Retained earnings (accumulated deficit)		(11,919,865	)		(14,360,008	)
Accumulated deficit		(11,824,536	)		(14,360,008	)
Total stockholders’ equity (deficit)		35134,~~662~~756			(2,418,750	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	1,650,940		$	7,966,033
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,059,242		$	7,966,033

See Notes to Condensed Consolidated Financial Statements.

- 1 -

CornerWorld Corporation

Condensed Consolidated Statements of Operations

(unaudited)

	For the Three Months Ended October 31,						For the Six Months Ended October 31,
	For the Three Months Ended January 31,						For the Nine Months Ended January 31,
	2013			2012			2013			2012
	2014			2013			2014			2013
Sales, net	$	~~216~~269,~~070~~056		$	~~471~~436,~~347~~479		$	~~515~~784,~~503~~559		$	1,~~181~~618,~~531~~010
Costs of goods sold		96112,~~751~~289			~~170~~125,~~311~~362			~~218~~330,~~434~~723			~~455~~580,~~504~~866
Gross profit		~~119~~156,~~319~~767			~~301~~311,~~036~~117			~~297~~453,~~069~~836			~~726~~1,~~027~~037,144
Expenses:
Selling, general and administrative expenses		~~294~~20,~~953~~634			~~694~~689,~~714~~022			~~914~~935,~~502~~136			12,~~659~~348,~~132~~154
Depreciation and amortization		1110,~~960~~304			1817,~~893~~206			2637,~~833~~137			3754,~~493~~699
Total Operating expenses		~~306~~30,~~913~~938			~~713~~706,~~607~~228			~~941~~972,~~335~~273			12,~~696~~402,~~625~~853
Operating loss		(187,594	)		(412,571	)		(644,266	)		(970,598	)
Operating income (loss)		125,829			(395,111	)		(518,437	)		(1,365,709	)
Other income (expense), net:
Interest expense		(7,~~434~~310	)		(9,~~542~~775	)		(1725,~~700~~041	)		(1828,~~858~~633	)
Other income (expense), net		(~~225~~23,~~000~~159	)		—			(~~225~~248,~~002~~161	)		(100	)
Total other expense, net		(~~232~~30,~~434~~469	)		(9,~~542~~775	)		(~~242~~273,~~702~~202	)		(1828,~~958~~733	)
Loss from continuing operations before income taxes		(420,028	)		(422,113	)		(886,968	)		(989,556	)
Income (loss) from continuing operations before income taxes		95,360			(404,886	)		(791,639	)		(1,394,442	)
Income taxes		—			—			—			—
Loss from continuing operations		(420,028	)		(422,113	)		(886,968	)		(989,556	)
Income (loss) from continuing operations		95,360			(404,886	)		(791,639	)		(1,394,442	)
Income from discontinued operations, net of tax		~~139,964~~—			~~317~~281,~~066~~478			538,568			~~729~~1,~~810~~011,288
Gain from discontinued operations, net of tax		~~2,788,543~~—			—			2,788,543			—
Net income (loss)	$	295,~~508,479~~360		$	(~~105~~123,~~047~~408	)	$	2,~~440~~535,~~143~~472		$	(~~259~~383,~~746~~154	)
Basic earnings (loss) per share from continuing operations	$	0.0001		$	0.00		$	(0.01	)	$	0.00
Basic earnings (loss) per share from discontinued operations	$	0.0200		$	0.00		$	0.02		$	0.00
Basic earnings (loss) per share	$	0.0201		$	0.00		$	0.02		$	0.00
Diluted earnings (loss) per share from continuing operations	$	0.00		$	0.00		$	(0.01	)	$	0.00
Diluted earnings (loss) per share from discontinued operations	$	0.0200		$	0.00		$	0.02		$	0.00
Diluted earnings (loss) per share	$	0.0200		$	0.00		$	0.02		$	0.00	)
Basic weighted average number shares outstanding		156,~~998~~813,~~486~~704			~~147~~157,~~547~~313,~~607~~704			157,~~156~~041,~~095~~965			~~147~~150,~~547~~802,~~607~~973
Diluted weighted average number shares outstanding		~~163~~162,~~131~~947,~~893~~110			~~147~~157,~~547~~313,~~607~~704			157,~~156~~041,~~095~~965			~~147~~150,~~547~~802,~~607~~973

See Notes to Condensed Consolidated Financial Statements.

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CornerWorld Corporation

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(unaudited)

							Additional					Total
	Common Shares						Paid-in		Accumulated			Stockholders’
	Shares			Amount			Capital		Deficit			Equity (Deficit)
Balance, April 30, 2013		157,313,704		$	157,313		$	11,783,945	$	(14,360,008	)	$	(2,418,750	)
Stock-based compensation expense		—			—			1418,~~269~~034		—			1418,~~269~~034
Retirement of shares		(500,000	)		(500	)		500		—			—
Net income		—			—			—		2,~~440~~535,~~143~~472			2,~~440~~535,~~143~~472
Balance, October 31, 2013		156,813,704		$	156,813		$	11,798,714	$	(11,919,865	)	$	35,662
Balance, January 31, 2014		156,813,704		$	156,813		$	11,802,479	$	(11,824,536	)	$	134,756

See Notes to Condensed Consolidated Financial Statements.

- 3 -

CornerWorld Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited)

	For the Six Months ended October 31,
	For the Nine Months ended January 31,
	2013			2012
	2014			2013
Cash Flows from Operating Activities
Net income (loss)	$	2,~~440~~535,~~143~~472		$	(~~259~~383,~~746~~154	)
Adjustments to reconcile net loss to net cash provided by operating activities
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation and amortization		2637,~~833~~137			371,~~493~~231,154
Amortization of discount on debt		7,045			24402,~~338~~581
Provision for doubtful accounts		4247,~~285~~373			~~112~~152,~~258~~291
Stock-based compensation		1418,~~269~~034			83124,~~016~~524
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable		2(93,~~448~~721	)		51282,~~510~~980
Changes in other receivables		(800,000	)		—
Prepaid expenses and other current assets		(38,954	)		14,428
Prepaid expenses and other current assets		(57,014	)		(14,622	)
Other assets		19			691
Other assets		38			698
Accounts payable		(1,026,528	)		(536,469	)
Accounts payable		(357,034	)		(270,265	)
Accrued expenses		(179,936	)		126,200
Accrued expenses		(151,564	)		128,370
Deferred revenue		9,337			97,955
Deferred revenue		(16,611	)		(4,722	)
Other liabilities		—			88,187
Other liabilities		—			—
Changes in assets and liabilities of discontinued operations		(2,018,987	)		—
Changes in assets and liabilities of discontinued operations		(1,709,919	)		345,937
Net cash provided by (used in) operating activities		(703,709	)		1,601,368
Net cash provided by (used in) operating activities		(559,081	)		234,265
Cash Flows from Investing Activities
Proceeds from sale of fixed assets		—			—
Proceeds from the sale of subsidiary		8,300,000			—
Purchases of property and equipment		(46,~~439~~997	)		(~~469~~798	)
Net cash used in investing activities		(4,439	)		(469	)
Net cash provided by (used in) investing activities		8,293,003			(798	)
Cash Flows from Financing Activities
Payments on capital leases		(303	)		(46,~~414~~682	)
Net cash used in financing activities		(303	)		(4,414	)
Financing fees		(249,000	)		—
Net increase (decrease) in cash		(563,823	)		229,382
Principal payments on related party notes payable		(2,037,915	)		(220,000	)
Principal payments on notes payable		(4,791,316	)		(885,000	)
Cash paid for settlement of common stock put warrant (Note 4)		(929,017	)		—
Net cash used in financing activities		(8,007,551	)		(1,111,682	)
Net increase (decrease) in cash		(418,257	)		488,888
Cash at beginning of period		1,150,880			890,415
Cash at end of period	$	~~587~~732,~~057~~623		$	1,~~119~~379,~~797~~303
Cash paid for:
Interest	$	~~450~~432,~~291~~836		$	~~473~~673,~~622~~246
Income taxes	$	—		$	—

See Notes to Condensed Consolidated Financial Statements.

- 4 -

CornerWorld Corporation

Notes to Condensed Consolidated Financial Statements

~~October~~January 31, ~~2013~~2014

(unaudited)

1. Basis of Presentation

Interim Unaudited Condensed Consolidated Financial Statements

The unaudited interim condensed consolidated financial statements of CornerWorld Corporation (“CornerWorld” or the “Company”) as of ~~October~~January 31, ~~2013~~2014 and for the three and ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013 contained in this Quarterly Report (collectively, the “Unaudited Interim Condensed Consolidated Financial Statements”) were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for all periods presented. The results of operations for the three and ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 are not necessarily indicative of the results that may be expected for the entire fiscal year.

The accompanying Unaudited Interim Condensed Consolidated Financial Statements have been prepared in accordance with the regulations for interim financial information of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, the unaudited accompanying statements of financial condition and related interim statements of operations, cash flows, and stockholders’ deficit include all adjustments (which consist only of normal and recurring adjustments) considered necessary for a fair presentation in conformity with U.S. GAAP. These Unaudited Interim Condensed Consolidated Financial Statements should be read in conjunction with the CornerWorld consolidated financial statements as of and for the year ended April 30, 2013, as filed with the SEC on Form 10-K.

Organization

The Company was incorporated in the State of Nevada, on November 9, 2004. Effective May 1, 2007, we changed our name to CornerWorld Corporation.

The Company provides certain marketing services through its operating subsidiary Enversa Companies LLC, a Texas limited liability company (“Enversa”). CornerWorld is the sole member of Enversa. Enversa is a technology-oriented direct response marketing company. Using its proprietary technology, Enversa identifies qualified leads for advertisers thereby connecting them with potential consumers. Enversa utilizes a pay-for-performance pricing model which is very appealing to clients because it ensures that they are billed solely for campaign performance. Enversa also operates several ad networks. Enversa also provides search engine optimization services (“SEO”), domain leasing and website management services on a recurring monthly basis.

The Company provides telecommunications services through its wholly-owned subsidiary, Woodland Holdings Corp. (“Woodland Holdings”). Woodland Holdings was the owner of S Squared, LLC, doing business in the state of Texas as “Ranger Wireless LLC” (“Ranger”). The Company sold Ranger on September 30, 2013. See also Note 3, Discontinued Operations, for more detail.

Woodland Holdings also provides telephony and internet services through its subsidiaries Phone Services and More, L.L.C., doing business as Visitatel (“PSM”) and T2 Communications, L.L.C. (“T2 Communications”). As a provider of Internet ~~Protocol Television (IPTV), Internet~~ and VoIP services, T2 Communications delivers leading-edge technology to business customers in Michigan and Texas. Offerings include: phone lines, Internet connections, long distance and toll-free services. T2 Communications is a Competitive Local Exchange Carrier (CLEC). PSM, also a CLEC, holds an FCC 214 License as a wholesale long distance service provider to the carrier community and large commercial users of transport minutes.

The Company’s year-end is April 30^th.

- 5 -

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

2. Summary of Significant Accounting Policies

This summary of significant accounting policies is presented to assist in understanding the Company’s condensed consolidated financial statements. The condensed consolidated financial statements and notes are representations of the Company’s management who is responsible for their integrity and objectivity. These accounting policies conform to US GAAP and have been consistently applied in the preparation of the financial statements. The financial statements are stated in United States of America dollars.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, the realizability of accounts receivable, recoverability of property and equipment, ~~intangibles~~ and ~~goodwill and~~ valuation of stock-based compensation and deferred tax assets. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) No. 850 requires disclosure of fair value information about financial instruments when it is practicable to estimate that value. The carrying amount of the Company’s cash and cash equivalents, accounts receivable, accounts receivable-related party, accounts payable, accounts payable-related party, accrued liabilities, and notes payable approximate their estimated fair values due to their short-term maturities. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial statements.

Revenue Recognition

The Company recognizes revenue in accordance with Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition in Financial Statements,” as revised by SAB 104. As such, the Company recognizes revenue when persuasive evidence of an arrangement exists, title transfer has occurred, the price is fixed or readily determinable and collectibility is probable. Sales are recorded net of sales discounts.

At Enversa, revenue is recognized along with the related cost of revenue as leads are delivered. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. Amounts billed to clients in advance of delivery of leads are classified under current liabilities as deferred revenue. Revenue is also recognized monthly as SEO services are provided or in the form of revenues from domain leases. For T2 Communications, the majority of revenue is derived from month-to-month, bundled service contracts for the phone and internet services used by each customer. Revenue is recognized as the services are provided.

Income Taxes

The Company accounts for income tax in accordance with ASC No. 740 which requires the use of the asset and liability method of accounting of income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Long-Lived Assets

The Company accounts for its long-lived assets in accordance with the ASC. The Company’s only long-lived assets are property and equipment. The ASC requires a company to assess the recoverability of its long-lived assets whenever events and circumstances indicate the carrying value of an asset or asset group may not be recoverable from estimated future cash flows expected to result from its use and eventual disposition. Management does not believe that its fixed assets are impaired. No impairment charges have been recorded as of ~~October~~January 31, ~~2013~~2014.

- 6 -

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

Stock-Based Compensation

The Company accounts for awards made under its two stock-based compensation plans pursuant to the fair value provisions of ASC No. 718. ASC No. 718 requires the recognition of stock-based compensation expense, using a fair-value based method, for costs related to all share-based payments including stock options. ASC No. 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The Company accounts for stock-based compensation in accordance with ASC No. 718 and estimates its fair value based on using the Black-Scholes option pricing model. The Company’s determination of fair value of share-based payment awards is made as of their respective dates of grant using that option pricing model and is affected by the Company’s stock price as well as a number of subjective assumptions. These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards and actual and projected employee stock option exercise behavior. The expected term of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior. The risk-free rate selected to value any particular grant is based on the U.S. Treasury rate that corresponds to the pricing term of the grant effective as of the date of the grant. The expected volatility is based on the historical volatility of the Company’s stock price. These factors could change in the future, affecting the determination of stock-based compensation expense in future periods. The Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company’s options have certain characteristics that are significantly different from traded options, the existing valuation models may not provide an accurate measure of the fair value of the Company’s options. Although the fair value of the Company’s options is determined in accordance with ASC No. 718 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The calculated compensation cost is recognized on a straight-line basis over the vesting period of the options. See also Note 6 Stock Based Compensation, for more details.

Reclassifications

Certain prior year accounts have been reclassified to conform to the current year’s presentation.

3. Discontinued Operations

We completed the sale of our Ranger business on September 30, 2013 for $7.5 million in cash plus a contingent receivable for $800,000; we recognized a gain of $2,788,543 on the sale, net of tax. The decision to sell Ranger allowed us to retire substantially all of our secured debt. Our Ranger operations, previously reported within the Communications Services segment, have been reclassified as discontinued operations in our unaudited Condensed Consolidated Financial Statements for the operations up to the date of sale for the three and ~~six~~nine month periods ended ~~October 30~~January 31, ~~2013~~2014 and ~~2012~~2013. In addition, all secured debt retired as a result of the divestiture, including related interest expenses and fees, have been reclassified as discontinued operations.

The following is a summary of the operating results of our discontinued operations:

	For the Three Months Ended October 31,				For the Six Months Ended October 31,
	For the Three Months Ended January 31,				For the Nine Months Ended January 31,
	2013		2012		2013		2012
	2014		2013		2014		2013
Sales, net	$	~~781,239~~—	$	1,~~396~~244,~~984~~015	$	2,014,095	$	24,~~861~~105,~~867~~882
Income from discontinued operations before income taxes		~~139,964~~—		~~317~~281,~~066~~478		538,568		~~729~~1,~~810~~011,288
Income taxes		—		—		—		—
Net income from discontinued operations	$	~~139,964~~—	$	~~317~~281,~~066~~478	$	538,568	$	~~729~~1,~~810~~011,288

- 7 -

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

The following is a summary of assets and liabilities held for sale as of April 30, 2013:


	April 30, 2013

Assets:
Current assets	$	529,328
Property, plant and equipment, net		11,349
Patent and goodwill, net		5,995,692
Assets of discontinued operations held for sale		6,536,369

Liabilities
Accounts payable and accrued expenses		457,972
Long term debt, net of discounts		6,647,645
Deferred revenue		266,810
Other liabilities		873,861
	$	8,246,288

4. Debt

	As of
	October 31, 2013			April 30, 2013
	January 31, 2014			April 30, 2013
Long-term Debt
Notes payable to Emerald Crest Capital (the “Senior Lender”). These notes were collateralized by all assets of the Company. The notes and all accrued interest were settled in full as a result of the divestiture of Ranger.	$	—		$	3,700,000
Note payable IU Holdings, LP. This note was collateralized by all assets of the Company save for the Ranger patent. See also note 8, Related Party Transactions. The note and all accrued interest were settled in full as a result of the divestiture of Ranger.		—			1,500,000
Note payable to IU Investments, LLC. These notes were collateralized by all assets of the Company save for the Ranger patent. See also note 8, Related Party Transactions. The note and all accrued interest were settled in full as a result of the divestiture of Ranger.		—			527,915
Note payable to Internet University, Inc. This note was collateralized by all assets of the Company save for the Ranger patent. See also note 8, Related Party Transactions. The note and all accrued interest were settled in full as a result of the divestiture of Ranger.		—			10,000
Note payable to Ned B. Timmer. At October 31, 2013, the interest rate was 10%. This note was collateralized by all assets of Woodland Holdings, Corporation, including the Ranger patent. The note and all accrued interest were settled in full as a result of the divestiture of Ranger.		—			1,440,000
Note payable to Ned B. Timmer. This note was collateralized by all assets of Woodland Holdings, Corporation, including the Ranger patent. The note and all accrued interest were settled in full as a result of the divestiture of Ranger.		—			1,440,000
Note payable to CEO; the note matures July 31, 2016. At October 31, 2013, the interest rate was 10%. This note is collateralized by all assets of the Company save for the Ranger patent. See also note 8, Related Party Transactions.		338,958			338,958
Note payable to CEO; the note matures July 31, 2016. At January 31, 2014, the interest rate was 6.25%. This note is collateralized by all assets of the Company save for the Ranger patent. See also note 8, Related Party Transactions.		338,958			338,958
Note payable to Kelly Larabee Morlan; the note matures December 31, 2013. At October 31, 2013, the interest rate was 10%. This note is not collateralized.		16,316			16,316
Note payable to Kelly Larabee Morlan; the note matures December 31, 2013. The note and all accrued interest have been settled in full.		—			16,316
Total debt		~~355~~338,~~274~~958			7,533,189
Less current portion of long-term debt		(93114,~~675~~714	)		(4,352,979	)
Non-current portion of long-term debt	$	~~261~~224,~~599~~244		$	3,180,210

As previously noted, on September 30, 2013, the Company sold 100% of the outstanding membership interests of Ranger. By executing the sale of Ranger, the Company was able to payoff substantially all of its secured creditors including reacquiring the common stock purchase warrants originally issued to the Senior Lender (the “Warrants”), pursuant to which the Senior Lender could have purchased up to 8,762,008 shares of the Company’s common stock for an aggregate price of $100. The Warrants were not exercisable prior to March 30, 2014 but were being carried as a liability due to the fact that they could be put to the Company for $1,000,000 on March 30, 2014. In addition to retiring the Warrants and the notes payable to the Senior Lender, unamortized loan fees of $396,913 were written off as a result of the sale of Ranger and the subsequent retirement of substantially all secured payables.

- 8 -

CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

Notes Payable to Junior Lender:

Substantially all of the Company’s notes payable to its junior lenders were also paid off as a result of the sale of Ranger. The remaining collateralized note payable, due to the Company’s CEO, contains no restrictive covenants or events of default other than non-payment.

5. Commitments and Contingencies

Litigation

On October 10, 2013, the Company’s former President, Marc A. Pickren (“Pickren”) filed a lawsuit in Dallas County District court alleging, among other things, that the Company had wrongfully terminated his employment; Pickren’s suit seeks claims approximating $265,000 which represent one year’s severance and costs to provide health insurance. As noted in the Company’s form 8-K filed on October 4, 2013, Pickren’s employment agreement expired on September 15, 2013, Pickren’s employment agreement was not renewed and Pickren was removed as President of CornerWorld on October 4, 2013, though he remained employed as the President of Enversa, the Company’s only remaining operating subsidiary. The Company intends to vigorously defend itself against Pickren’s claims.

The Company is occasionally involved in other litigation matters relating to claims arising from the ordinary course of business. The Company’s management believes that there are no claims or actions pending or threatened against the Company, the ultimate disposition of which would have a material adverse effect on our business, results of operations and financial condition.

6. Stock-Based Compensation

Incentive Stock Plan

On August 17, 2007, the Company’s board of directors adopted and implemented the Company’s 2007 Incentive Stock Plan. Under the Incentive Stock Plan, the Company is authorized to issue 4,000,000 shares of its common stock to the Company’s directors, officers, employees, advisors or consultants.

Any Incentive Stock Option granted to an employee of the Company shall become exercisable over a period of no longer than 5 years, and no less than 20% of the shares covered thereby shall become exercisable annually. 20% of shares vest annually beginning on the first anniversary of the grant. The options expire 5 years from the grant date.

The Company issued no stock options pursuant to this plan during the three and ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014.

Stock Compensation Plan

On August 17, 2007, the Company’s board of directors adopted and implemented the Company’s 2007 Stock Compensation Plan. The total number of shares of the Company’s common stock which may be purchased or granted directly by Options, Stock Awards or Warrants under the Compensation Plan shall not exceed 4,000,000 shares of the Company’s common stock.

Awards granted to a participant of the Company shall become exercisable over a period of no longer than 5 years, and may vest as determined at the Company’s discretion at the time of grant.

The Company issued no stock options pursuant to this plan during the three and ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014.

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CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

A summary of the shares reserved for grant and awards available for grant under each Stock Plan is as follows:

	October 31, 2013
	January 31, 2014
		Shares Reserved for Grant	Awards Available for Grant
Incentive Stock Plan		4,000,000	3,~~230~~275,000
Stock Compensation Plan		4,000,000	3,825,000
		8,000,000	7,~~055~~100,000

The Company issues awards to employees, qualified consultants and directors that generally vest over time based solely on continued employment or service during the related vesting period and are exercisable over a five to ten year service period. Options are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant.

The fair value of each stock-based award is estimated on the grant date using the Black-Scholes option-pricing model. Expected volatilities are based on the historical volatility of the Company’s stock price. The expected term of options granted subsequent to the adoption ASC 718 is derived using the simplified method as defined in the SEC’s SAB No. 107. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury interest rates in effect at the time of grant. The fair value of options granted was estimated using the following weighted-average assumptions:

	For the three month periods Ended October 31				For the six month periods Ended October 31
	For the three month periods Ended January 31				For the nine month periods Ended January 31
	2013		2012		2013		2012
	2014		2013		2014		2013
Expected term (in years)	—		—5.0		—		—5.0
Expected volatility	—	%	—99.1	%	—	%	—99.1	%
Risk-free interest rate	—	%	—1.0	%	—	%	—1.0	%
Dividend yield	—	%	—0.0	%	—	%	—0.0	%

A summary of activity under the Stock Plans and changes during the period ended ~~October~~January 31, ~~2012~~2014 is presented below:

				Weighted-Average
	Shares			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at May 1, 2013		2,245,000		$	0.38		1.49	$	—
Issued		—			—		—		—
Cancelled/forfeited		(1,~~300~~345,000	)		0.4948
Exercised		—			—
Outstanding at October 31, 2013		945,000		$	0.22		1.65	$	—
Outstanding at January 31, 2014		900,000		$	0.22		1.34	$	—
Options vested and expected to vest		~~945~~695,000		$	0.2223		1.5171	$	—
Options exercisable at end of period		~~742~~720,~~500~~000		$	0.2221		1.4010	$	—

For the three month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, the Company recognized $73,~~134~~765 and $41,~~507~~508 of stock-based compensation expense, respectively, and for the ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, the Company recognized $1418,~~269~~034 and $83124,~~016~~524 of stock-based compensation expense, respectively. As of ~~October~~January 31, ~~2013~~2014 there was $3323,~~237~~753 of total unrecognized compensation cost, net of forfeitures, related to unvested employee and director stock option compensation arrangements. That cost is expected to be recognized on a straight-line basis over the next 1.434 weighted average years.

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CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

7. Business Segments

Our business consists primarily of two integrated business segments: (i) marketing services and (ii) communications services. Our corporate administrative functions are tracked separately and the associated costs are not pushed down to the operating segments. The following table summarizes selected financial information for each operating segment:

	Marketing Services			Communications Services			Corporate Overhead			Consolidated
Three Months Ended October 31, 2013
Three Months Ended January 31, 2014
Revenue	$	~~190~~214,~~602~~776		$	2554,~~468~~280		$	—		$	~~216~~269,~~070~~056
Income (loss) from continuing operations before tax		~~(138~~53,~~708~~918	)		(515,~~711~~944	)		~~(229~~47,~~609~~386	)		~~(420~~95,~~028~~360	)
Income (loss) from continuing operations after tax		(138,708	)		(51,711	)		(229,609	)		(420,028	)
Net (loss) income		53,918			(5,944	)		47,386			95,360
Net (loss) income		(138,708	)		2,650,088			(2,901	)		2,508,479
Total assets		156,569			89,968			812,705			1,059,242
Total assets		110,892			903,662			636,386			1,650,940
Depreciation and amortization		157			2,677			7,470			10,304
Depreciation and amortization		403			4,090			7,467			11,960

	Marketing Services		Communications Services			Corporate Overhead			Consolidated
Three Months Ended October 31, 2012
Three Months Ended January 31, 2013
Revenue	$	~~425~~387,~~545~~643	$	4548,~~802~~836		$	—		$	~~471~~436,~~347~~479
Income (loss) from continuing operations before tax		~~186~~185,~~374~~390		(99111,~~587~~246	)		(~~508~~479,~~900~~030	)		(~~422~~404,~~113~~886	)
Income (loss) from continuing operations after tax		186,374		(99,587	)		(508,900	)		(422,113	)
Net (loss) income		185,390		257,682			(566,480	)		(123,408	)
Net (loss) income		186,374		390,844			(682,265	)		(105,047	)
Total assets		287,081		8,231,313			673,727			9,192,121
Total assets		354,252		8,726,239			728,472			9,808,963
Goodwill		—		—			554,986			554,986
Depreciation and amortization		1,~~546~~545		4,600			1211,~~747~~061			1817,~~893~~206

	Marketing Services			Communications Services			Corporate Overhead			Consolidated
Six Months Ended October 31, 2013
Nine Months Ended January 31, 2014
Revenue	$	~~458~~673,~~876~~652		$	56110,~~627~~907		$	—		$	~~515~~784,~~503~~559
Income (loss) from continuing operations before tax		~~(46~~6,~~962~~956	)		(~~157~~163,~~354~~298	)		(~~682~~635,~~652~~297	)		(~~886~~791,~~968~~639	)
Income (loss) from continuing operations after tax		(46,962	)		(157,354	)		(682,652	)		(886,968	)
Net (loss) income		6,956			2,979,549			(451,033	)		2,535,472
Net (loss) income		(46,962	)		2,985,493			(498,388	)		2,440,143
Total assets		156,569			89,968			812,705			1,059,242
Total assets		110,892			903,662			636,386			1,650,940
Depreciation and amortization		3,368			11,366			22,403			37,137
Depreciation and amortization		3,211			8,689			14,933			26,833

	Marketing Services		Communications Services			Corporate Overhead			Consolidated
Six Months Ended October 31, 2012
Nine Months Ended January 31, 2013
Revenue	$	1,~~092~~479,~~339~~982	$	89138,~~192~~028		$	—		$	1,~~181~~618,~~531~~010
Income (loss) from continuing operations before tax		~~349~~534,~~509~~899		(~~213~~324,~~388~~634	)		(1,~~125~~604,~~677~~707	)		(~~989~~1,~~556~~394,442	)
Income (loss) from continuing operations after tax		349,509		(213,388	)		(1,125,677	)		(989,556	)
Net (loss) income		534,899		1,132,266			(2,050,319	)		(383,154	)
Net (loss) income		349,509		874,584			(1,483,839	)		(259,746	)
Total assets		287,081		8,231,313			673,727			9,192,121
Total assets		354,252		8,726,239			728,472			9,808,963
Goodwill		—		—			554,986			554,986
Depreciation and amortization		34,~~092~~637		913,~~199~~799			2536,~~202~~263			3754,~~493~~699

There were no intersegment sales. All of the Company’s business activities are conducted within the United States geographic boundaries.

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CornerWorld Corporation

Notes to the Unaudited Condensed Consolidated Financial Statements – (Continued)

There were no intersegment sales. All of the Company’s business activities are conducted within the United States geographic boundaries.

8. Related Party Transactions

On February 23, 2009, the Company entered into a promissory note (the “Tier 3 Junior Note”) totaling $1,900,000 with IU Investments, LLC (“IUI”). IUI is an entity owned by the parents of the Company’s Chief Executive Officer. Interest iswas payable at the Company’s discretion at a rate of 10% per annum~~. The~~ and the Company recorded interest of $26,105 and $2640,~~992~~473 on this facility during the ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, respectively. The outstanding portion of this note along with its accrued interest was settled in its entirety on September 30, 2013.

On March 30, 2011, the Company entered into a subordinated $1.5 million promissory note (the “Tier 2 Junior Note”) with IU Holdings, LP (“IUH”). Interest on the outstanding principal amount under the Tier 2 Junior Note iswas payable at the Company’s discretion at a rate of 10% per annum. As ~~additional consideration to induce~~ IUH ~~to enter into the Tier 2 Junior Note, the Company issued to IUH, 48,414,132 shares of CornerWorld Corporation Common stock. IUH~~ is a partnership whose limited partners include the family of the Company’s Chief Executive Officer. Steve Toback, the uncle of the Company’s Chief Executive Officer, serves as the manager of IU Holdings, GP, LLC which is the general partner of IUH. The Company recorded approximately $73113,~~006~~425 and $75,616 in interest on this facility, during the ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, respectively. The outstanding portion of this note along with its accrued interest was settled in its entirety on September 30, 2013.

On March 30, 2011, the Company entered into a subordinated $400,000 promissory note (the “Tier 5 Junior Note”) with Internet University. Interest on the outstanding principal amount under the Tier 5 Junior Note iswas payable at the Company’s discretion at a rate of 10% per annum. ~~As additional consideration to induce Internet University to enter into the Tier 5 Junior Note, the Company issued to Internet University, 12,910,435 shares of CornerWorld Corporation Common stock.~~ The Company recorded interest of $1,342 and $1216,~~641~~412 on this facility during the ~~six~~nine month ~~periods~~period ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, respectively. The outstanding portion of this note along with its accrued interest was settled in its entirety on September 30, 2013.

On March 30, 2011, the Company entered into a subordinated $389,942 promissory note (the “Tier 7 Junior Note”) with Scott N. Beck, the Company’s Chief Executive Officer. Interest on the outstanding principal amount under the Tier 7 Junior Note is payable at the Company’s discretion at a rate of 106.25% per annum~~. As~~ ~~additional~~and ~~consideration~~monthly toprincipal ~~induce~~payments ~~Mr.~~totaling ~~Beck to enter into this Promissory Note~~$12,746 ~~the~~have ~~Company~~been ~~issued~~deferred ~~Mr.~~until ~~Beck~~May 1231,~~585,802~~ ~~shares of CornerWorld Corporation Common stock~~2014. The ~~Tier 7 Junior Note consists primarily of prior accounts payable. The~~ Company recorded interest of $1926,~~840~~092 and $1725,~~087~~630 on this facility during the ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, respectively. The balance of this note totaled $338,958 at ~~October~~January 31, ~~2013~~2014.

The Company is party to a lease agreement with 13101 Preston Road, LP pursuant to which it leases office space for its corporate headquarters. The limited partners of 13101 Preston Road, LP are trusts controlled by the family of the Company’s Chief Executive Officer. The Company paid $1522,~~000~~500 and $6184,~~972~~472 in rent during the ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013, respectively.

In addition, the Company provides accounting, human resources and certain IT services to an entity controlled by the family of the Company’s Chief Executive Officer for $5,000 per month. The Company received $3045,000 from this entity during the ~~six~~nine month periods ended ~~October~~January 31, ~~2013~~2014 and ~~2012~~2013.

9. Subsequent Events

OnSubsequent ~~November 4, 2013, the Company amended its promissory note~~ to ~~Scott N. Beck dated March 30, 2011whereby it deferred any principal or interest payments on~~ the ~~Note~~date ~~until~~of ~~May 31, 2014 and reduced~~ the ~~interest~~issuance ~~rate~~of tothese ~~6.25%. On November 4~~statements, ~~2013,~~there ~~the~~were ~~Company~~no ~~amended~~occurrences ~~its~~that ~~employment~~had ~~agreement~~a ~~with~~material ~~Scott~~impact N.on ~~Beck,~~ the ~~Company’s~~financial ~~Chief Executive Officer originally dated July 28, 2011, to set his annual base salary to $18,000 per year effective November 1, 2013 and to waive any bonuses related to the recent sale of Ranger~~statements.

On November 6, 2013, the Company collected the $800,000 contingent receivable related to the Ranger sale.

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RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

CornerWorld Corporation (hereinafter referred to as “CornerWorld,” the “Company,” “we,” “our,” or “us”) is a marketing and telecommunication services company building services for the increased accessibility of content across mobile, television and Internet platforms.

~~Six~~Nine Months ended ~~October~~January 31, ~~2013~~2014 Highlights:

	·	On September 30, 2013 the Company sold its largest asset, Ranger. Ranger was sold to an unrelated third party investor which had no previous association with any of the Company’s directors or officers for $7.5 million in cash plus an additional $800,000 contingent receivable; the Company collected the contingent $800,000 receivable in November 2013. In addition, WWS signed a royalty contract enabling WWS to participate in revenues resulting from Ranger’s acquisition of customers in the future. With the sale of Ranger, the Company was able to payoff substantially all of its secured creditors while simultaneously substantially improving its ratio of current assets to current liabilities. The Company had previously been in default to all of its secured lenders.
	·	The Company’s marketing services division continues to be adversely affected by the deterioration in the for-profit educational lead generation space while simultaneously experiencing significant ongoing challenges and customer churn in our search engine optimization and website leasing businesses. In addition, the Company terminated the employment of Marc A. Pickren, the President of the marketing division. The Company cannot be certain how much further its marketing services revenues could deteriorate as a result of these material operating changes.


	·	On September 30, 2013 the Company sold its largest asset, Ranger. Ranger was sold to an unrelated third party investor which had no previous association with any of the Company’s directors or officers for $7.5 million in cash plus an additional $800,000 contingent receivable; the Company collected the contingent $800,000 receivable in November 2013. In addition, WWS signed a royalty contract enabling WWS to participate in revenues resulting from Ranger’s acquisition of customers in the future. With the sale of Ranger, the Company was able to payoff substantially all of its secured creditors while simultaneously substantially improving its ratio of current assets to current liabilities. The Company had previously been in default to all of its secured lenders.

	·	The Company’s marketing services division continues to be adversely affected by the deterioration in the for-profit educational lead generation space while simultaneously experiencing significant ongoing challenges and customer churn in our search engine optimization and website leasing businesses. In addition, the Company terminated the employment of Marc A. Pickren, the President of the marketing division and former President of Cornerworld Corporation. The Company cannot be certain how much further its marketing services revenues could deteriorate as a result of these material operating changes.

	·	The Company settled several long outstanding accounts payable with two separate vendors, one in each of the last two fiscal quarters. The gain recognized on these settlements totaled $504,215.

Service Offerings

Our business consists primarily of two integrated business segments: (i) marketing services and (ii) communications services. Our corporate administrative functions are tracked separately and the associated costs are not pushed down to the operating segments. See also Note 7 of the Notes to the Unaudited Condensed Consolidated Financial Statements – Business Segments for additional segment information.

Critical Accounting Policies and Estimates

Use of Estimates and Critical Accounting Policies

In preparing our ~~condensed~~Unaudited ~~consolidated~~Condensed ~~unaudited~~Consolidated ~~financial~~Financial ~~statements~~Statements, we make estimates, assumptions and judgments that can have a significant effect on our revenues, income (loss) from operations, and net income (loss), as well as on the value of certain assets on our consolidated balance sheet. We believe that there are several accounting policies that are critical to an understanding of our historical and future performance as these policies affect the reported amounts of revenues, expenses and significant estimates and judgments applied by management. While there are a number of accounting policies, methods and estimates affecting our financial statements, areas that are particularly significant include allowance for doubtful accounts, impairment of long-lived assets (including goodwill), revenue recognition and stock-based compensation. In addition, please refer to Note 2 of the Notes to the Unaudited ~~Condenses~~Condensed Consolidated Financial Statements for further discussion of our accounting policies.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on an estimate of buckets of customer accounts receivable, stratified by age, that, historically, have proven to be uncollectible; in addition, in certain cases, the allowance estimate is supplemented by specific identification of larger customer accounts and our best estimate of the likelihood of potential loss, taking into account such factors as the financial condition and payment history of major customers. We evaluate the collectibility of our receivables at least quarterly. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The differences could be material and could significantly impact cash flows from operating activities.

- 13 -

Impairment of Long-Lived Assets

The Company’s management assesses the recoverability of its long-lived assets by determining whether the depreciation and of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment is measured based on fair value and is charged to operations in the period in which long-lived asset impairment is determined by management.

Income Taxes

Revenue Recognition

It is the Company’s policy that revenue from product sales or services will be recognized in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB No. 104”), which superseded Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”). SAB No. 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4) are based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company will defer any revenue for which the product was not delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

Stock-Based Compensation

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. This model also requires the input of highly subjective assumptions including:


	(a)	The expected volatility of our common stock price, which we determine based on comparable companies;

	(b)	Expected dividends (which do not apply, as we do not anticipate issuing dividends);

	(c)	Expected life of the award, which is estimated based on the historical award exercise behavior of our employees; and

	(d)	The risk-free interest rate which we determine based on the yield of a U.S. Treasury bond whose maturity period equals the options expected term.

These factors could change in the future, affecting the determination of stock-based compensation expense in future periods. In the future, we may elect to use different assumptions under the Black-Scholes valuation model or a different valuation model, which could result in a significantly different impact on our net income or loss.

The Company’s determination of fair value of share-based payment awards is made as of their respective dates of grant using the Black Scholes option valuation model. Because the Company’s options have certain characteristics that are significantly different from traded options, the Black Scholes option valuation model may not provide an accurate measure of the fair value of the Company’s options. Although the fair value of the Company’s options is determined in accordance with ASC No. 718, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The calculated compensation cost is recognized on a straight-line basis over the vesting period of the options.

See also Note 6 – Stock Based Compensation of the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding our accounting policies for stock-based compensation.

- 14 -

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued during the ~~three~~nine months ended ~~October~~January 31, ~~2013~~2014, none of which are expected to have a material impact on the Company’s consolidated financial position, operations, or cash flows.

Results of Operations

Comparison of the three months ended ~~October~~January 31, ~~2013~~2014 to the three months ended ~~October~~January 31, ~~2012~~2013

Consolidated CornerWorld Corporation

Revenues:

We had revenues totaling $~~216~~269,~~070~~056 for the three month period ended ~~October~~January 31, ~~2013~~2014 as compared to $~~471~~436,~~347~~479 for the three month period ended ~~October~~January 31, ~~2012~~2013. The decrease of $~~255~~167,~~277~~423, or 5438.24%, is primarily due to revenue decreases in our marketing services segment resulting from the deterioration of the market for lead generation in the for-profit education space. In addition, our communications services segment experienced increased churn in our CLEC as the Company ceased investing resources in that division.

Depreciation and Amortization:

Depreciation and ~~amortization~~Amortization expenses totaled $1110,~~960~~304 for the three month period ended ~~October~~January 31, ~~2013~~2014 as compared to $1817,~~893~~206 for the three month period ended ~~October~~January 31, ~~2012~~2013. The decrease of $6,~~933~~902 is due to the fact that several of our larger telecommunications fixed assets have become fully depreciated.

Income (Loss) from Continuing Operations Before Taxes:

~~Loss~~Income from Continuing Operations Before Taxes totaled $~~420~~95,~~028~~360 for the three months ended ~~October~~January 31, ~~2013~~2014 as compared to a ~~net~~ loss of $~~422~~404,~~113~~886 for the corresponding period in the prior year. The improvement of $2500,~~085~~246 is primarily due to reductions in selling, general and administrative (“SG&A”) expenses ~~and~~which ~~depreciation~~included ~~expenses~~the astermination ~~well~~of asthe former President of the Company, among other personnel. In addition, the improvement is due to decreases in depreciation expenses, decreases in interest expenses and also the gain of approximately $250,000 recognized in connection with the discounted settlement of a certain large outstanding payable.

Net Income (loss):

Net Income totaled $295,~~508,479~~360 for the three months ended ~~October~~January 31, ~~2013~~2014 as compared to a net loss of $~~105~~123,~~047~~408 for the corresponding period in the prior year. The difference between the Net Income improvement of $2218,~~613~~768 versus the Income from Continuing Operations Before Taxes improvement of $500,~~526~~246 is primarily due to the ~~gain~~fact ~~recognized~~that onprior ~~the~~year ~~divestiture~~Net ofIncome ~~our~~numbers included earnings from the divested Ranger asset totaling $281,478.

Marketing services

Our marketing services segment consists of our Enversa division.

Revenues:

Our marketing services segment had revenues totaling $~~190~~214,~~602~~776 for the three month period ended ~~October~~January 31, ~~2013~~2014 as compared to $~~425~~387,~~545~~643 for the three month period ended ~~October~~January 31, ~~2012~~2013. This decrease is due to the deterioration in the for-profit educational lead generation space and significant ongoing challenges and customer churn in our search engine optimization and website leasing businesses.

Depreciation and Amortization:

Our marketing services segment had depreciation expenses totaling $~~403~~157 for the three month period ended ~~October~~January 31, ~~2013~~2014 as compared to $1,~~546~~545 for the three month period ended ~~October~~January 31, ~~2012~~2013. The decrease was due to more assets becoming fully depreciated.

Income (loss) from Continuing Operations Before Taxes and Net Income:

Loss from continuing operations before taxes totaled $138,708 for the three months ended October 31, 2013 as compared to net income of $186,374 for the corresponding period in the prior year. The decrease is due to the aforementioned reduction in revenue as well as the fact that we had previously classified most of our marketing personnel, including our former president, in corporate.

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Income from Continuing Operations Before Taxes and Net Income:

Income from Continuing Operations Before Taxes and Net Income totaled $53,918 for the three months ended January 31, 2014 as compared to net income of $185,390 for the corresponding period in the prior year. The decrease is due to the aforementioned reduction in revenue.

Communications services

Our communications services segment consists of our Woodland division.

Revenues:

Our communications services segment had revenues totaling $2554,~~468~~280 for the three month period ended ~~October~~January 31, ~~2013~~2014 as compared to $4548,~~802~~836 for the three month period ended ~~October~~January 31, ~~2012~~2013. ~~This~~The ~~decrease~~lower isrevenue in the previous year period was primarily due to ~~increased~~several ~~churn~~large incustomer ~~our~~credits ~~CLEC~~being asissued during the ~~Company~~corresponding ~~ceased~~period ~~investing~~during ~~resources~~the inprior ~~that division~~year.

Depreciation and Amortization:

Our communications services segment had depreciation and amortization expenses totaling $42,~~090~~677 for the three month period ended ~~October~~January 31, ~~2013~~2014 versus $4,600 for the corresponding period in 2012. The decrease is due to ~~some~~more of our telecom assets becoming fully depreciated.

Net Income (Loss):

Net ~~Income~~loss totaled $25,~~650,088~~944 for the three months ended ~~October~~January 31, ~~2013~~2014 as compared to net income of $~~390~~257,~~844~~682 for the corresponding period in the prior year. The ~~improvement~~decrease of $2263,~~259,244~~626 is ~~primarily~~ due to ~~the~~income ~~gain~~earned ~~recognized~~by onour ~~the~~divested ~~divestiture~~Ranger ofasset ~~our~~during ~~Ranger~~the ~~asset~~prior year.

Comparison of the ~~six~~nine months ended ~~October~~January 31, ~~2013~~2014 to the ~~six~~nine months ended ~~October~~January 31, ~~2012~~2013

Consolidated CornerWorld Corporation

Revenues:

We had revenues totaling $~~515~~784,~~503~~559 for the ~~six~~nine month period ended ~~October~~January 31, ~~2013~~2014 as compared to $1,~~181~~618,~~531~~010 for the corresponding period in the prior year. The decrease of $~~666~~833,~~028~~451, or 5651.45%, is primarily due to revenue decreases in our marketing services segment resulting from the deterioration of the market for lead generation in the for-profit education space.

Depreciation and Amortization:

Depreciation and ~~amortization~~Amortization expenses totaled $2637,~~833~~137 for the ~~six~~nine month period ended ~~October~~January 31, ~~2013~~2014 as compared to $3754,~~493~~699 for the ~~six~~nine month period ended ~~October~~January 31, ~~2012~~2013. The decrease of $1017,~~660~~562 is due to the fact that several of our larger telecommunications fixed assets have become fully depreciated.

Loss from Continuing Operations Before Taxes:

Loss from Continuing Operations Before Taxes totaled $~~886~~791,~~968~~639 for the ~~six~~nine months ended ~~October~~January 31, ~~2013~~2014 as compared to $~~989~~1,~~556~~394,442 for the corresponding period in the prior year. The improvement of $~~102~~602,~~588~~803 is primarily due to reductions in interest expenses and SG&A at corporate, as well as the discounted settlement of certain large outstanding payables and the elimination of amortization expenses.

Net Income (loss):

Net Income totaled $2,~~440~~535,~~143~~472 for the ~~six~~nine months ended ~~October~~January 31, ~~2013~~2014 as compared to a net loss of $~~259~~383,~~746~~154 for the corresponding period in the prior year. The improvement of $2,~~699~~918,~~889~~626 is primarily due to the gain recognized on the divestiture of our Ranger asset.

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Marketing services

Revenues:

Our marketing services segment had revenues totaling $~~458~~673,~~876~~652 for the ~~six~~nine month period ended ~~October~~January 31, ~~2013~~2014 as compared to $1,~~092~~479,~~339~~982 for the ~~six~~nine month period ended ~~October~~January 31, ~~2012~~2013. This decrease of 58$806,330 or 54.05% is due to the deterioration in the for-profit educational lead generation space and significant ongoing challenges and customer churn in our search engine optimization and website leasing businesses.

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Depreciation and Amortization:

Our marketing services segment had depreciation expenses totaling $3,~~211~~368 for the ~~six~~nine month period ended ~~October~~January 31, ~~2013~~2014 as compared to $34,~~092~~637 for the ~~three~~nine month period ended ~~October~~January 31, ~~2012~~2013. The ~~increase~~decrease was ~~not~~due ~~material~~to more fixed assets becoming fully depreciated and the write-down of certain fixed assets related to our Gulf subsidiary.

Income ~~(loss)~~ from Continuing Operations Before Taxes and Net Income:

~~Loss~~Income from ~~continuing~~Continuing ~~operations~~Operations Before ~~before~~Taxes ~~taxes~~and Net Income totaled $466,~~962~~956 for the ~~six~~nine months ended ~~October~~January 31, ~~2013~~2014 as compared to ~~net~~Net ~~income~~Income of $~~349~~534,~~509~~899 for the corresponding period in the prior year. The decrease is due to the aforementioned reduction in revenue ~~as well as the fact that we had previously classified most of our marketing personnel in corporate~~.

Communications services

Revenues:

Our communications services segment had revenues totaling $56110,~~627~~907 for the ~~six~~nine month period ended ~~October~~January 31, ~~2013~~2014 as compared to $89138,~~192~~028 for the ~~six~~nine month period ended ~~October~~January 31, ~~2012~~2013. This decrease is due to experienced increased churn in our CLEC as the Company ceased investing resources in that division.

Depreciation and Amortization:

Our communications services segment had depreciation and amortization expenses totaling $811,~~689~~366 for the ~~six~~nine month period ended ~~October~~January 31, ~~2013~~2014 versus $913,~~199~~799 for the corresponding period in ~~2012~~2013. The decrease is due to more of our telecom assets becoming fully depreciated.

Loss from Continuing Operations Before Taxes:

Loss from Continuing Operations Before Taxes totaled $163,298 for the nine months ended January 31, 2014 as compared to $324,634 for the corresponding period in the prior year. The improvement of $161,336 is primarily due to reductions in interest expenses, SG&A and the elimination of amortization expenses.

Net Income:

Net Income totaled $2,~~985~~979,~~493~~549 for the ~~six~~nine months ended ~~October~~January 31, ~~2013~~2014 as compared to $~~874~~1,~~584~~132,266 for the corresponding period in the prior year. The improvement of $21,~~110~~847,~~909~~283 is primarily due to the gain recognized on the divestiture of our Ranger asset.

Liquidity and Capital Resources

As of ~~October~~January 31, ~~2013~~2014, we ~~had~~continued to have positive working capital ~~for the first time in the Company’s history~~ totaling $~~246~~316,~~946~~412 which including cash of $~~587~~732,~~057~~623. ~~Our working capital includes one large account payable associated with our 2009 Woodland Acquisition. We consider our relationship with that single vendor to be positive.~~

As previously noted, on September 30, 2013, the Company sold Ranger to an unrelated third party for $7.5 million plus an $800,000 contingent receivable; the contingency was met in November and the Company received $800,000 on November 6, 2013 ~~just subsequent to the balance sheet date of this report~~. As a result of the sale of Ranger, the Company was able to retire the notes payable, ~~the~~ accrued interest ~~on the notes payable~~ and any accrued penalties to Emerald Crest Capital (the “Senior Lender”), IU Holdings, LP (“IUH”), IU Investments, LLC (“IUI”) and Ned Timmer (“Timmer”) (IUH, IUI and Timmer collectively the “Paid-in-Full Junior Lenders”). In addition, the Company was able to pay off the warrant which the Senior Lender could have put to the Company for $1.0 million on March 30, 2014. As a result of the sale of Ranger and the respective payoff of the Senior Lender and the Paid-in-Full Junior Lenders, the only remaining secured debt is the note payable to the Company’s CEO, Scott Beck (the “CEO Note”). OnNo ~~November 4, 2013, Mr. Beck amended the CEO Note such that no~~ principal or interest payments are due on the CEO Note until May 31, 2014. Mr. Beck also took a significant salary reduction from $250,000 per annum to $18,000 per annum, as a result of an amendment to his employment contract.

Our investing activity for the six months ended October 31, 2013, consisted of $4,439 of capital expenditures, primarily associated with the leasing of a certain piece of equipment pursuant to a capital lease.

Our financing activities for the three months ended October 31, 2013 included interest of $303 related to the financing of the equipment pursuant to the aforementioned capital lease. As previously noted, the Company completely paid off the Senior Lender as well as the Paid-in-Full Junior Lenders as a result of the sale of Ranger.

We have no other bank financing or other external sources of liquidity and we source all of our liquidity through our operations. However, now that we have sold our largest asset, there can be no assurance that, going forward, our operations will generate positive operating cash flow. However, as a result of the sale of Ranger, the Company believes it has enough cash left over to sustain operations in excess of one year.

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AsOur ~~previously~~investing ~~noted,~~activity for the ~~Company’s~~nine ~~marketing~~months ~~revenues~~ended ~~have~~January ~~been~~31, ~~adversely~~2014, ~~impacted~~totaled by$8,293,003 ~~industry~~which ~~forces.~~consisted ~~The~~almost ~~marketing~~entirely ~~services~~of ~~division~~proceeds ~~continues~~from ~~to be adversely affected by~~ the ~~deterioration~~divestiture inof ~~the for-profit educational lead generation space while simultaneously experiencing significant ongoing challenges and customer churn in~~ our ~~search~~Ranger ~~engine optimization and website leasing businesses~~assets. ~~The Company cannot be certain how much further its marketing services revenues could deteriorate as a result of these industry-wide changes.~~

Our financing activities for the nine months ended January 31, 2014 totaled $8,007,551 which enabled the Company to completely pay off the Senior Lender as well as the Paid-in-Full Junior Lenders as a result of the sale of Ranger. The Company also paid $249,000 of investment banking fees related to the divestiture of the Ranger assets.

As previously noted, the Company’s marketing revenues have been adversely impacted by industry forces. The marketing services division continues to be adversely affected by the deterioration in the for-profit educational lead generation space while simultaneously experiencing significant ongoing challenges and customer churn in our search engine optimization and website leasing businesses. The Company elected to not renew the employment contract of its former president, Marc Pickren, whose main responsibility was the growth of the marketing division and the Company. Mr. Pickren has not been replaced and the Company and Enversa have eliminated the position of President. The Company cannot be certain how much further its marketing services revenues could deteriorate.

We will most likely need to obtain additional capital in order to further expand our operations. We are currently investigating other financial alternatives, including additional equity financing. In order to obtain capital, we may need to sell additional shares of our common stock or borrow funds from private lenders. However, there can be no assurance that any additional financing will become available to us, and if available, that such financing will be on terms acceptable to us.

Off-balance sheet arrangements

We have not entered into any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or 15d-15(e)) designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in its reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of its principal executive officer and its chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) or 15d-15(e)) as of ~~October~~January 31, ~~2013~~2014. Based on that evaluation, the Company’s chief executive officer and chief financial officer concluded that, as of that date, the Company’s disclosure controls and procedures, were not effective at a reasonable assurance level.

Management’s Remediation Plan

Management determined that a material weakness existed due to an inability to appropriately segregate duties in the accounting department due to the number of personnel in the accounting department. Management has included additional reviews and controls to mitigate the size of the accounting department and the overlap of responsibilities. Management believes the foregoing efforts will effectively remediate this material weakness but the Company can give no assurance that the additional controls will be effective. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. We cannot assure you that, as circumstances change, any additional material weakness will not be identified.

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Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other information

On December 2023, 2013, CornerWorld Corporation (“CornerWorld” or the “Company”) terminated Schumacher and Associates (“Schumacher”) as its independent registered public accounting firm. During the past two years Schumacher’s reports contained no adverse opinions, disclaimer of opinions nor were they qualified or modified as to uncertainty, audit scope, or accounting principles~~. The~~, ~~decision~~except tothat ~~change accountants was approved by~~ the ~~Chairman~~report ofcontained ~~the~~a ~~Board~~modification ofto ~~Directors. During~~ the ~~two~~effect ~~most~~that ~~recent~~there ~~fiscal~~was ~~years~~substantial ~~and~~doubt ~~any~~as ~~through~~to the ~~end~~Company’s ofability ~~the~~to ~~quarter~~continue ~~ended~~as ~~October~~a ~~31,~~going ~~2013,~~concern. ~~there~~The ~~were~~decision noto ~~disagreements~~change ~~with~~accountants ~~the~~was ~~former~~approved ~~accountant~~by onthe ~~any~~Chairman ~~matter~~ of ~~accounting~~the ~~principles~~Board orof ~~practices, financial statement disclosure, or auditing scope or procedure~~Directors.

During the two most recent fiscal years the quarter ended October 31, 2013 and up through the December 23, 2013 termination date, there was one disagreement with the former accountant with respect to disclosure of related party transactions that, had it not been resolved to the satisfaction of the former accountant, would have caused it to make reference to the disagreement in the audit report. Specifically, the former accountant required the Company to disclose the exact familial relationship of certain related parties to the Company’s CEO, Scott N. Beck. The Company has authorized the former accountant to respond fully to any inquiries of the successor accountant concerning the subject matter of the disagreement. The Company made the disclosures required by the former accountants and the disagreement was resolved to the former accountant’s satisfaction. There were no other disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure. A letter from Schumacher directed to the SEC indicating their concurrence with the events as described above is attached hereto as Exhibit 16.1 and is incorporated by reference herein.

On December 20, 2013, the Company engaged Montgomery Coscia Greilich, LLP (“MCG”) as their new its independent registered public accounting firm. During the previous two year period, the Company did not consult with MCG with respect to any issues nor was there any prior relationship between the Company and MCG.

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Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibit Numbers	Description	Method of Filing

10.1	Membership Interests Purchase Agreement by and among Woodland Wireless Solutions, LTD., CornerWorld Corporation and Ranger Wireless Holdings, LLC for 100% of the Issued and Outstanding Membership Interests of S Squared, L.L.C. dated as of September 30, 2013 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed October 4, 2013)
10.2	Pro-Forma balance sheet as of July 31, 2013 and pro-forma statement of operations for the three month period ended July 31, 2013 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed October 4, 2013)
10.3	Amendment No. 4 to the Employment Agreement dated as of July 28, 2011 between CornerWorld Corporation and Scott Beck (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed October 4, 2013)
10.4	Amendment No. 4 to Promissory Note dated as of March 30, 2011 between CornerWorld Corporation and Scott Beck (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 6, 2013)
10.5	Amendment Number 5 to Employment Agreement dated as of July 28, 2011 between CornerWorld Corporation and Scott Beck (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed November 6, 2013)
10.6	Amended and Restated Employment Agreement dated as of July 28, 2011 between CornerWorld Corporation and Scott Beck (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed November 6, 2013)
31.1	Rule 13a-14(a) Certification by our chief executive officer	(1)
31.2	Rule 13a-14(a) Certification by our chief financial officer	(1)
32.1	Section 1350 Certification by our chief executive officer	(2)
32.2	Section 1350 Certification by our chief financial officer	(2)
101	Interactive Data Files of Financial Statements and Notes.	(3)

__________


(1)	Filed herewith.
(2)	Furnished (and not filed) herewith pursuant to Item 601(b)(32)(ii) of Regulation S-K under the Exchange Act.
(3)	Furnished (and not filed) herewith pursuant to Regulation S-T under the Exchange Act.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CORNERWORLD CORPORATION
	Registrant
December 23, 2013	/s/ V. Chase McCrea III
March 17, 2014	/s/ V. Chase McCrea III
	V. Chase McCrea III
	Chief Financial Officer

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