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 September 30, 2015
	For the Quarterly Period Ended March 31, 2016
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: 000-54419

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 ~~November~~May 12, ~~2015~~2016 was 4,655,338.

CORNERWORLD CORPORATION

INDEX

Item Number		Page
	PART I. FINANCIAL INFORMATION
1	Financial Statements (Unaudited):
	Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014 (Audited)	1
	Condensed Consolidated Balance Sheets as of March 31, 2016 and December 31, 2015 (Audited)	1
	Condensed Consolidated Statements of Operations for the Three and Nine Month Periods Ended September 30, 2015 and 2014	2
	Condensed Consolidated Statements of Operations for the Three Month Period Ended March 31, 2016 and 2015	2
	Condensed Consolidated Statement of Stockholders’ Deficit for the Nine Months Ended September 30, 2015	3
	Condensed Consolidated Statement of Stockholders’ Deficit for the Three Month Period Ended March 31, 2016	3
	Condensed Consolidated Statements of Cash Flows for the Nine Month Periods Ended September 30, 2015 and 2014	4
	Condensed Consolidated Statements of Cash Flows for the Three Month Period Ended March 31, 2016	4
	Notes to Condensed Consolidated Financial Statements	5
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
3	Quantitative and Qualitative Disclosures about Market Risk	1815
4	Controls and Procedures	1815
	PART II. OTHER INFORMATION
1	Legal Proceedings	1915
1A	Risk Factors	1915
2	Unregistered Sales of Equity Securities and Use of Proceeds	1915
3	Defaults Upon Senior Securities	1915
4	Mine Safety Disclosures	1916
5	Other Information	1916
6	Exhibits	1916
	Signatures	2016

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CornerWorld Corporation

Condensed Consolidated Balance Sheets

	September 30, 2015			December 31, 2014
	March 31, 2016			December 31, 2015
		(Unaudited)
Assets
Current assets:
Cash	$	384,~~542~~074		$	701,~~746~~268
Accounts receivable, net		203,~~839~~376			371,~~313~~265
Prepaid expenses and other current assets		310,~~516~~769			659,~~132~~969
Assets of discontinued operations		—			431,~~788~~555
Total current assets		62,897			177,979
TOTAL ASSETS	$	18,219		$	44,057
Property and equipment, net		—			2,677
Other assets		4			7
TOTAL ASSETS	$	62,901		$	180,663
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	~~138~~176,~~037~~577		$	~~217~~145,~~726~~249
Accrued expenses		~~309~~341,~~834~~815			~~311~~338,~~977~~936
Notes payable related parties		~~280~~338,~~412~~958			~~152~~338,~~952~~958
Lease payable, current portion		—			2,662
Deferred revenue		1,563			499
Deferred revenue		300			75,687
Liabilities of discontinued operations		—			9,378
Other current liabilities		—			9,266
Total liabilities		858,913			833,020
Liabilities of discontinued operations		—			29,534
Total current liabilities		728,583			799,804
Long-term liabilities:
Notes payable related parties, net of current portion		58,546			186,006
Total liabilities		787,129			985,810
Commitments and Contingencies		—			—
Stockholders’ 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; 162,937,110 shares issued and outstanding, at September 30, 2015 and December 31, 2014, respectively		162,937			162,937
Common stock, $0.001 par value, 250,000,000 shares authorized; 4,655,338 shares issued and outstanding, at March 31, 2016 and December 31, 2015, respectively		162,937			162,937
Additional paid-in capital		117,~~810~~774,~~978~~006			11,~~806~~812,~~865~~349
Accumulated deficit		(128,~~698~~777,~~143~~637	)		(12,~~774~~764,~~949~~249	)
Total stockholders’ deficit		(~~724~~840,~~228~~694	)		(~~805~~788,~~147~~963	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	6218,~~901~~219		$	~~180~~44,~~663~~057

See Notes to Condensed Consolidated Financial Statements.

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CornerWorld Corporation

Condensed Consolidated Statements of Operations

(unaudited)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	For the Three Months Ended March 31,
	2015			2014			2015			2014
	2016			2015
Sales, net	$	6259,~~432~~302		$	~~190~~235,~~975~~843		$	~~443,451~~		$	~~623,900~~
Costs of goods sold		311,~~594~~203			8292,~~420~~003			~~151,007~~			~~312,461~~
Gross profit		5848,~~838~~099			~~108~~143,~~555~~840			~~292,444~~			~~311,439~~
Expenses:
Selling, general and administrative expenses		4970,~~623~~924			~~349~~127,~~347~~700			~~209,240~~			~~1,121,964~~
Depreciation		—			2,677			907			14,131
Operating income (loss)		(22,825	)		16,140
Total Operating expenses		49,623			352,024			210,147			1,136,095
Other income (expense), net:
Operating income (loss)		9,215			(243,469	)		82,297			(824,656	)
Interest expense		(8,102	)		(6,779	)
Other income (expense), net:
Other income (expense), net		—			(200	)
Interest expense		(7,148	)		(6,802	)		(20,889	)		(20,108	)
Total other expense, net		(8,102	)		(6,979	)
Other income (expense), net		—			—			(379	)		(3,313	)
Income (loss) from continuing operations before income taxes		(30,927	)		9,161
Total other expense, net		(7,148	)		(6,802	)		(21,268	)		(23,421	)
Income taxes		—			—
Income (loss) from continuing operations before income taxes		2,067			(250,271	)		61,029			(848,077	)
Income (loss) from continuing operations		(30,927	)		9,161
Income taxes		—			—			—			—
Income (loss) from discontinued operations, net of tax		—			95,316
Income (loss) from continuing operations		2,067			(250,271	)		61,029			(848,077	)
Net income (loss)	$	(30,927	)	$	104,477
Income from discontinued operations, net of tax		—			(5,322	)		15,777			(23,177	)
Basic and diluted earnings loss per share from continuing operations	$	(0.01	)	$	0.00
Gain from discontinued operations, net of tax		—			—			—			—
Basic and diluted earnings per share from discontinued operations	$	0.00		$	0.02
Net income (loss)	$	2,067		$	(255,593	)	$	76,806		$	(871,254	)
Basic and diluted earnings (loss) per share	$	(0.01	)	$	0.02
Basic earnings (loss) per share from continuing operations	$	0.00		$	0.00		$	0.00		$	(0.01	)
Basic and diluted weighted average number shares outstanding		4,655,338			4,655,338
Basic earnings per share from discontinued operations	$	0.00		$	0.00		$	0.00		$	0.00
Basic earnings (loss) per share	$	0.00		$	0.00		$	0.00		$	(0.01	)
Diluted earnings (loss) per share from continuing operations	$	0.00		$	0.00		$	0.00		$	(0.01	)
Diluted earnings per share from discontinued operations	$	0.00		$	0.00		$	0.00		$	0.00
Diluted earnings (loss) per share	$	0.00		$	0.00		$	0.00		$	(0.01	)
Basic weighted average number shares outstanding		162,937,110			162,937,110			162,937,110			161,524,016
Diluted weighted average number shares outstanding		162,937,110			162,937,110			162,937,110			161,524,016

See Notes to Condensed Consolidated Financial Statements.

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CornerWorld Corporation

Condensed Consolidated Statements of Stockholders’ Deficit

(unaudited)

					Additional						Total
	Common Shares				Paid-in			Accumulated			Stockholders’
	Shares		Amount		Capital			Deficit			Equity (Deficit)
Balance, December 31, 2014		162,937,110	$	162,937	$	11,806,865		$	(12,774,949	)	$	(805,147	)
Balance, December 31, 2015		4,655,338	$	162,937	$	11,812,349		$	(12,764,249	)	$	(788,963	)
Stock-based compensation expense		—		—		4,113			—			4,113
Equity of spun-off subsidiaries		—		—		(4,039,714	)		(4,017,539	)		(22,175	)
Net income		—		—		—			76,806			76,806
Stock-based compensation expense		—		—		1,371			—			1,371
Balance, September 30, 2015		162,937,110	$	162,937	$	11,810,978		$	(12,698,143	)	$	(724,228	)
Net loss		—		—		—			(30,927	)		(30,927	)
Balance, March 31, 2016		4,655,338	$	162,937	$	7,774,006		$	(8,777,637	)	$	(840,694	)

See Notes to Condensed Consolidated Financial Statements.

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CornerWorld Corporation

Condensed Consolidated Statements of Cash Flows

(unaudited)

	For the Nine Months Ended September 30,
	For the Three Months Ended March 31,
	2015			2014
	2016			2015
Cash Flows from Operating Activities
Net income (loss)	$	76(30,~~806~~927	)	$	~~(871~~104,~~254~~477	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation		907			14,131
Provision for doubtful accounts		17,137			18,276
Provision for doubtful accounts		23,424			52,132
Stock-based compensation		1,371			1,371
Stock-based compensation		4,113			8,765
Changes in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable		(619,~~950~~248	)		(3542,~~904~~145	)
Prepaid expenses and other current assets		~~61,616~~(800	)		878,~~840~~300
Other assets		3			(3	)
Accounts payable		31,328			4,567
Accounts payable		(79,689	)		60,561
Accrued expenses		2,879			(14,235	)
Accrued expenses		(2,143	)		(30,853	)
Deferred revenue		1,064			(75,687	)
Deferred revenue		(75,387	)		(11,695	)
Changes in assets and liabilities of discontinued operations		22,177			(87,019	)
Other liabilities		(9,266	)		—
Net cash provided by (used in) operating activities		24,981			(82,095	)
Changes in assets and liabilities of discontinued operations		(24,746	)		42,873
Cash Flows from Investing Activities
Net cash used in operating activities		(31,312	)		(683,407	)
Equity in spun-off subsidiary		(22,175	)		—
Cash Flows from Financing Activities
Net cash used in financing activities		(22,175	)		—
Payments on capital leases		(892	)		(7,785	)
Net change in cash		2,806			(82,095	)
Net cash used in financing activities		(892	)		(7,785	)
Cash at beginning of period		1,268			94,857
Net decrease in cash		(32,204	)		(691,192	)
Cash at end of period	$	4,074		$	12,762
Cash at beginning of period		70,746			857,954
Cash at end of period	$	38,542		$	166,762
Cash paid for:
Interest	$	—		$	—
Income taxes	$	—		$	—

See Notes to Condensed Consolidated Financial Statements.

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CornerWorld Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

~~September~~March 3031, ~~2015~~2016

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 ~~September~~March 3031, ~~2015~~2016 and for the three month ~~and~~period ~~nine month periods~~ ended ~~September~~March 3031, ~~2015~~2016 and ~~2014~~2015 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 nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2015~~2016 ~~are~~is 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 December 31, ~~2014~~2015, 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, the Company changed its 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. Enversa provides domain hosting, domain leasing, programmatic re-targeting and website management services on a recurring monthly basis.

The Company provides telecommunications services, including telephony and internet services, through its wholly-owned subsidiary, Woodland Holdings Corporation (“Woodland”). Woodland provides telephony and internet services through its wholly owned subsidiaries Phone Services and More, L.L.C., doing business as Visitatel (“PSM”) and T2 Communications, L.L.C. (“T2”). T2 is a Competitive Local Exchange Carrier (CLEC) that generates revenues via the sale of long-distance minutes to its customers. T2 also generates commissions from its carrier partners related to the provision of long-distance minutes to its customers. PSM, also a CLEC, is a wholesale long distance service provider to the carrier community and large commercial users of minutes. PSM generates revenues via earning commissions from serving as a broker for services provided by T2. T2’s and PSM’s CLEC licenses permit them to operate in the lucrative telecommunications industry but their respective business models do not require any significant investments in property plant and equipment due to the fact that they are able to outsource all switching and technology needs to third parties.

On March 31, 2015, the Company sold T2’s Michigan-based customers as well as all of T2’s Michigan network operations and contracts to an unrelated third party. See also Note 3, Discontinued Operations, for more information.

The Company’s year-end is December 31^st.

~~Common Stock Reverse Split~~Spinoff

On ~~November~~August 613, 2015, ~~after~~ the ~~report~~Company’s ~~date~~Board of ~~this~~Directors ~~quarterly~~formally ~~report~~approved ona ~~Form~~plan ~~10-Q,~~whereby the Company ~~effected~~was authorized to split its telecommunications services segment, Woodland Holdings Corporation (“Woodland”) and Woodland’s wholly owned subsidiaries, in their entirety, into a ~~one-~~separate reporting entity. On October 14, 2015, the US Securities and Exchange Commission (the “SEC”) formally informed the Company that the Woodland’s registration statement had become effective, clearing the way for the spin-~~thirty-five~~off. Finally, ~~reverse~~on ~~stock~~December ~~split~~31, 2015, the Company’s Board of Directors spun-off Woodland to CornerWorld’s shareholders of record as of ~~November~~December 631, 2015 (the “Record Date”). CornerWorld ~~Share~~shareholders, ~~and~~as ~~per~~of ~~share~~the ~~information~~Record ~~has~~Date, ~~not~~received ~~been~~shares ~~retroactively~~in ~~adjusted~~Woodland equal to ~~reflect~~their ~~the~~pro-rata ~~reverse~~ownership ~~stock~~percentage ~~split~~of ~~due~~CornerWorld. toFor every share owned by the ~~fact~~Company’s ~~that~~shareholders as of the ~~reverse~~Record ~~stock~~Date, ~~split~~those ~~took~~same ~~place~~shareholders ~~after~~were ~~the~~issued ~~close~~1 share of ~~the~~Woodland’s ~~reporting~~common ~~period~~stock.

The Company previously provided telecommunications services, including telephony and internet services, through Woodland’s wholly owned subsidiaries Phone Services and More, L.L.C., doing business as Visitatel (“PSM”) and T² Communications, L.L.C. (“T²”). As a provider of Internet and VoIP services, T² delivers leading-edge technology to business and residential customers in Michigan and Texas. Offerings include: phone lines, internet connections, long distance and toll-free services. T² 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. Neither the Company nor Woodland has incurred any costs over the previous three years on research and development activities for either T² or PSM. Woodland’s operations, along with those of its wholly owned subsidiaries, have been reported as discontinued operations in these unaudited interim condensed consolidated financial statements.

- 5 -

CornerWorld Corporation

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

~~Spinoff~~Common Stock Reverse Split

On ~~August~~November 136, 2015, the Company’s ~~Board~~effectuated ~~of Directors formally approved~~ a plan whereby the Company will split Woodland Holdings, its telecommunications services segment, in its entirety, into a separate reporting entity. On October 14, 2015, the US Securities and Exchange Commission (the “SEC”) formally informed the Company that the Woodland’s registration statement had become effective, clearing the way one-for ~~the spin~~-~~off. Accordingly,~~thirty-five ~~the~~reverse ~~Company’s~~stock ~~Board~~split ofto ~~Directors has determined that~~ shareholders of record as of ~~October~~November 316, 2015 ~~(the “Record Date”) will receive shares in Woodland Holdings in their pro-rata ownership percentage of CornerWorld~~. ~~For~~Share ~~every~~and per share ~~owned~~information byhave ~~the~~been ~~Company’s~~retroactively ~~shareholders~~adjusted asto ofreflect the ~~Record~~reverse ~~Date,~~stock ~~those~~split ~~same~~due ~~shareholders~~to ~~will~~the befact ~~issued~~that ~~1 share of~~ the ~~Woodland~~reverse ~~Holdings’ common~~ stock. ~~The~~split ~~Company~~took isplace inafter the ~~process~~close of ~~taking~~ the ~~necessary~~reporting ~~actions whereby Woodland Holdings’ shares will be free-trading on the OTCXB exchange~~period.

AsProspective previously disclosed, on November 5, 2014, the Company announced that it had signed a non-binding letter of intent (the “LOI”) to merge its interests with another entity. The LOI expired of its own accord on June 30, 2015 and it has not been renewed and, at this time, the Company has broken off all merger discussions with the other entity.Merger

On February 29, 2016, CornerWorld executed a merger agreement with Deportes Media, LLC (the “Merger Agreement”). Pursuant to the Merger Agreement, the Merger Agreement itself was non-binding until such time as Deportes Media, LLC (“Deportes”) was able to secure approval for the Merger Agreement from no less than 75% of its shareholders. On March 18, 2016, Deportes reported to CornerWorld that it had, in fact, obtained the approval of the Merger Agreement from more than 75% of its shareholders and that, accordingly, the Merger Agreement had become binding.

Pursuant to the Merger Agreement, CornerWorld is not contractually obligated to close the Merger Agreement, until such time as Deportes has completed certain Conditions to Close, as described in more detail below. If CornerWorld and Deportes close the Merger Agreement, Deportes shareholders will be entitled to receive 27.32 shares of CornerWorld common stock for each share of Deportes common stock. If CornerWorld closes the Merger Agreement, a total of approximately 13.7 million shares will be outstanding with an implied price of $1.32 per share and existing CornerWorld shareholders would own approximately 33.9% of the combined Company.

CornerWorld can terminate the Merger Agreement, at its sole option, if Deportes fails to perform any of the Conditions to Close as further defined below. Conditions to Close include, but are not limited to, the following: Deportes must acquire certain radio towers in certain markets, Deportes current debt holders must convert their debt to equity and Deportes must acquire the ESPN Deportes New York affiliate, WEPN AM-1050. Should Deportes fail to meet all the Conditions to Close, CornerWorld will be entitled to receive a break-up fee equivalent to 10% of Deportes then outstanding common shares. CornerWorld, at its sole discretion, may close the Merger Agreement without Deportes completing the Conditions to Close. However, CornerWorld will only receive the 10% break-up fee if CornerWorld terminates the Merger Agreement as a result of Deportes’ failure to execute any one of the Conditions to Close after May 31, 2016. Should Deportes fail to execute the Conditions to Close and CornerWorld does not close the transaction by September 30, 2016, the Merger Agreement will terminate of its own accord and CornerWorld will be entitled to the a breakup fee equivalent to 10% of Deportes then outstanding common shares.

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.

Receivables

Accounts receivable include uncollateralized customer obligations due under normal trade terms requiring payment within 30-60 days from invoice date. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The carrying amount of accounts receivable is reduced by a valuation allowance for doubtful accounts that reflects management’s best estimate of the amounts that will not be collected based on historical collection trends. The allowance for doubtful accounts was $393,~~241~~741 and $803,~~790~~741 as of ~~September~~March 3031, ~~2015~~2016 and December 31, ~~2014~~2015, respectively.

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 and valuation of stock-based compensation and deferred tax assets. Actual results could differ from these estimates.

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CornerWorld Corporation

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

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 payable, 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 6Enversa, -revenue is recognized along with the related cost of revenue as services 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.

CornerWorld Corporation

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

At Enversa, revenue is recognized along with the related cost of revenue as services 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. For T2 and PSM, revenue is recognized as long-distance minutes are incurred or as commissions accrue.

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 a patent and 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. The ~~patent,~~Company’s ~~which~~only ~~was~~long-lived ~~issued on March 4, 2014, is currently being valued at its net realizable value of $0. Management does not believe that its fixed~~ assets are ~~impaired~~a property and noequipment ~~impairment~~which ~~charges~~ have been ~~recorded~~fully ~~as of September 30, 2015~~depreciated.

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.

Concentration of credit risk

Credit is extended based on an evaluation of the customer’s financial condition, and the Company does not require collateral. Write-offs of accounts receivable have historically been nominal. Approximately 18.4% and 45.6% of total revenue was derived from the Company’s largest customer during the three month periods ended September 30, 2015 and 2014, respectively, while approximately 41.7% and 48.0% of total revenue was derived from the Company’s largest customer during the nine month periods ended September 30, 2015 and 2014, respectively.

- 7 -

CornerWorld Corporation

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

Concentration of credit risk

Reclassifications

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

3. Discontinued Operations

OnAs ~~March~~previously 31noted, ~~2015,~~on ~~the~~August ~~Company~~13, ~~signed~~2015, ~~an agreement whereby it completed~~ the ~~sale of T2~~Company’s ~~Michigan~~Board ~~based~~of ~~operations~~Directors onformally ~~for~~approved ~~$15,000~~a inplan ~~cash;~~whereby the Company ~~retained~~was T2authorized ~~itself~~to assplit ~~well as T2~~Woodland’s ~~Texas~~and ~~CLEC~~its ~~license~~wholly ~~among~~owned ~~other~~subsidiaries, ~~Texas~~in ~~based~~their T2entirety, ~~operations. There~~into ~~was~~a noseparate ~~gain~~reporting ~~recognized~~entity. On onOctober 14, 2015, the ~~disposal~~SEC asformally informed the Company ~~had~~that ~~incurred~~the ~~losses on T2~~Woodland’s ~~Michigan~~registration ~~operations~~statement ~~since~~had ~~its~~become ~~original~~effective. Finally, ~~acquisition~~ on ~~February~~December 2331, ~~2009. The~~2015, ~~decision~~the toCompany ~~sell~~Board ~~T2’s~~of ~~Michigan~~Directors ~~operations~~spun-off ~~eliminated~~Woodland ~~the~~to ~~Company~~CornerWorld’s ~~presence~~shareholders inof ~~Michigan~~record ~~altogether~~as ~~and~~of ~~enables~~ the ~~Company~~Record toDate. As ~~focus~~a ~~solely~~result ~~on its more profitable lines~~ of ~~business~~the Spin-Off, ~~located in Texas. T2~~Woodland’s ~~Michigan~~ operations, ~~previously~~along ~~reported~~with ~~within~~those ~~the~~of ~~Communications~~its ~~Services~~wholly ~~segment~~owned subsidiaries, have been ~~reclassified~~reported as discontinued operations in ~~our~~these ~~unaudited~~consolidated ~~Condensed~~financial ~~Consolidated Financial Statements for the operations up to the date of sale for the three and nine month periods ended September 30, 2015 and 2014~~statements. ~~In addition, all accounts receivable, accounts payable and accrued liabilities, as a result of the divestiture, have been reclassified as discontinued operations.~~

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

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	For the Three Months Ended March 31,
	2015		2014			2015		2014
	2016		2015
Sales, net	$	—	$	3269,~~174~~806		$	~~39,185~~	$	~~81,789~~
Income (loss) from discontinued operations before income taxes		—		(595,~~322~~316	)		~~15,777~~		~~(23,177~~	)
Income taxes		—		—			—		—
Net income (loss) from discontinued operations	$	—	$	(5,322	)	$	15,777	$	(23,177	)
Net income from discontinued operations	$	—	$	95,316

The following is a summary of assets and liabilities of discontinued operations as of March 31, 2016 and December 31, 2015:


	March 31, 2016		December 31, 2015

Assets:
Current assets	$	—	$	31,555
Assets of discontinued operations held for sale		—		31,555

Liabilities
Accounts payable and accrued expenses		—		9,378
	$	—	$	9,378

4. Debt

	As of
	September 30, 2015			December 31, 2014
	March 31, 2016			December 31, 2015
Long-term Debt
Note payable to CEO (the “Senior Note”); the Senior Note matures July 31, 2016. At March 31, 2016, the interest rate was 6.25%. This note is collateralized by all assets of the Company. See also Note 7, Related Party Transactions.	$	338,958		$	338,958
Note payable to CEO (the “Senior Note”); the Senior Note matures July 31, 2016. At September 30, 2015, the interest rate was 6.25%. This note is collateralized by all assets of the Company. See also Note 8, Related Party Transactions.		338,958			338,958
Total debt	$	338,958		$	338,958
Total debt		338,958			338,958
Less current portion of long-term debt		(280,412	)		(152,952	)
Non-current portion of long-term debt	$	58,546		$	186,006

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CornerWorld Corporation

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

The Senior Note contains no restrictive covenants or events of default other than non-payment. On December 31, 2014, the Company did not make its regularly scheduled payment totaling $12,746 which constituted an event of default. Mr. Beck did not call default but there can be no assurance that, as the Company’s senior secured lender, he will not do so. It is anticipated that the Company will amend the Senior Note at some future point but there can be no assurance that we will be successful in amending the terms of the Senior Note. Should we be unsuccessful in executing an amendment or an extension, Mr. Beck, as the senior secured lender, could move to seize the underlying collateral which would have a material adverse effect on the Company’s ability to continue as a going concern.

5. Commitments and Contingencies

Litigation

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.

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CornerWorld Corporation

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

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 options pursuant to this plan during the three ~~and nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2015~~2016.

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 nine~~ month ~~periods~~period ended ~~September~~March 3031, ~~2015~~2016.

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

	September 30, 2015
		March 31, 2016
		Shares Reserved for Grant	Awards Available for Grant
Incentive Stock Plan		4,000,000	3,~~795~~999,~~000~~858
Stock Compensation Plan		4,000,000	23,~~375~~953,~~000~~575
		8,000,000	67,~~170~~953,~~000~~433

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 September 30				For the nine month periods Ended September 30
	2015		2014		2015		2014
Expected term (in years)	—		5.0		—		5.0
Expected volatility	—	%	125	%	—	%	125	%
Risk-free interest rate	—	%	1.6	%	—	%	1.5	%
Dividend yield	—	%	0.00	%	—	%	0.00	%

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CornerWorld Corporation

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

AThe ~~summary~~fair value of ~~activity~~each ~~under~~stock-based award is estimated on the ~~Stock~~grant ~~Plans~~date ~~and~~using ~~changes~~the ~~during~~Black-Scholes option-pricing model. Expected volatilities are based on the ~~three~~historical ~~month~~volatility ~~period~~of ~~ended~~the ~~September~~Company’s ~~30,~~stock ~~2015~~price. The expected term of options granted subsequent to the adoption ASC 718 is ~~presented~~derived ~~below~~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:

				Weighted-Average
	For the three month periods ended March 31,
	Shares			Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	2016			2015
Outstanding at December 31, 2014		3,550,000		$	0.13		3.94	$	—
Expected term (in years)	—			—
Issued		—			—		—		—
Expected volatility	—	%		—	%
Cancelled/forfeited		(1,720,000	)		0.13
Risk-free interest rate	—	%		—	%
Outstanding at September 30, 2015		1,830,000		$	0.12		3.08	$	—
Dividend yield	—	%		—	%
Options expected to vest		1,830,000		$	0.12		3.08	$	—
Options exercisable at end of period		667,500		$	0.15		2.21	$	—

~~For~~A ~~the~~summary ~~nine~~of ~~month~~activity ~~periods~~under ~~ended September 30, 2015 and 2014,~~ the ~~Company~~Stock ~~recognized~~Plans ~~$4,113~~ and ~~$8,765 of~~changes ~~stock-based~~during ~~compensation~~the ~~expense,~~three ~~respectively.~~month Asperiod ofended ~~September~~March 3031, ~~2015~~2016 ~~there was $8,967 of total unrecognized compensation cost, net of forfeitures, related to unvested employee and director stock option compensation arrangements. That cost~~ is ~~expected~~presented ~~to be recognized on a straight-line basis over the next 3.08 weighted average years.~~ below:

7. Business Segments


			Weighted-Average
	Shares		Exercise Price		Remaining Contractual Term (Years)		Aggregate Intrinsic Value

Outstanding at December 31, 2015		46,567	$	3.84		3.20	$	—
Issued		—		—		—		—
Cancelled/forfeited		—		—		—
Outstanding at March 31, 2016		45,567	$	3.84		2.95	$	—
Options expected to vest		45,567	$	3.84		2.95	$	—
Options exercisable at end of period		24,426	$	4.15		2.84	$	—

~~Our~~For ~~business~~the ~~consists~~three ~~primarily~~month ofperiod ~~two~~ended ~~integrated~~March ~~business~~31, ~~segments:~~2016 ~~(i)~~and ~~marketing~~2015, ~~services~~the Company recognized $1,371 and ~~(ii)~~$1,371 ~~communications~~of ~~services~~stock-based compensation expense, respectively. ~~Our~~As ~~corporate~~of ~~administrative~~March ~~functions~~31, ~~are~~2016 ~~tracked~~there ~~separately~~was ~~and~~$6,825 ~~the~~of ~~associated~~total ~~costs~~unrecognized ~~are~~compensation ~~not~~cost, ~~pushed~~net ~~down~~of forfeitures, related to ~~the~~unvested ~~operating~~employee ~~segments~~and director stock option compensation arrangements. ~~The~~That ~~following~~cost ~~table~~is ~~summarizes~~expected ~~selected~~to ~~financial~~be ~~information~~recognized ~~for~~on ~~each~~a ~~operating~~straight-line ~~segment:~~basis over the next 2.95 weighted average years.

	Marketing Services		Communications Services		Corporate Overhead			Consolidated
Three Months Ended September 30, 2015
Revenue	$	36,133	$	26,299	$	—		$	62,432
Income (loss) from continuing operations before tax		27,115		26,769		(51,817	)		2,067
Net income (loss)		27,115		26,769		(51,817	)		2,067
Total assets		3,363		57,188		2,350			62,901
Depreciation		—		—		—			—

7. Related Party Transactions

	Marketing Services		Communications Services			Corporate Overhead			Consolidated
Three Months Ended September 30, 2014
Revenue	$	163,361	$	27,614		$	—		$	190,975
Income (loss) from continuing operations before tax		30,621		(2,828	)		(278,064	)		(250,271	)
Net income (loss)		30,621		(8,150	)		(278,064	)		(255,593	)
Total assets		103,964		158,619			69,471			332,054
Depreciation		—		2,677			—			2,677

On March 30, 2011, the Company entered into a subordinated $389,942 promissory note (the “Senior Note”) with Scott N. Beck, the Company’s Chief Executive Officer. Interest on the outstanding principal amount under the Senior Note is payable at the Company’s discretion at a rate of 6.25% per annum and monthly principal payments totaling $12,746 were due beginning December 31, 2014. On December 31, 2014, the Company did not make its regularly scheduled payment totaling $12,746 to Mr. Beck which constituted an event of default under the Senior Note. Mr. Beck did not call default but there can be no assurance that, as the Company’s Senior Lender, he will not do so. It is anticipated that the Company will amend the Senior Note at some future point but there can be no assurance that we will be successful in amending the terms of the Senior Note. Should we be unsuccessful in executing an amendment or an extension, Mr. Beck, as the senior lender, could move to seize the underlying collateral which would have a material adverse effect on the Company’s ability to continue as a going concern. The Company recorded interest of $8,102 and $6,779 on this facility during the three month period ended March 31, 2016 and 2015, respectively. The balance of this note totaled $338,958 at March 31, 2016.

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CornerWorld Corporation

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

	Marketing Services		Communications Services		Corporate Overhead			Consolidated
Nine Months Ended September 30, 2015
Revenue	$	374,240	$	69,211	$	—		$	443,451
Income (loss) from continuing operations before tax		139,880		125,470		(204,321	)		61,029
Net income (loss)		139,880		141,247		(204,321	)		76,806
Total assets		3,363		57,188		2,350			62,901
Depreciation		—		907		—			907

The Company was party to a lease agreement with 13101 Preston Road, LP pursuant to which it leases office space for its corporate headquarters. The lease expired on January 31, 2016. The limited partners of 13101 Preston Road, LP are trusts controlled by the family of the Company’s Chief Executive Officer. The Company paid $2,500 and $7,500 in rent during the three month periods ended March 31, 2016 and 2015, respectively. As of March 31, 2016, the Company had recorded a liability of $17,500 for unpaid rent on its office space.

	Marketing Services		Communications Services			Corporate Overhead			Consolidated
Nine Months Ended September 30, 2014
Revenue	$	527,227	$	96,673		$	—		$	623,900
Income (loss) from continuing operations before tax		6,584		(42,057	)		(812,604	)		(848,077	)
Net income (loss)		6,584		(65,234	)		(812,604	)		(871,254	)
Total assets		103,964		158,619			69,471			332,054
Depreciation		—		8,032			6,099			14,131

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 $15,000 from this entity during each of the three month periods ended March 31, 2016 and 2015.

~~There were no intersegment sales~~8. ~~All~~Subsequent ~~of the Company’s business activities are conducted within the United States geographic boundaries.~~ Events

8.There ~~Related~~were ~~Party~~no ~~Transactions~~events that took place subsequent to March 31, 2016 up through the date of the filing of these financial statements that had a material impact on these financial statements.

On March 30, 2011, the Company entered into a subordinated $389,942 promissory note (the “Senior Note”) with Scott N. Beck, the Company’s Chief Executive Officer. Interest on the outstanding principal amount under the Senior Note is payable at the Company’s discretion at a rate of 6.25% per annum and monthly principal payments totaling $12,746 were due beginning December 31, 2014. On December 31, 2014, the Company did not make its regularly scheduled payment totaling $12,746 to Mr. Beck which constituted an event of default under the Senior Note. Mr. Beck did not call default but there can be no assurance that, as the Company’s Senior Lender, he will not do so. It is anticipated that the Company will amend the Senior Note at some future point but there can be no assurance that we will be successful in amending the terms of the Senior Note. Should we be unsuccessful in executing an amendment or an extension, Mr. Beck, as the senior lender, could move to seize the underlying collateral which would have a material adverse effect on the Company’s ability to continue as a going concern. The Company recorded interest of $7,148 and $6,716 on this facility during the three month periods ended September 30, 2015 and 2014, respectively, and the Company recorded interest of $20,889 and $19,627 during the nine month periods ended September 30, 2015 and 2014, respectively. The balance of this note totaled $338,958 at September 30, 2015.

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 $7,500 in rent during each of the three month periods ended September 30, 2015 and 2014 and paid $22,500 in rent during each of the nine month periods ended September 30, 2015 and 2014, respectively. As of September 30, 2015, the Company recorded a liability of $5,000 for unpaid rent on its office space.

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 $15,000 from this entity during each of the three month periods ended September 30, 2015 and 2014 and $45,000 from this entity during each of the nine month periods ended September 30, 2015 and 2014.

9. Subsequent Events

On November 6, 2015, the Company effectuated a one-for-thirty-five reverse stock split to shareholders of record as of November 6, 2015.

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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.

~~Nine~~Three Months ended ~~September~~March 3031, ~~2015~~2016 Highlights:

	·	The Company ~~filed~~completed ~~Registration Statement on Form 10 for~~ the ~~purpose of spinning~~spin-off of its Woodland ~~Holdings Corporation~~ subsidiary. ~~The~~to ~~SEC~~shareholders ~~notified~~of ~~the~~record ~~Company~~as onof ~~October~~December 1431, 2015. ~~that~~Effective ~~the~~January ~~Registration~~1, ~~Statement was effective. Accordingly~~2016, ~~the~~Woodland ~~Company~~became ~~anticipates~~its ~~completing~~own ~~the~~operating ~~planned spin-off during the fourth calendar quarter of 2015~~company.
	·	The Company ~~divested~~entered ~~its~~into T2a ~~Michigan~~contract ~~customers~~ to anmerge ~~unrelated~~with ~~third party~~Deportes. The ~~divestiture~~Company ofcan ~~these~~close ~~operations~~the ~~permanently~~merger ~~ends~~at ~~the~~is ~~Company’s~~own ~~presence~~discretion inassuming ~~Michigan~~Deportes ~~and~~completes certain conditions to close with includes but is ~~anticipated~~not limited to: ~~yield~~Deportes ~~significant~~must ~~cost~~acquire ~~savings.~~certain radio towers in certain markets, Deportes current debt holders must convert their debt to equity and Deportes must acquire the ESPN Deportes New York affiliate, WEPN AM-1050

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 Unaudited Condensed Consolidated Financial 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 Interim 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 collectability 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.

Impairment of Long-Lived Assets

The Company’s management assesses the recoverability of its long-lived assets by determining whether the depreciation 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.

- 12 -

Income Taxes

- 12 -

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.

Recent Accounting Pronouncements

There were various accounting standards and interpretations issued during the ~~nine~~three month period ended ~~September~~March 3031, ~~2015~~2016, none of which are expected to have a material impact on the Company’s consolidated financial position, operations, or cash flows.

- 13 -

Results of Operations

Comparison of the three months ended ~~September~~March 3031, ~~2015~~2016 to the three months ended ~~September~~March 3031, ~~2014~~ 2015

Consolidated CornerWorld Corporation

Revenues:

We had revenues totaling $6259,~~432~~302 for the three month period ended ~~September~~March 3031, ~~2015~~2016 as compared to $~~190~~235,~~975~~843 for the corresponding period in the prior year. The decrease of $~~128~~176,~~543,~~541 ~~or 67.3%,~~ is ~~primarily~~ due to the ~~loss~~termination of programmatic marketing services by our two largest ~~marketing~~customers ~~services clients~~ during the second quarter of 2015.

Selling, General and Administrative (“SG&A”) Expenses:

We had SG&A expenses totaling $49,623 for the three month period ended September 30, 2015 as compared to $349,347 for the corresponding period in the prior year. The decrease of $299,724, or 85.8%, is primarily due to reductions in marketing headcount, closure of our Michigan office and reductions in corporate overhead made in response to the loss of our two largest marketing services clients during the second quarter of 2015. During the three month period ended September 30, 2014, we had a development team completing the work on our TinyDial mobile application. That entire team was eliminated as part of a reduction in staff at the end of 2014 and their costs are not present in the 2015 operating results.

Gain (Loss) from Continuing Operations Before Taxes:

Gain (Loss) from Continuing Operations Before Taxes totaled $2,067 for the three month period ended September 30, 2015 as compared to a loss of $250,271 for the corresponding period in the prior year. The improvement of $252,338 is primarily due to the aforementioned reductions in SG&A expenses which included across the board reductions in marketing, technology and accounting personnel along with rent, telephone and other SG&A related reductions.

Net Income (Loss):

Net Income totaled $2,067 for the three months ended September 30, 2015 as compared to a Net Loss of $255,593 for the corresponding period in the prior year. The improvement of $257,660 is primarily due to the previously discussed SG&A reductions combined with the absence of the $5,322 loss from discontinued operations incurred by our Telecommunications Services segment during the three month period ended September 30, 2014.

Marketing services

Our marketing services segment consists of our Enversa division.

Revenues:

Our marketing services segment had revenues totaling $36,133 for the three month period ended September 30, 2015 as compared to $163,361 for the corresponding period in the prior year. This decrease is due to decreased sales of programmatic marketing services which were terminated by our two largest customers during the second quarter of 2015.

SG&A Expenses

SG&A expenses totaled $470,~~202~~924 for the three months ended ~~September~~March 3031, ~~2015~~2016 as compared to $53127,~~209~~700 for the corresponding period in the prior year. The improvement is due to headcount and other SG&A reductions in response to the loss of our two largest customers during the second quarter of 2015.

Income from Continuing Operations Before Taxes and Net Income:

Income from Continuing Operations Before Taxes and Net Income totaled $27,115 for the three months ended September 30, 2015 as compared to a $30,621 for the corresponding period in the prior year. The decrease is due to the aforementioned decrease in sales of programmatic marketing services which was offset, to some extent by headcount and other SG&A reductions.

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Communications services

Our communications services segment consists of our Woodland division.

Revenues:

Our communications services segment had revenues totaling $26,299 for the three month period ended September 30, 2015 as compared to $27,614 for the corresponding period in the prior year. The slight decrease in revenue was due to a decrease in carrier access billing at our CLEC resulting from decrease in telecommunications traffic at our CLEC’s largest customer.

SG&A Expenses

SG&A expenses totaled $752 for the three months ended September 30, 2015 as compared to $24,876 for the corresponding period in the prior year. The improvement is due to the fact that we finally closed out our Michigan operations during the second quarter of 2015.

Income (Loss) from Continuing Operations Before Taxes:

~~Income~~Loss from Continuing Operations Before Taxes totaled $2630,~~769~~927 for the three ~~month~~months ~~period~~ ended September 30, 2015 as compared to aincome ~~loss~~of ~~totaling~~ $29,~~828~~161 for the corresponding period in the prior year. The ~~improvement~~decrease ~~of $29,597~~ is ~~primarily~~ due to the aforementioned ~~reductions~~decrease in ~~SG&A~~sales asof ~~well~~programmatic asmarketing ~~the~~services ~~fact~~which ~~that~~was weoffset, noto ~~longer~~some ~~incur~~extent ~~depreciation~~by ~~expenses~~headcount asand ~~all~~other ofSG&A ~~our assets have become fully depreciated~~reductions.

Net Income (Loss):

Net ~~income~~Loss totaled $2630,~~769~~927 for the three months ended ~~September~~March 3031, ~~2015~~2016 as compared to ~~net~~Net ~~loss~~Income of $8104,~~150~~477 for the corresponding period in the prior year. The ~~increase~~decrease of $34135,~~919~~404 is due to the aforementioned reductions inprogrammatic ~~SG&A~~marketing revenues combined with the fact that ~~our~~we ~~telecommunications~~had ~~services~~income ~~segment incurred no net loss~~ from discontinued operations oftotaling $95,316 during the quarter ended ~~September~~March 3031, 2015 as compared to ~~incurring~~the aCompany ~~loss~~recording no income from discontinued operations ~~of $5,322~~ during the ~~corresponding~~current ~~period in the prior~~ year.

Corporate

SG&A Expenses

SG&A expenses totaled $44,669 for the three months ended September 30, 2015 as compared to $271,262 for the corresponding period in the prior year. The improvement is due to headcount and other SG&A reductions at corporate. In addition, during the prior year, the Company employed a complete team of mobile application developers to work on our TinyDial mobile application. We completed our development work at the end of 2014 and the entire team was eliminated; accordingly, their costs are not present in the 2015 operating results.

Comparison of the nine months ended September 30, 2015 to the nine months ended September 30, 2014

Consolidated CornerWorld Corporation

Revenues:

We had revenues totaling $443,451 for the nine month period ended September 30, 2015 as compared to $623,900 for the corresponding period during the prior year. The decrease of $180,449, or 28.9%, is primarily due to the loss of our two largest marketing services clients during the second quarter of 2015 and reductions in carrier traffic at our telecommunications services segment.

SG&A Expenses:

We had SG&A Expenses totaling $209,240 for the nine month period ended September 30, 2015 as compared to $1,121,964 for the corresponding period in the prior year. The decrease of $912,724, or 81.4%, is primarily due to reductions in marketing headcount, closure of our Michigan office, elimination of research & development expenses on our TinyDial mobile application and reductions in corporate overhead.

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Depreciation and Amortization:

We had Depreciation and Amortization expenses totaling $907 for the nine month period ended September 30, 2015 as compared to $14,131 for the corresponding period in the prior year. This is due to the fact that all of the Company’s fixed assets have become fully depreciated.

Income (Loss) from Continuing Operations Before Taxes:

Income from Continuing Operations Before Taxes totaled $61,029 for the nine month period ended September 30, 2015 as compared to a Loss of $848,077 for the corresponding period in the prior year. The improvement of $909,106 is primarily due to the aforementioned reductions in SG&A expenses offset, to some degree, by the loss of our two largest marketing customers.

Net Income (Loss):

Net Income totaled $76,806 for the nine months ended September 30, 2015 as compared to a Net Loss of $871,254 for the corresponding period in the prior year. The improvement of $948,060 is primarily due to the previously discussed SG&A reductions combined with the fact that we had net income from discontinued operations totaling $15,777 during the nine months ended September 30, 2015 as compared to a net loss from discontinued operations totaling $23,177 for the corresponding period in the prior year.

Marketing services

Revenues:

Our marketing services segment had revenues totaling $374,240 for the nine month period ended September 30, 2015 as compared to $527,227 for the corresponding period in the prior year. This decrease is due to decreased sales of programmatic marketing services which were terminated by our two largest customers during the second quarter of 2015.

SG&A Expenses

SG&A expenses totaled $93,820 for the nine months ended September 30, 2015 as compared to $237,848 for the corresponding period in the prior year. The improvement is due to headcount and other SG&A reductions in response to the loss of our two largest customers during the second quarter of 2015.

Income from Continuing Operations Before Taxes and Net Income:

Income from Continuing Operations Before Taxes and Net Income totaled $139,880 for the nine months ended September 30, 2015 as compared to $6,584 for the corresponding period in the prior year. The improvement is due to substantial SG&A reductions which were offset, to some extent, by the aforementioned losses of our two largest marketing customers.

Communications services

Revenues:

Our communications services segment had revenues totaling $69,211 for the nine month period ended September 30, 2015 as compared to $96,673 for the corresponding period in the prior year. The decrease in revenue is due to a decrease in carrier access billing at one of our CLECs resulting from decrease in telecommunications traffic at our CLEC’s largest customer.

SG&A Expenses

SG&A expenses totaled a credit of $67,809 for the nine months ended September 30, 2015 as compared to $101,032 for the corresponding period in the prior year. The improvement of $168,841 is primarily due to the reversal of bad debt expense resulting from collections of a long overdue account as well as settlement of certain accounts payable at a discount.

Depreciation and Amortization:

We had Depreciation and Amortization expenses totaling $907 at our Telecommunications Services segment for the nine month period ended September 30, 2015 as compared to $8,032 for the corresponding period in the prior year. This is due to the fact that all of the Company’s fixed assets have become fully depreciated.

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Income (Loss) from Continuing Operations Before Taxes:

Income from Continuing Operations Before Taxes totaled $125,470 for the nine month period ended September 30, 2015 as compared to a Loss from Continuing Operations Before Taxes totaling $42,057 for the corresponding period in the prior year. The improvement of $167,527 is primarily due to the aforementioned improvements in SG&A expenses.

Net Income (Loss):

Net Income totaled $141,247 for the nine month period ended September 30, 2015 as compared to Net Loss of $65,234 for the corresponding period in the prior year. The improvement of $206,481 is due to the aforementioned collection of a long overdue customer account combined with the fact that our telecommunications services segment earned $15,777 from discontinued operations of during the year to date period ended September 30, 2015 as compared to a loss from discontinued operations of $23,177 earned in the corresponding period in the prior year.

Corporate

SG&A Expenses

SG&A expenses totaled $183,229 for the nine months ended September 30, 2015 as compared to $783,084 for the corresponding period in the prior year. The improvement is due to headcount and other SG&A reductions at corporate. In addition, during the prior year, the Company employed a complete team of mobile application developers to work on our TinyDial mobile application. We completed our development work at the end of 2014 and the entire team was eliminated; accordingly, their costs are not present in the 2015 operating results.

Depreciation and Amortization:

We had no Corporate Depreciation and Amortization expenses for the nine month period ended September 30, 2015 as compared to Depreciation and Amortization expenses totaling $6,099 for the corresponding period in the prior year. This is due to the fact that all of the Company’s fixed assets have become fully depreciated.

Loss from Continuing Operations Before Taxes and Net Loss:

Loss from Continuing Operations Before Taxes and Net Loss totaled $204,321 for the nine month period ended September 30, 2015 as compared to a loss of $812,604 for the corresponding period in the prior year. The improvement of $608,283 is primarily due to significant reductions in headcount at Corporate, which included the outsourcing of all technology personnel, as well as the reduction of telecommunications infrastructure and other SG&A expenses.

Liquidity and Capital Resources

As of ~~September~~March 3031, ~~2015~~2016, we had negative working capital totaling $~~665~~840,~~686~~694 which included cash of $384,~~452~~074. Our revenue generating operations consist of our ~~two telecommunications CLEC’s and our~~ marketing company, Enversa. We anticipate that our CLECs will generate positive future cash flow as a result of their ability to generate carrier access revenues. We divested all end user customers during the quarter ended March 31, 2015 focusing all our telecommunications efforts entirely on our carrier to carrier business. With respect to the Marketing Services division, Enversa’s revenues have generally stabilized but our efforts in the programmatic marketing space were terminated with the loss of our two largest customers and their respective termination of their marketing campaigns. There can be no assurance that Enversa will ~~continue to~~ increase revenues and the Company is not currently generating positive operational cash flow.

The Company’s only secured debt is the note payable to the Company’s CEO, Scott Beck (the “Senior Note”). On December 31, 2014, the Company did not make its regularly scheduled payment totaling $12,746 on the Senior Note which constituted an event of default. Mr. Beck did not call default but there can be no assurance that, as the Company’s senior secured lender, he will not do so. It is anticipated that the Company will amend the Senior Note at some future point but there can be no assurance that we will be successful in amending the terms of the Senior Note. Should we be unsuccessful in executing an amendment or an extension, Mr. Beck, as the senior secured lender, could move to seize the underlying collateral which would have a material adverse effect on the Company’s ability to continue as a going concern.

-We 17had no financing activity for the three months ended March 31, 2016 while our entire investing activities consisted of the divestiture of the equity in our spun-off subsidiaries which yielded no cash to the Company.

We had no investing activity for the nine months ended September 30, 2015 while our entire financing activities consisted of the final $892 payment on our lone capital lease.

We have no other bank financing or other external sources of liquidity. There can be no assurance that, going forward, our operations will generate positive operating cash flow. 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.

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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 ~~September~~March 3031, ~~2015~~2016. 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.

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

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Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other information

None.

Item 6. Exhibits

The following exhibits are filed as part of this report:


Exhibit Numbers	Description	Method of Filing

3.1	Certificate of Amendment to Articles of Incorporation For Nevada Profit Corporations of CornerWorld Corporation (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed November 6, 2015)
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.

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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
November 16, 2015	/s/ V. Chase McCrea III
May 20, 2016	/s/ V. Chase McCrea III
	V. Chase McCrea III
	Chief Financial Officer

- 2016 -

Filing Compare · Cornerworld Corp