UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2012 OR o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________

For the quarterly period ended March 31, 2012

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: 333-168587

CONTINUITYX SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware		27-2701563
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
610 State Route 116, Metamora IL		61548
(Address of principal executive offices)		(Zip Code)

~~610~~(309) ~~State Route 116, Metamora, IL 61548~~367-2800

(Address of principal executive offices, including zip code)

Tel: 309-922-1400

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has 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 ¨ o

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 ~~(§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 xo

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 ~~definition~~the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ¨

Large accelerated filer ¨o Accelerated filer ¨o Non-accelerated filer ¨o (Do not check if a smaller reporting company) 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 ¨ o No x

As of ~~May~~November 1120, 2012, there were ~~issued and outstanding 136~~134,~~480~~014,~~000~~ 900 shares of ~~Common~~the ~~Stock~~registrant’s common stock, $0.~~001~~01 par value, outstanding.

EXPLANTORY NOTE

In connection with the filing of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, ContinuityX Solutions, Inc. (“Continuity”) is relying on Release No. 68224 issued by the Securities and Exchange Commission (the “SEC”), titled “Order Under Section 17A and Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder,” which provides that filings by registrants unable to meet filing deadlines due to Hurricane Sandy and its aftermath shall be considered timely as long as the filing is made on or before November 21, 2012, and the conditions contained therein are satisfied. Continuity’s Chief Financial Officer is headquartered in New York and its SEC counsel’s offices are in New York. Accordingly, Continuity was unable to file this report by November 14, 2012 on a timely basis due to disruptions caused by Hurricane Sandy.

CONTINUITYX SOLUTIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

~~INDEX~~FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

		Page
		Number
PART I. FINANCIAL INFORMATION
Item 1.	Unaudited Financial Statements for the three month and nine month periods ending March 31, 2012
	Consolidated Balance Sheets at June 30, 2011 and March 31, 2012	2
	Consolidated Statements of Operations for the three and nine month periods of March 31, 2012	3
	Consolidated Statements of Changes in Stockholders’ Equity for the nine months ending March 31, 2012	4
	Consolidated Statements of Cash Flows for the nine months ending March 31, 2012	5-6
	Notes to Unaudited Consolidated Financial Statements	7-15
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosure	21
Item 5.	Other Information	21
Item 6.	Exhibits	22
SIGNATURES		23

TABLE OF CONTENTS

Page 1 of 23


		Page
PART I. FINANCIAL INFORMATION		3

Item 1. Financial Statements		3

	Consolidated Balance Sheets June 30, 2012 and September 30, 2012 (Unaudited)	3

	Consolidated Statements of Operations for the Three Months Ended September 30, 2011 and 2012 (Unaudited)	4

	Consolidated Statement of Changes in Shareholders' Equity for the Three Months Ended September 30, 2012 (Unaudited)	5

	Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2011 and 2012 (Unaudited)	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18

Item 4.	Controls and Procedures	18

PART II. OTHER INFORMATION		19

Item 1.	Legal Proceedings	19

Item 1A.	Risk Factors	19

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23

Item 3.	Defaults Upon Senior Securities	24

Item 4.	Mine Safety Disclosures	24

Item 5.	Other Information	24

Item 6.	Exhibits	25

SIGNATURE		26

~~CONTINUITYX~~PART ~~SOLUTIONS,~~I. ~~INC~~FINANCIAL INFORMATION

~~CONSOLIDATED~~Item ~~BALANCE~~1. Financial ~~SHEET~~Statements

~~March~~CONTINUITYX 31SOLUTIONS, ~~2012~~INC. ~~(Unaudited)~~AND ~~and June 30, 2011~~SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

	March 31, 2012
	(Unaudited)			June 30, 2011
ASSETS
CURRENT ASSETS
Cash	$	635,975		$	149,784
Accounts receivable		31,220			537,879
Factored accounts receivable		4,933,195			-
Deposits		-			46,000
Investment - convertible note receivable		75,000			-
Prepaid expenses		28,134			-
Total Current Assets		5,703,524			733,663
OTHER ASSETS
Security deposits		1,438,023			240,000
FIXED ASSETS
Property and equipment		906,470			-
Accumulated depreciation		(112,853	)		-
Net Fixed Assets		793,617
TOTAL ASSETS	$	7,935,164		$	973,663
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	247,531		$	49,410
Commission payable		560,394			91,439
Accrued payroll		383,751			208,146
Accrued interest - related party		22,226			17,190
Due to factor		1,639,666			-
Capital lease payable - current portion		325,035			-
Sales tax payable		2,110			-
Short-term notes payable		-			108,750
Short-term notes payable - related party		259,705			424,750
Income taxes payable		696,078			11,325
Total Current Liabilities		4,136,496			911,010
OTHER LIABILITIES
Capital lease payable - net of current portion		308,340			-
Deferred tax liability		878,512			-
Total Other Liabilities		1,186,852			-
TOTAL LIABILITIES	$	5,323,348		$	911,010
SHAREHOLDERS' EQUITY
Preferred stock - $.001 par value, 25,000,000 shares authorized, no shares issued and outstanding		-			-
Common stock - $.001 par value, 200,000,000 shares authorized, 136,479,900 and 97,330,900 shares issued and outstanding at March 31, 2012 and June 30, 2011, respectively		136,480			97,331
Additional paid-in capital		810,304			(87,331	)
Retained Earnings		1,665,032			52,653
Total Shareholders' Equity		2,611,816			62,653
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	7,935,164		$	973,663

(Unaudited)

Page 2 of 23

	June 30, 2012		September 30, 2012
ASSETS:
Current assets:
Cash and cash equivalents	$	698,283	$	2,076,458
Investment – convertible note receivable		75,000		75,000
Accounts receivable:
Factored, less allowance of $0 and $3,499,685, respectively		10,567,669		7,063,003
Other		3,070		7,393,260
Prepaid expenses and other current assets		92,448		389,102
Total current assets		11,436,470		16,996,823

Other assets:
Security deposits		2,137,598		2,137,598
Deferred finance costs, net		249,688		241,778
Deferred tax asset		-		388,007
Total other assets		2,387,286		2,767,383

Property and equipment:
Cost		2,765,427		6,720,527
Accumulated depreciation		(400,915)		(841,062)
Property and equipment, net		2,364,512		5,879,465

Total assets	$	16,188,268	$	25,643,671

LIABILITIES:
Current liabilities:
Current portion of long-term debt	$	668,777	$	2,518,606
Notes payable		345,441		211,140
Amount due factor		2,815,227		2,994,579
Accounts payable		1,053,532		4,523,502
Accrued expenses:
Salaries, wages, commissions, etc.		464,447		871,124
Outside commissions		516,307		1,189,518
Interest		34,994		159,314
Other		92,640		-
Income taxes		-		3,013,109
Warrant liabilities		-		661,778
Total current liabilities		5,991,365		16,142,670

Long-term debt, less current portion shown above		2,785,569		5,313,995
Deferred income taxes		2,866,411		-

Total liabilities		11,643,345		21,456,665

SHAREHOLDERS’ EQUITY:
Preferred Stock, $0.001 par value, authorized 25,000,000 shares at June 30, 2012 and September 30, 2012; none issued		-		-
Common Stock, $0.001 par value, authorized 200,000,000; issued 133,979,900 shares at June 30, 2012 and September 30, 2012		133,980		133,980
Additional paid-in capital		710,304		746,635
Retained earnings		3,700,639		3,306,391
Total shareholders’ equity		4,544,923		4,187,006
Total liabilities and shareholders’ equity	$	16,188,268	$	25,643,671

~~CONTINUITYX~~ The ~~SOLUTIONS,~~accompanying ~~INC~~notes are an integral part of these consolidated financial statements.

CONTINUITYX SOLUTIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three months and nine months ending March 31, 2012 (Unaudited)

For the Three Months Ended September 30, 2011 and 2012 (Unaudited)

		2011		2012
Gross service revenues	$	1,018,566	$	7,428,846
Less: reseller commissions		57,436		813,015
Net service revenue		961,130		6,615,831

Costs of services		212,816		1,331,812

Gross profit		748,314		5,284,019

Other income and expenses:
Selling and administrative expenses		906,376		5,402,052
Interest expense		21,591		518,419
Other (income) expense, net		(73)		(895)
		927,894		5,919,576

Loss before income taxes		(179,580)		(635,557)

Provision for (benefit from) income taxes:
Current		-		1,168,014
Deferred		(69,525)		(1,409,323)

Net loss	$	(110,055)	$	(394,248)

Earnings (loss) per share, basic and diluted	$	(0.00)	$	(0.00)

Weighted average number of common shares		97,330,900		133,979,900

							For The Period
	Three months			Nine months			From Inception
	March 31			March 31			(March 25, 2011)
	(Unaudited)			(Unaudited)			Through March 31, 2011
GROSS SERVICES	$	6,479,243		$	10,933,600			-
RESELLER COMMISSIONS		225,736			936,110			-
NET SERVICES		6,253,507			9,997,490			-
COST OF SERVICES		1,162,160			1,953,191			-
GROSS PROFIT		5,091,347			8,044,299			-
OPERATING EXPENSES
Salaries		531,148			1,098,048			-
Commissions		432,054			1,032,490			-
Payroll taxes		147,136			239,084			-
Rent		8,370			22,184			-
Advertising and promotion		14,921			80,625			-
Bank charges and factor fees		71,254			127,395			-
Computer and internet		60,014			122,158			-
Depreciation		112,355			112,853			-
Insurance		45,984			102,917			-
Office expense		28,345			96,168			-
Outside services		395,328			510,052			-
Professional fees		69,208			252,064			-
Travel and entertainment		96,329			247,574			-
Utilities		19,593			33,997			-
Other		15,525			54,342			-
TOTAL OPERATING EXPENSES		2,047,564			4,131,951			-
INCOME FROM OPERATIONS		3,043,783			3,912,348			-
OTHER INCOME (EXPENSES)
Interest income		566			725			-
Interest expense		(65,118	)		(150,645	)		-
TOTAL OTHER INCOME (EXPENSES)		(64,552	)		(149,920	)		-
INCOME BEFORE INCOME TAXES		2,979,231			3,762,428			-
PROVISION FOR INCOME TAXES
State		75,063			151,162			-
Federal		267,349			533,591			-
Deferred tax		878,512			878,512			-
TOTAL PROVISION FOR INCOME TAXES		1,220,924			1,563,265			-
Net Income	$	1,758,307		$	2,199,163
Earnings per share, basic and diluted	$	0.01		$	0.02			-
Weighted average shares		129,957,213			111,981,693			-

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

~~Page 3 of 23~~4

CONTINUITYX SOLUTIONS, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENT OF ~~CHANGES~~ ~~IN SHAREHOLDERS’ EQUITY~~CHANGES

~~For~~IN ~~the~~SHAREHOLDERS' ~~nine months ending March 31, 2012 (unaudited)~~EQUITY

															Total
				Capital		Treasury						Retained			Shareholders'
	Shares			Stock		Stock			APIC			Earnings			Equity
Balance at June 30, 2011		97,330,900		$	97,331	$	-		$	(87,331	)	$	52,653		$	62,653
Repurchase of stock		(33,332,500	)				(33,333	)		-			-			(33,333	)
Issuance of treasury stock		33,332,500			-		33,333			-			-			33,333
Issuance of stock for accrued compensation		1,980,000			1,980		-			245,520			-			247,500
Issuance of stock for services		2,500,000			2,500		-			100,000			-			102,500
Shares issued then existing shareholders in reorganization		19,999,400			19,999		-			(19,999	)		-			-
Stock dividend		14,669,600			14,670		-			572,114			(586,784	)		-
Net Income		-			-		-			-			2,199,163			2,199,163
Balance at March 31, 2012 (unaudited)		136,479,900		$	136,480	$	-		$	810,304		$	1,665,032		$	2,611,816

For the Three Months Ended September 30, 2012 (Unaudited)

Note: The shareholders' equity has been recapitalized to give effect to the shares exchanged by the existing shareholders pursuant to the acquisition agreement dated November 8, 2011. The shareholders equity section has further been retroactively restated to reflect a 13.333:1 forward stock split on December 28, 2011 and a stock dividend on January 27,2012 of 1.667 shares for every one share issued and outstanding immediately prior to the forward stock split on December 28, 2011. These transactions are more fully described in Note 8 to these financial statements.

							Additional
	Common Stock				Preferred		Paid-in		Retained
	Shares		Amount		Stock		Capital		Earnings			Total
Balance – June 30, 2012		133,979,900	$	133,980	$	-	$	710,304	$	3,700,639		$	4,544,923

Stock-based compensation		-		-		-		36,331		-			36,331

Net loss		-		-		-		-		(394,248	)		(394,248	)

Balance –September 30, 2012		133,979,900	$	133,980	$	-	$	746,635	$	3,306,391		$	4,187,006

~~Page~~The 4accompanying notes are an integral part of 23these consolidated financial statements.

~~CONTINUITYX SOLUTIONS, INC.~~5

~~CONSOLIDATED~~CONTINUITYX ~~STATEMENT OF CASH FLOWS For the nine months ending March 31~~SOLUTIONS, ~~2012~~INC. ~~(Unaudited)~~AND SUBSIDIARY

				For The Period
	Nine Months			from Inception
	March 31			(March 25, 2011)
	Unaudited			To March 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	2,199,163		$	-
Adjustments to reconcile net income to net
cash used by operating activities:
Stock issued for services		102,500			-
Deferred tax		878,512			-
Depreciation		112,853			-
Changes in assets and liabilities
Accounts receivable		506,659			-
Factored accounts receivable		(4,933,195	)		-
Deposits		46,000			-
Prepaid expenses		(28,134	)		-
Security deposits		(1,198,023	)		-
Accounts payable		199,621			-
Commission payable		468,955			-
Accrued payroll		473,105			-
Sales tax payable		2,110			-
Accrued interest - related party		45,676			-
Income taxes payable		684,753			-
NET CASH USED BY OPERATING ACTIVITIES		(439,445	)		-
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in investment - convertible note receivable		(75,000	)		-
Purchase of property and equipment		(49,943	)		-
NET CASH USED BY INVESTING ACTIVITIES		(124,943	)		-
					-
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from factor		1,639,666			-
Payments on short term debt		(108,750	)		-
Payments on related party notes payable		(312,185	)		-
Proceeds from related party notes payable		55,000			-
Payments on capital lease		(223,152	)		-
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,050,579			-
NET INCREASE IN CASH		486,191			-
CASH - Beginning		149,784			-
Ending	$	635,975		$	-
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash paid during the period:
Interest	$	128,419		$	-
Taxes		-0-			-

CONSOLIDATED STATEMENTS OF CASH FLOWS

Page 5 of 23

For the Three Months Ended September 30, 2011 and 2012 (Unaudited)
	2011			2012
Cash flows from operating activities:
Net loss	$	(110,055	)	$	(394,248	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operations:
Deferred tax		(70,350	)		(1,409,323	)
Depreciation and amortization		74			483,157
Bad debts expense		-			3,499,685
Amortization of debt-discount		-			132,546
Stock-based compensation		-			36,331
Amortization of non-cash prepaid expenses		-			19,500
Changes in operating assets and liabilities:
Accounts receivable		62,233			(7,385,209	)
Prepaid expenses and other current assets		46,000			(82,154	)
Security deposits		(337,364	)		-
Accounts payable and accrued expenses		213,933			4,581,539
Income taxes payable		825			1,168,014
Net cash provided by (used in) operating activities		(194,704	)		649,838

Cash flows used in investing activities:
Purchase of property and equipment		(11,951	)		(3,955,100	)
Net cash used in investing activities		(11,951	)		(3,955,100	)

Cash flows provided by (used in) financing activities:
Issuance of senior secured convertible debentures		-			2,975,000
Issuance of notes payable		55,000			1,825,000
Net proceeds from factor		475,000			179,352
Debt payments – current and long term		(98,305	)		(260,815	)
Deferred finance costs		-			(35,100	)
Net cash provided by financing activities		431,695			4,683,437

Net increase in cash and cash equivalents		225,040			1,378,175

Cash and cash equivalents, beginning of period		149,784			698,283

Cash and cash equivalents, end of period	$	374,824		$	2,076,458

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,151		$	261,553
Cash paid for income taxes	$	-		$	-

Supplemental disclosure of non-cash investing and financing activities:
Assets acquired through capital lease	$	856,527		$	-
Issuance of notes payable to reduce deferred compensation	$	50,000		$	-
Warrants issued for prepaid services	$	-		$	234,000
Warrants liability incurred with debt issuance	$	-		$	427,778

~~CONTINUITYX~~ The ~~SOLUTIONS,~~accompanying ~~INC~~notes are an integral part of these consolidated financial statements.

~~CONSOLIDATED STATEMENT OF CASH FLOWS For the nine months ending March 31, 2012 (Unaudited)~~6

~~(CONTINUED)~~CONTINUITYX SOLUTIONS, INC. AND SUBSIDIARY

SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of shares to reduce accrued payroll	$	247,500
Issuance of note payable to reduce accrued payroll		50,000
Issuance of note payable to reduce accrued interest – related party		40,640
Equipment acquired under capital lease		856,527

Notes to Consolidated Financial Statements

~~The~~For ~~accompanying~~the ~~notes~~Three ~~are~~Months ~~an integral~~Ended ~~part~~September of30, ~~these~~2011 ~~financial~~and ~~statements.~~2012 (Unaudited)

~~Page~~Note 61 – Basis of 23Presentation

~~Note~~The 1accompanying –unaudited ~~BUSINESS~~consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and footnotes required by Generally Accepted Accounting Principles (“GAAP”) for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in ContinuityX Solutions, Inc.’s (the “Company”) Annual Report on Form 10-K for the year ended June 30, 2012, as filed with the Securities and Exchange Commission. Certain prior year amounts have been reclassified to conform to current year classifications.

~~ContinuityX~~Operating ~~Solutions,~~results ~~Inc., formerly~~for ~~EDUtoons, Inc. (~~the ~~“Company”),~~three ~~incorporated~~month ~~under~~period ~~the~~ending ~~laws~~September of30, ~~the~~2012 ~~State~~are ofnot ~~Delaware~~necessarily onindicative ~~March~~of ~~18,~~the ~~2010,~~results ~~provides client solutions~~ that ~~ensure~~may ~~efficient~~be ~~business~~expected continuity and disaster relief through experienced planning, implementation, and management with offices located in two cities: Marlborough, Massachusetts and Metamora, Illinois. The Company provides business continuity, disaster recovery and managed network services and offers an approach for medium to large scale enterprise businesses to address immediate needs without losing sight of their long term objective. The Company also provides virtual / cloud hosting, managed equipment and storage, VoIP and voice connectivity and network and interconnection services through 23 colocation data service facilities throughout the ~~country.~~year Inending ~~addition,~~June ~~the Company provides advanced broadband communication and high performance networks with strategic partners such as AT&T~~30, ~~XO Communications, Telx and others~~2013. The company also offers an extensive line of products and services. Our unique combination of consultation and technical expertise affords the client faster delivery and lower cost than larger consulting companies.

~~The~~Note ~~Company~~2 ~~changed~~– ~~its~~Revenue name to ContinuityX Solutions, Inc. pursuant to a Certificate of Amendment of the Certificate of Incorporation of EDUtoons, Inc., which was filed with the Secretary of State of the State of Delaware on December 28, 2011.Recognition

~~ContinuityX,~~The ~~Inc. entered into a Stock Purchase Agreement with the~~ Company, ~~dated~~recognizes ~~October~~revenue ~~27,~~when ~~2011,~~it ~~which~~is ~~closed~~realized onor ~~November~~realizable ~~1, 2011. Pursuant to the agreement, ContinuityX, Inc. acquired 3,250,000 shares of the Company’s common stock. On November 8, 2011, the Company~~ and ~~ContinuityX~~earned, ~~Inc.~~net ~~entered into an Acquisition Agreement whereby the Company acquired 100%~~ of ~~the~~commissions ~~issued~~paid ~~and~~to ~~outstanding~~third ~~common shares of ContinuityX, Inc~~parties. ~~for~~The ~~7,300,000 shares of the~~ Company’s ~~common~~current ~~stock~~revenue ~~issuable~~generating toactivities ~~its~~primarily ~~stockholders. The~~involve ~~Company~~compensation ~~filed~~earnings afrom ~~Certificate~~coordinating ofnetwork ~~Amendment~~and totelecommunication ~~its Certificate~~needs ofwith ~~Incorporation~~third onparties ~~December 28, 2011, to change its name to ContinuityX Solutions, Inc., increase the number of authorized shares from 10,000,000 to 200,000,000 shares~~ and ~~implementing~~maintaining a ~~forward~~customer ~~stock~~service ~~split~~relationship ofwith ~~13.333~~those toparties ~~1. In addition,~~ on ~~January~~behalf ~~27,~~of ~~2012,~~ the Company’s ~~approved~~customers aand ~~stock~~from ~~dividend~~sales oforiginated ~~1.667~~through ~~common~~a ~~shares~~Joint ~~per~~Marketing ~~common~~Agreement ~~stock~~(“JMA”) ~~share~~with ~~that~~Hutchison ~~was outstanding prior to the forward stock split~~HG.

~~The~~Depending ~~effect~~on of the ~~Acquisition Agreement~~nature ~~is such that effectively a reorganization~~ of the ~~entities~~customer ~~has occurred for accounting purposes and is deemed to be a reverse acquisition. Subsequent to the Closing pursuant to the Acquisition Agreement~~contract, ~~ContinuityX, Inc. and its stockholders have effective control of~~ the ~~Company,~~timing even though the Company has acquired ContinuityX, Inc. For accounting purposes, ContinuityX, Inc. has been deemed to be the accounting acquirer in the transaction and, consequently, the transaction has been treated as a recapitalization of the Company, i.e., a capital transaction involving the issuance of shares by the Company for the shares of ContinuityX, Inc. Accordingly, the combined assets, liabilities and results of operations of ContinuityX, Inc. became the historical financial statements of the Company at the closing of the Acquisition Agreement, and the Company’s ~~assets,~~revenue ~~liabilities~~recognition ~~and results~~occurs ~~of operations have been consolidated with those of ContinuityX, Inc. commencing as of November 8, 2011, the date of the Closing. No step-up~~ in ~~basis~~three or intangible assets or goodwill was recorded in this transaction. As this transaction is being accounted for as a reverse acquisition, all direct costs of the transaction have been charged to additional paid-in capital. All professional fees associated with the transaction have been charged to additional paid-in-capital. The Company has determined to continue to utilize June 30 as the end of its fiscal year.ways:

Page 7 of 23

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Reporting

The accompanying unaudited consolidated financial statements include all adjustments of a normal and recurring nature which, in the opinion of Company’s management, are necessary to present fairly the Company’s financial position as of March 31, 2012 and the results of its operations and cash flows for the nine months then ended.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to the rules and regulations of the Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company’s consolidated financial statements for the period from March 25, 2011 through June 30, 2011. These consolidated financial statements are included in a Form 8-K filed with the Securities and Exchange Commission on November 15, 2011 and on May 9, 2012.

Basis of Accounting

The consolidated financial statements have been prepared on the accrual basis of accounting. The significant accounting policies are described below to enhance the usefulness of the financial statements to the reader.

Fiscal Year

The Company’s fiscal year ends on June 30.

Consolidation Policy

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, ContinuityX, Inc. All significant inter-company balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value Measurements

The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Page 8 of 23

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value Measurements (continued)

The fair value hierarchy is based on three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last is considered unobservable.

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s convertible note receivable is classified as a Level 3 investment. The carrying value of the convertible note receivable approximates its fair value due to the short maturity of the instrument.

Cash and Cash Equivalents

The Company considers all highly-liquid financial instruments with a maturity of three months or less to be cash equivalents. The Company maintains cash and cash equivalents at financial institutions which periodically may exceed federally insured amounts.

Property and Equipment

Property and equipment are stated at cost. It is management's policy to capitalize certain purchases with a useful life greater than one year and a value greater than $2,000.

Furniture and equipment			5 - 7 years
Computer equipment and software			2 - 5 years
Leasehold improvements			5 - 15 years

Depreciation is provided over the estimated useful life of each class of depreciable assets and is computed using the straight-line method. Equipment under capital lease obligations is amortized on the straight-line method over the shorter period of the lease term or the estimated useful life of the equipment. Such amortization is included in depreciation and amortization in the accompanying statements of operations.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 - 60 days from the invoice date. Unpaid accounts receivable with invoice dates over 60 days old bear interest at 5% per month. Due to the uncertainty regarding collection, delinquency fees are recognized as income when received. Accounts receivable are stated at the amounts billed to the customer plus any accrued and unpaid interest.

Page 9 of 23

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable and Allowance for Doubtful Accounts (continued)

Payments of accounts receivable are allocated to the specific invoices identified on the customers’ remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

Trade accounts receivable are stated at the amount management expects to collect from outstanding balances. The carrying amounts of accounts receivable are reduced by an allowance for doubtful accounts that reflects management's best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed 90 days from invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. Management provides for probable uncollectible amounts through a charge to earnings and a credit to the allowance for doubtful accounts based on its assessment of the current status of individual accounts. Balances still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts and a credit to trade accounts receivable. Changes in the allowance for doubtful accounts have not been material to the financial statements

No bad debt expense and no allowance for doubtful accounts have been recorded as of March 31, 2012 or June 30, 2011.

Factored Accounts Receivable

The Company accounted for the sale of accounts receivable under the Forest Capital Master Factoring Agreement as a secured borrowing with a pledge of the subject receivables as collateral, in accordance with FASB ASC 860, the authoritative guidance for accounting for transfers and servicing of financial assets. The caption “Factored accounts receivable” on the accompanying balance sheet in the amount of $4,933,195 as of March 31, 2012 represents the gross accounts receivable that were designated as “sold” to Forest Capital, LLC (the “Factor”). There were no factored receivables as of June 30, 2011.

Security Deposits

The Company has assumed security deposits on systems and monthly recurring services from several customers. The deposits secure space on the customer’s network which is necessary for the Company’s operations and amount to $1,438,023 at March 31, 2012 as compared to $240,000 at June 30, 2011.

Page 10 of 23

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned, net of commissions paid to third parties. The Company’s current revenue generating activities primarily involve compensation earnings from coordinating network and telecommunication needs with third parties and maintaining a customer service relationship with those parties on behalf of the Company’s customers.

Depending on the nature of the customer contract the timing of the Company’s revenue recognition occurs in two ways:

Type 1

The Company submits a contract with a third party to its customer for services that the customer will provide (typically over a 36-month period). The customer completes its review of the submitted contract and accepts the submitted contract by publishing an order number and releasing the contract for provisioning. The amount is determined based on the agreed upon total contract value multiplied by the established compensation rates and revenue is recognized. These sales result in a one-time incentive compensation fee.

In these lump-sum compensation arrangements, the customer may not claw back – unreasonably withhold – or transfer these orders and must pay the Company per agreement within 3090-60120 days depending on the type and timing of the contract.

Type 2

The Company submits a contract with a third party to its customer for services that the customer will provide (typically over a 36-month period). The customer completes set-up and installation services with the third party. The third party will provide acceptance to the customer at which point the Company is also granted acceptance from its customer. The amount is based on the customer’s monthly billing to the third party times an established compensation rate. These sales result in monthly recognition of the compensation fee.

~~Advertising~~Type 3

The Company ~~expenses~~sells ~~advertising costs~~data ascenter ~~they~~rack ~~are~~space, ~~incurred~~cross connections between data centers and associated network services to Hutchison HG on behalf of their clients under the JMA. The JMA provides that the Company pay 20% of the revenue earned through the JMA to a wholly-owned US based subsidiary of Hutchison HG. The Company recognizes revenue on a monthly basis based on rack space and data center usage along with provided network services to the Hutchinson HG clients, pursuant to their related contracts with Hutchison HG.

~~Income~~Note ~~Taxes~~3 – Accounts receivable

~~The~~Accounts ~~Company~~receivable ~~files~~are ~~income~~receivables ~~tax returns~~generated infrom ~~the~~services Ubilled to customers.S Management provides an allowance for doubtful accounts for receivables that are outstanding greater than 120 days. ~~Federal~~As ~~and~~of ~~Illinois~~September ~~jurisdictions~~30, 2012, the total allowance recorded for doubtful accounts receivable was $3,499,685.

Income taxes provide for the tax effects of transactions reported in the financial statements. The provision for income taxes consists of taxes currently due and, if material, deferred taxes resulting from differences in the accounting methods used for financial reporting purposes and those used for income tax reporting. There are deferred tax items for the period ended March 31, 2012 based upon the company’s intention to file its Federal tax return on the cash basis.7

~~Page~~CONTINUITYX 11SOLUTIONS, ofINC. 23AND SUBSIDIARY

~~Note~~Notes 2to -Consolidated ~~SUMMARY~~Financial ~~OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~Statements

~~Income~~For ~~Taxes~~the Three Months Ended September 30, 2011 and 2012 (~~continued~~Unaudited)

~~The~~Note 4 ~~Company~~– ~~follows~~Fair ~~the~~Value provisions of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company recognized no liability for unrecognized tax benefits. The Company has no tax position at March 31, 2012, for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at March 31, 2012.Measurements

~~Recent~~Financial ~~Accounting~~instruments, ~~Pronouncements~~including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities are carried at cost, which the Company believes approximates fair value due to the short-term nature of these instruments.

~~Transfers~~The Company measures the fair value of financial assets and ~~Servicing~~liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company maximized the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The Company uses three levels of inputs that may be used to measure fair value:

In April 2011, the FASB issued ASU No. 2011-03 “Transfers and Servicing (Topic 860) - Reconsideration of Effective Control for Repurchase Agreement.” ASU 2011-03 removes from the assessment of effective control the criterion relating to the transferor’s ability to repurchase or redeem financial assets on substantially the agreed terms, even in the event of default by the transferee. The other criteria to assess effective control were not changed. ASU 2011-03 is effective for the first interim or annual period beginning on or after December 15, 2011. The guidance should be applied prospectively to transactions or modifications of existing transactions that occur on or after the effective date. Early adoption is not permitted. The amendments were effective for the Company beginning January 1, 2012, and do not have a material effect on the financial statements.

	Level 1	Quoted prices in active markets for identical assets or liabilities
	Level 2	Quoted prices for similar assets and liabilities in active markets or inputs that are observable.
	Level 3	Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions).

Fair Value Measurements

		September 30, 2012			Quoted prices in active market for identical assets (Level l)				Significant other observable inputs (Level 2)				Significant unobservable inputs (Level 3)
Warrant Liabilities	$	661,778			$	-			$	-			$	661,778

InWarrant ~~May~~liabilities ~~2011,~~are ~~the~~measured ~~FASB~~at ~~issued ASU~~fair ~~No.~~value ~~2011-04,~~using ~~which~~the ~~amends~~lattice ~~ASC~~pricing ~~820,~~model ~~Fair Value Measurements,~~ and ~~provides~~are ~~guidance~~classified ~~related~~within toLevel ~~fair~~3 ~~value~~of ~~measurements and disclosures in~~ the ~~financial~~valuation ~~statements~~hierarchy. ~~This~~ ~~guidance~~For ~~conforms~~fair ~~the~~value ~~wording~~measurements tocategorized ~~describe~~within ~~many~~Level 3 of the ~~requirements~~fair invalue ~~U.S.~~hierarchy, ~~GAAP~~the ~~to International~~Company’s Chief Financial ~~Reporting~~Officer, ~~Standards~~who reports to ~~ensure~~ the ~~related~~Chief ~~standards~~Executive ~~are~~Officer, ~~consistently~~determines ~~applied. The~~its ~~guidance~~valuation ~~also expands~~policies ~~the~~and ~~disclosures~~procedures. ~~for~~The ~~fair~~development ~~value~~and ~~measurements~~determination ~~that~~of ~~are~~the ~~estimated~~unobservable ~~using~~inputs ~~significant~~for ~~unobservable (~~Level 3) ~~inputs.~~fair ~~This~~value ~~new guidance~~measurements ~~is effective during interim~~ and ~~annual~~fair ~~periods~~value ~~beginning~~calculations ~~after~~are ~~December~~the ~~15,~~responsibility ~~2011~~of ~~and~~the isCompany’s toChief beFinancial ~~applied~~Officer ~~prospectively.~~and ~~The adoption~~are ofapproved ~~this~~by ~~standard did not materially expand~~ the ~~Company’s~~Chief ~~consolidated~~Executive ~~financial statement footnote disclosures~~Officer.

~~Reclassifications~~The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis:

Certain amounts in the prior period consolidated financial statements have been reclassified to conform to current presentation.

	For the three months ended September 30, 2012
Beginning balance	$	-
Aggregate fair value of warrants issued		661,778
Change in fair value of warrants		-
Settlement of warrants included in additional paid in capital		-

Ending balance	$	661,778

The significant assumptions and valuation methods that the Company used to determine fair value and the change in fair value of the Company’s derivative financial instruments are discussed in Note 8.

~~Page~~The 12Company presented the warrant liabilities at fair value on its consolidated balance sheets, with the corresponding changes in fair value recorded in the Company’s consolidated statements of 23operations for the applicable reporting periods. As disclosed in Note 8, the Company computed the fair value of the derivative liability at the date of issuance and the reporting date of September 30, 2012 using both the Black-Scholes option pricing and lattice pricing methods. The value calculated using the lattice pricing method is within 1% of the value determined under the Black-Scholes method.

Note 5 3 – ~~INVESTMENT~~Earnings –per ~~CONVERTIBLE NOTE RECEIVABLE~~Share

OnBasic ~~December~~earnings ~~22,~~per ~~2011,~~share ~~the Company made a loan to a private company in the sum of $75,000 which~~ is ~~evidenced~~computed by adividing ~~convertible~~income ~~note.~~available ~~The~~for ~~note~~common ~~matures~~shareholders on (the ~~earliest of (a~~numerator) ~~December~~by ~~31, 2012 or (b)~~ the ~~date~~weighted onaverage ~~which~~number ~~an Event~~ of ~~Default~~common ~~has~~shares ~~occurred,~~outstanding at(the ~~which~~denominator) ~~time~~for the ~~private company shall pay ContinuityX Solutions, Inc~~period., inDiluted ~~cash,~~earnings ~~the~~per ~~amount~~share ofreflect the ~~then~~potential ~~outstanding~~dilution ~~principal balance of the Note plus all accrued and unpaid interest thereon. The Note bears a simple interest rate of 4% per year; provided, however,~~ that ~~upon~~could ~~and~~occur ~~during~~if ~~the~~securities ~~continuance of~~or another ~~Event~~contracts ofto ~~Default,~~issue ~~the~~common ~~interest~~stock ~~rate~~were ~~shall~~exercised beor ~~increased~~converted tointo 7%common ~~per annum~~stock.

The ~~Note~~potentially ~~has~~dilutive asecurities ~~mandatory~~that ~~conversion upon~~ the ~~occurrence~~Company ofhas ~~qualified~~outstanding ~~financing~~are inSenior ~~the~~Secured ~~amount~~Convertible ~~of $2~~Debentures,~~000,000~~ bystock ~~November~~options ~~30,~~and ~~2012~~warrants. The ~~Note~~Company ~~and~~uses ~~all~~the ~~unpaid~~Treasury ~~interest~~Stock ~~will convert~~Method ~~into a number of equity securities equal~~ to ~~the~~compute ~~quotient of~~ the ~~aggregate~~dilutive ~~amount~~effect of ~~outstanding~~any ~~principal~~potentially ~~and~~dilutive ~~accrued and unpaid interest on this Note divided by the price per share paid in such financing~~securities. ~~The~~Senior ~~payer~~Secured ~~also~~Convertible ~~has~~Debentures, ~~the~~stock ~~option~~options toand ~~convert~~warrants ~~the Note~~that toare ~~common~~anti-dilutive ~~stock~~are 30excluded ~~days~~from ~~prior to~~ the ~~maturity~~calculation ~~date based upon a valuation~~ of ~~the~~diluted ~~payer~~earnings ofper ~~$7,000,000~~common share.

~~Note~~For 4the three months ended September 30, 2012, 27,555,555 shares from Senior Secured Convertible Debentures, 453,333 stock options and 8,069,445 warrants were excluded as anti-dilutive, ~~OPERATING~~due ~~LEASES~~to the Company incurring a net loss during the period.

~~A subsidiary of the Company leased office space in Marlborough, Massachusetts on July 28, 2011. The term of the lease is through September 30, 2012, and calls for monthly rent of $840.~~8

OnCONTINUITYX ~~September 1~~SOLUTIONS, ~~2011, a subsidiary of the Company entered into a lease for office space in Metamora, Illinois~~INC. ~~The~~AND term of the lease is through July 31, 2016, and called for monthly rent of $1,200. On November 1, 2011 the same subsidiary of the Company leased additional space and the rent was increased to $1,950 per month.SUBSIDIARY

~~Total~~Notes ~~rent~~to ~~expense~~Consolidated ~~for~~Financial ~~the three months and nine months ending March 31, 2012 was $8,370 and $22,184, respectively.~~Statements

~~Minimum~~For ~~future lease payments on operating leases for~~ the ~~fiscal~~Three ~~years~~Months ~~ending~~Ended ~~after~~September ~~March 31~~30, ~~2012,~~2011 ~~are~~and as2012 ~~follows:~~(Unaudited)

2012	$	8,370
2013		25,920
2014		23,400
2015		23,400
2016		23,400
Thereafter		1,950
Total Minimum Future Lease Payments	$	106,440

Note 6 – Financial Arrangements

~~Page~~The 13Company’s debt consists of 23the following:

Note 5 - CAPITAL LEASE

	June 30, 2012		September 30, 2012
Senior Secured Convertible Debentures	$	1,985,000	$	4,960,000
Promissory notes		-		1,529,769
Capitalized lease obligation		454,646		412,252
Installment purchase of equipment		1,014,700		930,580
Factoring agreement		2,815,227		2,994,579
Notes payable to management employees		215,441		206,140
Other notes payable		130,000		5,000

Total debt		6,615,014		11,038,320

Less current portion		3,829,445		5,724,325

Long-term debt	$	2,785,569	$	5,313,995

~~The~~In ~~Company~~June ~~leases~~2012, ~~data~~the ~~sales equipment~~Company ~~under~~issued a ~~capital~~series ~~lease~~of Senior Secured Convertible Debentures totaling $1,985,000. An additional $2,975,000 of Senior Secured Convertible Debentures were issued during the first quarter of 2013. The ~~economic~~Senior ~~substance~~Secured Convertible Debentures bear an 8% interest rate to be paid semi-annually on December 15 and June 15 of each year commencing on December 15, 2012. Interest shall be payable at the ~~lease~~holder’s isoption ~~that~~in cash or restricted shares of the Company’s isCommon ~~financing~~Stock at the ~~acquisition~~volume weighted average closing price for the ten previous trading days to the interest due date. The Senior Secured Convertible Debentures are secured by all of the assets ~~through~~ and property of the ~~lease,~~Company subject to the prior claim of the factor and, ~~accordingly~~other existing secured interests incurred with respect to the purchase of equipment and are due on June 15, it2014. isThe ~~recorded~~holders inof the Senior Secured Convertible Debentures may elect to convert all or part of the principal of the debentures into restricted shares of the Company’s ~~assets~~Common inStock at the ~~amount~~Conversion Price of $~~856,527~~0.18 ~~The~~per ~~following~~share isat any time or times before or on the maturity date. If the Company sells securities, convertible securities or debt with a ~~schedule~~ byprice ~~years~~per share less than the Conversion Price noted above, the Conversion Price shall be reduced to equal the price per share of ~~future~~such ~~minimum~~offering. ~~payments~~The ~~required~~right ~~under~~to the ~~lease~~reduction ~~together~~in ~~with~~the ~~their~~Conversion ~~present~~Price ~~value~~shall ~~for~~terminate upon the ~~years~~Company ~~ending~~raising ~~June 30:~~$5,000,000 or more at a price per share of more than the Conversion Price.

2012	$	399,965
2013	$	391,668
2014	$	227,887
Total Minimum Lease Payments	$	1,019,520
Less Amount Representing Interest		(162,993	)
Present Value of Minimum Lease Payments	$	856,527

On July 25, 2012, the Company issued a $1,125,000 Promissory Note. This note bears an 8% interest rate to be paid on or prior to the note’s maturity date (December 19, 2012) and is secured by all of the assets and property of the Company subject to the interest of the Factor and other existing secured interests incurred with respect to the purchase of equipment. In connection with this note, the Company issued to the holder of this note a warrant to purchase 3,125,000 shares of the Company’s Common Stock at an exercise price of $0.18 per share. The warrant expires on January 25, 2017. On August 24, 2012, an additional $700,000 of Promissory Notes were sold to five investors which were issued with warrants for the purchase of an aggregate of 1,944,445 shares of the Company’s Common Stock. These notes bear a 12% interest rate to be paid on or prior to the note’s maturity date (February 24, 2013).

The ~~assets~~warrants ~~held~~are ~~under~~exercisable for five years from the ~~capital lease~~date of issuance with an exercise price of $0.18 per share. The warrants have ~~been~~both ~~placed~~cash inand ~~service~~cashless ~~over~~exercise options. The exercise price of the ~~course~~warrants shall be reduced if the Company issues Common Stock or any Common Stock equivalent at an effective price of less than the ~~three~~warrants’ ~~months~~exercise ~~ended~~price. ~~March~~The 31number of shares to be issued shall be adjusted if the Company issues rights, ~~2012~~options or warrants to all holders of the Common Stock. The investors who were issued warrants received registration rights as follows: (i) the right to demand registration once commencing one year after the issuance of the warrant and ~~depreciation~~(ii) ~~has~~unlimited ~~now~~piggy ~~been~~back ~~recorded on~~registration ~~those~~rights. ~~assets~~The ~~for~~total fair value of the ~~three~~warrants ~~months~~at ~~ended~~the ~~March~~date 31of issuance was determined to be $427,778 and has been recorded as a debt discount. As of September 30, 2012, ~~and~~amortization ~~regularly~~expense ~~scheduled~~in ~~lease~~connection ~~payments~~with ~~have~~the ~~commenced~~debt discount amounted to $132,546.

~~Note 6 - SIGNIFICANT CUSTOMERS AND CREDIT RISK~~9

~~Income~~CONTINUITYX ~~for the period was derived from three service providers~~SOLUTIONS, ~~with 89% from one service provider, and accounts receivable and factored accounts receivable were derived from two service providers~~INC. ~~The~~AND ~~89% service provider is AT&T and there are 11 shared customers with AT&T including MultiPoint, Telworx, AARMG, X Connect and Greenwave.~~SUBSIDIARY

~~Note~~Notes 7to -Consolidated ~~FACTORING~~Financial ~~AGREEMENT~~Statements

~~The~~For ~~Company~~the ~~entered~~Three ~~into~~Months aEnded ~~factoring agreement of receivables on~~ September 930, 2011 ~~for up to $500,000, increasing on November 17, 2011 to $1,000,000, to $1,250,000 on January 19, 2012~~ and ~~to $2,000,000 on March 30,~~ 2012 to be payable immediately at 70%. Upon collections by the Factor, the Company is remitted the balance, less applicable discount fees and 5% of the remaining uncollected assigned accounts to be used to establish and maintain a “contingency account”. Fees per the agreement start at 1.30% for collections within 30 days, increasing by 0.65% every 15 days. The factored receivables are secured by the assets and receivables of the Company and are with recourse if the assigned account becomes the subject of a dispute, there exists any breach of representation under the agreement or an assigned account is not paid within 90 days of its invoice. The Company had an outstanding principal balance of $1,639,666 as of March 31, 2012. (Unaudited)

Note 7 8 – ~~SHORT-TERM~~Material ~~NOTES PAYABLE~~Contracts

On ~~November~~July 3017, ~~2011~~2012, the Company entered into a professional service agreement with Michael Neiberg to provide investor relations and financial consulting services to the Company for two years. Mr. Neiberg is a related party as he was appointed to the Company’s Board of Directors on October 16, 2012. Under the agreement, Mr. Neiberg will receive compensation of $~~116~~100,~~250~~000 ~~non-interest~~of ~~bearing~~restricted ~~note~~Common ~~payable~~Stock of the Company and the payment for direct expenses if incurred on work performed for the Company. On ~~The~~July ~~note~~25, ~~was~~2012, ~~secured~~Mr. Neiberg participated (to the extent of $50,000) in a $1,125,000 Promissory Note issued by the Company. A warrant to purchase 138,750 shares of the Company’s Common Stock was also issued to Mr. Neiberg in connection with his portion of this loan. See Note 6. On September 11, 2012, Mr. Neiberg participated (to the extent of $50,000) in the additional issuance of Senior Secured Convertible Debentures totaling $2,975,000. See Note 6. On September 11, 2012, pursuant to a ~~security~~Stock ~~deposit~~Purchase Agreement, Mr. Neiberg purchased 100,000 shares of the Company’s Common Stock from Anthony Roth, a former Officer and ~~could~~Director beof ~~repaid~~the atCompany, ~~any time~~for $0.10 ~~The~~per ~~Company~~share which was paid to Mr. Roth. In addition, $0.02 per share was paid by Mr. Neiberg to a third party to cover a portion of the ~~note~~legal fees and other expenses incurred on behalf of the purchasers. Mr. Neiberg also received 166,667 shares of the Company’s Common Stock from investors in ~~full~~the asInitial Public Offering of ~~December~~the 31Company dated November 1, 2011 for no consideration. In September 2012, pursuant to a Shareholder Voting Proxy Agreement, Anthony Roth appointed Mr. Neiberg as a proxy holder to exercise Mr. Roth’s shareholder voting rights with respect to 13,100,000 shares of the Company’s Common Stock owned by Mr. Roth. Pursuant to the terms of the Shareholder Voting Proxy Agreement, if Mr. Roth determines to sell any of the shares of the Company’s Common Stock owned by him, Mr. Neiberg shall have the right of first refusal to the shares which Mr. Roth determines to sell.

~~Related~~On ~~party~~August ~~notes~~1, ~~payable~~2012, the Company entered into a two year consulting agreement with Millennium Capital Corporation which will provide various services for the Company including securing qualified management executives and potential Board of Director candidates, assisting the Company in the search for potential acquisitions, securing major clients and introducing the Company to investment banking contacts and investment relations advisors. Under the terms of the agreement, the Company will pay $25,000 per month for the term of the agreement in addition to the issuance of cashless warrants for 3,000,000 shares of the Company’s Common Stock exercisable for a period of five years commencing on August 1, 2012 at an exercise price of $0.20. The total fair value of the warrants at the date of issuance was determined to be $234,000 and has been recorded as a prepaid expense. As of September 30, 2012, consulting expense in connection with the prepaid expense amounted to $19,500.

~~From~~On ~~May~~August ~~through~~9, ~~July~~2012, the Company entered into an Investment Banking Agreement with J. H. Darbie & Company (“JHD”). Under the terms of ~~2011~~ the nine month agreement, aJHD ~~total~~will ofassist ~~$127~~the Company in identifying,~~000~~ ofanalyzing, ~~deferred~~structuring, ~~compensation~~negotiating ~~owed~~and tofinancing suitable business opportunities which the ~~CEO~~Company may take advantage of by purchase or sale of stock or assets, ~~Mr.~~assumption ~~Godwin~~of liabilities, ~~was~~merger, ~~converted~~consolidation, totender ~~three~~offer, ~~Notes~~joint ~~payable~~venture, financing arrangement or any similar transaction. ~~The notes~~Under ~~were~~the ~~combined~~terms ~~into~~of ~~one~~the ~~Note~~agreement, in ~~July~~October ~~2011~~2012, ~~which~~the isCompany ~~secured~~paid a nonrefundable retainer fee by the ~~assets~~issuance ~~and~~of ~~receivables~~35,000 ~~held~~restricted byshares of the Company’s ~~that~~Common ~~may~~Stock. ~~be subject~~Upon tothe ~~subordination~~closing byof ~~third-party~~each ~~financiers.~~financing ~~The~~deal, the Company ~~received~~will ~~loans~~pay JHD a cash fee equal to 7% of anthe ~~additional~~gross ~~$109,026~~proceeds ~~from~~in Mrsuch financing. ~~Godwin~~In addition, ~~also~~ ~~from~~at ~~his~~the ~~deferred~~closing ~~compensation,~~of ~~through~~each ~~March~~financing ~~31,~~with ~~2012~~certain ~~and~~defined investors, the ~~total~~Company ~~amount~~shall ~~due~~issue atJHD ~~that~~warrants ~~date~~to ~~was~~purchase ~~$236~~600,~~026~~000 shares of the Company’s Common Stock. InThe ~~addition, all~~warrants ~~previously~~will ~~outstanding~~be ~~interest~~exercisable ~~due~~for ~~has~~a ~~been~~period ~~forgiven~~of ~~and~~5 ~~all~~years ~~such~~from ~~debt~~the ~~going~~date ~~forward~~of isthe ~~non-interest~~closing ~~bearing~~with an exercise price of $0.24 ~~Interest forgiven~~per ~~for~~share. ~~amounts~~The ~~previously~~Company ~~recorded~~will isalso ~~not~~pay ~~material~~JHD at the first closing of each transaction with certain defined investors a transaction fee equal to ~~these~~4% ~~consolidated~~of ~~financial~~the ~~statements.~~aggregate ~~Please~~consideration, ~~see~~as ~~Note~~defined 10in the agreement.

~~There~~On isAugust an16, ~~outstanding~~2012, ~~note due~~the toCompany ~~Mr.~~entered ~~Roth,~~into ~~the~~a ~~Executive~~three ~~Vice~~year ~~President~~consulting ofagreement ~~the~~with ~~Company~~BAW ~~for~~Holding Corp. and Brian A. Wasserman. Under the ~~amount~~terms of ~~$48~~the agreement,~~565~~ Mr. ~~The~~Wasserman ~~note~~will isfunction ~~secured~~as bythe Chief Financial Officer of the ~~assets~~Company and ~~receivables held~~provide byfinancial consulting services for the Company ~~that~~(debt/equity ~~may~~financing, befinancial ~~subject~~projections/budgets, toreview ~~subordination~~of byfinancial ~~third-party~~statements ~~financiers.~~and ~~Through~~filings ~~March~~with ~~31,~~the ~~2012~~Securities anand ~~additional~~Exchange ~~$244~~Commission,~~028 was~~ ~~loaned~~etc.). In addition to a monthly fee of $10,500, the Company byagreed ~~Mr.~~to ~~Roth~~issue ~~and~~an ~~the~~option ~~total~~to ~~amount~~purchase ~~due~~2,720,000 onshares ~~that~~of ~~date~~the ~~was~~Company’s Common Stock at $~~292,593~~0.183 Inper ~~addition~~share. Effective upon entering into such agreement, ~~all~~one-sixth ~~previously~~of ~~outstanding interest~~the ~~was~~option ~~forgiven~~shares ~~and~~were ~~all~~vested ~~such~~with ~~debt~~the ~~going~~remaining ~~forward~~shares isvesting ~~non-interest~~equally ~~bearing.~~on ~~Interest~~December ~~forgiven~~31, ~~for~~2012, ~~amounts~~June ~~previously~~30, ~~recorded is~~2013, ~~not~~December ~~material~~31, to2013, ~~these~~June ~~consolidated~~30, ~~financial~~2014 ~~statements~~and December 31, 2014. ~~Please~~The ~~see~~option ~~Note~~expires 105 years from each respective vesting date.

~~Page~~In 14August 2012, the Company entered into a Joint Marketing Agreement with Hutchison Global Communications Limited, a Hong Kong corporation, and its subsidiaries including Blue City and NexGen in the United States to market the Company’s complete portfolio of 23products and services focusing on co-location access, network and managed services. This relationship has created an opportunity to further international relationships and pursue the global network strategy incorporating the Far East, Canada, South America and Europe to our existing U.S. network and platform.

~~Note~~On 8September –12, ~~SHORT-TERM~~2012, ~~NOTES~~the ~~PAYABLE~~Company entered into a Severance Agreement and Mutual Release agreement with Anthony Roth, the Company’s then Executive Vice President, Chief Financial Officer and a Director. Under the terms of the agreement, Mr. Roth’s employment would terminate and he would resign as an officer and director of the Company immediately. In return, Mr. Roth will receive his full base salary due him under his employment agreement (~~continued~~a total of $149,333 through March 31, 2013) and a monthly auto and remote office allowance (a total of $11,900 through March 31, 2013). In addition, he will receive a bonus of $34,133 and accrued deferred compensation due him in the amount of $345,132 over an 18 month period beginning April 15, 2013. The Company also agreed to pay his outstanding loan to the Company ($9,301) and legal fees associated with the agreement ($2,500). Pre-tax operating results for the period ended September 30, 2012 includes a charge of approximately $198,000 to accrue for all provisions of his agreement not previously recognized.

OnIn ~~July~~September ~~27,~~2012 ~~2011, a stockholder of~~ the Company ~~advanced~~entered ~~the~~into ~~Company~~a ~~$55,000.~~Marketing OnAgreement ~~October~~with 1,M ~~2011,~~& ~~three~~M ~~notes~~Licensing, toInc. ~~this~~focused ~~stockholder~~on ofmajor ~~the~~sports ~~Company including the $55~~leagues,~~000 and~~ ~~$40~~teams,~~640~~ ofand ~~accrued~~stadium ~~interest~~venues, ~~were~~with ~~consolidated into~~ a ~~single~~goal ~~note~~to ~~and~~increase isthe ~~secured~~quality byof ~~the~~communication ~~assets~~ and ~~receivables~~data ~~held~~exchange byexperience. ~~the~~The Company ~~that~~ ~~may~~will beprovide ~~subject~~leading toedge ~~subordination~~technology byaccess, ~~third~~wi-~~party~~fi ~~financiers.~~and Atsystems ~~March~~software ~~31,~~to ~~2012,~~ the ~~Company~~organizations ~~had an outstanding principal balance of $82,640 on the note~~ and ~~accrued~~their ~~interest~~ownership ~~of $21,726~~companies. ~~Please see Note 10.~~

~~Note 9 – EQUITY TRANSACTIONS~~10

ACONTINUITYX ~~subsidiary of the Company entered into a Consulting Agreement~~SOLUTIONS, ~~dated July 5, 2011, with a third party to provide consulting services during a 12 month term~~INC. ~~The agreement~~AND provides that such party shall receive 34.25% of the issued and outstanding shares of the Company based upon the Company’s then capitalization. To provide for the issuance of said shares the subsidiary repurchased 34,250 shares from the existing shareholders for $0.10 per share and issued 34,250 pre-reorganization and pre-split shares to the consultant and/or its designees.SUBSIDIARY

OnNotes ~~December 28, 2011, the Company authorized a 13.333-for-1 stock split (the "Stock Split”) of the Company's Common Stock. All references~~ to ~~the number~~Consolidated ofFinancial ~~shares of Common Stock and per share amounts have been retroactively restated in the accompanying financial statements to reflect the effect of the Forward Stock Split.~~Statements

OnFor ~~January 24, 2012, Mr. Godwin entered into an agreement with~~ the ~~Company~~Three toMonths ~~receive~~Ended ~~1,800,000~~September ~~shares of the Company’s common stock for the cancelation of $225~~30,~~000~~ of2011 ~~unpaid~~and ~~compensation.~~2012 (Unaudited)

OnNote 8 ~~January~~– ~~24, 2012, Mr. Roth entered into an agreement with the Company to receive 180,000 shares of the Company’s common stock for the cancelation of $22,500 of unpaid compensation.~~Warrants

On ~~January~~July 2725, 2012, ~~our~~in ~~Board of~~connection ~~Directors~~with ~~agreed~~the toissuance ~~issue~~of a ~~stock~~promissory ~~dividend~~note, ofthe ~~1.667~~Company issued warrants to purchase 3,125,000 shares of the Company’s Common Stock – See Note 6. In addition, in August 2012, in connection with the issuance of various promissory notes, the Company issued warrants for ~~every~~the ~~one~~purchase (of an aggregate of 1),944,445 ~~share~~shares of the Company’s Common Stock. ~~which~~These ~~was issued~~warrants ~~and~~are ~~outstanding~~exercisable ~~immediately~~for ~~prior~~five toyears from the ~~Forward~~date ~~Stock~~of ~~Split~~issuance with an exercise price of $0.18 per share.

On ~~February~~August 201, 2012, in connection with a consulting agreement, the Company ~~agreed~~issued towarrants ~~issue~~ to apurchase ~~consultant 2~~3,~~500~~000,000 shares of the Company’s ~~restricted~~Common ~~common~~Stock ~~stock~~– asSee ~~part~~Note ~~of his compensation~~7. ~~The~~These ~~consultant’s~~warrants ~~rights~~are inexercisable ~~such~~for ~~shares~~five ~~shall~~years ~~vest~~commencing ~~over~~on ~~the~~August ~~course~~1, of2012 ~~three~~at ~~years~~an exercise price of ~~services~~$0.20.

~~Note~~The 10warrants –have ~~SUBSEQUENT~~both ~~EVENTS~~cash and cashless exercise options. The exercise price of the warrants shall be reduced if the Company issues Common Stock or any Common Stock equivalent at an effective price of less than the warrants’ exercise price. The number of shares to be issued shall be adjusted if the Company issues rights, options or warrants to all holders of the Common Stock. The investors who were issued warrants received registration rights as follows: (i) the right to demand registration once commencing one year after the issuance of the warrant and (ii) unlimited piggy back registration rights. Accordingly, the fair market value of the warrants as of the date of issuance has been classified as liabilities. The fair market value of the warrants at the date of issuance was determined to be the same as of September 30, 2012. The fair value of the warrants as of September 30, 2012 was $661,778.

OnThe ~~April~~Company ~~17,~~developed ~~2012,~~the assumptions that were used as follows: The fair value of the Company ~~amended~~’s ~~the~~common ~~Master~~stock ~~Factoring~~was ~~Agreement~~obtained ~~with~~from ~~Forest~~valuation ~~Capital,~~models ~~LLC~~developed toby ~~increase~~the Company. The results of the ~~aggregate~~valuation ~~principal~~were assessed for reasonableness by comparing such amount to sales of ~~advances~~other atequity ~~any~~and ~~time~~ equity linked securities to ~~$2,550,000~~unrelated parties for cash and intervening events affected in the price of the Company’s stock. The term represents the remaining contractual term of the derivative; the volatility rate was developed based on ~~April~~analysis ~~24,~~of ~~2012~~the ~~such~~Company’s ~~amount~~historical stock price volatility and the historical volatility rates of ~~advances~~several other similarly situated companies (using a number of observations that was ~~increased~~at least equal to ~~$3,000,000~~or exceeded the number of observations in the life of the derivative financial instrument at issue); the risk free interest rates were obtained from publicly available U.S. Treasury yield curve rates; the dividend yield is zero because the Company has not paid dividends and does not expect to pay dividends in the foreseeable future.

The ~~additional~~significant ~~funds~~assumptions ~~advanced by~~which ~~Mr. Godwin mentioned in Note 8 will be placed under~~ the ~~same~~Company ~~collateral~~used ~~as the $127,000 Note which will be amended~~ to ~~include~~ measure the ~~additional~~fair ~~funds~~value ~~for a total~~ of ~~$236,026~~warrants ~~and~~at ~~the~~September ~~due date will be extended to December 31~~30, 2012. ~~Should funds be available to repay a portion of the loan from Mr. Godwin such repayment may not exceed $25,000 per month and~~ is ~~subject~~as ~~to agreement at that time between Mr. Godwin and Mr. Roth.~~follows:

The additional funds advanced by Mr. Roth mentioned in Note 8 will be placed under the same collateral as the $48,565 Note which will be amended to include the additional funds for a total of $292,593 and the due date will be extended to December 31, 2012 Should funds be available to repay a portion of the loan from Mr. Roth such repayment may not exceed $25,000 per month and is subject to agreement at that time between Mr. Godwin and Mr. Roth.

Stock price	$	0.20
Term	4.82-4.9 Years
Volatility		50	%
Risk-free interest rate		0.62	%
Exercise prices	$	0.18-0.20
Dividend yield		0.00	%

~~The~~No ~~Stockholder~~warrants ~~note~~have ~~mentioned~~been inexercised ~~Note 8,~~as ~~pursuant to an agreement with the stockholder, is presently due on or before June 30, 2012 with an effective annual interest rate~~ of 6%September ~~and with a minimum payment of $50,000 due on or before May~~ 30, 2012. If the Company raises $3,000,000 or more in any combination of equity or debt, the entire outstanding principal and interest will be due at that time. In addition, the stockholder has the option of taking any portion of the debt in stock as part of a private placement offering which shall be conducted by the Company.

~~Page~~Note 9 15– ofStock 23Options

~~ITEM~~The 2Company records the expense of share-based payment awards at fair value on the date of grant and recognizes compensation expense over the service period for awards expected to vest. ~~MANAGEMENT’S~~The ~~DISCUSSION~~fair ~~AND~~value ~~ANALYSIS~~of OFrestricted ~~FINANCIAL~~stock ~~CONDITION~~is ~~AND~~determined ~~RESULTS~~based OFon ~~OPERATIONS~~the number of shares granted and the fair value of our common stock on date of grant. The recognized expense is net of expected forfeitures.

~~The~~On ~~following~~August ~~discussion~~16, ~~should~~2012, ~~be read~~ in ~~conjunction~~connection with ~~our~~ ~~unaudited~~a ~~financial~~consulting ~~statements~~agreement ~~and~~ the ~~related~~Company ~~notes~~issued ~~that~~an ~~appear~~option ~~elsewhere~~to inpurchase ~~this~~2,720,000 ~~Form~~shares ~~10-Q.~~of ~~The~~the ~~following~~Company’s ~~discussion~~Common ~~contains forward-looking~~Stock ~~statements~~at ~~that~~$0.183 ~~reflect~~per ~~our~~share. ~~plans,~~Effective ~~estimates~~upon ~~and~~entering ~~beliefs.~~into ~~Our~~such ~~actual~~agreement, ~~results~~one-sixth ~~could~~of ~~differ~~the ~~materially~~option ~~from~~shares ~~those discussed~~were invested with the ~~forward~~remaining ~~looking~~shares ~~statements.~~vesting ~~Factors~~equally ~~that~~on ~~could~~December ~~cause~~31, or2012, ~~contribute~~June to30, ~~such~~2013, ~~differences~~December ~~include~~31, ~~those~~2013, ~~discussed below~~June 30, 2014 and ~~elsewhere~~December in31, ~~this~~2014. ~~Form~~The ~~10-Q~~option expires 5 years from each respective vesting date – See Note 7.

~~Our~~A ~~consolidated~~summary ~~financial~~of ~~statements~~stock ~~are~~option ~~stated~~activity inas ~~United~~of ~~States dollars~~September ~~and~~30, ~~are~~2012 ~~prepared~~and inchanges ~~accordance~~during ~~with~~the ~~United~~three ~~States~~months ~~generally~~then ~~accepted~~ended ~~accounting~~are ~~principles.~~presented below:

Application of Critical Accounting Estimates

	Shares		Weighted Average Fair Value Per Share		Weighted Average Exercise Price Per Share		Weighted Average Remaining Terms (in years)	Aggregate Intrinsic Value
Outstanding – June 30, 2012		-	$	-	$	-
Granted		2,720,000		0.068		0.183
Exercised		-		-		-
Cancelled		-		-		-
Outstanding – September 30, 2012		2,720,000	$	0.068	$	0.183	7.25	$	19,040
Exercisable – September 30, 2012		453,333	$	0.068	$	0.183	4.88	$	3,173

~~The~~For ~~preparation~~the ofthree ~~financial~~months ~~statements~~ended inSeptember ~~conformity~~30, ~~with~~2012, ~~United States generally accepted accounting principles requires management to make estimates and assumptions that affect~~ the ~~reported amounts~~Company ofrecognized ~~assets~~stock-based ~~and~~compensation ~~liabilities~~expense ~~and disclosure~~ of ~~contingent~~$36,331, ~~assets~~which ~~and~~is ~~liabilities~~included atin ~~the~~selling ~~date of the financial statements~~ and ~~the~~administrative ~~reported amounts of revenues and~~ expenses ~~during~~in the ~~year.~~accompanying Consolidated ~~Management~~Statements ~~bases~~of ~~its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances~~Operations. ~~However, actual results may differ from the estimates.~~

As of September 30, 2012, there was $148,629 of total unrecognized compensation costs related to non-vested stock options, which will be expensed over a weighted average of 2.25 years. The fair value at September 30, 2012 was $0.19 per share as determined by using a weighted value between the income approach method, the public company market multiple method, and a fair value method developed by the Company.

The fair value of the stock-based option awards granted during the three months ended September 30, 2012 were estimated at the date of grant using the Black-Scholes option valuation model with the following assumptions:

Stock price	$	0.19
Expected life	3.07 Years
Volatility		50	%
Risk-free interest rate		0.42	%
Exercise prices	$	0.183
Dividend yield		0.00	%

Because the Company does not have significant historical data on employee exercise behavior, the Company uses the “Simplified Method” to calculate the expected life of the stock-based option awards. The simplified method is calculated by averaging the vesting period and contractual term of the options.

CONTINUITYX SOLUTIONS, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

For the Three Months Ended September 30, 2011 and 2012 (Unaudited)

Note 10 – Income Taxes

In accordance with current tax regulations, the Company is required to change from the cash basis to the accrual basis in filing its income tax returns. Pursuant to these regulations, the Company will recoup 50% of its previously deferred income taxes under the cash basis each year for the next two years. A portion (approximately $1,845,000) of the deferred tax liability at June 30, 2012 has been reclassified to current income taxes payable for financial reporting purposes in the first quarter of 2013.

Note 11 – Subsequent Events

On October 18, 2012, Metamora Cloud Services, Inc. was incorporated pursuant to the laws of the state of Delaware as a wholly owned subsidiary of the Company.

On October 23, 2012, the Board of Directors of the Company unanimously approved the awarding of 2,500,000 shares of the Company’s Common Stock to David Godwin, President and CEO, 1,500,000 shares of the Company’s Common Stock to Brian Wasserman, CFO, and 3,000,000 shares to Mintz & Fraade, P.C., Company Counsel.

Subsequent to September 30, 2012, the Company entered into various equipment lease agreements with a credit line of approximately $3,000,000.

In October and November, 2012, the Company issued a series of Senior Secured Convertible Debentures totaling $349,000. The Senior Secured Convertible Debentures bear an 8% interest rate to be paid semi-annually on December 15 and June 15 of each year commencing on December 15, 2012. Interest shall be payable at the holder’s option in cash or restricted shares of the Company’s Common Stock at the volume weighted average closing price for the ten previous trading days to the interest due date. The Senior Secured Convertible Debentures are secured by all of the assets and property of the Company subject to the prior claim of the factor and other existing secured interests incurred with respect to the purchase of equipment and are due on June 15, 2014. The holders of the Senior Secured Convertible Debentures may elect to convert all or part of the principal of the debentures into restricted shares of the Company’s Common Stock at the Conversion Price of $0.18 per share at any time or times before or on the maturity date. If the Company sells securities, convertible securities or debt with a price per share less than the Conversion Price noted above, the Conversion Price shall be reduced to equal the price per share of such offering. The right to the reduction in the Conversion Price shall terminate upon the Company raising $5,000,000 or more at a price per share of more than the Conversion Price.

On October 24, 2012, the Company entered into an Independent Consulting Agreement with The Del Mar Consulting Group, Inc. (“Del Mar”) and Alex Partners, LLC (“Alex Partners”). Pursuant to the Independent Consulting Agreement, Del Mar and Alex Partners are to provide consulting services including, but not limited to, the following: establishing an image for the Company in the financial community; introducing the Company to the financial community including retail brokers, institutional managers, portfolio managers, analysts and financial public relations professionals; assisting with the dissemination of information about the Company’s plans, strategy and personnel to the financial community; and assisting with stockholder relations and other public relations with the financial community. The agreement shall continue for a period of one year. In addition to monthly retainers resulting in an aggregate total payment of $86,400 to Del Mar and $57,600 to Alex Partners, we shall pay a commencement bonus of 1,350,000 shares of Common Stock to Del Mar and 900,000 shares of Common Stock to Alex Partners.

On November 16, 2012, the Company and its subsidiaries entered into an Amended and Restated Master Factoring Agreement with Vion Operations LLC and Forest Capital LLC which amended and restated its previous Master Factoring Agreement with Forest Capital LLC. Pursuant to this agreement, the Company may be advanced up to an aggregate of $6,000,000 on accounts receivable which it assigns to the Factor which was fully advanced as of the closing.

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

Introduction and Certain Cautionary Statements

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our consolidated financial statements and related notes and schedules included elsewhere in this Quarterly Report on Form 10-Q. The unaudited consolidated financial statements and notes included herein should be read in conjunction with our audited consolidated financial statements and notes for the year ended June 30, 2012, which were included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, intensified competition and/or operating problems in its operating business projects and their impact on revenues and profit margins or additional factors, and those discussed in Part II, Item 1A “Risk Factors” and elsewhere this Quarterly Report on Form 10-Q. In addition, certain information presented below is based on unaudited financial information. There can be no assurance that there will not be changes to this information once audited financial information is available.

General Organization and Business

ContinuityX Solutions, Inc. (the “Company,” “we,” “us” or “our”), formerly known as EDUtoons, Inc. (EDUtoons) was incorporated in the State of Delaware on March 28, 2010. We are headquartered in Metamora, IL~~, and also maintain a satellite office in Marlborough, Massachusetts~~. In addition, we currently have 23approximately 30 data service centers throughout the country devoted to colocation and networks. The Company also hosts ~~cloud~~Cloud computing, manages equipment and storage and has relationships with strategic channel partners such as AT&T, Telx, XO Communications and others.

We provide ~~client~~consulting ~~solutions~~services ~~that~~and ~~ensure~~management ~~efficient~~of business continuity ~~and~~, ~~disaster~~virtual ~~relief~~/ ~~through~~Cloud ~~experienced planning~~hosting, ~~implementation,~~managed equipment and ~~management.~~storage, Wemonitoring, ~~provide~~VoIP ~~reliability~~ and ~~recovery~~voice ~~through~~needs. Our ~~a methodology~~consultative ~~that~~approach ~~strengthens~~provides ~~its~~clients ~~client’s~~with business continuity and disaster ~~relief~~recovery ~~framework~~solutions ~~and~~alongside ~~preparedness~~management, ~~with~~migration ~~certified experts~~and ~~that~~re-engineering, ~~specialize~~system inintegration ~~security,~~and ~~risk~~cross ~~management~~connects, and ~~consultation~~IT ~~for~~infrastructure ~~practical~~services ~~business~~including ~~solutions~~data center, converged networks (public / private Cloud) services and ~~network-IT~~transformation ~~visibility~~solutions.

We ~~offer~~provide anclient ~~approach~~solutions ~~for~~that ~~medium~~ensure toefficient ~~large~~business ~~scale~~continuity ~~enterprise businesses to address immediate needs without losing sight of their long term objective. We provide consultation in the discovery acquisition, implementation~~ and ~~management~~disaster ofrelief ~~network,~~through ~~disaster~~experienced ~~recovery~~planning, ~~voice~~implementation and ~~voice over internet protocol (VOIP) and project design-~~management~~-monitoring (virtual-hosted/managed-network)~~. ByThe ~~specializing~~Company inprovides ~~finance,~~reliability ~~health, manufacturing,~~ and ~~large-scale~~recovery ~~distribution,~~through ~~we act as~~ a ~~solutions~~ ~~provider~~methodology ~~and channel partner in~~ that westrengthens ~~will~~its ~~partner~~client’s ~~with~~business ~~manufacturers~~continuity ~~to market~~ and ~~sell~~disaster ~~the~~relief ~~manufacturer's~~framework ~~products, services,~~ and~~/or~~ ~~technologies.~~preparedness Wewith ~~afford~~certified ~~clients~~experts ~~the~~that ~~ability~~specialize toin ~~have~~security, ~~one-stop~~risk ~~service~~management atand aconsultation ~~fair~~for ~~price~~practical ~~with~~business ~~responsive~~solutions and ~~efficient solutions~~network-IT visibility.

We have business relationships with many companies including, but not limited to, being a “Premier Solutions Provider” for AT&T, an XO Communications “Business Partner” and partnering with Telx in colocation facilities and many others. We also have a relationship with the St. Louis Rams wherein we are replacing and upgrading their entire IT infrastructure including all of the hardware, software and networks. In addition, we are installing a new IP and voice network and will assist them in completing compliance ~~as set forth by the NFL~~ for content, Ticketmaster, Media and any other requirements identified.

~~Page~~We 16meet ofand 23exceed new industry standards and requirements for medium and large-scale enterprise organizations by building national, tailor-made networks for public/private business communications. We understand that an organization’s IT staff may not have the deep relationships with third-party technology vendors and telecommunication providers to construct and manage national and international IT infrastructures.

Our Network and Datacenter infrastructure includes facilities built to deliver the highest level of uptime availability and 24/7 NOC (Network Operational Center) services; high availability – low latency connectivity services in any major datacenter market; Cloud on demand via Appcore® and Telx™ partnership; and hosting facilities offering resilient network, data center, and hosted services Internet and Network Services, deploying Cisco’s leading Aggregated Service Router platform into a single, customer facing network providing cost effective bandwidth and higher performance.

In August 2012, we entered into a Joint Marketing Agreement with Hutchison Global Communications Limited, a Hong Kong corporation, and its subsidiaries including Blue City and NexGen in the United States to market our complete portfolio of products and services focusing on co-location access, network and managed services. This relationship has created an opportunity to further international relationships and pursue the global network strategy incorporating the Far East, Canada, South America and Europe to our existing U.S. network and platform.

In August 2012, we entered into a two year consulting agreement with Millennium Capital Corporation which will provide various services to us including securing qualified management executives and potential Board of Director candidates, assisting us in the search for potential acquisitions, securing major clients and introducing us to investment banking contacts and investment relations advisors. Under the terms of the agreement, we will pay $25,000 per month for the term of the agreement in addition to the issuance of cashless warrants for 3,000,000 shares of the Company’s Common Stock exercisable for a period of five years commencing on August 1, 2012 at an exercise price of $0.20.

In September 2012 we entered into a Marketing Agreement with M & M Licensing, Inc. focused on major sports leagues, teams, and stadium venues, with a goal to increase the quality of communication and data exchange experience. We will provide leading edge technology access, wi-fi and systems software to the organizations and their ownership companies.

History

On November 1, 2011, we issued three million (3,000,000) shares of our ~~common~~Common ~~stock~~Stock pursuant to ~~its~~our Initial Public Offering (“IPO”) for an aggregate purchase price of $150,000, pursuant to a Registration Statement on Form S-1 filed by us with the Securities and Exchange Commission (“SEC”), having an effective date of May 5, 2011 (the “Registration Statement”). Immediately after the ~~Closing~~closing, we redeemed 3,250,000 shares of our ~~common~~Common ~~stock~~Stock owned by our existing ~~stockholders~~shareholders excluding the ~~stockholders~~shareholders who became ~~stockholders~~shareholders pursuant to the IPO (the “Redemption”) for an aggregate cost of $82,500, which was funded by the proceeds of the IPO. The balance of the proceeds of the IPO were utilized to pay various expenses.

For a purchase price of twenty-five thousand ($25,000) dollars we sold 3,250,000 shares of our ~~common~~Common ~~stock~~Stock, par value of $0.001 per share, to ContinuityX, Inc.

Pursuant to an Acquisition Agreement with ContinuityX, Inc., Inc., dated November 8, 2011, we acquired ContinuityX, Inc. through a reverse acquisition which gave the ~~stockholders~~shareholders of ContinuityX, Inc. effective control of the Company.

We filed a Certificate of Amendment to its Certificate of Incorporation changing our name to ContinuityX Solutions, Inc. on December 28, 2011.

Also, on December 28, 2011, we implemented a ~~forward~~ stock split of 13.333 shares of Common Stock for every one (1) share of then existing Common Stock (the “Forward Stock Split”), which resulted in a total of 117,330,400 issued and outstanding shares of our Common Stock on such date. On January 27, 2012, we issued a stock dividend of 1.667 shares of ~~common~~Common ~~stock~~Stock for every one share of ~~common~~Common ~~stock~~Stock issued and outstanding prior to the Forward Stock Split.

~~ContinuityX,~~Since ~~Inc.~~our ~~since its~~ formation ~~has~~we have brought together a collaboration of individuals in technical sales, marketing and operations, combined with engineers and technology specialists for companies including, but not limited to, Microsoft, VMWare, Cisco, EMC, AT&T, XO Communications, AboveNet, Qwest, and Level 3 among others.

Business Strategy

By specializing in finance, health, manufacturing, large-scale distribution, and leveraging long-term leading relationships with companies, which we consider “Channel Partners” such as AT&T, Telx and XO Communications, we have been able to effectively market our company. Moreover, through anticipating the needs of our clients to connect and communicate more effectively with employees, customers, partners and suppliers, we and our Channel Partners have created a nationwide network of carrier and cloud service companies which are strategically positioned to enable next-generation requirements that help manage, protect and optimize networked communications.

Marketing and Branding

We cooperatively market our services alongside AT&T, Telx, XO Communications and other leading Carrier and Strategic Channel Partners. Our client base includes corporations such as: Playcast Media (Playstation), Associated Network Providers, Inc., 1st USA Phone Cards, Inc., Blue City, the St. Louis Rams, and Hutchison Global Communications Limited.

Intellectual Property

We ~~recently~~ filed for trademark protection for the mark “ContinuityX” in various trademark classes in which we operate and a name search has been completed. The name has been cleared and our Formal Application has been accepted by the USU.S. Patent and Trademark Office as of April 12, 2012. ~~We expect to receive official notification in the near future.~~

Competition

We believe our main competitors are the companies set forth below:

·● Accenture Consulting

o Accenture is a global management consulting, technology consulting and technology outsourcing company headquartered in New York City. According to its Yahoo Finance profile, it is the largest consulting firm in the world and is a Fortune Global 500 company. According to Accenture’s website, as of September ~~2011~~2012, Accenture had ~~more~~approximately ~~than 211~~257,000 employees across 120 countries.

~~Page 17 of 23~~14

· IBM Consulting

●	IBM Consulting
o		IBM Global Services is the information technology and business services arm of International Business Machines and operates in approximately 170 countries, providing a comprehensive range of enterprise IT and consulting services to commercial and public sector clients. According to IBM’s website, IBM Global Services started in the spring of 1991, with the aim towards helping companies manage their IT operations and resources. IBM Global Business Services “GBS” is the professional services arm of Global Services, including management consulting, systems integration and application management services. GBS is also the highest revenue earning division of IBM.

o● ~~IBM~~Others ~~Global~~o ~~Services~~Zayo isGroup, ~~the~~which ~~information~~provides ~~technology~~high ~~and~~bandwidth ~~business~~connectivity ~~services~~primarily ~~arm~~for oflarge ~~International~~corporate ~~Business~~enterprises ~~Machines~~ and ~~operates~~communications incarriers ~~approximately~~as ~~170~~well ~~countries,~~as ~~providing~~an aoptical ~~comprehensive~~network ~~range~~that ofdelivers ~~enterprise~~key ITnetwork and ~~consulting~~IP services tothroughout ~~commercial~~the ~~and~~United ~~public~~States ~~sector~~and ~~clients.~~London; ~~According~~Rack ~~to IBM’s website~~Space, ~~IBM~~which ~~Global~~provides ~~Services~~Cloud ~~started~~hosting, inmanaged ~~the~~hosting, ~~spring~~hybrid ~~of 1991~~hosting, ~~with~~managed ~~the~~server ~~aim~~configuration ~~towards~~and ~~helping~~managed ~~companies~~colocation ~~manage~~servers ~~their~~and ITcollaboration ~~operations~~ and ~~resources. IBM Global Business Services “GBS” is the professional services arm of Global Services~~Masergy, ~~including~~which ~~management~~provides ~~consulting~~managed, ~~systems integration~~secure, and ~~application~~virtualized ~~management~~ services. ~~GBS~~to isenterprises ~~also~~that ~~the~~have ~~highest~~complex ~~revenue~~needs ~~earning~~across ~~division~~multiple ~~of IBM~~locations.

· Others

o Abovenet, which provides high bandwidth connectivity primarily for large corporate enterprises and communications carriers as well as an optician network that delivers key network and IP services throughout the United States and London; Rack Space, which provides cloud hosting, managed hosting, hybrid hosting, managed server configuration and managed colocation servers and collaboration and Masergy, which provides managed, secure, and virtualized services to enterprises that have complex needs across multiple locations.

Results of Operations

~~For~~Three ~~the~~Months ~~three~~Ended ~~months~~September ~~ending March 31~~30, 2012 our gross revenues and services were $6,479,243, net revenues and services were $6,253,507 and net income was $1,758,307 . There was an increase of $3,470,654 or approximately 225% in net revenues and an increase of $1,250,221 or approximately 346% in net income compared to the three month period ending December 31, 2011 ~~which reflected $2,782,853 in net revenue~~ and ~~net income of $508,086.~~2012

Revenues and profits have increased for the three months ending March 31, 2012 compared to the three months ended December 31, 2011 as a result of increased marketing by our growing sales staff and Mr. Godwin which have produced additional shared customers, more than 10 resellers and an infrastructure arrangement with the St. Louis Rams. We offer a three-tiered solutions package consisting of consulting, technology and outsourcing at a more cost-effective rate than other consulting firms. We also have partnerships with AT&T, Telx and other carriers with whom we share 23 colocation and interconnection facilities.

	September 30, 2011			September 30, 2012
Operating loss	$	(158,062	)	$	(118,033)
Other (expenses):		(21,518	)		(517,524	)
Loss before income taxes		(179,580	)		(635,557)
Provision for (benefit from) income taxes		(69,525	)		(241,309)
Net loss	$	(110,055	)	$	(394,248)

For the three months ending March 31, 2012 our total operating expenses were $2,047,564, an increase of $826,783 or approximately 168% compared to the three month period ending December 31, 2011 during which our total operating expenses were $1,220,836.Revenue

~~For~~Gross service revenue for the ~~nine~~three months ended ~~March~~September 3130, 2012 weamounted ~~recorded~~to ~~gross~~$7,428,846. ~~sales~~During ~~and~~the ~~services~~three ofmonths ~~$10~~ended September 30,~~933~~ 2012,~~600~~ $813,015 ~~net~~of ~~sales~~reseller ~~and~~commissions ~~services~~were ofrecognized resulting in $96,~~997~~615,~~490~~831 ~~and~~of net ~~income~~service ofrevenue. $2During the three months ended September 30,~~199,163.~~ ~~In addition~~2011, ~~our~~gross ~~total~~service ~~Shareholders’~~revenue ~~Equity~~amounted ~~was~~to $21,~~611~~018,~~816~~566. Reseller atcommissions ~~March~~and ~~31,~~net ~~2012~~service asrevenue ~~compared~~amounted to $~~503~~57,~~509~~436 atand ~~December~~$961,130, 31respectively, for the three months ended September 30, 2011. an The increase of $25,~~108~~654,~~307~~701 orin ~~approximately~~net ~~584%~~service revenue resulted from significantly more contracts being recognized during the three months ended September 30, 2012 compared to the three month ended September 30, 2011.

~~Our~~Cost ~~assets and our liabilities have increased. As~~ of ~~March~~Services ~~31, 2012 we have had an increase in total assets to the amount of $7,935,164 compared to $973,663 as of June 30, 2011, an increase of approximately 815%. Our major asset is accounts receivable~~ and ~~factored~~Gross accounts receivable which were $4,964,415 at March 31, 2012 compared to $1,899,929 at December 31, 2011, an increase of 261%. Our total liabilities as of March 31, 2012 were $5,323,348, compared to $911,010 at June 30, 2011, an increase of approximately 584%.Profit

Cost of services for the three months ended September 30, 2012 amounted to $1,331,812. Gross profit was $5,284,019 which resulted in a gross profit percentage of approximately 71% for the three months ended September 30, 2012. Cost of revenue for the three months ended September 30, 2011 amounted to $212,816. Gross profit was $748,314 which resulted in a gross profit percentage of approximately 78% for the three months ended September 30, 2011. Gross profit percentage decreased between the three months ended September 30, 2012 and 2011, due to increased resellers commissions on a percentage basis due to our JMA with Hutchison HG.

Selling and Administrative Expenses

For the three months ended September 30, 2012, selling and administrative expenses amounted to $5,402,052. For the three months ended September 30, 2011, selling and administrative expenses amounted to $906,376. The major categories of selling and administrative expenses and the amounts for the three months ended September 30, 2012 and 2011, respectively, were the following: bad debts expense, approximately $3,500,000 and $0, advertising and promotion, approximately $195,000 and $22,000, consulting, approximately $153,000 and $67,000, and payroll and related expenses, approximately $1,006,000 and $522,000. The overall increase in expenses resulted from an overall increase in business during the three months ended September 30, 2012 compared to the three months ended September 30, 2011. The major difference between the three months ended September 30, 2012 compared to the three months ended September 30, 2011, was the recognition of bad debts expense in the amount of $3,499,685.

Interest Expense

Interest expense for the three months ended September 30, 2012 amounted to $518,419. Interest expense for the three months ended September 30, 2011 amounted to $21,591. Interest expense was earned by the holders of the notes payable and our factor, Forest Capital, LLC. During the three months ended September 30, 2012, interest expense was also recognized in connection with a capital lease agreement, as well as $132,546 of amortization of a debt-discount

Other (Income)

During the three months ended September 30, 2012, $895 of other income was recognized. During the three months ended September 30, 2011, $73 of other income was recognized.

Income Tax Provision

Income tax expense (benefit from income taxes) for the three months ended September 30, 2012 and 2011 amounted to $(241,309) and $(69,525), respectively. The expense (benefit) was based on the U.S. Federal and Illinois income tax rates.

Impact of Inflation

The impact of inflation upon the Company’s revenue and income from operations during the three months ended September 30, 2012 and 2011 has not been material to its financial position or results of operations for those periods because the Company does not maintain any inventories whose costs are affected by inflation.

Liquidity and Capital Resources

Since the reverse acquisition of the Company by ContinuityX, Inc. in 2011, we have generated income from operations. As of September 30, 2012 and June 30, 2012, our shareholders’ equity was approximately $4,200,000 and $4,500,000, respectively. The Company’s operating loss for the three months ended September 30, 2012 and 2011 was $(118,033) and $(158,062), respectively. Net cash ~~used~~provided by ~~operating~~(used ~~activities~~in) operations was $~~439~~649,~~445~~ 838 and ($194,704) for the ~~nine~~three months ended ~~March~~September 3130, 2012 and 2011, respectively. Operations since inception have been mainly funded with the proceeds from debt financings and sales activity. Our net loss for the three months ended September 30, 2012 was $394,248. As of September 30, 2012, we had cash and cash equivalents of $2,076,458. As of September 30, 2012 our working capital was $854,153.

Net cash used byin investing activities was $~~124~~3,~~943~~955,100 and $11,951 for the ~~nine~~ three months ended ~~March~~September 3130, 2012 and 2011, respectively. Net proceeds from financing activities were $4,683,437 and $431,695 for the three months ended September 30, 2012 and 2011, respectively. During the three months ended September 30, 2012, we generated net cash of $2,975,000 from the issuance of senior secured convertible debentures, $1,825,000 from the issuance of notes payable and $179,352 from factored accounts receivable. We also repaid $260,815 of debt during the three months ended September 30, 2012.

~~Net~~We ~~cash~~finance ~~provided~~our byday to day operations through financing ~~activities~~our ~~for~~accounts ~~the~~receivable ~~nine~~and ~~months ended~~working ~~March~~capital ~~31,~~from ~~2012~~revenues. We ~~was~~intend ~~$1,050,579~~to expand operations to generate cash flow and to raise funds through either borrowings and / or selling equity.

We have working capital of $1,567,028 as of March 31, 2012. On June 30, 2011 we had cash in the amount of $149,784, and as of March 31, 2012 cash was $635,975, an increase of approximately 424%. We finance our day to day operations through financing our accounts receivable and working capital from revenues. We intend to expand operations to generate cash flow and to raise funds through either borrowings and / or selling equity.

Page 18 of 23

We also have 25,000,000 shares of preferred stock authorized with a par value of $.001. No shares of preferred stock have been issued or are outstanding as of March 31, 2012.

Off Balance Sheet Arrangements

~~None~~As of September 30, 2012 and June 30, 2012, the Company had no material off-balance sheet arrangements other than operating leases to which we are a party.

Critical Accounting Estimates and Recent Accounting Pronouncements

Critical Accounting Estimates

The preparation of consolidated financial statements in accordance with Generally Accepted Accounting Principals in the United States requires management to make estimates and assumptions that affect reported amounts and related disclosures in the consolidated financial statements. Management considers an accounting estimate to be critical if it requires assumptions to be made that were uncertain at the time the estimate was made, and changes in the estimate or different estimates that could have been selected could have a material impact on our consolidated results of operations or financial condition.

Revenue Recognition. The Company recognizes revenue when it is realized or realizable and earned, net of commissions paid to third parties. The Company’s current revenue generating activities primarily involve compensation earnings from coordinating network and telecommunication needs with third parties and maintaining a customer service relationship with those parties on behalf of the Company’s customers and from sales originated through a Joint Marketing Agreement (“JMA”) with Hutchison HG.

Depending on the nature of the customer contract, the timing of the Company’s revenue recognition occurs in three ways:

Type 1

In these lump-sum compensation arrangements, the customer may not claw back – unreasonably withhold – or transfer these orders and must pay the Company per agreement within 90-120 days depending on the type and timing of the contract.

Type 2

Type 3

The Company sells data center rack space, cross connections between data centers and associated network services to Hutchison HG on behalf of their clients under the JMA. The JMA provides that the Company pay 20% of the revenue earned through the JMA to a wholly-owned US based subsidiary of Hutchison HG. The Company recognizes revenue on a monthly basis based on rack space and data center usage along with provided network services to the Hutchinson HG clients, pursuant to their related contracts with Hutchison HG.

Office Locations

We are headquartered in Metamora, IL,. ~~and~~We we also ~~maintain~~lease ~~a satellite~~ office space in ~~Marlborough~~New York, ~~Massachusetts~~NY on a month to month basis.

~~Page 19 of 23~~17

~~ITEM~~Item 3. Quantitative ~~QUANTITATIVE~~and ~~AND~~Qualitative ~~QUALITATIVE~~Disclosures ~~DISCLOSURES~~About ~~ABOUT~~Market ~~MARKET RISK~~Risk

WeNot ~~are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item~~applicable.

~~ITEM~~Item 4. Controls ~~CONTROLS~~and ~~AND PROCEDURES~~Procedures

~~Evaluation~~(a) of Disclosure Controls and Procedures .

~~Limitations~~Management, onwith the participation of our Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of ~~Internal~~our ~~Controls:~~“disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

AsNotwithstanding athe ~~result~~conclusion ofthat ~~the~~our ~~Acquisition~~disclosure ~~Agreement~~controls ~~whereby~~and ~~EDUtoons,~~procedures ~~Inc. acquired~~were ~~Continuity;~~not ~~ContinuityX~~effective ~~Solutions,~~as ~~Inc.~~of (the ~~Company)~~end ~~has~~of ~~survived as~~ the ~~continuing~~period ~~entity~~covered ~~(“Reorganization”). Following~~by this ~~Reorganization~~Quarterly Report, the ~~Company,~~Principal asExecutive Officer and the ~~operating~~Principal ~~company~~Financial Officer believe that the consolidated financial statements and ~~accounting~~other ~~acquirer~~information ~~has~~contained ~~implemented~~in athis ~~system~~Quarterly ofReport ~~internal controls~~present ~~over~~fairly, in all material respects, our business, financial ~~reporting~~condition and results of operations.

~~Pursuant~~(b) to the scope exception allowed under Item 308 of Regulation S-K, the Company has not completed its assessment of the effectiveness of its internal control over financial reporting and its disclosure controls and procedures. As managementManagement’s ~~assessment~~Quarterly ~~was~~Report ~~not~~on ~~required~~Internal ~~for Continuity prior~~Control toover ~~the~~Financial reverse merger, the Company, as the surviving private operating company, is working toward completing its documentation and assessment to include such assessments and certifications in its June 30, 2012 Form 10-K.Reporting

~~Recently~~Our ~~enacted~~management ~~accounting~~is ~~standards~~also responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with Generally Accepted Accounting Principles (“GAAP”).

~~During~~As ~~2011~~of September 30, ~~The~~2012, ~~Financial~~we ~~Accounting~~carried ~~Standards~~out ~~Board~~an (assessment of the effectiveness of our internal control over financial reporting based on the framework in “~~FASB~~Internal Control-Integrated Framework”) issued ~~ASU~~by ~~No.~~the ~~2011-02~~Committee ~~through~~of ~~ASU~~Sponsoring ~~2011-12,~~Organizations ~~which~~of ~~are~~the ~~not~~Treadway ~~expected~~Commission. Based toon ~~have~~our aevaluation, ~~material~~our ~~impact~~management onconcluded ~~the~~that ~~consolidated~~our internal control over financial ~~statements upon~~reporting ~~adoption~~was not effective as of September 30, 2012.

~~PART~~As IIof September 30, 2012, we had identified certain matters that constituted material weaknesses in our internal controls over financial reporting, specific material weaknesses include the fact that we (i) have experienced difficulty in generating data in a form and format that facilitates the timely analysis of information needed to produce accurate financial reports, (ii) have experienced difficulty in applying complex accounting and financial reporting and disclosure rules required under GAAP and the Securities and Exchange Commission reporting regulations, (iii) have limited segregation of duties and (iv) do not have proper internal controls in place in regards to proper documentation. ~~OTHER~~ During ~~INFORMATION~~the Quarter ended September 30, 2012, we have taken certain steps in an effort to correct these material weaknesses, including hiring of a Chief Financial Officer who has significant experience with publicly held companies. Although this is an important step towards improving the application of complex accounting principles, the preparation of financial reports and the segregation of duties, additional time is still required to fully implement additional internal controls procedures and test their operating effectiveness before we can definitively conclude that we have remediated our deficiencies. Because these remediation steps have not yet been completed, we have performed additional analyses and other procedures to ensure that our consolidated financial statements contained in this Quarterly Report were prepared in accordance with GAAP and applicable Securities and Exchange Commission regulations.

~~ITEM~~This 1Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. ~~LEGAL~~Management's ~~PROCEEDINGS~~report was not subject to attestation by the Company's registered public accounting firm pursuant to the exemption provided to issuers that are neither “large accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

~~There~~(c) ~~are~~Changes noin ~~pending,~~Internal ~~nor~~Control toover ~~our~~Financial ~~knowledge threatened, legal proceedings against us.~~Reporting

~~ITEM~~Notwithstanding ~~1A.~~our ~~RISK~~remedial ~~FACTORS~~actions and integration of our financial reporting systems, there was no change in our internal control over financial reporting that occurred during the first quarter of our fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.~~18

~~ITEM~~PART 2II. ~~UNREGISTERED~~OTHER ~~SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~INFORMATION

OnItem ~~November~~ 1~~, 2011, we sold 3,250,000 shares of our common stock, par value of $0~~.~~001~~ Legal ~~per share, to ContinuityX, Inc. for a purchase price of twenty five thousand ($25,000) dollars. These shares were subsequently deemed canceled.~~ Proceedings

~~On November 8, 2011 we issued an aggregate of 7,300,000 shares to 10 stockholders of ContinuityX, Inc~~None. ~~in exchange for 100% of the stock in ContinuityX, Inc.~~

AItem ~~subsidiary of the Company entered into a Consulting Agreement, dated July 5, 2011, with a third party to provide consulting services during a 12 month term~~1A. ~~The agreement~~Risk provides that such party shall receive 34.25% of the issued and outstanding shares of the subsidiary based upon the subsidiary’s then capitalization. To provide for the issuance of said shares the subsidiary repurchased 34,250 shares from the existing shareholders for $0.10 per share and issued 34,250 shares to the consultant and/or its designees.Factors

~~Page~~Our 20business and operations involve numerous risks, some of 23which are beyond our control which may affect future results and the future market price of our common shares. In any such case, the market price of our common shares could decline, and investors may lose all or part of their investment. The following discussion highlights all material risks known to us.

OnYou ~~December~~should 28consider carefully, ~~2011~~among other things, the ~~Company~~risk ~~authorized a~~factors ~~13.333-for-1~~set ~~stock~~forth ~~split~~below (as well as the ~~"Stock~~other ~~Split”)~~information ofcontained in this Quarterly Report on Form 10-Q and in our other filings with the ~~Company's~~Securities and Exchange Commission before deciding to purchase, hold or sell our Common Stock. ~~All~~ ~~references~~If toany of the ~~number~~identified risks actually occurs, or is adversely resolved, our consolidated financial statements could be materially, adversely impacted in a particular fiscal quarter or year and our business, financial condition and results of ~~shares~~ operations may suffer materially. As a result, the market price of our Common Stock could decline and ~~per~~you ~~share~~could ~~amounts~~lose ~~have~~all ~~been~~or ~~retroactively~~part ~~restated~~of your investment in our Common Stock. The identified risks are not the ~~accompanying~~only ~~financial~~risks ~~statements~~we face. Additional risks and uncertainties, including those not currently known to ~~reflect the~~us ~~effect~~or ofthat ~~the~~we ~~Forward~~currently ~~Stock~~deem ~~Split~~to be immaterial, also could materially adversely affect our business, financial condition and results of operations.

OnRisks ~~January~~With ~~24,~~Respect ~~2012, Mr. Godwin entered into an agreement with the Company~~ to ~~receive~~Our ~~1,800,000 shares of the Company’s common stock for the cancelation of $225,000 of unpaid compensation.~~Business

OnWe ~~January~~have ~~24,~~a ~~2012,~~limited ~~Mr.~~operating ~~Roth entered into an agreement with the Company to receive 180,000 shares of the Company’s common stock for the cancelation of $22,500 of unpaid compensation~~history.

OnContinuityX, ~~January~~Inc., 27which we acquired on November 8, ~~2012~~2011, was incorporated on March 25, 2011. As such, our ~~Board~~business must be evaluated in view of ~~Directors agreed~~the risks and uncertainties associated with a start-up business. There can be no assurance that our revenues will continue to ~~issue~~grow. We may incur losses on a ~~stock~~quarterly ~~dividend~~or annual basis for a number of 1reasons both within and outside our control.~~667~~ The ~~shares~~growth of ~~Common~~our ~~Stock~~business ~~for~~and ~~every~~ability ~~one~~to ~~(1)~~generate ~~share~~revenue ofwill ~~Common~~rely ~~Stock~~greatly ~~which~~upon ~~was~~our ~~issued~~ability ~~and~~to ~~outstanding immediately~~execute ~~prior~~our business plan. However there can be no assurance that we will be able to ~~the~~successfully ~~Forward~~implement ~~Stock~~our ~~Split~~business plan or continue to generate revenues.

OnOur ~~February~~success ~~20,~~depends ~~2012,~~on ~~the~~our ~~Company agreed~~ability to ~~issue~~compete ~~2,500,000~~effectively ~~shares of the Company’s restricted common stock to a consultant as part of his compensation. The consultant’s rights~~ in ~~such~~our ~~shares shall vest over the course of three years of services~~industry.

~~ITEM~~The 3telecommunications industry is extremely competitive, particularly with respect to price and service. Our ~~DEFAULTS~~failure ~~UPON~~to ~~SENIOR~~compete ~~SECURITIES~~effectively with our competitors could have a material adverse effect on our business, financial condition and results of operations. A significant increase in industry capacity or reduction in overall demand would adversely affect our ability to maintain or increase prices. Further, we anticipate that prices for certain telecommunications services such as IP bandwidth will continue to decline due to a number of factors including (a) price competition as various network providers attempt to gain market share to cover the fixed costs of their network investments and/or install new networks that might compete with our networks and (b) technological advances that permit substantial increases in the transmission capacity of many of our competitors’ networks.

~~None.~~19

~~ITEM~~Problems 4.in ~~MINE~~the ~~SAFETY~~economy ~~DISCLOSURE~~could negatively affect our future operating results.

~~Not~~The ~~Applicable~~problems in the economy could adversely affect our operations, by among other things,

~~ITEM~~● 5.reducing ~~OTHER~~and/or ~~INFORMATION~~delaying the demand for our services; ● increasing our customer turnover, both with respect to customer terminations and with respect to reduced prices upon renewals of customer agreements; ● leading to reduced services from our vendors facing economic difficulties; and ● increasing the bad debts in our customer receivables.

~~None~~These and other related factors could negatively affect our future operating results.

~~Page~~Rapid 21technological changes could affect the continued use of 23our services.

~~ITEM~~The 6telecommunications industry is subject to rapid and significant changes in technology that could materially affect the continued use of our services. ~~EXHIBITS~~Changes in technology could negatively affect the desire of customers to purchase our existing services and may require us to make significant investments in order to meet customer demands for services incorporating new technologies. We also cannot assure that technological changes in the communications industry and Internet-related industry will not have a material adverse effect on our business, financial condition and results of operations.

~~The~~We ~~following~~may ~~exhibits~~not ~~are~~be ~~filed~~able ~~herewith:~~to successfully implement our business strategy because we depend upon factors beyond our control, which could adversely affect our results of operations.

Exhibit No.		Description
3.1*		Certificate of Incorporation of EDUtoons, Inc.
3.11**		Amendment to Certificate of Incorporation filed on December 28, 2011.
3.2*		Bylaws of EDUtoons, Inc.
4.1*		Specimen Stock Certificate
31.1		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Our future success largely depends upon our ability to implement our business strategy to create new business and revenue opportunities. Our results of operations will be adversely affected if we cannot fully implement our business strategy. Successful implementation depends upon numerous factors beyond our control, including economic, competitive, regulatory and other conditions and uncertainties, the ability to obtain licenses, permits, franchises and rights-of-way on reasonable terms and conditions and the ability to hire and retain qualified management personnel.

*Governmental ~~Previously~~regulation ~~filed~~may asnegatively ~~exhibits~~affect toour ~~the registration statement on Form S-1 filed by the Company on August 6, 2010~~operations.

**Existing ~~Amendment~~and ~~filed~~future asgovernment anlaws ~~exhibit~~and toregulations ~~Form~~greatly ~~8-K~~influence ~~filed~~how bywe operate our business. U.S. federal and state laws directly shape the ~~Company~~telecommunications onand ~~January~~Internet 19markets. Consequently, ~~2012~~regulatory requirements and changes could adversely affect our operations and also influence the markets for telecommunications and Internet services. We cannot predict the future regulatory framework of our business.

~~Page~~Local 22governments also exercise legal authority that may have an adverse effect on our business because of 23our need to obtain rights-of-way for our fiber networks. While local governments may not prohibit persons from providing telecommunications services nor treat telecommunication service providers in a discriminatory manner, they can affect the timing and costs associated with our use of public rights-of-way.

~~SIGNATURES~~We have incurred secured indebtedness.

InWe ~~accordance~~have ~~with~~secured ~~the~~certain ~~requirements~~debt ofusing ~~the Securities~~our ~~Exchange~~receivables ~~Act~~as collateral. We currently have secured borrowings of ~~1934~~$6,000,000 with a pledge of the ~~registrant~~subject ~~has~~receivables ~~duly~~as ~~caused~~collateral ~~this~~with ~~report~~Forest toCapital, beLLC ~~signed~~and onVion ~~its~~Operations ~~behalf~~LLC by(jointly, the ~~undersigned,~~“Factor”) ~~thereunto duly~~pursuant ~~authorized~~to the Amended and Restated Master Factoring Agreement.

	ContinuityX Solutions, Inc.
Date: May 15, 2012	By:	/s/ David Godwin
		David Godwin Chairman, CEO and President 610 State Route 116 Metamora, IL 61548

In addition, in June 2012, and in September 2012, we issued a series of Senior Secured Convertible Debentures totaling $1,985,000 and $2,975,000, respectively, and are due on June 15, 2014. In July 2012 and August 2012 we borrowed $1,125,000 evidenced by promissory notes payable in December 2012, and $700,000 evidenced by promissory notes payable in February 2013, respectively. The Senior Secured Convertible Debentures and promissory notes are secured by all of the assets and property of the Company and are junior only to the interest of the Factor and other existing secured interests incurred with respect to the purchase of equipment.

~~Pursuant~~We tocannot ~~the~~predict ~~requirements~~our offuture ~~the~~tax ~~Securities~~liabilities. If ~~Exchange~~we ~~Act of~~become ~~1934,~~subject ~~this~~to ~~report~~increased ~~has~~levels ~~been~~of ~~signed~~taxation, ~~below~~our byfinancial ~~the~~condition ~~following~~and ~~persons~~results ~~on behalf~~ of ~~the~~operations ~~Registrant~~could ~~and~~be inadversely ~~the capacities and on the dates indicated~~affected.

Date: May 15, 2012	By:	/s/ Anthony Roth
		Anthony Roth
		Interim Chief Financial Officer, Principal Accounting Officer 610 State Route 116 Metamora, IL 61548

We provide telecommunication and other services in multiple jurisdictions across the United States and internationally and are therefore subject to multiple sets of complex and varying tax laws and rules. We cannot predict the amount of future tax liabilities to which we may become subject. Any increase in the amount of taxation incurred as a result of our operations or due to legislative or regulatory changes could result in a material adverse effect on our sales, financial condition and results of operations. While we believe that our current provisions for taxes are reasonable and appropriate, we cannot assure you that these items will be settled for the amounts accrued or that we will not identify additional exposures in the future.

~~Page 23 of 23~~20

Competition could substantially impair our business and our operating results.

The IT industry is extremely competitive, particularly with respect to price and service. We are engaging in a business similar to several major corporations. Most of the financial and technical resources, name recognition, market access, commercial connections, sales and marketing and research and development resources and capabilities of each of our competitors far exceed ours. In view of our limited history, lack of capital and number of personnel, it will be difficult for us to gain market access, and if we do develop a successful service, one or more of these companies may develop a similar or superior service within a short time. Our failure to compete effectively with our competitors could have a material adverse effect upon our business, financial condition and results of operations. A significant increase in industry capacity or reduction in overall demand would adversely affect our ability to maintain or increase prices. Increased activity by these competitors could result in downward pricing pressure or loss of customers, which could adversely affect our business, financial condition and results of operations.

We depend upon third parties for important parts of our business operations and the failure of those third parties to provide their products, services and/or technologies could negatively affect our services.

We rely upon third parties for important parts of our business, including provision of the products, services and/or technologies which we market and sell. If these third party providers fail to perform the services required under the terms of our contracts with them or fail to renew agreements upon reasonable terms and conditions, it could materially and adversely affect the provisioning of our products, services and/or technologies, and we may experience difficulties locating alternative service and technology providers on favorable terms, if at all, and our operations could be negatively affected.

We are dependent upon key personnel.

Our Chairman of the Board and Chief Executive Officer, Mr. David Godwin, is critical to our operations. If we were to lose the services of Mr. Godwin, it could have a material adverse effect upon our business. The Company intends to obtain Key Person life insurance on Mr. Godwin. To date no Key Person Life Insurance policy has been obtained upon the life of Mr. Godwin and there can be no assurance as to the availability or cost of such a policy upon the life of Mr. Godwin.

Our directors and officers will have substantial influence over our operations and control substantially all business matters.

Currently, we have five directors and two executive officers. Four of the directors and one of the executive officers assumed such positions within the past three months. We will not benefit from the multiple judgments which a greater number of directors or officers may provide, and we rely completely upon the judgment of such people in making business decisions.

We will need financing to develop our business and to meet our capital requirements.

We will need financing to develop our business and meet our capital requirements. We currently are making arrangements to obtain financing and we will be dependent upon sources such as:

●	funds from private sources such as, loans from shareholders and private placements,
●	funds from public offerings, and
●	cash generated from operations.

Financing may only be available, if at all, upon terms which may not be commercially advantageous. If adequate funds are not available from operations or additional sources of financing, our business will be materially adversely affected.

We have received substantially all of our revenues from a few service providers.

For the three months ended September 30, 2012, approximately 99% of our revenues came from the following three sources: Hutchison Global Communications Limited, Zayo Group and XO Communications, which revenues were derived from customers which we introduced to such sources. If, for any reason these relationships terminate, management believes it will be able to develop alternative business relationships. There can be no assurance that any such termination will not disrupt our business activities and cash flow.

Our primary bank account which receives a substantial portion of our revenues is under the control of another party.

The bank account into which substantially all of our revenues are deposited is under the exclusive control of Forest Capital, LLC. This account receives the payments from two of our service providers, including AT&T, which, to date, has been our largest source of revenues, and serves as collateral for $6,000,000 in account receivables pledged to Forest Capital, LLC and Vion Operations LLC by Continuity. We have two other accounts which receive revenues from other sources as well as the payments from accounts receivable in excess of what is owed to Forest Capital, LLC and Vion Operations LLC under our factoring agreement.

If we cannot consistently generate positive cash flows or raise sufficient capital then we will not realize our growth potential and the business could suffer financially.

We are attempting to grow while maintaining costs. However, we expect to require increasing cash flows to finance our needs in the marketplace. To finance growth, we will need to raise capital to fund infrastructure needs, expand our service offerings and implement more aggressive sales, marketing and advertising programs. However, if we are not successful in raising additional capital, we will not meet our projections for growth and sales could be adversely affected due to loss of customers.

Risks With Respect to Our Shares of Common Stock

We have never paid dividends on our Common Stock.

We have never paid cash dividends on our Common Stock, and there can be no assurance that we will have sufficient earnings to pay any dividends with respect to our Common Stock. Moreover, even if we have sufficient earnings, we are not obligated to declare dividends with respect to the Common Stock. The future declaration of any cash or stock dividends will be in the sole and absolute discretion of the Board of Directors and will depend upon our earnings, capital requirements, financial position, general economic conditions and other pertinent factors. It is also possible that the terms of any future debt financing may restrict the payment of dividends. We presently intend to retain earnings, if any, for the development and expansion of our business.

There can be no assurance that our Common Stock will ever be traded on a continuous, active basis or traded on national securities exchanges or markets.

Our Common Stock has received approval from FINRA to be listed but has only been traded on one day as of the date of this report. In addition, we have received approval from DTC to have it begin electronically trading and clearing our free trading Common Stock. Until such time as our Common Stock is traded more heavily upon any securities exchanges or markets, of which there can be no assurance, accurate quotations as to the market value of our securities may not be possible. Sellers of our securities are likely to have more difficulty disposing of their securities than sellers of securities which are listed upon any of the several NASDAQ markets, the New York Stock Exchange, the American Stock Exchange, or one of the other national securities exchanges or markets.

Although we have made arrangements for our Common Stock to be traded upon a public market, the OTCQB, there can be no assurance that we would be successful in having our Common Stock quoted on any other public markets, or that if so quoted, that our Common Stock would thereafter increase in value.

Even if public markets develop further, the volume of trading in our Common Stock will presumably be limited and likely dominated by a few individuals for the foreseeable future. The limited volume, will make the price of our Common Stock subject to manipulation by one or more shareholders and will significantly limit the number of shares that one can purchase or sell in a short period of time. An investor may find it difficult to dispose of his, hers or its securities.

We became a publicly traded company through the acquisition of a public shell company, and we could face repercussions as a result thereof.

We face risks associated with being a former public shell company. The current regulatory environment does not look favorably upon reverse acquisitions which could adversely affect our shareholders.

We may be subject to the Securities and Exchange Commission's "penny stock" rules if our Common Stock sells below $5.00 per share.

If the trading price of our Common Stock sells below $5.00 per share, trading in our securities may be subject to the requirements of the Securities and Exchange Commission's rules with respect to securities trading below $5.00, which are referred to as "penny stocks". These rules require the delivery prior to any transaction of a disclosure schedule explaining the penny stock market and all associated risks and impose various sales practice requirements on broker-dealers who sell "penny stocks" to persons other than established customers and accredited investors, which are generally defined as institutions or an investor individually or with their spouse, who has a net worth exceeding $1,000,000, excluding their primary residence, or annual income, individually exceeding $200,000 or, with their spouse, exceeding $300,000. For these types of transactions the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our Common Stock, which could severely limit its market price and liquidity.

Our Board of Directors has the right to authorize the issuance of Preferred Stock.

Our Board of Directors which consists of five directors, without further action by our shareholders, has the authority to issue shares of Preferred Stock from time to time in one or more series, and to fix the number of shares, the relative rights, conversion rights, voting rights, terms of redemption, liquidation preferences and any other preferences, special rights and qualifications of any such series. Any issuance of Preferred Stock could adversely affect the rights of holders of Common Stock and the value of such Common Stock.

In addition, the Company has the right to issue preferred shares which shall have anti-dilutive rights. If the Company issues 10,000,000 shares of preferred stock which are convertible into 30,000,000 shares of Common Stock, an example of anti-dilutive rights would provide that if the Company does a reverse split and 100,000,000 shares of Common Stock outstanding are reduced to 50,000,000 shares, the 10,000,000 shares of Preferred Stock would continue to be convertible into the 30,000,000 shares of Common Stock.

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

In the first quarter of fiscal year 2013, the below listed unregistered convertible debt securities and debt securities issued together with warrants which were sold by the Company pursuant to the exemption provided by Securities and Exchange Commission by Rule 506. No commission or payments were made by the Company to any person or entity with respect to these sales.

On July 25, 2012, the Company issued a $1,125,000 Promissory Note. This note bears an 8% interest rate to be paid on or prior to the note’s maturity date (December 19, 2012) and is secured by all of the assets and property of the Company subject to the interest of the Factor pursuant to the Amended and Restated Master Factoring Agreement with Forest Capital LLC and Vion Operations LLC, and other existing secured interests incurred with respect to the purchase of equipment. In connection with this note, the Company issued to the holder of this note a warrant to purchase 3,125,000 shares of the Company’s Common Stock at an exercise price of $0.18 per share. The warrant expires on January 25, 2017. On August 24, 2012, an additional $700,000 of Promissory Notes were sold to various investors which were issued with warrants for the purchase of an aggregate of 1,944,445 shares of the Company’s Common Stock. These notes bear a 12% interest rate to be paid on or prior to the note’s maturity date (February 24, 2013).

The warrants are exercisable for five years from the date of issuance with an exercise price of $0.18 per share. The warrants have both cash and cashless exercise options. The exercise price of the warrants shall be reduced if the Company issues Common Stock or any Common Stock equivalent at an effective price of less than the warrants’ exercise price. The number of shares to be issued shall be adjusted if the Company issues rights, options or warrants to all holders of the Common Stock. The investors who were issued warrants received registration rights as follows: (i) the right to demand registration once commencing one year after the issuance of the warrant and (ii) unlimited piggy back registration rights.

$2,975,000 of Senior Secured Convertible Debentures were issued in September, 2012. The Senior Secured Convertible Debentures bear an 8% interest rate to be paid semi-annually on December 15 and June 15 of each year commencing on December 15, 2012. Interest shall be payable at the holder’s option in cash or restricted shares of the Company’s Common Stock at the volume weighted average closing price for the ten previous trading days to the interest due date. The Senior Secured Convertible Debentures are secured by all of the assets and property of the Company subject to the prior claim of the Factor and other existing secured interests incurred with respect to the purchase of equipment and are due on June 15, 2014. The holders of the Senior Secured Convertible Debentures may elect to convert all or part of the principal of the debentures into restricted shares of the Company’s Common Stock at the Conversion Price of $0.18 per share at any time or times before or on the maturity date. If the Company sells securities, convertible securities or debt with a price per share less than the Conversion Price noted above, the Conversion Price shall be reduced to equal the price per share of such offering. The right to the reduction in the Conversion Price shall terminate upon the Company raising $5,000,000 or more at a price per share of more than the Conversion Price.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

(a) See “Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" regarding the unregistered sale of equity securities, which is incorporated herein by reference.

(b) There has been no material changes to the procedures by which security holders may recommend nominees to our board of directors

Item 6. Exhibits

10.1	Consulting Agreement dated August 1, 2012, by and between ContinuityX Solutions, Inc. and Millennium Capital Corporation
10.2	Sales and Marketing Representative Agreement dated September 13, 2012, by and between ContinuityX Solutions, Inc. and M&M Licensing, Inc.
10.3	Professional Services Agreement between ContinuityX Solutions, Inc. and Michael Neiberg dated July 17, 2012
10.4	Investment Banking Agreement dated August 9, 2012 by and between ContinuityX Solutions, Inc. and J.H. Darbie & Co., Inc.
10.5	Joint Marketing Agreement dated August 14, 2012 by and between ContinuityX Solutions, Inc. and Hutchison Global Communications Limited (redacted pursuant to a request for confidential treatment)
10.6*	Severance Agreement and Mutual Release dated September 12, 2012 by and between Anthony Roth and ContinuityX Solutions, Inc (previously filed with the Company’s report on Form 8-K filed with the Securities and Exchange Commission on September 19, 2012)
31.2+	Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2+	Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+	Certification by Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS#+	XBRL Instance Document.
101.SCH#+	XBRL Taxonomy Extension Schema Document.
101.CAL#+	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF#+	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB#+	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE#+	XBRL Taxonomy Extension Presentation Linkbase Document.

+	Transmitted herewith.

*	Previously filed and incorporated by reference.
#	This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such exhibit will not be deemed to be incorporated by reference into any filing under the Securities Act or Securities Exchange Act, except to the extent that the Company specifically incorporates it by reference.

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) 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.

CONTINUITYX SOLUTIONS, INC.

Date: November 21, 2012	By:	/s/ David Godwin
		David Godwin Chairman of the Board, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: November 21, 2012	By:	/s/ David Godwin
		David Godwin Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date: November 21, 2012	By:	/s/ Brian Wasserman
		Brian Wasserman Chief Financial Officer (Principal Financial and Accounting Officer)

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