XFORMITY TECHNOLOGIES, INC. (XFMY) - Description of business

Company Description
The Company's flagship suite of products includes a business intelligence solution and balanced scorecard solutions that are geared for delivering real-time, or near real-time, exception based management and analysis of key performance indicators. The Company has developed a proprietary data integration and management infrastructure that provides for rapid integration of information systems that include in-unit systems (point of sale, cash, labor and inventory management systems) and non-unit systems (food distributors, customer satisfaction surveys, payroll and accounting systems, etc.). Along with this robust data integration infrastructure, the Company has developed a high-performance, hosted, data analytical solution that is highly configurable. The Company identified a significant need for data integration and analytical tools within the quick-service restaurant (QSR) segment of the food service industry and has configured solutions for providing business intelligence (BI) packages for multi-unit QSR owners and operators. Solutions are deployed as a hosted (software-as-a-service) model, allowing the Company to rapidly configure and implement solutions for new customers in an affordable, cost-effective manner. The Company has deployed its BI services to customers of all sizes, from single-unit operators to multi-national franchisors of quick-serve restaurants. The Company currently has its BI solution utilized by franchisees of YUM Brands that represent over 1,000 restaurants, 230 franchised Domino's Pizza restaurants, and 13 Burger King franchised restaurants. Burger King Corporation (BKC) utilizes the Company's BI solution with all of its corporate owned and operated restaurants in the United States and Canada. The Company is engaged with BKC to implement the solution for all of their corporate restaurants globally. In February 2007, BKC contracted the Company to develop and deploy its Balanced Scorecard solution for its franchisee owners and operators as a stand-alone solution or integrated with its BI solution. This solution for BKC was fully developed, tested and deployed in eight weeks. The franchise balanced scorecard was delivered to BKC in early April and launched at the world-wide BKC Convention the first week of May. This solution, launched with 6,400 restaurants, will eventually encompass every BKC world-wide and is licensed with an annual enterprise license rather than on a restaurant / month basis as the BI is licensed. Licensing revenue began in July 2007. The Company has maintained a very lean operating team which is predominately technical in nature. As additional units are brought onboard, only marginal operational resources are required to manage those new customers, greatly enhancing the employee to revenue efficiency ratio.

The Company has incurred operating losses from its inception through June 30, 2007 and has addressed resulting liquidity issues through the sales of its software and professional services and the issuance of convertible debentures. The Company continues to meet with various potential investors for the purpose of raising additional capital as it will need additional financing and there is no assurance that such financing will be available, if at all, at terms acceptable to the Company. If additional funds are raised by the issuance of equity securities, existing stockholders may experience dilution of their ownership interests and these securities may have rights senior to those of holders of the common stock. If adequate funds are not available or not available on acceptable terms, it could have a materially adverse effect on the Company's financial condition, results of operations and as a going concern. .XFormity's Competition The Company's biggest competition in today's marketplace remains the existing methodologies of assembling and communicating store-level performance data. Many of the restaurant operators use internally-developed systems that lack the scope and flexibility of our business intelligence software solution. Most point of sale and back office system providers have proprietary business intelligence tools; however, they are sold in conjunction with the main system only and do not offer alternative system integration.

XFormity's Marketing Strategy In prior years, the Company relied heavily on leveraging existing customer relationships into new business opportunities. During the past fiscal year the Company has retained the expertise of a professional sales consultant who is directing all sales and marketing activities. The Company is executing under a marketing plan that is increasing the company's presence in both franchisee and industry trade shows, compiling new and professional marketing collateral and developing reseller channels for its core products. During FY 2007, the Company entered into agreements with two global point-of-sale and back-office system providers to utilize the Company's tools and reporting architecture within their offerings as well as serve as resellers of the Company's solutions. These resellers are building significant opportunities that the Company believes will translate into revenues in fiscal year 2008. XFormity's Intellectual Property The Company protects its Intellectual Property through copyright and trademarks. As a hosted solution, the Company does not distribute software to users; authorized users are granted access to centrally managed solutions on an individual basis that is monitored by the Company's personnel. Unauthorized access and piracy risks are greatly mitigated with this software deployment model. Under an agreement with b-50.com LLC, the company licenses b-50.com's patent for processing its reports. It has registered its key Internet URLs, including XFormity.com, and reviews these registrations on a regular basis to ensure that they remain current and in good standing. Some of the limitations of Intellectual Property Protection: * If and to the extent we apply for patent protection in the future, (of which there exists no current plan), no assurance can be given that any patent will be issued or that the scope of any patent protection will exclude competitors or that any patent, if issued, will be held valid if subsequently challenged. Except for our license of patent rights from b.50.com, we currently do not rely on any patent protection for our solution. * When the Company applies for registration of trademarks and registered domain names in an effort to protect them, it cannot be sure of the nature or extent of the protection afforded, since trademark registration does not assure any enforceable rights under many circumstances and there exists significant uncertainty surrounding legal protections of domain names. * There can be no assurance that any steps the Company takes in this regard will be adequate to deter misappropriation of our proprietary rights or independent third parties developing functionally equivalent products. Despite precautions, unauthorized parties may attempt to engineer, reverse engineer, or copy features and functions of the Company's products. * Although management believes that the Company's products do not infringe on the intellectual property rights of others, there can be no assurance that an infringement claim will not be asserted in the future. The prosecution or defense of any intellectual property litigation can be extremely expensive and would place a material burden upon the Company's working capital as noted in the Company's financial statements and accompanying notes included herein with reference to the Company's defense against b-50.com's patent infringement suit that has been settled.