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KUNEKT CORPORATION AND SUBSIDIARY

APRIL 30, 2011 QUARTERLY REPORT ON FORM 10-Q

INDEX

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PART I

Item 1

Interim Consolidated Financial Statements – Unaudited

The accompanying unaudited interim consolidated financial statements of Kunekt Corporation (“Kunekt”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited consolidated financial statements and notes thereto contained in Kunekt’s Annual Report on Form 10-K as filed with the SEC (the “Form 10-K”). In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of consolidated financial position and the consolidated results of operations for the interim period are not necessarily indicative of the results that may be expected for the full year. Notes to the interim consolidated financial statements that would substantially duplicate the disclosure contained in the audited consolidated financial statements for fiscal 2010 as reported in the Form 10-K have been omitted.

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

INDEX TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

April 30, 2011 (Unaudited) and October 31, 2010

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

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

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 (Unaudited) and October 31, 2010

NOTE 1 -

BASIS OF CONSOLIDATED FINANCIAL STATEMENT PRESENTATION

The financial statements presented are those of Kunekt Corporation and Subsidiary (the “Company”). The accompanying unaudited interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted in accordance with such rules and regulations. The information furnished in the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such consolidated financial statements. Although management believes the disclosures and information presented are adequate to make the information not misleading, it is suggested that these consolidated interim financial statements be read in conjunction with the Company’s most recent consolidated audited financial statements contained in the Company’s Form 10-K filing with the Securities and Exchange Commission. Consolidated operating results for the three months ended April 30, 2011 are not necessarily indicative of the results that may be expected for the year ending October 31, 2011.

NOTE 2 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.

Organization

The Company was incorporated in the State of Nevada as a for-profit company on October 1, 2007 and established a fiscal year end of October 31.  The Company is a development-stage company that was originally organized to enter into the financial account card market with a proprietary patent pending financial account card product that the company was developing. The patent application, which was filed with the U.S. Patent and Trademark Office, was abandoned on September 3, 2010. The company has subsequently changed its business and now markets mobile devices, specifically mobile phones, smartphones and tablet devices. The company is evolving its business to become a designer and manufacturer of mobile devices. The company intends to sell its products under its own brand name "KUNEKT" in its target markets, which include China, India, Southeast Asia, the Middle East, Eastern Europe and South America.

b.

Basis of Presentation

The Company uses the accrual method of accounting for financial purposes and has elected October 31 as its year-end.

c.

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 certain reported amounts and disclosers.  Accordingly, actual results could differ from those estimates.

d.

Fixed Assets

Fixed assets are recorded at cost.  Major additions and improvements are capitalized.  Minor replacements, maintenance and repairs that do not increase the useful life of the assets are expensed as incurred.  Depreciation of property and equipment is determined on a straight-line basis over the expected useful lives.

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 (Unaudited) and October 31, 2010

NOTE 2 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

d.

Fixed Assets (continued)

The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as gain or loss on sale of equipment.

e.

Long-Lived Assets

Our policy regarding long-lived assets is to evaluate the recoverability of our assets when the facts and circumstances suggest that the assets may be impaired. This assessment is performed based on the estimated undiscounted cash flows compared to the carrying value of the assets. If the future cash flows (undiscounted and without interest charges) are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

f.

Fair Value of Financial Instruments

The carrying amounts of the Company’s consolidated financial instruments, including cash, accounts payable, and accrued liabilities, approximate fair value due to their short maturities.

g.

Revenue

The Company records revenue on the accrual basis when all goods and services have been performed and delivered, the amounts are readily determinable, and collection is reasonably assured.  The Company has not generated any revenue since its inception.

h.

Website Development Costs

Internal and external costs incurred during the preliminary project stage are expensed as they are incurred. Internal and external costs incurred to develop internal-use computer software during the application development stage are capitalized. Training costs are not internal-use software development costs and, if incurred during this stage, are expensed as incurred. These capitalized costs are amortized based on their estimated useful life over three years. Payroll and other related costs are not capitalized, as the amounts principally relate to maintenance.

i.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturity of three months or less to be cash equivalents.

j.

Foreign Currency Translation

The Company's cash deposits with a functional currency other than the U.S. dollar translate amounts to the reporting currency, United States dollars. At each balance sheet date, assets and liabilities that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate which may give rise to a foreign currency translation adjustment accounted for as a separate component of stockholders’ equity and included in comprehensive loss.

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 (Unaudited) and October 31, 2010

NOTE 2 -

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)

j.

Foreign Currency Translation (continued)

For transactions undertaken by the Company in foreign currencies, monetary assets and liabilities are translated into the functional currency at the exchange rate in effect at the end of the year. Non-monetary assets and liabilities are translated at the exchange rate prevailing when the assets were acquired or the liabilities assumed. Revenues and expenses are translated at the rate approximating the rate of exchange on the transaction date. Exchange gains and losses are included in the determination of net income (loss) for the year.

k.

Comprehensive Income (Loss)

Comprehensive income (loss) is comprised of foreign currency translation adjustments.

l.

Recent Accounting Pronouncements

There are no recently issued accounting pronouncements that the Company believes are applicable or would have a material impact on the financial statements of the Company.

m.

Basic Loss Per Share

The computation of basic loss per share of common stock is based on the weighted average number of shares outstanding during the period of the consolidated financial statements as follows:

Net loss per share is computed by dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock outstanding.

n.

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company, and its 100% owned subsidiary: Kunekt Corporation Limited.  All inter-company balances and transactions have been eliminated in consolidation.

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 (Unaudited) and October 31, 2010

NOTE 3 -

RELATED PARTY TRANSACTIONS

Common Stock

On October 15, 2007, corporate officer Mark Bruk acquired 400,000,000 shares of the Company’s common stock at a price of $0.000025 per share, or $10,000, which shares represented 93% of the 430,000,000 issued and outstanding common stock of the Company.  

On January 21, 2008, corporate officer Arom Thaveeloue acquired 2,000,000 shares of the Company’s common stock at a price of $0.0005 per share, or $1,000, which shares represented less than 1% of the 430,000,000 issued and outstanding common stock of the Company. On September 1, 2010, corporate officer Arom Thaveeloue sold his 2,000,000 shares of the Company's common stock in a private transaction.

Common Stock (continued)

On April 19, 2010, Mark Bruk, president, treasurer and sole director of the Company, voluntarily and without consideration submitted 368,000,000 of his 400,000,000 shares of common stock of the Company for cancellation. Following the cancellation, Mr. Bruk has 32,000,000 shares of common stock of the Company, which represents 51.6% of the issued and outstanding shares of common stock of the Company.

Accrued Expenses

For the six months ended April 30, 2011, the Company accrued $37,250 in wages payable to Mark Bruk, its president, treasurer and sole director. For the three months ended April 30, 2011, the Company accrued $21,000 in wages payable to Mark Bruk, its president, treasurer and sole director, which represents having worked during the period at a rate of $7,000 per month.

Notes Payable and Accrued Interest

Effective as of November 1, 2009, we amended the shareholder loan agreement between the Company and Mr. Bruk, whereby Mr. Bruk agreed to continue to loan us funds, as required, to operate our business. The interest rate on the loan is 4.0%. The note is unsecured, due upon demand and accrues interest at the end of each month on the then outstanding balance on a last-in, first-out basis for new funds and payments.

As of April 30, 2011, the Company had a note payable to an officer totalling $90,795. The note represents patent filing fees paid by the officer totalling $31,048 and cash advances for the payment of general corporate expenses of $153,618. The Company has repaid $135,151 of this note as of April 30, 2011. Accrued interest payable on the note totals $8,429 at April 30, 2011.

As of April 30, 2011, the Company had a loan payable to an officer totaling $64,000. The promissory note carries interest at 6.5%, and is secured by the Company’s assets and is payable on demand. Accrued interest payable on the promissory note totals $41,978 at April 30, 2011. During the quarter ended April 30, 2011 the Company repaid $386,000 of the $450,000 loan payable to an officer of the Company leaving $64,000 of the note owing as indicated above.

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 (Unaudited) and October 31, 2010

NOTE 4 -

PATENTS

Patent filing costs totalling $27,318 were capitalized at October 31, 2009 and additional patent filing costs totalling $3,730 were capitalized during the period ended January 31, 2010. As of January 31, 2010, patent filing costs totalling $31,048 were capitalized. The patent is pending however, as a direct result of the United States Patent and Trademark Office’s final Office Action (see below) management determined that the expected use of the patent has deteriorated significantly and therefore has impaired the patent application fully.

On April 6, 2010 the Company announced that on April 1, 2010, the Company received correspondence, from its patent application counsel in respect of its U.S. Patent Application No. 11/809,031, filed with the United States Patent and Trademark Office on May 31, 2007, and entitled "Method And System For Processing Financial Transactions Using Multiple Financial Accounts".

The United States Patent and Trademark Office issued a final Office Action in connection with the above-referenced matter where the United States Patent and Trademark Office declined the patent application. The due date set for filing a response with the United States Patent and Trademark Office was June 4, 2010.

On June 3, 2010 the Company announced that the Company decided to file a Pre-Appeal Brief Request for Review and Notice of Appeal prior to September 4, 2010, which extended the June 4, 2010 deadline under a concurrently filed request for a 3-month extension.

On September 3, 2010 the Company abandoned its patent application.

NOTE 5 -

GOING CONCERN

The Company's consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern that contemplates the realization of assets and liquidation of liabilities in the normal course of business.  However, the Company does not have significant cash or other material assets, nor does it have an established source of revenues sufficient to cover its operating costs. Additionally, the Company has accumulated significant losses, has negative working capital, and a deficit in stockholders' equity.  All of these items raise substantial doubt about its ability to continue as a going concern.

Management's plans with respect to alleviating the adverse financial conditions that caused shareholders to express substantial doubt about the Company's ability to continue as a going concern are as follows:

The Company's current assets are not deemed to be sufficient to fund ongoing expenses related to the start up of planned principal operations.  If the Company is not successful in the start up of business operations which produce positive cash flows from operations, the Company may be forced to raise additional equity or debt financing to fund its ongoing obligations and cease doing business. In order to raise equity or debt financing the issuance by the British Columbia Securities Commission (the “BCSC”) of an order varying its temporary cease trade order issued against the Company may be required. At this time Management does not know whether or not a variation is necessary or is likely to be obtained as this may depend upon the details of any proposed transaction.

Management believes that the Company will be able to operate for the coming year by obtaining additional loans from Mr. Bruk, the president, treasurer and sole director of the Company.  However, there can be no assurances that management’s plans will be successful.

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KUNEKT CORPORATION AND SUBSIDIARY

(A Development Stage Company)

Notes to the Consolidated Financial Statements

April 30, 2011 (Unaudited) and October 31, 2010

NOTE 5 -

GOING CONCERN – (CONTINUED)

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plan described in the preceding paragraph and eventually attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 6 -

SUBSEQUENT EVENTS

On June 14, 2011, the Company terminated its agreements with ProActive Capital Resources Group, Stern & Co., Mavericks Group Inc. (dba TangeloPR) and Barwicki Investor Relations Inc.

Management has evaluated subsequent events pursuant to ASC TOPIC 855, and has determined there are no additional subsequent events to be reported.

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

This quarterly report contains forward-looking statements that involve risk, uncertainties and assumptions. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expect”, “plan”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue” or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this quarterly report on Form 10-Q include statements about:

·

Our business plans,

·

Our ability to raise additional finances,

·

Our future customers,

·

Our design of our products and our ability to secure manufactures, and

·

Our future investments and allocation of capital resources.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including:

·

General economic and business conditions,

·

Risks associated with the mobile market,

·

Our lack of operating history,

·

Our limited experience manufacturing mobile products, and  

·

The risks in the section of this quarterly report entitled “Risk Factors”,

any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results

The following discussion and analysis should be read in conjunction with the financial statements and related notes and the other financial information appearing elsewhere in this quarterly report. Our financial statements are stated in United States dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

As used in this quarterly report, the terms “we”, “us” and “our” mean Kunekt Corporation and its wholly-owned subsidiary Kunekt Corporation Limited, unless otherwise indicated.

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Company Overview

We are a development-stage company that was originally organized to enter into the financial account card market with a proprietary patent pending financial account card product that we were developing. Our patent application, which was filed with the U.S. Patent and Trademark Office, was abandoned on September 3, 2010.

We have subsequently changed our business and we now market mobile devices, specifically mobile phones, smartphones and tablet devices.

Transaction with AMS-INT

On January 20, 2011, we entered into share exchange agreements (the “Share Exchange Agreements”) with the shareholders of AMS-INT Asia Limited (“AMS”) pursuant to which we would obtain all of the issued and outstanding common shares of AMS. On March 31, 2011, we entered into agreements (the “Amending Agreements”) that amended the Share Exchange Agreements to change the consideration offered to the shareholders of AMS. Also on March 31, 2011, we entered into an exclusive distribution and sales agency agreements (the “Distribution Agreements”) with each of Guangzhou Xingwei Communications Technology Ltd. Inc., Easlink Info Ltd., and Beijing Yiyueqiji Science and Technology Development Ltd. Inc. For a discussion of these agreements, please refer to our Current Report on Form 8-K filed on January 24, 2011 and April 11, 2011. The Share Exchange Agreements, Amending Agreements, and Distribution Agreements (the “Agreements”) are all subject to regulatory approving, including a variation of a temporary cease trade order issued by the British Columbia Securities Commission. As of June 17, 2011, regulatory approval for the Agreements had not been obtained.

Plan of Operation

We moved our head office to Hong Kong as of January 21, 2011and also incorporated a wholly-owned subsidiary, Kunekt Corporation Limited, in Hong Kong, which will be responsible for our operations in China.

Over the next twelve months we estimate that we should need to spend approximately $1,200,000 on completing these stages. The following is a breakdown of our anticipated expenses over the next four quarters.

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Financial Condition, Liquidity and Capital Resources

At April 30, 2011, we had $1,271,137 cash on hand and in the bank compared to $387,150 in cash at October 31, 2010. At April 30, 2011, we had a working capital deficit of $628,582 compared to working capital deficit of $221,631, at October 31, 2010. This increase in working capital deficit was primarily the result of share subscription cash received in advance and payments for general and administrative expenses incurred during the three month period ended April 30, 2011. The share subscription amount was recorded as a current liability due to the cease trade order placed on the Company’s shares by BCSC.

At April 30, 2011, we had total assets of $1,492,711 consisting of cash of $1,271,137, advances of $216,000, prepaid expenses of $5,346 and security deposits of $228. Our total assets at October 31, 2010 were $387,248 consisting of cash of $387,150 and prepaid expenses of $98. On March 3, 2011, we accepted a subscription agreement with one subscriber for 1,223,777 of our common shares at a price of $1.43 per share for gross proceeds of $1,750,000, which the company received in full. The amount of the subscriptions received in advance was recorded as a current liability since these shares were not yet issued at the end of the quarter and the Company had a cease trade order placed by BCSC on its shares.

At April 30, 2011, our total liabilities were $2,121,065, consisting of stock subscriptions received in advance of $1,750,000, a loan payable and accrued interest to our principle executive officer of $105,978, a note payable and accrued interest to our principle executive officer of $99,224 accrued wages payable to our principle executive officer of $92,825, accrued stock compensation of $37,500 and accounts payable of $35,538. Our total liabilities at October 31, 2010 were $608,879, consisting of a loan payable and accrued interest to our principle executive officer of $480,711, a note payable and accrued interest to our principle executive officer of $59,147, accrued wages payable to our principle executive officer of $55,575 and accounts payable of $13,446. For six-months ended April 30, 2011, net cash provided by operating activities was $1,254,786, net cash used by investment activities was nil, net cash used by financing activities was $347,269, foreign exchange effect on cash was ($23,530). For the six months ended April 30, 2010 net cash used by operating activities was $23,332, net cash used by investment activities was nil, net cash used by financing activities was $67,847, foreign exchange effect on cash was $23,962. The changes in cash used by operating activities between the six month periods ended April 30, 2010 and 2011 was due to increase in operating expenses during the six month period ended April 30, 2011 compared to that ended April 30, 2010. The change in financing activities between the six-month period ended 31 April 2011 and 2010 was due to the fact that during the six month period ended April 2011, Mark Bruk, the President, made no payments related to the patent filing that was abandoned in September 2010, where as there were such payments during the six-month period ended 31 April 2010. The amounts paid by Mark Bruk on behalf of our company are recorded as related party notes payable. We must raise capital to continue the staged design, development, production, packaging and distribution of our mobile device products and initiate sales and marketing activities.

We estimate our cost over the next twelve months to be (a) approximately $1,138,000 to commence marketing and distribution of our mobile device products, and (b) $62,000 to maintain our reporting status. Therefore our current cash on hand will not satisfy our cash requirements for the next twelve months. We plan to satisfy our future cash requirements - primarily the working capital required for the design, development, production, packaging and distribution of our mobile device products and initiating sales and marketing activities, and to offset legal and accounting fees - by additional financing. This will likely be in the form of future debt or equity financing.

Management believes that if we obtain sufficient funds to operate our business through future debt or equity financing, we may generate sales revenue within the following twelve months thereof. However, additional debt or equity financing may not be available to us on acceptable terms or at all, and thus we could fail to satisfy our future cash requirements.

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If we are unsuccessful in raising additional proceeds through future equity financing we will then have to seek additional funds through debt financing, which would be highly difficult for a new development stage company to secure. Therefore, we are highly dependent upon the future equity financing and failure to obtain equity financing would result in our having to seek capital from other resources such as debt financing, which may not even be available to us. However, if such financing were available, because we are a development stage company we would likely have to pay additional costs associated with high risk loans and be subject to an above market interest rate. At such time these funds are required, management would evaluate the terms of such debt financing and determine whether the business could sustain operations and growth and manage the debt load. If we cannot raise additional proceeds via future debt or equity financing we would be required to cease business operations. As a result, investors in our common stock would lose all of their investment. Also management believes if we cannot raise sufficient revenues or maintain our reporting status with the Securities and Exchange Commission we will have to cease all efforts directed towards the company. As such, any investment previously made would be lost in its entirety.

Our auditors have issued a "going concern" opinion. This means that there is substantial doubt that we can continue as an on-going business for the next one year unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no substantial revenues are anticipated until we build a network of distributors for our mobile device products. Accordingly, we must raise cash from sources other than from the sale of our mobile device products. Our only source for cash at this time is investments by our president, treasurer and sole director. We must raise cash to implement our business strategy and stay in business. On September 24, 2009, we raised $450,000 in a loan from our founder and we have used up $15,000 we raised through initial public offering of shares of our common stock, therefore our president, treasurer and sole director will need to make additional financial commitments to our company and/or we will need to raise additional capital through future debt or equity financing. Our success or failure will be determined by our ability to market our mobile device products. On March 3, 2011, we accepted a subscription agreement with one subscriber for 1,223,777 of our common shares at a price of $1.43 per share for gross proceeds of $1,750,000, which the company received in full. We have not issued any shares in connection with this private placement. The amount of the subscriptions received in advance was recorded as a current liability since these shares were not yet issued at the end of the quarter and the Company had a cease trade order placed by BCSC on its shares.

Results of Operations

Our operating expenses consist of professional and legal fees, officer wages, incorporation costs, and general and administrative expenses. Professional and legal fees for the six-month period ended April 30, 2011 were $285,912 compared to $20,832 for the six-month period ended April 31, 2010. For the six-month period ended April 30, 2011 accounting fees were $2,284, auditing fees were $12,234, legal fees were $111,616, stock transfer agent fees were $1,450 and miscellaneous professional fees (including consulting - $24,091, Investor relations - $71,900, Public relations - $32,000, Web design - $22,856 and Misc. $3,648) were $116,995, compared to $440; $9,543; $483; $1,366 and $9,000 respectively for the six-month period ended April 30, 2010. Officer wages for the six-month period ended April 30, 2011 were $37,250 compared to $19,425 for the six-month period ended April 30, 2010. During the six-month period ended April 30, 2011 we accrued $37,250 in wages payable to Mr. Bruk, our president, compared to $19,425 in accrued wages payable during the six-month period ended April 30, 2010. General and administrative expenses for the six-month period ended April 30, 2011 was $77,521 compared to $4,327 for the six-month period ended April 30, 2010. The increase in operating expenses was primarily attributable to our increased work on the Kunekt mobile device and related systems.

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The following table shows a breakdown of material components of our expenses:

Additional Disclosure of Outstanding Share Data

As of June 6, 2011, we had 62,000,000 shares of common stock issued and outstanding.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any outstanding derivative financial statements, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts, nor are any contemplated by management. We do not engage in trading activities involving non-exchange traded contracts.

The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the company is a party, under which the company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Critical Accounting Policies

The following are the accounting policies that we consider to be critical accounting policies. Critical accounting policies are those that are both important to the portrayal of our financial condition and results and those that require the most difficult, subjective, or complex judgments, often as results of the need to make estimates about the effect of matters that are subject to a degree of uncertainty.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the consolidated condensed financial statements and accompanying notes included elsewhere in this quarterly report. The United States Securities and Exchange Commission has defined a company’s most critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. For additional information, see the notes to consolidated condensed financial statements included elsewhere in this quarterly report and also please refer to our annual report on Form 10-K for the year ended October 31, 2010, for a more detailed discussion of our critical accounting policies. Although we believe that our estimates and assumptions are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions or conditions.

We did not make any material changes in or to our critical accounting policies during the three-month period ended April 30, 2011.

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The carrying amounts of our financial instruments, including cash, accounts payable, and accrued liabilities, approximate fair value due to their short maturities.

Recent Accounting Pronouncements

There are no recently issued accounting pronouncements that the company believes are applicable or would have a material impact on the financial statements of the company.

Item 3

Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4

Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is accumulated and communicated to management including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

In connection with this quarterly report, as required by Rule 15d-15 under the Securities Exchange Act of 1934, we have carried out an evaluation of the effectiveness of the design and operation of our company's disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our company's management, including our company's principal executive officer and principal financial officer. Based upon that evaluation, our company's principal executive officer and principal financial officer concluded that subject to the inherent limitations noted in this Part II, Item 9A(T) as of October 31, 2010, our disclosure controls and procedures were not effective due to the existence of material weaknesses in our internal controls over financial reporting, as discussed below.

Management's Report on Internal Control over Financial Reporting

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.

As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our President evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Interim Report, being January 31, 2011.  Our President evaluated our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of January 31, 201.

Based on that evaluation, our President concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to the material weaknesses as disclosed in our annual report on Form 10-K for the fiscal year ended October 31, 2010.

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We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies at some time in the future. This will depend on our financial position and the management’s determination of which changes should be made and when. We intend to consider the results of our remediation efforts and related testing as part of our year-end assessment of the effectiveness of our internal control over financial reporting.

We continue to have material weaknesses in our internal control over financial reporting as disclosed in our annual report on Form 10-K for the fiscal year ended October 31, 2010. We have not implemented remediation measures for the material weaknesses described in our annual report due to lack of funds.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f)) during the first quarter ended April 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II

Item 1

Legal Proceedings

On February 28, 2011, the British Columbia Securities Commission (BCSC) issued a temporary Halt Trade Order (HTO) against the company due to its concerns about various promotional material found on the Internet (the “Promotional Material Web Sites”). The HTO was renewed on March 3, 2011 and expired on March 8, 2011.  However, on March 8, 2011, the Executive Director of the BCSC issued a Temporary Order and Notice of Hearing (the “CTO”) in the province of British Columbia, Canada, whereby the BCSC ordered that all persons cease trading in the securities of Kunekt until certain information is provided to the BCSC.  On April 12, 2011 the BCSC denied Kunekt’s application to have the CTO removed or varied to allow us to complete the aforementioned Agreements with liberty to re-apply upon providing further evidence to the BCSC that neither Kunekt, nor any of its directors, officers or insiders, caused or had any direct or indirect involvement in the preparation or publication of the Promotional Material Web Sites or any knowledge of them prior to being informed of them by BCSC staff.

Background Information

Staff of the BCSC had sought assistance and assurances from Kunekt and its director/insider and officers with respect to the Promotional Material Web Sites.   The company responded to the concerns of the BCSC which were identified to the company by the BCSC Staff on or about March 2, 2011.

Neither Kunekt, nor its director/insider or officers had any involvement, direct or indirect, in the materials found on the Promotional Material Web Sites, including any creation, financing (paid or prospective) or dissemination of said material.  Further, other than as identified to the BCSC, the director/insider and officers of Kunekt had no knowledge of the Promotional Material Web Sites until being informed of them by BCSC staff.

Unauthorized Websites

Upon being advised of the existence of the Promotional Material Web Sites, on or about March 4, 2011, Kunekt issued cease and desist demands to each of the Promotional Material Web Sites. In addition, Kunekt located unauthorized web sites that were promoting Kunekt and sent email cease and desist demands to those web sites (a total of 19 web sites which include the 3 identified by the BCSC Staff). Kunekt also asked for and received confirmation from all third party public relations, investor relations and creative writing (blog) consultants/firms working on behalf of the company, of their non-involvement.

Unauthorized E-Letters

One of the Promotional Material Web Sites contained content promoting Kunekt and promising substantial profits. The director/insider and officers of Kunekt were unaware of this website until advised by BCSC Staff by email on March 2, 2011. In addition, various promotional emails have been identified which contain similar content, also purportedly from the same source (the “Unauthorized E-Letters”).  

Neither Kunekt, nor its director/insider and officers had any involvement in, direct or indirect, in the Unauthorized E-Letters including any creation, financing (paid or prospective) or dissemination of said e-letters. Indeed, Kunekt has issued cease and desist demands to the apparent originators of the Unauthorized E-Letters.

Authorized Kunekt Websites and Email Alerts

“Authorized Kunekt Websites”

The only authorized investor relations, marketing and promotional websites owned or managed by the company or owned or managed by third party public relations, investor relations and creative writing (blog) consultants/firms working on behalf of the company are;

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·

www.kunekt.com

·

www.kunektivity.com

·

www.ProActiveNewsroom.com/knkt

·

www.TheProActiveNetwork.com

·

www.pitchengine.com/newsroom.php?id=35283

·

www.youtube.com/kunekt

·

www.twitter.com/kunekt

·

www.facebook.com/KunektCorp

“Authorized Kunekt Email Alerts”

Kunekt also publishes news releases (available through Authorized Kunekt Websites and www.prnewswire.com); and authorized email alerts (identified as mailer@kunekt.com) to anyone subscribing through “www.kunekt.com”. No other news releases or email alerts are published by Kunekt.

Kunekt may add or remove Authorized Kunekt Websites and/or Authorized Kunekt Email Alert links in the future, the Authorized Kunekt Websites and Authorized Kunekt Email Alerts are listed at www.kunekt.com/investor.

The only statements endorsed by Kunekt are those that appear in the Authorized Kunekt Websites and Authorized Kunekt Email Alerts. Any website, e-letter, or similar communication which gives an undertaking relating to the future value or price of Kunekt securities is wholly unauthorized.

Other than as disclosed herein, there are no other material pending legal proceedings to which our company is a party or of which any of our property is the subject, and no such proceedings are known by us to be contemplated.

Other than as disclosed herein, there are no other material proceedings to which any director, officer, or affiliate of our company, or any owner of record or beneficial owner of more than 5% of any class of voting securities of our company, or any associate of any such director, officer, affiliate of our company, or security holder is a party adverse to our company or has a material interest adverse to our company.

Item 1A

Risk Factors

In addition to other information in this quarterly report on Form 10-Q, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward looking statements.

Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, you may lose all or part of your investment.

We may be unable to close the Agreements.

As of June 17, 2011, we have been unable to obtain regulatory approval from the British Columbia Securities Commission. Unless we obtain a variation of a temporary cease trade order issued against us by the British Columbia Securities Commission, we will be unable to close the Agreements. Our inability to close the Agreements could have a material adverse effect upon the results of our operations and upon our financial conditions.

There is substantial doubt about our ability to continue as a going concern.

Our auditor's report on our October 31, 2010 financial statements expressed an opinion that substantial doubt exists as to whether we can continue as an ongoing business. We secured $450,000 in a loan from our founder on September 24, 2009, and $15,000 from our prospectus offering, which prospectus was filed on Form 424A with the Securities and Exchange Commission on January 14, 2008. We will need to raise additional capital, or we may be required to suspend or cease activities within one year. Since our prospectus offering contained no minimum or refunds on sold shares, you may have invested in a company that will not have the funds necessary to continue to deploy its business strategies.

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We have incurred an accumulative net loss of $655,839 for the period from October 1, 2007 (date of inception) to April 30, 2011 and we have had no revenue. Mark Bruk, our president, treasurer and sole director, in addition to his investment in our common stock, has invested an additional $90,795 in our company and made a $64,000 loan to the company. He is not willing to make additional financial commitments.

On March 3, 2011, we accepted a subscription agreement with one subscriber for 1,223,777 of our common shares at a price of $1.43 per share for gross proceeds of $1,750,000, which the company received in full. We have not issued any shares in connection with this private placement. The amount of the subscriptions received in advance was recorded as a current liability since these shares were not yet issued at the end of the quarter and the Company had a cease trade order placed by BCSC on its shares.

Our future is dependent upon our ability to obtain additional financing and upon future profitable operations from the sale of our mobile device products. We plan to seek additional funds through future debt or equity financing. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event we cannot continue in existence.

As we have been issued an opinion by our auditors that substantial doubt exists as to whether we can continue as a going concern, it may be more difficult for us to attract investors.

If we do not obtain adequate financing, our business will fail, which will result in the complete loss of your investment.

Our cash balance as of April 30, 2011 is $1,271,137. We anticipate our ongoing expenses over the next one year to be $1,053,000 for the one year period. We will require additional financing in order to maintain our corporate existence and status as a reporting issuer and implement our business plans and strategy. At this time Management has not determined how we can raise additional capital through future debt or equity financing until the issuance by the British Columbia Securities Commission (the “BCSC”) of an order varying its temporary cease trade order issued against our company. At this time we do not anticipate that the BCSC will revoke or vary its temporary cease trade order in the near future.

On March 3, 2011, we accepted a subscription agreement with one subscriber for 1,223,777 of our common shares at a price of $1.43 per share for gross proceeds of $1,750,000, which the company received in full. We have not issued any shares in connection with this private placement. The amount of the subscriptions received in advance was recorded as a current liability since these shares were not yet issued at the end of the quarter and the Company had a cease trade order placed by BCSC on its shares.

Currently, management estimates that the company will require $1,200,000 over the next twelve months to establish a market for our products primarily through a direct sales model. Investors should be aware that even if we establish a sales channel, the associated costs may be cost prohibitive, which would result in the total loss of any investment made in our company. Additionally, if we are not successful in earning profitable revenues once we have commenced business operations, we may require additional financing to sustain business operations.

Currently, we do not have any arrangements for additional financing and can provide no assurance to investors that we will be able to obtain financing when required. Obtaining additional financing would be subject to a number of factors, including our ability to attract interest from potential customers for our mobile device products, changes in the mobile device marketplace, and investor sentiment. These factors may have an effect on the timing, amount, terms or conditions of additional financing and make such additional financing unavailable to us.

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Since we anticipate operating expenses will increase prior to earning revenue, if any, we may never achieve profitability.

Prior to establishing our sales and marketing initiatives, we anticipate that we will incur increased operating expenses without realizing any revenue. Based upon current plans, we expect to incur operating losses in future periods. Anticipated losses will occur because there are expenses associated with the manufacture of our mobile device products and establishing our sales and marketing initiatives. We will need to raise additional funds through future debt or equity financing.

Within the next one year, increases in expenses associated with the manufacture of our mobile device products and establishing our sales and marketing initiatives will be attributed primarily to the cost of suppliers, manufacturers and sales and marketing personnel.

Since we lack an operating history, we face a high risk of business failure, which may result in the loss of your investment.

We are a development-stage company and recently began marketing our mobile device products. Thus we have no way to evaluate the likelihood that we will be able to operate our business successfully.

We cannot guarantee that in the future we will be successful in generating revenue or raising funds through the sale of shares or through debt financing to pay for manufacturing, sales and marketing expenses. As of the date of this quarterly report, we have not earned any revenue. Failure to generate revenue may cause us to go out of business, which will result in the complete loss of your investment.

Our president, treasurer and sole director is a non-resident of the United States.

Mark Bruk, our president, treasurer and sole director, is a non-resident of the United States. Accordingly, investors may not feel comfortable investing in a company whose management is outside of the country and may have concerns regarding the future stability of the company. There can be no assurance management will ever be run by residents of the United States.

As our president, treasurer and sole director has other outside business activities, he may not be in a position to devote a majority of his time to our company, which may result in periodic interruptions or business failure.

Mark Bruk, our president, treasurer and sole director, has other outside business activities and currently is devoting approximately 40 hours per week to our operations, however this may not continue. Our operations may be sporadic and occur at times which are not convenient to Mr. Bruk, which may result in periodic interruptions or suspensions of our business plan. Such delays could have a significant negative effect on the success of the business.

Key management personnel may leave our company, which could adversely affect our ability to continue operations.

We are entirely dependent on the efforts of Mark Bruk, our president, treasurer and sole director. The loss of our president, treasurer and sole director, or of other key personnel hired in the future, could have a material adverse effect on the business and our prospects.  There is no guarantee that replacement personnel, if any, will help our company to operate profitably. We do not maintain key person life insurance on Mr. Bruk.

Since our president has no direct experience in the mobile device business, we may never be successful in implementing our business strategy, which will result in the loss of your investment.

Mark Bruk, our president, treasurer and director, has no direct experience in the design, manufacture, sales and marketing of mobile device products. As a result, he may not be fully aware of many of the specific requirements of operating a mobile devices' business. His decisions and choices may also not account for the business or sales strategies which are commonly deployed in the mobile device industry. Consequently our operations, earnings and ultimate financial success could suffer irreparable harm due to his lack of experience in this area. As a result, we may have to suspend or cease operations, which will result in the loss of your investment.

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Compensation may be paid to our officers, directors and employees regardless of our profitability. Such payments may negatively affect our cash flow and our ability to finance our business plan, which would cause our business to fail.

Mark Bruk, our president, treasurer and director is receiving compensation and Arom Thaveeloue, our secretary and/or any future employees of our company may be entitled to receive compensation, payments and reimbursements regardless of whether we operate at a profit or a loss. Any compensation received by Mr. Bruk, Mr. Thaveeloue or any other personnel in the future will be determined from time to time by the board of directors, which currently consists solely of Mr. Bruk, or Mr. Bruk in his capacity as our president, as applicable. We expect to reimburse Mr. Bruk, Mr. Thaveeloue and any future personnel for any direct out-of-pocket expenses they incur on behalf of us.

Since our president currently owns 51.6% of the issued and outstanding common stock, investors may find that his decisions are contrary to their interests.

As of the date of this quarterly report, Mark Bruk, our president, treasurer and sole director, currently owns 51.6% of the issued and outstanding shares. As a result, he is able to choose all of our directors and control the direction of our company. Mr. Bruk's interests may differ from the interests of other shareholders. Factors that could cause his interests to differ from the interests of other shareholders include the impact of corporate transactions on the timing of business operations and his ability to continue to manage the business given the amount of time he is able to devote to our company.

Because our stock is a penny stock, shareholders will be more limited in their ability to sell their stock.

The shares of our common stock constitute “penny stocks” under the Securities Exchange Act of 1934. The shares will remain classified as a penny stock for the foreseeable future. The classification as a penny stock makes it more difficult for a broker/dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker/dealer engaged by the purchaser for the purpose of selling his or her shares will be subject to rules 15g-1 through 15g-10 of the Securities Exchange Act of 1934. Rather than having to comply with these rules, some broker-dealers will refuse to attempt to sell a penny stock.

The "penny stock" rules adopted by the SEC under the Securities Exchange Act of 1934 subjects the sale of the shares of our common stock to certain regulations which impose sales practice requirements on broker/dealers. For example, brokers/dealers selling such securities must, prior to effecting the transaction, provide their customers with a document that discloses the risks of investing in such securities.

Legal remedies, which may be available to an investor in "penny stocks,” are as follows:

(a)

if "penny stock" is sold to an investor in violation of his or her rights listed above, or other federal or states securities laws, the investor may be able to cancel his or her purchase and get his or her money back.

(b)

if the stocks are sold in a fraudulent manner, the investor may be able to sue the persons and firms that caused the fraud for damages.

(c)

if the investor has signed an arbitration agreement, however, he or she may have to pursue his or her claim through arbitration.

If the person purchasing the securities is someone other than an accredited investor or an established customer of the broker/dealer, the broker/dealer must also approve the potential customer's account by obtaining information concerning the customer's financial situation, investment experience and investment objectives. The broker/dealer must also make a determination whether the transaction is suitable for the customer and whether the customer has sufficient knowledge and experience in financial matters to be reasonably expected to be capable of evaluating the risk of transactions in such securities. Accordingly, the SEC's rules may limit the number of potential purchasers of the shares of our common stock.

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If we are dissolved, it is unlikely that there will be sufficient assets remaining to distribute to the shareholders.

In the event of our dissolution, any proceeds realized from the liquidation of our assets will be distributed to the shareholders only after all claims of our creditors are satisfied. In that case, the ability of our shareholders to recover any portion of their investments in our shares will depend on the amount of funds realized and the claims to be satisfied therefrom.

Since we have 66,000,000 authorized shares, our management could issue additional shares, diluting our current shareholders' equity.

We have 66,000,000 authorized shares (65,000,000 shares of common stock with a par value of $0.001 per share and 1,000,000 shares of preferred stock with a par value of $0.01 per share), of which 62,000,000 common shares are currently issued and outstanding. We do not anticipate issuing any preferred shares in the foreseeable future.
Large increases in authorized shares and share issuances by us would generally have a negative impact on our share price. It is possible that, due to an increase in the authorized shares or additional share issuance, you could lose a substantial amount, or all, of your investment.

Since we are a development-stage company, we do not anticipate paying dividends in the foreseeable future.

We do not anticipate paying dividends on either our common stock or preferred stock in the foreseeable future, but plan rather to retain earnings, if any, for the operation, growth and expansion of our business.

There is a risk that we may be unable to continue our services or continue operations if we experience uninsured losses or an act of god.

We may, but are not required to, obtain comprehensive liability and other business insurance of the types customarily maintained by similar businesses. There are certain types of extraordinary occurrences, however, which may be either uninsurable or not economically insurable. For example, in the event of a major earthquake, our computer systems could be rendered inoperable for protracted periods of time, which would impair our ability to distribute products or collect revenues and thus adversely affect our financial condition. In the event of a major civil disturbance, our operations could be adversely affected. Should such an uninsured loss occur, we could lose significant revenues and financial opportunities in amounts that would not be partially or fully compensated by insurance proceeds.

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

On February 1, 2011, we entered into a stock option agreement with a member of our advisory board, Yabin Xing, granting stock options to purchase a total of 100,000 optioned shares at an exercise price of $0.85 per optioned share. The optioned shares vest as to one-tenth (1/10) of the optioned shares every month until the options shares are fully vested.

On February 1, 2011, we entered into a stock option agreement with a member of our advisory board, Matt Li, granting stock options to purchase a total of 240,000 optioned shares at an exercise price of $0.94 per optioned share. The optioned shares vest as to one-twelfth (1/12) of the optioned shares every month until the options shares are fully vested.

On March 3, 2011, we accepted a subscription agreement with one subscriber for 1,223,777 of our common shares at a price of $1.43 per share for gross proceeds of $1,750,000, which the company received in full. We have not issued any shares in connection with this private placement. The subscriber represented that it was not a US person (as that term is defined in Regulation S of the Securities Act of 1933, as amended) and the private placement is an offshore transaction pursuant to Regulation S and/or Section 4(2) of the Securities Act of 1933, as amended. The amount of the subscriptions received in advance was recorded as a current liability since these shares were not yet issued at the end of the quarter and the Company had a cease trade order placed by BCSC on its shares.

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On March 7, 2011, we executed a subscription agreement with one subscriber for $50,000 worth of our common stock in four instalments. For each instalment, we will issue such number of shares as equal to $12,500 divided by the moving average of the public market closing price of the previous 10 days of the shares, which shall be the deemed price of the shares, on the following dates: January 18, 2011; February 18, 2011; April 18, 2011; and June 17, 2011. We have not issued any shares in connection with this subscription agreement. This subscription agreement is part of a services agreement with a third party, which services agreement was executed on January 17, 2011. On June 14, 2011, the Company terminated its agreements with ProActive Capital Resources Group, Stern & Co., Mavericks Group Inc. (dba TangeloPR) and Barwicki Investor Relations Inc. all amounts related to these cancelled contracts have been settled. The Company made no new share issuances.

Item 3

Defaults Upon Senior Securities

None.

Item 4

(Removed and Reserved)

Item 5

Other Information

None.

Item 6

Exhibits

Exhibits Required by Item 601 of Regulation S-K