UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

PART I – FINANCIAL INFORMATION

Item 1.       Financial Statements

The consolidated financial statements of Neologic Animation Inc., included herein were prepared, without audit, pursuant to rules and regulations of the Securities and Exchange Commission. Because certain information and notes normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America were condensed or omitted pursuant to such rules and regulations, these financial statements should be read in conjunction with the financial statements and notes thereto included in the audited financial statements of Full East International Limited as included in the current report on form 8-K filed on May 18, 2012.

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

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

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

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Neologic Animation Inc.

 (A Development Stage Company)

Notes to Financial Statements

(Unaudited)

NOTE 1 – NATURE OF OPERATIONS

Neologic Animation Inc. (“Neologic” or the “Company”) was incorporated in the State of Nevada on January 26, 2006. The Company is a Development Stage Company. The Company’s principal business is an educational software company in the People’s Republic of China.  The Company is focused in educational software development and marketing company; currently developing a website to be marketed as “Naniya World” for primary school students in China.  The website’s goal is to educate children on how to develop and hone their creative skills through interactive educational games that incorporate Adobe Flash. The games incorporate a curriculum that has been developed by some of China’s top professors and child psychology experts. It sets itself apart from other after school programs in China because it deviates from the traditional methods of Chinese education.  The Company’s mission is to inspire every child in China to become the best student they can possibly be by showing them that learning is fun.

On December 16, 2010, the Company filed articles of merger with its wholly-owned subsidiary to change the Company’s name to China Forest Energy Corp. and filed a certificate of change with the Nevada Secretary of State to give effect to a forward split of the Company’s authorized and issued and outstanding shares of common stock on a nine (9) new for one (1) old basis. Upon effect of the forward stock split, the authorized capital increased from 100,000,000 to 900,000,000 shares of common stock and, correspondingly, the issued and outstanding increased from 2,009,000 to 18,081,000 shares of common stock, with a par value of $0.00001. The Company’s preferred stock was unaffected as a result of the forward split. The Company’s financial statements have been retroactively restated to incorporate the effect of the forward split.

On January 12, 2011, the Company entered into share exchange agreement with Zhejiang Forest Bamboo Tec Co., Ltd. a People’s Republic of China corporation and Forest Energy Co., Ltd., a British Virgin Islands corporation. Forest Energy Co., Ltd. is the registered and beneficial owner of all of the issued and outstanding common shares in the capital of Sinoport Enterprises Limited, a British Virgin Islands corporation (“Sinoport”); Sinoport is the sole owner of all share capital of USCNHK Group Limited, a Hong Kong corporation, (“USCNHK”), and USCNHK is the owner of 95%, or 76,000,000 shares, of the share capital of Zhejiang Forest Bamboo Tec Co., Ltd. The Company has agreed to issue 15,919,000 common shares to the Forest Energy Co., Ltd.’s Shareholder as consideration for the purchase of 50,000 common shares of Zhejiang Forest Bamboo Tec Co., Ltd. Upon closing of the share exchange, Yongfu Zhu, one of the Company’s current officers and directors, will cancel 9,000,000 shares of the Company’s common stock held in his name and the Company will have no more than 25,000,000 shares of common stock issued and outstanding.  As of November 22, 2011, this share exchange agreement has been terminated.   According to the terms of the share exchange agreement, the Company had agreed to acquire 95% of the share capital of Zhejiang Forest from Forest Energy in exchange for 15,919,000 shares of Company’s common stock.  The parties mutually agreed to terminate the agreement.  There were no early termination penalties associated with the termination of the above agreement.

Effective January 25, 2012, in accordance with approval from the Financial Industry Regulatory Authority (“FINRA”) and the U.S.  Securities and Exchange Commission, we changed our name from China Forest Energy Corp. to Narnia Corp.  In addition, our issued and outstanding shares of common stock increased from 18,081,000 shares of common stock to 162,729,000 shares of common stock, par value of $0.00001, pursuant to a 1:9 forward split of our issued and outstanding shares of common stock.  Also effective January 25, 2012, our authorized capital decreased from 900,000,000 shares of common stock to 400,000,000 shares of common stock, par value of $0.00001.  Our preferred stock will remain unchanged.

On May 7, 2012, the Company filed Articles of Merger with the Nevada Secretary of State to change the name from Narnia Corp. to Neologic Animation Inc. The name change became effective on May 11, 2012 upon approval from FINRA.

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On May 14, 2012, the Company issued 100,000,000 shares of common stock in exchange for all 50,000 shares held by shareholders of Full East International Limited (“Full East”).  Neologic cancelled 77,729,000 shares of common stock held by Yongfu Zhu, our former Chief Financial Officer. As a result of share exchange above, the Company acquired Full East. Through its subsidiaries, Full East provides a range of goods and services in the areas of information technology and interactive education. Full East was incorporated in the British Virgin Islands on May 4, 2011. It has the expertise in the business of providing advisory and services in developing, marketing, and distributing educational cards used as a tool to educate children through the means of online games.

Full East has one wholly owned subsidiary, Hangzhou Naniya Technology Co., Ltd. (“Naniya”), a wholly-owned foreign enterprise (“WOFE”) established on July 7, 2011, and organized under the laws of the People’s Republic of China (the “PRC”). Naniya's main business is information technology consulting, technology project planning, and outcome of the transfer; non-cultural education and training for adults; computer hardware, electronic products, technology development, technical services and technical advice.

Full East also holds a controlling contractual interest in Hangzhou Xuerun Education & Technology, Ltd. (“Xuerun”). Xuerun was incorporated in the City of Hangzhou, Province of Zhejiang, PRC on July 5, 2011.  Xuerun's main business is the creation of online educational games for students who are in primary school and middle school in China and is in the development and creation of a website to educate children how to develop and hone their creative skills through interactive educational games that incorporate Adobe Flash.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company regularly evaluates estimates and assumptions related to donated expenses and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Earnings (Loss) Per Share

Basic EPS is computed by dividing earnings (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method for options and warrants and the if-converted method for convertible preferred stock and convertible debt. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. The Company currently does not have any dilutive financial instruments outstanding.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalents.

Foreign Currency Translation

The Company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in a foreign currency. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts expected to be realized.

Recent Accounting Pronouncements

The Company does not expect the adoption of any other recently issued accounting pronouncements to have a significant effect on its financial position or results of operations.

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Subsequent Events

The Company evaluated subsequent events through the date the financial statements were issued for disclosure consideration.

NOTE 3 – GOING CONCERN

These financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. Since inception, the Company has not generated revenues and has not paid any dividends and is unlikely to either pay dividends or generate revenues in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing, the Company’s success in acquiring interests in properties that have economically recoverable reserves, and the attainment of profitable operations. As at September 30, 2012, the Company has a working capital deficit, generated no revenues since inception, and has an accumulated deficit totaling $67,248 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 4 – RELATED PARTY TRANSACTIONS

As of September 30, 2012 and December 31, 2011, the Company was indebted to a current director and a current officer in the amount of $26,830, including a loan of $21,000 and an advance of $5,830, and $1,763, respectively, representing cash advances and expenses paid on behalf of the Company. The balances consist of advances that are non-interest bearing, unsecured and due on demand.

NOTE 5 – NOTES PAYABLE

The Company assumed total debt of $42,500 with an unrelated party in connection with the reverse merger. The loan is non-interest bearing, unsecured and due on demand.

On July 1, 2012, the Company obtained a loan with a principal balance of $6,400 from an unrelated party. The loan is non-interest bearing, unsecured and due on demand.

On August 2, 2012, the Company obtained a loan with a principal balance of $5,000 from an unrelated party. The loan is non-interest bearing, unsecured and due on demand.

On August 3, 2012, the Company obtained a loan with a principal balance of $11,500 from an unrelated party. The loan is non-interest bearing, unsecured and due on demand.

On August 30, 2012, the Company obtained a loan with a principal balance of $1,000 from an unrelated party. The loan is non-interest bearing, unsecured and due on demand.

As of September 30, 2012, the Company had non-interest bearing loans totaling $66,400. These loans are unsecured and due on demand. The Company recorded imputed interest in the amount of $2,321 on these non-interest bearing loans and recorded as additional paid-in capital.

On August 23, 2012, the Company obtained a loan with a principal balance of $100,000 from an unrelated party. The loan bears an annual interest of 10% and matures on December 31, 2013.

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NOTE 6 – EQUITY

On May 14, 2012, the Company issued 100,000,000 shares of common stock in exchange for all 50,000 shares held by shareholders of Full East. Neologic cancelled 77,729,000 shares of common stock held by Yongfu Zhu, our former Chief Financial Officer.

During the nine months ended September 30, 2012 and 2011, the Company recognized $3,750 and $0, respectively, for donated rent and services. These amounts were charged to operations and recorded as additional paid-in capital.

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

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that 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.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. 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.

Our financial statements are stated in US Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.

As used in this quarterly report, the terms we", "us", "our" and "our company" mean Neologic Animation Inc., and our wholly-owned subsidiary, Full East International Limited., a British Virgin Islands company and Full East's wholly owned subsidiary, Hangzhou Naniya technology Co. Ltd., a People's Republic of China Company and Hangzhou Xuerun Education & Technology Ltd. a People's Republic of China Company of which Full East holds a controlling contractual interest, unless otherwise indicated.

Corporate Overview

We were incorporated in the State of Nevada on January 26, 2006 under the name "Henix Resources, Inc.".  Our original business was as an exploration stage corporation engaged in the search for mineral deposits or reserves which are not in either the development or production stage.

On December 16, 2010, we changed our name to "China Forest Energy Corp." by way of a merger with our wholly-owned subsidiary China Forest Energy Corp. which was formed for the sole purpose of the change of name. In addition to our change of name, we effected a 9 for 1 forward split of our authorized and issued and outstanding common shares. Our preferred shares were not affected by the stock split.

On November 18, 2011, we received consent resolutions from our directors and officers, and the holder of 54.3% of our issued and outstanding securities, to change our name to "Narnia Corp.", to reduce the authorized capital to 400,000,000 shares of common stock with a par value $0.00001 and to effect a 9 for 1 forward stock split of our issued and outstanding shares of common stock.  Upon effect of the forward stock split, our issued and outstanding shares of common stock increased to 162,729,000 shares of common stock with a par value of $0.00001.  The change of name and decrease to our authorized capital became effective with the Nevada Secretary of State on January 18, 2012.  The stock split became effective with Financial Industry Regulatory Authority on January 25, 2012.

On May 7, 2012, we filed Articles of Merger with the Nevada Secretary of State to change our name from "Narnia Corp." to "Neologic Animation Inc.", to be effected by way of a merger with our wholly-owned subsidiary Neologic Inc., which was created solely for the name change.  The name change became effective on May 11, 2012 upon approval from the Financial Industry Regulatory Authority.  

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Effective May 14, 2012, we acquired Full East International Limited, a British Virgin Islands corporation as our wholly owned subsidiary. Through its subsidiaries Full East provides a range of goods and services in the areas of information technology and interactive education.  The acquisition was carried out in accordance with a share exchange agreement dated May 7, 2012 among our company, Full East, and the selling shareholders of Full East.

Full East was incorporated in the British Virgin Islands on May 4, 2011. It has the expertise in the business of providing advisory and services in developing, marketing, and distributing educational cards used as a tool to educate children through the means of online games.

Full East has one wholly owned subsidiary, Hangzhou Naniya Technology Co., Ltd., a wholly-owned foreign enterprise established on July 7, 2011, and organized under the laws of the People’s Republic of China (“PRC”). Naniya's main business is information technology consulting, technology and project planning; as well as non-cultural education and training for children and adults; computer software, technology development, technical services and technical advice.

Full East also holds a controlling contractual interest in Hangzhou Xuerun Education & Technology, Ltd.  Xuerun was incorporated in the City of Hangzhou, Province of Zhejiang, PRC on July 5, 2011.  Xuerun provides online educational games for students who are in primary school and middle school in China and is in the development and creation of a website to educate children how to develop and hone their creative skills through interactive educational games that incorporate Adobe Flash. The games incorporate a curriculum that has been developed by some of China’s top professors and child psychology experts. It sets itself apart from other after school programs in China because it deviates from the traditional methods of Chinese education, which rely heavily on repetition and memorization, causing children to act in a generally conformist manner and to have similar thought processes. By stimulating the child’s thought processes; the child’s attention is focused on the subject at hand.

The closing of the share exchange agreement transaction took place on May 14, 2012.  On the closing date, pursuant to the terms of the share exchange agreement, we acquired all of the outstanding capital stock and ownership interests of Full East from the selling shareholders. In exchange, we cancelled 77,729,000 shares of our common stock held by Yongfu Zhu, a director of our company, and issued to the selling shareholders 100,000,000 of our common shares, constituting approximately 54.05% of our common stock outstanding after the closing and 54.05% of our voting securities.  The aforementioned shares were issued to 4 non-U.S persons in an offshore transaction relying on Regulation S of the Securities Act of 1933.

As a consequence of Full East becoming our wholly owned subsidiary, we have adopted the business of Full East as operated by its wholly owned subsidiary Naniya, and its contractually controlled subsidiary, Xuerun, both of which operate exclusively in the PRC.  We have adopted the business of Full East and its subsidiaries.

Prior to the closing of the share exchange agreement our fiscal year end was April 30.  Subsequent to the closing, our fiscal year end changed to December 31.

We maintain our business offices at Jindi Garden, Boyage, Xihu District, Hangzhou, Zhejiang, People's Republic of China and our telephone number is (86) 1358 841 1118.

Current Business

Pursuant to our acquisition of Full East on May 14, 2012, we are now an entertainment and educational company that plans to provide interactive web-based educational content and online games to primary school students.  

Our flagship product is Naniya World, an after school education website for primary school students in China. The website incorporates many aspects of the educational experience together with an interesting and fun approach to learning to help teach children and maintain their focus on their studies. The website adopts Flash games to explain subject knowledge in an exciting manner, and is designed in a way that will cover areas of human intelligence that is necessary for children to conquer in their early primary school years. The games are designed to be interactive and incorporate an entire community of users that can interact with each other in social and educational ways. Naniya

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World is focused on cultivating students’ independent learning capacity as well as their self-development capacity in order to foster creative and productive thought processes.

Subjects covered on the website range from art and music to science and math to language to cultural education. The program is extremely well thought out and is developed by top professors and educators in China. It sets itself apart from other after school programs in China because it deviates from the traditional ways of Chinese education, which incorporate dull and boring ways of educating which do not inspire the child’s thought process but rather focus on memorization and teach children to act in generally the same manner and have similar thought processes. By stimulating the child’s thought process, the child’s attention is focused on the subject at hand.

The core of Naniya World’s product and services is its website which has several modules that incorporates after-school education and interactive games, allowing the student to become part of the story and keeping the child’s on the subject matter. The modules not only focus on creating an atmosphere of quality education, but also focus on developing good study habits among other useful habits. The educational part focuses on developing eight areas of intelligence mentioned later in this business plan.

Marketing of the website will initially occur in the Yangtze River Delta, incorporating the Zhejiang, Jiangsu  Hangzough, and Shanghai Regions. Afterwards, after stable revenue is generated and word of mouth gets out, our company will focus on developing its efforts in the Pearl River Delta in South China. Later on, marketing will occur in other areas of the east coast of China, including Beijing, Tianjin and other port cities.  Marketing will be focused towards parents rather than children.  We will form partnerships with after school training centers in the aforementioned areas and will form agreements with them so they can use the website during their lessons.

Plan of Operations

Cash Requirements

We have little cash on hand, no financing arrangements and no lines of credit or other bank financing arrangements.  There can be no assurance that we will be able to close any financing and if we do close any financings, there can be no assurance that they will be sufficient to meet our needs for the upcoming 12 months.  

In order to execute our business plan, we estimate that we will require approximately $1,100,000 over the next 12 months.  However, we estimate that we will require approximately $70,000 in order to sustain our basic operations and meet our public reporting requirements for the same 12 month period.  In the event that we are unable to raise sufficient financing to execute our business plan, we will downscale our business plan and operations as required by our budgetary limitations. Our working capital requirements are expected to increase in line with the growth of our business.

We estimate that our expenses over the next 12 months will be approximately $1,100,000 as described in the table below.  These estimates may change significantly depending on the nature of our future business activities and our ability to raise capital from shareholders or other sources.

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We have no lines of credit or other bank financing arrangements.   Generally, we have financed operations to date through advances and loans from shareholders and related parties. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to developmental expenses associated with a start-up business. (ii) expansion of server facilities, technical support, and related infrastructure; and (iii) expansion of our marketing campaign. We intend to finance these expenses with further issuances of securities, and debt issuances. We require additional capital and generate revenues to meet both our immediate, short-term, long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to sustain our operations, develop our business, or take advantage of prospective new business endeavours or opportunities, which could significantly and materially restrict our business operations or cause our business to fail. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock. We have and will continue to seek to obtain short-term loans from our directors, although no future arrangement for additional loans has been made. We do not have any agreements with our directors concerning these loans. We do not have any arrangements in place for any future equity financing.

Results of Operations

We have not generated any revenue since inception and are dependent upon obtaining financing to pursue our business activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

Our operating results for the three and nine month periods ended September 30, 2012 and 2011 and for the period from May 4, 2011 (inception) to September 30, 2012 are summarized as follows:

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For the three month periods ended September 30, 2012 and 2011, we reported revenues of $Nil, and $Nil, respectively. For the three months ended September 30, 2012, total expenses were $22,199, compared to $339 reported for the same period in 2011.

For the nine month periods ended September 30, 2012 and 2011, we reported revenues of $Nil, and $Nil, respectively. For the nine months ended September 30, 2012, total expenses were $50,789, compared to $339 reported for the same period in 2011.

Total expenses reported for the three and nine month periods ended September 30, 2012 and 2011 primarily represent expenses incurred for general administration and interest. Compared with 2011, we had higher operating expenses in 2012 because: 1) We started our business in 2011 and we had very minimal activities; and, 2) We incurred higher legal and administrative costs in 2012 to in order bring our company public.

Liquidity and Capital Resources  

Working Capital

Cash Flows

As of September 30, 2012, our total current assets were $101,945 and our total current liabilities were $130,914, which resulted in a working capital deficit of $28,969.  

From time to time, we have received advances from our officers and related parties. We also received an advance of $4,067 from a related party and received $123,900 proceeds from notes payable. As of September 30, 2012, we have $101,945 in cash available. We are currently seeking new funding opportunities.

As of September 30, 2012, we had not generated revenues and had accumulated losses totaling $67,248 since inception. These factors raise substantial doubt regarding our company’s ability to continue as a going concern. The financial statements included herein do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should our company be unable to continue as a going concern.

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Future Financings

We will require additional funds to implement our growth strategy in our new business. These funds may be raised through equity financing, debt financing, or other sources, which may result in further dilution in the equity ownership of our shares.

There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis should it be required, or generate significant material revenues from operations, we will not be able to meet our other obligations as they become due and we will be forced to scale down or perhaps even cease our operations.

Critical Accounting Policies

Basis of Presentation

We accounted for the merger between Neologic and Full East as a “reverse merger,” since the former shareholders of Full East own a majority of the outstanding shares of our company’s common stock immediately following the closing of the merger. Full East is deemed to be the acquirer in the reverse merger. Consequently, the assets and liabilities and the historical operations that will be reflected in the financial statements prior to the share exchange will be those of Full East and will be recorded at the historical cost basis of Full East, and the consolidated financial statements after completion of the merger will include the assets and liabilities of Neologic and Full East, historical operations of Full East, and operations of Neologic from the closing date of the merger.

Upon completion of our merger with Full East, our company changed its year-end from April 30 to December 31. These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in U.S. dollars. Our company’s fiscal year-end is now December 31.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Our company regularly evaluates estimates and assumptions related to donated expenses and deferred income tax asset valuation allowances. Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by our company may differ materially and adversely from our company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Foreign Currency Translation

Our company’s functional and reporting currency is the United States dollar. Occasional transactions may occur in a foreign currency. Monetary assets and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Average monthly rates are used to translate revenues and expenses. Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

Recent Accounting Pronouncements  

Our company does not expect the adoption of any other recently issued accounting pronouncements to have a significant effect on its financial position or results of operations.

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Off-Balance Sheet Arrangements

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.

Item 3.       Quantitative and Qualitative Disclosure About Market Risks

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4.       Controls and Procedures

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) to allow for timely decisions regarding required disclosure.

As of the end of our quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our president (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this quarterly report.

We are currently engaged in the review, documentation and remediation of its disclosure controls and procedures. Once our company is engaged in a business of merit and has sufficient personnel available, we will establish and implement the internal control procedures.'

Changes in Internal Control over Financial Reporting

During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.       Legal Proceedings

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Item 1A.    Risk Factors

As a “smaller reporting company” we are not required to provide the information required by this Item.

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

None.

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Item 3.       Defaults Upon Senior Securities

None.

Item 4.       Mine Safety Disclosures

Not applicable.

Item 5.       Other Information

None.

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Item 6.       Exhibits

*      Filed herewith

**   Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of any registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise are not subject to liability under those sections.

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SIGNATURES

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.

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