UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q


x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended September 30, 2011


 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the transition period from ______________ to ______________





Commission file number: 333-168587





EDUTOONS, INC.





(Exact name of registrant as specified in its charter)


Delaware

27-2701563(State or other jurisdiction of

(I.R.S. Employerincorporation or organization)

Identification No.)





610 State Route 116, Metamora, IL 61548


(Address of principal executive offices, including zip code)





Tel: (866) 683-5246


(Registrant’s telephone number, including area code)





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes x  No   ̈





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes  ̈  No  ̈





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. ̈


Large accelerated filer         ̈
Accelerated filer
 ̈Non-accelerated filer           ̈
Smaller reporting company
x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes  ̈  Nox





As of November 8, 2011 there were issued and outstanding 8,800,000 shares of Common Stock, $.001 par value.





EDUTOONS, INC.


FORM 10-Q





INDEX


Page

NumberPART I.  FINANCIAL INFORMATION

3Item 1.
Unaudited Financial Statements for the three month period ending September 30, 2011

3Balance Sheets

3Statements of Operations

4Statements of Changes in Stockholders’ Equity

5Statements of Cash Flows

6Notes to Unaudited Financial Statements

7Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations

12Item 3.
Quantitative and Qualitative Disclosures About Market Risk

14Item 4.
Controls and Procedures

14PART II.  OTHER INFORMATION

14Item 1.
Legal Proceedings

14Item 1A.
Risk Factors

14Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

14Item 3.
Defaults Upon Senior Securities

14Item 4.
(Removed and Reserved)

14Item 5.
Other Information

14Item 6.
Exhibits

15SIGNATURES

15


2


PART I.  FINANCIAL INFORMATION





ITEM 1. FINANTIAL STATEMENTS





EDUTOONS, INC.


(A DEVELOPMENT STAGE COMPANY)


BALANCE SHEETS





September 30,

2011 (Unaudited)


June 30, 2011

(Derived from

audited

financial

statements)ASSETSCurrent assets:Cash (Note2)

$
471


$
525Total current assets


471470



525Deferred registration costs (Note 2)


36,193



36,193TOTAL ASSETS

$
36,664


$
36,718LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent liabilities:Due to stockholder (Note 2)

$
-


$
-Accrued liabilities


22,264



20,964Total current liabilities


22,264



20,964Stockholders’ equity:Common stock, $0.001 par value per share, 10,000,000 shares authorized, and 3,250,000 shares issued and outstanding


3,250



3,250Additional paid-in capital


49,250



49,250Deficit accumulated during development stage


(38,100
)


(36,746
)Total stockholders’ equity


14,400



15,754TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
36,664


$
36,718





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


3


EDUTOONS, INC.


(A DEVELOPMENT STAGE COMPANY)


STATEMENTS OF OPERATIONS


(UNAUDITED)





For Three Months

Ended

September 30,


For Period From

April 28, 2010

(Inception) to

September 30, 20112011


2010


(Cumulative)Revenue

$
-


$



$
-Operating expenses:General and administrative expenses


1,354



900



37,965Net (loss) before income taxes


(1,354
)






(37,965
)Provision for income tax (Note 2)


-







(135
)Net (loss)

$
(1,354
)

$
(900
)

$
(38,100
)(Loss) per common share, basic and diluted (Note 2)

$
(0.00
)

$
(0.00
)

$
(0.01
)Weighted average shares outstanding, basic and diluted


3,250,000



2,750,000



2,908,284





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


4


EDUTOONS, INC.


(A DEVELOPMENT STAGE COMPANY)


STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY


(UNAUDITED)





For the period from April 28, 2010 (Inception) to September

30, 2011Additional


Deficit

Accumulated

DuringCommon


Paid-in


DevelopmentStock


Capital


Stage


TotalInitial capitalization

$
2,750


$
24,750


$
-


$
27,500Net (loss)


-



-



(3,950
)


(3,950
)Balance, June 30, 2010


2,750



24,750



(3,950
)


23,550Stock based compensation  (Notes 2 and 6)


500



24,500



-



25,000Net (loss)


-



-



(32,796
)


(32,796
)Balance, September 30, 2011

$
3,250


$
49,250


$
(36,746
)

$
15,754





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


5


EDUTOONS, INC.


(A DEVELOPMENT STAGE COMPANY)


STATEMENTS OF CASH FLOWS


(UNAUDITED)





For the Period FromFor the


April 28, 2010Three Months


(Inception) toEnded


September 31, 2011September 31, 2011


(Cumulative )Cash flows from operating activities:Net (loss)

$
(54
)

$
(36,800
)Stock based compensation


0



25,000Change in operating assets and liabilities:Deferred registration costs


(0
)


(36,193
)Repayment of stockholder advance


(0
)


-Accrued liabilities


(0
)


20,964Net cash (used in) operating activities


(54
)


(27,029
)Cash flows from financing activities:Proceeds from issuance of common stock


-



27,500Net cash provided by financing activities


-



27,500Net change in cash


(54
)


471Cash, beginning of period


525



-Cash, end of period

$
471


$
471





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


6


NOTES TO UNAUDITED FINANCIAL STATEMENTS





NOTE 1. GENERAL





Organization and Business Nature





EDUtoons was incorporated under the laws of the State of Delaware on April 28, 2010.  Our initial business purpose was to provide education for children by producing one-minute, three-minute and five-minute educational cartoons, which were intended to serve as both an education tool and counter-balance to the, at times, violent and age-inappropriate nature of cartoons and programming directed at children.  We intended to provide a useful education format for school children and intended to market our cartoon segments to television programmers, as well as to education institutions in order to enable teachers to expose their students to a new learning format while keeping it fun at the same time.  Management is evaluating whether to continue the Company’s existing business.





On November 1, 2011, Continuity purchased three million two hundred fifty thousand (3,250,000) shares of common stock, par value of $0.001 per share, of EDUtoons for an aggregate purchase price of twenty-five thousand ($25,000) dollars.  Simultaneously, EDUtoons issued three million (3,000,000) shares of EDUtoon’s common stock pursuant to its Initial Public Offering (“IPO”) for an aggregate purchase price of one hundred fifty thousand ($150,000) dollars, pursuant to a Registration Statement on Form S-1 filed by EDUtoons with the Securities and Exchange Commission (“SEC”), having an effective date of May 5, 2011 (the “Registration Statement”).  Immediately after the Closing, EDUtoons redeemed three million two hundred fifty thousand (3,250,000) shares of Continuity’s common stock owned by Continuity’s existing stockholders excluding the stockholders who became stockholders pursuant to the IPO (the “Redemption”) for an aggregate cost of $82,500.





On November 1, 2011, Eileen Russell, President, CEO, Treasurer and a Director, appointed David Godwin and Anthony Roth as Directors of the Company.  Ms. Russell then resigned as Director and from all of her positions as an officer and director of the Registrant.





Mr. Godwin is the President, Chief Executive Officer and a Director of the Company and Mr. Roth is the Executive Vice President, Chief Financial Officer and a Director of the Company.  Accordingly, Mr. Godwin and Mr. Roth are currently our sole officers and directors.





On November 8, 2011, EDUtoons simultaneously executed an Acquisition Agreement (the “Acquisition Agreement”) and entered into with the shareholders of ContinuityX, Inc. (“Continuity”), a Delaware corporation, and closed with respect to the Acquisition Agreement (the “Closing”). At the Closing, EDUtoons acquired one hundred (100%) of the issued and outstanding common shares of Continuity from the stockholders of Continuity (the “Continuity Stockholders”) in exchange for seven million three hundred thousand (7,300,000) shares of the common stock of EDUtoons, constituting approximately 71% of EDUtoons’s Common Stock issued and outstanding as of November 8, 2011. Certain stockholders who are designated, have agreed to cancel 1,500,000 shares of this stock.





EDUtoons has not been involved in any bankruptcy, receivership or similar proceeding.




The effect of the Acquisition Agreement is such that effectively a reorganization of the entities has occurred for accounting purposes and is deemed to be a reverse acquisition.  Subsequent to the Closing pursuant to the Acquisition Agreement, the financial statements presented are those of the combined Continuity and EDUtoons, as if the Acquisition Agreement had been in effect retroactively for all periods presented. Immediately following the closing pursuant to the Acquisition Agreement, Continuity and its stockholders have effective control of EDUtoons, even though EDUtoons has acquired Continuity. For accounting purposes, Continuity will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction will be treated as a recapitalization of EDUtoons, i.e., a capital transaction involving the issuance of shares by EDUtoons for the shares of Continuity. Accordingly, the combined assets, liabilities and results of operations of Continuity became the historical financial statements of EDUtoons at the closing of the Acquisition Agreement, and EDUtoons’s assets, liabilities and results of operations have been consolidated with those of Continuity commencing as of November 8, 2011, the date of the Closing. No step-up in basis or intangible assets or goodwill will be recorded in this transaction. As this transaction is being accounted for as a reverse acquisition, all direct costs of the transaction have been charged to additional paid-in capital. All professional fees and other costs associated with transaction have been charged to additional paid-in-capital. The Company has determined to continue to utilize June 30 as the end of its fiscal year.




7





ContinuityX, Inc.





Continuity was incorporated on March 25, 2011, pursuant to the laws of the State of Delaware.  Continuity is in the business of providing consultation and expertise in the discovery, acquisition, implementation and management of network, disaster recovery, voice and voice over internet protocol (voip), project design, management, and monitoring.  Specializing in finance, health, manufacturing, and large-scale distribution, Continuity will act as a solutions provider and channel partner in that it will partner with manufacturers to market and sell the manufacturer's products, services, and/or technologies.  Continuity has business relationships with many companies including, but not limited to, being a “Premier Solutions Provider” for AT&T and as a XO Communication ”Business Partner”.





On July 5, 2011 Continuity and Highland Global Partners, Inc. (“Highland”) entered into a consulting agreement pursuant to which Highland agreed to provide to Continuity consulting services from time to time during the twelve (12) month term of the agreement in exchange for twenty-five million (25,000,000) shares of common stock of Continuity based on there being forty-eight million (48,000,000) shares of Continuity issued and outstanding.





NOTE 2.  ACCOUNTING POLICIES





Basis of Accounting and Presentation





The unaudited interim financial statements of the Company as of September 30, 2011 and for the three months ended September 30, 2011 and the period from April 28, 2010 (inception) to September 30, 2011, have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (the “SEC”) which apply to interim financial statements.  In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the periods presented.  The results of operations for the three months ended September 30, 2011 are not necessarily indicative of the results to be expected for future quarters or for the year ending June 30, 2012.





Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the SEC, although the Company believes the disclosure is adequate to make the information presented not misleading.  The accompanying unaudited financial statements should be read in conjunction with the audited financial statements of the Company for the period from April 28, 2010 (inception) to June 30, 2011.





Cash and Cash Equivalents





The Company considers all liquid investments with an original maturity of three months or less that are readily convertible into cash to be cash equivalents.  The Company places its cash with high credit quality financial institutions.  Accounts at these institutions are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000.  At September 30, 2011 and June 30, 2010, the Company did not have cash balances which were in excess of the FDIC insurance limit.  The Company performs ongoing evaluations of these institutions to limit its concentration of risk exposure.  Management believes this risk is not significant due to the financial strength of the financial institutions utilized by the Company.





Deferred Registration Costs





Deferred registration costs are incremental costs incurred by the Company in connection with a proposed common stock offering to be charged against the gross proceeds of the offering.  Deferred registration costs do not include any allocation of salaries, overhead or similar costs. Deferred registration costs were $22,614 as of September 30, 2011 and June 30, 2011.


8


Use of Estimates





The preparation of 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 of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimated.





Income Taxes





The Company accounts for income taxes in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes, which requires the recognition of deferred income taxes for differences between the basis of assets and liabilities for financial statement and income tax purposes.  Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled.  Deferred taxes are also recognized for operating losses that are available to offset future taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.  At September 30, 2011 and June 30, 2011, the Company has established full valuation allowances against deferred tax assets, recognized for operating losses, due to the uncertainty in realizing their benefits.  At September 30, 2011, the Company had $36,800 of unused operating losses expiring in 2031.





The Company adopted the provisions of FASB ASC 740-10-25.  The provisions prescribe a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns and require that uncertain tax positions are evaluated in a two-step process.





The Company is in the process of preparing and filing its federal income tax return for the year ended June 30, 2011.  As of September 30, 2011 and June 30, 2011, accrual of taxes, interest, and penalty of $385 and $0 are included in accrued liabilities in the accompanying balance sheets, respectively.  For the three months ended September 30, 2011 and for the period from April 28, 2010 (inception) to September 30, 2011, the Company recorded its federal income tax, penalty, and interest of $135 as income tax expense and as general and administrative expenses.





No income taxes or interest were paid as of September 30, 2011.





Fair Value of Financial Instruments





FASB ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.  The fair value should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.  The Company did not identify any financial assets and liabilities that are required to be presented on the balance sheets at fair value.





Financial instruments include cash, due to stockholder and accrued liabilities.  As of March 31, 2011 and June 30, 2010, the carrying values of these financial instruments approximated their fair values due to the short term nature of these financial instruments.





Earnings per Share





Net income (loss) per share is calculated in accordance with FASB ASC 260, Earnings per Share.  Basic net income (loss) per share is based upon the weighted average number of common shares outstanding.  Diluted net income (loss) per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised.  Dilution is computed by applying the treasury stock method.  Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.  Basic and diluted earnings per share are the same for the three months and nine months ended September 30, 2011 and for the period from April 28, 2010 (inception) to September 30, 2011 because the Company had no common stock equivalents.





Stock Based Compensation





The Company records stock based compensation in accordance with FASB ASC 718, Compensation – Stock Based Compensation,which requires the Company measure stock based compensation based on the grant date estimated fair values for all stock based awards made to employees and directors, including stock options and recognize the compensation expense on the straight-line basis over the period during which an employee or director is required to provide service in exchange for the award.


9


NOTE 3.  RECENTLY ISSUED ACCOUNTING STANDARDS





In January 2010, the FASB issued Accounting Standards Update No. 2010-6, Improving Disclosures about Fair Value Measurements (“ASU No. 2010-06”).  ASU No. 2010-06 amends FASB ASC Topic 820, to require additional information to be disclosed principally regarding Level 3 measurements and transfers to and from Level 1 and 2.  In addition, enhanced disclosure is required concerning inputs and valuation techniques used to determine Level 2 and Level 3 measurements.  This guidance is generally effective for interim and annual reporting periods beginning after December 15, 2009; however, requirements to disclose separately purchases, sales, issuances, and settlements in the Level 3 reconciliation are effective for fiscal years beginning after December 15, 2010 (and for interim periods within such years).  The update did not have a material impact on the Company’s results of operations or financial position.





In February 2010, the FASB issued Accounting Standards Update No. 2010-09, Amendments to Certain Recognition and Disclosure Requirements (“ASU No. 2010-09”).  ASU No. 2010-09 amends FASB ASC Topic 855-10, Subsequent Events, to remove the requirement for an SEC filer to disclose the date through which subsequent events have been evaluated in both issued and revised financial statements.  This change alleviates potential conflicts between ASC 855-10 and the SEC’s requirements.  The update did not have a material impact on the Company’s results of operations or financial position.





In March 2010, the FASB issued Accounting Standards Update No. 2010-11, which is included in the Codification under ASC 815, Derivatives and Hedging (“ASC 815”).  This update clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements.  Only an embedded credit derivative that is related to the subordination of one financial instrument to another qualifies for the exemption.  This guidance is effective for interim and annual reporting periods beginning January 1, 2010.  The adoption of this standard did not have a material impact on the Company’s results of operations or financial position.





In April 2010, the FASB issued ASU No. 2010-13,Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades  (“ASU 2010-13”). ASU 2010-13 addresses the classification of a share-based payment award with an exercise price denominated in the currency of a market in which the underlying equity security trades. FASB ASC Topic 718 was amended to clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trade shall not be considered to contain a market, performance or service condition.





Therefore, such an award is not to be classified as a liability if it otherwise qualifies for equity classification. The amendments in ASU 2010-13 are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010, with early application permitted. The Company does not believe that the adoption of this standard will have a material impact on the Company’s results of operations or financial position.





In December 2010, the FASB issued ASU No. 2010-28, When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts (“ASU 2010-28”). ASU 2010-28 modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. This eliminates an entity’s ability to assert that a reporting unit is not required to perform Step 2 because the carrying amount of the reporting unit is zero or negative despite the existence of qualitative factors that indicate the goodwill is more likely than not impaired. ASU 2010-28 is effective for fiscal and interim periods beginning after December 15, 2010. The Company does not believe that the adoption of this standard will have a material impact on the Company’s results of operations or financial position.





In December 2010, the FASB issued ASU No. 2010-29, Disclosure of Supplementary Pro Forma Information for Business Combinations (“ASU 2010-29”). ASU 2010-29 specifies that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ASU 2010-29 is effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The Company does not believe that the adoption of this standard will have a material impact on the Company’s results of operations or financial position.


10


NOTE 4.  SHARE CAPITAL





Number of

shares


AmountAuthorized:Common stock at $0.001 par value per share


10,000,000


$
10,000At December 31, 2010 and June 30, 2010


10,000,000


$
10,000Issued and outstanding:Shares issued at $0.001 par value per share


2,750,000


$
2,750At June 30, 2010


2,750,000


$
2,750Issued and outstanding:Shares issued at $0.001 par value per share


3,250,000


$
3,250At September 30, 2011


3,250,000


$
3,250





NOTE 5.  GOING CONCERN/RISKS AND UNCERTAINTIES





The Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company is a startup company subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure.  This raises substantial doubt about the Company’s ability to continue as a going concern.  The reasons for the substantial doubt along with management’s plans are as follows.





The Company has not generated any revenues since inception.  While the Company is attempting to commence operations and generate revenues, the Company’s cash position may not be sufficient to support the Company’s daily operations.  Management intends to raise additional funds through the issuance of equity or debt securities.  Management believes that the actions presently being taken to implement its business plan and to generate revenues provide the opportunity for the Company to continue as a going concern.  While the Company believes in the viability of its strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect.  The Company’s continuation as a going concern and its ability to emerge from the development stage with any planned principal business activity is dependent upon the continued financial support from its stockholders and its ability to obtain the necessary equity or debt financing and attain profitable operations.





The accompanying financial statements do not include any adjustments that would be necessary should the Company be unable to continue as a going concern.





NOTE 6.  STOCK BASED COMPENSATION





On December 15, 2010, the Company issued an aggregate of 500,000 shares of common stock to the Company’s officers in consideration for services rendered by them to the Company during the month of December 2010.  Such shares were valued at $25,000 at $0.05 per share. The total stock-based compensation cost recognized in the statements of operation for the three months ended September 30, 2011 was $0 and for the period from April 28, 2010 (inception) to September 30, 2011 was $25,000.


11


ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Form 10-Q. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Form 10-Q.





Our financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles.





Application of Critical Accounting Estimates





The preparation of financial statements in conformity with United States 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 year. The more significant areas requiring the use of estimates include asset impairment, stock-based compensation, and future income tax amounts. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.





General Organization and Business





EDUtoons, Inc. (the “Company,” “we,” “us,” or “our”) was incorporated in the State of Delaware on April 28, 2010 to produce one-minute, three-minute and five-minute educational cartoons primarily to be sold to television networks and independent television stations, and digital platforms throughout the United States and Canada, and thereafter offered at a lower cost to schools.  We aim to provide reinforcement in children’s programming that will serve as both an educational tool and counter-balance to the violence and age-inappropriate nature of cartoons and programming currently directed at children.  Our one-minute television programming consists of 26-segment series, each devoted to one letter of the alphabet; the three-minute segments would be offered in 13 and 26 series in subjects such as the presidents of the United States, the countries of the world, the states of the United States and the like; and the five-minute segments would be focused primarily on nature, various animal habitats around the world, the stars and sea life.





We have not generated any revenues and as of the date hereof, we have only taken the initial steps necessary before we can implement our business plan, such as the raising of initial capital through the sale of 2,750,000 shares of our common stock which occurred in May to June of 2010.  In addition, in October of 2010, we obtained the domain rights to our website, ww.edutoons4kids.com.  During the first quarter of 2010, our management also developed a business plan.





We have registered 3,000,000 shares of common stock with the Securities and Exchange Commission (the “SEC”) and the registration statement was declared effective on May 05, 2011.  The shares were sold as of November 1, 2011.


12


Results of Operations





We are a development stage company with no established source of revenue. From the period from inception (April 28, 2010) to September 30, 2011, we have incurred cumulative general & administrative expenses in the amount of $32,607 which primarily consists of the legal and accounting fees and stock based compensation. We have not generated any revenues and as of the date hereof, we have only taken the initial steps necessary before we can fully implement our business plan, such as the raising of initial capital through the sale of 2,750,000 shares of our common stock and obtaining the domain rights to our website.  Our auditors have expressed substantial doubt about our ability to continue as a going concern. Without realization of additional capital, it would be unlikely for us to continue as a going concern. Since inception, our activities have been supported by equity financing, and as of September 30, 2011, we have sustained losses in the amount of $36,800.





Liquidity and Capital Resources





Since inception, we have raised $27,500 through the sale or our common stock and have incurred expenses of $36,800.  In addition, since inception, we obtained an advance from a stockholder in the amount of $10,000, which was repaid in August of 2010.  We anticipate that our future cash needs will be approximately $95,000 for the twelve month period following the closing of the offering currently being undertaken by the Company.  We anticipate obtaining net proceeds of approximately $29,900 to $129,990 through the sale of our common stock.  Such amounts will be used to fund our anticipated expenses for the next twelve to eighteen months, including those expenses relating to the execution of our business plan, as discussed above.  However, no assurance can be given that any proceeds will be received, in which event, we may revise our business plan or may engage in additional financing activities, including the possible sale of debt instruments to be issued by us.  No assurance can be given that we will be successful in obtaining the necessary financing, or that we will be able to negotiate acceptable terms in a timely fashion. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition.  At this time, we have not entered into any agreements with any third-party relating to the provision of credit facilities to us.  In addition, none of our current officers, directors or shareholders has committed, whether orally or in writing, to provide us with additional financing when needed.





Off Balance Sheet Arrangements





None.





Subsequent Events





On November 1, 2011, Continuity purchased three million two hundred fifty thousand (3,250,000) shares of common stock, par value of $0.001 per share, of EDUtoons for an aggregate purchase price of twenty five thousand ($25,000) dollars.  Simultaneously, EDUtoons issued three million (3,000,000) shares of EDUtoon’s common stock pursuant to its Initial Public Offering (“IPO”) for an aggregate purchase price of one hundred fifty thousand ($150,000) dollars, pursuant to a Registration Statement on Form S-1 filed by EDUtoons with the Securities and Exchange Commission (“SEC”), having an effective date of May 5, 2011 (the “Registration Statement”).  Immediately after the Closing, EDUtoons redeemed three million two hundred fifty thousand (3,250,000) shares of Continuity’s common stock owned by Continuity’s existing stockholders excluding the stockholders who became stockholders pursuant to the IPO (the “Redemption”) for an aggregate cost of $82,500.





On November 1, 2011, Eileen Russell, President, CEO, Treasurer and a Director, appointed David Godwin and Anthony Roth as Directors of the Company.  Ms. Russell then resigned as Director and from all of her positions as an officer and director of the Registrant.





Mr. Godwin is the President, Chief Executive Officer and a Director of the Company and Mr. Roth is the Executive Vice President, Chief Financial Officer and a Director of the Company.  Accordingly, Mr. Godwin and Mr. Roth are currently our sole officers and directors.





On November 8, 2011, EDUtoons simultaneously executed an Acquisition Agreement (the “Acquisition Agreement”) and entered into with the shareholders of ContinuityX, Inc. (“Continuity”), a Delaware corporation, and closed with respect to the Acquisition Agreement (the “Closing”). At the Closing, EDUtoons acquired one hundred (100%) of the issued and outstanding common shares of Continuity from the stockholders of Continuity (the “Continuity Stockholders”) in exchange for seven million three hundred thousand (7,300,000) shares of the common stock of EDUtoons, constituting approximately 71% of EDUtoons’s Common Stock issued and outstanding as of November 8, 2011. Certain stockholders who are designated, have agreed to cancel 1,500,000 shares of this stock.


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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





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





ITEM 4.
CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures





Management, under the supervision and with the participation of our Principal Executive Officer (“PEO”), Mr. David Godwin, and our Principal Financial Officer (“PFO”), Mr. Anthony Roth, has evaluated the effectiveness of our disclosure controls and procedures (“Disclosure Controls”) as defined in Rules 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarter Report (the “Evaluation Date”). Based on such evaluation, our PEO and PFO have concluded that as of the Evaluation Date, our Disclosure Controls were not effective to provide reasonable assurance 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 periods specified by the SEC and that material information relating to our company is made known to management, including the PEO and PFO, particularly during the period when our periodic reports are being prepared, to allow timely decisions regarding required disclosure.





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) of the Securities Exchange Act of 1934) during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





PART II.  OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





There are no pending, nor to our knowledge threatened, legal proceedings against us.





ITEM 1A. RISK FACTORS





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





ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM 3. DEFAULTS UPON SENIOR SECURITIES





None.





ITEM 4. (Removed and Reserved).





ITEM 5. OTHER INFORMATION





None.


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ITEM 6. EXHIBITS





The following exhibits are filed herewith:


ExhibitNo.

Description3.1*

Certificate of Incorporation of EDUtoons, Inc.3.2*

Bylaws of EDUtoons, Inc.4.1*

Specimen Stock Certificate31.1

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





*
Previously filed as exhibits to the registration statement on Form S-1 filed by the Company on August 6, 2010.





SIGNATURES





In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


EDUtoons, Inc.Date: December 23, 2011
By:
/s/ David GodwinDavid Godwin

610 State Route 116

Metamora, IL 61548Chairman, CEO and President





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





Date: December 23, 2011
By:
/s/ Anthony RothAnthony RothPrincipal Financial Officer

and Principal Accounting Officer

610 State Route 116

Metamora, IL 61548


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