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 December 31,
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



CONTINUITYX SOLUTIONS, INC.



(Exact name of registrant as specified in its
charter)



|Delaware                        |  | 27-2701563         
|------------------------------- |  | -------------------
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)



610 State Route 116, Metamora, IL 61548

(Address of principal executive offices, including
zip code)



Tel: 309-922-1400

(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 x



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  ̈
    No x



As of February 10, 2012 there were issued and outstanding
133,980,000 shares of Common Stock, $.001 par value.





1









CONTINUITYX SOLUTIONS, INC.

FORM 10-Q



INDEX



|                               |                                                                                                   | Page
        Number
|------------------------------ | ------------------------------------------------------------------------------------------------- | -------------------
|                               |                                                                                                   |                    
|PART I.  FINANCIAL INFORMATION |                                                                                                   | 3                  
|                               |                                                                                                   |                    
|Item 1.                        | Unaudited Financial Statements for the three month and six month periods ending December 31, 2011 |                    
|                               |                                                                                                   |                    
|                               | Balance Sheets for the period of June 30, 2011 and December 31, 2011                              |                    
|                               |                                                                                                   |                    
|                               | Statements of Operations for the three and six month periods of December 31, 2011                 |                    
|                               |                                                                                                   |                    
|                               | Statements of Changes in Stockholders’ Equity for the six months ending December 31, 2011         |                    
|                               |                                                                                                   |                    
|                               | Statements of Cash Flows for the six months ending December 31, 2011                              |                    
|                               |                                                                                                   |                    
|                               | Notes to Unaudited Financial Statements                                                           |                    
|                               |                                                                                                   |                    
|Item 2.                        | Management’s Discussion and Analysis of Financial Condition and Results of Operations             |                    
|                               |                                                                                                   |                    
|Item 3.                        | Quantitative and Qualitative Disclosures About Market Risk                                        |                    
|                               |                                                                                                   |                    
|Item 4.                        | Controls and Procedures                                                                           |                    
|                               |                                                                                                   |                    
|PART II.  OTHER INFORMATION    |                                                                                                   | 21                 
|                               |                                                                                                   |                    
|Item 1.                        | Legal Proceedings                                                                                 |                    
|                               |                                                                                                   |                    
|Item 1A.                       | Risk Factors                                                                                      |                    
|                               |                                                                                                   |                    
|Item 2.                        | Unregistered Sales of Equity Securities and Use of Proceeds                                       |                    
|                               |                                                                                                   |                    
|Item 3.                        | Defaults Upon Senior Securities                                                                   |                    
|                               |                                                                                                   |                    
|Item 4.                        | (Removed and Reserved)                                                                            |                    
|                               |                                                                                                   |                    
|Item 5.                        | Other Information                                                                                 |                    
|                               |                                                                                                   |                    
|Item 6.                        | Exhibits                                                                                          |                    
|                               |                                                                                                   |                    
|SIGNATURES                     |                                                                                                   | 24                 





2







CONTINUITY X SOLUTIONS, INC.





|CONSOLIDATED BALANCE SHEETS                                     
|----------------------------------------------------------------
|December 31, 2011 (unaudited) and  June 30, 2011                
|                                                                
|ASSETS                                                          
|                                                                
|                                                                
|                                                                
|CURRENT ASSETS                                                  
|Cash                                                            
|Accounts receivable                                             
|Factored accounts receivable                                    
|Deposits                                                        
|Investment - convertible note receivable                        
|Total Current Assets                                            
|                                                                
|OTHER ASSETS                                                    
|Security deposits                                               
|Total Other Assets                                              
|                                                                
|FIXED ASSETS                                                    
|Property and equipment                                          
|Accumulated depreciation                                        
|Net Fixed Assets                                                
|                                                                
|TOTAL ASSETS                                                    
|                                                                
|LIABILITIES AND SHAREHOLDERS' EQUITY                            
|                                                                
|                                                                
|CURRENT LIABILITIES                                             
|Accounts payable                                                
|Commission payable                                              
|Accrued payroll                                                 
|Accrued interest - related party                                
|Due to factor                                                   
|Capital lease payable - current portion                         
|Short-term notes payable                                        
|Short-term notes payable - related party                        
|Income taxes payable                                            
|Total Current Liabilities                                       
|                                                                
|OTHER LIABILITIES                                               
|Capital lease payable - net of current portion                  
|                                                                
|TOTAL LIABILITIES                                               
|                                                                
|SHAREHOLDERS' EQUITY                                            
|Preferred stock - $.001 par value, 25,000,000 shares authorized,
|no shares issued and outstanding                                
|Common stock - $.001 par value, 200,000,000 shares authorized,  
|117,330,400 and 97,330,900 shares issued and outstanding at     
|December 31, 2011 and June 30, 2011, respectively               
|Additional paid-in capital                                      
|Retained Earnings                                               
|Total Shareholders' Equity                                      
|                                                                
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                      







3







CONTINUITY X SOLUTIONS, INC.



|CONSOLIDATED STATEMENTS OF OPERATIONS                                   
|------------------------------------------------------------------------
|For the three months and six months ending December 31, 2011 (unaudited)
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|SERVICES, NET                                                           
|                                                                        
|COST OF SERVICES                                                        
|                                                                        
|GROSS PROFIT                                                            
|                                                                        
|OPERATING EXPENSES                                                      
|Salaries                                                                
|Commissions                                                             
|Payroll taxes                                                           
|Rent                                                                    
|Advertising and promotion                                               
|Automobile                                                              
|Bank charges                                                            
|Charitable contributions                                                
|Computer and internet                                                   
|Depreciation                                                            
|Dues and subscriptions                                                  
|Insurance                                                               
|Meals and entertainment                                                 
|Office supplies                                                         
|Outside services                                                        
|Postage and shipping                                                    
|Repairs and maintenance                                                 
|Telephone                                                               
|Travel                                                                  
|Utilities                                                               
|Other                                                                   
|TOTAL OPERATING EXPENSES                                                
|                                                                        
|INCOME FROM OPERATIONS                                                  
|                                                                        
|OTHER INCOME (EXPENSES)                                                 
|Interest income                                                         
|Interest expense                                                        
|TOTAL OTHER INCOME (EXPENSES)                                           
|                                                                        
|INCOME BEFORE INCOME TAXES                                              
|                                                                        
|PROVISION FOR INCOME TAXES                                              
|State                                                                   
|Federal                                                                 
|Deferred tax                                                            
|TOTAL PROVISION FOR INCOME TAXES                                        
|                                                                        
|Net Income                                                              
|                                                                        
|Earnings per share, basic and diluted                                   
|Weighted average shares                                                 





4









CONTINUITY X SOLUTIONS, INC.





|CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY     
|--------------------------------------------------------------
|For the six months ending December 31, 2011 (unaudited)       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|Balance at June 30, 2011                                      
|                                                              
|Repurchase of stock                                           
|                                                              
|Issuance of stock                                             
|                                                              
|Shares issued to existing shell shareholders in reorganization
|                                                              
|Net Income                                                    
|                                                              
|Balance at December 31, 2011 (unaudited)                      





Note: The shareholders' equity has been recapitalized to give effect to the shares exchanged by the
existing shareholders pursuant to the merger agreement dated November 8, 2011. The shareholders equity section has further
been retroactively restated to reflect a 13.333:1 stock spilt on December 28, 2011. These transactions are more fully
described in Note 8 to these financial statements.





5







CONTINUITY X SOLUTIONS, INC.





|CONSOLIDATED STATEMENT OF CASH FLOWS                   
|-------------------------------------------------------
|For the six months ending December 31, 2011 (unaudited)
|                                                       
|                                                       
|                                                       
|                                                       
|CASH FLOWS FROM OPERATING ACTIVITIES                   
|Net Income                                             
|Adjustments to reconcile net income to net             
|cash used by operating activities:                     
|Depreciation                                           
|Changes in assets and liabilities                      
|Increase in accounts receivable                        
|Increase in factored accounts receivable               
|Decrease in deposits                                   
|Increase in security deposits                          
|Increase in commission receivable                      
|Increase in accounts payable                           
|Increase in commission payable                         
|Increase in accrued payroll                            
|Increase in accrued interest - related party           
|Increase in income taxes payable                       
|NET CASH USED BY OPERATING ACTIVITIES                  
|                                                       
|CASH FLOWS FROM INVESTING ACTIVITIES                   
|Increase in investment - convertible note receivable   
|Purchase of property and equipment                     
|NET CASH USED BY INVESTING ACTIVITIES                  
|                                                       
|CASH FLOWS FROM FINANCING ACTIVITIES                   
|Net proceeds from factor                               
|Payments on short term debt                            
|Payments on related party notes payable                
|Proceeds from related party notes payable              
|Payments on capital lease                              
|NET CASH PROVIDED BY FINANCING ACTIVITIES              
|                                                       
|NET INCREASE IN CASH                                   
|CASH - Beginning                                       
|Ending                                                 
|                                                       
|SUPPLEMENTAL CASH FLOW DISCLOSURES                     
|Cash paid during the period:                           
|Interest                                               
|Taxes                                                  
|                                                       
|SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES
|Issuance of note payable to reduce accrued payroll     
|Issuance of note payable to reduce accrued interest    
|Equipment acquired under capital lease                 





6







Note 1 -
BUSINESS



Continuity X Solutions, Inc.,
formally EDUtoons, Inc. (the “Company”), incorporated under the laws of the State of Delaware on March 18, 2010, provides
client solutions that ensure efficient business continuity and disaster relief through experienced planning, implementation, and
management with offices located in two cities: Marlborough, Massachusetts and Metamora, Illinois. The Company offers an approach
for medium to large scale enterprise businesses to address immediate needs without losing sight of their long term objective.



The Registrant changed its
name to Continuity X Solutions, Inc. pursuant to a Certificate of Amendment of the Certificate of Incorporation of EDUtoons, Inc.,
which was filed with the Secretary of State of the State of Delaware on December 28, 2011 (the “Amendment”). A copy
of the Amendment is attached as an Exhibit hereto.



The Company
entered into a Stock Purchase Agreement with EDUtoons, Inc. (EDUtoons), dated October 27, 2011, which closed on November
1, 2011.  Pursuant to the agreement, the Company acquired 3,250,000 shares of EDUtoons common
stock.  On November 8, 2011, the Company and EDUtoons entered into a Acquisition Agreement whereby EDUtoons
acquired 100% of the issued and outstanding common shares of the Company for 7,300,000 shares of EDUtoons common stock
issuable to its stockholders.  EDUtoons filed a Certificate of Amendment to its Certificate of Incorporation on December 28,
2011, to change its name to Continuity X Solutions, Inc., increase the number of authorized shares from 10,000,000 to
200,000,000 shares, implementing a forward stock split of 13.333 to 1. On January 27, 2012, the Company approved a stock
dividend of 1.667 per common stock share amounting to the total of 133,980,000 shares.



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 Company and its stockholders have effective
control of EDUtoons, even though EDUtoons has acquired the Company. For accounting purposes, the Company 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 the Company. Accordingly, the combined assets,
liabilities and results of operations of the Company will become 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 the Company 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 associated with the transaction have been
charged to additional paid-in-capital.  The Company has determined to continue to utilize June 30 as the end of its fiscal
year.





7











Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Interim
Reporting



The accompanying unaudited
financial statements include all adjustments of a normal and recurring nature which, in the opinion of Company’s management,
are necessary to present fairly the Company’s financial position as of December 31, 2011 and the results of its operations
and cash flows for the six months ended December 31, 2011.





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

Basis
of Accounting



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

Fiscal
Year



The Company’s fiscal
year ends on June 30.



Consolidation Policy



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

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 the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities
at the date of the financial statements, and reported amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.



Fair Value Measurements



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





8









Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)



Fair Value Measurements
(continued)



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



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



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



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



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



Cash and Cash Equivalents



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

Property
and Equipment



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





|Furniture and equipment         |  |  | 5 - 7 years  | 
|------------------------------- |  |  | ------------ | 
|Computer equipment and software |  |  | 3 - 5 years  | 
|Leasehold improvements          |  |  | 5 - 15 years | 





Accounts
Receivable and Allowance for Doubtful Accounts



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





9









Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Accounts
Receivable and Allowance for Doubtful Accounts (continued)



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



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



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



Factored
Accounts Receivable



The Company accounted for
the sale of accounts receivable under the Forest Capital Master Factoring Agreement as a secured borrowing with a pledge of the
subject receivables as collateral, in accordance with FASB ASC 860, the authoritative guidance for accounting for transfers and
servicing of financial assets. The caption “Factored accounts receivable” on the accompanying balance sheet in the
amount of $1,850,409 as of December 31, 2011 represents the gross accounts receivable that were designated as “sold”
to Forest Capital (the “Factor”). There were no factored receivables as of June 30, 2011.



Security
Deposits



The Company has assumed security
deposits on systems and monthly recurring services from several customers. The deposits secure space on the customer’s network
which is necessary for the Company’s operations.



10







Note 2 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Revenue
Recognition



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



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



Type 1

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



In these lump-sum compensation
arrangements, the customer may not claw back – unreasonably withhold – or transfer these orders and must pay the Company
per agreement within 30-60 days depending on the type and timing of the contract.



Type 2

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

Advertising



The Company expenses advertising
costs as they are incurred.



Income Taxes



The Company files income
tax returns in the U.S. federal and California jurisdictions.



Income taxes provide for
the tax effects of transactions reported in the financial statements. The provision for income taxes consists of taxes currently
due and, if material, deferred taxes resulting from differences in the accounting methods used for financial reporting purposes
and those used for income tax reporting. There are no material deferred tax items for the period ended December 31, 2011.



11









Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)



Income Taxes (continued)



The Company follows the provisions
of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company recognized no liability
for unrecognized tax benefits. The Company has no tax position at December 31, 2011, for which the ultimate deductibility is highly
certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related
to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized
during the period presented. The Company had no accruals for interest and penalties at December 31, 2011.



Recent Accounting Pronouncements



Transfers and Servicing



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



Fair Value Measurements



In May 2011, the FASB issued
ASU No. 2011-04, which amends ASC 820, Fair Value Measurements, and provides guidance related to fair value measurements and disclosures
in the financial statements.  This guidance conforms the wording to describe many of the requirements in U.S. GAAP to
International Financial Reporting Standards to ensure the related standards are consistently applied.  The guidance
also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This
new guidance is effective during interim and annual periods beginning after December 15, 2011 and is to be applied prospectively.
The adoption of this standard will not materially expand the Company’s consolidated financial statement footnote disclosures.



12





Note 3 – INVESTMENT – CONVERTIBLE NOTE
RECEIVABLE



On December 22, 2011, the
Company received a convertible note receivable from a private company for $75,000. The note matures on the earliest of (a) December
31, 2012 or (b) the date on which an Event of Default has occurred, at which time the private company shall pay Continuity X Solutions,
Inc., in cash, the amount of the then outstanding principal balance of the Note plus all accrued and unpaid interest hereon. The
Note bears a simple interest rate of 4% per year; provided, however, that upon and during the continuance of an Event of Default,
the interest rate shall be increased to 7% per annum.



The Note holds a mandatory
conversion upon the occurrence of qualified financing in the amount of $2,000,000 by November 30, 2012. The payer has the option
to convert the Note to Common Stock 30 days prior to the maturity date. The Note and all unpaid interest will convert into a number
of equity securities equal to the quotient of the aggregate amount of outstanding principal and accrued and unpaid interest on
this Note divided by the price per share paid.



Note 4 - OPERATING LEASES



The Company leases office
space in Marlborough, Massachusetts. The term of the lease is through September 30, 2012, and calls for monthly rent of $840.



In September 2011, the Company
entered into a lease for office space in Metamora, Illinois. The term of the lease is through July 31, 2016, and calls for monthly
rent of $1,200.



Total rent expense for the
three months and six months ending December 31, 2011 were $12,794 and $19,328, respectively.



Minimum future lease payments
on operating leases for the fiscal years ending after December 31, 2011, are as follows:



|2012                                |  | $ | 12,240 | 
|----------------------------------- |  | - | ------ | 
|2013                                |  |   | 16,920 | 
|2014                                |  |   | 14,400 | 
|2015                                |  |   | 14,400 | 
|2016                                |  |   | 14,400 | 
|Thereafter                          |  |   | 1,200  | 
|                                    |  |   |        | 
|Total Minimum Future Lease Payments |  | $ | 73,560 | 



13





Note 5 - CAPITAL
LEASE



The Company leases data sales
equipment under a capital lease. The economic substance of the lease is that the Company is financing the acquisition of the assets
through the lease, and, accordingly, it is recorded in the Company’s assets in the amount of $856,527. The following is a
schedule by years of future minimum payments required under the lease together with their present value for the years ending June
30:



|2012                                    |  | $ | 504,029  |  
|--------------------------------------- |  | - | -------- | -
|2013                                    |  |   | 391,668  |  
|Total minimum lease payments            |  |   | 895,697  |  
|Less amount representing interest       |  |   | (111,960 | )
|Present value of minimum lease payments |  | $ | 783,737  |  



The assets held under capital
lease have not been placed in service as of December 31, 2011. As a result, there has been no depreciation recorded on those assets
for the six-months ended December 31, 2011, and regularly scheduled lease payments have not yet commenced.



Note 6 - SIGNIFICANT
CUSTOMERS AND CREDIT RISK



Income for the
period was derived from two service providers, with 99% from one service provider, and accounts receivable and factored accounts
receivable were derived from one service provider.



Note 7 – SHORT-TERM NOTES PAYABLE



The Company entered into
a $116,250 non-interest bearing note payable November 30, 2011. The note is secured by the Company’s security deposit and
could be repaid at any time. The Company paid the note in full as of December 31, 2011.



The Company entered into
a factoring agreement for $500,000, increasing on November 17, 2011 to $1,000,000, of receivables to be payable immediately at
70%. Upon collections by the Factor, the Company is remitted the balance, less applicable discount fees and 5% of the remaining
uncollected assigned accounts to be used to establish and maintain a “contingency account”. Fees per the agreement
start at 1.30% for collections within 30 days, increasing by 0.65% every 15 days. The factored receivables are secured by the
assets and receivables of the Company and are with recourse if the assigned account becomes the subject of a dispute, there exists
any breach of representation under the agreement or an assigned account is not paid within 90 days of its invoice. The Company
had an outstanding principal balance of $960,000 as of December 31, 2011.





14





Note 7 –
SHORT-TERM NOTES PAYABLE (continued)

Related
party notes payable



On July 24, 2011, $50,000
of deferred compensation owed to the CEO was converted to a note payable. Outstanding notes due to the CEO bear 6% simple interest
to be paid by March 31, 2012. The notes are secured by the assets and receivables held by the Company that may be subject to subordination
by third-party financiers and could be repaid at any time. The Company had an outstanding principal balance of $127,000 on the
notes and has accrued $2,737 in interest as of December 31, 2011.



Outstanding notes due to
the CFO of the Company bear a weighted average simple interest rate of 13.7% to be paid March 31, 2012. The notes were secured
by the assets and receivables held by the Company that may be subject to subordination by third-party financiers and could be repaid
at any time. A total of $45,604 was repaid as of December 31, 2011. The Company had an outstanding principal balance of $88,165
on the note and has accrued $5,229 in interest as of December 31, 2011.



On July 27, 2011, a stockholder
of the Company advanced the Company $55,000. On October 1, 2011, three notes to a stockholder of the Company and $40,640 of accrued
interest were consolidated into a single note. The note bears a simple interest rate of 18%, with a maturity date of March 31,
2012. The note is secured by the assets and receivables held by the Company that may be subject to subordination by third-party
financiers and could be repaid at any time. A total of $125,000 was repaid as of December 31, 2011. The Company had an outstanding
principal balance of $202,640 on the note and has accrued $12,773 in interest as of December 31, 2011.



Note 8 – EQUITY TRANSACTIONS



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



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



Note 9 – SUBSEQUENT EVENTS



On January 19, 2012, the
Company amended the Master Factoring Agreement with Forest Capital to increase the aggregate principal amount of advances at any
time to $1,250,000.



15











Note 9 – SUBSEQUENT EVENTS (continued)



On January 24, 2012, the
CEO of the Company entered into an agreement with the Company to receive 1,800,000 shares of the Company's Common Stock for the
cancelation of $225,000 of unpaid compensation.



On January 24, 2012, the
CFO of the Company entered into an agreement with the Company to receive 180,000 shares of the Company's Common Stock for the cancelation
of $22,500 of unpaid compensation.



On January 27,
2012, the Company approved a stock dividend of 1.667  per common stock share. The stock dividend was for every one (1) share
of common stock which was issued and outstanding prior to the Forward Stock Split. As a result, a total of 133,980,000
shares of common stock are now outstanding.



16











|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. 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



ContinuityX Solutions, Inc. (the Company,”
“we,” “us” or “our”), formerly known as EDUtoons, Inc. (EDUtoons) was incorporated in the
State of Delaware on March 28, 2010. We are headquartered in Metamora, IL, and also maintain a satellite office in Marlborough,
Massachusetts.



We provide client solutions that ensure efficient business continuity
and disaster relief through experienced planning, implementation, and management. We provide reliability and recovery through a
methodology that strengthens its clients business continuity and disaster relief framework and preparedness with certified experts
that specialize in security, risk management, and consultation for practical business solutions and network-IT visibility.



We offer an approach for medium to large scale enterprise
businesses to address immediate needs without losing sight of their long term objective. We provide consultation in the
discovery acquisition, implementation and management of network, disaster recovery, voice and  voice over internet protocol
(voip), and project design-management-monitoring (virtual-hosted/managed-network). By specializing in finance, health, manufacturing, and large-scale distribution, we intend to act as a solutions provider
and channel partner in that we will partner with manufacturers to market and sell the manufacturer's products, services,
and/or technologies.We afford clients the ability to have one-stop service at a fair price with responsive and
efficient solutions.



We have business relationships
with many companies including, but not limited to, being a “Premier Solutions Provider” for AT&T and a XO Communication
“Business Partner”.





17







History



On November
1, 2011, we 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 $150,000, 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, we redeemed 3,250,000 shares of our common stock owned by our existing stockholders excluding the stockholders
who became stockholders pursuant to the IPO (the “Redemption”) for an aggregate cost of $82,500, which was funded by
the proceeds of the IPO. The balance of the proceeds of the IPO were  utilized to pay various expenses.



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



Pursuant to an Acquisition Agreement with EDUtoons, Inc., dated
November 8, 2011, EDUtoons acquired ContinuityX, Inc. through a reverse acquisition which gave the stockholders of Continuity X,
Inc. effective control of EDUtoons.



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



Also, on December 28, 2011, we implemented a forward stock split
of 13.333 shares of Common Stock for every one (1) share of existing Common Stock (the “Forward Stock Split”), which
resulted in a total of 117,330,400 issued and outstanding shares of our Common Stock.



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



Business Strategy



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



Marketing and Branding



We cooperatively market our services alongside AT&T, Telx, XO
Communications and other leading Carrier and Strategic Channel Partners. Our client bases includes corporations such as: Playcast
Media (Playstation), Associated Network Providers, Inc., 1st USA Phone Cards, Inc., Baptist Health Systems, J.P. Morgan
Chase, and SeaLand Shipping Inc.



Intellectual Property



We intend to apply for trademark protection
for the mark “ContinuityX” in various trademark classes in which we operate.



Competition

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



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





18









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





| | · | Deloitte & Touche IT Consults                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o | Deloitte (“Deloitte”) assists clients by providing services in the areas of enterprise applications, technology integration, strategy & operations, human capital, and short-term outsourcing.  Deloitte is the largest private professional services organization in the world.  According to Deloitte’s website, as of 2010 Deloitte has approximately 170,000 staff in more than 140 countries, delivering audit, tax, consulting, enterprise risk and financial advisory services through its member firms.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

Results of Operations



We have had approximately ten months
of operations. For the three months ending December 31, 2011 we had $2,782,853 in revenue, with net income of $508,086, an
increase of $1,821,723 or approximately 190% in revenues and an increase of $575,310 in net income compared to the period of
July 1, 2011 to September 30, 2011 where we had $961,130 in revenue and a loss $67,230.



Revenues and profits have
increased for the three months ending December 31, 2011 compared to July 1, 2011 to September 30, 2011 as a result of our
longer period of business operations.



For the three months ending December 31,
2011 our total operating expenses were $1,220,836, an increase of $357,285 or approximately 41% compared to the period of July
1, 2011 to September 30, 2011 where our total operating expenses were $863,551.



Our assets as well as our liabilities have
increased. As of December 31, 2011 we have had an increase in total assets to the amount of $4,147,829 compared to $973,663 as
of June 30, 2011, an increase of approximately 326%. Our total liabilities as of December 31, 2011 were $3,644,320, compared to
$911,010 in June 30, 2011, an increase of approximately 300%.



As of December 31, 2011 our shareholder
equity increased to $503,509 compared to $62,653 as of June 30, 2011, an increase of $440,856 or approximately 704%.



Liquidity and Capital Resources



Net cash used by operating activities was $225,736 for the six months ended December 31, 2011.



Net cash used by investing activities was $90,630 for the six months ended December 31, 2011



Net cash provided by financing activities for the six months ended
December 31, 2011 was $680,876.



We have working capital deficit of $811,239
as of December 31, 2011. On June 30, 2011 we had cash in the amount of $149,784, and as of December 31, 2011 cash was $484,294,
an increase of 223%. We finance our day to day operations through financing our accounts receivable and working capital from revenues.  We
intend to expand operations to generate cash flow and to raise funds through either borrowing funds or selling equity.



On December 28, 2011, we implemented a forward stock split of 13.333
shares of Common Stock for every one (1) share of existing Common Stock (the “Forward Stock Split”), which resulted
in a total of 117,330,400 issued and outstanding shares of Common Stock of our company. As of December 31, 2011, we have 200,000,000
shares of common stock authorized with a par value of $.001 with 117,330,400 shares issued and outstanding.





19









We also have 25,000,000 shares of preferred stock authorized with
a par value of $.001. No shares of preferred stock have been issued or are outstanding as of December 31, 2011.



Off Balance Sheet Arrangements



None.



Office Locations



We are headquartered in Metamora, IL, and we also maintain a satellite
office in Marlborough, Massachusetts.



Subsequent Events



A market maker filed a Form 15C211 with FINRA on our behalf in January
2012 to have our common stock approved for quotation and trading on the OTB Bulletin Board and the OTC QB.



Executive Deferred Compensation Stock
Agreements were entered into with David Godwin and Anthony Roth on January 24, 2012, pursuant to which President and CEO David
Godwin, in lieu of deferred compensation of $225,000, received 1,800,000 shares of Common Stock, and Executive Vice President and
CFO Anthony Roth, in lieu of deferred compensation of $22,500, received 180,000 shares of
Common Stock.



On January 27, 2012 our Board of Directors agreed to issue a stock dividend of 1.667 shares of Common Stock for every
one (1) share of Common Stock which was issued and outstanding immediately prior to the Forward Stock Split. As a result, a total
of 133,980,000 shares of common stock are  now issued and outstanding.





20









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 ineffective 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





As a result of the Acquisition Agreement whereby EDUtoons
Inc. acquired Continuity, ContinuityX Solutions, Inc. has survived as the continuing entity. (“Reorganization”) Following
this Reorganization Continuity X Solutions, Inc., as the operating company and accounting acquirer has implemented a system of
internal controls over financial reporting.

Recently enacted accounting standards



In the first nine months of 2011, The Financial Accounting Standards
(“FASB”) has issued ASU No. 2011-02 through ASU 2011-12, which are not expected to have a material impact on the consolidated
financial statements upon adoption.



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



On November
1, 2011, we sold 3,250,000 shares  of our common stock, par value of $0.001 per share, to ContinuityX, Inc for a purchase
price of twenty five thousand ($25,000) dollars.



On November 8, 2011 we issued an aggregate of 7,300,000 shares
to 10 stockholders of Continuity in exchange for 100% of the stock in ContinuityX, Inc.  The stockholders who are designated
in the chart below, have agreed to cancel 1,500,000 shares of this stock.





21









|NAME OF INVESTOR             |  | TOTAL SHARES 
(Pre-Split) |          
|---------------------------- |  | ------------------------- | ---------
|David Godwin                 |  |                           | 2,040,000
|Anthony G. Roth              |  |                           | 1,440,000
|Gary Elliston                |  |                           | 1,320,000
|Andrew Rubin                 |  |                           | 312,500* 
|Lisa Diaz                    |  |                           | 312,500* 
|Linda Rubin                  |  |                           | 312,500* 
|Robert M. Rubin              |  |                           | 312,500* 
|Breckenridge Associate, Inc. |  |                           | 570,000* 
|Beverly Pomerantz            |  |                           | 340,000* 
|Elizabeth Rosenfeld          |  |                           | 340,000* 

* Agreed to cancel 60% of shares
received upon receipt



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM 4. (Removed and Reserved).



ITEM 5. OTHER INFORMATION



None.





22







ITEM 6. EXHIBITS



The following exhibits are filed herewith:



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



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



| | ** | Amendment filed as an exhibit to Form 8-K filed by the
Company on January 19, 2012.
| | -- | -----------------------------------------------------------------------------------





23









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.



|                        | ContinuityX Solutions, Inc.
|----------------------- | ---------------------------
|                        |                            
|Date: February 14, 2012 | By:                        
|                        |                            
|                        |                            

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: February 14, 2012 | By: | /s/ Anthony Roth                                                                                                                                  
|----------------------- | --- | --------------------------------------------------------------------------------------------------------------------------------------------------
|                        |     | Anthony Roth                                                                                                                                      
|                        |     | Chief Financial Officer, Principal Accounting Officer, and Executive
        Vice President
        610 State Route 116
        Metamora, IL 61548





24