**U.S. SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-QSB**

 

Quarterly Report Under

the            Securities Exchange Act of 1934

 

For            Quarter Ended: September 30, 2007

 

Commission File Number: 000-52564

 

**LEE FINE ARTS, INC.**

(Exact name of small business issuer as specified in its            charter)

 

**Nevada**

(State or other jurisdiction of incorporation or            organization)

 

**51-0588752**

(IRS            Employer Identification No.)

 

**10            Universal City Plaza**

**Suite 1950**

**Universal City, CA**

(Address of principal place of business)

 

**91608**

(Zip            Code)

 

**1-800-218-5520**

(Issuer’s Telephone Number)

 

Check            whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of            the Securities Exchange Act of 1934 during the past 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 ____.

 

The            number of shares of the registrant’s only class of common stock issued and            outstanding as of November 14, 2007, was 2,300,000 shares.

 

Indicate by check mark whether the registrant is a shell company (as            defined in Rule 12b-2 of the Exchange Act)xYes [__] No

 

----

**PART I**

 

| **ITEM 1.** | **FINANCIAL STATEMENTS.** |
|-------------|---------------------------|

 

LEE            FINE ARTS, INC.

 

BALANCE SHEETS

(unaudited)

 

 

|                                                                                                                                                                                     |   | **As of****September 30, 2007** |    |   |   | **As of****December 31, 2006** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------|---------|--------|--------|--------------------------------|--------|
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| ASSETS                                                                                                                                                                                   |   |                            |    |   |   |                           |   |   |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| Current Assets                                                                                                                                                                           |   |                            |    |   |   |                           |   |   |   |
| Cash                                                                                                                                                                                     |   | $                               | — |   |   |                           | $      | 9,265 |   |
| Inventory                                                                                                                                                                                |   |                            | — |   |   |                           |   | 1,600 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| Total Current Assets                                                                                                                                                                     |   |                            | — |   |   |                           |   | 10,865 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| Other Assets                                                                                                                                                                             |   |                            |    |   |   |                           |   |   |   |
| Reproduction Rights to Paintings                                                                                                                                                         |   |                            | — |   |   |                           |   | 1,000 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| Total Other Assets                                                                                                                                                                       |   |                            | — |   |   |                           |   | 1,000 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| TOTAL ASSETS                                                                                                                                                                             |   | $                               | 0       |   |   |                           | $      | 11,865 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| LIABILITIES AND SHAREHOLDERS’ EQUITY                            (DEFICIT)                                                                                                          |   |                            |    |   |   |                           |   |   |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| TOTAL LIABILITIES                                                                                                                                                                        |   | $                               | — |   |   |                           | $      | — |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| STOCKHOLDERS’ EQUITY (DEFICIT)                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| Preferred stock, $0.001 par value;10,000,000 shares authorized, 0 outstanding

                                                                                                     |   |                            | — |   |   |                           |   | **—** |   |
| Common stock, $0.001 par value;50,000,000 shares authorized, 2,300,000                            sharesIssued and outstanding as of 6/30/2007 and                            12/31/2006 |   |                            | 2,300   |   |   |                           |   | 2,300 |   |
| Paid-in Capital                                                                                                                                                                          |   |                            | 10,300  |   |   |                           |   | 10,300 |   |
| Deficit                                                                                                                                                                                  |   |                            | (12,600 | )      |   |                           |   | (735 | ) |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| TOTAL SHAREHOLDERS’ EQUITY (DEFICIT0                                                                                                                                               |   |                            | — |   |   |                           |   | 11,865 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |
| TOTAL LIABILTIES AND STOCKHOLDERS’                            EQUITY                                                                                                               |   | $                               | — |   |   |                           | $      | 11,865 |   |
|                                                                                                                                                                                     |   |                            |    |   |   |                           |   |   |   |

 

See            Notes to Financial Statements.

 

2

 

----

LEE            FINE ARTS, INC.

 

STATEMENTS OF OPERATIONS

(unaudited)

 

 

|                                                |   | **Three Months Ended****September 30,** |      |   |   | **Nine Months Ended****September 30,** |   |    |   | **For the Period****Form Inception****Through****September 30,** |   |
|-----------------------------------------------------|--------|-----------------------------------------|-----------|--------|--------|----------------------------------------|--------|---------|--------|------------------------------------------------------------------|--------|
|                                                |   | **2007**                                |      |   |   | **2006**                               |   |    |   | **2007**                                                         |   |   |   | **2006** |   |   |   | **2007** |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| REVENUE                                             |   | $                                       | —   |   |   |                                   | $      | — |   |                                                             |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Revenue                                       |   | $                                       | —   |   |   |                                   | $      | — |   |                                                             |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| EXPENSES                                            |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Professional Expense                                |   |                                    | 3,765     |   |   |                                   |   | — |   |                                                             |   |   | 9,265 |   |   |   |   | — |   |   |   |   | 9,965 |   |
| General & Administrative Expense                |   |                                    | 2,600     |   |   |                                   |   | — |   |                                                             |   |   | 2,600 |   |   |   |   | — |   |   |   |   | 2,635 |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Expenses                                      |   |                                    | 6,365     |   |   |                                   |   | — |   |                                                             |   |   | 11,865 |   |   |   |   | — |   |   |   |   | 12,600 |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OPERATING INCOME (LOSS)                             |   |                                    | (6,365    | )      |   |                                   |   | — |   |                                                             |   |   | (11,865 | ) |   |   |   | — |   |   |   |   | (12,600 | ) |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| OTHER INCOME (EXPENSE)                              |   |                                    | —   |   |   |                                   |   | — |   |                                                             |   |   | — |   |   |   |   | — |   |   |   |   | — |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Income Tax                                  |   |                                    | —   |   |   |                                   |   | — |   |                                                             |   |   | — |   |   |   |   | — |   |   |   |   | — |   |
| Income Tax Benefit                                  |   |                                    | —   |   |   |                                   |   | — |   |                                                             |   |   | — |   |   |   |   | — |   |   |   |   | — |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| NET INCOME (LOSS)                                   |   | $                                       | (6,365    | )      |   |                                   | $      | — |   |                                                             |   |   | (11,865 | ) |   |   | $ | — |   |   |   | $ | (12,600 | ) |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted earning (Loss) per Share          |   | $                                       | (0.003    | )      |   |                                   | $      | — |   |                                                             |   | $ | (0.005 | ) |   |   | $ | — |   |   |   |   |   |   |
|                                                |   |                                    |      |   |   |                                   |   |    |   |                                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of commonshares outstanding |   |                                    | 2,300,000 |   |   |                                   |   | 10,000  |   |                                                             |   |   | 2,300,000 |   |   |   |   | 10,000 |   |   |   |   |   |   |

 

See            Notes to Financial Statements.

 

3

 

----

LEE            FINE ARTS, INC.

 

STATEMENT OF CASH FLOWS

(unaudited)

 

 

|                                                                                                    |   | **Nine Months Ended****September 30** |    |   |   | **For the Period****From Inception****Through****September 30** |   |
|---------------------------------------------------------------------------------------------------------|--------|---------------------------------------|---------|--------|--------|-----------------------------------------------------------------|--------|
|                                                                                                    |   | **2007**                              |    |   |   | **2006**                                                        |   |   |   | **2007** |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| CASH FLOWS FROM OPERATING ACTIVITIES                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Net Income (Loss)                                                                                       |   |                                  | (11,865 | )      |   |                                                            | $      | — |   |   |   | $ | (12,600 | ) |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Adjustments to reconcile net income (loss) to net cash                            (used in) operations: |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Changes in operating assets and liabilities                                                             |   |                                  | 2,600   |   |   |                                                            |   | — |   |   |   |   | 2,600 |   |
| Net cash provided by (used in) operations                                                               |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   | — |   |   |   |   |   |   |
| Cash Flows From Investing Activities                                                                    |   |                                  | — |   |   |                                                            |   | — |   |   |   |   | — |   |
| Net cash provided by investing activities                                                               |   |                                  | — |   |   |                                                            |   | — |   |   |   |   | — |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Cash Flows From Financing Activities                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Common stock issuance                                                                                   |   |                                  | — |   |   |                                                            |   | — |   |   |   |   | 10,000 |   |
| Net cash provided by financing activities                                                               |   |                                  | — |   |   |                                                            |   | — |   |   |   |   | 10,000 |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Net increase (decrease)                                                                                 |   |                                  | (9,265  | )      |   |                                                            |   | — |   |   |   |   | — |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Cash beginning of period                                                                                |   |                                  | 9,265   |   |   |                                                            |   | — |   |   |   |   | — |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Cash end of period                                                                                      |   | $                                     | — |   |   |                                                            | $      | — |   |   |   | $ | — |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW                            INFORMATION:                            |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |
| Interest paid                                                                                           |   | $                                     | — |   |   |                                                            | $      | — |   |   |   | $ | — |   |
| Income taxes paid                                                                                       |   | $                                     | — |   |   |                                                            | $      | — |   |   |   | $ | — |   |
|                                                                                                    |   |                                  |    |   |   |                                                            |   |   |   |   |   |   |   |   |

 

See            Notes to Financial Statements.

 

 

4

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 1.            NATURE OF BUSINESS

 

Lee            Fine Arts, Inc. (“the Company” or “the Issuer”) was organized            under the laws of the State of Nevada on December 8, 1998 under the name Composite            Solutions, Inc. The name was changed to Lee Fine Arts, Inc. by an amendment to the            articles of incorporation filed on April 28, 2006. From inception until October 2004,            the Company was involved in providing consulting services on the use of high technology            products and processes to the construction industry.

 

As a            result of the Chapter 11 bankruptcy of the Company’s parent, the Company entered            into a new business on December 4, 2006. On that date the Company acquired an inventory            of lithographs and the reproduction rights to the paintings of Elfred Lee. Because            management believed that the Company lacked the resources to effectively market these            lithographs, on September 17, 2007, the Company reassigned the reproduction rights and            relinquished the art lithograph inventory back to Elfred Lee. As a result thereof, the            Company can be defined as a “shell” company and, as such, has changed its            business plan to that of seeking to acquire assets or shares of an entity actively            engaged in business in exchange for its securities.

 

NOTE 2.            BACKGROUND OF THE COMPANY

 

The            Company was originally established as a wholly owned subsidiary of Composite Solutions,            Inc. (“Composite Parent”), a company which at the time was a publicly            traded Florida corporation engaged in the business of developing and integrating high            technology products and processes for sale to the construction industry.

 

On            October 1, 2004 Composite Parent became insolvent and both Composite Parent and its            subsidiary, the Company, ceased all operations. On October 11, 2004, Composite Parent            filed a voluntary petition for bankruptcy under Chapter 7. The case was voluntarily            dismissed on November 18, 2004, and on May 5, 2005. Composite Parent filed a voluntary            petition for bankruptcy under Chapter 11. The Company was not party to these            actions.

 

Pursuant to the Plan of Reorganization confirmed by the Bankruptcy Court            on December 4, 2006, the Company was spun off from Composite Parent, appointed new            management, and acquired the inventory of lithographs. These actions were completed on            December 4, 2006.

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

A.            BASIS OF ACCOUNTING

 

The            Company’s financial statements are prepared using the accrual method of            accounting. The Company has elected a December 31 year-end.

 

5

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

B.            BASIC EARNINGS PER SHARE

 

In            February 1997, the FASB issued SFAS No. 128, “Earnings Per Share,” which            specifies the computation, presentation and disclosure requirements for earnings (loss)            per share for entities with publicly held common stock. SFAS No. 128 supersedes the            provisions of APB No. 15, and requires the presentation of basic earnings (loss) per            share and diluted earnings (loss) per share. The Company has adopted the provisions of            SFAS No. 128 effective February 1997.

 

Basic net loss per share amounts are computed by dividing the net loss            by the weighted average number of common shares outstanding. Diluted earnings per share            are the same as basic earnings per share due to the lack of dilutive items in the            Company.

 

C.            ESTIMATES

 

The            preparation of financial statements in conformity with generally accepted accounting            principles requires management to make estimates and assumptions that affect the            reported amounts of assets and liabilities and disclosure of contingent assets and            liabilities at the date of the financial statements and the reported amounts of            revenues and expenses during the reporting period.

 

Actual results could differ from those estimates.

 

D. CASH            AND CASH EQUIVALENT

 

For            the Balance Sheet and Statement of Cash Flows, all highly liquid investments with            maturity of three months or less are considered to be cash equivalents.

 

6

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

E.            GOODWILL AND OTHER INTANGIBLE ASSETS

 

Goodwill represents the excess of the cost of businesses acquired over            the fair value of the identifiable net assets at the date of acquisition. Goodwill and            intangible assets acquired in a purchase or business combination and determined to have            indefinite useful lives are not amortized, but instead are evaluated for impairment            annually and if events or changes in circumstances indicate, the carrying amount may be            impaired per Statement of Financial Accounting Standards, No.142 (“SFAS            142”), “Goodwill and Other Intangible Assets.” An impairment loss            would generally be recognized when the carrying amount of the reporting unit’s            net assets exceeds the estimated fair value of the reporting unit. The estimated fair            value is determined using a discounted cash flow analysis. SFAS 142 also requires that            intangible assets with estimable useful lives be amortized over their respective            estimated useful lives to their estimated residual values, and reviewed for impairment            in accordance with SFAS No. 144, “Accounting for Impairment or Disposal of            Long-Lived Assets.”

 

F.            REVENUE RECOGNITION

 

The            Company recognizes revenues and the related costs when persuasive evidence of an            arrangement exists, delivery and acceptance has occurred or service has been rendered,            the price is fixed or determinable, and collection of the resulting receivable is            reasonably assured. Amounts invoiced or collected in advance of product delivery or            providing services are recorded as deferred revenue.

 

The            Company accrues for warranty costs, sales returns, bad debts, and other allowances            based on its historical experience.

 

7

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

G.            STOCK-BASED COMPENSATION

 

Statement of Financial Accounting Standards No. 123 (“SFAS            123”), “Accounting for Stock-Based Compensation,” provides for the            use of a fair value based method of accounting for stock-based compensation. However,            SFAS 123 allows the measurement of compensation cost for stock options granted to            employees using the intrinsic value method of accounting prescribed by Accounting            Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock            Issued to Employees,” which only requires charges to compensation expense for the            excess, if any, of the fair value of the underlying stock at the date a stock option is            granted (or at an appropriate subsequent measurement date) over the amount the employee            must pay to acquire the stock. The Company has elected to account for employee stock            options using the intrinsic value method under APB 25. By making that election, the            Company is required by SFAS 123 to provide pro forma disclosures of net loss as if a            fair value based method of accounting had been applied.

 

H.            INCOME TAXES

 

Income taxes are provided for using the liability method of accounting            in accordance with SFAS No. 109 “ACCOUNTING FOR INCOME TAXES.” A deferred            tax asset or liability is recorded for all temporary differences between financial and            tax reporting. Temporary differences are the differences between the reported amounts            of assets and liabilities and their tax basis. Deferred tax assets are reduced by a            valuation allowance when, in the opinion of management, it is more likely than not that            some portion or all of the deferred tax assets will not be realized. Deferred tax            assets and liabilities are adjusted for the effect of changes in tax laws and rates on            the date of enactment.

 

I.            RECENT ACCOUNTING PRONOUNCEMENTS

 

In            March 2005, the FASB issued FASB Interpretation (“FIN”) No. 47            “ACCOUNTING FOR CONDITIONAL ASSET RETIREMENT OBLIGATIONS--AN INTERPRETATION OF            FASB STATEMENT NO. 143” (“FIN No. 47”). FIN No. 47 clarifies the            timing of liability recognition for legal obligations associated with the retirement of            a tangible long-lived asset when the timing and/or method of settlement are conditional            on a future event. FIN No. 47 is effective for us no later than December 31,            2005.

 

We            do not expect that the adoption of FIN No. 47 will have a material impact on our            financial condition or results of operations.

 

8

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

I.            RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

In            May 2005, the FASB issued SFAS No. 154, “ACCOUNTING CHANGES AND ERROR            CORRECTIONS, A REPLACEMENT OF APB NO. 20 AND FASB STATEMENT NO. 3” (“SFAS            No. 154”). SFAS No. 154 requires retrospective application to prior            periods’ financial statements of a voluntary change in accounting principle            unless it is impracticable. APB Opinion No. 20 “ACCOUNTING CHANGES,”            previously required that most voluntary changes in accounting principle be recognized            by including in net income of the period of the change the cumulative effect of            changing to the new accounting principle. This statement is effective for our Company            as of January 1, 2006. The Company does not believe that the adoption of SFAS No. 154            will have a material impact on our financial statements.

 

In            February 2006, the Financial Accounting Standards Board (“FASB”) issued            Statement of Financial Accounting Standard (“SFAS”) No. 155,            “Accounting for Certain Hybrid Financial Instruments--an amendment of FASB            Statements No. 133 and 140” (“SFAS No. 155”). The provisions of SFAS            No. 155 will be effective for all financial instruments acquired, issued, or subject to            a re-measurement (new basis) event occurring after the beginning of an entity’s            first fiscal year that begins after September 15, 2006. The fair value election            provided for in paragraph 4(c) of this Statement may also be applied upon adoption of            this Statement for hybrid financial instruments that had been bifurcated under            paragraph 12 of Statement 133 prior to the adoption of this Statement. Earlier adoption            is permitted as of the beginning of an entity’s fiscal year, provided the entity            has not yet issued financial statements, including financial statements for any interim            period, for that fiscal year. SFAS No. 155 amends FASB SFAS No. 133, “Accounting            for Derivative Instruments and Hedging Activities” (“SFAS No. 133”),            and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and            Extinguishments of Liabilities” (“SFAS No.140”). SFAS No. 155            resolves issues addressed in SFAS No. 133 Implementation Issue No. D1,            “Application of Statement 133 to Beneficial Interests in Securitized Financial            Assets”. This Statement: a) permits fair value remeasurement for any hybrid            financial instrument that contains an embedded derivative that otherwise would require            bifurcation, b) clarifies which interest-only strips and principal-only strips are not            subject to the requirements of SFAS No.133, c) establishes a requirement to evaluate            interests in securitized financial assets to identify interests that are freestanding            derivatives or that are hybrid financial instruments that contain an embedded            derivative requiring bifurcation, d) clarifies that concentrations of credit risk in            the form of subordination are not embedded derivatives, and e) amends SFAS No.140 to            eliminate the prohibition on a qualifying special purpose entity from holding a            derivative financial instrument that pertains to a beneficial interest other than            another derivative financial instrument. The Company is currently evaluating the impact            of adopting SFAS No. 155.

 

9

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

I.            RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

In            March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial            Assets--an amendment of FASB Statement No. 140” (“SFAS No. 156”). An            entity shall adopt this Statement as of the beginning of its first fiscal year that            begins after September 15, 2006. Earlier adoption is permitted as of the beginning of            an entity’s fiscal year, provided the entity has not yet issued financial            statements, including interim financial statements, for any period of that fiscal year.            The effective date of this Statement is the date that an entity adopts the requirements            of this Statement. SFAS No. 156 amends SFAS No. 140, “Accounting for Transfers            and Servicing of Financial Assets and Extinguishments of Liabilities”, with            respect to the accounting for separately recognized servicing assets and servicing            liabilities. This Statement: a) requires an entity to recognize a servicing asset or            servicing liability each time it undertakes an obligation to service a financial asset            by entering into a servicing contract in any of the following situations, b) requires            all separately recognized servicing assets and servicing liabilities to be initially            measured at fair value, if practicable, c) permits an entity to choose between two            subsequent measurement methods for each class of separately recognized servicing assets            and servicing liabilities, d) at its initial adoption, permits a one-time            reclassification of available-for-sale securities to trading securities by entities            with recognized servicing rights, without calling into question the treatment of other            available-for-sale securities under SFAS No. 115, provided that the available-for-sale            securities are identified in some manner as offsetting the entity’s exposure to            changes in fair value of servicing assets or servicing liabilities that a servicer            elects to subsequently measure at fair value, and e) requires separate presentation of            servicing assets and servicing liabilities subsequently measured at fair value in the            statement of financial position and additional disclosures for all separately            recognized servicing assets and servicing liabilities. The Company is currently            evaluating the impact of adopting SFAS No. 156.

 

In            July 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”),            “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement            No. 109”. FIN 48 requires that the Company recognize in the consolidated            financial statements the impact of a tax position that is more likely than not to be            sustained upon examination based on the technical merits of the position. The            provisions of FIN No. 48 will be effective for the Company beginning in the March 2007            quarter, with the cumulative effect of the change in accounting principle recorded as            an adjustment to opening retained earnings. The Company is currently evaluating the            impact of adopting FIN No. 48.

 

10

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 3.            SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

I.            RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

 

In            September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”            (“SFAS No. 157”). SFAS No. 157 is effective for financial statements issued            for fiscal years beginning after November 15, 2007, and interim periods within those            fiscal years. Earlier application is encouraged, provided that the reporting entity has            not yet issued financial statements for that fiscal year, including any financial            statements for an interim period within that fiscal year. The Company is currently            evaluating the impact of adopting SFAS No. 157.

 

In            September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for            Defined Benefit Pension and Other Postretirement Plans” (“SFAS No.            158”). SFAS No. 158 provides different effective dates for the recognition and            related disclosure provisions and for the required change to a fiscal year-end            measurement date. Also, the effective date of the recognition and disclosure provisions            differs for an employer that is an issuer of publicly traded equity securities from one            that is not. For purposes of this Statement, an employer is deemed to have publicly            traded equity securities if any of the following conditions is met: a) the employer has            issued equity securities that trade in a public market, which may be either a stock            exchange (domestic or foreign) or an over-the-counter market, including securities            quoted only locally or regionally, b) the employer has made a filing with a regulatory            agency in preparation for the sale of any class of equity securities in a public            market, or c) the employer is controlled by an entity covered by (a) or (b). An            employer with publicly traded equity securities shall initially apply the requirement            to recognize the funded status of a benefit plan and the disclosure requirements as of            the end of the fiscal year ending after December 15, 2006. Application as of the end of            an earlier fiscal year is encouraged; however, early application shall be for all of an            employer’s benefit plans. The requirement to measure plan assets and benefit            obligations as of the date of the employer’s fiscal year-end statement of            financial position (paragraphs 5, 6, and 9) shall be effective for fiscal years ending            after December 15, 2008, and shall not be applied retrospectively. Earlier application            is encouraged; however, early application shall be for all of an employer’s            benefit plans. An employer with publicly traded equity securities shall initially apply            the requirement to recognize the funded status of a benefit plan (paragraph 4) and the            disclosure requirements (paragraph 7) as of the end of the fiscal year ending after            December 15, 2006.

 

The            Company is currently evaluating the impact of adopting SFAS No. 158.

 

11

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 4.            GOING CONCERN

 

The            Company’s financial statements are prepared in accordance with generally accepted            accounting principles applicable to a going concern. This contemplates the realization            of assets and the liquidation of liabilities in the normal course of business.            Currently, the Company does not have significant cash or other material assets, nor            does it have operations or a source of revenue sufficient to cover its operation costs            and allow it to continue as a going concern. The officers and directors have committed            to advancing certain operating costs of the Company.

 

Management plans to seek a merger or acquisition target with adequate            funds to support operations. Management has yet to identify a merger or acquisition            target, and there is no guarantee that the Company will be able to identify such a            target business in the future.

 

NOTE 5.            STOCKHOLDERS’ EQUITY

 

A.            COMMON STOCK

 

The            authorized common stock of the Company consists of 50,000,000 shares with $0.001 par            value. As of December 31, 2006, and as of September 30, 2007, there were a total of            2,300,000 common shares issued and outstanding.

 

Transactions, other than employees’ stock issuance, are in            accordance with paragraph 8 of SFAS 123. Thus issuances shall be accounted for based on            the fair value of the consideration received. Transactions with employees’ stock            issuance are in accordance with paragraphs (16-44) of SFAS 123. These issuances shall            be accounted for based on the fair value of the consideration received or the fair            value of the equity instruments issued, or whichever is more readily            determinable.

 

The            following stock issuances took place pursuant to the Plan of Reorganization confirmed            by the Bankruptcy Court:

 

On            December 4, 2006, the Company acquired the reproduction rights to the paintings of            Elfred Lee as well as an inventory of his lithography in exchange for 2,000,000 common            shares valued at $ 2,600 or $ .0013 per share. Thereafter, on September 17, 2007, the            Company reassigned the reproduction rights and relinquished the art lithograph            inventory back to Elfred Lee and charged $2,600 against administrative            expense.

 

Also            on December 4, 2006, all creditors of Composite Parent (the former parent company)            received their pro rata share of a pool of 175,000 shares of common stock in the            Company and the old shareholders of Composite Parent received their pro rata share of a            pool of 25,000 shares of common stock in the Company.

 

Also            on December 4, 2006, 100,000 preferred shares in the Company were converted to 100,000            common shares, by payment of a conversion price of $10,000 or $.10 per            share.

 

12

 

----

**LEE FINE ARTS, INC.**

**(A            Development Stage Company)**

**Notes to Financial Statements**

**September 30, 2007 and 2006**

 

NOTE 5.            STOCKHOLDERS’ EQUITY (Continued)

 

A.            COMMON STOCK (Continued)

 

As a            result of these issuances there were 2,300,000 common shares issued and outstanding on            December 31, 2006 and also on September 30, 2007.

 

B.            PREFERRED STOCK

 

The            authorized preferred stock of the Company consists of 10,000,000 shares with a par            value of $0.001 per share.

 

On            December 4, 2006, the Company confirmed 100,000 shares of preferred stock which was            converted into 100,000 shares of common stock on December 4, 2006. The preferred shares            had been awarded by the Court as a “success fee” upon confirmation of the            Plan of Reorganization.

 

NOTE 6.            INCOME TAXES

 

The            Company provided current or deferred U.S. federal income tax provision or benefit. The            Company also provided a valuation allowance on the net deferred tax asset, consisting            of net operating loss carryforwards, because management has determined that it is more            likely than not that the Company will not fully earn income sufficient to realize the            deferred tax assets during the carryforward period.

 

NOTE 7.            RELATED PARTY TRANSACTIONS

 

The            Company neither owns nor leases any real or personal property. An officer of the            corporation provides office services without charge. Such costs are immaterial to the            financial statements and accordingly, have not been reflected therein. The officers and            directors for the Company are involved in other business activities and may, in the            future, become involved in other business opportunities. If a specific business            opportunity becomes available, such persons may face a conflict in selecting between            the Company and their other business interest. The Company has not formulated a policy            for the resolution of such conflicts. Effective December 4, 2006, the Company acquired            an inventory of fine art lithographs and the exclusive right to reproduce the original            paintings of Elfred Lee, a noted artist and former Director and Chief Executive Officer            of the Company in exchange for issuance of Common Stock of the Company. Management            determined that because the art industry is highly competitive, it did not have the            resources to develop an efficient art sales organization to promote, distribute and            sell the art lithographs. Consequently, the Company reassigned the reproduction rights            and relinquished the art lithograph inventory back to Elfred Lee on September 17, 2007            and charged $2,600 of expense to administrative expense.

 

NOTE 8.            WARRANTS AND OPTIONS

 

There are no warrants or options outstanding to acquire any additional            shares of common stock of the Company.

 

13

 

----

 

             

| **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 notes thereto included herein. In connection with,            and because we desire to take advantage of, the “safe harbor” provisions of            the Private Securities Litigation Reform Act of 1995, we caution readers regarding            certain forward looking statements in the following discussion and elsewhere in this            report and in any other statement made by, or on our behalf, whether or not in future            filings with the Securities and Exchange Commission. Forward-looking statements are            statements not based on historical information and which relate to future operations,            strategies, financial results or other developments. Forward looking statements are            necessarily based upon estimates and assumptions that are inherently subject to            significant business, economic and competitive uncertainties and contingencies, many of            which are beyond our control and many of which, with respect to future business            decisions, are subject to change. These uncertainties and contingencies can affect            actual results and could cause actual results to differ materially from those expressed            in any forward-looking statements made by, or on, our behalf. We disclaim any            obligation to update forward-looking statements.

 

Lee Fine Arts, Inc. (“we,” “our,” or the            “Company”) was incorporated on December 8, 1998 under the laws of the State            of Nevada and under the name of Composite Solutions, Inc. The Company’s purpose            was to provide consulting services on the use of high technology products and processes            to the construction industry in general and to the earthquake retrofit industry in            particular. The Company was a wholly owned subsidiary of Composite Solutions, Inc., a            company which at that time was a publicly traded Florida corporation engaged in the            business of developing and integrating high technology products and processes for sale            to the construction industry. The Company amended its Articles of Incorporation on            April 28, 2006 to change its name to its current name, Lee Fine Arts, Inc.

 

On October 1, 2004, the Company’s parent, Composite Solutions,            Inc. (“Composite Parent”), became insolvent and both Composite parent and            the Company, as its subsidiary, ceased all operations. On October 11, 2004, Composite            Parent filed a voluntary petition for bankruptcy under Chapter 7 of the U.S. Bankruptcy            Code. The bankruptcy case was voluntarily dismissed on November 18, 2004, and on May 5,            2005, Composite Parent filed a voluntary petition for bankruptcy under Chapter 11 of            the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of            California (Case No. 05-04045).

 

On December 4, 2006, the Bankruptcy Court confirmed the Plan of            Reorganization (the “Plan”) proposed by Composite Parent and, pursuant to            the Plan, all creditors of Composite Parent were paid their pro rata share of a pool of            cash and their pro rata share of a pool of shares of common stock in Composite            Parent.

 

Also pursuant to the Plan, the Company was “spun off” and            all creditors of Composite parent received their pro rata share of a pool of 175,000            shares of Common Stock of the Company, while all old shareholders of Composite Parent            received their pro rata share of a pool

 

14

 

----

of            25,000 shares of Common Stock of the Company. The shares were issued pursuant to            section 1145 of the Bankruptcy Code and are exempt from the registration requirements            of Section 5 of the Securities Act of 1933 and any state or local laws requiring            registration for an officer or sale of securities. As a result of these issuances,            Composite parent no longer held any shares in the Company.

 

Also, effective December 4, 2006, the Company acquired an inventory of            fine art lithographs and the exclusive right to reproduce the original paintings of            Elfred Lee, a noted artist and former Chief Executive Officer of the Company in            exchange for issuance of Common Stock of the Company. Management determined that            because the art industry is highly competitive, it did not have the resources to            develop an efficient art sales organization to promote, distribute and sell the art            lithographs. Consequently, the Company reassigned the reproduction rights and            relinquished the art lithograph inventory back to Elfred Lee.

 

The Company can be defined as a “shell” company, being an            entity which is generally described as having no or nominal operations and with no or            nominal assets. Our purpose, described more fully below, is to negotiate and consummate            merger or acquisition with an operating entity which will bring greater value to our            shareholders.

 

We generated no revenues during the nine month period ended September            30, 2007. Our management anticipates that we will not generate any significant revenues            until we accomplish our business objective of merging with a non-affiliated entity or            acquiring assets from the same.

 

**Plan            of Operation**

 

Lee Fine Arts, Inc. (“we,” “our,” or the            “Company”) intends to seek to acquire assets or shares of an entity            actively engaged in business, in exchange for our securities. As of the date of this            report, our management has had preliminary discussions with potential merger or            acquisition candidates, but there is no definitive agreement with any third party            relevant thereto. In the event we do not enter into an agreement with such a third            party, our Board of Directors does intend to obtain certain assurances of value of the            target entity assets prior to consummating such a transaction, with further assurances            that audited financial statements would be provided within specified time parameters.            Closing documents relative thereto will include representations that the value of the            assets conveyed to or otherwise so transferred will not materially differ from the            representations included in such closing documents, or the transaction will be            voidable.

 

We have no full time employees. Our Chief Executive Officer and Chief            Financial Officer and our Secretary have agreed to allocate a portion of their time to            our business, without compensation. These officers anticipate that our business plan            can be implemented by their devoting approximately 20 hours per month to our business            affairs and, consequently, conflicts of interest may arise with respect to the limited            time commitment by such officers.

 

Because we presently have nominal overhead and no other material            financial obligations, we believe that our short term cash requirements can be            satisfied by management injecting whatever nominal amounts of cash as may be necessary            to cover these incidental expenses.

 

15

 

----

There are no assurances whatsoever that any additional cash will be made            available to us through any means.

 

**Liquidity and Capital Resources**

 

We presently have no cash or cash equivalents. We are dependent upon our            current officers and directors to meet any minimal costs that we may incur. Our            officers and directors have agreed to provide the necessary funds, without interest,            for us to comply with the requirements of the Securities Act of 1934, as amended.            Because we are not required to pay rent or salaries to any of our officers or            directors, we believe that such advancements will enable us to continue operations            through the foreseeable future.

 

We had no revenues during the nine-month period ended September 30,            2007, and we have no prospect of significant revenues unless we complete a merger or            acquisition with an operating entity, of which there can be no assurance. We had a loss            for the year ended December 31, 2006 of $735 and a loss for the nine-month period ended            September 30, 2997 of $9,265, and we will continue to incur losses unless and until we            complete our business objective of merging with a non-affiliated entity or acquiring            assets from the same.

 

Our securities are currently not liquid. Although our Common Stock is            listed on the OTC Bulletin Board, there is not currently an active trading market in            our shares nor do we believe that any active trading market has existed for several            years. It is not anticipated that any market will develop in our securities until such            time as we successfully implement our business plan of engaging in a business            opportunity, either by merger or acquisition of assets. In the event an active trading            market commences, there can be no assurance as to the market price of our shares of            Common Stock, whether any trading market will provide liquidity to investors, or            whether any trading market will be sustained.

 

| **ITEM 3.** | **CONTROLS AND PROCEDURES** |
|-------------|-----------------------------|

 

Within 90 days prior to the date of filing of this quarterly report on            Form 10-QSB, we carried out an evaluation, under supervision and with the participation            of our management, including our CEO and CFO, of the effectiveness of the design and            operation of our disclosure controls and procedures pursuant to Exchange Act Rule            13a-14. Based upon that evaluation, our CEO and CFO concluded that our disclosure            controls and procedures are effective in timely alerting them to material information            relating to us required to be included in our periodic SEC filings. Subsequent to the            date of that evaluation, there have been no changes in internal controls or in other            factors that could significantly affect internal controls, nor were any corrective            actions required with regard to significant deficiencies and material            weaknesses.

 

**PART II. OTHER INFORMATION**

 

| **ITEM 1.** | **LEGAL PROCEEDINGS –**None. |
|-------------|------------------------------------|

 

| **ITEM 2.** | **CHANGES IN SECURITIES**– None. |
|-------------|----------------------------------------|

 

16

 

----

 

| **ITEM 3.** | **DEFAULTS UPON SENIOR SECURITIES**- None |
|-------------|-------------------------------------------|

 

| **ITEM 4.** | **SUBMISSION OF MATTERS TO A VOTE OF SECURITY                            HOLDERS**– |
|-------------|-------------------------------------------------------------------------------------------|

 

None

 

| **ITEM 5.** | **OTHER INFORMATION.** |
|-------------|------------------------|

 

|   | None. |
|--------|-------|

 

| **ITEM 6.** | **EXHIBITS AND REPORTS ON FORM 8-K -** |
|-------------|----------------------------------------|

 

|   | (a) | Exhibits |
|--------|-----|----------|

 

|   | 31.1 | Certification of Chief Executive Officer and Chief                            Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of                            2002. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

32.1   Certification of Chief Executive Officer and Chief Financial Officer            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

|   | (b) | Reports on Form 8-K. |
|--------|-----|----------------------|

 

We did not file any reports on Form 8-K during the nine-month period            ended September 30, 2007.

 

**Subsequent Event****:**

 

On November 14, 2007, we filed a Form 8-K reporting the disposition of            certain reproduction rights and inventory of lithographic art works to Elfred Lee, the            Company’s former president and Chief Executive Officer, effective September 17,            2007. No consideration was received by the Company as a result of such disposition. The            Form 8-K also reported the purchase of 2,100,000 shares of the Company’s issued            and outstanding Common Stock by Gary Clark and Charles Volk representing approximately            91.3% of the issued and outstanding Common Stock of the Company, also effective            September 17, 2007, resulting in a change in control of the Company and the            resignations of Elfred Lee and Martha Lee as officers and directors of the Company and            the appointment of Gary Clark, Charles Volk and Charles Lamberson as Directors of the            Company and the appointing of Gary Clark as Chief Executive Officer and Chief Financial            Officer of the Company and Charles Lamberson as Secretary of the Company, all such            resignations and appointments being effective September 17, 2007.

 

17

 

----

**SIGNATURES**

 

Pursuant to the requirements of Section 12 of the Securities and            Exchange Act of 1934, the Registrant has duly caused this report to be signed on its            behalf by the undersigned, thereunto duly authorized.

 

 

| Dated: November 19, 2007 | **LEE FINE ARTS, INC.**

(Registrant)

                             

                             

By:_s/Gary                            Clark____________________________

Gary Clark, Chief Executive Officer |
|--------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

18