UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20429




FORM
10-K




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




For the
fiscal year ended December 31, 2009




or




o
            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: 333-141521




City
Language Exchange Incorporated


(Exact
Name of Registrant as Specified in Its Charter)




Delaware
            20-5433090(State
      or Other Jurisdiction of
            (I.R.S.
      EmployerIncorporation
      or Organization)
            Identification
      No.)





6021
      Roxton RoadHalifax,
      Nova Scotia, Canada
            B3H
      1H4(Address
      of Principal Executive Offices)
            (Zip
      Code)




Registrant’s
telephone number, including area code: (904) 478-5065




Securities
registered pursuant to Section 12(b) of the Act:  None




Securities
registered pursuant to Section 12(g) of the Act: None




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.Yes oNo þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act. Yes oNo þ




Indicate by check mark if 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 12months (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 þNo o





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 (Section 232.405 of
this chapter) during the preceding 12 months (or such shorter period that the
registrant was required to submit and post such files. Yes o No o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.Yes þNo £





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 the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):





Large
      accelerated filero
            Accelerated
      filer  oNon-accelerated filero
            Smaller reporting
      company  þ(Do
      not check if a smaller reporting company)





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




The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant, as of February 22, 2010, was $9,450 based on
the sale price of the shares in a private resale transaction completed on April
14, 2008, of $.05 per share.  The shares of our company did not trade
publicly in 2009.




Number of
shares outstanding of the registrant’s common stock as of February 22,
2010:  35,945,000 shares.




DOCUMENTS
INCORPORATED BY REFERENCE




None












City
Language Exchange Incorporated




Annual
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934




TABLE OF
CONTENTS






Page No.PART
      IItem
      1.
                          Business
                          
                          1Item
      1A.
                          Risk
      Factors
                          
                          4Item
      1B.
                          Unresolved
      Staff Comments
                          
                          8Item
      2.
                          Properties
                          
                          8Item
      3.
                          Legal
      Proceedings
                          
                          8Item
      4.
                          Submission
      of Matters to a Vote of Security Holders
                          
                          8PART
      IIItem
      5.
                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                          
                          8Item
      6.
                          Selected
      Financial Data
                          
                          10Item
      7.
                          Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                          
                          10Item
      7A.
                          Quantitative
      and Qualitative Disclosures About Market Risk
                          
                          13Item
      8.
                          Financial
      Statements and Supplementary Data
                          
                          13Item
      9.
                          Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                          
                          13Item
      9A.
                          Controls
      and Procedures
                          
                          13Item
      9B.
                          Other
      Information
                          
                          15PART
      IIIItem
      10.
                          Directors,
      Executive Officers and Corporate Governance
                          
                          15Item
      11.
                          Executive
      Compensation
                          
                          16Item
      12.
                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                          
                          17Item
      13.
                          Certain
      Relationships and Related Transactions, and Director
      Independence
                          
                          18Item
      14.
                          Principal
      Accountant Fees and Services
                          
                          18PART
      IVItem
      15.
                          Exhibits
      and Financial Statement Schedules
                          
                          19Signatures
                          
                          
                          20





PART
I





ITEM
1.  BUSINESS





Overview





City
Language Exchange Incorporated was incorporated in the State of Delaware on
August 28, 2006.  Our address is 6021 Roxton Road, Halifax, Nova
Scotia, B3H 1H4, and our telephone number is (902) 478-5065.





Business





City
Language Exchange was formed to develop a business to provide people with an
affordable form of language instruction. We match two native speakers of
different languages - living in the same city - to routinely teach each other.
This service will be offered separately in various cities.





For
example, John is a native English-speaker living in San Francisco. He is
interested in learning Japanese. Tomo is a native Japanese speaker who is also
living in San Francisco. He wants to improve his English. Once matched by us,
they are able to teach each other and learn for free as a mutually beneficial
arrangement.





Since
inception, we have been developing our business as follows:





·
            A
      business plan and rough projections of financial statements were created
      based on that business plan and optimistic, pessimistic and expected
      levels of performance,





·
            Bank
      accounts for the company were created once the company was
      incorporated,





·
            A
      programmer was hired to consult on and construct the website in tandem
      with the owner, through which all of the business’ services are
      provided,





·
            A
      public relations freelancer was hired to consult on and execute a
      marketing/PR plan, in tandem with the
owner,





·
            The
      owner, programmer and another consultant created the database through
      which registrants are stored, contacted and matched, and began online
      advertising,





·
            The
      owner set up an online payment system for credit cards,
  and





·
            Incoming
      registrants are presently matched while marketing efforts are being
      launched and will be ongoing.





We
currently have over 3,100 registrants interested in matches and are focused on
increasing that number primarily through online marketing. In 2009 and 2008, we
generated $0 and $156 in revenues, respectively.  We expanded our
services from simply operating in San Francisco to include New York, Los Angeles
and Seattle in April 2007 and initially received a positive response to our
service, particularly in New York. We created an automated matching program to
save administrator hours in managing the larger number of registrants we
expected to receive through the new cities.







In 2008,
however, we had a falling-off in new registrations, leading to less matches and,
therefore, less revenue. The causes seemed to be twofold and related. First,
once the most enthusiastic persons searching for language exchanges register, it
can take additional time or new methods of advertising to bring in more
participants. Second, when participant registration and matching drops off, so
does the enthusiasm of the registrants, participants, referrers, and
administrators. We have considered that this trend may be seasonal, in that
people are less willing to venture out to meet a stranger for a language
exchange in the cold and during the school term for students, than in the
summer, when time is more available for most. We are hoping that continued
administrator dedication and warming weather will lead to a rebound in
revenues.  Our testing is currently focused on the best methods to
bring in additional registrants, focusing on foreign language speakers, by
creating translations of the site and advertising in other languages, to match
the number of existing registrants who are primarily English speakers. Online
marketing has proven to be the most effective means of bringing in registrants,
based on surveys asking where registrants heard about our business. We are also
working to create more online publicity and advertising for the business as well
as to improve the website’s “searchability” in all languages by page-ranking,
signifying that when a consumer searches on Google for language instruction in
San Francisco, the business’ website would come up higher on the list of
potential websites.





Recent
Developments





On
December 23, 2009, we issued a senior secured promissory note to our largest
stockholder, Vision Opportunity Master Fund, Ltd., in the principal amount of
$250,000.  The note bears interest at 8% per annum, is secured by all
our assets and matures on June 30, 2010.





Service





Our
service operates as follows:





·
            A
      prospective customer registers on City Language Exchange’s website by
      submitting a web form,





·
            The
      registrant’s data is gathered and stored electronically into our
      database,





·
            The
      registrant is matched with another registrant of opposite linguistic
      ability and similar aspirations,





·
            Both
      registrants are informed they have been selected for a match and are sent
      electronic invoices for the payment of their matching fee,
    and





·
            Once
      both matching fees have been collected, both registrants are sent their
      new language exchange partner’s contact
  information.





Pricing





As City
Language Exchange is designed to allow access to affordable language study to
anyone, we plan to keep matching fee prices at a standard, one-time fee of $30.
Similar services such as private tuition often charge a similar fee as an hourly
rate. Because matching one pair is relatively inexpensive, we believe this low
price will allow maximum public interest, maximum participation and maximum
profit.


2




Target
Market





Although
the potential language exchange market is broad and diverse, we have broken down
our target market into native English speakers and non-English
speakers.





Group 1
are native English speakers and are interested in learning or improving upon
another language. We believe they will be generally between the ages of 16 and
65 and internationally minded. We anticipate that they usually have either
specific linguistic goals or wish to take up language a hobby.





Group 2
comprises of native speakers of languages other than English. We believe they
are generally between the ages of 18 and 65 and were most likely born in another
country, living in America either temporarily or as an immigrant. We believe
their linguistic goals generally range from adapting to a new society to
employment or academic prospects.





Although
City Language Exchange will match non-English-speakers interested in learning a
language that is not English, this will not be one of our primary
markets.





Marketing





We have
four separate marketing programs:





Promote Online Searchability- As our potential customers’ main source of information about the
corporation and its services will be our website, it is of the utmost importance
that the website ranks highly on Internet search engines such as Google.com and
Yahoo.com. Our online searchability has been increasing slowly but steadily as
anticipated. Google searches, which are used 80% of the time by the American
internet community, assign a search ranking based on a number of factors that
allegedly include relevance, connectedness, and longevity of the site being
searched. The ranking determines whether the page searched will appear first on
the list of relevant pages or 500th. Our Google ranking using a few set searches
has moved up consistently. We also purchased Google Adwords, which prove to be
worth their cost in bringing in registrants.





Independent Publications- We
have abandoned the campaign using independent publications as very few
registrants indicated that they heard about our services through this media. It
would seem that online advertisements are most effective in obtaining online
visits.





Public Relations- While
press kits were also sent to localized media with limited success, we again
found that we were getting very few visitors from these advertising methods and
discontinued them. As our registration page forces each new user to indicate
where they heard about our service we are fortunate to have very accurate data
in this respect, which enables us to abandon ineffective campaigns.





Participant Referrals -We
have enacted a participant referral program, where participants receive a
promotional gift in exchange for referring another paying customer. Participant
referrals have emerged as a source of new clients. Honest and diligent customer
service seems to be our best tool for continuing to gain from this method of
advertising.





3




Competition




The
industry of language instruction products is highly competitive. Many of our
competitors have substantially greater financial, marketing, personnel and other
resources than we do. Competitors include traditional language instruction
services, as well as competitors on the internet. If additional competitors
enter the field, our market share may fail to increase or may
decrease.





Competitors
include those language-learning methods that involve human interaction such as
private language schools, university language programs and private tutors; and
those that don’t, such as language self-study textbooks, language-learning
software and online language-learning websites. Our advantage over the former is
price, and our advantage over the latter is effectiveness.





We also
face competition from worldwide language exchange matching sites. Currently, the
most well known of these websites include: Peerme.com, Zuiop.com,
Expatriates.com and MyLanguageExchange.com.  All of these sites will
allow a registrant to be matched for little or no cost. These sites, however,
use very little advertising and do not hold a database of the registrants’
information, thus displaying the registrant’s contact information to the site’s
viewers. These sites are also all international sites, thus spreading their
customer base thin across the globe. Therefore, our advantages over these
companies involve advertising, security and local-focus.





Employees





We
currently have no other employees other than Mr. White. In his capacity as our
President and Chief Financial Officer, Mr. White currently devotes approximately
20% of his time to our business.





Governmental
Regulation





As an
internet-based company, we are subject to privacy regulations. We are not aware
of any other governmental regulations as to which it is subject.





ITEM
1A. RISK FACTORS





In
addition to the other information provided in this annual report, you should
carefully consider the following risk factors in evaluating our business before
purchasing any of our common stock. All material risks are discussed in this
section.





We
have experienced net losses and have made limited sales and generated limited
revenue to date. Therefore, you should not rely on our historical results of
operations as an indication of our future performance.





During
the period from inception on August 28, 2006 through December 31, 2009, we
incurred a net loss of $52,193.  We had not made any sales and had no
revenue during the period from inception on August 28, 2006 through December 31,
2006 from the sale of our language education services. We have subsequently
generated $0 and $156 in revenues from the sale of our services in 2009 and
2008, respectively. Our future success is dependent on our ability to develop
language education and other future products into a successful business, which
depends upon wide-spread acceptance of and commercializing our products. None of
these factors is demonstrated by our historic performance to date and there is
no assurance we will be able to accomplish them in order to sustain our
operations. We may never develop profitable operations. As a result, there is no
assurance of future successful performance of our business.





4




Our
poor financial condition raises substantial doubt about our ability to continue
as a going concern. You will be unable to determine whether we will ever become
profitable.





Our
independent auditors have indicated in their audit report for the year ended
December 31, 2009, that, due to our working capital deficiency, there is
substantial doubt about our ability to continue as a going concern. Our poor
financial condition could inhibit our ability to achieve our business plan and
therefore an investor cannot determine if we will ever become
profitable.





If
we are unable to obtain and maintain a high ranking for our website for key
search terms within the major search engines, we may fail to create consumer
awareness of our website and our revenues may be reduced.




Many of
our sales will come from customers who arrive at our website after searching for
key terms on Internet portals and search engines such as
Google.com.  Establishing and maintaining relationships with leading
Internet portals and search engines and optimizing our website to generate
visitors from the major search engines is competitive and expensive. Since our
inception, we have spent $4,145 on search engine optimization, website
development and other online marketing which was equal to approximately 2.4% of
all of our expenses incurred during the period. We have no marketing
relationships established with any Internet portals. We expect that we will have
to pay high fees to enter into relationships of this type. In addition, traffic
to our websites could decline if our search ranking on Internet search engines
or if the traffic to the website of an Internet portal on which we advertise
decreases. A failure to maintain, expand or enter into Internet portal
relationships or to establish additional online advertising relationships that
generate a significant amount of traffic from other websites could prevent us
from achieving significant sales or limit the growth of our
business.





If
our marketing and public relations efforts fail, our business may not achieve
the interest and sales levels forecasted and our revenues may be
reduced.




Attracting
a large number of potential registrants to the website is essential to obtain a
large number of these as registrants. Subsequently, registrants become matched
and purchase our service and it is from these subscribers that the business’
revenues will come. Should we be unable to attract a large initial pool of
potential registrants our ability to collect subscriptions will be reduced,
which could decrease our revenues.




If
our business reputation is damaged due to the actions of external factors over
which we may have little or no control, including the performance of persons
acting as matching partners for language education, our revenues could be
reduced.




Promoting
our business depends largely on the success of our marketing efforts and our
ability to provide a consistent, positive customer experience. Our ability to
provide a positive customer experience is dependent on external factors over
which we may have little or no control, including the performance of our persons
acting as matching partners for language education. Our failure to provide our
customers with positive customer experiences for any reason could substantially
harm our reputation. The failure of these activities could adversely affect our
ability to attract new customers and maintain customer relationships and, as a
result, substantially harm our business and reduce our revenues.




Competition
from traditional and online retail companies with greater brand recognition and
resources may reduce our gross margins or reduce our revenues.




The
language teaching industry is highly competitive and if it increases, it may
result in price pressure and reduced gross margins, any of which could
substantially harm our business and results of operations. We compete with
traditional language teaching services offered in brick and mortar buildings or
other sites offering language-teaching services over the internet.




Many of
our current and potential competitors have advantages over us, including longer
operating histories, greater brand recognition, existing customer and supplier
relationships, and significantly greater financial, marketing and other
resources. In addition, traditional facility-based teaching services offer
consumers the ability to interact personally a manner that is not possible over
the Internet.


5




In
addition, larger, more established and better-capitalized entities may acquire,
invest or partner with traditional and online competitors as use of the Internet
and other online services increases. Our online competitors can duplicate many
of the services and content we offer, which could harm our business and reduce
our revenues.




Because
our sales operation is dependent on having adequate credit card activity
processing capacity with the major credit card companies and a credit card
processor, restrictions imposed upon our credit card processing capacity by our
processing company for reasons such as excess chargeback activity could result
in our being unable to have customers pay us using credit cards which could
reduce our revenue.





A third
party credit card processor regulates our daily credit card sales order volume
and sets limits as to the maximum daily sales volume it will process. In
addition, credit card companies, such as Visa and MasterCard, and credit card
processors typically maintain a record of the level of customer requests to have
charges for our products reversed. The credit card companies and processors may
impose increased deposit requirements and fines for high chargeback levels, may
modify our daily sales volume limit, make a demand for additional reserves or
even discontinue doing business with us. The direct response business is known
for relatively high chargeback levels and we may experienced periods of higher
than accepted levels of chargeback activity that could lead to fines and
disruptions in credit card processing of customer orders. We will endeavor to
maintain reasonable business practices and customer satisfaction, which we hope
will in part, contribute to lower levels of chargeback activity. Restrictions
imposed upon our credit card processing capacity by our processing company for
reasons such as excess chargeback activity could result in our being unable to
have customers pay us using credit cards which could reduce our
revenue.





Because
we are small and do not have much capital, we must limit marketing our services
to potential customers. As a result, we may not be able to attract enough
customers to operate profitably. If we do not make a profit, we may have to
suspend or cease operations.




Because
we are small and do not have much capital, we must limit marketing our website
to potential customers. We intend to generate revenue through the sale of our
online language teaching matching services. Because we will be limiting our
marketing activities, we may not be able to attract enough customers to purchase
our services. If we cannot operate profitably, we may have to suspend or cease
operations.




We
believe that many consumers do not shop on the Internet because they believe
their credit card information may be compromised. This will reduce our potential
income.




We
believe that the lack of financial security on the Internet is hindering
economic activity thereon. To ensure the security of transactions occurring over
the Internet, U.S. federal regulations require that any computer software used
within the United States contain a 128-bit encoding encryption, while any
computer software exported to a foreign country contain a 40-bit encoding
encryption. There is uncertainty as to whether the 128-bit encoding encryption
required by the US is sufficient security for transactions occurring over the
Internet. Accordingly, there is a danger that any financial (credit card)
transaction via the Internet will not be a secure transaction. Accordingly,
risks such as the loss of data or loss of service on the Internet from technical
failure or criminal acts are inhibiting potential customers from purchasing
goods and services on the Internet. Accordingly, many people who may want to use
our matching service may not as a result of a belief that their credit card
information could be compromised.




6





Because
our largest stockholder controls our activities, it may cause us to act in a
manner that is most beneficial to it and not to outside stockholders, which
could cause us not to take actions that outside investors might view
favorably.





Our
largest stockholder owns approximately 97.4% of our outstanding common stock. As
a result, it effectively controls all matters requiring director and stockholder
approval, including the election of directors and the approval of significant
corporate transactions, such as mergers and related party
transaction.  It also has the ability to delay or perhaps even block,
by its ownership of our stock, an unsolicited tender offer. This concentration
of ownership could have the effect of delaying, deterring or preventing a change
in control of our company that you might view favorably.





Our
management decisions are made by our President and Chief Financial Officer,
Jonathan White; if we lose his services, our revenues may be
reduced.





The
success of our business is dependent upon the expertise of our President,
Jonathan White. Because Mr. White is essential to our operations, you must rely
on his management decisions.  Mr. White will continue to control our
business affairs after this filing. We have not obtained any key person life
insurance relating to Mr. White. If we lose his services, we may not be able to
hire and retain another President with comparable experience. As a result, the
loss of Mr. White’s services could reduce our revenues.





The
person responsible for managing our business, Jonathan White, will devote less
than full time to our business, which may reduce our revenues.





We
currently have no employees other than our President and Chief Financial
Officer, Jonathan White. In his capacity as our President and Chief Financial
Officer, Mr. White currently devotes approximately 20% of his time to our
business.  Mr. White may not be able to devote the time necessary to
our business to assure successful implementation of our business
plan.





Because
our common stock is considered a penny stock, any investment in our common stock
is considered a high-risk investment and is subject to restrictions on
marketability; you may be unable to sell your shares.





We are be
subject to the penny stock rules adopted by the U.S. Securities and Exchange
Commission that require brokers to provide extensive disclosure to its customers
prior to executing trades in penny stock. These disclosure requirements may
cause a reduction in the trading activity of our common stock, which in all
likelihood would make it difficult for our shareholders to sell their
securities.





Because
we do not have an audit or compensation committee, stockholders will have to
rely on the entire board of directors, none of whom are independent, to perform
these functions.





We do not
have an audit or compensation committee comprised of independent
directors.  We do not have any audit or compensation committee. These
functions are performed by the board of directors as a whole. All members of the
board of directors are not independent directors. Thus, there is a potential
conflict in that board members who are management will participate in
discussions concerning management compensation and audit issues that may affect
management decisions.





7


Special
Information Regarding Forward-Looking Statements


Some of
the statements in this prospectus are “forward-looking statements.” These
forward-looking statements involve certain known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. These
factors include, among others, the factors set forth above under “Risk Factors.”
The words “believe,” “expect,” “anticipate,” “intend,” “plan” and similar
expressions identify forward-looking statements. We caution you not to place
undue reliance on these forward-looking statements. We undertake no obligation
to update and revise any forward-looking statements or to publicly announce the
result of any revisions to any of the forward-looking statements in this
document to reflect any future or developments. However, the Private Securities
Litigation Reform Act of 1995 is not available to us as a penny stock issuer and
thus we may not rely on the statutory safe harbor from liability for
forward-looking statements. Further, Section 27A(b)(2)(D) of the Securities Act
and Section 21E(b)(2)(D) of the Securities Exchange Act expressly state that the
safe harbor for forward looking statements does not apply to statements made in
connection with this offering.





ITEM
1B. UNRESOLVED STAFF COMMENTS





None





ITEM
2. PROPERTIES





We
currently occupy space in the residence of our President at 6021 Roxton Road,
Halifax, Nova Scotia B3H 1H4, Canada.  No rent is
charged.





We do not
intend to renovate, improve or develop properties. We are not subject to
competitive conditions for property and currently have no property to insure. We
have no policy with respect to investments in real estate or interests in real
estate and no policy with respect to investments in real estate mortgages.
Further, we have no policy with respect to investments in securities of or
interests in persons primarily engaged in real estate activities.





ITEM
3. LEGAL PROCEEDINGS





None





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





No
matters were submitted to a vote of security holders during the fourth quarter
of 2009.





PART
II





ITEM
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES





Common
Stock





We are
authorized to issue 100,000,000 shares of common stock at a par value of $0.0001
per share. As of February 22, 2010, there were 35,945,000 shares of common stock
issued and outstanding held by 33 shareholders of record.





8


Market
Information


There is
no established public trading market for our securities and a regular trading
market may not develop or, if developed, may not be sustained. We have no plans,
proposals, arrangements or understandings with any person with regard to the
development of a trading market in any of our securities. Our securities are
currently qualified for quotation on the OTC Bulletin Board under the symbol
CLGX.OB, but are unpriced and have not traded.





OTC
Bulletin Board Qualification for Quotation





To have
our shares of common stock on the OTC Bulletin Board, a market maker must file
an application on our behalf in order to make a market for our common stock. We
have been issued a trading symbol CLGX.OB, but no trading has yet
commenced.





Dividends





Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared by the board of directors out of funds legally available. We have
not paid any dividends since our inception, and we presently anticipate that all
earnings, if any, will be retained for development of our business. There are no
restrictions in our certificate of incorporation or bylaws that prevent us from
declaring dividends. Any future disposition of dividends will be at the
discretion of our board of directors and will depend upon, among other things,
our future earnings, operating and financial condition, capital requirements,
and other factors.




Preferred
Stock




We are
authorized to issue 20,000,000 shares of preferred stock in series as fixed by
the board of directors with a par value of $0.0001 per share. As of the date of
this annual report, there are no shares of preferred stock
outstanding.




Preferred
stock may be issued in series with preferences and designations as the board of
directors may from time to time determine. The board may, without shareholders
approval, issue preferred stock with voting, dividend, liquidation and
conversion rights that could dilute the voting strength of our common
shareholders and may assist management in impeding an unfriendly takeover or
attempted changes in control. There are no restrictions on our ability to
repurchase or reclaim our preferred shares while there is any arrearage in the
payment of dividends on our preferred stock.




Securities
Authorized for Issuance under Equity Compensation Plans




We do not
have any compensation plans or arrangements under which equity securities are
authorized for issuance.




Recent
Sales of Unregistered Securities




There
have been no sales of unregistered securities within the last three years which
would be required to be disclosed pursuant to Item 701 of Regulation S-K, except
as follows: 189,000 shares of our common stock were offered and sold in a
private placement to accredited investors at a price equal to $18,900 that
closed on February 1, 2007. The total offering price for the shares was $0.10
per share.  The private placement was exempt from registration under
Section 4(2) of the Securities Act. In the offering, no general solicitation was
made by us or any person acting on our behalf, the securities were sold subject
to transfer restrictions, and the certificates for the shares contained an
appropriate legend stating that such securities have not been registered under
the Securities Act and may not be offered or sold absent registration or an
exemption therefrom. There were no underwriting discounts or
commissions.


9




Purchases
of Equity Securities




No
purchases of our own equity securities, either as a part of a publicly-announced
plan or otherwise, were made during any month in 2009.




ITEM
6. SELECTED FINANCIAL DATA




Not
applicable




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




Special
Information Regarding Forward-Looking Statements




Some of
the statements in this Form 10-K are “forward-looking statements.” These
forward-looking statements involve certain known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. These
factors include, among others, the factors set forth above under “Risk Factors.”
The words “believe,” “expect,” “anticipate,” “intend,” “plan” and similar
expressions identify forward-looking statements. We caution you not to place
undue reliance on these forward-looking statements. We undertake no obligation
to update and revise any forward-looking statements or to publicly announce the
result of any revisions to any of the forward-looking statements in this
document to reflect any future or developments.




The
following discussion should be read in conjunction with our financial statements
and the notes thereto which appear elsewhere in this annual report. The results
shown herein are not necessarily indicative of the results to be expected in any
future periods. This discussion contains forward-looking statements based on
current expectations, which involve uncertainties. Actual results and the timing
of events could differ materially from the forward-looking statements as a
result of a number of factors.




Overview




In the
online world, the Internet is increasingly being used as a tool to bring
together people in real space and time. Email is used to coordinate meetings,
and fast-growing sites such as Craigslist.com, Facebook.com, and Lavalife.com
bring individuals together who otherwise would not meet. In the real world, we
are experiencing the “global village phenomenon.”  Americans are
becoming more aware of other places and cultures and people from more places and
cultures are coming to America. These two factors make possible an online
business uniquely designed to bring people together who are interested in
learning about each other’s language and culture. This business is City Language
Exchange.  We set up a website in each city we enter and use that
website to connect individuals interested in exchanging languages. There are
other websites that offer similar services online, but these fail where we will
succeed for one of three reasons: (1) these sites do not collect any money for
their matching services and, therefore, do not have the ability to market
themselves, and users have not paid for the service and, therefore, have no
vested interest in showing up for their match and do not know that the other
party will show up; (2) these sites are nation- or world-wide, making finding a
language exchange partner in your area unlikely and difficult; and (3) these
sites offer online matching for online conversation and teaching, which puts
barriers to communication between two people for whom it will already be
somewhat difficult to communicate given the language barrier.




We have
attempted to mitigate business development risks by creating the business while
the language exchange niche remains unfilled, using a freelance programmer and a
freelance public relations agent to create and market an attractive website, and
scheduling our President’s time according to the needs of the
business.


10




Plan
of Operation




We
currently have over 3,100 registrants interested in matches and are focused on
increasing that number primarily through on line marketing. In 2009 and 2008, we
generated $0 and $156 in revenues, respectively.  We expanded our
services from simply operating in San Francisco to include New York, Los Angeles
and Seattle in September 2007 and initially received a positive response to our
service, particularly in New York. We created an automated matching program to
save administrator hours in managing the larger number of registrants we
expected to receive through the new cities.




In 2008,
however, we had a falling-off in new registrations, leading to less matches and,
therefore, less revenue. The causes seemed to be twofold and related. First,
once the most enthusiastic persons searching for language exchanges register, it
can take additional time or new methods of advertising to bring in more
participants. Second, when participant registration and matching drops off, so
does the enthusiasm of the registrants, participants, referrers, and
administrators. We have considered that this trend may be seasonal, in that
people are less willing to venture out to meet a stranger for a language
exchange in the cold and during the school term for students, than in the
summer, when time is more available for most. We are hoping that continued
administrator dedication and warming weather will lead to a rebound in
revenues.




As the
business and its effective marketing is based entirely online, there is
relatively little effort required to replicate the site for a new city. While we
are currently capable of expanding to new cities rapidly, we wish to continue
learning from our business and increasing the effectiveness of our service to
ensure customer satisfaction and corresponding word of mouth marketing. We feel
that the continued success of the business model will depend upon ensuring we
can service each city we expand to, before increasing the managerial load. We
added three cities (New York, Los Angeles and Seattle) in September 2007. New
York and Los Angeles have added substantial target population to our market.
While our target market has been increasing, we are finding that establishing
ourselves in new cities takes some time to work out what areas are most
conducive for matching and what online marketing is most effective to reach
potential registrants in each city. The nature of networking and business sites
in cities is such that while major players such as EBay or Facebookhave a presence in
every city, other social networking and exchange websites are more popular in
one city than another.  Therefore, it takes some time to discover what
sites the population of each city is visiting and setup advertising on these
sites.




Analysis
of Financial Condition and Results of Operations




We had
revenues of $0 for the year ended December 31, 2009, and $156 for the year ended
December 31, 2008.  There has been a downward turn of registrations by
100% comparing the year ended December 31, 2009 to the year ended December 31,
2008, due to a lack of consumer interest.




There
were $51,008 of general and administrative expenses for the year ended December
31, 2009 as compared to $53,209 of general and administrative expenses for the
year ended December 31, 2008.  The major components of these expenses
were the professional expenses consisting of legal and accounting
fees.  For the year ended December 31, 2009, professional fees were
$39,227, which were 76.9% of the general and administrative fees for the same
period.  This is a decrease of 11.6% from the professional fees of
$44,382 incurred for the year ended December 31, 2008. The professional fees
paid during 2008 are 83% of the general and administrative expenses for the year
ended December 31, 2008.  There were no contract labor and commission
expenses during 2009 or 2008.




Depreciation
expense was $338 for the year ended December 31, 2009 as compared to $336 for
the year ended December 31, 2008.




Total
expenses were $52,193 for the year ended December 31, 2009 and $53,545 for the
year ended December 31, 2008.


11




Total
net loss was $52,193 for the year ended December 31, 2009 and $53,389 for the
year ended December 31, 2008.




We
anticipate our primary expense, professional expense, to remain steady as we
continue our quarterly and annual filings.




Liquidity
and Capital Resources




Since
we are a development stage company, we have been dependent on our majority owner
to provide cash resources to fund operations. As of December 31, 2009, our
accumulated deficit was $166,716.




On
December 23, 2009, we issued a senior secured promissory note to our largest
stockholder, Vision Opportunity Master Fund, Ltd., in the principal amount of
$250,000.  The note bears interest at 8% per annum, is secured by all
our assets and matures on June 30, 2010.




We
will need to secure a minimum of $10,000 in funds to finance our business in the
next 12 months, in addition to the funds which will be used to stay public,
these funds will be used for business development and sales and marketing.
However, in order to become profitable, we may still need to secure additional
debt or equity funding. We hope to be able to raise additional funds from an
offering of our stock in the future. However, this offering may not occur, or if
it occurs, may not raise the required funding. We do not have any plans or
specific agreements for new sources of funding, except for the anticipated loans
from management as described above, or any planned material
acquisitions.




As
part of our plan to augment our financial resources and consider attractive
business opportunities, our president has entered into definitive discussions
with an unnamed, unaffiliated third party with respect to a potential merger
transaction which could result in the discontinuance of our current operations,
change of control/ownership and new management.  We expect that,
although there can be no assurance, such a transaction will occur
shortly.  When finalized and binding, we will provide full disclosure
about the transaction and the third party, as required by applicable securities
laws.




On
December 23, 2009, we loaned Gamers Factory, Inc. $242,500 at a rate of 8%
per annum with interest due on maturity which is June 30,
2010.




Our
independent auditors have indicated in their audit report for the year ended
December 31, 2009, that, due to our working capital deficiency, there is
substantial doubt about our ability to continue as a going concern.




Off-Balance
Sheet Arrangements




There
were no off-balance sheet arrangements.




Critical
Accounting Policies





Use of estimates. In preparing
financial statements, management makes estimates and assumptions that affect the
reported amounts of assets and liabilities in the balance sheets and revenue and
expenses in the statements of operations. Actual results could differ from those
estimates.





Cash and cash equivalents. For
purposes of the statement of cash flows, we consider all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents. As of December 31, 2009 and 2008, cash consisted of monies
held in checking accounts.





Property and equipment.
Property and equipment is valued at cost. Additions are capitalized and
maintenance and repairs are charged to expense as incurred. Gains and losses on
dispositions of equipment are reflected in operations. Depreciation is provided
using the straight-line method over the estimated useful lives of the assets,
which is three years for equipment.


12




Income taxes. We recognize
deferred tax assets and liabilities based on differences between the financial
reporting and tax bases of assets and liabilities using the enacted tax rates
and laws that are expected to be in effect when the differences are expected to
be recovered. We provide a valuation allowance for deferred tax assets for which
we do not consider realization of such assets to be more likely than
not.





Revenue recognition. We
generate revenue from the sales of their services in accordance with Staff
Accounting Bulletin 101. The criteria for recognition is as follows: (1)
persuasive evidence of an arrangement exists; (2) delivery has occurred or
services have been rendered; (3) the seller’s price to the buyer is fixed
or determinable; and (4) collectability is reasonably assured.





In
accordance with the listed criteria, we generally recognize the revenue upon
matching customers who have signed up for language services.





Net loss per share data. Basic
and diluted net loss per common share are presented in conformity with the SFAS
No. 128, “Earnings Per Share.” Diluted net loss per share is the same as basic
net loss per share as the inclusion of any outstanding options and warrants
would be anti-dilutive.  Basic net loss per share is computed by dividing
net loss available to common shareholders (numerator) by the weighted average
number of common shares outstanding during the year (denominator).  Diluted
net loss per share is computed using the weighted average number of common
shares and dilutive potential common shares outstanding during the year. For the
years ended December 31, 2008 and 2007, we had no dilutive potential common
shares.





Recently-issued accounting
pronouncements. We do not expect the adoption of recently issued
accounting pronouncements to have a significant impact on our results of
operations, financial position or cash flows.




ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Not
applicable




ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




The
audited financial statements for this Form 10-K follow the signature page of
this report.





ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE





None





ITEM
9A. CONTROLS AND PROCEDURES





Conclusion
Regarding the Effectiveness of Disclosure Controls and Procedures





Under the
supervision and with the participation of our management, including our
principal executive officer, we conducted an evaluation of our disclosure
controls and procedures, as such term is defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the end
of the period covered by this report. Based on this evaluation, our principal
executive officer and our principal financial officer concluded that our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms, and is
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosures.


13




Management's
Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) of the Exchange Act. Our internal control system was designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes, in accordance
with generally accepted accounting principles. Because of inherent limitations,
a system of internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate due to
change in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.




Our
management conducted an evaluation of the effectiveness of our internal control
over financial reporting using the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control -
Integrated Framework. Based on its evaluation, our management concluded that
there is a material weakness in our internal control over financial reporting. A
material weakness is a deficiency, or a combination of control deficiencies, in
internal control over financial reporting such that there is a reasonable
possibility that a material misstatement of the Company’s annual or interim
financial statements will not be prevented or detected on a timely
basis.




The
material weakness relates to the lack of sufficient accounting staff and the
performance of the principal accounting functions by one officer. Our chief
executive officer also serves as our chief financial officer. All of our
financial reporting is carried out by one individual, and we do not have an
audit committee. Our board of directors consists of one individual, who serves
as our chief executive officer and chief financial officer. This lack of
accounting staff results in a lack of segregation of duties and accounting
technical expertise necessary for an effective system of internal
control.




In order
to remedy our existing internal control deficiencies, as soon as our finances
allow, we will hire a Chief Financial Officer who will be sufficiently versed in
public company accounting to implement appropriate procedures for timely and
accurate disclosures. We will also establish an audit committee and recruit
members to serve on our board of directors.




This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the SEC that permit us to provide
only management’s report in this annual report.




Changes
in Internal Control Over Financial Reporting




There
were no changes in our internal control over financial reporting during the
fourth quarter of fiscal 2008 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.




Attestation
Report of our Registered Public Accounting Firm




This
annual report does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial
reporting. Our management's report was not subject to attestation by our
independent registered public accounting firm pursuant to rules of the SEC that
permit us to provide only management’s report in this annual
report.


14


ITEM
9B. OTHER INFORMATION
 
 None
 
 PART
III
 
 ITEM
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
 Directors
and Executive Officers
 
 Our sole
director and executive officer is:
 
 Jonathan
White, age 28, has been our President, Chief Executive Officer, Chief Financial
Officer and sole Director since inception. He is currently a Ph.D. student in a
distributed learning (distance) program at Fielding Graduate University. From
August 2005 to February 2007, he was a graduate student at Saint Mary’s
University. From May 2005 to August 2005, he was a (full-time) organizational
psychology consultant for Assessment Strategies, which consults in selection
procedures for government, business and universities. From February 2004 to the
present date, he was a (part-time) contract consultant for FitPro, which
consults in fitness, organizational health and wellness, special events, and
charity events. From September 2004 to the present date, he was a (part-time and
contract) researcher and teaching assistant at Saint Mary’s University. From
March 2003 to September 2003, he was Youth Sailing Liaison for Nova Scotia
Yachting Association, which promotes sailing in the province of Nova Scotia.
From June 2002 to August 2002, he was Head Instructor of Queen’s Quay Yacht
Club, which teaches sailing lessons and rents boats. In May 2003, he received an
Honors Business Administration degree, with distinction from The Richard Ivey
School of Business at The University of Western Ontario. In May 2003, he
received a B.A. degree in psychology with distinction from The University of
Western Ontario.
 
 Family
Relationships
 
 There are
no family relationships among our current or former officers and
directors.
 
 Significant
Employees
 
 None
 
 Legal
Proceedings
 
 No
officer, director, persons nominated for such positions, promoter or significant
employee has been involved in the last five years in any of the
following:
 
 ·
              Any
      bankruptcy petition filed by or against any business of which such person
      was a general partner or executive officer either at the time of the
      bankruptcy or within two years prior to that
  time;
 
 ·
              Any
      conviction in a criminal proceeding or being subject to a pending criminal
      proceeding (excluding traffic violations and other minor
      offenses);
 
 ·
              Being
      subject to any order, judgment, or decree, not subsequently reversed,
      suspended or vacated, of any court of competent jurisdiction, permanently
      or temporarily enjoining, barring suspending or otherwise limiting his
      involvement in any type of business, securities or banking activities;
      and
  15
 
 ·
              Being
      found by a court of competent jurisdiction (in a civil action), the
      Commission or the Commodity Futures Trading Commission to have violated a
      federal or state securities or commodities law, and the judgment has not
      been reversed, suspended or
vacated.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 We were
not subject to Section 16(a) during our year ended December 31, 2009, as we did
not have a class of equity securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
 
 Code
of Ethics
 
 We have
adopted a Code of Ethics that applies to our principal executive officer,
principal financial officer, principal accounting officer and any other senior
executive officers.  Jonny White, our President, has executed the Code
of Ethics. A copy of the Code of Ethics was attached as an exhibit to our 2007
annual report on Form 10-K.
 
 Changes
to Nomination Process
 
 There
were no material changes to the procedures by which shareholders may recommend
nominees to our board of directors.
 
 Audit
Committee
 
 We do not
have a separately-designated audit committee. The entire board of directors
serves as the audit committee of the company.  We do not have an
“audit committee financial expert,” as defined in the applicable rules and
regulations of the Securities Exchange Act of 1934, as amended.
  ITEM
11. EXECUTIVE COMPENSATION
  Compensation
Agreements
  The
following table sets forth summary information concerning the compensation
received for services rendered to us during the years ended December 31, 2009
and 2008 by our sole officer.
  Summary
Compensation Table
 
 Annual Compensation
                                    
                                    Long-Term CompensationAwards
                                    
                                    PayoutsName and Principal Position
                                    
                                    Fiscal
                                        Year
                                    
                                    Salary
                                        ($)
                                    
                                    Bonus
                                        ($)
                                    
                                    Other Annual
                                        Compensation
                                        ($)
                                    
                                    Restricted
                                        Stock
                                        Award(s)
                                        ($)
                                    
                                    Securities
                                        Underlying
                                        Options/
                                        SARs
                                        (#)
                                    
                                    LTIP
                                        Payouts ($)
                                    
                                    All Other
                                        Compensation
                                        ($)Jonathan
      White
                                    
                                    2009
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -President
      and Chief
                                      Financial
      Officer
                                    
                                    2008
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
                                    
                                    -
 
 Employment
Agreements
 
 We do not
have an employment agreement with Jonathan White or any other officer or
employee.
  16
 
 Director
Compensation
 
 We do not
pay our sole director any fees or other compensation for serving as a director.
We have not granted any stock options or stock awards to our sole
director.
 
 ITEM
      12.
              SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS
 
 The
following table sets forth certain information concerning the number of shares
of our common stock owned beneficially as of February 22, 2010, by: (i) each
person known by us to be the beneficial owner of more than 5% of our outstanding
common stock; (ii) each of our directors; (iii) each of our officers; and (iv)
our executive officers and directors as a group.
 
 Shares of Common StockNames and Address
                    
                    Beneficially Ownedof Beneficial Owner
                    
                    Number
                    
                    
                    PercentVision
      Opportunity Master Fund, Ltd.
                    
                    
                    35,000,000
                    
                    
                    
                    97.4
                    %Jonathan
      White
                    
                    
                    —
                    
                    
                    
                    —All
      directors and named executive officers as a group (1
    person)
                    
                    
                    —
                    
                    
                    
                    —
  The table
above is based upon information derived from our stock records. Unless otherwise
indicated in the footnotes to the table and subject to community property laws
where applicable, each of the shareholders named in the table has sole or shared
voting and investment power with respect to the shares indicated as beneficially
owned.  The address for Vision Opportunity Master Fund, Ltd. is c/o
Citi Hedge Fund Services (Cayman) Limited, Cayman Corporate Centre, 27 Hospital
Road, 5th Floor,
Grand Cayman KY1-1109, Cayman Islands.
 
 Except as
set forth above, applicable percentages are based upon 35,945,000 shares of
common stock outstanding as of February 22, 2010.
 
 The
information presented above regarding beneficial ownership of our voting
securities has been presented in accordance with the rules of the SEC and is not
necessarily indicative of ownership for any other purpose. Under these rules, a
person is deemed to be a “beneficial owner” of a security if that person has or
shares the power to vote or direct the voting of the security or the power to
dispose or direct the disposition of the security. A person is deemed to own
beneficially any security as to which such person has the right to acquire sole
or shared voting or investment power within 60 days through the conversion or
exercise of any convertible security, warrant, option or other right. More than
one person may be deemed to be a beneficial owner of the same securities. The
percentage of beneficial ownership by any person as of a particular date is
calculated by dividing the number of shares beneficially owned by such person,
which includes the number of shares as to which such person has the right to
acquire voting or investment power within 60 days, by the sum of the number of
shares outstanding as of such date plus the number of shares as to which such
person has the right to acquire voting or investment power within 60 days.
Consequently, the denominator used for calculating such percentage may be
different for each beneficial owner. Except as otherwise indicated below and
under applicable community property laws, we believe that the beneficial owners
of our common stock listed above have sole voting and investment power with
respect to the shares shown.
 
 We are
unaware of any contract or other arrangement the operation of which may at a
subsequent date result in a change in control of the company.
  17
  We do not
have a compensation plan under which equity securities are authorized for
issuance.
 
 ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 
 Related
Transactions
 
 On
December 23, 2009, we issued a senior secured promissory note to our largest
stockholder, Vision Opportunity Master Fund, Ltd., in the principal amount of
$250,000.  The note bears interest at 8% per annum, is secured by all
our assets and matures on June 30, 2010.
 
 Director
Independence
 
 Our sole
director, Jonathan White, is not independent under Nasdaq guidelines because he
is an executive officer of the company.
 
 ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Audit
Fees
 
 
 For
      year end December 31, 2009:
                              
                              $
                              16,500For
      year end December 31, 2008:
                              
                              $
                              12,963
 
 We did
not pay any other fees as specified in Item 9(e) of Schedule 14A.
 
 We do not
have audit committee pre-approval policies and procedures.
  18
  PART
IV
 
 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
 The
following exhibits are filed as part of this Form 10-K and this list includes
the Exhibit Index.
  No.
                          
                          Description3.1*
                          
                          Certificate
      of Incorporation.3.2*
                          
                          By-laws.4.1*
                          
                          Form
      of Common Stock Certificate.14.1**
                          
                          Code
      of Ethics.21.1**
                          
                          Subsidiaries
      of Registrant.31.1
                          
                          Certification
      as Adopted pursuant to Section 302(a) of the Sarbanes-Oxley Act of
      2002.32.1
                          
                          Certification
      pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of
      the Sarbanes-Oxley Act of
2002.
 
  *
              Incorporated
      herein by reference from our Registration Statement on Form SB-2, filed
      with the U.S. Securities and Exchange Commission on March 22, 2007,
      effective on April 4, 2007.
  **
              Incorporated
      herein by reference from our Annual Report on Form 10-K for the year ended
      December 31, 2007, filed on March 31,
2008.
  19
  SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 CITY
      LANGUAGE EXCHANGE
                INCORPORATEDDate:
      February 25, 2010
              
              By:
              /s/ Jonathan WhiteJonathan
      WhitePresident,
      Chief Executive Officer and Chief
                Financial
      Officer(principal
      executive officer and principalfinancial
      and accounting officer)
 
 In
accordance with the Exchange Act, 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 25, 2010
                /s/ Jonathan WhiteJonathan
      WhitePresident,
      Chief Executive Officer, Chief Financial
                  Officer
      and Director(principal
      executive officer and principalfinancial
      and accounting officer)
  20
  REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors
 City
Language Exchange Incorporated
 (A
Development Stage Company)
 Halifax,
Nova Scotia, Canada
 
 We have
audited the accompanying balance sheets of City Language Exchange Incorporated
as of December 31, 2009 and 2008 and the related statements of operations,
stockholders’ deficit, and cash flows for the years then ended and for the
period from August 28, 2006 (inception) through December 31, 2009. These
financial statements are the responsibility of City Language Exchange
Incorporated Our responsibility is to express an opinion on these financial
statements based on our audits.
 
 We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of City Language Exchange Incorporated
as of December 31, 2009 and 2008, and the results of its operations and its cash
flows for the years then ended and for the period from August 28, 2006
(inception) through December 31, 2009, in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying financial statements have been prepared assuming that City Language
Exchange Incorporated will continue as a going concern. As discussed in Note 3
to the financial statements, City Language Exchange Incorporated has a working
capital deficiency, which raises substantial doubt about its ability to continue
as a going concern. Management’s plans regarding those matters also are
described in Note 3. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
 
 /s/
MaloneBailey, LLP
 MALONEBAILEY,
LLP
 www.malone-bailey.com
 Houston,
Texas
 
 February
25, 2010
  21
  CITY
      LANGUAGE EXCHANGE, INC.(A
      Development Stage Company)BALANCE
      SHEETSASSETSDECEMBER
      31,
                
                
                DECEMBER
      31,2009
                
                
                2008CURRENT
      ASSETSCash
                
                $
                2,101
                
                
                $
                173Loan
      receivable
                
                
                242,500
                
                
                
                -FIXED
      ASSETSEquipment,
      net of accumulated depreciation of $1,306 and $968
      respectively
                
                
                164
                
                
                
                502TOTAL
      ASSETS
                
                $
                244,765
                
                
                $
                675LIABILITIES
      AND STOCKHOLDERS' DEFICITCURRENT
      LIABILITIESAccrued
      liabilities - related party
                
                $
                947
                
                
                $
                1,681Loan
      payable- related party
                
                
                250,000
                
                
                
                -TOTAL
      LIABILITIES
                
                
                250,947
                
                
                
                1,681STOCKHOLDERS'
      DEFICITPreferred
      stock, $0.0001 par value, 20,000,000 shares authorized,none
      issued and outstanding as of December 31, 2009 & 2008
                
                
                -
                
                
                
                -Common
      stock, $0.0001 par value, 100,000,000 shares authorized, 35,945,000 shares
      issued andoutstanding
      at December 31, 2009 and 2008
                
                
                3,595
                
                
                
                3,595Additional
      paid in capital
                
                
                156,939
                
                
                
                109,922Deficit
      accumulated during the development stage
                
                
                (166,716
                )
                
                
                (114,523
                )TOTAL
      STOCKHOLDERS' DEFICIT
                
                
                (6,182
                )
                
                
                (1,006
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                
                $
                244,765
                
                
                $
                675The
      accompanying notes are an integral part of these unaudited financial
      statements.
  22




CITY LANGUAGE EXCHANGE,
      INC.(A Development Stage
      Company)STATEMENTS OF
      OPERATIONS
  AUGUST 28,
    2006YEAR
      ENDEDDECEMBER
      31,
              
              
              (INCEPTION)
      THROUGH2009
              
              
              2008
              
              
              DECEMBER 31,
      2009REVENUETranslation
      services
              
              $
              -
              
              
              $
              156
              
              
              $
              5,096OPERATING
      EXPENSESGeneral &
      administrative
              
              
              51,008
              
              
              
              53,209
              
              
              
              167,969Commissions
              
              
              -
              
              
              
              -
              
              
              
              1,690Depreciation
      expense
              
              
              338
              
              
              
              336
              
              
              
              1,306Total operating
      expenses
              
              
              51,346
              
              
              
              53,545
              
              
              
              170,965Interest
      expense
              
              
              847
              
              
              
              -
              
              
              
              847NET LOSS
              
              $
              (52,193
              )
              
              $
              (53,389
              )
              
              $
              (166,716
              )NET LOSS PER COMMON SHARE - BASIC
      & DILUTED
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              
              N/AWEIGHTED AVERAGE NUMBER OF COMMON
      SHARES OUTSTANDING - BASIC & DILUTED
              
              
              35,945,000
              
              
              
              35,945,000
              
              
              
              N/A
  The accompanying notes are
      an integral part of these unaudited financial
      statements.




23




CITY
      LANGUAGE EXCHANGE, INC.(A
      Development Stage Company)STATEMENTS
      OF STOCKHOLDERS' DEFICITFOR
      THE PERIOD FROM AUGUST 28, 2006 (INCEPTION) THROUGH DECEMBER 31,
      2009DeficitsAccumulatedAdditional
              
              
              During
      theCommon
      Stock
              
              
              Paid-In
              
              
              DevelopmentShares
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              TotalFounders
      shares issued
              
              
              35,000,000
              
              
              $
              3,500
              
              
              $
              -
              
              
              $
              -
              
              
              $
              3,500Capital
      contribution
              
              
              -
              
              
              
              -
              
              
              
              9,645
              
              
              
              -
              
              
              
              9,645-Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (8,414
              )
              
              
              (8,414
              )Balance,
      December 31, 2006
              
              
              35,000,000
              
              
              
              3,500
              
              
              
              9,645
              
              
              
              (8,414
              )
              
              
              4,731Common
      stock issued for cash
              
              
              945,000
              
              
              $
              95
              
              
              
              18,805
              
              
              
              -
              
              
              
              18,900-Capital
      contribution
              
              
              -
              
              
              
              -
              
              
              
              25,481
              
              
              
              -
              
              
              
              25,481-Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (52,721
              )
              
              
              (52,721
              )$
              -Balance,
      December 31, 2007
              
              
              35,945,000
              
              
              
              3,595
              
              
              
              53,931
              
              
              
              (61,135
              )
              
              
              (3,610
              )-Capital
      contribution
              
              
              -
              
              
              
              -
              
              
              
              55,991
              
              
              
              -
              
              
              
              55,9910Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (53,388
              )
              
              
              (53,388
              )0Balance,
      December 31,  2008
              
              
              35,945,000
              
              
              
              3,595
              
              
              
              109,922
              
              
              
              (114,523
              )
              
              
              (1,006
              )-Capital
      Contribution
              
              
              
              
              
              
              
              
              
              
              47,017
              
              
              
              
              
              
              
              47,017$
              -Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (52,193
              )
              
              
              (52,193
              )0Balance,
      December 31, 2009
              
              
              35,945,000
              
              
              $
              3,595
              
              
              $
              156,939
              
              
              $
              (166,716
              )
              
              $
              (6,182
              )The
      accompanying notes are an integral part of these unaudited financial
      statements.
  24




CITY LANGUAGE EXCHANGE,
      INC.(A
      Development Stage Company)STATEMENTS
      OF CASH FLOWS
  YEAR ENDED
              
              
              INCEPTIONDECEMBER
      31,
              
              
              DECEMBER
      31,
              
              
              THROUGH2009
              
              
              2008
              
              
              DECEMBER 31,
      2009CASH FLOWS FROM OPERATING
      ACTIVITIES:Net
      loss
              
              $
              (52,193
              )
              
              $
              (53,388
              )
              
              $
              (166,716
              )Adjustments to
      reconcile net loss to net cash used in operating
      activities:Depreciation
              
              
              338
              
              
              
              335
              
              
              
              1,306Increase
      (Decrease) of accrued liabilities
              
              
              (734
              )
              
              
              (4,019
              )
              
              
              947Net
      cash used in operating activities
              
              
              (52,589
              )
              
              
              (57,072
              )
              
              
              (164,463
              )CASH FLOWS FROM INVESTING
      ACTIVITIESPurchase of
      equipment
              
              
              -
              
              
              
              -
              
              
              
              (1,470
              )Issuance of loan
      receivable
              
              
              (242,500
              )
              
              
              -
              
              
              
              (242,500
              )Net
      cash used in investing activities
              
              
              (242,500
              )
              
              
              -
              
              
              
              (243,970
              )CASH FLOWS FROM FINANCING
      ACTIVITIES:Issuance of stock
      for cash
              
              
              -
              
              
              
              -
              
              
              
              18,900Contribution of
      capital
              
              
              47,017
              
              
              
              55,991
              
              
              
              141,634Proceeds from
      related party loan payable
              
              
              250,000
              
              
              
              -
              
              
              
              250,000Net
      cash provided by financing activities
              
              
              297,017
              
              
              
              55,991
              
              
              
              410,534NET INCREASE (DECREASE) IN
      CASH
              
              $
              1,928
              
              
              $
              (1,081
              )
              
              $
              2,101CASH, BEGINNING OF
      PERIOD
              
              
              173
              
              
              
              1,254
              
              
              
              -CASH, END OF
      PERIOD
              
              $
              2,101
              
              
              $
              173
              
              
              $
              2,101SUPPLEMENTAL
      INFORMATIONInterest
      paid
              
              $
              -
              
              
              $
              -
              
              
              $
              -Income taxes
      paid
              
              $
              -
              
              
              $
              -
              
              
              $
              -
  The accompanying
      notes are an integral part of these unaudited financial
      statements.




25




CITY
LANGUAGE EXCHANGE, INC
 (A
Development Stage Company)
 NOTES TO
FINANCIAL STATEMENTS
 
 NOTE 1 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Nature  of  Business.
City Language Exchange, Inc (“CLE”) was organized in Delaware on August 8, 2006
as a corporation. CLE is authorized to issue 100,000,000 shares of .0001 par
value common stock and 20,000,000 shares of .0001 par value preferred stock. CLE
is a web based cultural integration service which matches people of different
cultural backgrounds for effective, efficient, and inexpensive language exchange
meetings. CLE charges a one-time fee for this matching service.
 
 Use  of  Estimates.
In preparing financial statements, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities in the balance sheets
and revenue and expenses in the statements of operations. Actual results could
differ from those estimates.
 
 Cash and Cash
Equivalents. For purposes of the statement of cash flows, CLE considers
all highly liquid investments purchased with an original maturity of three
months or less to be cash equivalents. As of December 31, 2009 and 2008, cash
consisted of monies held in checking accounts.
 
 Property and
Equipment. Property and equipment is valued at cost. Additions are
capitalized and maintenance and repairs are charged to expense as incurred.
Gains and losses on dispositions of equipment are reflected in operations.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets, which is three years for equipment.
 
 Income taxes. CLE
recognizes deferred tax assets and liabilities based on differences between the
financial reporting and tax bases of assets and liabilities using the enacted
tax rates and laws that are expected to be in effect when the differences are
expected to be recovered. CLE provides a valuation allowance for deferred tax
assets for which it does not consider realization of such assets to be more
likely than not.
 
 Revenue Recognition.
The Company generates revenue from the sales of their services in accordance
with Staff Accounting Bulletin 101. The criteria for recognition is as follows:
(1) Persuasive evidence of an arrangement exists; (2) Delivery has occurred or
services have been rendered; (3) The seller’s price to the buyer is fixed
or determinable, and (4) Collectability is reasonably assured.
 
 In
accordance with the listed criteria, the Company generally recognizes the
revenue upon matching customers who have signed up for language
services.
 
 Net Loss Per Share
Data. Basic and diluted net loss per common share are presented in
conformity with ASC 260, “Earnings Per Share”. Diluted net loss per share is the
same as basic net loss per share as the inclusion of any outstanding options and
warrants would be anti-dilutive.  Basic net loss per share is computed by
dividing net loss available to common shareholders (numerator) by the weighted
average number of common shares outstanding during the year (denominator). 
Diluted net loss per share is computed using the weighted average number of
common shares and dilutive potential common shares outstanding during the year.
For the years ended December 31, 2009 and 2008, CLE had no dilutive potential
common shares.
 
 Recently- Issued Accounting
Pronouncements. CLE does not expect the adoption of recently issued
accounting pronouncements to have a significant impact on CLE’s results of
operations, financial position or cash flows.
  26
  NOTE 2 -
INCOME TAXES
 
 CLE uses
the asset and liability method, where deferred tax assets and liabilities are
determined based on the expected future tax consequences of temporary
differences between the carrying amounts of assets and liabilities for financial
and income tax reporting purposes. During 2008 there was a change in control and
this change in control has resulted in a limitation on CLE’s ability to utilize
its entire net operating loss and has been reflected in the 2008 and 2009
deferred tax asset accordingly. During 2009, CLE incurred net losses and,
therefore, has no tax liability. The net deferred tax asset generated by the
loss carry-forward has been fully reserved. The cumulative net operating loss
carry-forward is approximately $101,099 December 31, 2009, and will expire in
year 2029.
 
 At
December 31, 2009 and 2008, deferred tax assets consisted of the
following:
  December
31,2009
              
              
              2008Deferred tax
      assets
              
              $
              35,681
              
              
              $
              16,916Less: valuation
      allowance
              
              
              (35,681
              )
              
              
              (16,916
              )Net deferred tax
      asset
              
              $
              -
              
              
              $
              -
 
 NOTE 3 -
GOING CONCERN
 
 Since its
inception, CLE has incurred losses and has been dependent on its majority owner
to provide cash resources to fund its operations. As of December 31, 2009, CLE
has an accumulated deficit . Management has plans to seek additional capital
through private placements and public offerings of its common stock. There is no
guarantee that CLE will be able to complete any of the above objectives. These
factors raise substantial doubt regarding CLE's ability to continue as a going
concern. Our financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 NOTE 4 –
EQUITY
 
 On July
1, 2008, CLE effected a 5-for-1 forward split of its outstanding shares of
common stock, thereby increasing the number of shares of common stock
outstanding from 7,189,000 shares to 35,945,000 shares. All references to shares
(except shares authorized) and per share information in these financial
statements and footnotes have been adjusted to reflect the forward stock split
on a retroactive basis.
 
 During
2009, Vision Opportunity Master Fund, Ltd. a related party contributed $47,017
for operating expenses and is reflected as contributed capital and $55,991 was
contributed during 2008.
 
 NOTE 5–
CHANGE IN CONTROL
 
 On April
14, 2008, Jonathan White, CLE’s President, Chief Executive Officer and Chief
Financial Officer, privately sold 35,000,000 shares of common stock,
constituting 97.4% of the outstanding shares and all of the shares owned
beneficially by him, to Vision Opportunity China LP, a Guernsey registered
limited partnership. As a result of the privately-negotiated sale, a change in
control occurred from Mr. White to Vision Opportunity China LP. Vision
Opportunity China purchased the shares for a total of approximately $345,000 in
cash, inclusive of related acquisition costs. The terms of the purchase and sale
transaction were as a result of arm’s length negotiations between the parties.
Neither party had any relationship with the other prior to this
transaction.
 
 27
  On
December 10, 2008, Vision Opportunity China LP privately sold 35,000,000 shares
of our common stock, constituting 97.4% of our outstanding shares and all of the
shares owned beneficially by it, to its affiliate, Vision Opportunity Master
Fund, Ltd., a Cayman Islands company.  Vision Opportunity Master Fund
purchased the shares for the same amount as Vision Opportunity China LP paid
when it purchased those shares in April 2008, plus related costs in acquiring
and holding such investment.
  
 This
change in control has resulted in a limitation on CLE’s ability to utilize its
entire net operating loss which amounts to approximately $101,099 as of December
31, 2009. The valuation of CLE’s deferred tax asset and related valuation
allowance as a result of this limitation was disclosed in Note 2.
 
 NOTE
6—NOTES RECIEVABLE
 
 On
December 23, 2009, CLE made an unsecured loan to Gamers Factory, Inc. in
the amount of $242,500 at a rate of 8% per annum with interest due on
maturity which is June 30, 2010.
  NOTE 7 –
RELATED PARTY TRANSACTIONS
 
 On April
14, 2008, Vision Opportunity China LP purchased 35,000,000 shares of CLE’s
common stock. Since then, Vision Opportunity China LP paid City Language’s
operating expenses on behalf of the Company.  Since December 10, 2008,
when Vision Opportunity Master Fund, Ltd. purchased all of Vision Opportunity
China LP’s shares in CLE, Vision Opportunity Master Fund, Ltd. has paid the
operating expenses on behalf of the Company.   During the year
ended December 31, 2009 $47,017 has been contributed capital and $55,991 was
contributed during the year ended December 31, 2008.
 
 On
December 23, 2009, Vision Opportunity Master Fund, Ltd. entered into a secured
promissory note with City Language Exchange for $250,000 at 8% interest.
Principle and interest are due to Vision Opportunity Master Fund, Ltd
on  June 30, 2010. In the event that the note is defaulted CLE is to
pay 16% interest. $847 of interest has been accrued as of December 31,
2009.
 
 CLE
currently occupies space in the residence of the President and no rent is
charged.
 
 NOTE 8 –
SUBSEQUENT EVENTS
  As
part of CLE’s plan to augment its financial resources and consider attractive
business opportunities, its president has entered into definitive discussions
with an unnamed, unaffiliated third party with respect to a potential merger
transaction which could result in the discontinuance of its current operations,
change of control/ownership and new management.  CLE expects that,
although there can be no assurance, such a transaction will occur
shortly.
  Other
than as described above, CLE has evaluated all events subsequent to
December 31, 2009 through February 25, 2010 and concluded that there are no
significant or material transactions to be reported for the period from January
1, 2010 to February 25, 2010.
  28