UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C.  20549  Form 10-QSB  (Mark One)  [X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the quarterly period ended: JUNE 30, 2006  [ ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT  For the transition period from ______________to________________  Commission file number 000-52020  ELITE ARTZ, INC. ----------------------------------------------------------------- (Exact name of small business issuer as specified in its charter)  Nevada                         90-0201309 -------------------------------   -------------------------------- (State or other jurisdiction of   (IRS Employer Identification No.) incorporation or organization)  4950 W. Craig Road, Suite 3-235, Las Vegas, NV 89130 ----------------------------------------------------- (Address of principal executive offices)  (702)655-3591 -------------------------- (Issuer's telephone number)  Check whether the Issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes [X]   No [ ]  Indicate by check mark whether the Issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes [ ]   No [X]  APPLICABLE ONLY TO CORPORATE ISSUERS  State the number of shares outstanding of each of the Issuer's classes of common equity, as of the latest practical date: AUGUST 1, 2006 B 30,059,500 common shares, par value $0.001.  Transitional Small Business Disclosure Format (check one). Yes [ ]  No [X]   -1-    FORM 10-QSB ELITE ARTZ, INC.  INDEX Page  PART I - FINANCIAL INFORMATION .............................................2  ITEM 1.  FINANCIAL STATEMENTS ..............................................2  Balance Sheets - June 30, 2006 and December 31, 2005...............3  Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005 and Since Inception July 15, 2002...........4  Statements of Cash Flows for the Three and Six Months Ended June 30, 2006 and 2005 and Since Inception July 15, 2002...........5  Notes to Financial Statements......................................6  ITEM 2.  MANAGEMENT=S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION...........................9  ITEM 3.  CONTROLS AND PROCEDURES...........................................12  PART II. OTHER INFORMATION.................................................13  ITEM 1.  LEGAL PROCEEDINGS.................................................13  ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.......13  ITEM 3.  DEFAULTS IN SENIOR SECURITIES.....................................13  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...............13  ITEM 5.  OTHER INFORMATION.................................................13  ITEM 6.  EXHIBITS..........................................................13  SIGNATURES.................................................................14  PART I: FINANCIAL INFORMATION   ITEM 1. FINANCIAL STATEMENTS  The financial information set forth below with respect to our statements of operations for the three and six month periods ended June 30, 2006 and 2005 are unaudited.  This financial information, in the opinion of management, includes all adjustments consisting of normal recurring entries necessary for the fair presentation of such data.  The results of operations for the three and six month periods ended June 30, 2006, are not necessarily indicative of results to be expected for any subsequent period.     -2-     ELITE ARTZ, INC.BALANCE SHEETSJun 30,Dec. 31,20062005ASSETS(Unaudited)Current AssetsCash$         6,441$       17,505Inventory - for resale4,74010,240Total Current Assets11,18127,745Fixed Assets:Office Equipment - net of accumulated depreciation8491,037$       12,030$       28,782LIABILITIES AND STOCKHOLDERS' EQUITYCurrent LiabilitiesAccounts Payable$         3,004$            975Notes Payable8,920-Total Current Liabilities11,924975STOCKHOLDERS' EQUITY (DEFICIT)Preferred Stock20,000,000 shares authorized at $0.001 par value;none issued--Common Stock50,000,000 shares authorized at $0.001 par value;3,059,400 shares issued and outstanding3,0593,059Capital in excess of par value282,141282,001Deficit accumulated during the development stage(285,094)(257,253)Total Stockholders' Equity (Deficit)10627,807$       12,030$       28,782The accompanying notes are an integral part of these financial statements    -3-     ELITE ARTZ, INC.STATEMENTS OF OPERATIONSFor the Three and Six Months Ended June 30, 2006 and 2005And the Period July 15, 2002 (Date of Inception) to June 30, 2006(Unaudited)InceptionThree Months EndedSix Months EndedtoJun 30,Jun 30,Jun 30,Jun 30,Jun, 3020062005200620052006Sales$        33,000$               -$       38,000$        11,700$     248,029Cost of Sales9,121-12,1217,150238,006Groff Profit (Loss)23,879-25,8794,55010,023ExpensesSales & Marketing3,5002,3885,9633,03227,531Depreciation94-188-282General & Administrative22,9352,87647,5697,744174,80426,5295,26453,72010,776202,617Net Operating Loss(2,650)(5,264)(27,841)(6,226)(192,594)Other ExpensesRealized loss in availablefor-sale securities---(15,500)(92,500)Net Loss(2,650)(5,264)(27,841)(21,726)(285,094)Net Loss Per Common ShareBasic and diluted$          (0.00)$         (0.00)$         (0.01)$          (0.01)Average Outstanding SharesBasic (stated in 1,000's)3,0593,0383,0593,038The accompanying notes are an integral part of these financial statements    -4-     ELITE ARTZ, INC.STATEMENTS OF CASH FLOWSFor the Six Month Periods Ended June 30, 2006 and 2005And the Period July 15, 2002 (Date of Inception) to June 30, 2006(Unaudited)InceptiontoJun 30,Jun 30,Jun 30,200620052006Cash Flows From Operating Activities:Net Loss$        (27,841)$        (21,726)$   (285,094)Adjustments to reconcile net loss tonet cash used by operating activities:Net Cash Used In Operating Activities:Depreciation188-282Changes in Inventory5,5002,950(4,740)Changes in Accounts Payable2,0291,1353,004Realized loss in available-for -sale securities-15,500-Net Cash provided from (used in) Operating Activities(20,124)(2,141)(286,548)Cash Flows From Investing Activities:Purchase of Equipment & Furniture--(1,131)Net Cash from (used in) Investing Activities--(1,131)Cash Flows From Financing Activities:Contributions to capital140200500Proceeds from notes payable8,920-8,920Proceeds from issuance of common stock--284,700Net Cash provided from (used in) Financing Activities9,060200294,120Net (Decrease) Increase In Cash(11,064)(1,941)6,441Cash at Beginning of Period17,5051,958-Cash at the End of Period$           6,441$               17$        6,441Supplemental Disclosures of Cash Flow Information:Cash paid during the period for:Interest$                  -$                 -$               -Income taxes$                  -$                 -$               -The accompanying notes are an integral part of these financial statements   -5-    ELITE ARTZ, INC. (Development Stage Company) NOTES TO FINANCIAL STATEMENTS June 30, 2006 ==============================================================================  1.  ORGANIZATION  The Company was incorporated under the laws of the State of Delaware on July 15, 2002, with authorized common stock of 50,000,000 shares at $0.001 par value with the name "North American Marketing Corporation".  On March 25, 2004 the Company changed it domicile to the state of Nevada in connection with a name change to "Elite Artz, Inc."  and the addition of authorized preferred stock of 20,000,000 shares with a par value of $.001. The terms of the preferred stock have not been determined by the board of directors of the Company.  The Company was organized to engage in the business of direct marketing of fine quality original oil paintings, and framed and matted prints, by well known artists, as well as specialty collections to hospitals, corporations, colleges and private individuals.  2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Accounting Methods  The Company recognizes income and expenses based on the accrual method of accounting.  Dividend Policy  The Company has not yet adopted a policy regarding payment of dividends.  Basic and Diluted Net Income (Loss) Per Share  Basic net income (loss) per share amounts are computed based on the weighted average number of shares actually outstanding. Diluted net income (loss) per share amounts are computed using the weighted average number of common shares and common equivalent shares outstanding as if shares had been issued on the exercise of any common share rights unless the exercise becomes antidilutive and then only the basic per share amounts are shown in the report.  Estimates and Assumptions  Management uses estimates and assumptions in preparing financial statements in accordance with generally accepted accounting principles.  Those estimates and assumptions affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Actual results could vary from the estimates that were assumed in preparing these financial statements.  Financial Instruments  The carrying amounts of financial instruments are considered by management to be their estimated fair values due to their short term maturities.            -6-    ELITE ARTZ, INC. (Development Stage Company) NOTES TO FINANCIAL STATEMENTS - continued June 30, 2006 ==============================================================================  2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued  Income Taxes  The Company utilizes the liability method of accounting for income taxes. Under the liability method deferred tax assets and liabilities are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws that will be in effect, when the differences are expected to reverse.  An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.  On June 30, 2006, the Company had a net operating loss available for carry forward of $192,594.  The tax benefit of approximately $57,778 from the loss carry forward has been fully offset by a valuation reserve because the use of the future tax benefit is doubtful since the Company has been unable to project an estimated future operating profit.  The loss carryforward expires beginning in the years 2023 through 2026.  Concentration of Credit Risk  There are no financial instruments that potentially subject the Company to significant concentration of credit risks.  Revenue Recognition  Revenue is recognized on the sale and delivery of a product or the completion of services provided.  Advertising and Market Development  The Company expenses advertising and market development costs as incurred.  Inventory  Inventory consists of oil paintings and framed matted prints ready for sale and is stated at the lower of cost or market, which is determined on an individual basis.  Recent Accounting Pronouncements  The Company does not expect that the adoption of other recent accounting pronouncements will have a material impact on its financial statements.  3.  NOTES PAYABLE  During the three months ended June 30, 2006, a non related party made two no interest loans to the Company for a total of $8,920 payable on December 31, 2006. The notes are convertible at the option of the holder anytime after December 31, 2006, but no later than December 31, 2007, at a conversion price equal to the bid price of the Companys common stock, or in the event there is no bid price, then the notes shall be converted into 90,000 shares of the Companys common stock.  The holder must give notice of conversion during the conversion period, absent such notice, the conversion rights expire at the end of the conversion period on December 31, 2007.       -7-    ELITE ARTZ, INC. (Development Stage Company) NOTES TO FINANCIAL STATEMENTS - continued June 30, 2006 ==============================================================================  4.  CAPITAL STOCK  Since inception, the Company completed private placement offerings of 3,038,400 common shares for $284,700, and during the year ended December 31, 2005, completed the sale of 21,000 shares for $10,500.  5.  SIGNIFICANT RELATED PARTY TRANSACTIONS  An officer-director has acquired 66% of the outstanding common stock of the Company.    -8-     ITEM 2.   MANAGEMENT=S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION PLAN OF OPERATION  In this report, references to "Elite Artz" "we," "us," and "our" refer to Elite Artz, Inc.  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS  The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand future prospects and make informed investment decisions.  This report contains these types of statements.  Words such as "may," "will," "expect," "believe," "anticipate," "estimate," "project," or "continue" or comparable terminology used in connection with any discussion of future operating results or financial performance identify forward-looking statements.  You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this report.  All forward-looking statements reflect our present expectation of future events and are subject to a number of important factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.  General  We are a development stage company founded in July of 2002. Although we have conducted operations since then, we have had only limited revenues and have operated at a loss. Our activities to date consist of our formation and business plan development, the acquisition and sale of our artwork inventory and various placements of our common stock.  Results of Operations Three and Six months Ended June 30, 2006/2005  The following is a summary comparison our operations for the three and six month periods ended June 30, 2006 and 2005.  Three Months Ended             Six Months Ended June 30                      June 30 2006        2005             2006        2005  Sales                 $   33,000     $       -   $   38,000   $   11,700 Cost of Sales              9,121             -       12,121        7,150 Gross Profit              23,879             -       25,879        4,550 Expenses                  26,529         5,264       53,720       10,776 Net Operating Loss        (2,650)       (5,264)     (27,841)      (6,226) Other Expenses                 -             -            -      (15,500) Net Loss                  (2,650)       (5,264)     (27,841)     (21,726)   We have experienced losses since inception.  We suffered a net loss of $2,650 during our quarter ended June 30, 2006, which brings our losses since inception to $285,094.  Sales of our artwork inventory for our second quarter of 2006 were $33,000, up $5,000 from our first quarter, compared to -0- in our 2005 second quarter.  Costs of our 2006 first quarter sales were $9,121 compared to -0- in the prior year=s second quarter resulting in a gross profit of $23,879. When comparing our six month periods between the two years: our sales were $38,000 this year compared to $11,700 last year; cost of sales was $12,121, during our 2006 first six months compared to $7,150 in our 2005 first six month period; and, our gross profit was $25,879 or 68% in the first half of 2006 compared to   -9-    $4,550 or 38% in the first half of 2005.  Our overall sales since inception are $248,029, with a gross profit of $10,023.  We had $26,529 in expenses for our quarter ended June 30, 2006, compared to $5,264 in the second quarter of 2005. Our first quarter expenses for this year included $3,500 in sales and marketing expenses, depreciation of $94 and administrative expenses of $22,935. Comparatively, we spent about one third less on sales and marketing last year or $2,388, had no depreciation expenses and experienced much lower administrative costs of $2,876. Generally, the higher expenses in the three months ended June 30, 2006, were a result of management=s efforts to both increase sales and analyze our market potential. We also began renting office space in Salt Lake City, Utah, for both sales and administrative work and to store our artwork inventory.  Rent is month to month at a cost of $2,500. In the first six months of 2006, our expenses are consistent with our first quarter of 2006, at $53,720.  They consist of $5,963 in sales and marketing expenses, depreciation of $188 and general and administrative expenses of $47,569.  In the first six months of last year we spent only $10,766, with about 70% of that spent on general and administrative expenses.  Our net operating loss for the quarter ended June 30, 2006, was $2,650, compared to a loss of $5,264 for the same quarter in 2005; the higher second quarter losses in 2005 reflect the lack of sales revenue in our second quarter of that year although it was mitigated by our lower general and administrative expenses. During the six months ended June 30, 2006, we had a net operating loss of $27,841 compared to a net operating loss of $6,226 in that same six month period in 2005. Our net loss in the second quarter of 2005, however, increased to $21,726 due to the realization of a $15,500 loss on available-for-sale securities recorded in that quarter; there was no such loss recorded this year.  Liquidity and Capital Resources  We have assets of $12,030 consisting of $6,441 in cash, $4,740 in original artwork inventory and fixed assets of $849 in office equipment, net of depreciation.  We have $11,924 in liabilities consisting of accounts payable and two notes to a non-related party totaling $8,920. The notes are to the same individual, have an imputed interest of 6% and are as follows:  .  The first is for $2,537 and is due and payable on December 31, 2006. The holder has the option to convert this note into common stock at a conversion price equal to the Abid@ price of our common stock on the conversion date, or, if there is no bid price, into 25,000 shares of common stock.  The holder can convert any time after December 31, 2006, but not later than December 31, 2007, by giving notice to Elite.  .   The second note is for $6,383 and is due and payable on December 31, 2006.  It has the same conversion rights as above and is convertible into 65,000 shares of our common stock.  During 2006 we have funded our operations mostly through the sale of our art inventory and additional financing from a small $140 capital contribution and two loans provided under the convertible notes discussed above.  Last year we funded our operations through cash flows from operations with some additional funding through sales of our common stock.  In July 2005, our Form SB-2 Registration Statement under the Securities Act of 1933 was declared effective for the sale of up to 200,000 shares of our common stock by the Company and the resale by certain selling shareholders of 745,900 shares. Our offering closed on October 31, 2005, with only 21,000 shares sold for $10,500 in proceeds. In addition, we sold our available for sale securities which consisted of 50,000 shares of iMedia International, Inc. that we received as   -10-    payment for $171,525 worth of inventory in June of 2004. We realized a loss of $15,500 on those securities in June of 2005.  Trends and Uncertainties  Our prospects must be considered in light of the risks, difficulties and expenses frequently encountered by companies in their early stage of development, particularly companies in rapidly changing markets such as ours without significant barriers to entrance. To address these risks, we must, among other things, maintain an awareness of current trends in art appreciation as it relates to interior design and consumer demand for both public and private use; implement and successfully execute our business and marketing strategy; update and add to our existing inventory in response to evolving customer demands; provide quality customer service; respond to competitive developments; find and solicit new artists or unknown artists where we can purchase quality art at reasonable prices and attract, retain and motivate qualified personnel. There can be no assurance we will be successful in addressing such risks, and the failure to do so would seriously harm our business, financial condition and results of operations. Our current and future expense levels are based on our planned operations and estimates of future revenues.  We have not been able to accurately forecast revenues nor have we yet been able to capture any substantial portion of our target market. Accordingly, we believe that period-to-period comparisons of our operating results are not very meaningful and should not be relied upon as an indication of future performance.  Some of the following conditions could have a material impact on our short or long-term liquidity:  .  our failure to successfully complete our offering (closed in October of 2005) which leaves us unable to purchase any significant amount of new inventory;  .  general risks associated with buying and selling original artwork which is very unpredictable and often a matter of personal taste;  .  the overall inexperience of new management in the purchase and sale of artwork;  .  any failure to obtain additional working capital when needed;  .  loss of key personnel and dependence on one individual to generate business;  .  lack of market acceptance of our services;  .  inability to compete with art galleries with name experience and name recognition in our geographical location;  .  an inability to forecast trends in original art work or provide our clients with what they are looking for;  .  the ability to attract and retain qualified and effective personnel, and  .  management of our growth in an effective manner.     Plan of Operation over the Next 12 Months - Need for Additional Financing  We have only $6,441 in cash to satisfy our cash requirements over the next 12   -11-    months and only $4,740 in inventory. We no longer have our available- for-sale securities which provided us with $20,000 in cash during 2005 nor was Management successful in selling our offering, raising only $10,500 before it closed on October 31, 2005. Management determined that we needed a minimum of $3,500 per month to fund minimal day to day operations and we exceeded that estimate in both our first and second quarters of 2006. We have sufficient cash to fund operations for only 2.5 months provided we are successful in selling our remaining inventory.  This does not include the purchase of additional inventory to expand or replace inventory we have sold, or funds needed to continue with our business plan.  During the past six months, we have expended extra capital on analyzing our existing market and not replaced inventory as we have sold it.  We also increased our liabilities by obtaining loans from a non related party.  Although most of our business development is being handled by our sole officer/director who does not take any compensation, we will need additional funds to conduct operations over the next year both to help fund our existing operations and to continue to develop our business. This includes the purchase and marketing of artwork inventory.  It also includes other additional expenses such as a rent expense of $2,500 per month, as well as expenses associated with our reporting obligations that commenced upon the effective date of our registration statement, and involves considerable time, energy and professional fees, including legal and accounting costs.  Management will likely be forced to look to other ways to fund our operations. We could attempt to receive additional loans from either related parties such as shareholders or directors, or we could receive additional loans from unrelated third parties. However, there are no written agreements with any party regarding loans or advances. If these parties do provide loans or advances, we may repay them, or we may convert them into common stock. We do not, however, have any commitments or specific understandings from any party or from any individual, in writing or otherwise, regarding any loans or advances or the amounts.  Management also anticipates that additional capital may also be provided by private placements of our common stock.  We would issue such stock pursuant to exemptions provided by federal and state securities laws.  The purchasers and manner of issuance would be determined according to our financial needs and the available exemptions. We do not intend to do a private placement of our common stock at this time nor do we have any commitments from anyone for financing of any type.  Off-balance Sheet Arrangements  None.  ITEM 3.  CONTROLS AND PROCEDURES  (a) Evaluation of disclosure controls and procedures. Based on the evaluation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) required by Securities Exchange Act Rules 13a-15(b) or 15d-15(b), our Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, our disclosure controls and procedures were effective. (b) Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   -12-     PART IIB OTHER INFORMATION  ITEM 1.  LEGAL PROCEEDINGS  None.  ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS  We have had no sales of unregistered securities in the current quarter.  ITEM 3.  DEFAULTS UPON SENIOR SECURITIES  None.  ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  None.  ITEM 5.  OTHER INFORMATION  During our second quarter, on May 26, 2006, we filed our Form 8A for Registration of Certain Classes of Securities Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended.   ITEM 6.  EXHIBITS  2.1      Plan of Merger * 3.1.1    Articles of Incorporation Elite Artz * 3.1.2    Articles of Merger * 3.2      By-laws * 10.1     Convertible Note - $2,537 10.2     Convertible Note - $6,383 31.1     Certification of Principal Executive Officer as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2     Certification of Principal Financial Officer pursuant to Section 302 32.1     Certification of Principal Executive and Financial Officer Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  * filed as part of our initial registration on Form SB-2 with the Securities and Exchange Commission on December 23, 2004    -13-     SIGNATURES  In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  ELITE ARTZ, INC. (Registrant)    Dated: August 8, 2006             By: /s/ David Oman _______________________________________ David Oman President/Chief Executive and Financial Officer/Chief Accounting Officer/Director     -14-