UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)


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


For the
quarterly period ended September 30, 2009





 ̈
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
  ACT


For the
transition period from _________________ to _________________





Commission
file number 333-149184





NanoTech
      Entertainment, Inc.(Exact
      name of registrant as specified in its
charter)





Nevada
              20-1379559(State
      or jurisdiction of incorporation or
                organization)
              (I.R.S.
      Employer Identification No.)




3887
      Pacific StreetLas Vegas, Nevada 89121(Address
      of principal executive offices)702 518 7410(Issuer's
      telephone number)(Former
      name, former address and former fiscal year, if changed since last
      report)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or 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. x Yes
 ̈
No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes  ̈No  ̈




Indicate
by a 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.




Large
      accelerated filer  ̈
              Accelerated filer ̈Non-accelerated
      filer  ̈
              Smaller reporting companyx




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




As of the
date of this filing, the registrant had 15,910,000 shares of common stock, $.001
par value, issued and outstanding.









TABLE OF
CONTENTS




PART
      I — FINANCIAL INFORMATION
                3ITEM
      1. FINANCIAL STATEMENTS
                3ITEM
      2. MANAGEMENT’S DISCUSSON AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                18ITEM
      3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
                21ITEM
      4T. CONTROLS AND PROCEDURES
                21PART
      II — OTHER INFORMATION
                22ITEM
      1. LEGAL PROCEEDINGS
                22ITEM
      1A. RISK FACTORS
                22ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                22ITEMS
      3. DEFAULTS UPON SENIOR SECURITIES
                23ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                23ITEM
      5. OTHER INFORMATION
                23ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K
                23SIGNATURES
                24


2




PART
I — FINANCIAL INFORMATION




ITEM
1. FINANCIAL STATEMENTS





The
accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
and the rules of the Securities and Exchange Commission ("SEC"), and should be
read in conjunction with the audited financial statements and notes thereto
contained in the Company's June 30, 2009 Form 10-K. In the opinion of
management, all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of financial position and the results of
operations for the periods presented have been reflected herein. The results of
operations for the periods presented are not necessarily indicative of the
results to be expected for the full year.




3


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Balance
Sheets





September 30,
                
                
                June 30,2009
                
                
                2009(unaudited)ASSETSCurrent
      assets:Cash
                
                $
                29,049
                
                
                $
                35,536Inventory
      (Note B)
                
                
                11,050
                
                
                
                8,800Prepaid
      expenses
                
                
                -
                
                
                
                2,500Prepaid
      royalties (Note I)
                
                
                102,500
                
                
                
                55,000Total
      current assets
                
                
                142,599
                
                
                
                101,836Property
      and equipment (Note B)
                
                
                3,945
                
                
                
                3,071Less:
      accumulated depreciation
                
                
                (1,853
                )
                
                
                (1,524
                )Net
      property and equipment
                
                
                2,092
                
                
                
                1,547Total
      assets
                
                $
                144,691
                
                
                $
                103,383LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESCurrent
      liabilities:Accounts
      payable
                
                $
                89,573
                
                
                $
                81,553Cash
      drawn in excess of bank balance
                
                
                12,476
                
                
                
                5,174Common
      stock payable
                
                
                6,000
                
                
                
                -Accrued
      liabilities – related parties (Note C)
                
                
                1,145,762
                
                
                
                981,906Royalties
      payable (Note I)
                
                
                78,646
                
                
                
                31,771Accrued
      interest, convertible debentures (Note F)
                
                
                911
                
                
                
                458Accrued
      interest, notes payable (Note D)
                
                
                23,919
                
                
                
                17,586Accrued
      interest, notes payable – related party (Note C)
                
                
                12,311
                
                
                
                9,223Convertible
      debentures, net (Note F)
                
                
                17,841
                
                
                
                15,778Notes
      payable – current (Note D)
                
                
                30,000
                
                
                
                30,000Notes
      payable – current, related party (Note C)
                
                
                80,500
                
                
                
                80,500Total
      current liabilities
                
                
                1,497,939
                
                
                
                1,253,949Long-Term
      LiabilitiesNotes
      payable – noncurrent (Note D)
                
                
                250,000
                
                
                
                250,000Total
      liabilities
                
                
                1,747,939
                
                
                
                1,503,949STOCKHOLDERS’
      DEFICIT (Note E)Common
      stock, $.001 par value, 75,000,000 shares authorized, 15,346,000 and
      14,437,000 shares issued and outstanding as of September 30, 2009
      and  June 30, 2009, respectively
                
                
                15,346
                
                
                
                14,437Additional
      paid-in capital
                
                
                450,493
                
                
                
                360,502Services
      prepaid with common stock
                
                
                (10,417
                )
                
                
                -Deficit
      accumulated during the development stage
                
                
                (2,058,670
                )
                
                
                (1,775,505
                )Total
      stockholders’ deficit
                
                
                (1,603,248
                )
                
                
                (1,400,566
                )Total
      liabilities and stockholders’ deficit
                
                $
                144,691
                
                
                $
                103,383





The
accompanying notes are an integral part of these financial
statements


4


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Statements
of Operations


(unaudited)





November 13,Three Months Ended
                
                
                2007 (Inception) toSeptember 30,
                
                
                September 30,2009
                
                
                2008
                
                
                2009Revenues:Sales,
      net
                
                $
                6,791
                
                
                $
                5,530
                
                
                $
                62,642Less:
      costs of goods sold
                
                
                (973
                )
                
                
                (60
                )
                
                
                (11,303
                )Gross
      profit
                
                
                5,818
                
                
                
                5,470
                
                
                
                51,339Operating
      Expenses:Selling,
      general and administrative
                
                
                275,631
                
                
                
                222,385
                
                
                
                1,869,651Other
      Income (Expenses)Interest
      expense
                
                
                (13,352
                )
                
                
                (10,016
                )
                
                
                (225,746
                )Net
      loss before income taxes
                
                
                (283,165
                )
                
                
                (226,931
                )
                
                
                (2,044,058
                )Provision
      for income taxes
                
                
                -
                
                
                
                -
                
                
                
                -Net
      loss before discontinued operations
                
                
                (283,165
                )
                
                
                (226,931
                )
                
                
                (2,044,058
                )Discontinued
      operations:Loss
      from discontinued operations, net
                
                
                -
                
                
                
                -
                
                
                
                (14,612
                )Net
      loss available to common stockholders
                
                $
                (283,165
                )
                
                $
                (226,931
                )
                
                $
                (2,058,670
                )Continuing
      operationsBasic
                
                $
                (.02
                )
                
                $
                (.04
                )Diluted
                
                $
                (.02
                )
                
                $
                (.04
                )Discontinued
      operationsBasic
                
                $
                (.00
                )
                
                $
                (.00
                )Diluted
                
                $
                (.00
                )
                
                $
                (.00
                )Total
      net loss per shareBasic
                
                $
                (.02
                )
                
                $
                (.04
                )Diluted
                
                $
                (.02
                )
                
                $
                (.04
                )Weighted
      average shares outstandingBasic
                
                
                14,839,185
                
                
                
                6,480,000Diluted
                
                
                15,141,185
                
                
                
                6,480,000





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


5


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Statements
of Cash Flows


(unaudited)


November 13,Three Months Ended
                
                
                2007 (Inception) toSeptember 30,
                
                
                September 30,2009
                
                
                2008
                
                
                2009Cash
      flows from operating activities:Net
      loss
                
                $
                (283,165
                )
                
                $
                (226,931
                )
                
                $
                (2,058,670
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      expense
                
                
                329
                
                
                
                256
                
                
                
                2,556Common
      stock issued for finder fees
                
                
                -
                
                
                
                -
                
                
                
                162,000Common
      stock issued for services
                
                
                8,400
                
                
                
                -
                
                
                
                28,400Amortization
      of debt discount
                
                
                2,063
                
                
                
                -
                
                
                
                33,441Amortization
      of services prepaid with common stock
                
                
                2,083
                
                
                
                -
                
                
                
                2,083Interest
      on debt converted to common stock
                
                
                -
                
                
                
                -
                
                
                
                124,500Loss
      on disposal of fixed assets
                
                
                -
                
                
                
                -
                
                
                
                10,373Changes
      in operating assets and liabilities:Decrease
      in accounts receivable
                
                
                -
                
                
                
                -
                
                
                
                572Increase
      in inventory
                
                
                (2,250
                )
                
                
                (3,445
                )
                
                
                (11,050
                )Decrease
      in prepaid expenses
                
                
                2,500
                
                
                
                -Decrease
      in prepaid expenses – related party
                
                
                -
                
                
                
                44,394
                
                
                
                -Increase
      in prepaid royalties
                
                
                (47,500
                )
                
                
                (46,250
                )
                
                
                (102,500
                )Increase
      in accounts payable
                
                
                8,020
                
                
                
                -
                
                
                
                51,294Increase
      in accrued liabilities – officers
                
                
                163,856
                
                
                
                125,000
                
                
                
                1,072,871Increase
      in accrued interest,convertible
      debentures
                
                
                453
                
                
                
                -
                
                
                
                760Increase
      in accrued interest, notes payable
                
                
                6,333
                
                
                
                -
                
                
                
                23,919Increase
      in accrued interest, notes payable – related party
                
                
                3,088
                
                
                
                -
                
                
                
                10,454Increase
      in royalties payable
                
                
                46,875
                
                
                
                51,224
                
                
                
                78,646Net
      cash used in operating activities
                
                
                (88,915
                )
                
                
                (55,752
                )
                
                
                (570,351
                )Cash
      flows from investing activities:Net
      cash received in reverse recapitalization
                
                
                -
                
                
                
                -
                
                
                
                31,769Purchase
      of property and equipment
                
                
                (874
                )
                
                
                -
                
                
                
                (3,945
                )Cash
      flows used for investing activities
                
                
                (874
                )
                
                
                -
                
                
                
                27,824Cash
      flows from financing activitiesIncrease
      in cash drawn in excess of bank balance
                
                
                7,302
                
                
                
                -
                
                
                
                12,476Proceeds
      from notes payable – related party
                
                
                -
                
                
                
                25,000
                
                
                
                77,500Repayment
      of notes payable – related party
                
                
                -
                
                
                
                -
                
                
                
                (2,700
                )Proceeds
      from notes payable
                
                
                -
                
                
                
                25,000
                
                
                
                280,000Proceeds
      from issuance of common stock
                
                
                76,000
                
                
                
                -
                
                
                
                183,000Proceeds
      from issuance of convertible debentures
                
                
                -
                
                
                
                -
                
                
                
                21,300Net
      cash provided by financing activities
                
                
                83,302
                
                
                
                50,000
                
                
                
                571,576Increase
      (decrease) in cash
                
                
                (6,487
                )
                
                
                (5,752
                )
                
                
                29,049Cash,
      beginning of period
                
                
                35,536
                
                
                
                41,801
                
                
                
                -Cash,
      end of period
                
                $
                29,049
                
                
                $
                36,049
                
                
                $
                29,049


(continued)


6


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Statements
of Cash Flows (cont’d)


(unaudited)





November 13,Three Months Ended
                
                
                2007 (Inception) toSeptember 30,
                
                
                September 30,2009
                
                
                2008
                
                
                2009Non-cash
      investing and financing activitiesIssuance
      of common stock upon conversion of debentures
                
                $
                -
                
                
                $
                -
                
                
                $
                40,000Issuance
      of common stock upon conversion of loan
                
                $
                -
                
                
                $
                -
                
                
                $
                500Issuance
      of common stock in settlement of vendor debt
                
                $
                -
                
                
                $
                -
                
                
                $
                1,000Conversion
      of notes payable to convertible debentures
                
                $
                -
                
                
                $
                -
                
                
                $
                21,400Supplemental
      cash flow information:Interest
      paid in cash
                
                $
                1,416
                
                
                $
                8,503
                
                
                $
                31,473Income
      taxes paid in cash
                
                $
                -
                
                
                $
                -
                
                
                $
                -





The
accompanying notes are an integral part of these financial
statements


7


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





A.
            ORGANIZATION





NanoTech
Entertainment, Inc. (“NEI”) was incorporated under the laws of the state of
Nevada on November 13, 2007.  On April 30, 2009, NEI entered into a
Sale and Acquisition Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”),
a Nevada corporation, wherein AGI acquired 100% of NEI’s issued and outstanding
common stock through the issuance of 6,480,000 common shares.  As a
result of the Agreement, AGI changed its name to NanoTech Entertainment, Inc.
(“NTI”) (“the Company”) to better reflect the direction of the newly formed
entity.  For accounting purposes, the share exchange transaction was
treated as a capital transaction where AGI, as the shell corporation and legal
acquirer, issued stock for the net monetary assets of NEI, the accounting
acquirer, accompanied by a recapitalization. The accounting is similar in form
to a reverse acquisition, except that goodwill or other intangibles are not
recorded.  All references to NTI’s common stock have been restated to
reflect the equivalent numbers of AGI’s common shares (Note E).





The
accompanying financial statements include those of NEI for the period of
inception on November 13, 2007 through September 30, 2009.  The
financial statements of AGI are consolidated from the date of the Agreement
through June 30, 2009, subsequent to which the NEI Nevada corporation was
dissolved and the AGI Nevada corporation amended its Articles of Incorporation
to effect its name change to NanoTech Entertainment, Inc. (“NTI”), thereby
discontinuing all AGI operations and assuming all of the former NEI assets,
liabilities, and operations.  Prior to June 30, 2009, all significant
intercompany balances and transactions between NEI and AGI were eliminated in
consolidation.  Subsequent to June 30, 2009, the financial statements
consist solely of NTI.





The
Company operates as a virtual manufacturer, developing technology and games, and
then licensing such products to third parties for manufacturing and ultimate
distribution.





DEVELOPMENT
STAGE COMPANY





The
Company is considered to be in the development stage as defined in Statement of
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) Topic No. 915.  The Company’s efforts have been devoted
primarily to raising capital, borrowing funds and attempting to implement its
planned, principal activities.





B.
            SIGNIFICANT
      ACCOUNTING POLICIES





USE
OF ESTIMATES




The
preparation of the Company’s financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amount of revenues and expenses during
the reporting period.  Actual results could differ from those
estimates.  The Company’s periodic filings with the Securities and
Exchange Commission include, where applicable, disclosures of estimates,
assumptions, uncertainties and markets that could affect the financial
statements and future operations of the Company.


8


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





B.
            SIGNIFICANT
      ACCOUNTING POLICIES (CONT’D)





CASH
AND CASH EQUIVALENTS





Cash and
cash equivalents include cash in banks, money market funds, and certificates of
term deposits with maturities of less than three months from inception, which
are readily convertible to known amounts of cash and which, in the opinion of
management, are subject to an insignificant risk of loss in
value.  The Company’s cash balances totaled $29,049 and $35,536 as of
September 30, 2009 and June 30, 2009, respectively.





INVENTORY





The
Company’s inventory is stated at lower of cost or market using the FIFO costing
method.  Inventory on hand totaled $11,050 and $8,800 at September 30,
2009 and June 30, 2009, respectively, and consisted entirely of finished goods
gaming equipment available and ready for sale.





PROPERTY
AND EQUIPMENT





The
Company’s property and equipment is comprised of office and computer equipment,
which are stated at cost.  Depreciation is calculated over the
estimated useful lives ranging from 3 to 7 years using the straight – line
method.  The Company is in the development stage and has only acquired
minimal operating assets.  At September 30, 2009 and June 30, 2009,
the Company had property and equipment of $3,945 and $3,071, respectively, and
accumulated depreciation of $1,853 and $1,524,
respectively.  Depreciation expense totaled $329 and $256 for the
three months ended September 30, 2009 and 2008, respectively.





REVENUE
RECOGNITION





Revenues
for gaming equipment sales are recognized when risks associated with ownership
have passed to unaffiliated customers, and when all criteria of ASB Topic No.
605 (SAB Topic 13) have been met.  Typically, this occurs when
finished products are shipped.





NET
INCOME (LOSS) PER SHARE OF COMMON STOCK




ASC Topic
No. 260 requires presentation of basic and diluted EPS on the face of the
statement of operations for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.  In the accompanying financial statements, basic loss per
share is computed by dividing net loss by the weighted average number of shares
of common stock outstanding during the period, while diluted loss per share
takes into consideration the convertible bonds (Note F) and their related
interest and debt discount.  The potential conversion of the bonds
would have no effect on loss per share due to the Company’s continuing losses,
so basic and diluted loss per share are the same.  The Company has no
other potentially dilutive securities, such as options or warrants, currently
issued and outstanding.


9


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





B.
            SIGNIFICANT
      ACCOUNTING POLICIES (CONT’D)





NET
INCOME (LOSS) PER SHARE OF COMMON STOCK (CONT’D)





Three
      Months EndedSeptember
      30,2009
                  
                  
                  2008BASICNet
      loss
                  
                  $
                  (283,165
                  )
                  
                  $
                  (226,931
                  )Weighted
      average common shares outstanding
                  
                  
                  14,839,185
                  
                  
                  
                  6,480,000Net
      loss per share (Basic)
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.04
                  )DILUTEDNet
      loss (Basic)
                  
                  $
                  (283,165
                  )
                  
                  $
                  (226,931
                  )Convertible
      bond interest expense
                  
                  
                  2,516
                  
                  
                  
                  -Unamortized
      convertible bond issuance costs
                  
                  
                  (12,159
                  )
                  
                  
                  -Net
      loss (Diluted)
                  
                  $
                  (292,808
                  )
                  
                  $
                  (226,931
                  )Weighted
      average common shares outstanding (Basic)
                  
                  
                  14,839,185
                  
                  
                  
                  6,480,000Convertible
      preferred shares
                  
                  
                  -
                  
                  
                  
                  -Convertible
      bonds and notes
                  
                  
                  302,000
                  
                  
                  
                  -Options
                  
                  
                  -
                  
                  
                  
                  -Warrants
                  
                  
                  -
                  
                  
                  
                  -Weighted
      average common shares outstanding (Diluted)
                  
                  
                  15,141,185
                  
                  
                  
                  6,480,000Net
      loss per share (Diluted)
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.04
                  )





RECENTLY-ISSUED
ACCOUNTING PRONOUNCEMENTS





In June
2009 the FASB established the Accounting Standards Codification ("Codification"
or "ASC") as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial
statements in accordance with generally accepted accounting principles in the
United States ("GAAP"). Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") issued under authority of federal securities laws
are also sources of GAAP for SEC registrants. Existing GAAP was not intended to
be changed as a result of the Codification, and accordingly the change did not
impact our financial statements. The ASC does change the way the guidance is
organized and presented.





Statement
of Financial Accounting Standards ("SFAS") SFAS No. 165 (ASC Topic 855),
"Subsequent Events," SFAS No. 166 (ASC Topic 810), "Accounting for Transfers of
Financial Assets-an Amendment of FASB Statement No. 140," SFAS No. 167 (ASC
Topic 810), "Amendments to FASB Interpretation No. 46(R)," and SFAS No. 168 (ASC
Topic 105), "The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles-a replacement of FASB Statement No.
162," were recently issued. SFAS No. 165, 166, 167, and 168 have no current
applicability to the Company or their effect on the financial statements would
not have been significant.


10


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





B.
            SIGNIFICANT
      ACCOUNTING POLICIES (CONT’D)





RECENTLY-ISSUED
ACCOUNTING PRONOUNCEMENTS (CONT’D)





Accounting
Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends Fair
Value Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple-Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985),
Certain Revenue Arrangements that include Software Elements, and various other
ASU's No. 2009-2 through ASU No. 2010-18 which contain technical corrections to
existing guidance or affect guidance to specialized industries or entities were
recently issued. These updates have no current applicability to the Company or
their effect on the financial statements would not have been
significant.





C.
            RELATED
      PARTY TRANSACTIONS





NOTES
PAYABLE





Several
of the Company’s current and former officers have provided funding in the form
of notes payable, totaling $80,500 at both September 30, 2009 and June 30,
2009.  The notes carry interest rates ranging from 0% to 20%,
resulting in interest expense of $3,088 and $0 for the quarters ended September
30, 2009 and 2008, respectively, and accrued interest of $12,311 and $9,223 as
of September 30, 2009 and June 30, 2009, respectively.  The notes are
due on demand and therefore classified as current liabilities. Interest has not
been imputed due to its nominal impact on the financial statements.





ACCRUED
LIABILITIES





The
Company has employment agreements with two of its officers whereby the officers
are entitled to the annual salaries payable as follows:





SalaryfortheYearEndedJune30,2008
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2011
                        
                        
                        Total$
                        175,000
                        
                        
                        $
                        400,000
                        
                        
                        $
                        500,000
                        
                        
                        $
                        275,000
                        
                        
                        $
                        1,350,00075,000
                        
                        
                        
                        162,500
                        
                        
                        
                        192,500
                        
                        
                        
                        105,000
                        
                        
                        
                        535,000$
                        250,000
                        
                        
                        $
                        562,500
                        
                        
                        $
                        692,500
                        
                        
                        $
                        380,000
                        
                        
                        $
                        1,885,000





Accrued
salaries totaled $985,625 and $812,500 at September 30, 2009 and June 30, 2009,
respectively.  The Company also reimburses its officers for expenses
they incur in the Company’s behalf, including rent for the use of property for
business purposes.  Salary expense totaled $173,125 and $125,000 for
the three months ended September 30, 2009 and 2008, and rent expense totaled
$49,500 for each of the periods then ended.  Salaries, rent, and other
reimbursable expenses owed to the officers totaled $1,145,762 and $981,906 at
September 30, 2009 and June 30, 2009, respectively, and will be repaid as cash
flows allow.


11





NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





D.
            NOTES
      PAYABLE





The
Company has originated the following notes payable with unaffiliated entities
and individuals:





Principal Balance
                  
                  
                  Accrued Interest9/30/2009
                  
                  
                  6/30/2009
                  
                  
                  9/30/2009
                  
                  
                  6/30/2009Note
      1, 10% interest, due April 30, 2011
                  
                  $
                  250,000
                  
                  
                  $
                  250,000
                  
                  
                  $
                  22,918
                  
                  
                  $
                  16,668Note
      2, 20% interest, due on demand
                  
                  
                  25,000
                  
                  
                  
                  25,000
                  
                  
                  
                  835
                  
                  
                  
                  835Note
      3, 20% interest, due on demand
                  
                  
                  5,000
                  
                  
                  
                  5000
                  
                  
                  
                  166
                  
                  
                  
                  83Totals
                  
                  
                  280,000
                  
                  
                  
                  280,000
                  
                  
                  $
                  23,919
                  
                  
                  $
                  17,586Less
      current portion (Notes 2 & 3)
                  
                  
                  (30,000
                  )
                  
                  
                  (30,000
                  )Noncurrent
      portion (Note 1)
                  
                  $
                  250,000
                  
                  
                  $
                  250,000





The notes
require monthly interest payments only, with principal and any accrued interest
payable upon maturity or demand, as indicated above.





E.
            STOCKHOLDERS’
      DEFICIT





The
Company has authorized 75,000,000 shares of common stock with a par value of
$.001, and no preferred stock.  Upon inception on November 13, 2007,
the Company had 6,480,000 shares issued and outstanding, which represents the
number of shares issued by AGI in the recapitalization retroactively reflected
to have occurred at inception.  The recapitalization also included an
effective share issuance of 4,533,000, which represents the number of AGI shares
issued and outstanding at June 30, 2008 (the most recent fiscal year prior to
the recapitalization).  Additional share issuances occurring through
September 30, 2009 to arrive at the total shares issued and outstanding of
15,346,000 are as follows:





During
the period of January through June 2009, the following shares were issued for
cash in accordance with private offerings (of which 1,670,000 shares were issued
and $87,000 cash received subsequent to the reverse
recapitalization):





Number
                  
                  
                  Stock
                  
                  
                  CashDate
                  
                  of Shares
                  
                  
                  Price
                  
                  
                  Received1/16/2009
                  
                  
                  100,000
                  
                  
                  $
                  0.10
                  
                  
                  $
                  10,0002/19/2009
                  
                  
                  96,000
                  
                  
                  
                  0.05
                  
                  
                  
                  4,8005/15/2009
                  
                  
                  100,000
                  
                  
                  
                  0.05
                  
                  
                  
                  5,0005/29/2009
                  
                  
                  20,000
                  
                  
                  
                  0.10
                  
                  
                  
                  2,0006/14/2009
                  
                  
                  1,500,000
                  
                  
                  
                  0.05
                  
                  
                  
                  75,0006/23/2009
                  
                  
                  50,000
                  
                  
                  
                  0.10
                  
                  
                  
                  5,000Totals
                  
                  
                  1,866,000
                  
                  
                  
                  
                  
                  
                  $
                  101,800





During
the period of July through September 2009, the following shares were issued for
cash in accordance with private offerings to unrelated
individuals:


12




NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





E.
            STOCKHOLDERS’
      DEFICIT (CONT’D)




Number
                    
                    
                    Stock
                    
                    
                    CashDate
                    
                    of Shares
                    
                    
                    Price
                    
                    
                    Received7/1/2009
                    
                    
                    200,000
                    
                    
                    $
                    0.10
                    
                    
                    $
                    20,0009/11/2009
                    
                    
                    560,000
                    
                    
                    
                    0.10
                    
                    
                    
                    56,000Totals
                    
                    
                    760,000
                    
                    
                    
                    
                    
                    
                    $
                    76,000





On
January 30, 2009, the Company issued 10,000 shares at $.10 per share to a vendor
to settle a $1,000 debt.





During
March through May 2009, several convertible debenture holders converted their
debentures resulting in the issuance of 400,000 shares of common stock at $.10
for total value of $40,000 (Note F).





On April
30, 2009 and in connection with the reverse recapitalization between NTI and
AGI, the Company issued 648,000 shares to an unaffiliated entity as a finders’
fee.  The shares were valued at $.25 per share, resulting in total
expense of $162,000. As a term of the recapitalization, the Company also issued
500,000 shares at $.001 to an affiliated entity in settlement of $500 in
debt.  This issuance resulted in recognition of $124,500 in additional
interest expense.





On August
1, 2009, the Company entered into an agreement with an unrelated entity that was
to render financial consulting services for a 12-month period.  As
compensation, the Company issued 125,000 shares of common stock upon the
agreement’s execution.  The shares were valued at $.10 per share for
total compensation of $12,500 to be amortized ratably over the term of the
agreement.  During the quarter ended September 30, 2009, the Company
amortized $2,083 to consulting expense, resulting in a $10,417 prepaid balance
that has been reported in the stockholders’ equity section of the balance
sheet.  The entity is also entitled to $25,000 in finders’ fees for
each $1,000,000 of funding raised in the Company’s behalf.  No funds
have been raised as of the date of this report.





On June
19, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 26-week period.  The
consultant was to receive cash compensation of $36,400 over the term of the
contract, and 104,000 shares of common stock upon the contract’s completion on
or about December 18, 2009.  The shares were valued at $.10 per share,
for total stock compensation of $10,400 to be expensed ratably over the
contract’s term.  The Company recorded 15 weeks, or $27,000, of
consulting expense during the three months ended September 30, 2009, of which
$21,000 was paid in cash and $6,000 of stock compensation was accrued and
reported as the current liability, common stock payable.





On August
5, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 6-week period.  The consultant
was to receive cash compensation of $6,000 over the term of the contract, and
24,000 shares of common stock upon the contract’s completion.  The
shares were valued at $.10 per share, for total stock compensation of $2,400 to
be expensed ratably over the contract’s term.


13




NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





E.
            STOCKHOLDERS’
      DEFICIT (CONT’D)





The
Company recorded 6 weeks, or $8,400, of consulting expense during the three
months ended September 30, 2009, of which $6,000 was paid in
cash.  The 24,000 shares of common stock were issued upon the
contract’s completion on September 16, 2009.





F.
            CONVERTIBLE
      DEBENTURES





During
the period of March through May 2009, the Company issued convertible debentures
bearing interest at 6% with a term of two years.  The debenture
principal and accrued interest may be converted into shares of the Company’s
common stock in the first year at a conversion price of $0.10 or in the second
year at a price which is 80% of the three lowest closing bid prices during the
ten days prior to conversion.





During
the year ended June 30, 2009, the Company issued debentures totaling $70,200
(convertible into potentially 702,000 shares of common stock based on a $.10
conversion rate), which amount includes cash received of $48,800 (of which
$21,300 was received after the reverse recapitalization) and $21,400 in notes
payable converted to convertible debentures on March 12,
2009.   The fair market value of the stock on the convertible
debenture issuance dates ranged from $.10 to $.25, resulting in a beneficial
conversion feature of $45,800, of which $31,378 was amortized during the year
ended June 30, 2009.





The
following debentures were converted during the year ended June 30,
2009:





Conversion
                        
                        Number
                        
                        
                        ConversionDate
                        
                        of Shares
                        
                        
                        Price
                        
                        
                        Total3/13/2009
                        
                        
                        107,000
                        
                        
                        $
                        0.10
                        
                        
                        $
                        10,7003/27/2009
                        
                        
                        50,000
                        
                        
                        
                        0.10
                        
                        
                        
                        5,0003/31/2009
                        
                        
                        10,000
                        
                        
                        
                        0.10
                        
                        
                        
                        1,0004/3/2009
                        
                        
                        20,000
                        
                        
                        
                        0.10
                        
                        
                        
                        2,0005/4/2009
                        
                        
                        80,000
                        
                        
                        
                        0.10
                        
                        
                        
                        8,0005/7/2009
                        
                        
                        50,000
                        
                        
                        
                        0.10
                        
                        
                        
                        5,0005/29/2009
                        
                        
                        83,000
                        
                        
                        
                        0.10
                        
                        
                        
                        8,300Total
                        
                        
                        400,000
                        
                        
                        
                        
                        
                        
                        $
                        40,000





At
September 30, 2009 and June 30, 2009, respectively, the Company’s unconverted
debentures totaled $17,841 ($30,200 principal netted with $12,359 unamortized
debt discount) and $15,778 ($30,200 principal netted with $14,422 unamortized
debt discount), while the potential number of shares into which the debentures
could be converted was 302,000 based on a $0.10 conversion
rate.  Accrued interest on the bonds totaled $911 and $458 at
September 30, 2009 and June 30, 2009, respectively.  During the three
months ended September 30, 2009 and 2008, $2,063 and $0 of the debt discount was
amortized to interest expense.  No debentures were converted during
the quarter ending September 30, 2009.


14


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





G.
            INCOME
      TAXES





The
Company recognizes the tax effects of transactions in the year in which such
transactions enter into the determination of net income, regardless of when
reported for tax purposes. Deferred taxes are provided in the financial
statements under ASC Topic No. 740 to give effect to the resulting temporary
differences which may arise from differences in the bases of fixed assets,
depreciation methods, allowances, and start-up costs based on the income taxes
expected to be payable in future years.





Deferred
officer compensation in the amount of $985,625 has been expensed per the
financial statements but is not deducted for tax purposes in the current
year.  This results in a deferred tax asset of $344,969 that would
reduce tax payments in the future as the compensation is subsequently recognized
for tax purposes.  This deferred tax asset however is offset in its
entirety by a valuation allowance of the same amount due to doubts concerning
the Company’s ability to utilize the deferred tax asset in future
years.





Operating
loss carry forwards of $1,443,356 (including permanent differences of $370,311
attributed to AGI’s accumulated losses on the reverse recapitalization date)
generated since inception through September 30, 2009 will begin to expire in
2027.  Accordingly, deferred tax assets of approximately $505,175 were
completely offset by a valuation allowance, which increased by approximately
$99,108 and $79,426 during the quarters ended September 30, 2009 and 2008,
respectively, (including the allowance associated with deferred compensation tax
benefits).  This deferred tax asset was also offset due to a lack of
evidence that suggests that the Company would likely be able to utilize the
asset to offset tax payments in future years.





H.
            GOING
      CONCERN CONSIDERATIONS





The
Company’s financial statements have been prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. As of and during the period from
November 13, 2007 (inception) to September 30, 2009, the Company has incurred
net losses totaling $2,058,670, and has a working capital deficit of
$1,355,340.  These conditions raise substantial doubt about the
Company’s ability to continue as a going concern. The accompanying financial
statements do not include any adjustments that might result from the outcome of
this uncertainty. The Company's ability to meet its ongoing financial
requirements is dependent on management being able to obtain additional equity
and/or debt financing, the realization of which is not assured.


15


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





I.
            ROYALTIES





The
Company has entered into several licensing agreements whereby the Company
licenses certain gaming software from various developers.  The Company
is responsible for paying royalties to the developers based on product
sales.  In the event that no product is sold, the Company is also
required to pay a minimum royalty in order to maintain exclusivity (i.e., the
developer cannot license the same software to the Company's
competitors).  Certain developers also require prepayment of royalties
that are either offset by future sales, or expire at the end of a calendar year
- at which point they are expensed.  The Company had prepaid $102,500
and $55,000 in royalties at September 30, 2009 and June 30, 2009,
respectively.  No sales of the licensed products had occurred during
the period of inception on November 13, 2007 through September 30, 2009, so only
exclusivity minimums of $78,646 and $31,771 have been accrued at September 30
2009 and June 30, 2009, respectively.





J.
            SUBSEQUENT
      EVENTS





On
October 23, 2009, the Company issued 100,000 shares of common stock at $.05 per
share for $5,000 to an unrelated individual.  On that same date, the
Company received $2,500 pursuant to a non-interest bearing promissory note with
an unrelated individual.





On
December 1, 2009 upon Kenneth Liebscher’s resignation from his positions with
the Company, Ted Campbell was appointed as Chief Compliance Officer and Chief
Financial Officer.  On that same date, the Company executed an
employment agreement whereby Mr. Campbell will be compensated with a base salary
as follows:





Months 1
– 6:     $1,750 in cash per month plus common stock
equal to $3,250 based on the average trading price over the previous 30
days.





Months 7
– 24:   $2,500 in cash per month plus common stock equal to
$3,500 based on the average trading price over the previous 30
days.





Mr.
Campbell is also eligible for an incentive bonus at the end of each year in an
amount between 10% and 100% of the base salary.  The incentive bonus
will be determined by the Board of Directors and will be based on the Company’s
operating results.





On
December 1, 2009, the Company executed an agreement with a company affiliated
with the Company’s CFO (“the Affiliate”) that is to perform services including
the compilation and coordination of corporate documentation, as well as filing
services to facilitate the Company’s public listing on the OTCBB.  The
Affiliate was compensated with a non-refundable $7,500 cash retainer payment and
50,000 shares of common stock upon the agreement’s execution, and an additional
$7,500 cash payment is due upon the completion of a Form S-1 to be filed with
the SEC.  The stock was valued at $.05 per share for total
compensation of $2,500.


16


NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Three
Months Ended September 30, 2009 and 2008,


and
the Period of November 13, 2007 (Inception) to September 30, 2009





J.
            SUBSEQUENT
      EVENTS (CONT’D)





On March
16, 2010, the Company received a $10,000 loan from a stockholder pursuant to a
promissory note carrying a 10% interest rate.  The loan and $167 in
accrued interest were payable on May 16, 2010, but had not yet been repaid as of
the date of this report.





On March
30, 2010, the Company issued to an independent investor 50,000 shares of common
stock at $.10 per share for total proceeds of $5,000.





On April
1, 2010, the Company issued $5,000 in convertible debentures bearing interest at
6% with a maturity date of March 30, 2010.  The debenture principle
and accrued interest may be converted into shares of the Company’s common stock
in the first year at a conversion price of $0.10 or in the second year at a
price which is 80% of the three lowest closing bid prices during the ten days
prior to conversion.





The
Company has evaluated events from September 30, 2009, through the date whereupon
the financial statements were issued and has determined that there are no
additional items to disclose.


17




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




This
section must be read in conjunction with the unaudited financial statements
included in this report.




A.
            Management’s
      Discussion




NanoTech
Entertainment, Inc. (“NEI”) was originally organized as a Nevada corporation on
November 13, 2007.  On April 30, 2009, NEI entered into a Sale and
Acquisition Agreement (the “Agreement”) with Aldar Group, Inc. (“AGI”), a Nevada
corporation organized on July 15, 2004, wherein AGI acquired 100% of NEI’s
issued and outstanding common stock through the exchange of 6,480,000 common
shares.  As a result of the Agreement, the Company changed its name to
NanoTech Entertainment, Inc. (“NTI”) (“the Company” or “We” or “NanoTech”) to
better reflect the direction of the newly formed entity.




For
accounting purposes, the share exchange transaction was treated as a capital
transaction where AGI, as the legal acquirer and shell corporation, issued stock
for the net monetary assets of NEI, as the accounting acquirer, accompanied by a
recapitalization. The accounting is similar in form to a reverse acquisition,
except that goodwill or other intangibles are not
recorded.




The
Company now operates as a virtual manufacturer, developing technology and games,
and then licensing such products to third parties for manufacturing and ultimate
distribution.  The Company’s business model supports relatively low
overhead costs and efficiencies in operations in the new global manufacturing
economy.




Company
Overview




NanoTech
Entertainment, Inc. is a provider of gaming technology for the coin-op arcade,
casino gaming and consumer gaming markets. Headquartered in Las Vegas, Nevada,
we operate as a virtual manufacturer, developing technology and games, and then
licensing them to third parties for manufacturing and distribution. This
business model supports extremely low overhead and efficient operations in the
new global manufacturing economy.




With an
ever-expanding lineup of technology and products, NanoTech is redefining the
role of developers and manufacturers in the gaming market. NanoTech's team is
compromised of industry veterans of the gaming industry that have collectively
been responsible for dozens of award winning products and multi-million copy
selling video games and technology.




During
the period of July 15, 2004 (AGI’s inception) to September 30, 2009, the Company
generated revenues of $62,642 while incurring $11,303 in cost of sales,
$1,869,651 in general and administrative expenses, $225,746 in interest expense,
and $14,612 in losses from AGI’s discontinued operations. This resulted in a
cumulative net loss of $2,058,670 for the period then ended from
inception.




During
the three months ended September 30, 2009, the Company generated revenues of
$6,791 while incurring $973 in cost of sales, $275,631 in general and
administrative expenses, and $13,352 in interest expense. This resulted in a net
loss for three months ended September 30, 2009 of $283,165. During the three
months ended September 30, 2008, the Company generated revenues of $5,530 while
incurring $60 in cost of sales, $222,385 in general and administrative expenses,
and $10,016 in interest expense. This resulted in a net loss for the quarter
ended September 30, 2008 of $226,931. The net loss for both periods is
attributable primarily to the continuing costs of start-up operations and
product development.


18




Liquidity and Capital
Resources




As of
September 30, 2009, the Company had $(1,355,340) in working capital, which is
current assets minus current liabilities.  This negative working
capital is attributable to monies owed for the acquisition of the Company’s
current products, monies owed to officers for accrued salaries, convertible
debentures issued by the Company, and the current portion of notes payable to
related and unrelated parties. The Company’s current assets as of September 30,
2009 consisted of $29,049 in cash, $11,050 in inventory, and $102,500 in prepaid
royalties.




NTI has
limited capital resources from which to operate.  Without the
realization of either significant cash flow from ongoing revenue or additional
capital investment, the Company may not be able to continue without short-term
loans from its current officer and director.  However, the Company’s
independent auditors have expressed substantial doubt about the Company's
ability to continue as a going concern.




B.
            Plan
      of Operation





Market
and Industry




We have
experience and products for all aspects of the various gaming industries. 
By traversing the market from consumer to coin-op to casino, the Company may be
able to take advantage of all three growth and profitable industries and balance
out the seasonal patterns of each.





Even in
the unsteady economic climate, the gaming market continues to flourish and
expand.  In 2008, the arcade industry saw $7.2 billion in revenue and the
consumer market saw $58 billion with a growth of 19%. The following are excerpts
from other sources:





“As
people cut back on travel and going out, they are turning more to home
entertainment, providing a boost to the video game industry.” Reuters, April 2,
2009





“The
video game business continues to enjoy robust growth, making it the fastest
growing of the many consumer goods categories.” Market Watch, Feb 18,
2009





The
NanoTech team has won numerous awards in recent years including innovative
product of the year in 2005 and 2006 in the arcade industry, and innovative
product of the year in 2007 in the casino market.




Products





Below is
a list of the Company’s upcoming & current product line with detailed
descriptions. For more information on the Company’s products and services you
can view our web site at www.NanoTechEnt.com.




MultiPinTM
- There is currently only one Pinball manufacturer left in the world, Stern
Pinball.  While they supply over 10,000 machines per year to the market,
there is a huge demand for new and innovative pinball.  MultiPinTM
represents the next generation in pinball.  By replacing the mechanical
parts of a pinball machine with state of the art electronics, MultiPinTM solves
two major problems seen by operators of Pinball machines.  First, it
eliminates any mechanical failures, which are common amongst pinball
machines.  Secondly, it provides a multi-game platform that can be
constantly updated with new games without having to swap out the machine. 
Our proprietary physics engine and motion sensors allow MultiPinTM to accurately
recreate the experience of a mechanical pinball machine, while providing players
with a variety of classic and modern pinball games to choose
from.


19


Xtreme
Rally RacingTM - An Xtreme Off-Road Racing Experience with no boundaries. Xtreme
Rally Racing is an innovative new driving machine that features three modes of
game play:




Xtreme
Off-Road - Race head-to-head against other players and the computer to
checkpoints while driving anywhere on the map with no preset
course.





Timed
Rally Stages - Classic Rally Racing on real world courses. Players will be able
to race in five different countries on real world rally courses.





Xtreme
Stadium Racing - Custom stadiums designed for Xtreme racing including a figure 8
multi-lap course with huge jumps.





NanoNET
Online System - Local and Worldwide head-to-head competition in real time
against machines located around the world. Remote Operator Control of your
machines including diagnostics, accounting reports, and automatic software
updates and enhancements downloaded over the net. Link up to 4 Cabinets for
local multiplayer action.




Pinball
Wizard TM - Consumer Pinball enthusiasts have been growing with the advent of
Visual Pinball and now Future Pinball.  The official Visual Pinball forum
boasts over 155,000 members, and the free version Future Pinball has been
downloaded over 1 million times in the past six months, and over 500,000 copies
in April 2009.  We have created the only input device designed to give
these players a way to experience real pinball controls on their personal
computer.   Based on the technology developed for the MultiPinTM
product we have built a controller that lets people play pinball using
traditional controls and the ability to “shake” and “nudge” the
table.




Mot-IonTM
Adapter - The Mot-Ion adapter is a USB adapter that allows do-it-yourself
Pinball enthusiasts to build their own cabinet using real pinball controls
providing analog inputs for nudging and bumping. This kit includes everything
needed to connect a pinball cabinet to a PC (I/O Board, Digital Plunger, Wiring
Harness).




Opti-GunTM
Adapter - The Opti-Gun Adapter is a USB adapter that allows players to connect
Arcade Light Guns to any USB based system. This universal adapter provides a
complete solution to implement an arcade game including Gun Inputs, Force
Feedback Outputs, digital inputs, and built-in audio amplifiers. The adapter can
also be used with PC-based emulators such as M.A.M.E. to connect arcade light
guns on your home system.




Retr-IOTM
Adapter - The Retr-IO Adapter provides a standard JAMMA interface for USB based
systems. This universal adapter provides a complete solution to implement an
arcade game using Joysticks, Trackballs, Spinners, buttons and features, digital
outputs, and built-in audio and video amplifiers.





The board
works with any PC-based system including M.A.M.E and other emulation products.
It provides an all-in-one solution to hooking up traditional arcade controls to
your PC, or any USB system. All digital inputs and outputs are interfaced via
standard keyboard commands, and appear as mapped keys to your games. The default
key mappings match those of many popular PC emulation products. Two Trackballs
and two Spinners are supported, and are mapped to the system as mice. The board
supports four player standard configurations or two player four-way joystick and
six button configurations.


20


Competition


The
Company will compete against established companies with significantly greater
financial, marketing, research and development, personnel, and other resources
than the Company. Such competition could have a material adverse effect on the
Company's profitability.





Government
Regulation





There are
no government regulations regulating the development and sale of gaming products
for coin operated machines.





ITEM 3
              QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
applicable.




ITEM 4T.
              CONTROLS
      AND PROCEDURES





The
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended) was evaluated under the supervision and with
the participation of our management, including the Chief Executive Officer and
Chief Financial Officer, including the period covered by this quarterly report.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are not
effective in providing reasonable assurance that the information required to be
disclosed in this quarterly report is recorded, processed, summarized and
reported within the time period required for the filing of this quarterly
report.





There was
no change in our internal control over financial reporting (as defined in Rules
13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended)
identified in connection with the evaluation of our internal control performed
during our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.





Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. A control system no matter how
well conceived and operated can provide only reasonable, not absolute assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints and the
benefits of control systems must be considered relative to their cost. As a
result of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues of fraud, if
any, have been detected.




Based on
their most recent review, which was completed within ninety days of the filing
of this report, NTI’s Officers have concluded that the Company’s newly adopted
disclosure controls and procedures will be effective to ensure that information
required to be disclosed by NTI in the reports it files or submits under the
Securities Exchange Act of 1934, as amended, is accumulated and communicated to
NTI’s management, including its Officers, as appropriate to allow timely
decisions regarding required disclosure and are effective to ensure that such
information is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.  There were no significant changes in NTI’s internal controls
or in other factors that could significantly affect those controls subsequent to
the date of their evaluation.


21




PART
II — OTHER INFORMATION




ITEM 1.
              LEGAL
      PROCEEDINGS




None.




ITEM 1A.
              RISK
      FACTORS




Not
applicable.




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





On July
1, 2009 and September 11, 2009, the Company issued to an unrelated individual,
200,000 and 560,000 shares, respectively, at $.10 per share for total proceeds
of $76,000 used to fund operations.





On August
1, 2009, the Company entered into an agreement with an unrelated entity that was
to render financial consulting services for a 12-month period.  As
compensation, the Company issued 125,000 shares of common stock upon the
agreement’s execution.  The shares were valued at $.10 per share for
total compensation of $12,500 to be amortized ratably over the term of the
agreement.  During the quarter ended September 30, 2009, the Company
amortized $2,083 to consulting expense, resulting in a $10,417 prepaid balance
that has been reported in the stockholders’ equity section of the balance
sheet.  The entity is also entitled to $25,000 in finders’ fees for
each $1,000,000 of funding raised in the Company’s behalf.  No funds
have been raised as of the date of this report.





On June
19, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 26-week period.  The
consultant was to receive cash compensation of $36,400 over the term of the
contract, and 104,000 shares of common stock upon the contract’s
completion.  The shares were valued at $.10 per share, for total stock
compensation of $10,400 to be expensed ratably over the contract’s
term.  The Company recorded 15 weeks, or $27,000, of consulting
expense during the three months ended September 30, 2009, of which $21,000 was
paid in cash and $6,000 of stock compensation was accrued and reported as the
current liability, stock payable.





On August
5, 2009, the Company entered into an agreement with an unrelated individual who
was to render consulting services for a 6-week period.  The consultant
was to receive cash compensation of $6,000 over the term of the contract, and
24,000 shares of common stock upon the contract’s completion.  The
shares were valued at $.10 per share, for total stock compensation of $2,400 to
be expensed ratably over the contract’s term.  The Company recorded 6
weeks, or $8,400, of consulting expense during the three months ended September
30, 2009, of which $6,000 was paid in cash.  The 24,000 shares of
common stock were issued upon the contract’s completion on September 16,
2009.


22




ITEMS 3.
              DEFAULTS
      UPON SENIOR SECURITIES




None.




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




None.




ITEM 5.
              OTHER
      INFORMATION




None




ITEM 6.
              EXHIBITS
      AND REPORTS ON FORM 8-K





Exhibit No.:
                
                Description:3.1(i)
                
                Articles
      of Incorporation and amendments thereto (1) and
      (2)3.1(ii)
                
                Bylaws
      (1)14
                
                Code
      of Ethics (1)31.1
                
                Certification
      of Principal Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
                
                Certification
      of Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
                
                Certification
      of Principal Executive Officer and Principal Financial Officer Pursuant to
      Section 906 of the Sarbanes-Oxley Act 0f
2002





(1)
            Filed
      with the Securities and Exchange Commission on February 12, 2008 as an
      exhibit numbered as indicated above, to the Registrant’s registration
      statement on Form S-1 (file no. 333-149184 which exhibit is incorporated
      herein by reference.


(2)
            Amendment
      to the Article of Incorporation filed with the Securities and Exchange
      Commission on Form 8K on May 7, 2009 which exhibit is incorporated herein
      by reference.




(b)
Reports on Form 8-K




During
the period ended September 30, 2009, NANOTECH ENTERTAINMENT, INC. filed the
following Current Reports on Form 8-K:




Date of Report
                      
                      Date Filed
                      
                      Items ReportedNone


23




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.





NanoTech Entertainment,
  Inc.(Registrant)Signature
                            
                            Title
                            
                            Date/s/ Robert DeKett
                            
                            President
      & CEO, Director
                            
                            May
      24, 2010Robert
      DeKett/s/ Robert DeKett
                            
                            Secretary,
      Treasurer, Director
                            
                            May
      24, 2010Robert
      DeKett/s/ Ted D. Campbell II
                            
                            Principal
      Financial Officer
                            
                            May
      24, 2010Ted
      D. Campbell II/s/ Robert DeKett
                            
                            Principal
      Accounting Officer
                            
                            May
      24, 2010Robert
      DeKett


24