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 March 31, 2010





 ̈
            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
      lastreport)




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 company x




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.  ̈ Yes
x
No





TABLE OF
CONTENTS




PAGEPART
      I — FINANCIAL INFORMATION
                3ITEM
      1. FINANCIAL STATEMENTS
                3ITEM
      2. MANAGEMENT’S DISCUSSON AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS
                18PART
      II — OTHER INFORMATION
                22ITEM
      1. LEGAL PROCEEDINGS
                22ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
                22ITEMS
      3. DEFAULTS UPON SENIOR SECURITIES
                22ITEM
      4. REMOVED AND RESERVED
                22ITEM
      5. OTHER INFORMATION
                22ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K
                22SIGNATURES
                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





March 31,
                
                
                June 30,2010
                
                
                2009(unaudited)ASSETSCurrent
      assets:Cash
                
                $
                452
                
                
                $
                35,536Stock
      subscription receivable (Note E)
                
                
                5,000
                
                
                
                -Inventory
      (Note B)
                
                
                -
                
                
                
                8,800Prepaid
      expenses
                
                
                -
                
                
                
                2,500Prepaid
      royalties (Note I)
                
                
                107,500
                
                
                
                55,000Total
      current assets
                
                
                112,952
                
                
                
                101,836Property
      and equipment (Note B)
                
                
                3,945
                
                
                
                3,071Less:
      accumulated depreciation
                
                
                (2,511
                )
                
                
                (1,524
                )Net
      property and equipment
                
                
                1,434
                
                
                
                1,547Total
      assets
                
                $
                114,386
                
                
                $
                103,383LIABILITIES
      AND STOCKHOLDERS’ DEFICITLIABILITIESCurrent
      liabilities:Accounts
      payable
                
                $
                160,516
                
                
                $
                81,553Cash
      drawn in excess of bank balance
                
                
                -
                
                
                
                5,174Accrued
      liabilities – related parties (Note C)
                
                
                1,538,953
                
                
                
                981,906Royalties
      payable (Note I)
                
                
                92,396
                
                
                
                31,771Accrued
      interest, convertible debentures (Note F)
                
                
                1,817
                
                
                
                458Accrued
      interest, notes payable (Note D)
                
                
                38,963
                
                
                
                17,586Accrued
      interest, notes payable – related party (Note C)
                
                
                18,486
                
                
                
                9,223Convertible
      debentures, net (Note F)
                
                
                21,967
                
                
                
                15,778Notes
      payable – current (Note D)
                
                
                32,500
                
                
                
                30,000Notes
      payable – current, related party (Note C)
                
                
                90,908
                
                
                
                80,500Total
      current liabilities
                
                
                1,996,506
                
                
                
                1,253,949Long-Term
      LiabilitiesNotes
      payable – noncurrent (Note D)
                
                
                250,000
                
                
                
                250,000Total
      liabilities
                
                
                2,246,506
                
                
                
                1,503,949STOCKHOLDERS’
      DEFICIT (Note E)Common
      stock, $.001 par value, 75,000,000 shares authorized, 15,910,000 and
      14,437,000 shares issued and outstanding as of March 31, 2010 and June 30,
      2009, respectively
                
                
                15,910
                
                
                
                14,437Additional
      paid-in capital
                
                
                488,829
                
                
                
                360,502Services
      prepaid with common stock
                
                
                (4,167
                )
                
                
                -Deficit
      accumulated during the development stage
                
                
                (2,632,692
                )
                
                
                (1,775,505
                )Total
      stockholders’ deficit
                
                
                (2,132,120
                )
                
                
                (1,400,566
                )Total
      liabilities and stockholders’ deficit
                
                $
                114,386
                
                
                $
                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)





Three Months Ended
                  
                  
                  Nine Months Ended
                  
                  
                  November 13, 2007
                    (inception) toMarch 31,
                  
                  
                  March 31,
                  
                  
                  March 31,2010
                  
                  
                  2009
                  
                  
                  2010
                  
                  
                  2009
                  
                  
                  2010Revenues:Sales,
      net
                  
                  $
                  14,588
                  
                  
                  $
                  5,649
                  
                  
                  $
                  31,724
                  
                  
                  $
                  23,208
                  
                  
                  $
                  87,575Less:
      costs of goods sold
                  
                  
                  (15,454
                  )
                  
                  
                  (603
                  )
                  
                  
                  (18,419
                  )
                  
                  
                  (1,351
                  )
                  
                  
                  (28,749
                  )Gross
      profit
                  
                  
                  (866
                  )
                  
                  
                  5,046
                  
                  
                  
                  13,305
                  
                  
                  
                  21,857
                  
                  
                  
                  58,826Operating
      Expenses:Selling,
      general and administrative
                  
                  
                  307,104
                  
                  
                  
                  210,466
                  
                  
                  
                  830,390
                  
                  
                  
                  656,064
                  
                  
                  
                  2,424,410Other
      Income (Expenses)Interest
      expense
                  
                  
                  (13,398
                  )
                  
                  
                  (2,278
                  )
                  
                  
                  (40,102
                  )
                  
                  
                  (20,336
                  )
                  
                  
                  (252,496
                  )Net
      loss before income taxes
                  
                  
                  (321,368
                  )
                  
                  
                  (207,698
                  )
                  
                  
                  (857,187
                  )
                  
                  
                  (654,543
                  )
                  
                  
                  (2,618,080
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      loss before discontinued operations
                  
                  
                  (321,368
                  )
                  
                  
                  (207,698
                  )
                  
                  
                  (857,187
                  )
                  
                  
                  (654,543
                  )
                  
                  
                  (2,618,080
                  )Discontinued
      operations:Loss
      from discontinued operations (net)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (14,612
                  )Net
      loss available to common stockholders
                  
                  $
                  (321,368
                  )
                  
                  $
                  (207,698
                  )
                  
                  $
                  (857,187
                  )
                  
                  $
                  (654,543
                  )
                  
                  $
                  (2,632,692
                  )Continuing
      operationsBasic
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.06
                  )
                  
                  $
                  (0.10
                  )Diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.03
                  )
                  
                  $
                  (0.06
                  )
                  
                  $
                  (0.10
                  )Weighted
      average shares outstandingBasic
                  
                  
                  15,733,278
                  
                  
                  
                  6,480,000
                  
                  
                  
                  15,340,288
                  
                  
                  
                  6,480,000Diluted
                  
                  
                  16,035,278
                  
                  
                  
                  6,480,000
                  
                  
                  
                  15,642,288
                  
                  
                  
                  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,Nine Months Ended
                
                
                2007 (Inception) toMarch 31,
                
                
                March 31,2010
                
                
                2009
                
                
                2010Cash
      flows from operating activities:Net
      loss
                
                $
                (857,187
                )
                
                $
                (654,543
                )
                
                $
                (2,632,692
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      expense
                
                
                987
                
                
                
                768
                
                
                
                3,214Amortization
      of debt discount
                
                
                6,189
                
                
                
                -
                
                
                
                37,567Common
      stock issued for finder fees
                
                
                -
                
                
                
                -
                
                
                
                162,000Common
      stock issued for services
                
                
                25,800
                
                
                
                -
                
                
                
                45,800Amortization
      of services prepaid with common stock
                
                
                10,833
                
                
                
                -
                
                
                
                10,833Interest
      on debt converted to common stock
                
                
                -
                
                
                
                -
                
                
                
                124,500Loss
      on disposal of fixed assets
                
                
                -
                
                
                
                -
                
                
                
                10,373Changes
      in operating assets and liabilities:Decrease
      in accounts receivable
                
                
                -
                
                
                
                -
                
                
                
                572Decrease
      (increase) in inventory
                
                
                8,800
                
                
                
                (10,218
                )
                
                
                -Decrease
      in prepaid expenses
                
                
                2,500
                
                
                
                -
                
                
                
                -Decrease
      in prepaid expenses – related party
                
                
                -
                
                
                
                57,576
                
                
                
                -Increase
      in prepaid royalties
                
                
                (52,500
                )
                
                
                (46,250
                )
                
                
                (107,500
                )Increase
      in accounts payable
                
                
                78,963
                
                
                
                82,151
                
                
                
                122,237Increase
      in accrued liabilities – related party
                
                
                557,047
                
                
                
                435,840
                
                
                
                1,466,062Increase
      in accrued interest, convertible debentures
                
                
                1,359
                
                
                
                -
                
                
                
                1,666Increase
      in accrued interest, notes payable
                
                
                21,377
                
                
                
                -
                
                
                
                38,963Increase
      in accrued interest, notes payable – related party
                
                
                9,263
                
                
                
                -
                
                
                
                16,629Increase
      in royalties payable
                
                
                60,625
                
                
                
                38,750
                
                
                
                92,396Net
      cash used in operating activities
                
                
                (125,944
                )
                
                
                (95,926
                )
                
                
                (607,380
                )Cash
      flows from investing activities:Net
      cash received in reverse recapitalization
                
                
                -
                
                
                
                -
                
                
                
                31,769Purchase
      of property and equipment
                
                
                (874
                )
                
                
                -
                
                
                
                (3,945
                )Cash
      flows provided by (used in) investing activities
                
                
                (874
                )
                
                
                -
                
                
                
                27,824Cash
      flows from financing activities:Increase
      (decrease) in cash drawn in excess of bank balance
                
                
                (5,174
                )
                
                
                5,752
                
                
                
                -Proceeds
      from issuance of convertible debentures
                
                
                -
                
                
                
                -
                
                
                
                21,300Proceeds
      from issuance of common stock
                
                
                81,000
                
                
                
                -
                
                
                
                188,000Proceeds
      from notes payable – related party
                
                
                13,408
                
                
                
                25,000
                
                
                
                90,908Repayment
      of notes payable – related party
                
                
                -
                
                
                
                -
                
                
                
                (2,700
                )Proceeds
      from notes payable
                
                
                2,500
                
                
                
                30,000
                
                
                
                282,500Net
      cash provided by financing activities
                
                
                91,734
                
                
                
                60,752
                
                
                
                580,008Increase
      (decrease) in cash
                
                
                (35,084
                )
                
                
                (35,174
                )
                
                
                452Cash,
      beginning of period
                
                
                35,536
                
                
                
                41,801
                
                
                
                -Cash,
      end of period
                
                $
                452
                
                
                $
                6,627
                
                
                $
                452


(continued)


6





NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Statements
of Cash Flows (cont’d)


(unaudited)





November 13,Nine Months Ended
                
                
                2007 (Inception) toMarch 31,
                
                
                March 31,2010
                
                
                2009
                
                
                2010Non-cash
      investing and financing activities:Issuance
      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
                
                $
                -
                
                
                $
                -
                
                
                $
                21,400Issuance
      of common stock for stock subscription receivable
                
                $
                5,000
                
                
                $
                -
                
                
                $
                5,000Forgiveness
      of related party debt
                
                $
                3,000
                
                
                $
                -
                
                
                $
                3,000Supplemental
      cash flow information:Interest
      paid in cash
                
                $
                1,916
                
                
                $
                18,295
                
                
                $
                31,973Income
      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


Nine
Months Ended March 31, 2010 and 2009,


and
the Period of November 13, 2007 (Inception) to March 31, 2010





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 March 31, 2010.  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 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.


8





NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Nine
Months Ended March 31, 2010 and 2009,


and
the Period of November 13, 2007 (Inception) to March 31, 2010





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.





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 $452 and $35,536 as of March 31, 2010 and June
30, 2009, respectively.





INVENTORY





The
Company’s inventory is stated at the lower of cost or market using the FIFO
costing method.  Inventory on hand totaled $0 and $8,800 at March 31, 2010
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 March 31, 2010 and June 30, 2009, the Company had property and
equipment of $3,945 and $3,071, and aaccumulated depreciation of $2,511 and
$1,524, respectively.  Depreciation expense totaled $987 and $768 for the
nine months ended March 31, 2010 and 2009, 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.


9





NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Nine
Months Ended March 31, 2010 and 2009,


and
the Period of November 13, 2007 (Inception) to March 31, 2010





B.
              SIGNIFICANT
      ACCOUNTING POLICIES (CONT’D)





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.  For the three months ended March 31, 2010, 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.  For the nine months ended March 31, 2009, the potential conversion
of the bonds would have an antidilutive effect on loss per share.  The
Company has no other potentially dilutive securities, such as options or
warrants, currently issued and outstanding.


Three Months Ended March 31,
                
                
                Nine Months Ended March 31,2010
                
                
                2009
                
                
                2010
                
                
                2009BASICNet
      loss
                
                $
                (321,368
                )
                
                $
                (207,698
                )
                
                $
                (857,187
                )
                
                $
                (654,543
                )Weighted
      average common shares outstanding
                
                
                15,733,278
                
                
                
                6,480,000
                
                
                
                15,340,288
                
                
                
                6,480,000Net
      loss per share (Basic)
                
                $
                (0.02
                )
                
                $
                (0.03
                )
                
                $
                (0.06
                )
                
                $
                (0.10
                )DILUTEDNet
      loss (Basic)
                
                $
                (321,368
                )
                
                $
                (207,698
                )
                
                $
                (857,187
                )
                
                $
                (654,543
                )Convertible
      bond interest expense
                
                
                2,516
                
                
                
                -
                
                
                
                7,548
                
                
                
                -Unamortized
      convertible bond issuance costs
                
                
                (8,233
                )
                
                
                -
                
                
                
                (8,233
                )
                
                
                -Net
      loss (Diluted)
                
                $
                (327,085
                )
                
                $
                (207,698
                )
                
                $
                (857,872
                )
                
                $
                (654,543
                )Weighted
      average common shares outstanding (Basic)
                
                
                15,733,278
                
                
                
                6,480,000
                
                
                
                15,340,288
                
                
                
                6,480,000Convertible
      preferred shares
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Convertible
      bonds and notes
                
                
                302,000
                
                
                
                -
                
                
                
                302,000
                
                
                
                -Options
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Warrants
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Weighted
      average common shares outstanding (Diluted)
                
                
                16,035,278
                
                
                
                6,480,000
                
                
                
                15,642,288
                
                
                
                6,480,000Net
      loss per share (Diluted)
                
                $
                (0.02
                )
                
                $
                (0.03
                )
                
                $
                (0.05
                )
                
                $
                (0.10
                )





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.


10




NanoTech
Entertainment, Inc.


(A
Development Stage Company)


Notes
to Unaudited Financial Statements


Nine
Months Ended March 31, 2010 and 2009,


and
the Period of November 13, 2007 (Inception) to March 31, 2010





B.
            SIGNIFICANT
      ACCOUNTING POLICIES (CONT’D)




RECENTLY-ISSUEDACCOUNTING PRONOUNCEMENTS
(CONT’D)




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.




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. 2010-19 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 and other affiliates have provided
funding in the form of notes payable, totaling $90,908 and $80,500 as of March
31, 2010 and June 30, 2009, respectively.  The notes carry interest rates
ranging from 0% to 20%, resulting in interest expense of $9,263 and $4,291 for
the nine months ended March 31, 2010 and 2009, respectively, and accrued
interest of $18,486 and $9,223 as of March 31, 2010 and June 30, 2009,
respectively.  During the nine months ended March 31, 2010, $3,000 in notes
payable to former officers and directors were forgiven and written off to
additional paid-in capital.  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 its current and former officers whereby
the officers are entitled to the salaries for each of the years ended June
30th
payable as follows:




2008
                        
                        
                        2009
                        
                        
                        2010
                        
                        
                        2011
                        
                        
                        2012
                        
                        
                        TotalDavid
      Foley
                        
                        $
                        175,000
                        
                        
                        $
                        400,000
                        
                        
                        $
                        500,000
                        
                        
                        $
                        275,000
                        
                        
                        $
                        -
                        
                        
                        $
                        1,350,000Robert
      DeKett
                        
                        
                        75,000
                        
                        
                        
                        162,500
                        
                        
                        
                        192,500
                        
                        
                        
                        105,000
                        
                        
                        
                        -
                        
                        
                        
                        535,000Ted Campbell
                        
                        
                        -
                        
                        
                        
                        -
                        
                        
                        
                        36,000
                        
                        
                        
                        72,000
                        
                        
                        
                        30,000
                        
                        
                        
                        138,000Total
                        
                        $
                        250,000
                        
                        
                        $
                        562,500
                        
                        
                        $
                        728,500
                        
                        
                        $
                        452,000
                        
                        
                        $
                        30,000
                        
                        
                        $
                        2,023,000


11


NanoTech
Entertainment, Inc.
 (A
Development Stage Company)
 Notes
to Unaudited Financial Statements
 Nine
Months Ended March 31, 2010 and 2009,
 and
the Period of November 13, 2007 (Inception) to March 31, 2010
 
 C.
              RELATED
      PARTY TRANSACTIONS (CONT’D)
 
 ACCRUED
LIABILITIES (CONT’D)
 
 Salaries
for Mr. Foley and Mr. DeKett are payable in cash, while Mr. Campbell’s salary is
payable in cash and stock of $55,500 and $82,500, respectively.  His stock
compensation is expensed and issued at the end of each month; $3,250 in stock
for each of the months December 2009 through May 2010, and $3,500 in stock for
each of the months June 2010 through November 2011.  The number of shares
issued is based on the average trading price over the previous thirty
days.  Accrued cash salaries for the officers totaled $1,336,875 and
$812,500 at March 31, 2010 and June 30, 2009, respectively, and will be paid as
cash flows allow.  Salary expense totaled $534,375 and $421,875 for the
nine months ended March 31, 2010 and 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.  Rent
expense totaled $113,640 and $148,360 for the nine months ended March 31, 2010
and 2009, respectively.
 
 Salaries,
rent, and other reimbursable expenses owed to officers totaled $1,538,953 and
$981,906 at March 31, 2010 and June 30, 2009, respectively, and will be repaid
as cash flows allow.
 
 CONSULTING
SERVICES
 
 On
December 1, 2009, the Company executed a consulting agreement with a company
affiliated with the Company’s CFO.  See Note E (3).
 
 D.
              NOTES
      PAYABLE
 
 The
Company has originated the following notes payable with unaffiliated entities
and individuals:
 
 Principal
      Balance
                      
                      
                      Accrued
      Interest3/31/2010
                      
                      
                      6/30/2009
                      
                      
                      3/31/2010
                      
                      
                      6/30/2009Note
      1, 10% interest, due April 30, 2011
                      
                      $
                      250,000
                      
                      
                      $
                      250,000
                      
                      
                      $
                      35,460
                      
                      
                      $
                      16,668Note
      2, 20% interest, due on demand
                      
                      
                      25,000
                      
                      
                      
                      25,000
                      
                      
                      
                      2,920
                      
                      
                      
                      835Note
      3, 20% interest, due on demand
                      
                      
                      5,000
                      
                      
                      
                      5,000
                      
                      
                      
                      583
                      
                      
                      
                      83Note
      4,  0% interest, due on demand
                      
                      
                      2,500
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Totals
                      
                      
                      282,500
                      
                      
                      
                      280,000
                      
                      
                      $
                      38,963
                      
                      
                      
                      17,586Less
      current portion (Notes 2, 3, and 4)
                      
                      
                      (32,500
                      )
                      
                      
                      (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.
  12
  NanoTech
Entertainment, Inc.
 (A
Development Stage Company)
 Notes
to Unaudited Financial Statements
 Nine
Months Ended March 31, 2010 and 2009,
 and
the Period of November 13, 2007 (Inception) to March 31, 2010
 
 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 March 31,
2010 to arrive at the total shares issued and outstanding of 15,910,000 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 2009 through March 2010, the following shares were issued for
services rendered, as prepayment for future services to be rendered, or for cash
in accordance with private offerings:
 
 Number
                                                  
                                                  
                                                  Stock
                                                  
                                                  
                                                  Cash
                                                  
                                                  
                                                  Services
                                                  
                                                  
                                                  ServicesDate
                                                  
                                                  of
      Shares
                                                  
                                                  
                                                  Price
                                                  
                                                  
                                                  Received
                                                  
                                                  
                                                  Rendered
                                                  
                                                  
                                                  Prepaid7/1/2009
                                                  
                                                  
                                                  200,000
                                                  
                                                  
                                                  $
                                                  0.10
                                                  
                                                  
                                                  $
                                                  20,000
                                                  
                                                  
                                                  $
                                                  -
                                                  
                                                  
                                                  $
                                                  -8/1/09
                                                  
                                                  
                                                  125,000
                                                  
                                                  
                                                  
                                                  0.10
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  8,333
                                                  
                                                  
                                                  
                                                  4,167
                                                  (1)9/11/2009
                                                  
                                                  
                                                  560,000
                                                  
                                                  
                                                  
                                                  0.10
                                                  
                                                  
                                                  
                                                  56,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -9/16/09
                                                  
                                                  
                                                  24,000
                                                  
                                                  
                                                  
                                                  0.10
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,400
                                                  
                                                  
                                                  
                                                  -
                                                  (2)10/23/2009
                                                  
                                                  
                                                  100,000
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  5,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -12/1/09
                                                  
                                                  
                                                  50,000
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  2,500
                                                  
                                                  
                                                  
                                                  -
                                                  (3)12/19/09
                                                  
                                                  
                                                  104,000
                                                  
                                                  
                                                  
                                                  0.10
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  10,400
                                                  
                                                  
                                                  
                                                  -
                                                  (4)12/31/09
                                                  
                                                  
                                                  65,000
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,250
                                                  
                                                  
                                                  
                                                  -
                                                  (5)1/31/10
                                                  
                                                  
                                                  65,000
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,250
                                                  
                                                  
                                                  
                                                  -
                                                  (5)2/28/10
                                                  
                                                  
                                                  65,000
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,250
                                                  
                                                  
                                                  
                                                  -
                                                  (5)3/30/10
                                                  
                                                  
                                                  50,000
                                                  
                                                  
                                                  
                                                  0.10
                                                  
                                                  
                                                  
                                                  5,000
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  -
                                                  (6)3/31/10
                                                  
                                                  
                                                  65,000
                                                  
                                                  
                                                  
                                                  0.05
                                                  
                                                  
                                                  
                                                  -
                                                  
                                                  
                                                  
                                                  3,250
                                                  
                                                  
                                                  
                                                  -
                                                  (5)Totals
                                                  
                                                  
                                                  1,473,000
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  $
                                                  86,000
                                                  
                                                  
                                                  $
                                                  36,633
                                                  
                                                  
                                                  $
                                                  4,167
  13
  NanoTech
Entertainment, Inc.
 (A
Development Stage Company)
 Notes
to Unaudited Financial Statements
 Nine
Months Ended March 31, 2010 and 2009,
 and
the Period of November 13, 2007 (Inception) to March 31, 2010
 
 E.
              STOCKHOLDERS’
      DEFICIT (CONT’D)
 
 (1)
              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 nine months ended March 31,
      2010, the Company amortized $8,333 to consulting expense, resulting in a
      $4,167 prepaid balance at that has been reported in the stockholders’
      equity section of the balance sheet at March 31, 2010.  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.
 
 (2)
              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 nine months ended March 31, 2010, 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.
 
 (3)
              On
      December 1, 2009, the Company executed an agreement with a company
      affiliated with its 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.  Upon the agreement’s execution, the Affiliate was compensated
      with a non-refundable $7,500 cash retainer payment and 50,000 shares of
      common stock.  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 prepaid compensation of $2,500. 
      During the three months ended March 31, 2010, the $2,500 and $7,500 in
      prepaid stock and cash, respectively, were amortized to
      expense.
 
 (4)
              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 received 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 19, 2009.  The shares were
      valued at $.10 per share, for total stock compensation of
      $10,400.
 
 (5)
              On
      each of the dates December 31, 2009, January 31, 2010, February 28, 2010,
      and March 31, 2010, the Company issued to Ted Campbell 65,000 shares of
      common stock at $.05 per share, resulting in total shares issued of
      260,000 and total compensation expense of $13,000.  These amounts
      were paid pursuant to an employment agreement (Note C, Accrued
      Liabilities).
  14
  NanoTech
Entertainment, Inc.
 (A
Development Stage Company)
 Notes
to Unaudited Financial Statements
 Nine
Months Ended March 31, 2010 and 2009,
 and
the Period of November 13, 2007 (Inception) to March 31, 2010
 
 E.
                STOCKHOLDERS’
      DEFICIT (CONT’D)
 (6)
              On
      March 30, 2010, the Company issued to an unaffiliated investor 50,000
      shares of common stock at $.10 per share for $5,000.  The cash was
      received by the Company on April 1, 2010, and has thus been reported as a
      stock subscription receivable (current
asset).
 
 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.
 
 F.
              CONVERTIBLE
      DEBENTURES
 During
March through May 2009, the Company issued convertible debentures bearing
interest at 6% with a term of two years.  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.
 
 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
  15
  NanoTech
Entertainment, Inc.
 (A
Development Stage Company)
 Notes
to Unaudited Financial Statements
 Nine
Months Ended March 31, 2010 and 2009,
 and
the Period of November 13, 2007 (Inception) to March 31, 2010
 
 F.
              CONVERTIBLE
      DEBENTURES
 
 At March
31, 2010 and June 30, 2009, the Company’s unconverted debentures totaled $21,967
($30,200 principal netted with $8,233 unamortized debt discount) and $15,778
($30,200 principal netted with $14,422 unamortized debt discount), respectively,
while the potential number of shares into which the debentures could be
converted was 302,000 based on a $.10 conversion rate.  Accrued interest on
the bonds totaled $1,817 and $458 at March 31, 2010 and June 30, 2009,
respectively.  No debentures were converted during the nine months ended
March 31, 2010.
 
 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
compensation in the amount of $1,336,875 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 $467,906 which 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 carryforwards of $1,666,128 (including permanent differences of $370,311
attributed to AGI’s accumulated losses on the reverse recapitalization date)
generated since inception through March 31, 2010 will begin to expire in
2027.  Accordingly, deferred tax assets of approximately $583,145 were
completely offset by a valuation allowance, which increased by approximately
$300,015 and $229,090 during the nine months ended March 31, 2010 and 2009,
respectively.  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 March 31, 2010, the Company has incurred net
losses totaling $2,632,692, and has a working capital deficit of
$1,883,554.
  16
  NanoTech
Entertainment, Inc.
 (A
Development Stage Company)
 Notes
to Unaudited Financial Statements
 Nine
Months Ended March 31, 2010 and 2009,
 and
the Period of November 13, 2007 (Inception) to March 31, 2010
 
 H.
              GOING
      CONCERN CONSIDERATIONS (CONT’D)
 
 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.
 
 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 $107,500 and $55,000 in royalties at
March 31, 2010 and June 30, 2009, respectively.  No sales of the licensed
products had occurred during the period of inception on November 13, 2007
through March 31, 2010, so only exclusivity minimums of $92,396 and $31,771 have
been accrued at March 31, 2010 and June 30, 2009, respectively.  The
Company recognized royalty expense of $13,125 and $17,500 during the nine months
ended March 31, 2010 and 2009, respectively.
 
 J.
              SUBSEQUENT
      EVENTS
 
 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.
 
 On April
1, 2010, the Company received $5,000 in satisfaction of a stock subscription
receivable for 50,000 shares of common stock issued on March 30, 2010, as
described in Note E (6).
 
 The
Company has evaluated events from March 31, 2010, 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 DISCUSSION 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
  The
Company was originally organized as a Nevada Corporation on July 15, 2004 under
the name Aldar Group, Inc. (“AGI”) for the purpose of acquiring, selling and
breeding thoroughbred horses. NanoTech Entertainment, Inc. (“NEI”) was
originally organized as a Nevada corporation on November 13, 2007. On April 30,
2009, NEI entered into an Acquisition Agreement (the “Agreement”) with AGI,
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 from July 15, 2004 (AGI’s inception) to March 31, 2010, the Company
generated revenues of $87,575, while incurring $28,749 in cost of sales,
$2,424,410 in general and administrative expenses, $252,496 in interest expense,
and $14,612 in losses from AGI’s discontinued operations. This resulted in a
cumulative net loss of $2,632,692 through March 31, 2010.
  During
the nine months ended March 31, 2010, the Company generated revenues of $31,724,
while incurring $18,419 in cost of sales, $830,390 in general and administrative
expenses, and $40,102 in interest expense. This is compared to earning $23,208
in revenues for the nine months ended March 31, 2009, while incurring $1,351 in
cost of sales, $656,064 in general and administrative expenses, and $20,336 in
interest expense. This resulted in a net loss for the nine months ended March
31, 2010 and 2009 of $857,187 and $654,543, respectively. The net loss for both
comparative periods is attributable primarily to the continuing costs of
operations and product development.
  18
   For the
three months ended March 31, 2010, the Company generated revenues of $14,588,
while incurring cost of sales of $15,454, general and administrative expenses of
$307,104, and interest expense of $13,398. During the three months ended March
31, 2009, the Company earned revenues of $5,649, while incurring $603 in cost of
sales, $210,466 in general and administrative expenses, and $2,278 in interest
expense. This resulted in a net loss of $321,368 and $207,698 for three months
ended March 31, 2010 and 2009, respectively. The net loss for both quarter ends
is attributable primarily to the continuing costs of operations and product
development.
  Liquidity and Capital
Resources
  As of
March 31, 2010, the Company had a working capital deficit of $1,883,554, 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 and other reimbursable
expenses, royalties payable, convertible debentures, and the accrued interest
and current portion of notes payable to related and unrelated parties.  The
Company’s current assets as of March 31, 2010 consisted of $452 in cash, $5,000
in stock subscription receivable, and $107,500 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 officers and directors.  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% in 2008. 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.
  19
  Products
 
 Below is
a list of the Company’s 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.
  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 OptiGun 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 amplifier. 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.
  20
  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.
 
 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 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, as of the end of 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 each
of the dates December 31, 2009, January 31, 2010, February 28, 2010, and March
31, 2010, the Company issued to Ted Campbell 65,000 shares of common stock at
$.05 per share, resulting in total shares issued of 260,000 and total
compensation expense of $13,000.  These amounts were paid pursuant to Mr.
Campbell’s employment agreement with the Company.
 
 On March
30, 2010, the Company issued to an unaffiliated investor 50,000 shares of common
stock at $.10 per share for $5,000.  The cash was received by the Company
on April 1, 2010, and has thus been reported as a stock subscription receivable
(current asset).
  ITEMS
3. DEFAULTS UPON SENIOR SECURITIES
  None.
  ITEM
4. REMOVED AND RESERVED
  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
  22
 
 (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 8-K on May 7, 2009 which exhibit is incorporated herein
      by reference.
  (b)
Reports on Form 8-K
  During
the period ended March 31, 2010, 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