U.S.
Securities and Exchange Commission
 Washington,
D.C. 20549
 
 
 FORM
10-Q
  
 
 [X]           QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
 For the Quarterly Period Ended June 30,
2010
 
 
 [
]            TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF 1934
 
 For
the Transition Period From ____to _____
 
 Commission
File Number
 000-52548
  
 BLUESKY
SYSTEMS, CORP.
 (Exact
name of small business issuer as specified in its charter)
 
 
 Pennsylvania
              05-6141009(State
      or other jurisdiction of
              (IRS
      Employer Identification No.)incorporation
      or organization)
 
 191 Chestnut Street,
Springfield, MA. 01103
 (Address
of principal executive offices)
 
 (413)
734-3116
 (Issuer's
telephone number, including area code)
 
 Indicate
by check mark whether the registrant (1) 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 for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. [x]
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Date File required to be
submitted 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). [ ]
 
  Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
  Large
      accelerated filer
               ̈Non-accelerated
      filer
               ̈(Do
      not check if a smaller reporting company)Accelerated
      filer
               ̈Smaller
      reporting company
              þ
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). [  ]
 
 Number of
shares of common stock outstanding as of August 13,
2010:      25,548,933
  CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
 
 The
discussion contained in this 10-Q under the Securities Exchange Act of 1934, as
amended, contains forward-looking statements that involve risks and
uncertainties. The issuer's actual results could differ significantly from those
discussed herein. These include statements about our expectations, beliefs,
intentions or strategies for the future, which we indicate by words or phrases
such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the
Company believes," "management believes" and similar language, including those
set forth in the discussions under "Notes to Financial Statements" and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-Q. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update
them. Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
 
 1
  INDEX TO
FORM 10-Q
 
 PART I
                Page No.Item
      1.  Financial
      Statements
                3Item
      2.  Management's Discussion and Analysis of Financial
      Condition
                3Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
                11Item
      4. Controls and Procedures
                17Item
      4T. Controls and Procedures
                17PART
      IIItem
      1.  Legal Proceedings
                18Item
      1A. Risk Factors
                18Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
                18Item
      3.  Defaults Upon Senior Securities
                18Item
      4.  Submission of Matters to a Vote of Security
      Holders
                18Item
      5.  Other Information
                18Item
      6.  Exhibits
                18
  2
  ITEM 1.FINANCIAL
STATEMENTS
 
 INDEX
TOBLUESKY SYSTEMS
CORPORATION CONSOLIDATED FINANCIAL STATEMENTS
 
 BLUESKY SYSTEMS
CORPORATION                                                                 
PAGE
  Consolidate Balance
Sheets                                                                           4
 
 Consolidated
Statements of
Operations                                                        5
 
 Consolidated
Statement of Stockholders’
Equity                                        6
 
 Consolidate
Statements of Cash
Flows                                                         7
 
 Notes to
Consolidated Financial
Statements                                                8
 
 3
  BLUESKY
      SYSTEMS, CORP.Consolidated
      Balance SheetsAt
      June 30, 2010 and December 31, 2009(Unaudited)
                
                
                (Audited)Assets:
                
                6/30/2010
                
                
                12/31/2009Current
      assetsCash
                
                $
                -
                
                
                $
                53Total
      current assets
                
                
                -
                
                
                
                53Fixed
      assetsProperty
      and equipment
                
                
                105,000
                
                
                
                105,000Accumulated
      depreciation
                
                
                (6,481
                )
                
                
                (4,537
                )Total
      fixed assets
                
                
                98,519
                
                
                
                100,463Total
      assets
                
                $
                98,519
                
                
                $
                100,516Liabilities
      and Stockholders' DeficitCurrent
      liabilitiesAccounts
      payable and other current liabilities
                
                $
                8,500
                
                
                $
                8,500Overdrawn
      bank balance
                
                
                3
                
                
                
                -Current
      portion of mortgage payable
                
                
                1,193
                
                
                
                1,193Total
      current liabilities
                
                
                9,696
                
                
                
                9,693Long-term
      mortgage payable
                
                
                101,448
                
                
                
                102,044Total
      liabilities
                
                
                111,144
                
                
                
                111,737Stockholders'
      DeficitCommon
      stock, (50,000,000 shares authorized, 25,548,933 shares
    issuedand
      outstanding, par value $.001 per share)
                
                
                25,549
                
                
                
                25,549Additional
      paid-in capital
                
                
                1,239,020
                
                
                
                1,239,020Retained
      deficit
                
                
                (1,277,194
                )
                
                
                (1,275,790
                )Total
      stockholders' deficit
                
                
                (12,625
                )
                
                
                (11,221
                )Total
      liabilities and stockholders' deficit
                
                $
                98,519
                
                
                $
                100,516
 The
accompanying notes are an integral part of these financial
statements.
 
 4
  BLUESKY
      SYSTEMS, CORP.Consolidated
      Statements of OperationsFor
      the Three and Six Months Ended June 30, 2010 and 2009Three
      Months
                
                
                Three
      Months
                
                
                Six
      Months
                
                
                Six
      MonthsEnded
                
                
                Ended
                
                
                Ended
                
                
                Ended6/30/2010
                
                
                6/30/2009
                
                
                6/30/2010
                
                
                6/30/2009Rental
      income
                
                $
                4,993
                
                
                $
                4,350
                
                
                $
                9,752
                
                
                $
                10,200Total
      revenue
                
                
                4,993
                
                
                
                4,350
                
                
                
                9,752
                
                
                
                10,200Selling,
      general and administrative expenses
                
                
                2,782
                
                
                
                7,546
                
                
                
                3,198
                
                
                
                11,568Depreciation
                
                
                972
                
                
                
                972
                
                
                
                1,944
                
                
                
                1,944Total
      expenses
                
                
                3,754
                
                
                
                8,518
                
                
                
                5,142
                
                
                
                13,512Net
      ordinary income (loss)
                
                
                1,239
                
                
                
                (4,168
                )
                
                
                4,610
                
                
                
                (3,312
                )Other
      income (expense):Interest
      expense
                
                
                (2,973
                )
                
                
                (1,548
                )
                
                
                (6,014
                )
                
                
                (3,022
                )Total
      other (expense)
                
                
                (2,973
                )
                
                
                (1,548
                )
                
                
                (6,014
                )
                
                
                (3,022
                )Net
      (loss)
                
                $
                (1,734
                )
                
                $
                (5,716
                )
                
                $
                (1,404
                )
                
                $
                (6,334
                )Net
      income (loss) per share, basic and fully diluted
                
                $
                *
                
                
                $
                *
                
                
                $
                *
                
                
                $
                *Weighted
      Average Common Shares Outstanding
                
                
                25,548,933
                
                
                
                25,511,433
                
                
                
                25,548,933
                
                
                
                25,523,933* =
      Less than $.01 per share.
  The
accompanying notes are an integral part of these financial
statements.
 
 5
 
 BLUESKY
      SYSTEMS, CORP.Consolidated
      Statement of Stockholders' DeficitFor
      the Six Months Ended June 30, 2010CommonStock
                
                
                
                
                
                Additional(Par
      Value
                
                
                Common
                
                
                Paid
      in
                
                
                Retained$
                .001
                )
                
                Shares
                
                
                Capital
                
                
                (Deficit)Balances,
      December 31, 2009
                
                $
                25,549
                
                
                
                25,548,933
                
                
                $
                1,239,020
                
                
                $
                (1,275,790
                )Net
      loss for the six months ended June 30, 2010
                
                $
                -
                
                
                
                -
                
                
                $
                -
                
                
                $
                (1,404
                )Balances,
      June 30, 2010
                
                $
                25,549
                
                
                
                25,548,933
                
                
                $
                1,239,020
                
                
                $
                (1,277,194
                )
 
 The
accompanying notes are an integral part of these financial
statements.
 
 6
  BLUESKY
      SYSTEMS, CORP.Consolidated
      Statements of Cash FlowsFor
      the Six Months Ended June 30, 2010 and 2009Three
      Months
                
                
                Six
      MonthsEnded
                
                
                Ended6/30/2010
                
                
                6/30/2009CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      (loss)
                
                $
                (1,404
                )
                
                $
                (6,334
                )Adjustments
      to reconcile net (loss) to net cash provided by (used in)operating
      activities:Depreciation
                
                
                1,944
                
                
                
                1,944Increase
      (decrease) in operating liabilities:Overdrawn
      bank balance
                
                
                3
                
                
                
                -Accounts
      payable and other current liabilities
                
                
                -
                
                
                
                -NET
      CASH PROVIDED BY OPERATING ACTIVITIES
                
                
                543
                
                
                
                (4,390
                )CASH
      FLOWS FROM FINANCING ACTIVITIES:Contributions
      of capital from company related through common ownership
                
                
                
                
                
                
                5,000Principal
      repayments of long term debt
                
                
                (596
                )
                
                
                (556
                )NET
      CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
                
                
                (596
                )
                
                
                4,444NET
      INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                (53
                )
                
                
                54CASH
      AND CASH EQUIVALENTS:Beginning
      of period
                
                
                53
                
                
                
                -End
      of period
                
                $
                -
                
                
                $
                54OTHER
      SUPPLEMENTAL CASH FLOW DISCLOSURES:Cash
      paid during the period for interest
                
                $
                6,014
                
                
                $
                3,022Cash
      paid during the period for income taxes
                
                $
                -
                
                
                $
                -The
      accompanying notes are an integral part of these consolidated financial
      statements
 
 7
 BLUESKY
SYSTEMS CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)
  NOTE A—SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 Business
Activity— BlueSky System, Corp. (“The Company”) was organized under the
laws of the State of Pennsylvania in June 2004 as a
C-Corporation.  The Company owns one subsidiary, School Street Second
Corp. (“The Subsidiary”). The purpose of the Subsidiary is to buy, sell, rent,
and improve any and all aspects of real estate.  The Subsidiary
currently owns one building in Chicopee, Massachusetts.
 
 Basis of
Presentation—The financial statements included herein include the
accounts of the Company prepared under the accrual basis of
accounting.
 
 Cash and
Cash Equivalents—For purposes of the Consolidated Statement of Cash
Flows, the Company considers liquid investments with an original maturity of
three months or less to be cash equivalents.
 
 Management’s
Use of Estimates—The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period.  Actual results
could differ from those estimates.
 
 Revenue
Recognition—The Company’s revenue is derived from rental income from 4
leases.  The expired leases are considered month-to-month leases. In
accordance with SFAS 13, paragraph 23, the cost of property held for leasing by
major classes of property according to nature or function, and the amount of
accumulated depreciation in total, is presented in the accompanying December 31,
2009 balance sheet. There are no contingent rentals included in income in the
accompanying statements of operations. With the exception of the month-to-month
leases, revenue is recognized on a straight-line basis and amortized into income
on a monthly basis, over the lease term.
 
 Comprehensive
Income (Loss)—The Company adopted Financial Accounting Standards Board
Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive
Income”, which establishes standards for the reporting and display of
comprehensive income and its components in the  financial
statements.  There were no items of comprehensive income (loss)
applicable to the Company during the periods covered in the financial
statements.
 
 Advertising
Costs—Advertising costs are expensed as incurred. Advertising expense
totaled    $-0- and $-0- for the three and six months ended
June 30, 2010 and 2009, respectively.
  Loss per
Common Share—Statement of Financial Accounting Standard (SFAS) No. 128
requires dual presentation of basic and diluted earnings per share (EPS) with a
reconciliation of the numerator and denominator of the EPS
computations.  Basic earnings per share amounts are based on the
weighted average shares of common stock outstanding.  If applicable,
diluted earnings per share would assume the conversion, exercise or issuance of
all potential common stock instruments such as options, warrants and convertible
securities, unless the effect is to reduce a loss or increase earnings per
share.  Accordingly, this presentation has been adopted for the period
presented.  There were no adjustments required to net loss for the
period presented in the computation of diluted earnings per share.
 
 Income
Taxes—Income taxes are provided in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, “Accounting for Income
Taxes.”A deferred tax asset or liability is recorded for all
temporary differences between financial and tax reporting and net operating
loss-carryforwards.
 
 Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that, and some portion or the entire
deferred tax asset will not be realized.  Deferred tax assets and
liabilities are adjusted for the effect of changes in tax laws and rates on the
date of enactment.
 
 Fair
Value of Financial Instruments—The carrying amounts reported in the
balance sheet for cash, accounts receivable and payable approximate fair value
based on the short-term maturity of these instruments.
 
 Stock
Based Transactions—The Company acquires nonmonetary assets including
goods for its common stock.  The goods are recorded at the fair value
of the nonmonetary asset exchanged or at an independent quoted market price for
items exchanged.
 
 The
Company accounts for stock-based compensation using the fair value method of
Financial Accounting Standard No. 123 (revised, 2004), “Accounting for
Stock-Based Compensation”.  Shares issued for services rendered by a
third party are recorded at the fair value of the shares issued or services
rendered, whichever is more readily determinable.  The Company
accounts for options and warrants under the same authoritative guidance using
the Black-Scholes Option Pricing Model.
 
 Accounts
Receivable—Accounts deemed uncollectible are written off in the year they
become uncollectible. During 2010 and 2009 interim periods, Accounts Receivable
in the amounts of    $-0- and $-0- were deemed uncollectible
and were written off to Bad Debt Expense. As of June 30, 2010, the Company’s
Accounts Receivable balance was $-0-.
 
 8
 BLUESKY
SYSTEMS CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
 
 
 NOTE A—SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT’)
 
 Impairment
of Long-Lived Assets—In accordance with SFAS No. 144, the Company reviews
and evaluates its long-lived assets for impairment whenever events or changes in
circumstances indicate that their net book value may not be
recoverable.  When such factors and circumstances exist, including
those noted above, the Company compares the assets’ carrying amounts against the
estimated undiscounted cash flows to be generated by those assets over their
estimated useful lives.  If the carrying amounts are greater than the
undiscounted cash flows, the fair values of those assets are estimated by
discounting the projected cash flows.  Any excess of the carrying
amounts over the fair values are recorded as impairments in that fiscal
period.
 
 Property
and equipment—Depreciable assets are stated at cost. As of June 30, 2010,
the Company had the following depreciable assets:
  Asset
                Cost
                Accumulated
      Depreciation
                Book
      Value
                Estimated
      Life
                Estimated
      Annual DepreciationRental
      Property
                $           105,000
                $                6,481
                $               98,519
                27.5
                $                3,889$           105,000
                $                6,481
                $               98,519
                
                $                3,889
  Recent
Accounting Pronouncements— The Company
has reviewed all recently issued, but not yet effective, accounting
pronouncements and do not believe the future adoption of any such pronouncements
may be expected to cause a material impact on its financial condition or the
results of its operations.
 
 FASB Accounting
Standards Codification
 (Accounting Standards Update (“ASU”)
2009-01)
  In
June 2009, FASB approved the FASB Accounting Standards Codification (“the
Codification”) as the single source of authoritative nongovernmental GAAP. All
existing accounting standard documents, such as FASB, American Institute of
Certified Public Accountants, Emerging Issues Task Force and other related
literature, excluding guidance from the Securities and Exchange Commission
(“SEC”), have been superseded by the Codification. All other non-grandfathered,
non-SEC accounting literature not included in the Codification has become
nonauthoritative. The Codification did not change GAAP, but instead introduced a
new structure that combines all authoritative standards into a comprehensive,
topically organized online database. The Codification is effective for interim
or annual periods ending after September 15, 2009, and impacts the
Company’s consolidated financial statements as all future references to
authoritative accounting literature will be referenced in accordance with the
Codification. There have been no changes to the content of the Company’s
financial statements or disclosures as a result of implementing the Codification
during the six months ended June 30, 2010.
  Recent Accounting
Pronouncements (cont.)- As a result of the Company’s implementation of
the Codification during the six months ended June 30, 2010, previous references
to new accounting standards and literature are no longer applicable. In the
current annual consolidated financial statements, the Company will provide
reference to both new and old guidance to assist in understanding the impacts of
recently adopted accounting literature, particularly for guidance adopted since
the beginning of the current fiscal year but prior to the
Codification.
 
 Subsequent
Events
 (Included in Accounting Standards
Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165
“Subsequent Events”)
 
 SFAS
No. 165 established general standards of accounting for and disclosure of
events that occur after the balance sheet date, but before the consolidated
financial statements are issued or available to be issued (“subsequent events”).
An entity is required to disclose the date through which subsequent events have
been evaluated and the basis for that date. For public entities, this is the
date the consolidated financial statements are issued. SFAS No. 165 does
not apply to subsequent events or transactions that are within the scope of
other GAAP and did not result in significant changes in the subsequent events
reported by the Company. SFAS No. 165 became effective for interim or
annual periods ending after June 15, 2009 and did not impact the Company’s
consolidated financial statements. The Company evaluated for subsequent events
through the issuance date of the Company’s consolidated financial statements. No
recognized or non-recognized subsequent events were noted.
 
 Determination of
the Useful Life of Intangible Assets
 (Included in ASC 350 “Intangibles —
Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the
Useful Lives of Intangible Assets”)
 
 FSP SFAS
No. 142-3 amended the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a
recognized intangible asset under previously issued goodwill and intangible
assets topics. This change was intended to improve the consistency between the
useful life of a recognized intangible asset and the period of expected cash
flows used to measure the fair value of the asset under topics related to
business combinations and other GAAP. The requirement for determining useful
lives must be applied prospectively to intangible assets acquired after the
effective date and the disclosure requirements must be applied prospectively to
all intangible assets recognized as of, and subsequent to, the effective date.
FSP SFAS No. 142-3 became effective for consolidated financial statements
issued for fiscal years beginning after December 15, 2008, and interim
periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not
impact the Company’s consolidated financial statements.
 
 9
 
 BLUESKY
SYSTEMS CORPORATION
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
(UNAUDITED)
 
 Recent Accounting
Pronouncements (cont.)
 
 Noncontrolling
Interests
 (Included in ASC 810
“Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in
Consolidated Financial Statements an amendment of ARB
No. 51”)
 
 SFAS
No. 160 changed the accounting and reporting for minority interests such
that they will be recharacterized as noncontrolling interests and classified as
a component of equity. SFAS No. 160 became effective for fiscal years
beginning after December 15, 2008 with early application prohibited. The
Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer
records an intangible asset when the purchase price of a noncontrolling interest
exceeds the book value at the time of buyout. The adoption of SFAS No. 160
did not have any other material impact on the Company’s financial
statements.
 
 Consolidation of
Variable Interest Entities — Amended
 (To be included in ASC 810
“Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No.
46(R)”)
 
 SFAS
No. 167 amends FASB Interpretation No. 46(R) “Consolidation of
Variable Interest Entities regarding certain guidance for determining whether an
entity is a variable interest entity and modifies the methods allowed for
determining the primary beneficiary of a variable interest entity. The
amendments include: (1) the elimination of the exemption for qualifying
special purpose entities, (2) a new approach for determining who should
consolidate a variable-interest entity, and (3) changes to when it is
necessary to reassess who should consolidate a variable-interest entity. SFAS
No. 167 is effective for the first annual reporting period beginning after
November 15, 2009, with earlier adoption prohibited. The Company will adopt
SFAS No. 167 in fiscal 2010 and does not anticipate any material impact on
the Company’s financial statements.
 
 NOTE B—SUPPLEMENTAL CASH
FLOW INFORMATION
 
 Supplemental
disclosures of cash flow information for the six months ended June 30, 2010 and
2009 is summarized as follows:
 
 Cash paid
during the period for interest and income taxes:
 2010             2009
 Income
Taxes                                                                $   ---                  $   ---
 Interest                                                                           $6,014             
 $ 3,022
 
 NOTE C—INCOME
TAXES
 
 Due to
the operating loss and the inability to recognize an income tax benefit there
from, there is no provision for current or deferred federal or state income
taxes for the six months ended June 30, 2010 and 2009.
  NOTE C—INCOME TAXES
(CONT.)
 
 Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amount used for federal and state income tax purposes.
 
 The
Company’s total deferred tax asset, calculated using federal and state effective
tax rates, as of June 30, 2010 is as follows:
 
 Total
      Deferred Tax Asset
                
                $
                44,200Valuation
      Allowance
                
                
                (44,200
                )Net
      Deferred Tax Asset
                
                $
                -
 
 No tax
benefits have been recorded for the nondeductible (tax) expenses (stock for
services) totaling $970,500 in the year 2008. The measurement valuation
allowance increased $800 during the six months ended June 30, 2010.
 
 The
reconciliation of income taxes computed at the federal statutory income tax rate
to total income taxes for the six months ended June 30, 2010 and 2009 is as
follows:
 
 2009              2010
 Income
tax computed at the federal statutory
rate                                                    34%           
  34%
 Valuation
allowance                                                                                                 
   (34%)            (34%)
 Total
deferred tax
asset                                                                                               0%              0%
 
 Because
of the Company’s lack of earnings history, the deferred tax asset has been fully
offset by a valuation allowance.
 
 The
Company has approximately $127,000 in carry forwards available through the year
2029.
 
 NOTE D—GOING
CONCERN
 
 As shown
in the accompanying audited financial statements, the Company has suffered
recurring losses from operations to date. It experienced losses of $1,404 during
the six months ended June 30, 2009. The Company had a net deficiency of
$1,277,194 as of June 30, 2010. These factors raise substantial doubt about the
Company’s ability to continue as a going concern.
 
 Management’s
plans in regard to this matter are to raise equity capital and seek strategic
relationships and alliances in order to increase sales in an effort to generate
positive cash flow.  Additionally, the Company must continue to rely
upon equity infusions from investors in order to improve liquidity and sustain
operations. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
  NOTE E—SEGMENT
REPORTING
 
 In June
1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131, “Disclosures about Segments of an
Enterprise and Related Information.”  This statement requires
companies to report information about operating segments in interim and annual
financial statements.  It also requires segment disclosures about
products and services, geographic areas and major customers.  The
Company determined that it did not have any separately reportable operating
segments as of June 30, 2010 and 2009.
 
 NOTE F—NOTES
PAYABLE
 
 A
mortgage payable incurred for the purchase of the rental property consists of
the following at June 30, 2010:
 
 Secured
Commercial Mortgage to an unrelated party.
 Interest
bearing 6.875 % with a maturity of June 1, 2037,
 Balance
at June 30,
2010                                                                                                                                $102,641
 
 The
aggregate amount of long-term debt at June 30, 2010 maturing during each of the
succeeding five years and thereafter is as follows:
 
 For
      the year ending
                
                Amount2010
                
                $
                5972011
                
                $
                1,2772012
                
                $
                1,3682013
                
                $
                1,4652014
                
                $
                1,569Thereafter
                
                $
                96,365Total
                
                $
                102,641
 10
  ITEM 2.  
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Management’s
Discussion and Analysis contains various “forward looking statements” within
regarding future events or the future financial performance of the Company that
involve risks and uncertainties. Certain statements included in this 10-Q,
including, without limitation, statements related to anticipated cash flow
sources and uses, and words including but not limited to “anticipates”,
“believes”, “plans”, “expects”, “future” and similar statements or expressions,
identify forward looking statements. Any forward-looking statements herein are
subject to certain risks and uncertainties in the Company’s business, including
but not limited to, reliance on key customers and competition in its markets,
market demand, product performance, technological developments, maintenance of
relationships with key suppliers, difficulties of hiring or retaining key
personnel and any changes in current accounting rules, all of which may be
beyond the control of the Company. Management will elect additional changes to
revenue recognition to comply with the most conservative SEC recognition on a
forward going accrual basis as the model is replicated with other similar
markets (i.e. SBDC). The Company’s actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth therein.
 
 Management’s
Discussion and Analysis of Results of Financial Condition and Results of
Operations (“MD&A”) should be read in conjunction with the financial
statements included herein.
 
 BUSINESS
DESCRIPTION
 
 We were
incorporated on September 21, 2004 under the laws of the State of Pennsylvania
to engage in the business of buying, selling, renting, and improving real
estate. Over the last year we have been engaged in buying and selling our
property and we have entered into new agreements for the management of new
rental property.  In 2008, we owned 100% of the common stock of School
Second Corp., which, in turn, owned property in central downtown Chicopee,
Massachusetts at 192 School Street. Specifically, we owned a two-story building
that consists of four units and generated revenues by rentals on units. During
2008 we sold this property and acquired a new property in Chicopee Massachusetts
near Springfield in western Massachusetts at 12-14 Osgood Street. 
Accordingly, all of the leases and agreements relating to the property at 192
School Street were terminated.
 
 The
Registrant sold the property at 192 School Street, Chicopee, Massachusetts to
Serena Cieplinski of 5126 Castle Harbor Way, Centreville, VA 20120 on October
29, 2008 for $212,500.
 
 Also on
October 29, 2008 the Registrant entered into a Stock Purchase Agreement between
Pablo Torres, the majority shareholder of Oswego Real Estate Services, Inc.
(“Seller”) and Bluesky
Systems Corporation (“Buyer” or
“Bluesky”).
 
 The
Seller sold 20,000,000 shares (twenty million) of Oswego Real Estate Services,
Inc. (“Oswego”) in exchange for 250,000 shares (two hundred fifty thousand) of
Bluesky Systems Corporation and $5,000 so that such property located at 12-14
Osgood Street in Springfield, Massachusetts (“Property”) is owned by the Buyer.
The Buyer and Seller agreed and Philips become a wholly owned subsidiary of the
Buyer.
 
 As per
the terms of the Stock Purchase Agreement, the mortgage will continue to be the
personal liability of the Seller until paid in full by him. All rental proceeds
are to be collected by and controlled by the Seller until the property is resold
and any negative cash flows for repairs or expenses will be the sole
responsibility of the Seller. Furthermore in the event, cash flow after all
expenses exceeds 20%, Bluesky and the Seller will equally share the proceeds.
Upon liquidation of the property after expenses, the Seller will receive 25% of
the capital gains profit and Bluesky will receive 75% of the capital gains
profit. If the Seller is incapable of managing the property, then Bluesky will
hire a professional property management company to manage the day to day
operations, at the Seller’s expense. Additionally, 100,000 (one hundred
thousand) shares of the 250,000 (two hundred fifty thousand) shares are to be
sold at a mutually acceptable price and the proceeds to be used exclusively for
the pay down of the mortgage on the 12-14 Osgood Street property. Bluesky paid
$5,000 (five thousand) dollars for consideration in this
transaction
 
 Our
executive offices are located at 191 Chestnut Street in Springfield,
Massachusetts 01103. Our telephone number is (413) 734-3116. We are currently
authorized to issue 50,000,000 shares of common stock. We currently have
25,548,933 shares of common stock issued and outstanding.
 
 Our
business plan is to buy more investment properties, which we believe have good
cash flows or good cash flow potential, plus a favorable estimated resale value.
We plan to lease our properties primarily to residential tenants. We plan to
make limited improvements to our properties (on a case by case basis, if
commercially reasonable), so that we can increase occupancy, improve cash flows,
and enhance potential resale value.
 
 As shown
in the accompanying audited financial statements, we have suffered recurring
losses from operations since our inception. We experienced losses of $936,743
and $18,729 during 2008 and 2007, respectively. We also had a total accumulated
deficit of $1,268,902 as of December 31, 2008. These factors raise substantial
doubt about our ability to continue as a going concern.
 
 11
  THE
BUILDING AT 192 SCHOOL STREET
 
 On
September 21, 2004, we acquired 100% of the common stock of School Second Corp.,
which in turn, owns 100% of a two-story apartment house, with four units in
central downtown Chicopee, Massachusetts located at 192 School Street, which the
board of directors had identified as an acceptable business
opportunity.
 
 We
contracted with Lessard Property Management, Inc. to manage the lease on our
behalf however all contracts were terminated when the property was
sold.
 
 On
October 29, 2008, we sold the property at 192 School Street in the amount of
$212,500.
 
 THE
BUILDING AT 12-14 OSGOOD STREET, SPRINGFIELD, MASSACHUSETTS
 
 On
October 29, 2008, we acquired 20,000,000 shares of common stock of Oswego Real
Estate Services, Inc. (“Oswego) in exchange for 250,000 shares of the Company
along with $5,000 in additional cash consideration. In turn, Oswego became a
wholly owned subsidiary of the Company and the property located at 12-14 Osgood
Street in Springfield, Massachusetts is now owned by the Company through its
subsidiary Oswego Real Estate Services.
 
 The
building at 12-14 Osgood Street consists of 2 family rental units. Both units
are currently leased and yield approximately $1,200 rental income per month. The
mortgage payable on this property as of December 31, 2008 is
$105,000.
 
 OVERVIEW
OF OUR MARKET AREA
 
 The city
of Chicopee lies on the outskirts of the Springfield, Massachusetts urban area,
located in the Pioneer Valley near the intersection of U.S. Interstates 90 (the
Massachusetts Turnpike) and 91.  Interstate 90 is the major east-west
highway crossing Massachusetts. Interstate 91 is the major north-south highway
that runs directly through the heart of New England. Chicopee is located
approximately 90 miles west of Boston, Massachusetts, 70 miles southeast of
Albany, New York and 30 miles north of Hartford,
Connecticut.  Chicopee is located in Hampden County, Massachusetts,
whose estimated 2006 population was 460,805.
 
 The
economy in our primary market area enjoys the presence of large employers such
as the University of Massachusetts, Baystate Medical Center, Mass Mutual Life
Insurance Company, Big Y Foods, Inc., Friendly Ice Cream Corporation, Old Colony
Envelope, Hamilton Standard, Pratt and Whitney and Strathmore Paper Company.
Other employment and economic activity is provided by financial institutions,
eight other colleges and universities, seven other hospitals and a variety of
wholesale and retail trade businesses.
 
 Respected
national economists have given mixed opinions about the market for multi-family
rentals in 2006.  However, according to Moody's, Economy.com and
Fiserv Lending Solutions, Springfield MA is expected to see slight gains of
0.8%, while the rest of the state is expected to see significant losses as high
as -3.0%.
 
 Recent
local developments, such as the proposed New Haven-Hartford-Springfield commuter
rail line, have brought improvements to the local economy.  According
to the NAI 2006 Global Market Report, although there will be some slowdown in
the real estate market in Western Massachusetts, it is expected that the
Springfield, Massachusetts area will not see a dramatic drop in market prices
like many of the costal regions of the state.
 
 The City
of Chicopee Assessor's Office reported 2,579 multi-family units in 2006 and the
Pioneer Valley Planning Commission's SOCDS Building Permits Database shows an
increase of 120% in permits for multi-family structures in Springfield from 2002
to 2006.
 
 These
market factors form the setting in which we plan to execute our business
model.
 
 OUR PLAN
TO ACQUIRE OTHER RENTAL PROPERTIES
 
 Our
business plan is to buy more rental properties that we believe are undervalued,
compared to their cash flows and estimated resale value. Our strategy is to
identify rental properties with a favorable purchase price relative to their
market value, as well as positive cash flow. We plan to buy properties primarily
leased to residential tenants. We are prepared to make some improvements to our
properties (on a case by case basis, if commercially reasonable), so that we can
increase occupancy, improve cash flows, and enhance potential resale value.
However, given our current financial condition, we will most likely seek
properties in the Springfield, Massachusetts area for the next 12
months.  However, after that time, we also plan to explore the
possibility of acquiring additional properties in other areas of Western
Massachusetts and possibly North Carolina.
 
 Our
success will be dependent upon implementing our plan of operations and the risks
associated with our business plans. We operate primarily in the Springfield,
Massachusetts area. We plan to strengthen our position in these markets. We plan
to expand our operations through our acquisition and improvement of real
estate.
 
 We
presently own one two-story apartment house in Springfield, Massachusetts. We
hope to acquire additional real estate in the next 12 months, and to utilize the
rental proceeds of those properties to pay our operating costs for that period;
however, there are no assurances that this revenue will be sufficient to cover
our operating costs. Accordingly, if our revenues are not sufficient, we will
rely upon capital infusions from our director Duane Bennett; however, there are
no assurances that Mr. Bennett will have sufficient funds to provide such
capital infusions. He has made no assurance of the minimum or maximum capital
amounts he could provide.
  12
 
 PROPERTY
LOCATION PROCEDURES
 
 We plan
to conduct a preliminary analysis that consists of:
 
 -
              Reviewing
      real estate sales information provided by local board of realtors
      associations and our review of the census tract increases. The information
      that we may obtain that would weigh in favor or our proceeding with a
      property acquisition would be:o
              High
      volume of real estate sales within the specific areao
              New
      schools and major commercial developments in the areao
              Improved
      state and city roads in the area
 
 The
information that we may obtain that would weigh against our proceeding with a
property acquisition would be:
 o
              Hazardous
      waste in the areao
              Crime
      rates in the area that are higher than the national average (per 100,000
      people, based on 2005 FBI Uniform Crime Reports, released Sept.
      2006)o
              Vacancy
      rates of 10% or more in the area
 
 The data
that we analyze to determine whether to purchase properties are:
 
 -
              Demographic
      data that suggests increased demand in a specific area. The data that
      would weigh in favor of our proceeding with a purchase would
      be:o
              Continued
      economic development in the area, such as a major corporation moving into
      the area creating new jobs and increasing residential housing
      demand.o
              Increase
      in the population’s median income levels of 5 – 10% per year for a certain
      area.o
              Lower
      than the national average of violent and property crimes in the area (per
      100,000 people, based on 2005 FBI Uniform Crime Reports, released Sept.
      2006)
 
 -
              Demographic
      data that would weigh against a purchase would be:o
              Migration
      of industrial companies outside the area.o
              Decrease
      of 10% or more in median income levelso
              Violent
      and property crime rates in the area that are higher than the national
      average (per 100,000 people, based on 2005 FBI Uniform Crime Reports,
      released Sept. 2006)
 
 In order
to determine and evaluate the fastest growing areas, we will obtain reports from
sources such as the Pioneer Valley Planning Commission, Western Massachusetts
Economic Development Council, Massachusetts Alliance for Economic Development,
and University of Massachusetts Donahue Institute's Economic and Public Policy
Research unit. Most of the reports available through these organizations are
free of charge and will provide detailed information that we will then study to
determine the areas with good growth rates.
 
 We will
also rely on statistics provided by the U.S. Census Bureau to obtain information
pertaining to population shifts and number of total people in a specific area.
In addition, we plan to utilize economic, housing and population data available
from such sources as the Massachusetts Office of Economic Development and
Massachusetts Institute for Social and Economic Research to further assess the
best areas in which to purchase property.
  DETAILED
MARKET AND FINANCIAL ANALYSIS
 
 Our
Secretary will perform detailed market and financial analysis regarding each
property we decide to review for purchase to determine whether the specific
location is appropriate for acquisition and development. That detailed
information will include the following:
 
 -
              Number
      of properties on the market.-
              Number
      of properties sold in the past 12 months.-
              Sales
      prices asked per property.-
              Sales
      price sold per property.
 
 -
              Total
      square footage and acreage per property-
              Total
      number of units per property.-
              Total
      number of pending closings per
property.
 
 Our
secretary is a licensed realtor which provides the education for the above
reviews. He acquired training from his past experiences with ABC Realty, Inc.
and Xenicent, Inc. (FKA Great Land Development Corp.)
 
 The
activities that our secretary engaged in with both of the above noted companies
prior to their business combinations with unrelated businesses in unrelated
industries are identifying perceived under valued properties, developing such
properties by trying to add value in making the properties more valuable, and
subsequently reselling such properties to individual customers.
 
 PURCHASE
PROCEDURES
 
 Once we
have located a property that we may want to purchase, if it is not currently
listed for sale, we will ascertain whether the owner is willing to sell the
property*. We then negotiate a purchase price and ask the following questions of
the prospective seller and/or obtain answers from third parties:
 
 -
              When
      does the owner want to sell and close? Favorable conditions we look for
      regarding this factor are:o
              The
      seller is willing and able to sell within a six-month
    period.o
              Typically,
      the timing and motivation of sellers to enter into contract to sell may
      include several factors such as: estate planning, gifts to family, age,
      health and other personal factors.
 
 -
              How
      much will the owner sell the land for? Favorable conditions we will look
      for regarding this factor are:o
              The
      price is below market value. We determine market value through appraisals
      and comparable sales reports in the area.o
              With
      respect to price, we would also consider value trends, such as historical
      yearly increases in property values
 
 -
              Are
      there any defects on the title?  Favorable conditions we will
      look for regarding this factor are:o
              No
      liens and/or encumbrances.o
              The
      buyer is able to deliver a clean title within the time we would like to
      close.
 
 -
              Does
      the landowner have title insurance on the property? Favorable conditions
      we will look for regarding this factor are:o
              The
      landowner has title insurance on the property.o
              The
      landowner is able to secure title insurance on the
    property.o
              We
      would be able to obtain title insurance on the purchased
      property.
 
 We will
obtain the following documents from the seller during our due diligence on the
property:
 
 -
              General
      maps;-
              Environmental
      reports-
              Copies
      of existing zoning maps and regulations;-
              Conduct
      land inspection procedures;
 
 -
              Proposed
      zoning regulations;-
              Deeds;-
              Title
      insurance; and-
              Tax
      bills.
 
 We then
verify the accuracy of these documents and determine how the information
contained in the documents impacts the property that we are considering to
purchase.
 
 *
      We plan to evaluate properties not listed for sale because of the
      potential benefit of acquiring a property in a particular location at a
      lower cost by not having to pay realtor commissions or other costs and
      fees associated with purchasing properties only listed for sale with
      realtors. Since, in this case, there would not be a seller’s agent, there
      is a chance that we can get a better price on the property since a seller
      would not have to pay a realtor a commission. Therefore, the seller would
      not have to absorb the realtor’s commission in to his or hers selling
      price, which there is a chance a seller would do in order to obtain his or
      her needed price on a property.
 
 13
 
 OUR
FINANCING PROCEDURES
 
 We will
attempt to obtain financing from local banks doing business within the area
where we are attempting to purchase property. In the past, our director, Mr.
Bennett, has personally guaranteed repayment of debt for property purchases
along with necessary corporate guarantees for us as well as for two other
companies, Axiom III, Inc. and Moixa III, Inc. We do not have any written
agreements now or in the past with Mr. Bennett, obligating him to guarantee
repayment of future debt or any of our other obligations. Mr. Bennett is not
otherwise under any legal obligation to provide us with capital.
 
 When
obtaining financing we will look for mortgages at the then current lending rates
but will also consider interest rates as high as 11% if we are able to purchase
a property at least 25% below its existing market value, as determined by an
appraiser.
 
 Our
credit status was sufficient enough for us to acquire our current building at
192 School Street so long as we had a personal guarantee of Mr. Bennett. We
believe we can use this same approach for future purchases.
 
 In order
to finance down payments of property purchases in the future, if applicable, we
can seek debt or equity funding from related parties, including our director, as
discussed above. If necessary, we will also attempt to raise capital from
unrelated investors in the form of a debt or equity offering.
 
 The
procedures for obtaining our financing are as follows:
 
 1.
              File
      loan application.2.
              Credit
      checks, property appraisal done.3.
              Loan
      documents drafted.4.
              Down
      payment made that is typically approximately 5 to 10% of the appraised
      value.5.
              Institution
      lends funds for the balance, less certain transaction fees that are
      typically between approximately 2 to 3%.6.
              A
      lien is then filed with the appropriate recorder’s
  office.
 
 There are
no assurances that our financing procedures will be adequate to secure the funds
needed to sustain our operations.
 
 DISTRIBUTION
 
 We have
no distribution agreements in place with anyone. We plan to sell the properties
we acquire primarily through direct selling efforts involving established real
estate brokers and property managers and corporations that may have a need for
residential and/or commercial real estate. We plan to contract with real estate
brokers, sub-contractors and other agents to assist in us on a
project-by-project basis.
 
 NEW
PRODUCTS OR SERVICES
 
 We
currently have no new products or services announced to the public. We will make
public announcement in the future upon entering into material contracts to
acquire any new real estate projects.
 
 COMPETITIVE
BUSINESS CONDITIONS
 
 We face
significant competition both in acquiring rental properties and in attracting
renters. Our primary market area of residential multi-family unit rentals is
highly competitive, and we face direct competition from a significant number of
multi-family unit landlords, many with a local, state-wide or regional presence
and, in some cases, a national presence. Many of these landlords are
significantly larger and have greater financial resources than us. Our
competition for renters comes from newer built apartment complexes as well as
older apartment buildings.
 
 In
addition, we face significant competition from home builders and land
developers, because many renters have moved out of the rental market into
single-family homes due to recent mortgage interest rates, which have reached
40-year lows in some cases. Nationally, there are over one hundred major land
developers. Approximately 10% of these developers capture approximately 50% of
the market for such developments. These developers have greater financial
resources than we do and are better poised for market retention and expansion
than we are. Specifically, our competition with national homebuilders is as
follows:
 
 -
              Pulte
      Homes;-
              Ryan
      Homes;-
              Ryland
      Homes;-
              John
      Weiland Homes;
 
 -
              Crescent
      Resources; and-
              Harris
      Group
 
 Of the
builders listed above, Pulte Homes is the only one that currently operates in
Massachusetts.  All the other builders operate in various states on
the East Coast and throughout the country.
 
 These
national homebuilders purchase land or lots of vacant land parcels to build
single-family homes, often in connection with nearby shopping centers and
commercial buildings. The national homebuilders have substantial resources to
enable them to build single-family homes for resale.
 
 These
builders engage in single-family home development and have greater financial
resources than we do. In addition, these companies have greater operational
resources because they are able to perform a variety of development tasks
themselves. These companies purchase vacant land tracts and perform all the work
necessary to construct the homes, such as land clearing and road development and
then build the homes themselves. In contrast, we do not have the financial or
operational resources to perform these tasks. These national and local builders
are better equipped to acquire tracts of land equipped with these capabilities
due to their operational and financial superiority over us.
 
 We have
no competitive advantages over any of the individuals and/or companies against
whom we compete. We have significantly less capital, assets, revenues, employees
and other resources than our local and/or national competition. There are no
barriers to entry into this market.
 
 14
 
 INTELLECTUAL
PROPERTY
 
 At
present, we do not have any patents, trademarks, licenses, franchises,
concessions, and royalty agreements, labor contracts or other proprietary
interests.
 
 GOVERNMENT
REGULATION ISSUES
 
 We are
subject to applicable provisions of federal and state securities laws and to
regulations specifically governing the real estate industry, including those
governing fair housing and federally backed mortgage programs. Our operations
will also be subject to regulations normally incident to business operations,
such as occupational safety and health acts, workmen's compensation statutes,
unemployment insurance legislation and income tax and social security related
regulations. Although we will use our best efforts to comply with applicable
regulations, we can provide no assurance of our ability to do so, nor can we
fully predict the effect of these regulations on our proposed
activities.
 
 RESEARCH
AND DEVELOPMENT
 
 We have
spent no funds on research and development.
 
 EMPLOYEES
 
 With the
exception of Duane Bennett we have no employees. We have no employment
agreements with any of our management. We do not anticipate hiring any
additional employees in the next 12 months.
  RESULTS
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND
2009
 
 Revenues
(for the Three and Six Months Ended June 30, 2010 and 2009).
 
 Revenues
increased $643 to $4,993 for the three months ended June 30, 2010, as compared
with $4,350 for the three months ended June 30, 2009. Revenues consisted of
rentals on residential rental properties. We had four leases, of which three
expired in May 2006. The expired leases are now considered month-to-month
leases. The increase in revenues is attributable to the rental rates and vacancy
rates of the School Street property which was sold and the acquisition of the
Osgood Street property.
 
 Revenues
increased $448 to $9,752 for the six months ended June 30, 2010, as compared
with $10,200 for the six months ended June 30, 2009. Revenues consisted of
rentals on residential rental properties. We had four leases, of which three
expired in May 2006. The expired leases are now considered month-to-month
leases. The decrease in revenues is attributable to the rental rates and vacancy
rates of the School Street property which was sold and the acquisition of the
Osgood Street property.
 
 All sales
transactions were with unrelated parties.
 
 Cost
of Sales (for the Three and Six Months Ended June 30, 2010 and
2009).
 
 None.
 
 Expenses
(for the Three and Six Months Ended June 30, 2010 and 2009).
 
 Operating
expenses for the three months ended June 30, 2010 decreased $4,764 to $3,754
from $8,518 in 2009. The decrease in expenses through the three months ended
June 30, 2010 was due to leaner selling, general and administrative expenses in
the amount of $2,782.
 
 Operating
expenses for the six months ended June 30, 2010 decreased $8,370 to $5,142 from
$13,512 in 2009. The decrease in expenses through the six months ended June 30,
2010 was due to selling, general and administrative expenses in the amount of
$3,198.
 
 We do not
have any lease agreements for our principal office and do not currently have any
employment agreements.
 
 Income
Taxes (for the Three and Six Months Ended June 30, 2010 and 2009).
 
 We had no
provision for income taxes for the three and six months ended June 30, 2010 and
2009, respectively, due to our net loss.
 
 If we
incur losses, we may have a deferred tax asset. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely
than not that, some portion or all of the deferred tax asset will not be
realized. Deferred tax assets and liabilities are adjusted for the effect of
changes in tax laws and rates on the date of enactment. We do not currently have
any net deferred tax assets.
 
 15
 
 Income/Losses
(for the Three and Six Months Ended June 30, 2010 and 2009).
 
 We had a
net loss of $(1,734), or less than $.01 per common share for the three months
ended June 30, 2010. This compares to a net loss of $(5,716), or less than $.01
per common share for the three months ended June 30, 2009. The decrease in net
income is attributable to the decrease in general and administrative expenses as
mentioned above.
 
 We had a
net loss of $(1,404), or less than $.01 per common share for the six months
ended June 30, 2010. This compares to a net loss of $(6,334), or less than $.01
per common share for the six months ended June 30, 2009. The decrease in net
loss is attributable to the decrease in general and administrative expenses as
mentioned above.
 
 Impact
of Inflation.
 
 We
believe that inflation has had a negligible effect on operations since
inception. We believe that we can offset inflationary increases in the cost of
operations by increasing sales and improving operating
efficiencies.
 
 Liquidity
and Capital Resources (for the Three and Six Months Ended June 30, 2010 and
2009).
 
 Cash
flows provided by (used in) operations were $543 and $(4,390 for the six months
ended June 30, 2010 and 2009, respectively. The negative cash flows for the six
months ended June 30, 2009 were mainly attributable to the net loss in the first
two quarters of 2009.
 
 We had no
cash flows provided by investing activities for the six months ended June 30,
2009.
 
 Cash
flows provided by (used in) financing activities were $(596) and $4,444 for the
six months ended June 30, 2010 and 2009, respectively. Cash flows used in these
periods were due primarily to repayments on notes payable on our income
producing rental property offset by the capital contributions of $5,000 from a
company related through common ownership 2009 only.
 
 Overall,
we have funded our cash needs from inception through June 30, 2009 with a series
of equity and debt transactions, including those with related parties as
described above. If we are unable to receive additional cash from our related
parties, we may need to rely on financing from outside sources through debt or
equity transactions. Our related parties are under no legal obligation to
provide us with capital infusions. Failure to obtain such financing could have a
material adverse effect on our operations and financial condition. This could
include an inability to do sufficient advertising for the homes that we sell,
which would make us less competitive in the marketplace. We could also find it
more difficult to enter into strategic joint venture relationships with third
parties. Finally, it would most likely delay the implementation of our business
plan. An alternative plan of operation in the event of a failure to obtain
financing would be to continue operations as currently configured, with the
result being little, if any, projected growth. Another alternative would be to
enter into a joint venture with another company that has working capital
available, albeit on less favorable terms than had we obtained financing, for
the development of our business plan.
 
 We had
cash on hand of $-0- and a working capital deficit of $9,696 as of June 30,
2009. Our current amount of cash in the bank is insufficient to fund our
operations for the next twelve months. We will rely on the existence of revenue
from our business, if any, and funding from outside sources; however, we have no
current or projected capital reserves that will sustain our business for the
next 12 months. Also, if the projected revenues fall short of needed capital we
will not be able to sustain our capital needs for the next twelve months. We
will then need to obtain additional capital through equity or debt financing to
sustain operations for an additional year. A lack of significant revenues during
2009 will significantly affect our cash position and make it necessary to raise
additional funds through equity or debt financing. Our current level of
operations would require capital of approximately $10,000 to sustain operations
through year 2009 and approximately $35,000 per year thereafter. Modifications
to our business plans or additional property acquisitions may require additional
capital for us to operate. There can be no assurance that additional capital
will be available to us when needed or available on terms favorable to
us.
 
 On a
long-term basis, liquidity depends on continuation and expansion of operations,
receipt of revenues, and additional infusions of capital and debt financing. We
are considering launching a local advertising campaign. Our current capital and
revenues are insufficient to fund such marketing. If we choose to launch such a
campaign, we will require substantially more capital. If necessary, we will
raise this capital through an additional stock offering. However, there can be
no assurance that we will be able to obtain additional equity or debt financing
in the future, if at all. If we are unable to raise additional capital, our
growth potential will be adversely affected and we will have to significantly
modify our plans. For example, if we unable to raise sufficient capital to
develop our business plan, we may need to:
 
 - Seek
projects of lesser value or that may be less profitable
 - Seek
smaller projects, which are less capital intensive, in lieu of larger projects;
or
 - Seek
projects that are outside our geographical area to generate some revenue for
us.
 
 Demand
for our rental services will be dependent on, among other things, market
acceptance of our services, the real estate market in general and general
economic conditions, which are cyclical in nature. Inasmuch as a major portion
of our activities is the receipt of rents from residential properties, our
business operations may be adversely affected by our competitors and prolonged
recession periods.
 
 Our
success will depend upon implementing our plan of operations and the risks
associated with our business plans. We operate a small real estate rental
business in the Springfield, Massachusetts area. We plan to strengthen our
position in this market. We also plan to expand our operations in the
Springfield area.
 
 Going
concern
 
 As shown
in the accompanying financial statements, we have suffered recurring losses from
operation to date. We have a net deficiency of $1,277,194 as of June 30, 2009.
These factors raise substantial doubt about our ability to continue as a going
concern.
 
 Management's
plans in regard to this matter are to raise equity capital and seek strategic
relationships and alliances in order to increase revenues in an effort to
generate positive cash flow. Additionally, we must continue to rely upon equity
infusions from investors in order to improve liquidity and sustain operations.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
 
 16
 
 ITEM
3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKETRISK
 
 The
information to be reported under this item is not required of smaller reporting
companies.
 
 ITEM 4. CONTROLS AND
PROCEDURES
 
 We
maintain disclosure controls and procedures designed to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934 (“Exchange Act”) is recorded, processed, summarized and reported within the
specified time periods. Our Chief Executive Officer and its Chief Financial
Officer (collectively, the “Certifying Officers”) are responsible for
maintaining our disclosure controls and procedures. The controls and procedures
established by us are designed to provide reasonable assurance that information
required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission’s rules and forms.
 
 As of the
end of the period covered by this report, the Certifying Officers evaluated the
effectiveness of our disclosure controls and procedures. Based on the
evaluation, the Certifying Officers concluded that our disclosure controls and
procedures were effective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the applicable rules and forms, and that it is accumulated
and communicated to our management, including the Certifying Officers, as
appropriate to allow timely decisions regarding required
disclosure.
 
 The
Certifying Officers have also concluded, based on their evaluation of our
controls and procedures that as of June 30, 2010, our internal controls over
financial reporting are effective and provide a reasonable assurance of
achieving their objective.
 
 The
Certifying Officers have also concluded that there was no change in our internal
controls over financial reporting identified in connection with the evaluation
that occurred during our fourth fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.
 
 ITEM 4T. CONTROLS AND
PROCEDURES
 
 (a) Conclusions
regarding disclosure controls and procedures. Disclosure controls and
procedures are the Company’s controls and other procedures that are designed to
ensure that information required to be disclosed by the Company in the reports
that the Company files or submits under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
under the Exchange Act is accumulated and communicated to the Company’s
management, including its Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Management is responsible for establishing and maintaining adequate internal
control over financial reporting.
 
 Under the
supervision and with the participation of our management, including our
principal executive officer and principal financial officer, we conducted an
evaluation of our disclosure controls and procedures, as such term is defined
under Rule 13a-14(c) promulgated under the Exchange Act as of June 30, 2010,
and, based on their evaluation, as of the end of such period, the our disclosure
controls and procedures were effective as of the end of the period covered by
the Quarterly Report,
 
 (b) Management’s
Report On Internal Control Over Financial Reporting. It is management’s
responsibilities to establish and maintain adequate internal controls over the
Company’s financial reporting. Internal control over financial reporting is
defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a
process designed by, or under the supervision of, the issuer’s principal
executive and principal financial officers and effected by the issuer’s
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles and includes those policies and procedures that:
 
 •           Pertain
to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the issuer;
and
 
 •           Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and that receipts and expenditures of the issuer are being
made only in accordance with authorizations of management of the issuer;
and
 
 •           Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the issuer’s assets that could have a
material effect on the financial statements.
 
 As of the
end of the period covered by the Quarterly Report, an evaluation was carried out
under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of
our internal control over financial reporting.
 
 Management
assessed the effectiveness of our internal control over financial reporting as
of June 30, 2010. In making this assessment, management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control-Integrated Framework.
 
 Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that, as of the end of such period, internal controls over financial
reporting were effective as of the end of the period covered by the
Report.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness
to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. All internal control systems, no matter
how well designed, have inherent limitations. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. Because of the inherent
limitations of internal control, there is a risk that material misstatements may
not be prevented or detected on a timely basis by internal control over
financial reporting. However, these inherent limitations are known features of
the financial reporting process. Therefore, it is possible to design into the
process safeguards to reduce, though not eliminate, this risk.
 
 This
Quarterly Report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management’s report in this Quarterly
Report.
 
 (c) Changes in
internal control over financial reporting. There were no changes in our
internal control over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
 
 17
 
 PART II.  OTHER
INFORMATION
 
 ITEM
1.      LEGAL PROCEEDINGS
 
 As of the
date of this report, we are not a party to any pending legal proceeding and are
not aware of any threatened legal proceeding.
 
 ITEM
1A.   RISK FACTORS
 
 The
information to be reported under this item has not changed since the previously
filed 10K, for the year ended December 31, 2009.
 
 
 ITEM
2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE
OF PROCEEDS
 
 We have
not had any unregistered sales of equity securities.
 
 ITEM
3.      DEFAULTS UPON SENIOR SECURITIES
 
 We have
not had any default upon senior securities.
 
 ITEM
4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
 
 We have
not had any submission of matters to a vote of security holders.
 
 ITEM
5.      OTHER INFORMATION
 
 None.
 
 ITEM
6.      EXHIBITS
 
 31.1 CEO
Certification Pursuant to Section 302
 31.2 CFO Certification Pursuant to
Section 302(included in
Exhibit 31.1)
 32.1
CEO Certification Pursuant to Section 906
 32.2 CFO Certification Pursuant to
Section 906(included in
Exhibit 32.1)
 
 Reports on Form8-K
 
 The Plan
of Exchange Agreement, dated January 12, 2010, between us, Duane Bennett, our
President, China Folk Tourism Co., Ltd., a company organized and existing under
the laws of the British Virgin Islands (including its successors and assigns
“CFT”), and the shareholders of CFT (the “CFT Shareholders”) has been
terminated. Pursuant to the Plan of Exchange Agreement (the “POE”), we would
have acquired 100% of the capital stock of CFT equal to 50,000 shares in
exchange for an issuance by us of 35,000,000 new post-split shares of our common
stock to CFT shareholders. In addition, CFT and/or the CFT Shareholders would
have acquired 200,000 of our post-split shares from Mr. Bennett, or his
assignees, in exchange for a cash payment by CFT and/or the CFT Shareholders of
an amount equal to $210,000 to Mr. Bennett, less any expenses incurred and a
secured promissory note in the amount of $260,000. See Form 8-K filed on July
30, 2010.
 
 18
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
 
 BLUESKY
      SYSTEMS CORPORATION
                (Registrant)Date:
      August 16, 2010
              By:
              /s/
      Duane BennettDuane
      Bennett
                President,
      Chief Executive Officer, and
                Chief
      Financial Officer