SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________



FORM 10-QSB

____________________________



xQUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES

EXCHANGE ACT OF 1934



For the quarterly period ended February 28, 2006



 ̈TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM

_______________ to _______________





Commission File # 333-123479



PROJECT ROMANIA INC.

(Exact name of small business issuer as specified in its charter)



Nevada

(State or other jurisdiction of incorporation or organization)



98-0418754

(IRS Employer Identification Number)



2686 Point Grey Rd., Vancouver, British Columbia, Canada V6K 1A5

(Address of principal executive offices)



(604) 736-5777

(Issuers telephone number)



Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]



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



The issuer had 19,315,000 shares of common stock issued and outstanding as of April 10, 2006.



Transitional Small Business Disclosure Format (Check One): Yes [ ] No [x]











---

PART I  FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS (unaudited)



Index



Page(s)

Consolidated Balance Sheets

F-1

Consolidated Statements of Operations

F-2

Consolidated Statements of Stockholders Equity (Deficit)

F-3

Consolidated Statements of Cash Flows

F-4-F-5

Notes to Consolidated Financial Statements

F-6



















---

PROJECT ROMANIA INC.

(a Development Stage Company)



Consolidated Balance Sheets

|ASSETS                                                                                                                                                                   |   |                               |   |                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | - | ----------------------------- | - | ----------------------------
|(all data in US$)                                                                                                                                                        |   | February 28,
2006
(unaudited) |   | August 31,
2005
(See Note 1)
|CURRENT ASSETS                                                                                                                                                           |   |                               |   |                             
|Cash                                                                                                                                                                     | $ | 1,139                         | $ | 1,205                       
|Prepaid expenses                                                                                                                                                         |   | 1,048                         |   | 2,200                       
|Accounts receivable                                                                                                                                                      |   | -                             |   | -                           
|Total current assets                                                                                                                                                     |   | 2,187                         |   | 3,405                       
|                                                                                                                                                                         |   |                               |   |                             
|PROPERTY AND EQUIPMENT                                                                                                                                                   |   |                               |   |                             
|Office equipment, net of $408 and $318
accumulated depreciation as of February 28,
2006 and August 31, 2005 respectively                                                 |   | 491                           |   | 607                         
|Total property and equipment                                                                                                                                             |   | 491                           |   | 607                         
|                                                                                                                                                                         |   |                               |   |                             
|Total assets                                                                                                                                                             | $ | 2,678                         | $ | 4,012                       
|                                                                                                                                                                         |   |                               |   |                             
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                     |   |                               |   |                             
|                                                                                                                                                                         |   |                               |   |                             
|CURRENT LIABILITIES                                                                                                                                                      |   |                               |   |                             
|Accounts payable                                                                                                                                                         | $ | 6,948                         | $ | 10,321                      
|Shareholder loans                                                                                                                                                        |   | 121,473                       |   | 75,795                      
|Total current liabilities                                                                                                                                                |   | 128,421                       |   | 86,116                      
|                                                                                                                                                                         |   |                               |   |                             
|STOCKHOLDERS EQUITY (DEFICIT)                                                                                                                                           |   |                               |   |                             
|Common shares, 100,000,000 shares with par
value of $0.001 authorized, 19,315,000 shares
issued and outstanding as at February 28, 2006
and August 31, 2005 respectively |   | 19,315                        |   | 19,315                      
|Discount on Common Share issuance                                                                                                                                        |   | (7,309)                       |   | (7,309)                     
|Paid-in Capital                                                                                                                                                          |   | 29,260                        |   | 29,260                      
|Accumulated deficit in the development stage                                                                                                                             |   | (165,140)                     |   | (121,781)                   
|Accumulated other comprehensive income (loss)                                                                                                                            |   | (1,869)                       |   | (1,589)                     
|Total stockholders equity (deficit)                                                                                                                                     |   | (125,743)                     |   | (82,104)                    
|                                                                                                                                                                         |   |                               |   |                             
|Total liabilities and stockholders
equity (deficit)                                                                                                                     | $ | 2,678                         | $ | 4,012                       











F-1



The accompanying notes to financial statements are an integral part of this statement

---

PROJECT ROMANIA INC.

(a Development Stage Company)

Consolidated Statements of Operations

|                                        | 3 Months
Ending
February 28,
2006 | 3 Months Ending
February 28,
2005 | 6 Months
Ending
February 28,
2006 | 6 Months
Ending
February 28,
2005 | August 15,
2003
(inception)
through
February 28,
2006
|--------------------------------------- | --------------------------------- | --------------------------------- | --------------------------------- | --------------------------------- | -----------------------------------------------------
|REVENUES:                               |                                   |                                   |                                   |                                   |                                                      
|Sales of iBox packages                  | $      1,295                      | $     1,383                       | $      2,467                      | $      2,401                      | $     23,662                                         
|                                        |                                   |                                   |                                   |                                   |                                                      
|Cost of Goods Sold                      | 195                               | 322                               | 434                               | 436                               | 10,928                                               
|GROSS MARGIN                            | $      1,100                      | $     1,061                       | $      2,033                      | $      1,965                      | $     12,734                                         
|                                        |                                   |                                   |                                   |                                   |                                                      
|EXPENSES:                               |                                   |                                   |                                   |                                   |                                                      
|Salaries & related taxes                | $             -                   | $     4,061                       | $             -                   | $      8,259                      | $     14,333                                         
|Professional & consultant
Fees          | 4,694                             | 8,924                             | 22,212                            | 20,902                            | 87,934                                               
|Administrative expenses                 | 11,297                            | 3,498                             | 19,981                            | 5,797                             | 50,415                                               
|Sales & marketing
expenses              | 157                               | 2,559                             | 694                               | 3,066                             | 14,287                                               
|Advertising                             | -                                 | 2,964                             | -                                 | 2,964                             | 5,542                                                
|Total expenses                          | $    16,148                       | $   22,006                        | $    42,887                       | $    40,988                       | $    172,511                                         
|                                        |                                   |                                   |                                   |                                   |                                                      
|Net (loss) from operations              | $ (15,048)                        | $ (20,945)                        | $ (40,854)                        | $ (39,023)                        | $ (159,777)                                          
|                                        |                                   |                                   |                                   |                                   |                                                      
|Interest income                         | 1                                 | 2                                 | 1                                 | 5                                 | 10                                                   
|Interest expense                        | (1,402)                           | (447)                             | (2,506)                           | (610)                             | (5,555)                                              
|                                        |                                   |                                   |                                   |                                   |                                                      
|Net (loss)                              | $ (16,449)                        | $ (21,390)                        | $ (43,359)                        | $ (39,628)                        | $ (165,322)                                          
|                                        |                                   |                                   |                                   |                                   |                                                      
|Loss per common share                   | $            *                    | $            *                    | $            *                    | $            *                    | $      (0.01)                                        
|*less than $(0.01) per share            |                                   |                                   |                                   |                                   |                                                      
|                                        |                                   |                                   |                                   |                                   |                                                      
|Weighted average shares                 |                                   |                                   |                                   |                                   |                                                      
|Outstanding                             | 19,315,000                        | 19,315,000                        | 19,315,000                        | 19,315,000                        | 16,433,955                                           
|                                        |                                   |                                   |                                   |                                   |                                                      
|OTHER COMPREHENSIVE
INCOME (LOSS):      |                                   |                                   |                                   |                                   |                                                      
|Net loss                                | $  16,449)                        | $ (21,390)                        | $ (43,359)                        | $ (39,628)                        | $ (165,322)                                          
|Foreign currency translation
adjustment | (99)                              | 232                               | (280)                             | (2,227)                           | (1,873)                                              
|Total other comprehensive
Income (loss) | $ (16,548)                        | $ (21,158)                        | $ (43,639)                        | $ (41,855)                        | $ (167,195)                                          
|                                        |                                   |                                   |                                   |                                   |                                                      

F-2

The accompanying notes to financial statements are an integral part of this statement

---





PROJECT ROMANIA INC.

(a Development Stage Company)



Consolidated Statements of Stockholders Equity (Deficit)



|                                                                                     |            |            |            |            |               | Deficit        |                 
|------------------------------------------------------------------------------------ | ---------- | ---------- | ---------- | ---------- | ------------- | -------------- | ----------------
|                                                                                     |            |            |            |            | Accumulated   | Accumulated    |                 
|                                                                                     |            |            | Discount   |            | Other         | During the     | Total           
|                                                                                     | Common     | Common     | On Common  | Paid-in    | Comprehensive | Development    | Stockholders   
|                                                                                     | Shares     | Stock      | Stock      | Capital    | Income        | Stage          | Equity (Deficit)
|Net loss from August 15, 2003 (date of inception)
through August 31, 2003            |           | $         | $         | $         | $        24   | $        (467) | $        (443)  
|Balance, August 31, 2003                                                             |           | $         | $         | $         | 24            | $        (467) | $        (443)  
|Common shares issued under private placement
September 9, 2003                       | 4,000,000  | $       58 | $         | $         | $            | $             | $           58  
|Recapitalization on reverse acquisition of Galaxy Telnet,
SRL on October 31, 2003    | 2,000,000  | $  5,942   | $ (7,309)  | $         | $            | $             | $     (1,367)   
|Common shares issued for cash at $0.001
November 1, 2003                             | 6,000,000  | $  6,000   | $         | $         | $            | $             | $      6,000    
|Common shares issued for cash at $0.005 during the
period ended August 31, 2004      | 5,315,000  | $  5,315   | $         | $ 21,260   | $            | $             | $    26,575     
|Common shares issued for conversion of shareholder
debt at $0.005 on August 20, 2004 | 2,000,000  | $  2,000   | $         | $8,000     | $            | $             | $    10,000     
|Net loss for year ended August 31, 2004                                              |           |           |           |           | 137           | (39,413)       | (39,276)        
|Balance, August 31, 2004                                                             | 19,315,000 | $ 19,315   | $ (7,309)  | $ 29,260   | $      161    | $  (39,880)    | $      1,547    
|Net loss for year ended August 31, 2005                                              |           |           |           |           | (1,750)       | (81,901)       | (83,651)        
|Balance, August 31, 2005                                                             | 19,315,000 | $ 19,315   | $ (7,309)  | $ 29,260   | $ (1,589)     | $ (121,781)    | $   (82,104)    
|Net loss for the six months ended February 28, 2006                                  |           |           |           |           | (280)         | (43,359)       | (43,639)        
|Balance, February 28, 2006                                                           | 19,315,000 | $ 19,315   | $ (7,309)  | $ 29,260   | $ (1,869)     | $ (165,140)    | $ (125,743)     







F-3

The accompanying notes to financial statements are an integral part of this statement

---

PROJECT ROMANIA INC.

(a Development Stage Company)



Consolidated Statements of Cash Flows



|                                                                            | 6 Months
Ending
February 28,
2006 | 6 Months
Ending
February 28,
2005 | August 15, 2003
(inception)
through
February 28,
2006
|--------------------------------------------------------------------------- | --------------------------------- | --------------------------------- | -----------------------------------------------------
|Cash flows from operating
activities:                                       |                                   |                                   |                                                      
|Net loss for the period                                                     | $ (43,359)                        | $  (39,628)                       | $  (165,140)                                         
|Reconciling adjustments:                                                    |                                   |                                   |                                                      
|Adjustments to reconcile net loss to net
cash used in operating activities: |                                   |                                   |                                                      
|Depreciation                                                                | 116                               | 59                                | 372                                                  
|Accrued interest on
shareholder loans                                       | 2,506                             | 610                               | 5,555                                                
|Net change in operating
Assets and liabilities:                             |                                   |                                   |                                                      
|Prepaid expenses                                                            | 1,152                             | (7,908)                           | (1,048)                                              
|Accounts receivable                                                         | -                                 | -                                 | -                                                    
|Accounts payable and
accrued liabilities                                    | (3,373)                           | (997)                             | 6,948                                                
|Net cash provided (used) by
operating activities                            | (42,958)                          | (47,864)                          | (153,313)                                            
|                                                                            |                                   |                                   |                                                      
|Cash flows from investing activities:                                       |                                   |                                   |                                                      
|Purchase of property and equipment                                          | -                                 | (71)                              | (925)                                                
|Net cash (used) by investing activities                                     | -                                 | (71)                              | (925)                                                
|                                                                            |                                   |                                   |                                                      
|Cash flows from financing activities:                                       |                                   |                                   |                                                      
|Common stock issued for cash                                                | -                                 | -                                 | 32,633                                               
|Loans by stockholders                                                       | 43,172                            | 40,427                            | 124,613                                              
|Net cash provided by financing activities                                   | 43,172                            | 40,427                            | 157,246                                              
|                                                                            |                                   |                                   |                                                      
|Effect of foreign currency translation                                      | (280)                             | (2,227)                           | (1,869)                                              
|                                                                            |                                   |                                   |                                                      
|Net increase (decrease) in cash                                             | (66)                              | (9,735)                           | 1,139                                                
|Cash, beginning of period                                                   | 1,205                             | 13,351                            | -                                                    
|                                                                            |                                   |                                   |                                                      
|Cash, end of period                                                         | $     1,139                       | $     3,616                       | $      1,139                                         



F-4



The accompanying notes to financial statements are an integral part of this statement





---



PROJECT ROMANIA INC.

(a Development Stage Company)



Consolidated Statements of Cash Flows



|                                                                      | 6 Months
Ending
February 28,
2006 | 6 Months
Ending
February 28,
2005 | August 15, 2003
(inception)
through
February 28,
2006
|--------------------------------------------------------------------- | --------------------------------- | --------------------------------- | -----------------------------------------------------
|                                                                      |                                   |                                   |                                                      
|Supplemental cash flow
information:                                   |                                   |                                   |                                                      
|Interest earned                                                       | $       1                         | $       5                         | $       10                                           
|Interest paid                                                         | -                                 | -                                 | (201)                                                
|Income taxes paid                                                     | -                                 | -                                 | -                                                    
|                                                                      |                                   |                                   |                                                      
|                                                                      |                                   |                                   |                                                      
|Supplemental schedule of non-cash
investing and financing activities: |                                   |                                   |                                                      
|Common stock issued for
debt conversion                               | -                                 | -                                 | 10,000                                               
|Debt acquired in reverse
acquisition                                  | -                                 | -                                 | 1,367                                                
|                                                                      |                                   |                                   |                                                      









































F-5



The accompanying notes to financial statements are an integral part of this statement





---

PROJECT ROMANIA INC.

(a Development Stage Company)



NOTES TO FINANCIAL STATEMENTS



Note 1 Basis of Presentation



The financial statements included herein have been prepared by Project Romania Inc. (Project Romania, PRI or the Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the Commission) for reporting on interim statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the August 31, 2005 audited financial statements and the accompanying notes included in the Companys annual report on Form 10-KSB filed with the Commission. While management believes the procedures followed in preparing these financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be followed by the Company later in the year. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In managements opinion all adjustments necessary for a fair presentation of the Companys financial statements are reflected in the interim periods included.



Amounts shown for August 31, 2005 are based upon the audited financial statements of that date.



Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for the most recent fiscal year end August 31, 2005 as contained in the Companys annual report on Form 10-KSB, have been omitted.



Note 2Going Concern



Generally accepted accounting principles in the United States of America contemplate the continuation of the Company as a going concern. However, the Company has accumulated an operating loss of $(165,140) since its inception and has limited business operations, which raises substantial doubt about the Companys ability to continue as a going concern. Through a financing commitment from one of the directors the Company has sufficient financial resources to continue operating until September, 2006. The Company's ability to continue as a going concern is contingent upon the successful completion of additional financing arrangements and its ability to achieve and maintain profitable operations.  Management plans to raise additional funds to finance the operating and capital requirements of the Company through a combination of equity and debt financings.  Amounts raised will be used to provide financing for marketing and promotion, to secure additional property and equipment, and for other working capital purposes.  While the Company is expending its best efforts to achieve the above plans, there is no assurance that any such activity will generate funds that will be available for operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern.  These financial statements do not include any adjustments that might arise from this uncertainty.













F-6





---

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION



This quarterly report on Form 10-QSB contains "forward-looking statements" relating to the registrant which represent the registrant's current expectations or beliefs including, statements concerning registrants operations, performance, financial condition and growth.  For this purpose, any statement contained in this quarterly report on Form 10-QSB that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as "may", "anticipation", "intend", "could", "estimate", or "continue" or the negative or other comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, such as credit losses, dependence on management and key personnel and variability of quarterly results, ability of registrant to continue its growth strategy and competition, certain of which are beyond the registrant's control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.



The following discussion and analysis should be read in conjunction with the information set forth in the Companys audited financial statements for the years ended August 31, 2005 and August 31, 2004.



Our financial statements are prepared in accordance with U.S. generally accepted accounting principles.  We have expensed all development costs related to our establishment.



PRI was incorporated in Nevada on June 11, 2003, under the name Poseidon Casinos Inc., but changed its name to Project Romania Inc. by filing Articles of Amendment with the Nevada Secretary of State effective October 30, 2003.



PRI acquired 100% of the issued and outstanding shares of Galaxy Telnet SRL (Galaxy Telnet) a company incorporated under the laws of Romania, on August 15, 2003 under a stock exchange agreement between PRI and Galaxy Telnet dated as of October 31, 2003. Before the stock exchange transaction, L. Gabriel Luca, a Romanian-born, Canadian citizen entrepreneur, was the sole shareholder of Galaxy Telnet. On the closing date of the stock exchange transaction, Mr. Luca was also the sole director and officer of PRI. PRI issued 6,000,000 shares of its common stock to Mr. Luca in exchange for his shares in Galaxy Telnet. Mr. Lucas shares in Galaxy Telnet represented all the issued and outstanding shares of the common stock of Galaxy Telnet on the closing date of the share exchange transaction.



We are a holding company without any assets other than the shares we hold in Galaxy Telnet. Our core business operations consist of the Voice Over Internet Protocol (VoIP) business operations of Galaxy Telnet, our wholly owned operating subsidiary. All our revenues are derived from the operations of Galaxy Telnet.



Before the acquisition of Galaxy Telnet, we did not conduct business.



Our business operations take place solely within Romania, a country located in Southeastern Europe, bordering the Black Sea, between Bulgaria and Ukraine, with a landmass slightly smaller than Oregon. Romania is situated in the Eastern European time zone, i.e. GMT+2 hours.



Galaxy Telnet was created to concentrate on the continuous market introduction of emerging communication innovations in Romania. Its current focus is the introduction of Internet telephony solutions to the local and long distance telecommunications market in Romania.



Internet telephony (also known as, "Voice over Packet," "Voice over Internet Protocol" or "VoIP") is a category of hardware and software that enables people to use the Internet as the transmission medium for telephone calls. It is comprised of several interconnected processes that convert a standard phone voice signal in analog format into a stream of data packets on a data packet or digital network and back again. VoIP allows the human voice to travel simultaneously over a single data packet network line with both fax information and modem data. VoIP provides rich benefits for all levels of suppliers and end users, from networking equipment manufacturers who are providing next-generation equipment to service providers, who can now market new services to end users in businesses and homes. We are one such service provider.



Results of Operations



Three and Six Month Periods Ended February 28, 2006 Compared to the Three and Six Month Periods Ended February 28, 2005



Overview



During the quarter, management and the board undertook a comprehensive review of the development of our VoIP business over the last two years. In general, we are not satisfied with the growth of sales and our market penetration for this product in Romania. Since inception we have experienced negative cash flow from operations and, unless we diversify, expect to experience significant negative cash flow from operations for the foreseeable future as we expend greater funds on marketing and sales related initiatives. Although we expect to have sufficient working capital to pursue our current plans and will continue with operation of our VoIP operations, management also intends to devote time to identifying potential expansion opportunities and/or acquisitions with a view towards generating additional revenues for the Company.



Revenues



Our sales were relatively unchanged at $1,295 and $2,467 for the three and six months ended February 28, 2006 compared with $1,383 and $2,401 for the three and six months ended February 28, 2005. The failure to grow sales is a matter of concern to management.



Expenses



Our operating expenses are classified into six categories:



-

Cost of Goods Sold

-

Salaries & Related Taxes

-

Professional & Consultant Fees

-

Administrative Expenses

-

Sales & Marketing Expenses

-

Advertising Expenses



Cost of Goods Sold.For the three and six months ended February 28, 2006, Cost of Goods Sold were $195 and $434 respectively. Gross Margin for the same periods was $1,100 and $2,033 respectively. This compared with Cost of Goods Sold of $322 and $436 for the three and six months ended February 28, 2005. Gross Margin for these same periods was $1,061 and $1,965 respectively. Cost of Goods Sold amounts are driven by sales levels and are in line with expectations.



Salaries & Related Taxes. Salaries & Related Taxes are comprised of wages and payroll taxes paid to and for employees of the Company. Salaries & Related Taxes were nil for the three and six month periods ended February 28, 2006 compared to $4,160 and $8,259 for the three and six month periods ended February 28, 2005. The greater cost of salaries and related taxes in the earlier reporting period is explained by the fact that the Company employed sales staff and remitted payroll taxes during that period. The Company did not have any employees in the later reporting period and changed its staffing arrangements to switch from engaging employees to hiring consultants. As of the end of the second quarter of fiscal 2006, we did not have any staff classified as employees and are not anticipating changes in our staffing methods at this time.



Professional & Consultant Fees. Professional & Consultant Fees, comprised of fees for work performed by accounting, audit and legal professionals and of fees and commissions charged by consultants, were $4,694 and $22,212 for the three and six month periods ended February 28, 2006 compared to $8,924 and $20,902 for the three and six month periods ended February 28, 2005. The relative quarter over quarter decrease in the three month figures is attributable to timing differences in billing by the consultants we engaged and this is reflected in the relatively static level of consulting fees between the comparative six month periods.



Administrative Expenses. Administrative Expenses were $11,297 and $19,981 for the three and six month periods ended February 28, 2006 compared to $3,498 and $5,797 for the three and six month periods ended February 28, 2005. The relative period to period increases in Administrative Expenses are primarily attributable to changes in the following five items: Rent, which increased to $2,654 for the six months versus $1,257; Postal & Telecommunications expenses, which increased to $3,454 versus $2,864 for the six months; Filing fees related to the Companys Form SB-2 filings, which increased to $5,447 versus $1,393 for the six months; Stock Transfer fees related to issuance of the Companys shares, which increased to $1,470 versus $nil for the six months; and Internet & Cable expenses, incurred to support the Companys product delivery infrastructure, which increased to $3,171 versus $173 for the six months. We anticipate Administrative Expenses will decrease moderately in upcoming quarters due to the decreased need to file documents with the SEC as a result of the completion of the SECs review of our registration statement on Form SB-2.



Sales & Marketing Expenses. Sales & Marketing Expenses, comprised of costs for business travel and meals, decreased substantially to $694 and $157 for the three and six month periods ended February 28, 2006 compared to $2,599 and $3,066 for the three and six month periods ended February 28, 2006. These decreases are largely attributable to changes we have made to our targeted market areas. Based on our sales development goals, we expect Sales & Marketing Expenses will increase in upcoming quarters as we increase our customer base.



Advertising Expenses. Advertising Expenses are comprised of web site development and maintenance and Internet advertising. The Company did not incur any advertising expenses for the three and six month periods ended February 28, 2006, but expended $2,964 and $2,964 during the three and six month periods ended February 28, 2005. This decrease is the result of changes in our overall marketing plans during fiscal 2006. We anticipate there may be an increase in Advertising Expenses if we see possibilities for increasing sales through specific Internet advertising opportunities during upcoming quarters.



Net Loss. We incurred net losses from operations of $(15,048) and $(40,854) for the three and six month periods ended February 28, 2006 compared with net losses from operations of $(20,945) and $(39,023) for the three and six month periods ended February 28, 2005.



Liquidity and Capital Resources



Since its inception, the Company has financed its cash requirements from cash generated from operations, sale of common stock, a bank line of credit and shareholder loans. Uses of funds have included activities to establish our business, acquire equipment, the payment of salaries, rents, sales & marketing expenses and other administrative expenses.



The Companys principal sources of liquidity as of February 28, 2006, consisted of $1,139 in cash and cash equivalents, a $10,000 bank line of credit and a shareholder loan facility from a director and principal shareholder.



Under the shareholder loan facilities from L.Gabriel Luca and R. Michael Stunden loan advances to or on behalf of Galaxy and PRI, bear interest at 5% per annum, calculated and compounded annually, not in advance. Galaxy and PRI are required to repay the outstanding principal and interest at any time after May 1, 2007, on demand. Prepayment of all or a portion of the outstanding principal and interest may be made by Galaxy or PRI at any time without notice, bonus or penalty.



The amount outstanding under shareholder loan facilities was $121,473 as of February 28, 2006; and the amount outstanding under the bank line of credit was $2,209.37 as of March 14, 2006.



Since inception through to and including February 28, 2006, we have raised $42,575 through private placements of our common shares and debt conversion and $23,662 through sales.



We believe the Company will have adequate resources to implement its strategic objectives in upcoming quarters.



Material Events and Uncertainties



Our operating results are difficult to forecast. Our prospects should be evaluated in light of the risks, expenses and difficulties commonly encountered by comparable early stage companies in rapidly evolving markets.



There can be no assurance that we will successfully address such risks, expenses and difficulties. In addition, even though we have an operational business with revenues, we cannot assure you that our revenues will increase or that we will become profitable in the future.



ITEM 3. CONTROLS AND PROCEDURES



Disclosure controls and procedures



As of the end of the period covered by this report (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of the Company's Principal Executive Officer and Principal Financial Officer (the Certifying Officers) of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e)) under the Exchange Act.Based on that evaluation, the Certifying Officers have concluded that, as of the Evaluation Date, the disclosure controls and procedures in place were adequate to ensure that information required to be disclosed by us, including our consolidated subsidiaries, in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported on a timely basis in accordance with applicable rules and regulations.



Internal control over financial reporting



The Certifying Officers reviewed our internal control over financial reporting (as defined in rules 13a-15(f) and 15d-15(f)) under the Exchange Actas of the Evaluation Date and concluded that no changes occurred in such control or in other factors during the first quarter of our fiscal year ending August 31, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.









PART II  OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



There is no litigation pending or threatened by or against us.



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



The Company did not make any sales of equity securities during the quarter.



ITEM 3. DEFAULTS UPON SENIOR SECURITIES



The Company has no senior securities outstanding.



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



During the quarter ended February 28, 2006, no matters were submitted to a vote of the Company's security holders, through the solicitation of proxies or otherwise.



ITEM 5. OTHER INFORMATION



(a) No matters arose during the quarter which required the Company to report any information through the filing of a current report on Form 8-K.



(b) During the quarter there were no material changes to the procedures by which security holders may recommend nominees to the registrants board of directors.



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



EXHIBIT INDEX



Number

Exhibit Description



3.1

Articles of Incorporation*



3.2

Certificate of Amendment of Articles of Incorporation*



3.3

Bylaws*



10.1

Loan Agreement between R. Michael Stunden as lender and Project Romania Inc. as borrower and dated November 1, 2003 *



10.2

Amendment Agreement dated April 20, 2005 **



31.1

Certificate of President (chief executive officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



31.2

Certificate of Chief Financial Officer (principal financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002



32.1

Certificate of President (chief executive officer) and Treasurer (principal



financial officer) pursuant to 18 U.S.C. Section 1350, as adopted pursuant to



Section 906 of the Sarbanes-Oxley Act of 2002



*    Filed as an exhibit to our registration statement on Form SB-2 filed March 22, 2005 and incorporated herein by this reference



**  Filed as an exhibit to our amended registration statement on Form SB-2 filed May 9, 2005 and incorporated herein by this reference.





SIGNATURES



In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



PROJECT ROMANIA INC.



/s/ L. Gabriel Luca

L. Gabriel Luca

President and Director



Dated: April 10, 2006



/s/ R. Michael Stunden

R. Michael Stunden

Chief Financial Officer, Secretary, Treasurer and Director



Dated: April 10, 2006