----

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**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

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**FORM      10-Q**

**x QUARTERLY      REPORT      PURSUANT TO SECTION 13 OR 15(d) OF THE **

**SECURITIES      EXCHANGE ACT OF 1934**

** o**
**      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES      EXCHANGE ACT OF 1934**

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**KID      CASTLE EDUCATIONAL CORPORATION**

| **Florida**                                    | **59-2549529**                     |
|------------------------------------------------|------------------------------------|
| (State                or other jurisdiction of | (IRS                Employer       |
| incorporation                or organization)  | Identification                No.) |
|                                           |                               |

| **8th                Floor, No. 98 Min Chuan Road, Hsien Tien****Taipei,                Taiwan ROC** |
|------------------------------------------------------------------------------------------------------|
| (Address                of principal executive offices)                                              |

**011-886-22218      5996**

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**ITEM      1 - FINANCIAL STATEMENTS**

**Kid      Castle Educational Corporation**

**Condensed        Consolidated Balance Sheets**

**(Expressed        in US Dollars)**

|                                                                                                                                                                                                                                                  |   |                               |       |                              |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|-----------------------------------|--------|
| ASSETS                                                                                                                                                                                                                                                |   | September                  30,2005 |       | December                  31,2004 |   |
|                                                                                                                                                                                                                                                  |   | (Unaudited)                        |       | (Audited)                         |   |
| Current                  assets                                                                                                                                                                                                                       |   |                               |       |                              |   |
| Cash                  and bank balances include pledged bank fixed deposits of $67,064                  and                  $294,331                                                                                                                 |   | $                                  | 273,925    |                              | $      | 507,895 |   |
| Notes                  and accounts receivable include pledged notes receivables of $1,133,305                  and $1,218,356, net of provision for doubtful accounts and sales                  returns                  of $1,021,047 and $196,188 |   |                               | 4,513,386  |                              |   | 3,620,260 |   |
| Inventories,                  net                                                                                                                                                                                                                     |   |                               | 2,681,349  |                              |   | 2,979,738 |   |
| Other                  receivables                                                                                                                                                                                                                    |   |                               | 178,069    |                              |   | 337,848 |   |
| Prepayments                  and other current assets                                                                                                                                                                                                 |   |                               | 738,222    |                              |   | 478,752 |   |
| Deferred                  income tax assets                                                                                                                                                                                                           |   |                               | 197,453    |                              |   | 218,574 |   |
| Total                  current assets                                                                                                                                                                                                                 |   |                               | 8,582,404  |                              |   | 8,143,067 |   |
| Deferred                  income tax assets                                                                                                                                                                                                           |   |                               | 180,285    |                              |   | 170,477 |   |
| Prepaid                  long-term investments                                                                                                                                                                                                        |   |                               | —    |                              |   | 24,165 |   |
| Long-term                  investments                                                                                                                                                                                                                |   |                               | 102,475    |                              |   | 99,467 |   |
| Property                  and equipment, net                                                                                                                                                                                                          |   |                               | 2,114,023  |                              |   | 2,188,092 |   |
| Intangible                  assets, net of amortization                                                                                                                                                                                               |   |                               | 766,645    |                              |   | 894,419 |   |
| Long-term                  notes receivable includes pledged notes receivable of $484,523                  and                  $407,149                                                                                                              |   |                               | 694,163    |                              |   | 648,120 |   |
| Other                  assets                                                                                                                                                                                                                         |   |                               | 676,893    |                              |   | 613,617 |   |
| Total                  assets                                                                                                                                                                                                                         |   | $                                  | 13,116,888 |                              | $      | 12,781,424 |   |
| LIABILITIES                  AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                           |   |                               |       |                              |   |   |   |
| Current                  liabilities                                                                                                                                                                                                                  |   |                               |       |                              |   |   |   |
| Bank                  borrowings - short-term and maturing within one                  year                                                                                                                                                           |   | $                                  | 2,313,652  |                              | $      | 2,632,982 |   |
| Notes                  and accounts payable                                                                                                                                                                                                           |   |                               | 2,080,556  |                              |   | 1,506,543 |   |
| Accrued                  expenses                                                                                                                                                                                                                     |   |                               | 1,110,392  |                              |   | 703,407 |   |
| Other                  payables                                                                                                                                                                                                                       |   |                               | 319,095    |                              |   | 283,080 |   |
| Deposits                  received                                                                                                                                                                                                                    |   |                               | 837,496    |                              |   | 498,266 |   |
| Receipts                  in advance                                                                                                                                                                                                                  |   |                               | 2,753,266  |                              |   | 2,996,558 |   |
| Income                  tax payable                                                                                                                                                                                                                   |   |                               | 208,181    |                              |   | 97,142 |   |
| Obligation                  under capital leases due within one year                                                                                                                                                                                  |   |                               | 36,748     |                              |   | 8,659 |   |
| Total                  current liabilities                                                                                                                                                                                                            |   |                               | 9,659,386  |                              |   | 8,726,637 |   |
| Bank                  borrowings maturing after one year                                                                                                                                                                                              |   |                               | 1,768,217  |                              |   | 1,651,825 |   |
| Receipts                  in advance                                                                                                                                                                                                                  |   |                               | 1,189,140  |                              |   | 1,124,809 |   |
| Obligation                  under capital leases                                                                                                                                                                                                      |   |                               | 22,149     |                              |   | — |   |
| Deposits                  received                                                                                                                                                                                                                    |   |                               | 413,487    |                              |   | 689,530 |   |
| Accrued                  pension liabilities                                                                                                                                                                                                          |   |                               | 245,995    |                              |   | 160,907 |   |
| Total                  liabilities                                                                                                                                                                                                                    |   |                               | 13,298,374 |                              |   | 12,353,708 |   |
|                                                                                                                                                                                                                                                       |   |                               |       |                              |   |   |   |
|                                                                                                                                                                                                                                                       |   |                               |       |                              |   |   |   |

----

**Kid        Castle Educational Corporation**

**Condensed        Consolidated Balance Sheets - Continued**

**(Expressed        in US Dollars)**

|                                                                                                                                                                  |   |                               |       |                              |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|-----------------------------------|--------|
|                                                                                                                                                                       |   | September                  30,2005 |       | December                  31,2004 |   |
|                                                                                                                                                                  |   | (Unaudited)                        |       | (Audited)                         |   |
|                                                                                                                                                                       |   |                               |       |                              |   |
| Minority                  interest                                                                                                                                    |   |                               | 17,774     |                              |   | 33,791 |   |
|                                                                                                                                                                  |   |                               |       |                              |   |   |   |
| Shareholders’                  equity                                                                                                                           |   |                               |       |                              |   |   |   |
|                                                                                                                                                                  |   |                               |       |                              |   |   |   |
| Capital                  Stock                                                                                                                                        |   |                               |       |                              |   |   |   |
| Common                  stock, no par share:                                                                                                                          |   |                               |       |                              |   |   |   |
| 25,000,000                  shares authorized; 18,999,703 shares issued and outstanding at                  September                  30, 2005 and December 31, 2004 |   |                               | 7,669,308  |                              |   | 7,669,308 |   |
| Legal                  reserve                                                                                                                                        |   |                               | 65,320     |                              |   | 65,320 |   |
| Retained                  deficit                                                                                                                                     |   |                               | (8,001,668 | )                                 |   | (7,312,074 | ) |
| Accumulated                  other comprehensive loss                                                                                                                 |   |                               | (126,241   | )                                 |   | (222,650 | ) |
| Total                  shareholders’ equity                                                                                                                     |   |                               | (199,260   | )                                 |   | 393,925 |   |
| Total                  liabilities and shareholders’ equity                                                                                                     |   | $                                  | 13,116,888 |                              | $      | 12,781,424 |   |
|                                                                                                                                                                       |   |                               |       |                              |   |   |   |
|                                                                                                                                                                  |   |                               |       |                              |   |   |   |

----

**Kid      Castle Educational Corporation**

**Condensed        Consolidated Statements of Operations**

**(Expressed        in US Dollars)**

**(Unaudited)**

|                                                                                        |   |                                                             |       |
|---------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|
|                                                                                        |   | Nine                  months endedSeptember                  30, |       |
|                                                                                        |   | 2005                                                             |       | 2004 |   |
| Operating                  Revenue                                                          |   |                                                             |       |   |   |
| Sales                  of goods                                                             |   | $                                                                | 6,372,162  |   | $ | 5,661,046 |   |
| Franchising                  income                                                         |   |                                                             | 1,914,925  |   |   | 1,814,984 |   |
| Other                  operating revenue                                                    |   |                                                             | 448,807    |   |   | 389,846 |   |
|                                                                                        |   |                                                             |       |   |   |   |   |
| Total                  net operating revenue                                                |   |                                                             | 8,735,894  |   |   | 7,865,876 |   |
|                                                                                        |   |                                                             |       |   |   |   |   |
| Operating                  costs                                                            |   |                                                             |       |   |   |   |   |
| Cost                  of goods sold                                                         |   |                                                             | (2,701,227 | ) |   | (2,426,012 | ) |
| Cost                  of franchising                                                        |   |                                                             | (547,535   | ) |   | (373,980 | ) |
| Other                  operating costs                                                      |   |                                                             | (307,076   | ) |   | (307,660 | ) |
|                                                                                        |   |                                                             |       |   |   |   |   |
| Total                  operating costs                                                      |   |                                                             | (3,555,838 | ) |   | (3,107,652 | ) |
|                                                                                        |   |                                                             |       |   |   |   |   |
| Gross                  profit                                                               |   |                                                             | 5,180,056  |   |   | 4,758,224 |   |
| Other                  operating expenses                                                   |   |                                                             | (5,609,858 | ) |   | (5,409,916 | ) |
| Loss                  from operations                                                       |   |                                                             | (429,802   | ) |   | (651,692 | ) |
| Interest                  income                                                            |   |                                                             | 11,000     |   |   | 22,582 |   |
| Interest                  expenses                                                          |   |                                                             | (182,346   | ) |   | (123,474 | ) |
| Share                  of profit (loss) of investments                                      |   |                                                             | (21,633    | ) |   | 10,609 |   |
| Other                  non-operating income, net                                            |   |                                                             | 192,401    |   |   | 70,982 |   |
| Loss                  before income taxes and minority interest                             |   |                                                             | (430,380   | ) |   | (670,993 | ) |
| Provision                  for taxes                                                        |   |                                                             | (275,361   | ) |   | (111,567 | ) |
| Loss                  before minority interest                                              |   |                                                             | (705,741   | ) |   | (782,560 | ) |
| Minority                  interest in (income) loss                                         |   |                                                             | 16,147     |   |   | (2,611 | ) |
| Net                  loss                                                                   |   | $                                                                | (689,594   | ) | $ | (785,171 | ) |
| Loss                  per share - basic and diluted                                         |   | $                                                                | (0.04      | ) | $ | (0.04 | ) |
| Weighted-average                  shares used to compute loss per share - basic and diluted |   |                                                             | 18,999,703 |   |   | 18,999,703 |   |

----

**Kid        Castle Educational Corporation**

**Condensed        Consolidated Statements of Operations**

**(Expressed        in US Dollars)**

**(Unaudited)**

|                                                                                                                |   |                                                          |       |
|---------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------|------------|
|                                                                                                                |   | Three                months endedSeptember                30, |       |
|                                                                                                                |   | 2005                                                          |       | 2004 |   |
|                                                                                                                     |   |                                                          |       |
| Operating                Revenue                                                                                    |   |                                                          |       |   |   |
| Sales                of goods                                                                                       |   | $                                                             | 2,822,830  |   | $ | 2,444,267 |   |
| Franchising                income                                                                                   |   |                                                          | 606,879    |   |   | 622,244 |   |
| Other                operating revenue                                                                              |   |                                                          | 142,459    |   |   | 185,932 |   |
|                                                                                                                |   |                                                          |       |   |   |   |   |
| Total                net operating revenue                                                                          |   |                                                          | 3,572,168  |   |   | 3,252,443 |   |
|                                                                                                                |   |                                                          |       |   |   |   |   |
| Operating                costs                                                                                      |   |                                                          |       |   |   |   |   |
| Cost                of goods sold                                                                                   |   |                                                          | (1,194,054 | ) |   | (1,101,089 | ) |
| Cost                of franchising                                                                                  |   |                                                          | (370,880   | ) |   | (128,476 | ) |
| Other                operating costs                                                                                |   |                                                          | (129,805   | ) |   | (171,921 | ) |
|                                                                                                                |   |                                                          |       |   |   |   |   |
| Total                operating costs                                                                                |   |                                                          | (1,694,739 | ) |   | (1,401,486 | ) |
|                                                                                                                |   |                                                          |       |   |   |   |   |
| Gross                profit                                                                                         |   |                                                          | 1,877,429  |   |   | 1,850,957 |   |
| Other                operating expenses                                                                             |   |                                                          | (2,302,459 | ) |   | (1,525,320 | ) |
| Income                (loss) from operations                                                                        |   |                                                          | (425,030   | ) |   | 325,637 |   |
| Interest                income                                                                                      |   |                                                          | 2,622      |   |   | 3,412 |   |
| Interest                expenses                                                                                    |   |                                                          | (57,985    | ) |   | (39,368 | ) |
| Share                of loss of investments                                                                         |   |                                                          | (34,116    | ) |   | (20,816 | ) |
| Other                non-operating income (loss), net                                                               |   |                                                          | 138,777    |   |   | (10,788 | ) |
| Income                (loss) before income taxes and minority interest                                              |   |                                                          | (375,732   | ) |   | 258,077 |   |
| Provision                for taxes                                                                                  |   |                                                          | (90,611    | ) |   | (110,345 | ) |
| Income                (loss) before minority interest                                                               |   |                                                          | (466,343   | ) |   | 147,732 |   |
| Minority                interest in (income) loss                                                                   |   |                                                          | 35,206     |   |   | (2,611 | ) |
| Net                income (loss)                                                                                    |   | $                                                             | (431,137   | ) | $ | 145,121 |   |
| Earnings                (loss) per share - basic and diluted                                                        |   | $                                                             | (0.02      | ) | $ | 0.01 |   |
| Weighted-average                shares used to compute earnings (loss) per share - basic and                diluted |   |                                                          | 18,999,703 |   |   | 18,999,703 |   |

----

**Kid      Castle Educational Corporation**

**Condensed      Consolidated Statement of Comprehensive Income (Loss)**

**(Expressed      in US Dollars)**

**(Unaudited)**

|                                                    |   |                                                         |     |                                                          |   |
|---------------------------------------------------------|--------|--------------------------------------------------------------|----------|---------------------------------------------------------------|--------|
|                                                    |   | Nine                months endedSeptember                30, |     | Three                months endedSeptember                30, |   |
|                                                    |   | 2005                                                         |     | 2004                                                          |   | 2005 |   | 2004 |   |
|                                                    |   |                                                         |     |                                                          |   |   |   |   |   |
| Net                income (loss)                        |   | $                                                            | (689,594 | )                                                             | $      | (785,171 | ) | $ | (431,137 | ) | $ | 145,121 |   |
| Other                comprehensive income (loss):       |   |                                                         |     |                                                          |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation gain (loss) |   |                                                         | 96,409   |                                                          |   | (5,879 | ) |   | 21,901 |   |   | 273 |   |
| Total                comprehensive income (loss)        |   | $                                                            | (593,185 | )                                                             | $      | (791,050 | ) | $ | (409,236 | ) | $ | 145,394 |   |
|                                                         |   |                                                         |     |                                                          |   |   |   |   |   |   |   |   |   |
|                                                         |   |                                                         |     |                                                          |   |   |   |   |   |   |   |   |   |

----

**K**
**id      Castle Educational Corporation**

**Condensed        Consolidated Statements of Cash Flows**

**(Expressed        in US Dollars)**

**(Unaudited)**

|                                                                                                               |   |                                                             |       |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------|------------|
|                                                                                                               |   | Nine                  months endedSeptember                  30, |       |
|                                                                                                               |   | 2005                                                             |       | 2004 |   |
|                                                                                                               |   |                                                             |       |
| Cash                  flows from operating activities                                                              |   |                                                             |       |   |   |
| Net                  loss                                                                                          |   | $                                                                | (689,594   | ) | $ | (785,171 | ) |
| Adjustments                  to reconcile net loss to                  net cash used in operating activities:      |   |                                                             |       |   |   |   |   |
| Depreciation                  and amortization                                                                     |   |                                                             | 333,388    |   |   | 258,261 |   |
| Allowance                  for doubtful debts and sales returns                                                    |   |                                                             | 1,231,289  |   |   | 172,537 |   |
| Provision                  for allowance for loss on inventory obsolescence and slow-moving                  items |   |                                                             | 58,325     |   |   | 113,573 |   |
| Gain                  on disposal of property and equipment                                                        |   |                                                             | (30,333    | ) |   | (10,609 | ) |
| Decrease                  in deferred income tax assets                                                            |   |                                                             | 11,313     |   |   | 67,378 |   |
| Minority                  interest in income                                                                       |   |                                                             | (16,017    | ) |   | 2,611 |   |
| Share                  of loss of investments                                                                      |   |                                                             | 21,157     |   |   | — |   |
| Changes                  in assets and liabilities:                                                                |   |                                                             |       |   |   |   |   |
| Increase                  in notes and accounts receivable                                                         |   |                                                             | (2,124,415 | ) |   | (561,081 | ) |
| Decrease                  in inventories                                                                           |   |                                                             | 240,064    |   |   | (403,744 | ) |
| Increase                  in other receivables                                                                     |   |                                                             | 159,779    |   |   | (99,282 | ) |
| Increase                  in prepayments and other current assets                                                  |   |                                                             | (259,470   | ) |   | (250,194 | ) |
| Increase                  in other assets                                                                          |   |                                                             | (63,276    | ) |   | (122,453 | ) |
| Increase                  in notes and accounts payable                                                            |   |                                                             | 574,013    |   |   | 572,556 |   |
| Increase                  in accrued expenses                                                                      |   |                                                             | 406,985    |   |   | (104,349 | ) |
| Increase                  in other payables                                                                        |   |                                                             | 36,015     |   |   | (88,561 | ) |
| Decrease                  in receipts in advance                                                                   |   |                                                             | (178,961   | ) |   | 349,247 |   |
| Increase                  in income taxes payable                                                                  |   |                                                             | 111,039    |   |   | 42,967 |   |
| Increase                  in deposits received                                                                     |   |                                                             | 63,187     |   |   | 129,455 |   |
| Increase                  in accrued pension liabilities                                                           |   |                                                             | 85,088     |   |   | 10,406 |   |
|                                                                                                               |   |                                                             |       |   |   |   |   |
| Net                  cash used in operating activities                                                             |   |                                                             | (30,424    | ) |   | (706,453 | ) |
|                                                                                                               |   |                                                             |       |   |   |   |   |
| Cash                  flows from investing activities                                                              |   |                                                             |       |   |   |   |   |
| Purchases                  of property and equipment                                                               |   |                                                             | (111,270   | ) |   | (197,389 | ) |
| Proceeds                  from disposal of property and equipment                                                  |   |                                                             | 78,661     |   |   | 79,135 |   |
| Acquisition                  of long-term investments                                                              |   |                                                             | —    |   |   | (103,563 | ) |
| Acquisition                  of long-term notes receivable                                                         |   |                                                             | (46,043    | ) |   | — |   |
| Advances                  to shareholder                                                                           |   |                                                             | (2,267,424 | ) |   | — |   |
| Repayments                  of advances to shareholder                                                             |   |                                                             | 2,267,424  |   |   | — |   |
|                                                                                                               |   |                                                             |       |   |   |   |   |
| Net                  cash used in investing activities                                                             |   |                                                             | (78,652    | ) |   | (221,817 | ) |

----

**K**
**id        Castle Educational Corporation**

**Condensed        Consolidated Statements of Cash Flows - Continued**

**(Expressed        in US Dollars)**

|                                                                             |   |                                                             |     |
|----------------------------------------------------------------------------------|--------|------------------------------------------------------------------|----------|
|                                                                             |   | Nine                  months endedSeptember                  30, |     |
|                                                                                  |   | 2005                                                             |     | 2004 |   |
| Cash                  flows from financing activities                            |   |                                                             |     |   |   |
| Proceeds                  from bank borrowings                                   |   |                                                             | 791,450  |   |   | 2,500,962 |   |
| Repayment                  of bank borrowings                                    |   |                                                             | (994,388 | ) |   | (1,652,431 | ) |
| Repayment                  of capital leases                                     |   |                                                             | (18,365  | ) |   | (22,086 | ) |
| Repayment                  of loan from officers/shareholders                    |   |                                                             | —  |   |   | (581,228 | ) |
| Net                  cash consumed by financing activities                       |   |                                                             | (221,303 | ) |   | 245,217 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| Net                  decrease in cash and cash equivalents                       |   |                                                             | (330,379 | ) |   | (683,053 | ) |
|                                                                             |   |                                                             |     |   |   |   |   |
| Effect                  of changes in exchange rate on cash and cash equivalents |   |                                                             | 96,409   |   |   | 3,561 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| Cash                  and cash equivalents at beginning of period                |   |                                                             | 507,895  |   |   | 1,478,612 |   |
|                                                                             |   |                                                             |     |   |   |   |   |
| Cash                  and cash equivalents at end of period                      |   | $                                                                | 273,925  |   | $ | 799,120 |   |

**Supplemental      disclosure of cash flows information:**

----

**K**
**id      Castle Educational Corporation**

**Notes      to Condensed Consolidated Financial Statements**

**(Expressed      in US Dollars)**

**(Unaudited)**

**NOTE      **
**1.      BASIS OF PRESENTATION**

**NOTE      2**
**.      OTHER OPERATING EXPENSES**

|                                           |   | Nine                months endedSeptember                30, |      | Three                months endedSeptember                30, |   |
|------------------------------------------------|--------|--------------------------------------------------------------|-----------|---------------------------------------------------------------|--------|
|                                                |   | 2005                                                         |      | 2004                                                          |   | 2005 |   | 2004 |   |
| Commissions                                    |   | $                                                            | 137,783   |                                                          | $      | 421,994 |   | $ | 49,407 |   | $ | 103,747 |   |
| Advertising                                    |   |                                                         | 54,442    |                                                          |   | 400,591 |   |   | 28,050 |   |   | (5,521 | ) |
| Amortization                and depreciation   |   |                                                         | 333,388   |                                                          |   | 308,114 |   |   | 116,721 |   |   | 88,713 |   |
| Allowance                for doubtful accounts |   |                                                         | 1,167,068 |                                                          |   | (3,454 | ) |   | 820,825 |   |   | 0 |   |
| Insurance                                      |   |                                                         | 184,793   |                                                          |   | 175,854 |   |   | 56,667 |   |   | 46,785 |   |
| Professional                Fees               |   |                                                         | 300,440   |                                                          |   | 287,339 |   |   | 113,653 |   |   | 138,951 |   |
| Rent                                           |   |                                                         | 385,744   |                                                          |   | 278,111 |   |   | 115,045 |   |   | 85,994 |   |
| Salary                                         |   |                                                         | 2,131,239 |                                                          |   | 2,424,194 |   |   | 648,425 |   |   | 672,445 |   |
| Other                expenses                  |   |                                                         | 914,961   |                                                          |   | 1,117,173 |   |   | 353,666 |   |   | 394,206 |   |
| Other                operating expenses        |   | $                                                            | 5,609,858 |                                                          | $      | 5,409,916 |   | $ | 2,302,459 |   | $ | 1,525,320 |   |

----

**NOTE      3**
**.      RELATED PARTY TRANSACTIONS**

**NOTE      4**
**.      GOING CONCERN**

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

**Comparison      of the Three Months Ended September 30, 2005 and 2004**

** **

** **

----

** **

** **

----

**Comparison      of the Nine Months Ended September 30, 2005 and 2004**

** **

** **

** **

** **

----

** **

** **

** **

** **

**LIQUIDITY      AND CAPITAL RESOURCES**

----

**Going      Concern **

**ITEM      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

**Interest      rate exposure **

**Foreign      currency exposure **

|  | (a) | Current                assets, current liabilities and long term monetary assets and liabilities,                at the rate of exchange in effect as at the balance sheet                date; |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | Non-monetary                long term assets and liabilities, at the exchange rates prevailing                at the                time of the acquisition of the assets or assumption of liabilities;                and, |
|--|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | Revenues                and expenses, at the average rate of exchange for the                year. |
|--|-----|----------------------------------------------------------------------------------------------------|

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**PART        II**

**OTHER        INFORMATION**

**ITEM        1. LEGAL PROCEEDINGS**

**ITEM        2. CHANGES IN SECURITES**

**ITEM        3. DEFAULTS UPON SENIOR SECURITIES**

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

**ITEM        5. OTHER INFORMATION**

**ITEM        6. EXHIBITS**

|      |   |                                                                                                                                                                                                                                                                                 |
|------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1 |   | Acknowledgement                    of indebtedness for loan extension dated                    August 5, 2005, by and among Kidcastle Internet Technologies                    Limited and                    Fuhwa Commercial Bank.                                                 |
| 31.1 |   | Certification                    of Min-Tan Yang, Chief Executive Officer of the registrant, pursuant                    to                    Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302                    of the                    Sarbanes-Oxley Act of 2002. |
| 31.2 |   | Certification                    of Suang-Yi Pai, Chief Financial Officer of the registrant, pursuant                    to                    Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302                    of the                    Sarbanes-Oxley Act of 2002. |
| 32.1 |   | Certification                    of Min-Tan Yang, Chief Executive Officer of the registrant, pursuant                    to 18                    U.S.C. 1350, as adopted pursuant                    to Section 906 of the Sarbanes-Oxley Act of 2002.                              |
| 32.2 |   | Certification                    of Suang-Yi Pai, Chief Financial Officer of the registrant, pursuant                    to 18                    U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                    Act                    of 2002.           |

----

|                                     |                                                                    |                                 |
|------------------------------------------|-------------------------------------------------------------------------|--------------------------------------|
|                                     | **KID                CASTLE                EDUCATIONAL CORPORATION**    |
|                                |                                                               |                            |
| Dated: June                28, 2006 | By:                                                           | /s/ Min-Tan                Yang |
|                                     | Name:                    Min-Tan Yang                         |
|                                     | Title:                      Chief Executive Officer |

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