TABLE OF CONTENTS

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PART I — FINANCIAL INFORMATION

Item 1.    FINANCIAL STATEMENTS

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

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

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

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

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

BioCube, Inc. (formerly Alliance Network Communications Holdings, Inc.) (the “Company”) is a development stage company.  The Company was incorporated in Delaware. The Company plans to research, design, manufacture, market and distribute an environmentally safe aerosol-based decontamination system.

On July 12, 2010, the Company acquired all of the issued and outstanding common stock of BioCube, Inc., a Nevada corporation, from its shareholders in exchange for 8,750,000 shares of the common stock of the Company valued at par of $0.001 per share.  As a result of the transaction, BioCube, Inc. became a wholly-owned subsidiary of the Company and the Company then operated through two wholly-owned subsidiaries, Alliance Network Communications, Inc., which was engaged in the business of developing and marketing surge protectors and other electronic products, and BioCube.   On December 20, 2010, the Company filed a Certificate of Ownership with the Delaware Secretary of State under Section 267 of the Delaware General Corporation Law, to merge its two wholly-owned subsidiaries, Alliance Network Communications, Inc. and BioCube, Inc., into it, with the Company as the surviving entity.  As part of the filing, the corporate name was changed to BioCube, Inc., and its stock trading symbol became BICB. 

The surge protection business formerly operated by Alliance Network Communications, Inc. was terminated in the quarter ended April 30, 2011 and the Company now is engaged solely in the business of developing and marketing an environmentally safe aerosol based decontamination system.  There were no additional expenses or charges recorded as a result of the termination of the surge protection business.

  Note 2.  Significant Accounting Policies

Basis of Preparation

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which assume the continuation of the Company as a going concern.  This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. Since its formation in April 2009, BioCube, the Company’s principal subsidiary, has been a development stage company and had not begun its efforts to produce and market electrical surge protection devices or the aerosol based decontamination system,  and its activities, to date, have been organizational in nature, and have been directed towards the raising of capital and initiating its business plan.

The Company may not be able to execute its current business plan and fund business operations long enough to achieve profitability without obtaining financing. The Company's ultimate success depends upon its ability to raise capital. There can be no assurance that funds will be available to the Company when needed from any source or; if available, on terms that are favorable to the Company.  These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

Note 2.  Significant Accounting Policies (continued)

The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statement.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for interim periods are not necessarily indicative of results to be expected for the entire fiscal year or any other period.

The condensed balance sheet at July 31, 2011 has been derived from the unaudited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements.

These interim condensed financial statements should be read in conjunction with the Company’s audited financial statements and notes for the year ended January 31, 2011 filed with the Securities and Exchange Commission on Form 10-K on May 17, 2011.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Changes in the economic environment, financial markets, as well as in the healthcare industry and any other parameters used in determining these estimates could cause actual results to differ. 

Concentration of Credit Risk

The Company may place its cash with various financial institutions and, at times, cash held in depository accounts at such institutions may exceed the Federal Deposit Insurance Corporation insured limit.

Revenue Recognition

Upon initiation of active operations, the Company will recognize revenues when persuasive evidence of an arrangement exists, product has been delivered or services have been rendered, the price is fixed or determinable and collectability is reasonably assured. Revenue will be recognized net of estimated sales returns and allowances.

Income Taxes

The Company accounts for income taxes using a method that requires recognition of deferred tax assets and liabilities for expected future tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company’s assets and liabilities (commonly known as the asset and liability method). In assessing the ability to realize deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

Note 2.  Significant Accounting Policies (continued)

The Company evaluates its tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are ‘‘more-likely-than-not’’ of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are recorded as an expense in the applicable year.   The Company does not have a liability for any unrecognized tax benefits. Management’s evaluation of uncertain tax positions may be subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof.

As of July 31, 2011 and January 31, 2011, the Company has approximately $947,000 and $1,031,000 of net operating loss carry forwards available to affect future taxable income. Additionally, the Company has other temporary differences of $291,000 and $301,000 at July 31, 2011 and January 31, 2011, respectively. The Company has established a valuation allowance equal to the tax benefit of the net operating loss carry forwards and temporary differences as realization of the asset is not assured of $421,000 and $453,000 respectively.

Utilization of net operating loss carry-forwards arising from our predecessor company are subject to a substantial annual limitation due to the ‘‘change in ownership’’ provisions of the Internal Revenue Code. The annual limitation may result in the expiration of net operating loss carry-forwards before utilization.

  Income (loss) per share

Loss per common share is based upon the weighted average number of common shares outstanding during the periods.  Diluted loss per common share is the same as basic loss per share, as the effect of potentially dilutive securities (options – 21,667; warrants – 457,111; and convertible debentures – 2,438,933) are anti-dilutive.

Outstanding options were issued by the Company’s predecessor and are exercisable through 2018 with an exercise price of $5.70. Warrants for 322,111 shares of common stock were issued by our predecessor with weighted average exercise price of $11.21 and are exercisable through 2014. The balance of the outstanding warrants was issued in connection with the notes payable to a related party (see Note 4).

Reclassifications

Certain prior period amounts were reclassified to conform to the current period classifications.

New Accounting Pronouncements

Management does not believe there would have been a material effect on the accompanying financial statements had any recently issued, but not yet effective, accounting standards been adopted in the current period.

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

Note 2.  Significant Accounting Policies (continued)

Fair Value Measurements

Accounting principles generally accepted in the United States define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Additionally, the inputs used to measure fair value are prioritized based on a three-level hierarchy. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Recurring Fair Value Measurements

In accordance with accounting principles generally accepted in the United States, certain assets and liabilities are required to be recorded at fair value on a recurring basis. For the Company, the only assets and liabilities that are adjusted to fair value on a recurring basis are derivative instruments which were fair valued using Level 2 inputs (see Note 4).

Note 3. Decontamination Unit

In connection with the acquisition of BioCube in July 2010, the Company recorded an intangible asset related to the decontamination unit at its estimated fair value of $27,000. This asset is being amortized over its useful life of nine years on a straight-line basis. As of July 31, 2011 and January 31, 2011, the balances are as follows:

Amortization expense for the six months ended July 31, 2011 and 2010 was $1,500 and $0 respectively. As of July 31, 2011, annual amortization expense for each of the next five years is expected to be $3,000.

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

Note 4.  Related Party Transactions

Due to Related Parties – current portion includes the following:

⁽¹⁾ During the year ended January 31, 2010, the Company borrowed an aggregate of $17,000 from LeadDog Capital LP through the issuance of notes payable for periods of 1 year each with interest payable at 16% per year.  In connection with the issuance of these notes the Company granted the lender warrants for the purchase of 90,000 shares of the Company’s common stock at $.001.  In addition, the Company issued warrants to purchase 45,000 shares of the Company’s common stock at $.001 to LeadDog Capital Markets LLC (the general partner) for due diligence services. LeadDog Capital LP and its affiliates are shareholders and warrant holders; however the group is restricted from becoming a beneficial owner (as such term is defined under Section 13(d) and Rule 13d-3 of the Securities Exchange Act of 1934, as amended, (the 1934 Act)), of the Company’s common stock which would exceed 4.9% of the number of shares of common stock outstanding.

The proceeds from issuance of the promissory notes were allocated to the notes and the warrants based upon their relative fair values. This allocation resulted in allocating $9,500 to the notes and $7,500 to the warrants. The warrants issued for services were recorded as prepaid financing fees of $6,750 and will be amortized to interest expense over the related loan periods.  During the quarter ended January 31, 2011, the Company recorded expense of $4,800 for the amortization of the debt discount and prepaid financing fees.  The fair value of the warrants was determined using the Black-Scholes option pricing model using the following weighted-average assumptions: volatility of 452 % and 457 %; risk-free interest rate of .87% and .94%; expected life of 3 years and estimated dividend yield of 0%.

Due to Related Parties – non-current consists of borrowings under a convertible debenture arrangement.  In November 2009, the Company entered into an arrangement with LeadDog Capital LP in which the Company may borrow an aggregate of $500,000 with interest payable at 14% per annum three years from the date of any borrowings.  The indebtedness including interest is convertible into common stock at the lesser of $.10 or 75% of

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

Note 4. Related Party Transactions (Continued

the lowest closing bid price during the 15 day period prior to the conversion date but in no event can the conversion price be less than $0.005 The Company accounted for the borrowings under this arrangement  in accordance with ASC 480 - “Distinguishing Liabilities from Equity”, as the conversion feature embedded in the debentures could result in the principal being converted to a variable number of the Company's common shares.   The fair value of the conversion feature is calculated at the time of issuance and the Company records a conversion liability for the calculated value. The conversion liability is revalued at the end of each reporting period which results in a gain or loss for the change in fair value.  During the year ended January 31, 2010, the Company borrowed $62,400 under this arrangement and during the six months ended July 31, 2010 the Company borrowed an additional $29,060. The Company determined the fair value of the debentures at the dates of issuance to be $169,000 which represented the face value of the debentures plus the fair value of the conversion feature of $78,000 (of which $18,000 was recorded in the six months ended July 31, 2011). The conversion liability was revalued at April 30, 2011 resulting in additional expense of $41,000 to increase the liability to its fair value.  

Effective June 1, 2011, the Company and the LeadDog group agreed to restate and consolidate all of the outstanding debentures notes and interest accrued to that date into a Consolidated and Amended Debenture.  The previous debentures which were re-paid and replaced with the Consolidated and Amended Debenture were as follows:

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BioCube, Inc.   

(A Development Stage Company)

Notes to the Financial Statements

July 31, 2011

(Unaudited)

Note 4. Related Party Transactions (Continued

The new Debenture is for a three year term ending June 1, 2014 and allows the holder to convert all of part of the amount due at $0.03 per share, which was the closing market price of the common shares at June 1, 2011.  In addition, the Company agreed to issue a warrant to the holder to purchase 1,500,000 shares of common stock for a three year period at $0.03 per share.  The warrant was issued as of September 2, 2011.

Note 5.  Litigation

In September 2008, Jet One Group, Inc. ("Jet One") commenced an action against Halcyon Jets Holdings, Inc., the Company’s predecessor, and several of our former officers, directors and employees in the United States District Court for the southern district of New York, alleging, among other matters, that the Company’s predecessor fraudulently induced Jet One to enter into a Letter of Intent to acquire Jet One's business. The Complaint alleged that the Company violated the federal Racketeering Influenced Corrupt Organizations Act, the federal Computer Fraud and Abuse Act, the New York consumer fraud and Business law statutes and committed various common law torts, and sought compensatory damages of $15 million and treble or punitive damages of $45 million. On August 14, 2009, the Court dismissed the complaint without prejudice to Jet One's right to re-file the lawsuit.

The Company and the other defendants, in February 2009, filed a motion to dismiss the counts of the complaint for violation of the federal Computer Fraud and Abuse Act and for civil conspiracy for failure to state a claim upon which relief may be granted. On March 22, 2010, all the defendants in the Nassau County Action filed a Verified Answer, Counterclaims and Third-Party Complaint denying any liability to Jet One.  In addition, the Company and the former subsidiary re-asserted the defamation claims that had previously been asserted against Jet One and its principals in the discontinued case described above; and the Company asserted a breach of contract claim against Jet One and its principals relating to a $150,000 promissory note executed in favor of its predecessor by Jet One and personally guaranteed by Jet One’s principals.

There has been no action in the matter since the filings in March 2010 and Management does not believe that there is any risk of material liability from the action.

In October and December 2008, Blue Star Jets, LLC  (“Blue Star”) filed a complaint against the Company and certain former employees, including our former President, who were former employees of Blue Star (“former Blue Star employee”) in the Supreme Court of New York, New York County alleging, among other matters, that the Blue Star’s former employees stole confidential information belonging to Blue Star prior to joining the Company and that one or more of such former employees violated post-employment restrictive covenants by joining the  Company. The complaint seeks $7 million in damages.  This action is a revival of an earlier action that was voluntarily discontinued by Blue Star in 2007. In January 2011, the Company was dismissed from the case.

All other pending litigation against the Company was terminated during the year ended January 31, 2011, with no liability of any kind assessed against the Company.

Except as set forth above, there are no other pending or threatened legal proceedings against the Company.  Based on the advice of counsel, it is management's opinion that we have made adequate provision for potential liabilities, if any, arising from potential claims arising from litigation, governmental investigations, legal and administrative cases and proceedings. In connection with the sale of the Company’s Halcyon Jet subsidiary to the

Company’s former Chief Executive Officer the Company was indemnified by the buyer against any liability which may arise from the above litigation.

Note 6.  Subsequent Events

Subsequent to July 31, 2011, the Company issued three year warrants to purchase 1,500,000 shares of common stock of the Company to the related party discussed in Note 4, at an exercise price of $0.03 per share, in connection with the renewal and consideration of all of the outstanding convertible debentures of the Company as of June 1, 2011.

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INTRODUCTION AND CERTAIN CAUTIONARY STATEMENTS

FORWARD-LOOKING STATEMENTS

Statements in this annual report that are not historical facts constitute forward-looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential’’ or ‘‘continue’’ or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of these statements. We are under no duty to update any of the forward-looking statements after the date of this information statement to conform these statements to actual results.

OVERVIEW

Corporate Background - Reverse Merger - Acquisition

BioCube, Inc. (formerly Alliance Network Communications Holdings, Inc.) (the “Company”) is a development stage company. The Company was incorporated in Delaware. The Company plans to research, design, manufacture, market and distribute an environmentally safe aerosol based decontamination system. Its prior business of developing and marketing surge protectors and other electrical devices was abandoned in the quarter ended April 30, 2011.  There were no related costs associated with the abandonment of that business.

On July 12, 2010, the Company acquired all of the issued and outstanding common stock of BioCube, Inc., a Nevada corporation, from its shareholders in exchange for 8,750,000 shares of the common stock of the Company valued at par of $0.001 per share. As a result of the transaction, BioCube, Inc. became a wholly-owned subsidiary of the Company. The acquisition was closed based upon a Share Acquisition Agreement dated June 24, 2010 between the Company and BioCube, Inc., filed as Exhibit 10 to the Current Report for the Company filed on Form 8-K on July12, 2010.

As a result of the acquisition of BioCube, Inc. the Company operated through two wholly-owned subsidiaries, ANC and BioCube.  On December 20, 2010, the Company filed a Certificate of Ownership with the Delaware Secretary of State under Section 267 of the Delaware General Corporation Law, to merge its two wholly-owned subsidiaries, Alliance Network Communications, Inc. and BioCube, Inc., into it, with the Company as the surviving entity. As part of the filing, the corporate name was changed to BioCube, Inc. and its stock trading symbol became BICB.

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Business Plan

                We are a development stage company which plans to research, design, manufacture, market and distribute an environmentally safe decontamination system, utilizing an aerosol-based delivery method.   We are collaborating with our Russian research partners to complete the development and commercialization of an environmentally safe decontamination system, utilizing an aerosol-based delivery method. BioCube has also entered into a licensing agreement with Battelle Memorial Institute of Richland, Washington, to sub-license technology contained in certain rights of Batelle in patents relating to micro-aerosol based decontamination methods, which are complimentary to the technology of BioCube. This system has demonstrated effective results in  handling of microbial and fungal cells, spores, and viruses that are the core of such infections as MRSA, Avian Flu, Swine Flu and common molds.

Hospitals struggle with the control of infectious diseases and continue to look for effective, environmentally friendly and cost-effective means of dealing with this pervasive problem. BioCube intends to focus on this existing market need for decontamination of patient rooms, operating theaters, medical equipment and furniture, which exists in over 5,000 hospitals and nearly 1 million beds in the U.S. healthcare system, as well as the many other uses of a similar decontamination solution.

BioCube will focus on the following target markets:

-- Healthcare (hospital, nursing homes)

-- Travel (airplanes, cruise ships, mobile homes)

-- Mold remediation

-- Schools

-- Animal farming

-- Agriculture

BioCube believes that its decontamination technology holds significant promise as a long-term solution to a global problem. BioCube's objective is to help create an effective technology that will allow for rapid, inexpensive and environmentally safe remediation of buildings that have been contaminated by a biological agent, thus allowing a speedy return to a state of normalcy.

Results of Operations

Three and six months ended July 31, 2011 and 2010

During the quarters ended July 31, 2011 and 2010, the Company had no revenues as its activities principally involved its formation, negotiation of the merger, and planning for the execution of its business plan.  Expenses incurred in the three months ended July 31, 2011 were consulting expense of $15,000, professional fees of $22,400, officer salaries of $45,000, general and administrative of $2,514, finance costs of $93,019 and net interest expense of $6,284, resulting in a net loss of $184,217 compared to July 31, 2010 expenses relating to consulting expenses of $33,065, professional fees of $11,500, officer salaries of $9,194, general and administrative of $4,599, finance costs of  $1,787 and interest expense, net of $2,012, resulting in a net loss of $62,157. 

During the six months ended July 31, 2011, which differed primarily as the focus shifted toward implementing the business plan relating to the decontamination technology, the Company incurred expenses relating to professional fees of $30,000, professional fees of $22,400, officer salaries of $90,000 general and administrative of $5,030, finance cost of $101,475, and net interest expense of$11,513.  Offsetting these expenses was income relating to the derivative liability which at January 31, 2011 was $344,549 and upon the February 1, 2011 amendment of the convertible notes payable to a fixed exercise price, the liability ceased to exist and was taken to income.  During the quarter ended July 31, 2011, the Company recognized net income of $84,131 compared to July 31,2010 expenses relating to professional fees of $63,065, professional fees of $23,000, officer salaries of $9,194 general and administrative of $16,727, finance cost of $63,293, and net interest expense of$6,743.

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  Liquidity and Capital Resources

The Company may not be able to execute its current business plan and fund business operations long enough to achieve profitability without obtaining financing. The Company has received interim financing from a related party.  The Company's ultimate success may depend upon its ability to raise capital. There can be no assurance that funds will be available to the Company when needed from any source or; if available, on terms that are favorable to the Company.   The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

Except as set forth under Part II Item 1 – Legal Proceedings, there are no pending or threatened legal proceedings against the Company.  In the opinion of management, on the advice of counsel, we have made adequate provision for potential liabilities, if any, arising from potential claims arising from litigation, governmental investigations, legal and administrative cases and proceedings. In connection with the sale of the Company’s Halcyon Jet subsidiary to the Company’s former Chief Executive Officer the Company was indemnified by the buyer against any liability which may arise from the above litigation.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Not applicable

Evaluation of Disclosure Controls and Procedures

The Company is in the process of implementing disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the ‘‘Exchange Act’’), that are designed to ensure that information required to be disclosed in the Company’s Exchange Act reports are recorded, processed, summarized, and reported within the time periods specified in rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our Chief Executive Officer to allow timely decisions regarding required disclosure.

As of July 31, 2011, the Chief Executive Officer and Chief Financial Officer carried out an assessment, of the effectiveness of the design and operation of our disclosure controls and procedure and concluded that the Company’s disclosure controls and procedures were not effective as of July 31, 2011, because of the material weakness described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The material weakness identified during management's assessment was the lack of sufficient resources with SEC, generally accepted accounting principles (GAAP) and tax accounting expertise. This control deficiency did not result in adjustments to the Company’s interim financial statements. However, this control deficiency could result in a material misstatement of significant accounts or disclosures that would result in a material misstatement to the Company’s interim or annual financial statements that would not be prevented or detected. Accordingly, management has determined that this control deficiency constitutes a material weakness.

The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including detailed validation work with regard to balance sheet account balances, additional analysis on income statement amounts and managerial review of all significant account balances and disclosures in the Quarterly Report on Form 10-Q, to ensure that the Company’s Quarterly Report and the financial statements forming part thereof are in accordance with accounting principles generally accepted in the United States of America. Accordingly, management believes that the financial statements included in this Quarterly Report fairly present, in all material respects, the Company’s financial condition, results of operations, and cash flows for the periods presented.

Changes in Internal Control over Financial Reporting

During the three and six months ended July 31, 2011 there were no changes in our system of internal controls over financial reporting.

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In September 2008, Jet One Group, Inc. ("Jet One") commenced an action against Halcyon Jets Holdings, Inc., the Company’s predecessor, and several of our former officers, directors and employees in the United States District Court for the southern district of New York, alleging, among other matters, that the Company’s predecessor fraudulently induced Jet One to enter into a Letter of Intent to acquire Jet One's business. The Complaint alleged that the Company violated the federal Racketeering Influenced Corrupt Organizations Act, the federal Computer Fraud and Abuse Act, the New York consumer fraud and Business law statutes and committed various common law torts, and sought compensatory damages of $15 million and treble or punitive damages of $45 million. On August 14, 2009, the Court dismissed the complaint without prejudice to Jet One's right to re-file the lawsuit.

On or about October 28, 2009, Jet One Group filed a new action against the Company’s predecessor, its former subsidiary and the other defendants in the matter discussed above, in the Supreme Court of New York (“Nassau County Action”), which repeats the factual allegations of the dismissed federal court complaint and asserts claims for conversion, fraud, tortious interference with contract and violation of the state consumer fraud statute.  The new complaint seeks compensatory damages of $15 million, attorneys’ fees of $100,000 and punitive damages against each of the defendants in the amount of $45 million.

Separately, the former subsidiary filed an action against Jet One and its principals in the Supreme Court of New York in which the former subsidiary alleges that the Complaint in Jet One’s Federal Court Action contains false and defamatory statements regarding the former subsidiary and that Jet One filed its suit for the sole purpose of circulating a press release publicizing the false and defamatory allegations.  Jet One moved to dismiss the suit for failure to state a claim upon which relief may be granted, but this motion was denied by the court and the denial was affirmed by the Appellate Division of the Supreme Court of New York in February 2010.  On March 19, 2010, the Company’s former subsidiary dismissed its complaint without prejudice.

On March 22, 2010, all the defendants in the Nassau County Action filed a Verified Answer, Counterclaims and Third-Party Complaint denying any liability to Jet One.  In addition, the Company and the former subsidiary re-asserted the defamation claims that had previously been asserted against Jet One and its principals in the discontinued case described above; and the Company asserted a breach of contract claim against Jet One and its principals relating to a $150,000 promissory note executed in favor of its predecessor by Jet One and personally guaranteed by Jet One’s principals.

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There has been no action in the matter since the filings in March 2010 and Management does not believe that there is any risk of material liability from the action.

Except as set forth above, there are no other pending or threatened legal proceedings against the Company.  Based on the advice of counsel, it is management's opinion that we have made adequate provision for potential liabilities, if any, arising from potential claims arising from litigation, governmental investigations, legal and administrative cases and proceedings. In connection with the sale of the Company’s Halcyon Jet subsidiary to the Company’s former Chief Executive Officer the Company was indemnified by the buyer against any liability which may arise from the above litigation.  

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

    None during the quarter ended July 31, 2011.

     None.

Item 5.      OTHER INFORMATION

     None.

(a) Exhibits

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

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