10QSB

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended November 30, 2005

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File No. 000-50816

ARTCRAFT III INC.

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

Delaware
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

PO Box 101, 700 Bay Street

Toronto, Ontario M5G 1Z6

(Address of Principal Executive Offices)

416-408-1173

(Issuer’s telephone number)

3650 SE Marine Drive, Vancouver, British Columbia V5S 4R6

(Former name, address and fiscal year, if changed since last report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of January 23, 2006: 100,000 shares of common stock.

ARTCRAFT III INC.

FINANCIAL STATEMENTS

INDEX

Part I-- FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management’s Discussion and Analysis of Financial Condition

Item 3. Control and Procedures

Part II-- OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities

Item 3. Defaults Upon Senior Securities

Item 4. Submission of Matters to a Vote of Security Holders

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

Signature

Item 1. Financial Information

BASIS OF PRESENTATION

The accompanying reviewed financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-QSB and item 310 under subpart A of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal occurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the six months ended November 30, 2005 are not necessarily indicative of results that may be expected for the year ending May 31, 2006. The financial statements are presented on the accrual basis.

ARTCRAFT III, INC.

(a development stage company)

FINANCIAL STATEMENTS

(unaudited)

AS OF NOVEMBER 30, 2005

ARTCRAFT III, Inc.

(a development stage company)

Financial Statements Table of Contents

FINANCIAL STATEMENTS		Page #
	(unaudited)

Balance Sheet F-1

Statement of Operations and Retained Deficit F-2

Statement of Stockholders Equity F-3

Cash Flow Statement F-4

Notes to the Financial Statements F-5

ARTCRAFT III, INC.

(a development stage company)

BALANCE SHEET

As of November 30, 2005 and May 31, 2005

		Nov. 30, 2005		May 31, 2005
CURRENT ASSETS
Cash	$	0	$	0
TOTAL ASSETS	$	0	$	0
LIABILITIES AND STOCKHOLDER’S EQUITY
CURRENT LIABILITIES
Accrued expenses	$	2,400	$	1,700
TOTAL LIABILITIES		2,400		1,700
STOCKHOLDER’S EQUITY
Preferred Stock – par value $0.001
10,000,000 shares authorized;
None issued and outstanding		0		0
Common Stock - par value $0.001;
100,000,000 shares authorized;
100,000 issued and outstanding		100		100
Additional paid in capital		0		0
Accumulated Deficit		(2,500)		(1,800)
Total stockholder’s equity		(2,400)		(1,700)
TOTAL LIABILITIES AND EQUITY	$	0	$	0

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

F-1

ARTCRAFT III, INC.

(a development stage company)

STATEMENT OF OPERATIONS

For the six months ended Nov. 30, 2005, the 160 days ended Nov. 30, 2004

From inception (June 7, 2004) through Nov. 30, 2005

		Six Months Nov. 30, 2005		160 Days Nov. 30, 2004		From Inception to Nov. 30, 2005
Revenue	$	0	$	0	$	0
Cost of Revenue		0		0		0
GROSS PROFIT		0		0		0
GENERAL AND ADMINISTRATIVE EXPENSES		700		1,100		2,500
NET LOSS		(700)		(1,100)		(2,500)
ACCUMULATED DEFICIT, BEGINNING BALANCE		(1,800)		0		0
ACCUMULATED DEFICIT, ENDING BALANCE	$	(2,500)	$	(1,100)	$	(2,500)
NET EARNINGS PER SHARE
Net loss per share		($0.03)		($0.01)
Basic Weighted Average
Number of Common Shares Outstanding		100,000		100,000

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

F-2

ARTCRAFT III, INC.

(a development stage company)

STATEMENT OF OPERATIONS

For the three months ended Nov. 30, 2005 and 2004

		Three Months		Three Months
		Nov. 30, 2005		Nov. 30, 2004
Revenue	$	0	$	0
Cost of Revenue		0		0
GROSS PROFIT		0		0
GENERAL AND ADMINISTRATIVE EXPENSES		350		250
NET LOSS	$	(350)	$	(250)

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

F-3

ARTCRAFT III, INC.

(a development stage company)

STATEMENT OF STOCKHOLDER’S EQUITY

From inception(June 7, 2004) through November 30, 2005

	SHARES		COMMON STOCK		ACCUMULATED DEFICIT		TOTAL
Stock issued on acceptance
of incorporation expenses
June 7, 2004	100,000	$	100	$	0	$	100
Net loss					(1,800)		(1,800)
Total at May 31, 2005	100,000	$	100	$	(1,800)	$	(1,700)
Net loss					(700)		(700)
Total at November 30, 2005	100,000	$	100	$	(2,500)	$	(2,400)

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

F-4

ARTCRAFT III, INC.

(a development stage company)

STATEMENT OF CASH FLOWS

For the six months ended November 30, 2005,the 160 days ended Nov. 30, 2004

from inception (June 7, 2004) through Nov. 30, 2005

		Six Months Nov. 30, 2005		160 Days Nov. 30, 2004		From Inception
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(700)	$	(2,050)	$	(2,500)
Compensation in the form of stock		0		100		100
Increases (Decrease) in accrued expenses		700		1,950		2,400
NET CASH PROVIDED OR (USED) IN OPERATIONS		0		0		0
CASH FLOWS FROM INVESTING ACTIVITIES
None		0		0		0
CASH FLOWS FROM FINANCING ACTIVITIES
None		0		0		0
CASH RECONCILIATION
Net increase (decrease) in cash		0		0		0
Beginning cash balance		0		0		0
CASH BALANCE AT END OF PERIOD	$	0	$	0	$	0

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

F-5

ARTCRAFT III, INC.

NOTES TO FINANCIAL STATEMENTS

1. Summary of significant accounting policies:

Industry:

Artcraft III, Inc. (the Company), a Company incorporated in the state of Delaware as of June 7, 2004, plans to locate and negotiate with a business entity for the combination of that target company with The Company. The combination will normally take the form of a merger, stock-for-stock exchange or stock- for-assets exchange. In most instances the target company will wish to structure the business combination to be within the definition of a tax-free reorganization under Section 351 or Section 368 of the Internal Revenue Code of 1986, as amended. No assurances can be given that The Company will be successful in locating or negotiating with any target company.

The Company has been formed to provide a method for a foreign or domestic private company to become a reporting ("public") company whose securities are qualified for trading in the United States secondary market.

The Company has adopted its fiscal year end to be May 31.

Results of Operations and Ongoing Entity:

The Company is considered to be an ongoing entity. The Company's shareholders fund any shortfalls in The Company's cash flow on a day to day basis during the time period that The Company is in the development stage.

Liquidity and Capital Resources:

In addition to the stockholder funding capital shortfalls; The Company anticipates interested investors that intend to fund the Company's growth once a business is located.

Cash and Cash Equivalents:

The Company considers cash on hand and amounts on deposit with financial institutions which have original maturities of three months or less to be cash and cash equivalents.

Basis of Accounting:

The Company's financial statements are prepared in accordance with generally accepted accounting principles.

Income Taxes:

The Company utilizes the asset and liability method to measure and record deferred income tax assets and liabilities. Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. At this time, the Company has set up an allowance for deferred taxes as there is no company history to indicate the usage of deferred tax assets and liabilities.

F-6

ARTCRAFT III, INC.

NOTES TO FINANCIAL STATEMENTS

Fair Value of Financial Instruments:

The Company's financial instruments may include cash and cash equivalents, short-term investments, accounts receivable, accounts payable and liabilities to banks and shareholders. The carrying amount of long-term debt to banks approximates fair value based on interest rates that are currently available to the Company for issuance of debt with similar terms and remaining maturities. The carrying amounts of other financial instruments approximate their fair value because of short-term maturities.

Concentrations of Credit Risk:

Financial instruments which potentially expose the Company to concentrations of credit risk consist principally of operating demand deposit accounts. The Company's policy is to place its operating demand deposit accounts with high credit quality financial institutions. At this time the Company has no deposits that are at risk.

2. Related Party Transactions and Going Concern:

The Company's financial statements have been presented on the basis that it is a going concern in the development stage, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. At this time the Company has not identified the business that it wishes to engage in.

The Company's shareholders fund the Company's activities while The Company takes steps to locate and negotiate with a business entity for combination; however, there can be no assurance these activities will be successful.

3. Accounts Receivable and Customer Deposits:

Accounts receivable and Customer deposits do not exist at this time and therefore have no allowances accounted for or disclosures made.

4. Use of Estimates:

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenue and expenses. Management has no reason to make estimates at this time.

5. Revenue and Cost Recognition:

The Company uses the accrual basis of accounting in accordance with generally accepted accounting principles for financial statement reporting.

6. Accrued Expenses:

Accrued expenses consist of accrued legal, accounting and office costs during this stage of the business.

7. Operating Lease Agreements:

The Company has no agreements at this time.

F-7

ARTCRAFT III, INC.

NOTES TO FINANCIAL STATEMENTS

8. Stockholder's Equity:

PREFERRED STOCK includes 10,000,000 shares authorized at a par value of $0.001, of which no shares have been issued.

COMMON STOCK includes 100,000,000 shares authorized at a par value of $0.001, of which 100,000 have been issued for the amount of $100 on June 7, 2004 in acceptance of the incorporation expenses for the Company.

9. Required Cash Flow Disclosure for Interest and Taxes Paid:

The company has paid no amounts for federal income taxes and interest. The Company issued 100,000 common shares of stock to its sole shareholder in acceptance of the incorporation expenses for the Company.

10. Earnings Per Share:

Basic earnings per share ("EPS") is computed by dividing earnings available to common shareholders by the weighted-average number of common shares outstanding for the period as required by the Financial Accounting Standards Board (FASB) under Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Shares". Diluted EPS reflects the potential dilution of securities that could share in the earnings.

F-8

Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

Plan of Operation

The Registrant is continuing its efforts to locate a merger candidate for the purpose of a merger. It is possible that the registrant will be successful in locating such a merger candidate and closing such merger. However, if the registrant cannot effect a non-cash acquisition, the registrant may have to raise funds from a private offering of its securities under Rule 506 of Regulation D. There is no assurance the registrant would obtain any such equity funding.

Results of Operation

The Company did not have any operating income from inception (June 7, 2004) through November 30, 2005. For the quarter ended November 30, 2005, the registrant recognized a net loss of $700. Some general and administrative expenses during the year were accrued. Expenses for the quarter were comprised of costs mainly associated with legal and accounting fees.

Liquidity and Capital Resources

At November 30, 2005 the Company had no capital resources and will rely upon the issuance of common stock and additional capital contributions from shareholders to fund administrative expenses pending acquisition of an operating company.

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures.

Our Chief Executive Officer and Chief Financial Officer (collectively the “Certifying Officers”) maintain a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely. Under the supervision and with the participation of management, the Certifying Officers evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule [13a-14(c)/15d-14(c)] under the Exchange Act) within 90 days prior to the filing date of this report. Based upon that evaluation, the Certifying Officers concluded that our disclosure controls and procedures are effective in timely alerting them to material information relative to our company required to be disclosed in our periodic filings with the SEC.

(b) Changes in internal controls.

Our Certifying Officer has indicated that there were no significant changes in our internal controls or other factors that could significantly affect such controls subsequent to the date of his evaluation, and there were no such control actions with regard to significant deficiencies and material weaknesses.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is currently not a party to any pending legal proceedings and no such action by, or to the best of its knowledge, against the Company has been threatened.

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

No matter was submitted during the quarter ending November 30, 2005, covered by this report to a vote of the Company’s shareholders, through the solicitation of proxies or otherwise.

Item 5. Other Information.

None

Item 6. Exhibits and Reports of Form 8-K.

(a) Exhibits

31.1 Certification pursuant to Section 302 of Sarbanes Oxley Act of 2002

32.1 Certification pursuant to Section 906 of Sarbanes Oxley Act of 2002

(b) Reports of Form 8-K

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

ARTCRAFT III INC.

Registrant

Date: January 23, 2006	By: /s/ John Lopes
		John Lopes
		President

EX-31

CERTIFICATION

OF CHIEF EXECUTIVE OFFICER

AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

I, John Lopes, certify that:

1. I have reviewed this annual report on Form 10-QSB of ARTCRAFT III INC.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of

the small business issuer as of, and for, the periods present in this report;

4. The small business issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and

internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding there liability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principals;

(c) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the small business issuer’s internal control over financing reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involved management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

Date: January 23, 2006	/s/ John Lopes
	John Lopes
	Chief Executive Officer and Chief Financial Officer

EX-32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Quarterly Report of Artcraft III Inc. (the “Company”) on Form 10-QSB for the quarter ending November 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Lopes, Chief Executive Officer and Chief Financial Officer of the Company, certifies to the best of his knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) Such Quarterly Report on Form 10-QSB for the quarter ending November 30, 2005, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in such Quarterly Report on Form 10-QSB for the quarter ending November 30, 2005, fairly presents, in all material respects, the financial condition and results of operations of Artcraft III Inc.

/s/ John Lopes

John Lopes

Chief Executive Officer and

Chief Financial Officer

January 23, 2006