UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 2010

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

Commission File Number 000-50240

CHINA IVY SCHOOL, INC.

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

Nevada		98-0534456
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)

1 Suhua Road, Shiji Jinrong Building, Suite 801,

Suzhou Industrial Park, Jiangsu Province, China, 215020

(Address of principal executive offices)

(852) 2511-1665

(Issuer's telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o		Accelerated filer o
Non-accelerated filer o		Smaller reporting company x

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

As of ~~August~~November 1315, 2010, 22,582,500 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

~~CHINA~~ Table ~~IVY~~of ~~SCHOOL, INC. AND SUBSIDIARIES~~Contents

~~INDEX~~PART TOI. ~~CONSOLIDATED~~ FINANCIAL ~~STATEMENTS~~INFORMATION

	Page
Condensed Consolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009	F-1
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2010 and 2009 (Unaudited)	F-2
Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2010 (Unaudited) and for the year ended December 31, 2009	F-3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009 (Unaudited)	F-4
Notes to Condensed Consolidated Financial Statements (Unaudited)	F-5 - F-17

Page

Item 1. Financial Statements	F-1

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3

Item 3 Quantitative and Qualitative Disclosures About Market Risk	12

Item 4T. Controls and Procedures	12

PART II. OTHER INFORMATION

Item 1A Risk Factors	13

Item 6. Exhibits	13

SIGNATURES	14

Special Note Regarding Forward Looking Information

This report contains forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, future results and events, and financial performance. All statements made in this report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, including statements related to, cash flows, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward-looking statements. In particular, the words "believe," "expect," "intend," "anticipate," "estimate," "plan," "may," "will," variations of such words and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward looking. Readers should not place undue reliance on forward-looking statements which are based on management's current expectations and projections about future events, are not guarantees of future performance, and are subject to risks, uncertainties and assumptions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences include those discussed in this report, particularly under the caption "Risk Factors." Except as required under the federal securities laws, we do not undertake any obligation to update the forward-looking statements in this report.

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

CHINA IVY SCHOOL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page

Condensed Consolidated Balance Sheets as of September 30, 2010 (Unaudited) and December 31, 2009	F-1

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three and Nine Months Ended September 31, 2010 and 2009 (Unaudited)	F-2

Condensed Consolidated Statements of Stockholders’ Equity for the Nine Months Ended September 31, 2010 (Unaudited) and for the year ended December 31, 2009	F-3

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 31, 2010 and 2009 (Unaudited)	F-4

Notes to Condensed Consolidated Financial Statements (Unaudited)	F-5 - F-16

Table of Contents

CHINA IVY SCHOOL, INC. AND SUBSIDIARIES

(FORMERLY CLAREMONT TECHNOLOGIES CORP.)

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	September 30,			December 31,
	2010			2009
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	~~214~~51,~~215~~426		$	46,187
Advances made to vendors		1,~~475~~495			95,974
Advances to employee		14,~~033~~365			-
Receivable from related party		-1,437,613			2,790,207
Receivable from sale and leaseback of real property - related party		1,~~164~~180,~~534~~087			1,156,639
Total Current Assets		12,~~381~~674,~~257~~986			4,089,007
Property and equipment, net		7,~~357~~240,~~652~~977			7,749,770
Advances to contractors under Company major campus renovation plan		23,~~967~~007,~~700~~336			-
Receivable from sale and leaseback of real property - related party		32,~~153~~900,~~148~~240			3,710,090
Total Assets	$	1415,~~859~~823,~~757~~539		$	15,548,867
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank borrowings	$	10,~~325~~462,~~000~~900		$	10,401,500
Convertible notes payable		-			1,560,000
Accounts payable and accrued expenses		~~643~~1,~~196~~017,899			1,731,502
Payables to related parties		~~737~~610,~~179~~604			719,341
Deferred revenue		12,~~372~~294,~~760~~056			715,535
Total Current Liabilities		1314,~~078~~385,~~135~~459			15,127,878
Total Liabilities		1314,~~078~~385,~~135~~459			15,127,878
Stockholders' Equity
Preferred stock, $0.001 par value; 50,000,000 shares authorized, none issued and outstanding as of June 30, 2010 and December 31, 2009		-			-
Preferred stock, $0.001 par value; 50,000,000 shares authorized, none issued and outstanding as of September 30, 2010 and December 31, 2009		-			-
Common stock, $0.001 par value; 100,000,000 shares authorized, 22,582,500 and 3,082,500 shares issued and outstanding as of June 30, 2010 and December 31, 2009, respectively		22,583			3,083
Common stock, $0.001 par value; 100,000,000 shares authorized, 22,582,500 and 3,082,500 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively		22,583			3,083
Additional paid in capital		5,906,363			4,302,907
Statutory reserves		480,813			480,813
Accumulated deficit		(5,~~390~~753,~~383~~775	)		(5,115,622	)
Accumulated other comprehensive income		~~762~~782,~~246~~096			749,808
Total Stockholders' Equity		1,~~781~~438,~~622~~080			420,989
Total Liabilities and Stockholders' Equity	$	1415,~~859~~823,~~757~~539		$	15,548,867

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

F-1

~~CHINA~~Table ~~IVY~~of SCHOOL, INC. AND SUBSIDIARIES (FORMERLY CLAREMONT TECHNOLOGIES CORP.) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (UNAUDITED)Contents

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Net revenue	$	1,524,948		$	1,393,734		$	3,126,313		$	2,881,116
Operating expenses
Teachers salaries and related expenses		452,556			390,060			1,134,800			966,193
Student expenses		90,382			-			400,422			-
Professional and consulting fees		31,300			44,952			61,300			91,475
Rent and related expenses		468,708			411,237			937,416			868,870
Depreciation and amortization		227,662			225,898			455,435			452,261
Other general and administrative expenses		141,477			185,226			323,698			280,180
Total operating expenses		1,412,085			1,257,373			3,313,071			2,658,979
Income (loss) from operations		112,863			136,361			(186,758	)		222,137
Other (income) expense
Interest income		(194	)		(39	)		(340	)		(170	)
Interest expense		157,085			162,303			329,796			326,301
Loss on disposal of property and equipment		-			-			2,703			-
Accretion of discount on receivable from related party relating to sale of real property		(122,078	)		(122,078	)		(244,156	)		(243,989	)
Total Other (Income) Expense		34,813			40,186			88,003			82,142
Income (loss) from operations		78,050			96,175			(274,761	)		139,995
Provision for income tax		-			-			-			-
Net income (loss)		78,050			96,175			(274,761	)		139,995
Other comprehensive item
Foreign currency translation adjustment		12,492			2,086			12,438			556
Comprehensive income (loss)	$	90,542		$	98,261		$	(262,323	)	$	140,551
Basic net income (loss) per share:	$	0.00		$	0.03		$	(0.01	)	$	0.05
Diluted net income (loss) per share:	$	0.00		$	0.03		$	(0.01	)	$	0.04
Weighted average number of basic shares outstanding		22,582,500			3,082,500			18,919,517			3,082,500
Weighted average number of diluted shares outstanding		22,582,500			3,296,786			18,919,517			3,190,235

CHINA IVY SCHOOL, INC. AND SUBSIDIARIES

(FORMERLY CLAREMONT TECHNOLOGIES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009

Net revenue	$	1,577,826		$	1,652,292		$	4,704,139		$	4,533,408

Operating expenses
Teachers salaries and related expenses		436,900			782,967			1,571,700			1,749,160
Student expenses		206,167			-			606,589			-
Professional and consulting fees		389,290			48,176			450,590			139,651
Rent and related expenses		472,739			457,946			1,410,155			1,326,816
Depreciation and amortization		228,988			225,642			684,423			677,903
Other general and administrative expenses		167,814			463,872			491,512			744,052
Total operating expenses		1,901,898			1,978,603			5,214,969			4,637,582

Loss from operations		(324,072	)		(326,311	)		(510,830	)		(104,174	)

Other (income) expense
Interest income		(466	)		(621	)		(806	)		(791	)
Interest expense		158,804			187,582			488,600			513,883
Loss on disposal of property and equipment		4,110			-			6,813			-
Accretion of discount on receivable from related party relating to sale of real property		(123,128	)		(121,994	)		(367,284	)		(365,983	)
Total Other (Income) Expense		39,320			64,967			127,323			147,109

Loss Before Income Tax		(363,392	)		(391,278	)		(638,153	)		(251,283	)
Provision for income tax		-			-			-			-

Net Loss		(363,392	)		(391,278	)		(638,153	)		(251,283	)

Other comprehensive item
Foreign currency translation adjustment		19,850			4,090			32,288			556

Comprehensive income (loss)	$	(343,542	)	$	(387,188	)	$	(605,865	)	$	(250,727	)

Basic and diluted net loss per share:	$	(0.02	)	$	(0.13	)	$	(0.03	)	$	(0.08	)

Weighted average number of basic and diluted shares outstanding		22,582,500			3,082,500			20,153,929			3,082,500

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

F-2

~~CHINA~~Table ~~IVY~~of SCHOOL, INC. AND SUBSIDIARIES (FORMERLY CLAREMONT TECHNOLOGIES CORP.) CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2009Contents

							Accumulated Other								Total
	Common Stock				Additional		Comprehensive			Statutory		Accumulated			Stockholders'
	Number of Shares		Amount		Paid in Capital		Income (Loss)			Reserves		Deficit			Equity
Balance December 31, 2008		3,082,500	$	3,083	$	4,302,907	$	754,008		$	480,813	$	(4,300,694	)	$	1,240,117
Foreign currency translation adjustment		-		-		-		(4,200	)		-		-			(4,200	)
Net loss for the year ended December 31, 2009		-		-		-		-			-		(814,928	)		(814,928	)
Balance - December 31, 2009		3,082,500		3,083		4,302,907		749,808			480,813		(5,115,622	)		420,989
Conversion of convertible notes		19,500,000		19,500		1,540,500		-			-		-			1,560,000
Satisfaction of accrued interest on conversion of convertible notes		-		-		62,956		-			-		-			62,956
Foreign currency translation adjustment		-		-		-		12,438			-		-			12,438
Net loss for the six months ended June 30, 2010 (Unaudited)		-		-		-		-			-		(274,761	)		(274,761	)
Balance - June 30, 2010 (Unaudited)		22,582,500	$	22,583	$	5,906,363	$	762,246		$	480,813	$	(5,390,383	)	$	1,781,622

CHINA IVY SCHOOL, INC. AND SUBSIDIARIES

(FORMERLY CLAREMONT TECHNOLOGIES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 2009

	Common Stock				Additional		Accumulated Other Comprehensive			Statutory		Accumulated			Total Stockholders'
	Number of Shares		Amount		Paid in Capital		Income (Loss)			Reserves		Deficit			Equity
Balance December 31, 2008		3,082,500	$	3,083	$	4,302,907	$	754,008		$	480,813	$	(4,300,694	)	$	1,240,117
Foreign currency translation adjustment		-		-		-		(4,200	)		-		-			(4,200	)
Net loss for the year ended December 31, 2009		-		-		-		-			-		(814,928	)		(814,928	)
Balance - December 31, 2009		3,082,500		3,083		4,302,907		749,808			480,813		(5,115,622	)		420,989
Conversion of convertible notes		19,500,000		19,500		1,540,500		-			-		-			1,560,000
Satisfaction of accrued interest on conversion of convertible notes		-		-		62,956		-			-		-			62,956
Foreign currency translation adjustment		-		-		-		32,288			-		-			32,288
Net loss for the nine months ended September 30, 2010 (Unaudited)		-		-		-		-			-		(638,153	)		(638,153	)
Balance - September 30, 2010 (Unaudited)		22,582,500	$	22,583	$	5,906,363	$	782,096		$	480,813	$	(5,753,775	)	$	1,438,080

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

F-3

Table of Contents

CHINA IVY SCHOOL, INC. AND SUBSIDIARIES

(FORMERLY CLAREMONT TECHNOLOGIES CORP.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended June 30,
	For the Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(274,761	)	$	139,995
Net Loss	$	(638,153	)	$	(251,283	)
Adjustments to reconcile net income (loss) to net cash
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization		~~455~~684,~~435~~424			~~452~~677,~~261~~903
Imputed rent and related expense		~~822~~1,~~475~~237,249			~~821~~1,~~913~~232,870
Accrued interest on convertible notes		16,156			-
Accretion of discount on receivable from related party		(~~244~~367,~~155~~283	)		(~~243~~365,~~989~~983	)
Loss from disposal of property and equipment		26,~~703~~813			-
Changes in operating assets and liabilities
Advances made to vendors		94,499			-
Decrease in advances made to vendors		94,479			-
Increase in prepaid expenses		-			(~~146~~172,~~933~~307	)
Decrease in accounts payable and accrued expenses		(1,041,506	)		(541,162	)
(Decrease) increase in accounts payable and accrued expenses		(666,803	)		55,384
Increase in deferred revenue		~~657~~1,~~225~~578,521			~~283~~1,~~519~~634,368
Net cash provided by operating activities		~~488~~1,~~071~~945,403			~~765~~2,~~604~~810,952
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to contractors under Company major campus renovation plan		(23,~~967~~007,~~700~~336	)		-
Acquisition of property and equipment		(1652,~~247~~564	)		(516,~~284~~733	)
Advances to "key" and other employee		(735,430	)		-
Proceeds from disposal of assets		7,949			-
Repayment of advance to "key" and other employee		734,397			-
Advances to "key" and other employees		(738,762	)		-
Repayment of advances to "key" and other employees		734,397			-
Collection of prior year's advances made to related party		2,790,207			-
New advances made to related party		(425,446	)		(638,260	)
New advance made to related party		(1,437,613	)		(4,323,818	)
Repayment and proceeds from related party		443,284			146,400
Repayment of advances made to related party		-			146,500
Net cash used in investing activities		(~~176~~1,~~935~~703,722	)		(~~497~~4,~~144~~194,051	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from bank borrowings		-			1,~~756~~758,~~800~~000
Repayment of short term loans		(~~147~~149,~~500~~470	)		(1,~~903~~904,~~200~~500	)
Proceeds from convertible notes		-			1,560,000
Net cash (used in) provided by financing activities		(147,500	)		1,413,600
Repayment of amounts payable to other related parties		(108,737	)		-
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		4,392			4,104
Net cash( used in) provided by financing activities		(258,207	)		1,413,500
NET INCREASE IN CASH AND CASH EQUIVALENTS		168,028			1,686,164
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		21,765			5,014
NET INCREASE IN CASH AND CASH EQUIVALENTS		5,239			35,415
CASH AND CASH EQUIVALENTS, BEGINNING BALANCE		46,187			58,984
CASH AND CASH EQUIVALENTS, ENDING BALANCE	$	~~214~~51,~~215~~426		$	194,~~745,148~~399
Supplemental Disclosures of Cash Flow Information:
Income tax payments	$	-		$	-
Interest payments	$	~~329~~472,~~796~~204		$	~~326~~474,~~301~~758
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
Conversion of 6% convertible notes	$	1,560,000		$	-
Satisfaction of accrued interest on conversion of convertible notes	$	62,956		$	-

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

F-4

Table of Contents

CHINA IVY SCHOOL, INC. AND SUBSIDIARIES

(FORMERLY CLAREMONT TECHNOLOGIES CORP.)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(UNAUDITED)

NOTE 1 - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Organization

China Ivy School, Inc. (formerly Claremont Technologies Corp.) (“China Ivy") was incorporated on September 14, 1999 under the laws of the State of Nevada. China Ivy acquired a wholly owned subsidiary Safe Cell Tab Inc. ("Safe Cell") on August 22, 2003. Safe Cell was incorporated on May 9, 1996 under the laws of the Province of British Columbia, Canada and engaged in distributing Wi-Fi License and Mobius disposable cell phones. On July 31, 2008, the Company spun off Safe Cell to its stockholders.

On October 12, 2006, China Ivy and the shareholders of Brighter International Limited (“Brighter International”) entered into a Share Exchange Agreement in which China Ivy acquired 100% of Brighter International's outstanding common stock. Under the Share Exchange Agreement, the shareholders of Brighter International received 2,762,500 newly issued common shares of the company. This acquisition was accounted for as a reverse acquisition since after the acquisition, the former shareholders of Brighter International held a majority of the outstanding shares of China Ivy. The financial statements of the legal acquirer were not significant.

Brighter International Limited is an education investment enterprise and was incorporated in accordance with the General Corporation Act of the State of Nevada on June 1, 2006. On June 15, 2006, Brighter International entered into an agreement with Blue Tassel School, and pursuant to the agreement, all the shareholders of Blue Tassel School transferred all their ownership interests in Blue Tassel School to Brighter International. Prior to the acquisition, Brighter International and Blue Tassel School had common shareholders owning the same percentage of ownership in both companies. Therefore, the entities were under common control before the acquisition. This acquisition was accounted for at historical cost in a manner similar to the pooling of interests method. After the acquisition, Brighter International owned 100% of the outstanding shares of Blue Tassel School.

Blue Tassel School was established on July 10, 2001 under the laws of the People’s Republic of China (“PRC”). Blue Tassel School is an education center located in Suzhou city, accredited by the Jiangsu Province Educational Committee as a boarding school comprising grades from kindergarten through senior school, including an international school. The five schools that comprise Blue Tassel School are kindergarten, primary school, junior high school, senior high school, and international school.

Effective January 14, 2009, the Company effectuated a 1 for 20 reverse stock split (thereby reducing the issued and outstanding shares from 61,650,001 shares to 3,082,500 shares). The financial statements have been retroactively adjusted to reflect this stock split.

F-5

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of China Ivy and its subsidiaries Brighter International Limited, and Blue Tassel School (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The Company's reporting currency is the United States dollar.

F-5

Table of Contents

Going Concern

The financial statements have been prepared on a “going concern” basis, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as of ~~June~~September 30, 2010 and December 31, 2009, the Company had cash of $~~214~~51,~~215~~426 and $46,187, respectively, and a working capital deficit of $11,~~696~~710,~~878~~473 and $11,038,871, respectively. The Company also had an accumulated deficit of $5,~~390~~753,~~383~~775 as of ~~June~~September 30, 2010. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company plans to improve its financial condition through a debt or equity offering of its securities and /or a business combination with another business entity. However, there is no assurance that the Company will accomplish these objectives. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

Foreign Currency Transactions and Comprehensive Income (Loss)

The functional currency of China Ivy is the United States dollar. The functional currency of Blue Tassel School is the Chinese Renminbi (“RMB”). The reporting currency of the Company is the United States dollar.

The assets and liabilities of Blue Tassel School are translated into United States dollars at period-end exchange rates. The revenues and expenses are translated into United States dollars at average exchange rates for the periods. Resulting translation adjustments are recorded as a component of accumulated other comprehensive income within stockholders’ equity.

Transaction gains or losses arising from exchange rate fluctuations on balances and transactions denominated in a currency other than the functional currency are included in the consolidated results of operations. There is no material foreign currency transaction ~~gains~~gain or losses for the ~~six~~nine months ended ~~June~~September 30, 2010 and 2009.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates, and such differences may be material to the financial statements.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

F-6

Revenue Recognition

The revenues of the Company are tuition fees, accommodation fees and others. Tuition fees and accommodation fees are collected in advance on or before the new semester. Tuition fees are recognized as revenue proportionately as the instructions are delivered, and are reported net of scholarships and tuition refunds. Accommodation fees are recognized as revenue in proportion to semester progress through the end of the reporting period. Tuition and accommodation fees paid in advance are recorded as deferred revenue.

Stock-Based Compensation

Stock-based compensation is accounted for at fair value in accordance with Accounting Standards Codification (“ASC”) topic 718-10, Stock Compensation (formerly, SFAS 123(R), “Accounting for Stock-Based Compensation”). As of ~~June~~September 30, 2010 and December 31, 2009, no stock options or warrants have been granted and none are outstanding.

Advertising

Advertising costs are expensed as incurred. Advertising costs were not material for the three and ~~six~~nine months ended ~~June~~September 30, 2010 and 2009.

F-6

Table of Contents

Research and Development

In accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”) (formerly, SFAS No. 2, “Accounting For Research and Development Costs”), the Company expenses all research and development costs as incurred.

Segment Information

ASC 280-10 (formerly, SFAS No. 131, “Disclosure About Segments of and Enterprise and Related Information”) requires entity-wide disclosures about the products and services an entity provides, the material countries in which it holds assets and reports revenues, and its major customers. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Income Taxes

The Company accounts for income taxes using the asset and liability method described in ASC 740-10 (formerly, SFAS No. 109, “Accounting For Income Taxes”), the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Blue Tassel School is governed by the Income Tax Laws of the PRC. Pursuant to the PRC relevant laws and regulations and tax law, Blue Tassel School is exempt from income tax.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in demand deposit bank accounts, and all highly liquid debt instruments with original maturities of three months or less.

F-7

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Buildings		20 years
Infrastructure and leasehold improvements		10 years
Equipment		10 years
Automobiles		10 years
Furniture and fixtures		5 years
Computer hardware and software		5 years

Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, advances made to vendors, advances to employees, receivable from related party, receivable from sale and leaseback of real property - related party, bank borrowings, convertible notes payable, accounts payable and accrued expenses, and payables to related parties. The fair value of these financial instruments approximate their carrying amounts reported in the consolidated balance sheets due to the short term maturity of these instruments or based upon market quotations of instruments with similar interest rates and maturities.

F-7

Table of Contents

Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. When these events occur, the Company measures impairment by comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to result from the use of the assets and their eventual disposition. If the sum of the expected undiscounted cash flows is less than the carrying amount of the assets, the Company would recognize an impairment loss based on the fair value of the assets. Based on its review, the Company believes that, as of ~~June~~September 30, 2010 and December 31, 2009, there were no significant impairments of its long-lived assets.

Net Loss Per Common Share

The Company has adopted ASC 260-10 (formerly, SFAS No. 128, “Earnings per Share” (“EPS”)), which requires presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures and requires a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period.

Diluted net income (loss) per share is computed similarly to basic net income (loss) per share except that it includes the potential dilution that could occur if dilutive securities were converted.

F-8

Recently Adopted Accounting Standards

In February 2010, the Company adopted an amendment to previously adopted accounting guidance on subsequent event disclosure, which established standards of accounting for and disclosure of events or transactions that occur after the balance sheet date but before financial statements are issued or available to be issued. Under the amended guidance, the Company is no longer required to disclose the date through which subsequent events have been evaluated. The adoption of this requirement did not have a material impact on the Company’s financial condition or results of operations.

We adopted the accounting principles established by ASU 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, effective January 1, 2010. This ASU requires an ongoing reassessment and replaces the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity (“VIE”) with a primarily qualitative analysis. The qualitative analysis is based on identifying the party that has both the power to direct the activities that most significantly impact the VIE’s economic performance (the “power criterion”) and the obligation to absorb losses from or the right to receive benefits of the VIE that could potentially be significant to the VIE (the “losses/benefit criterion”). The party that meets both these criteria is deemed to have a controlling financial interest. The party with the controlling financial interest is considered to be the primary beneficiary and as a result is required to consolidate the VIE. The adoption of this new guidance did not have a material effect on our financial statements.

Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board issued guidance which expands the required disclosures about fair value measurements. This guidance requires disclosures about transfers of investments between levels in the fair value hierarchy and disclosures relating to the reconciliation of fair value measurements using significant unobservable inputs (level 3 investments). This guidance is effective for the Company as of January 1, 2011. The adoption of this guidance will not have a material impact on its financial condition or results of operations.

F-8

Table of Contents

In April 2010, the FASB issued ASU 2010-13, “Compensation-Stock Compensation (Topic 718) - Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB Emerging Issues Task Force,” or ASU 2010-13. ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The amendments in this update do not expand the recurring disclosures required by Topic 718. Disclosures currently required under Topic 718 are applicable to a share-based payment award, including the nature and the term of share-based payment arrangements. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company is currently evaluating the impact of the adoption of ASU 2010-13 on its financial statements.

Certain other accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.

NOTE 3 - INTERIM FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements as of ~~June~~September 30, 2010 and for the three and ~~six~~nine months ended ~~June~~September 30, 2010 and 2009 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10 - Q. In the opinion of management, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of ~~June~~September 30, 2010 and the results of operations and cash flows for the three and ~~six~~nine months ended ~~June~~September 30, 2010 and 2009. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and ~~six~~nine month period ended ~~June~~September 30, 2010 is not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending December 31, 2010. The balance sheet at December 31, 2009 has been derived from the audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2009 included in our Form 10 –K/A filed ~~April~~May 114, 2010.

NOTE 4 - RECEIVABLE FROM RELATED PARTY

Minglong Industry Co. Ltd. (“Minglong”) is one of the Company’s significant shareholders and is controlled by the chief executive officer of the Company. Receivable from related party in the amount of $1,437,613 and $2,790,207, respectively, as of September 30, 2010 and December 31, 2009, represented the net amount advanced to Minglong (see Note 14). The receivable due from Minglong ~~was~~is interest free and due on demand.

NOTE 5 - RECEIVABLE FROM SALE AND LEASEBACK OF REAL PROPERTY - RELATED PARTY

On March 12, 2008, Blue Tassel School sold the land use right of 91,993.32 square meters and twenty buildings of 50,113.81 square meters to its former shareholder Minglong with the sales price of $5,563,692 and $10,405,554 respectively, totaling $15,969,247 (RMB 111,829,458). Blue Tassel School leased back the land use right and the buildings from Minglong from the date of sale.

F-9

Table of Contents

The lease payments equaled the total sales price of $15,969,247 (RMB 111,829,458). The leases approximated $3.40 (RMB 24) per square meter annually, totaling approximately $315,280 (RMB 2,207,840) per year for using the land and $35.60 (RMB 180) per square meter annually, totaling approximately $1,288,125 (RMB 9,020,486) per year for leasing the buildings. The total annual lease was to approximate $1,603,405 (RMB 11,228,326) until a total of approximately $15,969,247 (RMB 111,829,458) has been offset against the amount receivable from related party over the 10 year term of the lease.

The total receivable from related party on the date of sale and lease back was $11,228,703. This amount represented the present value of the future cash inflows (our lease payments) at the date of the transactions. Assumptions used for the present value calculation were: (1) annual rent payments of $1,603,405; (2) term of ten years; (3) interest rate of 7% per annum.

The purpose of the sale and leaseback of the land use right and buildings was to comply with a new regulation from the government of Suzhou City, Jiangsu Province, China. According to the new regulation, "Public institutions like schools, kindergartens, hospitals etc., educational facilities and health facilities of social organizations and other lands for the use of other social welfare cannot be used as collateral for bank loans". As in 2007 the land use right and buildings were pledged for bank loans, the management of the Company decided to sell the land use right and buildings to Minglong and then lease back for the school use.

The loss on the March 12, 2008 sale of real property was $5,169,294, as follows:

Fair value of consideration received - $15,969,247 noninterest
bearing receivable from Minglong due in annual installments
of $1,603,405 until repaid (discounted at 7% interest rate)	$	11,228,703
Effect of change in exchange rate		45,893
Net carrying value of land use right and buildings
(less $113,057 foreign exchange translation adjustment)		(16,443,890	)
Loss on sale of real property	$	(5,169,294	)

From March 12, 2008 to ~~June~~September 30, 2010, the receivable from sale and leaseback of real property – related party changed as follows:

Balance due from Minglong at March 12, 2008 in connection with the
sale and leaseback of real property, noninterest bearing (discounted)	$	11,228,703
Amounts collected (See Note 15)		(7,681,172	)
Amounts collected (See Note 14)		(7,681,172	)
Accretion of discount on receivable		2,280,191
Foreign exchange translation adjustment		198,524
Balance at December 31, 2008		6,026,246
Amounts collected - during the year ended December 31, 2009		(1,625,300	)
Accretion of discount on receivable		482,478
Foreign exchange translation adjustment		(16,695	)
Balance at December 31, 2009		4,866,729
Amounts collected - during six months ended June 30, 2010		(822,475	)
Amounts collected - during nine months ended September 30, 2010		(1,237,249	)
Accretion of discount on receivable		~~244~~367,~~155~~283
Foreign exchange translation adjustment		2983,~~273~~564
Balance at June 30, 2010 (Unaudited)		4,317,682
Balance at September 30, 2010 (Unaudited)		4,080,327
Less: current portion		1,~~164~~180,~~534~~087
Receivable from sale and leaseback of real property - related party	$	32,~~153~~900,~~148~~240

F-10

Table of Contents

NOTE 6 – PROPERTY AND EQUIPMENT

As of ~~June~~September 30, 2010 and December 31, 2009, property, plant and equipment consist of the following:

	June 30,			December 31,
	September 30,			December 31,
	2010			2009
	(Unaudited)
Infrastructure and leasehold improvements	$	11,~~314~~465,~~345~~460		$	11,237,638
Educational equipment		~~526~~535,~~543~~473			561,144
Automobiles		2934,~~031~~201			28,834
Total property and equipment		1112,~~869~~035,~~919~~134			11,827,616
Accumulated depreciation		(4,~~512~~794,~~267~~157	)		(4,077,846	)
Property and equipment, net	$	7,~~357~~240,~~652~~977		$	7,749,770

The Company had depreciation expense of $~~455~~684,~~435~~423 and $~~452~~677,~~261~~903 for the ~~six~~nine months ended ~~June~~September 30, 2010 and 2009, respectively.

On May 24, 2010, the Company approved a major campus renovation plan with a total budget of RMB 26,000,000 ($3,~~835~~886,~~000~~220). In May 2010, the Company executed three contracts with three vendors for (1) central air conditioning system installation (RMB 12,300,000, or $1,~~814~~838,~~250~~481), (2) installation of 2,925 trees (RMB 7,280,000, or $1,~~073~~088,~~800~~142), and (3) renovation upgrade of school cafeteria (RMB 5,580,000, or $~~823~~834,~~050~~043), or for a total of RMB 25,160,000 ($3,~~711~~760,~~100~~666). As of ~~June~~September 30, 2010, a total of RMB 20,120,000 ($23,~~967~~007,~~700~~336) had been paid to the three contractors as required advances under the contracts, which amount is included in the consolidated balance sheet as “Advances to contractors under Company major campus renovation plan”.

The first contract provides for the work to be finished in August 2010 and provides for payments to the contractor of 80% in advance (RMB 9,840,000, or $1,~~451~~470,~~400~~785, was paid in June 2010), 10% within one year after project completion (RMB 1,230,000, or $~~181~~183,~~425~~848), and 10% within two years of project completion (RMB 1,230,000 or $~~181~~183,~~425~~848). The second contract provides for the work to be finished in September 2010 and provides for payments to the contractor of 80% in advance (RMB 5,820,000, or $~~858~~869,~~450~~915, was paid in June 2010), 10% within six months after project completion (RMB 728,000 or $~~107~~108,~~380~~814), and 10% within one year after project completion (RMB 732,000, or $~~107~~109,~~970~~413). The third contract provides for the work to be finished in September 2010 and provides for payments to the contractor of 80% in advance (RMB 4,460,000, or $~~657~~666,~~850~~636, was paid in June 2010), 10% within six months after project completion (RMB 558,000, or $8283,~~305~~404), and 10% within one year after project completion (RMB 562,000, or $8284,~~895~~003).

~~F-11~~Due to inclement weather, completion of the campus renovation project is not expected until December 2010.

NOTE 7 - BANK BORROWINGS

The Company has borrowed $10,~~325~~462,~~000~~900 and $10,401,500 from two banks located in China under credit agreements as of ~~June~~September 30, 2010 and December 31, 2009, respectively. Borrowings under credit lines consist of the following:

	June 30,		December 31,
	2010		2009
Bank Borrowings	(Unaudited)
Borrowings from Huaxia Bank Suzhou Branch
Interest at 5.346% per annum, due by October 30, 2010	$	2,655,000	$	2,637,000
Interest at 5.346% per annum, due by November 5, 2010		2,212,500		2,197,500
Interest at 5.346% per annum, due by November 9, 2010		2,728,750		2,710,250
Interest at 5.346% per annum, due by November 18, 2010		1,106,250		1,098,750
Borrowings from Huaxia Bank Subtotal		8,702,500		8,643,500
Borrowings from Jiangsu Dongwu Rural Commercial Bank
Interest at 6.903% per annum, due by June 12, 2011		295,000		293,000
Interest at 6.903% per annum, due by June 12, 2011		1,327,500		1,465,000
Borrowings from Dongwu Rural Commercial Bank Subtotal		1,622,500		1,758,000
Total borrowings		10,325,000		10,401,500
Current portion		10,325,000		10,401,500
Long term portion	$	-	$	-

F-11

OnTable ~~June~~of 17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural Commercial Bank. The Company acquired a 2,000,000 RMB (approximately $295,000) credit line from June 17, 2008 to June 17, 2011. This credit line is secured by a 234 square meter residential unit and 62 square meter land use right owned by Ti Yin and Yan Hong, the third party assigned by the bank.Contents

On June 17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural Commercial Bank. The Company acquired a 11,000,000 RMB (approximately $1,622,500) credit line from June 17, 2008 to June 17, 2011. This credit line is secured by a 477 square meter residential unit and 837 square meter land use right owned by the Chief Executive Officer of the Company. As of June 30, 2010, the balance borrowed was 9,000,000 RMB ($1,327,500).

	September 30,		December 31,
	2010		2009
Bank Borrowings	(Unaudited)
Borrowings from Huaxia Bank Suzhou Branch
Interest at 5.346% per annum, due by October 30, 2010	$	2,690,460	$	2,637,000
Interest at 5.346% per annum, due by November 5, 2010		2,242,050		2,197,500
Interest at 5.346% per annum, due by November 9, 2010		2,765,195		2,710,250
Interest at 5.346% per annum, due by November 18, 2010		1,121,025		1,098,750
Borrowings from Huaxia Bank Subtotal		8,818,730		8,643,500
Borrowings from Jiangsu Dongwu Rural Commercial Bank
Interest at 6.903% per annum, due by June 12, 2011		298,940		293,000
Interest at 6.903% per annum, due by June 12, 2011		1,345,230		1,465,000
Borrowings from Dongwu Rural Commercial Bank Subtotal		1,644,170		1,758,000
Total borrowings		10,462,900		10,401,500
Current portion		10,462,900		10,401,500
Long term portion	$	-	$	-

On June 17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural Commercial Bank. The Company acquired a 2,000,000 RMB (approximately $298,940) credit line from June 17, 2008 to June 17, 2011. This credit line is secured by a 234 square meter residential unit and a 62 square meter land use right owned by Ti Yin and Yan Hong, the third party assigned by the bank.

On June 17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural Commercial Bank. The Company acquired a 11,000,000 RMB (approximately $1,345,230) credit line from June 17, 2008 to June 17, 2011. This credit line is secured by a 477 square meter residential unit and a 837 square meter land use right owned by the Chief Executive Officer of the Company. As of September 30, 2010, the balance borrowed was 9,000,000 RMB ($1,345,230).

The loans from Huaxia Bank are secured by the land use right of Blue Tassel School and four buildings totaling 20,926.86 square meters of the School.

NOTE 8 - CONVERTIBLE NOTES PAYABLE

On June 30, 2009, the Company completed the sale of $1,560,000 principal amount of the Company's 6% Convertible Notes, due June 30, 2010 (the "Notes"). The Notes were sold to four related parties ($920,000 to the Company’s chief executive officer, $448,000 to Minglong Asia, and $192,000 to two other Company directors) outside the United States in a private transaction exempted from the registration requirements of the Securities Act of 1933 pursuant to Regulation D. The Notes accrued interest at the rate of 6% per annum and were to mature on June 30, 2010. The four related parties paid an aggregate of $1,560,000 for their Notes.

~~F-12~~Holders of the Notes could at any time convert all or any portion of the principal amount of the Notes into shares of the Company's Common Stock at a conversion price, subject to adjustment, initially equal to eight cents ($0.08) per share. No interest was payable on any portion of a Note converted into Common Stock. Should the conversion price decrease or increase, the number of shares of Common Stock issuable upon conversion of the Notes would have been proportionately increased or decreased, as the case may be. In the event of default by the Company in its obligations under the Notes, Holders could have, at their option, declared the principal of the Note and the interest accrued thereon to be immediately due and payable.

Holders of the Notes could at any time convert all or any portion of the principal amount of the Notes into shares of the Company's Common Stock at a conversion price, subject to adjustment, initially equal to eight cents ($0.08) per share. No interest was payable on any portion of a Note converted into Common Stock. Should the conversion price decrease or increase, the number of shares of Common Stock issuable upon conversion of the Notes would have been proportionately increased or decreased, as the case may be. In the event of default by the Company in its obligations under the Notes, Holders could have, at their option, declare the principal of the Note and the interest accrued thereon to be immediately due and payable.

On February 4, 2010, China Ivy issued a total of 19,500,000 shares of its common stock in full satisfaction of the $1,560,000 convertible notes payable due to the four related parties discussed above. Consequently, the Company’s issued and outstanding common stock increased from 3,082,500 shares to 22,582,500 shares. Accrued interest in the amount of $62,956 was treated as additional paid in capital.

F-12

Table of Contents

NOTE 9 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The Company's accounts payable and accrued expenses as of ~~June~~September 30, 2010 and December 31, 2009 are summarized as follows:

	June 30,		December 31,
	September 30,		December 31,
	2010		2009
	(Unaudited)
Accounts payable	$	~~505~~414,~~246~~987	$	490,001
Accrued wages		~~120~~138,~~002~~192		120,776
Accrued consulting fees		-372,355		883,384
Accrued interest on convertible notes payable		-		46,800
Other accrued expenses		1792,~~948~~365		190,541
Total accounts payable and accrued expenses	$	~~643~~1,~~196~~017,899	$	1,731,502

On December 31, 2009, the Company authorized consulting fee payments totaling $846,788 to 56 consultants who provided various education consulting services to the Company during 2009. The consulting fees were accrued in December 2009 and were paid in full on February 5, 2010.

On June 15, 2010, the Company authorized to contract with 56 consultants to provide various education consulting services for the Company from July 1, 2010 to December 31, 2010. Total estimated consulting fees are $744,710. Accordingly, consulting fees of $372,355 was accrued in the three months ended September 30, 2010.

NOTE 10 - PAYABLES TO RELATED PARTIES

Payables to related parties consist of the following:

	June 30,		December 31,
	September 30,		December 31,
	2010		2009
	(Unaudited)
Payable to Chief Financial Officer (see Note 14)	$	-	$	58,600
Payable to Mr. Yongqi Zhu		~~647~~610,~~552~~604		660,741
Payable to Minglong (see Note 4)		89,627		-
Total Payable to Related Parties	$	610,604	$	719,341
Total Payable to Related Parties	$	737,179	$	719,341

Payable to Chief Financial Officer in the amount of $58,600 as of December 31, 2009 represented the net balance of loans from the Chief Financial Officer of the Company. The payable was interest free and due on demand. The payable was paid in full during the first quarter of 2010.

~~F-13~~Payable to Mr. Yongqi Zhu, the Chief Executive Officer of the Company, was $610,604 and $660,741 as of September 30, 2010 and December 31, 2009, respectively. The payable represented the net balance of loans from Mr. Zhu advanced to the Company. The balance due to Mr. Zhu is interest free and due on demand.

Payable to Mr. Yongqi Zhu, the Chief Executive Officer of the Company, was $647,552 and $660,741 as of June 30, 2010 and December 31, 2009, respectively. The payable represented the net balance of loans from Mr. Zhu advanced to the Company. The balance due to Mr. Zhu is interest free and due on demand.

Payable to Minglong was $89,627 and $0 as of June 30, 2010 and December 31, 2009, respectively. The balance at June 30, 2010 represents unreimbursed expenses paid by Minglong and cash advances from Minglong. The payable due to Minglong is interest free and due on demand.

NOTE 11 - DEFERRED REVENUE

The Company’s revenue consists of tuition fees, accommodation fees and others. Those fees will usually be collected in advance at the beginning of a semester. Spring semester runs from February to July. Autumn semester runs from August to January. Spring semester tuition is collected starting from December. Autumn semester tuition is collected starting from May. The Company prorates the fees collected to applicable months during the semester, recognizes revenue in the corresponding periods and records unrecognized fees collected as deferred income. As of ~~June~~September 30, 2010 and December 31, 2009, the deferred revenue balance totaled $12,~~372~~294,~~760~~056 and $715,535, respectively.

F-13

Table of Contents

NOTE 12 - STATUTORY RESERVES

Statutory reserves consist of the following:
	June 30,		December 31,
	2010		2009
	(Unaudited)
Statutory surplus reserve	$	307,853	$	307,853
Statutory common welfare fund		172,960		172,960
Total	$	480,813	$	480,813

Statutory reserves consist of the following:

	September 30,		December 31,
	2010		2009
	(Unaudited)
Statutory surplus reserve	$	307,853	$	307,853
Statutory common welfare fund		172,960		172,960
Total	$	480,813	$	480,813

As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following: i. Making up cumulative prior years' losses, if any; ii. Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of Blue Tassel School's registered capital; iii. Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to Blue Tassel School's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the School's employees; and iv. Allocations to the discretionary surplus reserve, if approved in the stockholders' general meeting.

As an educational institution, the Blue Tassel School has an option not to make these appropriations. For the ~~six~~nine months ended ~~June~~September 30, 2010 and the year ended December 31, 2009, the Company did not make any appropriations to the statutory reserves.

F-14

NOTE 13 - ACCUMULATED OTHER COMPREHENSIVE INCOME

Balances of related after-tax components comprising accumulated other comprehensive income (loss), included in stockholders' equity at ~~June~~September 30, 2010 and December 31, 2009, were as follows:

	Foreign Currency
	Translation Adjustments
Balance at December 31, 2008	$	754,008
Change during the year ended December 31, 2009		(4,200	)
Balance at December 31, 2009		749,808
Change during the six months ended June 30, 2010 (Unaudited)		12,438
Change during the nine months ended September 30, 2010 (Unaudited)		32,288
Balance at June 30, 2010 (Unaudited)	$	762,246
Balance at September 30, 2010 (Unaudited)	$	782,096

NOTE 14 - RELATED PARTY TRANSACTIONS

The Company will sometimes receive funds from and advance funds to Mr. Yongqi Zhu, one of its significant shareholders and the Chief Executive Officer of the Company. As of ~~June~~September 30, 2010 and December 31, 2009, the balance due to Mr. Zhu was $~~647~~610,~~552~~604 and $660,741, respectively, which was included in payables to related parties (see Note 10). The balance due to Mr. Zhu is interest free and due on demand.

During 2009, the Company received $146,500 from Ms. Xue, Chief Financial Officer of the Company and returned $146,500 to Mr. Xue in the fourth quarter of 2009. As of ~~June~~September 30, 2010 and December 31, 2009, the balance due to Ms. Xue was $0 and $58,600, respectively, which was interest free and due on demand (see Note 10).

Minglong is a former shareholder of Blue Tassel School. It is controlled by Mr. Zhu, the chief executive officer of the Company. On March 12, 2008, the Company sold a 91,993 square meters land use right and twenty buildings of 50,114 square meters to Minglong. The Company leased back the land use right and buildings pursuant to a 10 year lease from Minglong at the date of sale (see Note 5).F-14

Table of Contents

Minglong was a former shareholder of Blue Tassel School. It is controlled by Mr. Zhu, the chief executive officer of the Company. On March 12, 2008, the Company sold a 91,993 square meters land use right and twenty buildings of 50,114 square meters to Minglong. The Company leased back the land use right and buildings pursuant to a 10 year lease from Minglong at the date of sale (see Note 5).

During 2008, the Company recorded rent expense of $1,296,466 to offset the scheduled amount due from related party in connection with the sale and leaseback of real property. Also, the Company received net cash inflow of $2,518,999 from Minglong. In addition, Company expenses of $2,181,385 and consulting fees of $1,684,322 were paid by Minglong. The Company agreed to apply and treat the above items totaling $7,681,172 as collections of the receivable from related party in connection with the sale and lease back of real property (See Note 5).

For the year ended December 31, 2009, the Company advanced net cash of $3,020,313 to Minglong. Minglong paid expenses of $156,734 and $73,372 on behalf of China Ivy during the year ended December 31, 2009 and 2008, respectively. A netted amount of $2,790,207 was recorded under the caption “Receivable from Related Party” as of December 31, 2009. On March 30, 2010, the Company received payment of RMB 20,000,000 ($2,930,000) from Minglong Industry Co. substantially satisfying an interest free advance receivable of $2,790,207 at December 31, 2009 due the Company.

During the ~~six~~nine months ended ~~June~~September 30, 2010, Minglong paid expenses of $36,406 on behalf of the Company.

~~F-15~~On December 31, 2009, the Company entered into a one year lease agreement with Minglong to continue use of current office space located at 1 Suhua Road, Shiji Jinrong Building, Suite 801, Suzhou Industrial Park, Jiangsu Province, P.R. China. The rent and related maintenance expense is $234,543 (RMB 1,569,163) per annum.

OnAs ~~December~~discussed ~~31,~~Note ~~2009~~8, ~~the~~in ~~Company~~exchange ~~entered~~for ~~into~~ a ~~one~~$448,000 ~~year~~convertible ~~lease~~note ~~agreement~~payable ~~with~~by ~~Minglong~~the Company to ~~continue~~Minglong ~~use~~(Asia) ofthe ~~current~~Company ~~office~~issued ~~space~~5,600,000 ~~located~~shares atof 1Company ~~Suhua~~common ~~Road~~stock, ~~Shiji~~resulting ~~Jinrong~~in ~~Building,~~Minglong ~~Suite~~(Asia) ~~801,~~being ~~Suzhou~~a ~~Industrial~~26% ~~Park,~~owner ~~Jiangsu~~in ~~Province~~the Company at September 30, P2010.R. ~~China~~Mr. ~~The~~Zhu ~~rent~~is ~~and~~a ~~related~~56% ~~maintenance~~owner ~~expense~~in isthe ~~$231,452~~Company ~~(RMB~~at 1September 30,~~569,163)~~ ~~per annum~~2010.

During the three months ended September 30, 2010, the Company advanced net cash of $1,401,201 to Minglong.

NOTE 15 - COMMITMENTS

Operating Lease Obligations

Blue Tassel School leases a land use right and 20 buildings located in Suzhou City Wuzhong Economy Development District from Minglong, the former shareholder of Blue Tassel School (Note 5). The term of the lease agreement is 10 years starting March 12, 2008. The lease is considered an operating lease.

On December 31, 2009, the Company entered into a one year lease agreement with Minglong to continue use of current office space located at 1 Suhua Road, Shiji Jinrong Building, Suite 801, Suzhou Industrial Park, Jiangsu Province, P.R. China. The rent and related maintenance expense is $~~231~~234,~~452~~543 (RMB 1,569,163) per annum.

Rent expense and related maintenance expenses ~~were~~totaled $~~937~~1,~~416~~410,155 and $~~868~~1,~~870~~326,816 for the ~~six~~nine months ended ~~June~~September 30, 2010 and 2009, respectively.

Aggregate minimum future lease payments under operating leases as of ~~June~~September 30, 2010 for each of the next five years and thereafter are as follows:

Period ending June 30,	Minimum lease payments
Period ending September 30,	Minimum lease payments
2011	$	1,~~771~~736,~~904~~263
2012		1,~~656~~678,~~178~~298
2013		1,~~656~~678,~~178~~298
2014		1,~~656~~678,~~178~~298
2015		1,~~656~~678,~~178~~298
Thereafter		4,~~554~~195,~~489~~730
Total	$	12,~~951~~587,~~105~~220

F-15

Table of Contents

Consulting Agreements

In 2009, the Company renewed one year service contracts with 56 consultants to provide various education consulting services for the Company. On December 31, 2009, the Company authorized consulting fee payments totaling $846,788 to the 56 consultants who provided various education consulting services to the Company during 2009. The consulting fees were accrued in December 2009 and were paid in full on February 5, 2010.

On June 13, 2008, the Company executed an 18 month consulting agreement with Beijing JP Investment Advisors Limited (the “Advisors”). For consideration of 30,000 RMB ($4,392) per month, the Advisors provided services related to business development, marketing research, and prospective acquisitions. The consulting agreement was terminated on December 31, 2009.

For the nine months ended September 30, 2010 and 2009, consulting fees expense was $372,355 and $39,699, respectively.

NOTE 16 – SUBSEQUENT EVENT

On October 28, 2010, the Company repaid $2,690,460 (18,000,000 RMB) borrowing from Huaxia Bank due October 30, 2010. On October 28 and 29, 2010, the Company repaid $2,242,050 (15,000,000 RMB) borrowing from Huaxia Bank due November 5, 2010. On October 29, 2010, the Company repaid $1,121,025 (7,500,000 RMB) borrowing from Huaxia Bank due November 18, 2010. On October 29, 2010, the Company repaid $523,145 (3,500,000 RMB) borrowing from Huaxia Bank (out of a total 18,500,000 RMB, or $ 2,765,195) due November 18, 2010. The remaining balance $2,242,050 (RMB 15,000,000) borrowing from Huaxia Bank is due November 18, 2010.

On October 28, 2010, the Company received a $4,633,570 (31,000,000 RMB) borrowing from Hauxia Bank. The new loan bears interest at 5.61% per annum and is due by January 28, 2011 and is secured by the land use rights of the Blue Tassle School and the four buildings totaling 20,926.86 square meters of the school. On October 29, 2010, the Company received a $1,943,110 (13,000,000 RMB) borrowing from Hauxia Bank. The new loan is a “working capital” loan that bears interest at 5.61% per annum and is due by January 29, 2011.

F-16

OnTable ~~June~~of 15, 2010, the Company authorized to contract with 56 consultants to provide various education consulting services for the Company from July 1, 2010 to December 31, 2010. Total estimated consulting fees are $743,400.Contents

For the six months ended June 30, 2010 and 2009, consulting fees expense was $0 and $26,523, respectively.

F-17

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our financial statements and notes thereto included in this Form 10-Q and Form 10-K filed on April 1, 2010.

~~The~~RESULTS ~~following~~OF discussion contains forward-looking statements. Our actual results may differ significantly from those projected. Factors that may cause future results to differ materially from those projected include, but are not limited to, those discussed in "Risk Factors" in our report on Form 10-K for the year ended December 31, 2009, and elsewhere in this Form 10-Q.OPERATIONS

~~Results~~Three ofMonths ~~Operations~~Ended September 30, 2010 as compared to Three Months Ended September 30, 2009

~~Three~~Comparison ~~Months~~of ~~Ended~~Revenue ~~June~~for ~~30,~~the ~~2010 as compared to~~ Three Months Ended ~~June~~September 30, 2010 and 2009

Comparison of Revenue for the Three Months Ended June 30, 2010 and 2009

	Three Months Ended September 30,
	2010		2009
Revenue
Tuition fees	$	1,400,632	$	1,422,957
Accommodation fees		125,552		133,956
Other		51,642		95,379
Total Revenue	$	1,577,826	$	1,652,292

	Three Months Ended June 30,
	2010		2009
Revenue
Tuition fees	$	1,307,322	$	1,139,541
Accommodation fees		134,121		155,303
Other		83,505		98,890
Total Revenue	$	1,524,948	$	1,393,734

Net revenue for the three months ended September 30, 2010 totaled $1,577,826, a decrease of $74,466 or approximately 5% compared to $1,652,292 for the three months ended September 30, 2009. The revenue from tuition fees was $1,400,632 for the three months ended September 30, 2010, a decrease of $22,305, or 2% compared to $1,422,957 for the three months ended September 30, 2009. The revenue from accommodation fees was $125,552 for the three months ended September 30, 2010, a decrease of $8,404, or 6% compared to $133,956 for the three months ended September 30, 2009. The revenue from other fees was $51,642 for the three months ended September 30, 2010, a decrease of $43,737, or 46% compared to $95,379 for the three months ended September 30, 2009. The decrease in revenues was primarily attributable to the drop of enrolled student numbers. Our current enrollment (as of September 30, 2010) was 1,342 students, a decrease of 468 students, or 26%, compared to an enrollment of 1,810 students as of September 30, 2009. The decrease in our enrolled student numbers resulted from the changes of students’ regulation by the local education authority. Under the new regulation, students are now allowed to transfer from private school to public school without limitation; cross school district border enrollment will not be allowed.

Net revenue for the three months ended June 30, 2010 totaled $1,524,948, an increase of $131,214 or approximately 9% compared to $1,393,734 for the three months ended June 30, 2009. The revenue from tuition fees was $1,307,322 for the three months ended June 30, 2010, an increase of $167,781, or 15% compared to $1,139,541 for the three months ended June 30, 2009. The increase in tuition fees was primarily attributable to the slight increase of fees for certain students. Our current enrollment (as of June 30, 2010) was 1,810 students, a decrease of 45 students, or 2%, compared to an enrollment of 1,855 students as of June 30, 2009. The decreased accommodation fees were primarily due to decreased boarding student numbers. The decreased other income was primarily due to the decreased kindergarten students in program and decreased boarding students.

Comparison of Operating Expenses for the Three Months Ended June 30 2010 and 2009

	Three Months Ended June 30,
	2010		2009
Operating Expenses
Teachers salaries and related expenses	$	452,556	$	390,060
Professional and consulting fees		31,300		44,952
Rental and related expenses		468,708		411,237
Student expenses		90,382		-
Depreciation and amortization expenses		227,662		225,898
Other general and administrative expenses		141,477		185,226
Total Operating Expenses	$	1,412,085	$	1,257,373

Operating expenses for the three months ended June 30, 2010 totaled $1,412,085, representing an increase of $154,712, or 12%, compared to $1,257,373 for the comparable period of 2009. The increase in operating expenses was mainly attributable to the increase in teachers’ salaries and related expenses, students’ expenses. The prices of food and other supplies are increasing continually. The Company was not able to cover the student related costs by increasing the fees without approval of local authority. The increase in student expenses was the result of price control on student fees by the local authority.

Comparison of Other Income and Expenses for the Three Months Ended June 30, 2010 and 2009

Other income and expenses consist of interest income, interest expense, loss on disposal of fixed assets and accretion of discount on receivable from leaseback. Other income and expense for the three months ended June 30, 2010 totaled a net expense of $34,813, decreased in $5,373, or 13%, compared to net expense of $40,186 for the three months ended June 30, 2009. The decrease of net other expense was the result of reduced interest expenses.

Six Months Ended June 30, 2010 as compared to Six Months Ended June 30, 2009

Comparison of Revenue for the Six Months Ended June 30, 2010 and 2009

	Six Months Ended June 30,
	2010		2009
Revenue
Tuition fees	$	2,737,162	$	2,350,145
Accommodation fees		254,957		329,817
Other		134,194		201,154
Total Revenue	$	3,126,313	$	2,881,116

Net revenue for the six months ended June 30, 2010 totaled $3,126,313, an increase of $245,197 or approximately 9% compared to $2,881,116 for the six months ended June 30, 2009. The revenue from tuition fees was $2,737,162 for the six months ended June 30, 2010, an increase of $387,017, or 16% compared to $2,350,145 for the six months ended June 30, 2009. The increase in tuition fees was primarily attributable to the slight increase of fees for certain students. Our current enrollment (as of June 30, 2010) was 1,810 students, a decrease of 45 students, or 2%, compared to an enrollment of 1,855 students as of June 30, 2009. The decreased accommodation fees were primarily due to decreased boarding student numbers. The decreased other income was primarily due to the decreased kindergarten students in program and decreased boarding students.

Comparison of Operating Expenses for the six Months Ended June 30 2010 and 2009

	Six Months Ended June 30,
	2010		2009
Operating Expenses
Teachers salaries and related expenses	$	1,134,800	$	966,193
Professional and consulting fees		61,300		91,475
Rental and related expenses		937,416		868,870
Student expenses		400,422		-
Depreciation and amortization expenses		455,435		452,261
Other general and administrative expenses		323,698		280,180
Total Operating Expenses	$	3,313,071	$	2,658,979

Operating expenses for the six months ended June 30, 2010 totaled $3,313,071, representing an increase of $654,092, or 25%, compared to $2,658,979 for the comparable period of 2009. The increase in operating expenses was mainly attributable to increase in teachers’ salaries and related expenses, students’ expenses. Student expenses consist of books, supplies, foods and miscellaneous expenses. The prices of food and other supplies are increasing continually. The Company was not able to cover the student related cost by increasing the fees without approval of local authority. The increase in student expenses was the result of price control on student fees by the local authority.

Comparison of Other Income and Expenses for the Six Months Ended June 30, 2010 and 2009

Other income and expenses consist of interest income, interest expense, loss on disposal of fixed assets and accretion of discount on receivable from leaseback. Other income and expense for the six months ended June 30, 2010 totaled a net expense of $88,003, increased in $5,861, or 7%, compared to net expense of $82,142 for the comparable period of 2009. The increase of net other expense was primarily attribute to the increase in interest expenses and a loss on sale of property.

Liquidity and Capital Resources

Cash has historically been generated from operations. Operations and liquidity needs are funded primarily through cash flows from operations and short-term borrowings. Cash and cash equivalents were $214,215 and $46,187 at June 30, 2010 and December 31, 2009, respectively.

~~Net~~Table ~~cash~~of provided by operating activities was $488,071 and $765,604 for the six months ended June 30, 2010 and 2009, respectively. The decrease in net cash provided by operating activities in 2010 was due to the Company’s net loss in 2010 compared to a net profit in 2009, and the fact that the Company paid more accounts payable and accrued expenses during six months ended June 30, 2010 than the similar payments made in 2009.Contents

~~Net~~Comparison ~~cash used in investing activities was $176,935 and 497,144 for the six months ended June 30, 2010 and 2009, respectively. During six months ended June 30, 2010, the Company collected advances~~ of ~~$2,790,207~~Operating ~~made~~Expenses in 2009 to an entity owned by the Company’s Chief Executive Officer who is also a significant shareholder in the Company. During six months ended June 30, 2010, the Company made new $425,446 advance to this related party in the first quarter and received $443,284 from the related entity in second quarter. On March 31, 2010, the Company made a temporary advance of $735,430 to its “key” employee. The advance was repaid in full on April 1, 2010. On May 24, 2010, the Company approved a major renovation plan with budget of RMB 26,000,000 ($3,835,000) for ~~major renovation of school air-condition, landscaping and other school facilities. During~~ the ~~May~~Three ~~2010,~~Months ~~the~~Ended ~~Company~~September ~~signed three renovation contracts with three vendors, with a total value for the contracts amounting to RMB 25,160,000 ($3,711,100). As of June~~ 30, 2010, ~~RMB 20,120,000 ($2,967,700), 80% of contracted value was paid. New equipment purchased was $16,247~~ and ~~$5,284 for the six months ended June 30, 2010 and~~ 2009~~, respectively.~~

Net cash used in financing activities was $147,500, and was represented by repayment of short term bank loans during the six months ended June 30, 2010. During the six months ended June 30, 2009, net repayment of short term bank loans was $146,400. On June 30, 2009, the Company completed the sale of $1,560,000 principal amount of the Company's 6% Convertible Notes, due June 30, 2010 (the "Notes"). The Notes were sold to four related parties. On February 4, 2010, China Ivy issued a total of 19,500,000 shares of its common stock in full satisfaction of the $1,560,000 convertible notes

	Three Months Ended September 30,
	2010		2009
Operating Expenses
Teachers salaries and related expenses	$	436,900	$	782,967
Professional and consulting fees		389,290		48,176
Rental and related expenses		472,739		457,946
Student expenses		206,167		-
Depreciation and amortization expenses		228,988		225,642
Other general and administrative expenses		167,814		463,872
Total Operating Expenses	$	1,901,898	$	1,978,603

Operating expenses for the three months ended September 30, 2010 totaled $1,901,898, representing a decrease of $76,705, or 4%, compared to $1,978,603 for the comparable period of 2009. The decrease in operating expenses was mainly attributable to the decrease in teachers’ salaries and related expenses, which were offset by increased consulting fees and student expenses. The prices of food and other supplies are increasing continually. The Company was not able to cover the student related costs by increasing student fees without approval of the local authority. The increase in student expenses was the result of price control on student fees by the local authority.

Comparison of Other Income and Expenses for the Three Months Ended September 30, 2010 and 2009

Other income and expenses consist of interest income, interest expense, loss on disposal of fixed assets and accretion of discount on receivable from leaseback. Other expense (net) for the three months ended September 30, 2010 totaled $39,320, compared to $64,967 for the three months ended September 30, 2009. The decrease in other expense (net) was mainly attributable to the $28,778 reduction in interest expense.

Nine Months Ended September 30, 2010 as compared to Nine Months Ended September 30, 2009

Comparison of Revenue for the Nine Months Ended September 30, 2010 and 2009

	Nine Months Ended September 30,
	2010		2009
Revenue
Tuition fees	$	4,137,794	$	3,773,102
Accommodation fees		380,509		463,773
Other		185,836		296,533
Total Revenue	$	4,704,139	$	4,533,408

Table of Contents

Net revenue for the nine months ended September 30, 2010 totaled $4,704,139, an increase of $170,731 or approximately 4% compared to $4,533,408 for the nine months ended September 30, 2009. The revenue from tuition fees was $4,137,794 for the nine months ended September 30, 2010, an increase of $364,692, or 10% compared to $3,773,102 for the nine months ended September 30, 2009. The increase in tuition fees was primarily attributable to the slight increase of fees for certain students. During the third quarter of 2010, the local education authority changed certain regulations. Under the new regulation, students are allowed to transfer from private school to public school without limitation; cross school district border enrollment is not allowed. These regulations have had a negative impact on our operations and revenues. Our current enrollment (as of September 30, 2010) decreased 468 students to 1,342, or 26%, from 1,810 students in the comparable period in 2009.

Comparison of Operating Expenses for the nine Months Ended September 30 2010 and 2009

	Nine Months Ended September 30,
	2010		2009
Operating Expenses
Teachers salaries and related expenses	$	1,571,700	$	1,749,160
Professional and consulting fees		450,590		139,651
Rental and related expenses		1,410,155		1,326,816
Student expenses		606,589		-
Depreciation and amortization expenses		684,423		677,903
Other general and administrative expenses		491,512		744,052
Total Operating Expenses	$	5,214,969	$	4,637,582

Operating expenses for the nine months ended September 30, 2010 totaled $5,214,969, representing an increase of $577,387, or 12%, compared to $4,637,582 for the comparable period of 2009. The increase in operating expenses was mainly attributable to the increase in student expenses. Student expenses consist of books, supplies, foods and miscellaneous expenses. The prices of food and other supplies are increasing continually. The Company was not able to cover the student related cost by increasing student fees without approval of the local authority. The increase in student expenses was the result of price control on student fees by the local authority.

Comparison of Other Income and Expenses for the Nine Months Ended September 30, 2010 and 2009

Other income and expenses consist of interest income, interest expense, loss on disposal of fixed assets and accretion of discount on receivable from leaseback. Other expense (net) for the nine months ended September 30, 2010 totaled $127,323, compared to $147,109 for the nine months ended September 30, 2009. The decrease in other expense (net) was mainly attributable to the $25,283 reduction in interest expense.

Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Cash has historically been generated from operations. Operations and liquidity needs are funded primarily through cash flows from operations and short-term borrowings. Cash and cash equivalents were $51,426 and $46,187 at September 30, 2010 and December 31, 2009, respectively.

Net cash provided by operating activities was $1,945,403 and $2,810,952 for the nine months ended September 30, 2010 and 2009, respectively. The decrease in net cash provided by operating activities in 2010 was due primarily to the Company’s $386,870 increase in net loss and the $666,803 reduction of accounts payable and accrued expenses in 2010.

Net cash used in investing activities was $1,703,722 and $4,194,051 for the nine months ended September 30, 2010 and 2009, respectively. During the nine months ended September 30, 2010, the Company collected advances of $2,790,207 made in 2009 to an entity owned by the Company’s Chief Executive Officer who is also a significant shareholder in the Company. During the nine months ended September 30, 2010, the Company made new advances of $1,437,613 to this related party. On March 31, 2010, the Company made a temporary advance of $735,430 to its “key” employee. The advance was repaid in full on April 1, 2010. On May 24, 2010, the Company approved a major renovation plan with a total budget of RMB 26,000,000 ($3,886,200) for major renovation of school air-conditioning, landscaping and other school facilities. During May 2010, the Company signed three renovation contracts with three vendors, with a total value for the contracts amounting to RMB 25,160,000 ($3,760,666). As of September 30, 2010, $3,007,336 (RMB 20,120,000), 80% of contracted value, was paid. Other property additions were $52,564 and $16,733 for the nine months ended September 30, 2010 and 2009, respectively.

Net cash (used in) provided by financing activities was ($258,207) and $1,413,500 for the nine months ended September 30, 2010 and 2009, respectively. The Company repaid short term bank loans of $149,470 and $1,904,500, respectively, during the nine months ended September 30, 2010 and 2009. It also repaid $108,737 of amounts due to other related parties during the nine months ended September 30, 2010. During the nine months ended September 30, 2009, the Company received net proceeds of $1,758,000 from bank borrowings. On June 30, 2009, the Company completed the sale of $1,560,000 principal amount of the Company's 6% Convertible Notes, due June 30, 2010 (the "Notes"). The Notes were sold to four related parties. On February 4, 2010, China Ivy issued a total of 19,500,000 shares of its common stock in full satisfaction of the $1,560,000 convertible notes.

Table of Contents

Bank Borrowings

	June 30,		December 31,
	September 30,		December 31,
	2010		2009
Bank Borrowings	(Unaudited)
Borrowings from Huaxia Bank Suzhou Branch
Interest at 5.346% per annum, due by October 30, 2010	$	2,~~655~~690,~~000~~460	$	2,637,000
Interest at 5.346% per annum, due by November 5, 2010		2,~~212~~242,~~500~~050		2,197,500
Interest at 5.346% per annum, due by November 9, 2010		2,~~728~~765,~~750~~195		2,710,250
Interest at 5.346% per annum, due by November 18, 2010		1,~~106~~121,~~250~~025		1,098,750
Borrowings from Huaxia Bank Subtotal		8,~~702~~818,~~500~~730		8,643,500
Borrowings from Jiangsu Dongwu Rural Commercial Bank
Interest at 6.903% per annum, due by June 12, 2011		~~295~~298,~~000~~940		293,000
Interest at 6.903% per annum, due by June 12, 2011		1,~~327~~345,~~500~~230		1,465,000
Borrowings from Dongwu Rural Commercial Bank Subtotal		1,~~622~~644,~~500~~170		1,758,000
Total borrowings		10,~~325~~462,~~000~~900		10,401,500
Current portion		10,~~325~~462,~~000~~900		10,401,500
Long term portion	$	-	$	-

On June 17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural Commercial Bank. The Company acquired a 2,000,000 RMB (approximately $~~295~~298,~~000~~940) credit line from June 17, 2008 to June 17, 2011. This credit line is secured by a 234 square meter residential unit and 62 square meter land use right owned by Ti Yin and Yan Hong, the third party assigned by the bank.

On June 17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural Commercial Bank. The Company acquired a 11,000,000 RMB (approximately $1,~~622~~345,~~500~~230) credit line from June 17, 2008 to June 17, 2011. This credit line is secured by a 477 square meter residential unit and 837 square meter land use right owned by the Chief Executive Officer of the Company. As of ~~June~~September 30, 2010, the balance borrowed was 9,000,000 RMB ($1,~~327~~345,~~500~~230).

The loans from Huaxia Bank are secured by the land use right of Blue Tassel School and four buildings totaling 20,926.86 square meters of the School.

4On October 28, 2010, the Company repaid $2,690,460 (RMB 18,000,000) borrowing from Huaxia Bank due October 30, 2010. On October 28 and 29, 2010, the Company repaid $2,242,050 (RMB 15,000,000) borrowing from Huaxia Bank due November 5, 2010. On October 29, 2010, the Company repaid $1,121,025 (RMB 7,500,000) borrowing from Huaxia Bank due November 18, 2010. On October 29, 2010, the Company repaid $523,145 (RMB 3,500,000) borrowing from Huaxia Bank (out of a total RMB ,18,500,000, or $ 2,765,195) due November 18, 2010. The remaining balance $2,242,050 (RMB 15,000,000) borrowing from Huaxia Bank is due November 18, 2010.

Table of Contents

Convertible Notes Payable

Going Concern

Table of Contents

Historically, operations, short term financing and the sale of our company stock have been sufficient to meet our cash needs. Our school is a reputable school in the City of Suzhou. The tuition income will be relatively stable in the foreseeable future. We believe that we will be able to generate enough cash to cover our daily operating needs in the next twelve months. We will focus our efforts on reducing operating costs, especially administrative expenses, in the next twelve months. However, our actual working capital needs for the long and short term will depend upon numerous factors, including operating results, competition, and the availability of credit facilities, none of which can be predicted with certainty. Future expansion will be limited by the availability of capital.

Critical Accounting Policies and Estimates

Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all our significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

General

The Company’s Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Senior management has discussed the development, selection and disclosure of these estimates with the Board of Directors. Management believes that the accounting estimates employed and the resulting balances are reasonable; however, actual results may differ from these estimates under different assumptions or conditions.

Table of Contents

Revenue Recognition

The Company’s revenue consists of tuition fees, donated tuition fees, accommodation fees and others. Those fees will usually be collected in advance at the beginning of a semester. Spring semester runs from February to July. Autumn semester runs from August to January. The Company prorates the fees collected to applicable months during the semester, recognizes revenue in the corresponding periods and records unrecognized fees collected as deferred income. As of ~~June~~September 30, 2010 and December 31, 2009, the deferred revenue balance was $12,~~372~~294,~~760~~056 and $715,535, respectively.

Fair Value of Financial Instruments

In connection with the determination of ~~accounts~~the receivable from sale and leaseback of real property - related party (Note 45), the Company used the following assumptions to calculate the present value at the date of the transactions: (1) annual rent payments of $1,603,405; (2) term of ten years; (3) interest rate of 7% per annum.

Foreign Currency Translation

The consolidated financial statements of the Company are translated pursuant to Accounting Standard Codification (“ASC”) 830, “Foreign Currency Matters.” The Company’s subsidiary, Blue Tassel School, is located and operated in China. The Chinese Yuan is the functional currency. The financial statements of Blue Tassel School are translated to U.S. dollars using period-end exchange rates (published by the Federal Reserve Bank) for assets and liabilities, and average exchange rates (published by the Federal Reserve Bank) for revenues, costs and expenses. Translation adjustments are recorded in accumulated other comprehensive income as a component of stockholders’ equity. Transaction gains or losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the consolidated results of operations.

Recently Adopted Accounting Standards

Table of Contents

Recently Issued Accounting Standards

~~Certain~~In ~~other~~April ~~accounting~~2010, ~~pronouncements~~the ~~have~~FASB ~~been~~ issued byASU 2010-13, “Compensation-Stock Compensation (Topic 718) - Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades - a consensus of the FASB ~~and~~Emerging ~~other~~Issues ~~standard~~Task ~~setting~~Force,” ~~organizations~~or ASU 2010-13. ASU 2010-13 provides amendments to Topic 718 to clarify that an employee share-based payment award with an exercise price denominated in the currency of a market in which ~~are~~a substantial portion of the entity’s equity securities trades should not ~~yet~~be ~~effective~~considered ~~and~~to ~~have~~contain a condition that is not ~~yet~~a ~~been~~market, ~~adopted~~performance, byor ~~the~~service ~~Company~~condition. Therefore, an entity would not classify such an award as a liability if it otherwise qualifies as equity. The ~~impact~~amendments onin this update do not expand the ~~Company’s~~recurring ~~consolidated~~disclosures ~~financial~~required ~~position~~by Topic 718. Disclosures currently required under Topic 718 are applicable to a share-based payment award, including the nature and ~~results~~the term of ~~operations~~share-based ~~from~~payment ~~adoption~~arrangements. ofThe ~~these~~amendments ~~standards~~in this update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company is ~~not~~currently ~~expected~~evaluating tothe beimpact ~~material~~of the adoption of ASU 2010-13 on its financial statements.

Table of Contents

Off-Balance Sheet Arrangements

We have never entered into any off-balance sheet financing arrangements and have never established any special purpose entities. We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 4T. Controls and Procedures.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based closely on the definition of "disclosure controls and procedures" in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, our management, including our principal executive officer and our principal financial officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934). Based upon that evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures are not effective in timely alerting them of material information relating to us that is required to be disclosed by us in the reports we file or submit under the Exchange Act, for the reasons set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2009 (the “2009 Form 10-K”), ~~although~~our ~~the~~disclosure ~~efforts~~controls ~~described~~and ~~therein~~procedures are not effective. Our efforts to improve our disclosure controls and procedures described in our 2009 Form 10-K are ongoing.

Changes in Internal Controls over Financial Reporting.

During the quarterly period ended ~~June~~September 30, 2010, there have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

712

~~PART~~Table IIof Contents

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

As of the date of this filing, there have been no material changes from the risk factors disclosed in the Company’s ~~Annual~~2009 ~~Report on~~ Form 10-K ~~filed for the year ended December 31, 2009,~~ which discussion is incorporated herein by reference. We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially affect our operations. The risks, uncertainties and other factors set forth in our ~~Annual~~2009 ~~Report on~~ Form 10-KKmay ~~may~~ cause our actual results, performances and achievements to be materially different from those expressed or implied by our forward-looking statements. If any of these risks or events occur, our business, financial condition or results of operations may be adversely affected.

Item 6. Exhibits.

(a) Exhibits

Exhibit No.		Description
31.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
31.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
32.1		Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

813

Table of Contents

SIGNATURES

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

		CHINA IVY SCHOOL, INC.
Date: August 18, 2010	By:	/s/ Yongqi Zhu
Date: November 18, 2010	By:	/s/ Yongqi Zhu
		Yongqi Zhu Chairman and Chief Executive Officer (Principal Executive Officer)
Date: August 18, 2010		/s/ Jian Xue______
Date: November 18, 2010		/s/ Jian Xue
		Jian Xue
		Chief Financial Officer (Principal Financial
		and Accounting Officer)

914

Filing Compare · CHINA IVY SCHOOL, INC.