NORTHERN MINERALS & EXPLORATION LTD. - Annual Report: 2010 (Form 10-K)

PUNCHLINE ENTERTAINMENT, INC

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of The Securities Act of 1934

For the Fiscal Year ended July 31, 2010

Commission File Number 333-146934

PUNCHLINE ENTERTAINMENT, INC.

(Exact Name of Registrant as Specified in its charter)

Nevada N/A

(State of incorporation) (I.R.S. Employer ID Number)

55 Bloor Street E, Suite 1205
Toronto, Ontario, Canada M4W 1A9

(416)-619-0611

(Address and telephone number of principal executive offices)

Securities registered pursuant to section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Common stock, $.0001 par value

(Title of Class)

Indicate by check mark if the registrant is a well- known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ( ) No (X)

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act, Yes ( ) No(X)

Note – Checking the box above will not relieve any registrant required by Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (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 ( )

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [Not Applicable.]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by references in Part III of this form 10-K or any amendment to this form 10-K. ( )

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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. (Check one):

Large accelerated filer ( )

Accelerated Filer ( )

Non-accelerated filer ( )

Smaller reporting company (X)

(Do not check if a smaller reporting company)

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the last sale price of such common equity as of October 29, 2010 was: $4,000,000.

As of October 29, 2010, the registrant had 50,000,000 shares of common stock, par value $0.0001, outstanding.

Documents Incorporated By Reference: None

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TABLE OF CONTENTS

Page

PART I

ITEM 1:

DESCRIPTION OF BUSINESS

ITEM 1A:

RISK FACTORS

ITEM 2:

DESCRIPTION OF PROPERTY

ITEM 3:

LEGAL PROCEEDINGS

ITEM 4:

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5:

MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS

AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6:

SELECTED FINANCIAL DATA

ITEM 7:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATION

ITEM 7A:

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8:

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ITEM 9:

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURES

ITEM 9A(T):

CONTROLS AND PROCEDURES

ITEM 9B

OTHER INFORMATION

PART III

ITEM 10:

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE

ITEM 11:

EXECUTIVE COMPENSATION

ITEM 12:

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13:

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND

DIRECTOR INDEPENDENCE

ITEM 14:

PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15:

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Organization Within the Last Five Years

We were incorporated on December 11, 2006 under the laws of the State of Nevada. On that date, Nikolai Malitski was appointed as President, Secretary, Treasurer, Chief Executive Officer and Director. On August 17, 2009, Nikolai Malitski resigned as our Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Treasurer, President, and Secretary and Kathryn Kozak was appointed as our President, Chief Executive Officer, Treasurer, Secretary, Principal Financial Officer, Principal Accounting Officer and Director.

On November 4, 2009, Nikolai Malitski transferred all of his 30,000,000 of outstanding common shares to Michael Thiessen in a stock purchase agreement for $30,000. As a result of the Agreement, there was a change in control of the Company. Michael Thiessen obtained 60% beneficial ownership interest in the Company, acquiring controlling interest of the Company.

On March 2, 2010, Michael Thiessen was appointed as President, Secretary, Treasurer, Chief Executive Officer and Director. Kathryn Kozak resigned from office.

On November 27, 2009, the Company filed a Form POS AM Post-Effective Amendment under the United States Securities Act of 1933, for which the Notice of Effectiveness was received on February 19, 2010 from the United States Securities and Exchange Commission (the “SEC”).

In General

We are a development stage company. We are engaged in the placing of strength testing amusement gaming machines called Boxers, in venues such as bars, pubs and night clubs in the Seattle area, in the State of Washington. As of July 31, 2010, we have acquired one Boxer that has been placed in Lynwood, Washington. The machine has been de-commissioned as it is in need of material repairs. Although we expect to receive revenues again in the future from this placement upon its repair, there is no guarantee that this will occur as there is no certainty the machine can be repaired and restored to an operational state and we have no timeline in place for such necessary repair.

Our business plan for the next twelve months is to contact 100 or more locations in North America. We hope to place 15-20 machines in those locations. Our entertainment machine is unique from any other vending and computer arcade machines. It can easily compliment or replace existing entertainment machines such as electronic arcade games, darts and even pool tables. We anticipate that that these activities will cost approximately $15,000.

In the next 12 months we also anticipate spending an additional $126,000 on professional fees and general administrative expenses including fees payable in connection with the filing of this annual report and complying with reporting obligations.

ITEM 1A. RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this annual report before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment.

IF WE DO NOT OBTAIN ADDITIONAL FINANCING, OUR BUSINESS WILL FAIL

Our business plan calls for initial expenditures in connection with the purchase of amusement game machines and related advertising costs. We have generated limited revenues from operations to date.

We expect to incur approximately $126,000 in organizational and marketing expenses in the next twelve months. As of July 31, 2010 and the date of this document, we do not have cash on hand to fulfill this requirement.

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We currently have limited operations and no income. Our business plan calls for significant expenses in connection with marketing and the placement of machines. In order to execute our business plan, we will have to raise additional funding. If we are not able to raise the funds necessary to fund our business expansion objectives, we may have to delay the implementation of our business plan.

We do not currently have any arrangements for financing. Obtaining additional funding will be subject to a number of factors, including general market conditions, investor acceptance of our business plan and initial results from our business operations. These factors may impact the timing, amount, terms or conditions of additional financing available to us. The most likely source of future funds is through the sale of additional shares of our common stock. Any sale of share capital will result in the dilution to existing shareholders.

BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE FACE A HIGH RISK OF BUSINESS FAILURE.

We were incorporated on December 11, 2006 and to date have been involved primarily in organizing activities and have placed only one entertainment machine at a bar located in Lynnwood, Washington. We have earned limited revenues from inception to the date of this prospectus and have incurred total losses of $118,693 from our incorporation to July 31, 2010.

Accordingly, you cannot evaluate our business, and therefore our future prospects, due to a minimal operating history. To date, our business development activities have consisted solely of purchasing one amusement machine and placing it in a bar located in Lynnwood, Washington, which machine is now de-commissioned as it is in need of repairs. Potential investors should be aware of the difficulties normally encountered by development stage companies and the high rate of failure of such enterprises.

In addition, there is no guarantee that we will be able to expand our business operations. Even if we are able to expand our operations, we do not know when.

WE NEED TO CONTINUE AS A GOING CONCERN IF OUR BUSINESS IS TO SUCCEED.

Our business condition raises substantial doubt as to our continuance as a going concern. To date, we have completed only a small part of our business plan and we can provide no assurance that we will be able to generate enough revenue from our business in order to achieve profitability. It is not possible at this time for us to predict with assurance the potential success of our business.

IF WE ARE UNABLE TO ARRANGE PLACEMENTS WITH A SIGNIFICANT NUMBER OF VENUES FOR THE USE OF THEIR FACILITIES FOR OUR AMUSEMENT GAME MACHINES OUR BUSINESS WILL FAIL.

The success of our business requires that we enter into revenue sharing arrangements with various public venues respecting the use of their facilities for placement of our amusement machines. If we are unable to conclude agreements with such venues, or if any agreements we reach with them are not on favorable terms that allow us to generate profit, our business will fail. To date, we have one verbal agreement with a pub in Lynnwood, Washington, concerning the use of their facilities.

IF WE ARE UNABLE TO REPAIR OUR AMUSEMENT GAMES IN A TIMELY FASHION OUR BUSINESS MAY FAIL.

It is crucial to repair all out of order machines in a timely manner as an in-operational amusement game machine will not generate revenue and could cause discontent from the bar owners and their patrons. We will be required to keep a repair person on call twenty four hours daily. As some of our amusement machine parts are costly and rare, such parts, if broken, may need be ordered from overseas. If we are not able to obtain replacement parts or perform repairs in a timely fashion, our business may fail due to loss of revenue and the subsequent loss of venue facilities.

IF WE ARE UNABLE TO ATTRACT ENOUGH PEOPLE TO PLAY OUR AMUSEMENT GAME MACHINES, OUR BUSINESS WILL FAIL.

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Since our revenue comes from players paying to use our amusement game machines, we need to attract enough players to justify the purchase and maintenance costs for each amusement game machine. If we are unable to attract enough players, our business will fail.

BECAUSE MANAGEMENT HAS LIMITED EXPERIENCE IN THE GAMING MACHINE BUSINESS, OUR BUSINESS HAS A HIGHER RISK OF FAILURE.

Our director has no technical training or experience in operating and maintaining the machines. In addition, we do not have any employees with experience in this business sector. As a result, we may not be able to recognize and take advantage of product and market trends in the sector and we may be unable to accurately predict consumer demand. As well, our directors’ decisions and choices may not be well thought out and our operations, earnings and ultimate financial success may suffer irreparable harm as a result.

IF WE ARE UNABLE TO RETAIN KEY PERSONNEL, THEN WE MAY NOT BE ABLE TO IMPLEMENT OUR BUSINESS PLAN.

We depend on the services of our sole director, Michael Thiessen for the future success of our business. The loss of the services of Mr. Thiessen could have an adverse effect on our business, financial condition and results of operations.

We do not carry any key personnel life insurance policies on Mr. Thiessen and we do not have a contract for his services.

IF WE BECOME INVOLVED IN A LIABILITY LAWSUIT, WE MAY LOSE OUR ASSETS AND HAVE TO SHUT DOWN OUR OPERATIONS.

Because our amusement game machines offer a form of entertainment predicated on physical assertion and fitness, we may be exposed to liability lawsuits due to potential bodily harm and property damage caused by such physical assertion exhibited by players of our games. Any successful lawsuit filed against us could cause significant harm to our company and may cause us to lose our corporate assets and force us to terminate our operations.

IF WE ARE NOT ABLE TO EFFECTIVELY RESPOND TO COMPETITION, OUR BUSINESS MAY FAIL.

There are hundreds of various sized amusement companies in the game amusement and entertainment business. Some of these competitors have established businesses with a substantial number of venues and valuable contacts. We will attempt to compete against these groups by offering unique amusement game entertainment and prompt machine repair and support services. We cannot assure you that such a business plan will be successful, or that competitors will not copy our business strategy.

Our inability to achieve profit and revenue due to competition will have an adverse effect on our business, financial condition and results of operations.

ANY ADDITIONAL FUNDING WE ARRANGE THROUGH THE SALE OF OUR COMMON STOCK WILL RESULT IN DILUTION TO EXISTING SHAREHOLDERS.

We must raise additional capital in order for our business plan to succeed. Our most likely source of additional capital will be through the sale of additional shares of common stock. Such stock issuances will cause stockholders' interests in our company to be diluted. Such dilution will negatively affect the value of an investor's shares.

ONE OF OUR SHAREHOLDERS, MICHAEL THIESSEN, CONTROL 60% OF OUR COMMON SHARES, AND HE MANY NOT VOTE HIS SHARES IN A MANNER THAT BENEFITS MINORITY SHAREHOLDERS.

Since November 13, 2009, Michael Thiessen, one of our shareholders, owns approximately 60% of our voting stock. As a result, Mr. Thiessen exercises significant control over our business affairs and policy. Mr. Thiessen is able to significantly influence all matters requiring approval by stockholders, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may also have the effect of delaying, deterring, or preventing a change in control and may make some transactions more difficult or impossible to complete without the support of Mr. Thiessen. In addition, Mr. Thiessen may not have an interest in fully promoting the sale of our common stock if such sales would reduce the opportunity for him to sell his own shares at any time in the future.

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OUR PRESIDENT HAS OTHER BUSINESS INTERESTS AND MAY NOT BE ABLE OR WILLING TO DEVOTE SUFFICIENT TIME TO OUR BUSINESS OPERATIONS, CAUSING OUR BUSINESS TO FAIL.

Our president, CEO and principal financial officer, Mr. Thiessen intends to respectively devote 40% of his business time to our affairs. It is possible that the demands on Mr. Thiessen from his other obligation could increase with the result that he would no longer be able to devote sufficient time to the management of our business. In addition, Mr. Thiessen may not possess sufficient time for our business if the demands of managing our business increased substantially beyond current levels.

OUR COMMON SHARES ARE CONSIDERED PENNY STOCK, WHICH LIMITS AN INVESTOR'S ABILITY TO SELL THE STOCK.

Our shares of common stock constitute penny stock under the Securities and Exchange Act. The shares will remain penny stock for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in our company will be subject to rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with those rules, some broker-dealers will refuse to attempt to sell penny stock.

Forward Looking Statements

This annual report contains forward- looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward looking statements. You should not place too much reliance on these forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in the “Risk Factors” section and elsewhere in this annual report.

ITEM 2. DESCRIPTION OF PROPERTY

The Company does not own or lease any property.

ITEM 3. LEGAL PROCEEDINGS

We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not currently involved in any legal proceedings and we are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

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

There were no matters submitted to a vote of the security holders during the year ended July 31, 2010.

PART II

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

Our shares are quoted on the Over-the-Counter Bulletin Board (OTC BB) under the symbol “PUNL”. The OTCBB is a regulated quotation service that displays real-time quotes, last sale prices and volume information in over-the counter securities. To be eligible for quotations on the OTCBB issuers must remain current in their filings with the SEC or applicable regulatory authority. Securities quoted on the OTCBB that become delinquent in their required filings will be removed following a grace period, if they do not make their required filing in that time. We cannot guarantee that we will continue to have the funds required to remain in compliance with our reporting obligations. There has been no active trading of our securities and therefore no high and low bid pricing.

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HOLDERS

As of October 29, 2010, we had 18 shareholders of record.

PENNY STOCK RULES

The Securities and Exchange Commission has also adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the FINRA system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

A purchaser is purchasing penny stock which limits the ability to sell the stock. Our shares constitute penny stock under the Securities and Exchange Act. The shares will remain penny stocks for the foreseeable future. The classification of penny stock makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his/her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in us will be subject to Rules 15g-1 through 15g-10 of the Securities and Exchange Act. Rather than creating a need to comply with these rules, some broker-dealers will refuse to attempt to sell penny stock.

The penny stock rules require a broker-dealer, prior to transaction in a penny stock not otherwise exempt from these rules, to deliver a standardized disclosure document, which:

Contains a description of the nature and level of risk in the market

for penny stock in both public offerings and secondary trading;

Contains a description of the broker’s or dealer’s duties to the customer

and of the rights and remedies available to the customer with respect to

a violation of such duties or requirements of the Securities Act of 1934, as

amended;

Contains a brief, clear, narrative description of a dealer market, including

“bid” and “ask” price for the penny stock and the significance of the spread

between the bid and ask price;

Contains a toll-free telephone number for inquiries on disciplinary actions;

Defines significant terms in the disclosure document or in the conduct of

trading penny stocks; and

Contains such other information and is in such form( including language,

type, size and format) as the Securities and exchange Commission shall

require by rule or regulation;

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, to the customer:

The bid and offer quotation for the penny stock;

The compensation of the broker-dealer and its salesperson in the transaction;

The number of shares to which such bid and ask prices apply, or other

comparable information relating to the depth and liquidity of the market for said

stock; and

Monthly account statements showing the market value of each penny stock held

in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks and a signed and dated copy of a suitability statement. These

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disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore stockholders may have difficulty selling their securities.

DIVIDENDS

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where, after giving effect to the distribution of the dividend:

We would not be able to pay our debts as they become due in the usual course of business; or

Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of shareholders who have preferential rights superior to those receiving the distribution.

On July 15, 2009, we effected a forward split of our common stock, by way of a dividend pursuant to which each shareholder of record on June 29, 2009 received ten shares of our post-split common stock in exchange for each share of pre-split common stock.

We do not plan to declare any additional dividends in the form of cash or stock in the foreseeable future.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

As of October 29, 2010, we had no compensation plans under which our equity securities are authorized for issuance.

RECENT SALES OF UNREGISTERED SECURITIES

There were no sales of unregistered securities during the period of this report.

ISSUER REPURCHASES OF EQUITY SECURITIES

None.

STOCK OPTION GRANTS

To date, we have not granted any stock options.

REPORTS

We are subject to certain filing requirements and will furnish annual financial reports to our stockholders, certified by our independent accountant and will furnish financial reports in our quarterly and annual reports filed electronically with the SEC. All reports and information filed by us can be found at the SEC website, www.sec.gov.

ITEM 6. SELECTED FINANCIAL DATA.

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report, particularly in the section entitled "Risk Factors" beginning on page 4 of this annual report.

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Our plan of operation for the following twelve months is to enter into additional agreements with bars, pubs, nightclubs and other entertainment venues granting us permission to set up Boxers at their premises. Further, the company is also exploring opportunities to expand its current plan of operation to include distributing and establishing other forms of entertainment kiosks and machines in its current and target client venues.

In the next twelve months, we intend to contact approximately 100 prospective venues with high traffic flow with a view to securing a profit-sharing or rental agreement with us for the use of their premises. Our President has some contacts with bar and pub owners located in the State of Washington whom we hope to recruit to help us gain additional Boxer placements through a referral arrangement. During this time, we will begin developing and implementing our marketing plan. Depending on the amount of referrals and placements that we manage to secure during this time, we intend to purchase and to place approximately 5 to 10 Boxers at various Venues located in the Greater Seattle area. Thereafter, we intend to keep placing Boxers in the Greater Seattle area and expand our business to other North American locations. The exact number of Boxers that will be purchased will depend on the success of our business and availability of funds. We intend to purchase additional Boxer machines in five-unit order batches as such an acquisition strategy will give us greater price bargaining power with our supplier. We cannot guarantee that we will be able to find successful placements for any Boxers, in which case our business may fail and we will have to cease our operations.

Even if we are able to obtain the planned number of placements at the end of the twelve month period, there is no guarantee that we will be able to attract enough players to justify our expenditures as well as the ongoing expenses of maintenance and rental fees. Since each Boxer amusement game costs approximately $5,000, if we are unable to generate a significant amount of revenue, we may not be able to purchase additional amusement games.

We intend to retain one full-time maintenance person in the next six months, as well as an additional full-time marketing person in the six months thereafter. These individuals will be independent contractors compensated solely in the form of commissions, calculated as a percentage of net profits generated from our Boxers. The typical duties of the maintenance person will be to perform collection, maintenance and repair services to machines placed at the Venues. The typical duties of the marketing person will involve finding new placements for our machines, organizing contests and other promotional events. We expect to pay our maintenance person and our marketing persons approximately twenty percent of the net profits realized from our business.

We therefore expect to incur the following costs in the next 12 months in connection with our core business operations:

Marketing costs:

$ 5,000

General administrative costs:

$10,000

Total:

$15,000

In addition, we anticipate spending an additional $111,000 on professional fees. Total expenditures over the next 12 months are therefore expected to be $126,000.

While we have sufficient funds on hand to commence business operations, our cash reserves are not sufficient to meet our obligations for the next twelve-month period. As a result, we will need to seek additional funding in the near future. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity financing from the sale of our common stock.

We may also seek to obtain short-term loans from our directors, although no such arrangement has been made. At this time, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock or through a loan from our directors to meet our obligations over the next twelve months. We do not have any arrangements in place for any future equity financing.

If we are unable to raise the required financing, we will be delayed in conducting our business plan.

Our ability to generate sufficient cash to support our operations will be based upon our ability to generate potential revenues through the placement of our machines at prospective Venues. We expect to accomplish this by securing a significant number of agreements with Venues located in the Greater Seattle area and by retaining suitable salespersons with experience in the vending sector.

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Results of Operations

For the fiscal year ended July 31, 2010, we incurred a net loss of $64,124 compared with a net loss of $21,664 for the fiscal year ended July 31, 2009. As we did not generate any revenue during the years ended July 31, 2010 and 2009, the net losses were comprised completely of general and administrative expenses incurred related to corporate overhead, public company filing and listing costs, financial and administrative contracted services such as legal and accounting, and business development costs. In the fiscal year ended July 31, 2010, we began incurring consulting expense, starting March 2, 2010, of $8,000 per month, resulting in the additional $40,000 expense which was not incurred in the prior year.

Since inception to date, we have earned revenues of $915, which were earned during the year ending July 31, 2009. Our net loss from inception through July 31, 2010 was $118,693.

As of July 31, 2010, our total assets were $5,000, our total liabilities were $95,693, and stockholders’ equity was $(90,693).

At July 31, 2009, we had total assets of $6,234 consisting of $1,234 in cash and $5,000 in vending equipment. Our total liabilities were $32,803, and stockholders’ equity was $(26,569) for the same period.

We have not attained profitable operations and are dependent upon obtaining financing to pursue the purchase of amusement games. For these reasons our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the small business issuer's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Significant Accounting Policies

It is suggested that these financial statements be read in conjunction with our July 31, 2009 audited financial statements and notes thereto, which can be found in our 10-K, on the SEC website at www.sec.gov under our SEC File Number 333-146934.

Basis of Presentation

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (US GAAP) applicable to development stage companies.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, 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 period. Actual results could differ from those estimates.

Cash and Cash Equivalents

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opinion of management, are subject to an insignificant risk of loss in value. The Company had $Nil in cash and cash equivalents at July 31, 2010 (July 31, 2009 - $1,234).

Financial Instruments and Risk Concentrations

The Company’s financial instruments comprise cash and cash equivalents, loan receivable, accounts payable and accrued liabilities, notes payable and convertible loan. Unless otherwise indicated, the fair value of financial assets and financial liabilities approximate their recorded values due to their short terms to maturity. The Company determines the fair value of its long-term financial instruments based on quoted market values or discounted cash flow analyses.

Financial instruments that may potentially subject the Company to concentrations of credit risk comprise primarily cash and cash equivalents and accounts receivable. Cash and cash equivalents comprise deposits with major commercial banks and/or checking account balances. With respect to accounts receivable, the Company performs periodic credit evaluations of the financial condition of its customers and typically does not require collateral from them. Allowances are maintained for potential credit losses consistent with the credit risk of specific customers and other information. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest or currency risks in respect of its financial instruments.

Foreign Currency Translation

The financial statements are presented in US dollars. In accordance with Statement of Financial Accounting Standards The Company maintains its accounting records in U.S. dollars, which is the functional, and reporting currency. No significant gains or losses were recorded form inception to July 31, 2010.

Income Taxes

The Company accounts for its income taxes in accordance with ASC 740, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that the deferred tax assets will not be realized.

Basic and Diluted Loss Per Share

The Company reports earnings (loss) per share in accordance with ASC 260, "Earnings per Share." Basic earnings (loss) per share is computed by dividing income (loss) available to common stockholders by the weighted average number of common shares available. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

The Company has no potential dilutive instruments and accordingly, basic loss and diluted share loss per share are equal.

Stock-Based Compensation

The Company has adopted FASB ASC 718 (Prior authoritative literature: SFAS 123 (revised in December 2004), “Share Based Payment,” which requires measuring the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee or a non-employee is required to provide service in exchange for the award-the requisite service period. The Company does not recognize compensation cost for equity instruments for which employees do not render the requisite service. Grant-date fair value of employee and non-employee share options and similar instruments are estimated using option-pricing models adjusted for the unique characteristics of those instruments.

- 12 -

Revenue Recognition

The Company recognizes revenue at the point of passage to the customer of title and risk of loss when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured.Service revenues are generally recognized at the time of performance. Revenues billed in advance under contracts are deferred and recognized over the corresponding service periods. Revenue will consist of services income and will be recognized only when all of the following criteria have been met:

(i)

Persuasive evidence for an agreement exists;

(ii)

Service has occurred;

(iii)

The fee is fixed or determinable; and

(iv)

Revenue is reasonably assured.

Recent Accounting Pronouncements

In April 2010, the FASB issued Accounting Standards Update (“ASU” or “Update”) No. 2010–17, “Revenue Recognition - Milestone Method.” The objective of this Update is to provide guidance ondefining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted. The Company does not anticipate that the adoption of this pronouncement will have a significant effect on its financial statements.

In February 2010, FASB issued ASU No. 2010-09, “Subsequent Events” (Topic 855) Amendments to Certain Recognition and Disclosure Requirements (“ASU 2010-09”). ASU 2010-09 amends disclosure requirements within Subtopic 855-10. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC’s requirements. ASU 2010-09 is effective for interim and annual periods ending after June 15, 2010. The Company does not expect the adoption of ASU 2010-09 to have a material impact on its results of operations or financial position.

In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures about Fair Value Measurements” (ASU 2010-06) (codified within ASC 820 Fair Value Measurements and Disclosures). ASU 2010-06 improves disclosures originally required under SFAS No. 157. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The adoption of the guidance did not have a material effect on the Company's financial position, results of operations, cash flows or related disclosures.

In October 2009, the FASB issued ASU No. 2009-13, “Multiple Deliverable Revenue Arrangements,” a consensus of the FASB Emerging Issues Task Force (ASU 2009-13) (codified within ASC Topic 605). ASU 2009-13 addresses the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, with early adoption permitted. The Company is currently assessing the impact of ASU 2009-13 on its financial position, results of operations and cash flows.

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

- 13 -

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FINANCIAL STATEMENTS

JULY 31, 2010 AND 2009, AND THE PERIOD FROM

DECEMBER 11, 2006 (INCEPTION) TO JULY 31, 2010

FORMING A PART OF ANNUAL REPORT

PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934

PUNCHLINE ENTERTAINMENT, INC.


							Page #

	Report of Independent Registered Public Accounting Firm						15

	Balance Sheets as of July 31, 2010 and July 31, 2009						16

	Statements of Operations and Comprehensive Loss for the Years ended July 31, 20§0 and 2009, and the Period from December 11, 2006 (Inception) to July 31, 2010						17

	Statements of Changes in Stockholders’ Deficiency for the Years ended July 31, 2010 and 2008 and the Period from December 11, 2006 (Inception) to July 31, 2010						18

	Statements of Cash Flows for the Years ended July 31, 2010 and 2009, and the Period from December 11, 2006 (Inception) to July 31, 2010						19

	Notes to Financial Statements						20-24

- 14 -

GEORGE STEWART, CPA

316 17^th AVENUE SOUTH

SEATTLE, WASHINGTON 98144

(206) 328-8554 FAX(206) 328-0383

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Punchline Entertainment, Inc.

I have audited the accompanying balance sheet of Punchline Entertainment, Inc. (A Development Stage Company) as of July 31, 2010 & 2009, and the related statement of operations, stockholders’ equity and cash flows for years then ended and the period from December 11, 2006 (inception), to July 31, 2010. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Punchline Entertainment, Inc., (A Development Stage Company) as of July 31, 2010 and 2009, and the results of its operations and cash flows for the years then ended and from December 11, 2006 (inception), to July 31, 2010 in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note # 1 to the financial statements, the Company has had no operations and has no established source of revenue. This raises substantial doubt about its ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note # 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/ George Stewart

Seattle, Washington

October 28, 2010

- 15 -


PUNCHLINE ENTERTAINMENT, INC (A Development Stage Company) Balance Sheets


ASSETS
			July 31,			July 31,
			2010			2009
			(Audited)			(Audited)
Current Assets
	Cash	$	0	$		1,234
	Total Current Assets		0			1,234
Other Assets
	Vending Equipment		5,000			5,000
	Total Other Assets		5,000			5,000

TOTAL ASSETS		$	5,000	$		6,234


LIABILITIES & STOCKHOLDERS’ DEFICIENCY


Current Liabilities
	Accounts payable and accrued liabilities	$	57,951	$	6,750
	Advances from Officers		37,742		26,053
Total Current Liabilities			95,693		32,803

Stockholders’ Equity
	Common stock, $0.0001 par value, 75,000,000 shares authorized;
	50,000,000* shares issued and outstanding		5,000		5,000
	Additional paid-in-capital		23,000		23,000
	Deficit accumulated during the development stage		(118,693)		(54,569)
Total Stockholders’ Deficiency			(90,693)		(26,569)
TOTAL LIABILITIES & STOCKHOLDERS’ DEFICIENCY		$	5,000	$	6,234


* Reflects the 10:1 stock split effective June 8, 2009 on a retroactive basis.

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

- 16 -

PUNCHLINE ENTERTAINMENT, INC.

(A Development Stage Company)

Statement of Operations

December 11, 2006

(inception)

Year Ended

through

July 31,

2010

2009

2010

Revenues

Revenues

915

Total Revenues

915

General &
Administrative
Expenses

64,124

21,664

119,608

Total General &
Administrative
Expenses

64,124

21,664

119,608

Net Income (Loss)

(64,124)

(21,664)

(118,693)

Basic earning (loss)
per share

(0.00)

Weighted average
number of

common shares
outstanding

*50,000,000

* Reflects the 10:1 stock split effective June 8, 2009 on a retroactive basis.

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

- 17 -


PUNCHLINE ENTERTAINMENT, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficiency)
From December 11, 2006 (Inception) through July 31, 2010

					Deficit
		Common	Common	Additional	Accumulated
		Stock *	Stock	Paid-in	During	Total
			Amount	Capital	Exploration
					Stage


	Balance, December 11, 2006	-	$ -	$ -	$ -	$ -

	Stock issued for cash on February 22, 2007	30,000,000	$ 3,000			$ 3,000
	@ $0.001 per share

	Stock issued for cash on March 15, 2007	15,000,000	$ 1,500	$ 13,500		$ 15,000
	@ $0.01 per share

	Stock issued for cash on May 9, 2007	5,000,000	$ 500	$ 9,500		$ 10,000
	@ $0.02 per share

	Net loss, July 31, 2007				(482)	(482)

	Balance, July 31, 2007	50,000,000	$ 5,000	$ 23,000	$ (482)	$ 27,518

	Net loss, July 31, 2008				(32,423)	(32,423)
	Balance, July 31, 2008	50,000,000	$ 5,000	$ 23,000	$ (32,905)	$ (4,905)

	Net loss, July 31, 2009				(21,664)	(21,664)
	Balance, July 31, 2009	50,000,000	$ 5,000	$ 23,000	$ (54,569)	$ (26,569)

	Net loss, July 31, 2010				(64,124)	(64,124)
	Balance, July 31, 2010	50,000,000	$ 5,000	$ 23,000	$ (118,693)	$ (90,693)

* The number in Common Stock reflects the 10:1 stock split effective June 8, 2009 on a retroactive basis.

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

- 18 -


PUNCHLINE ENTERTAINMENT, INC (A Development Stage Company) Statements of Cash Flows
				Year Ended July 31, 2010		Year Ended July 31, 2009		December 11, 2006 (inception) through July 31, 2009
Cash Flows from (used in) Operating Activities
	Net (loss)		$	(64,124)	$	(21,664)	$	(118,693)
	Accounts payables and accrued liabilities			51,201		4,747		57,951
	Net cash used for operating activities			(12,923)		(16,917)		(60,742)

Cash Flows from (used in) Investing Activities
	Purchase of Vending Equipment			-		-		(5,000)
	Net Cash provided by (used in) Investing Activities							(5,000)

Cash Flows from (used in) Financing Activities
	Sale of common stock			-		-		28,000
	Advances from Officers			11,689		15,953		37,742
	Net cash provided by financing activities			11,689		15,953		54,053

Net increase (decrease) in cash and equivalents				(1,234)		(964)		-

Cash and equivalents at beginning of the period				1.234		2,198		-
Cash and equivalents at end of the period			$	-	$	1,234	$	-


		Supplemental cash flow information:

		Cash paid for:

		Interest	$	-			$	-
		Taxes	$	-			$	-


Non-Cash Activities			$	-			$	-


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

- 19 -

Punchline Entertainment, Inc.

(A Development Stage Company)

Notes to Financial Statements

July 31, 2010 and 2009

ORGANIZATION AND BUSINESS OPERATIONS

Punchline Entertainment, Inc. (the “Company”) is a Nevada corporation incorporated on December 11, 2006. The Company is a development stage company that intends to place vending machines in venues such as bars, pubs and nightclubs in the Seattle, Washington area.

The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles for financial information and the instructions for Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Going Concern and Liquidity Considerations

The accompanying financial statements are prepared and presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, they do not include any adjustments relating to the realization of the carrying value of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Since inception to date, the Company has an accumulated deficit of $118,693, and has earned only $915 in revenues. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months ending July 31, 2011.

The ability of the Company to emerge from the development stage is dependent upon, among other things, revenues and obtaining additional financing to continue operations.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accounting and reporting policies of the Company conform to U.S. generally accepted accounting principles (US GAAP) applicable to development stage companies.

Fiscal Periods

The Company’s fiscal year end is July 31.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make 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 amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

- 20 -

Punchline Entertainment, Inc.

(A Development Stage Company)

Notes to Financial Statements

July 31, 2010 and 2009

SIGNIFICANT ACCOUNTING POLICIES - Continued

Cash and Cash Equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value. The Company had $Nil in cash and cash equivalents at July 31, 2010 (July 31, 2009 - $1,234).

Financial Instruments and Risk Concentrations

Foreign Currency Translation

Income Taxes

Basic and Diluted (Loss) per Share

The Company has no potential dilutive instruments and accordingly, basic loss and diluted share loss per share are equal.

- 21 -

Punchline Entertainment, Inc.

(A Development Stage Company)

Notes to Financial Statements

July 31, 2010 and 2009

SIGNIFICANT ACCOUNTING POLICIES - Continued

Stock-Based Compensation

For the year ended July 31, 2010 the Company did not have any stock-based compensation.

Revenue Recognition

The Company recognizes revenue at the point of passage to the customer of title and risk of loss when there is persuasive evidence of an arrangement, the sales price is determinable, and collection of the resulting receivable is reasonably assured. Service revenues are generally recognized at the time of performance. Revenues billed in advance under contracts are deferred and recognized over the corresponding service periods. Revenue will consist of services income and will be recognized only when all of the following criteria have been met:

(i)

Persuasive evidence for an agreement exists;

(ii)

Service has occurred;

(iii)

The fee is fixed or determinable; and

(iv)

Revenue is reasonably assured.

CAPITAL STOCK

Authorized Stock

The Company has authorized 75,000,000 common shares with $0.0001 par value. Each common share entitles the holder to one vote, in person or proxy, on any matter on which action of the stockholder of the corporation is sought.

Share Issuances

From inception of the Company (Dec 11, 2006), to April 30, 2010, there are 50,000,000* common stock issued and outstanding:

30,000,000* shares of common stock to the director at $.001/per share.

15,000,000* shares were issued to private shareholders at $.01/per share

5,000,000* shares to private shareholders at $.02/ per share for a total of $28,000.

* After giving retroactive effect of 10:1 stock split effective June 8, 2009.

- 22 -

Punchline Entertainment, Inc.

(A Development Stage Company)

Notes to Financial Statements

July 31, 2010 and 2009

INCOME TAXES

The Company has incurred operating losses of $ 118,693, which, if unutilized, will begin to expire in 2030. Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been off set by a valuation allowance.

Details of future income tax assets are as follows:


Future income tax assets:		2010
Net operating loss (from inception (Dec 11, 2006 to July 31, 2010)	$	118,693
Statutory tax rate (combined federal and state)		33%
Non-capital tax loss		39,169
Valuation allowance		(39,169)
	$	-

The potential future tax benefits of these losses have not been recognized in these financial statements due to uncertainty of their realization. When the future utilization of some portion of the carryforwards is determined not to be “more likely than not,” a valuation allowance is provided to reduce the recorded tax benefits from such assets.

RECENT ACCOUNTING PRONOUNCEMENTS

- 23 -

Punchline Entertainment, Inc.

(A Development Stage Company)

Notes to Financial Statements

July 31, 2010 and 2009

None of these recent pronouncements are applicable for the Company or have a material effect on the Company’s results of operations, financial position or cash flow.

6. RELATED PARTY TRANSACTIONS

While the Company is seeking additional capital, during the year ended July 31, 2010, the former director of the Company advanced the Company funds by making payments on behalf of the Company. As of July 31, 2010 this former director was owed $29,062.

As well, during the year ended July 31, 2010, the current director of the Company has advanced the Company $8,680 by making payments on behalf of the Company.

Both advances are unsecured, non-interest bearing and have no specific terms of repayment.

On March 2, 2010, an independent contractor agreement was entered into under which compensation of $8,000 per month was to be paid to perform services as an officer for a period of one year. The related service fee to July 31, 2010 amounted to $40,000.

7. SUBSEQUENT EVENT

There have been no subsequent events.

- 24 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

There have been none.

ITEM 9A(T), CONTROLS AND PROCEDURES

Evaluation Of Disclosure Controls, Procedures

Our management evaluated, with the participation of our Principal Executive Officer and our Principal Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this annual report on Form 10-K. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures cannot be relied upon to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.

Management’s Annual Report On Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. We have assessed the effectiveness of those internal controls as of July 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework.

Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of its management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management recognizes that there are inherent limitations in the effectiveness of any system of internal control and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in there being a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting, as of the Evaluation date, based on the framework set forth in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on its evaluation under this framework, management concluded that our internal control over financial reporting was not effective as of the Evaluation date.

- 25 -

Management assessed the effectiveness of the Company’s internal control over financial reporting as of Evaluation date and indentified the following material weaknesses:

INSUFFICIENT RESOURCES: We have an inadequate number of personal with requisite expertise in the key functional areas of finance and accounting.

INADEQUATE SEGREGATION OF DUTIES: We have an inadequate number of personal to properly implement control of procedures.

LACK OF AUDIT COMMITTEE & OUTSIDE DIRECTORS: We do not have a functional audit committee and we have no outside directors serving on the Company’s Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.

Management is committed to improving its internal controls and will (1) continue to use third party specialists to address shortfalls in staffing and to assist the Company with accounting and finance responsibilities, (2) increase the frequency of independent reconciliations of significant accounts which will mitigate the lack of segregation of duties until there are sufficient personnel and (3) may consider appointing outside directors and audit committee members in the future.

Management, including our Chief Executive Officer and Chief Financial Officer, has discussed the material weakness noted above with our independent public accounting firm. Due to the nature of this material weakness, there is a more than remote likelihood that misstatements which could be material to the annual or interim financial statements could occur that would not be prevented or detected.

This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestations by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

There was no change in our internal controls over financial reporting that occurred during the quarter ended July 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

- 26 -

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Our executive officers and directors and their respective ages as of the date of this annual report is as follows:

DIRECTORS:

Name of Director

Age

Michael Thiessen

EXECUTIVE OFFICERS:

Name of Officer

Age

Office

Michael Thiessen

President, Chief Executive Officer,

Secretary, Treasurer and Director

BIOGRAPHICAL INFORMATION

Set forth below is a brief description of the background and business experience of each of our executive officers and directors for the past five years.

Michael Thiessen

Mr. Michael Thiessen was appointed as our President, Chief Executive Officer, Treasurer, Secretary and Director on March 2, 2010. Mr. Michael Thiessen has spent his career focused on the study and utilization of the latest technologies designed to produce advanced new media products.

Prior to joining the Company, from 1995 to 1999, Mr. Thiessen was employed by World Gaming Inc., a pioneer in gaming software production. World Gaming Inc. was a U.S. public company, which was later listed on the AIM in London, UK. As the New Media Supervisor for World Gaming, Mr. Thiessen coordinated the in-house production of digital video, 3d animation, sound effects, programming and music production which were all utilized for the delivery of cutting edge gaming products. In 2000, Mr. Thiessen founded Foreground Image Inc., a company that produces television programs, commercials, corporate and music videos, as well as digital media serving and software programming. Mr. Thiessen is currently the Director and President. From 2006 to present, Mr. Thiessen has been the Supervising Post Production Producer for Rogers Television. Rogers Television is a division of Roger Communications Inc., a diversified Canadian communications and media company. Roger Communications Inc. is dually listed in both the United States and Canada.

Mr. Thiessen holds a Recording Arts Masters Degree from The Center for Digital Imaging and Sound where he graduated in 1999. He is also both an Avid certified Support Representative (ACSR) (since 2007) and a Certified Avid Instructor (ACI) (since 2008). Mr. Thiessen is not an officer or director of any other reporting company.

Kathryn Kozak

Ms. Kathryn Kozak acted as our President, Chief Executive Officer, Treasurer, Secretary and Director from August 17, 2009 to March 2, 2010. Ms. Kozak had a number of years’ experience include the building of infrastructures and management of private and public companies; specifically in high technology industries. Her experience also covered the fields of eCommerce, Database Management, interactive Gaming, Financial Processing, Telecommunications, Interactive Marketing and Online Advertising.

Prior to joining the Company, Ms. Kozak was Managing Director of Wiremix Interactive Media from 2006 to 2009. From June 2004 to January 2006, Ms. Kozak was the Founder & President of Eclipsicom Media Inc. She was Vice President, Business Development & Sales at NextLevel.com Internet Productions Inc. from January 2000 to June 2004. Ms. Kozak attended Carleton University and received a Bachelor's Degree with Honors in Law & Psychology. She also has a Diploma in Internet Marketing from the University of British Columbia, a Diploma in Public Relations from Algonquin College and Marketing Communications Diploma from the British Columbia Institute of Technology. Ms. Kozak was not an officer or director of any other reporting company.

- 27 -

Nikolai Malitski

Mr. Nikolai Malitski acted as our President, Chief Executive Officer, Treasurer, Secretary and Director since our incorporation on December 11, 2006 to August 17, 2009. He was involved in maintenance and collection work for amusement games for getting on for during his three years. He has developed contacts in the business of vending arcade games and we intend to take advantage of his acquired expertise in the field and his accumulated contacts.

ITEM 11. EXECUTIVE COMPENSATION

The table below summarizes all compensation awarded to, earned by, or paid to our executive officers by any person for all services rendered in all capacities to us from our inception on December 11, 2006 to the date of this report.

SUMMARY COMPENSATION TABLE


Name And Principal	Year	Salary	Bonus	Stock Awards	Option Awards	Non-Equity Incentive Plan Compensation	Change in Pension Value and Deferred Compensation Earnings	All Other Compensation	Totals
Michael Thiessen President, CEO, Treasurer, Secretary, Principal Financial Officer, Principal Accounting Officer Director	2010	40,000	0	0	0	0	0	0	40,000
Kathryn Kozak President, CEO, Treasurer, Secretary, Principal Financial Officer, Principal Accounting Officer Director	2010	0	0	0	0	0	0	0	0
Nikolai Malitski Former President, CEO, CFO, Treasurer, Director	2009 2008 2007 2006	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0	0 0 0 0

STOCK OPTION GRANTS

We have not granted any stock options to the executive officers since our inception.

- 28 -

CONSULTING AGREEMENTS

On March 2, 2010, we entered into an independent contractor agreement under which compensation of $8,000 per month was to be paid to perform services to the officer for a period of one year. The related service fee to July 31, 2010 amounted to $40,000.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides the name and addresses of each person known to us to own more than 5% of our outstanding common stock as of the date of this annual report and by the officer and director, individually. Except as otherwise indicated, all shares are owned directly.

Amount of

Percent of

Title of Class

Name & Address Beneficial Owner

Beneficial

Ownership

Common Stock

Michael Thiessen

30,000,000

60%

38 Earl Street, Unit 10

Toronto, Ontario

Canada, M4Y 1M3

Common Stock

All Officers & Directors

as a group that consists

of one person

The percent of class is based on 50,000,000 shares of common stock issued and outstanding as of October 29, 2010.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

None of the following parties has, since our date of incorporation, had any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect us:

Any director or officer;

Any person as a nominee for election as a director;

Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock;

Any member of the immediate family of any of the foregoing persons.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The total fees charged to the Company for audit and bookkeeping services including quarterly reviews through July 31, 2010 is $10,005.

- 29 -

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

The following exhibits are included with this annual filing. Those marked with an asterisk and required to be filed hereunder, are incorporated by reference and can be found in their entirety in our form SB-2 Registration Statement, filed under SEC File Number 333-146934, at the SEC website at www.sec.gov:

EXHIBITS


Exhibit Number	Description
3.1	Articles of Incorporation, filed with the SEC on October 27, 2007 in our Form SB-2, incorporated herein by reference.
3.2	Bylaws, filed with the SEC on October 27, 2007 in our Form SB-2, incorporated herein by reference.
8.01	10:1 forward split of the Company’s stock, filed with the SEC on June 11, 2009 in our Form 8-K, incorporated herein by reference.
10.1	Stock Purchase Agreement between Nikolai Malitski and Michael Thiessen dated November 4, 2009 (included as Exhibit 10.1 to the Form 10-K filed November 13, 2009 and incorporated herein by reference).
10.2	Independent Contractor Agreement between Punchline Entertainment, Inc. and Michael Thiessen dated March 2, 2010 (included as Exhibit 10.1 to the Form 8-K filed March 8, 2010 and incorporated herein by reference).
17.1	Resignation of Nikolai Malitski dated August 17, 2009 (included as Exhibit 17.1 to the Form 8-K filed September 2, 2009 and incorporate herein by reference).
17.2	Resignation of Kathryn Kozak dated March 2, 2010 (included as Exhibit 17.1 to the Form 8-K filed March 8, 2010 and incorporated herein by reference).
23.1	Consent of George Stewart CPA, regarding audited financial statements for the period ending July 31, 2010 (filed herewith).
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 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 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

REPORTS ON FORM 8-K

During the last quarter of the fiscal year, we did not file any reports on Form 8-K.

FINANCIAL STATEMENT SCHEDULES

We are not filing any financial statement schedules as part of this report as such schedules are either not applicable or the required information is included in the financial statements or notes thereto.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Punchline Entertainment, Inc.

(Registrant)

/s/ Michael Thiessen

Michael Thiessen

President, Chief Executive Officer,

Chief Financial Officer, Principal Accounting Officer,

Treasurer and Sole Director

Date

October 29, 2010

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Michael Thiessen, certify that:

I have reviewed this annual report of Punchline Entertainment, Inc.;

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

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

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

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

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

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

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

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

Date: October 29, 2010

/s/ Michael Thiessen

--------------------------------------

By: Michael Thiessen

Chief Executive Officer

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

I, Michael Thiessen, certify that:

I have reviewed this annual report of Punchline Entertainment, Inc.;

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

Date: October 29, 2010

/s/ Michael Thiessen

--------------------------------------

By: Michael Thiessen

Chief Financial Officer

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EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Annual Report of Punchline Entertainment, Inc. (the “Company”) on Form 10-K for the period ending July 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Michael Thiessen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

ii.

The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934; and

iii.

The information contained in the Report fairly presents, in all material respects, the financial condition and Result of operations of the company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 29^th day of October, 2010.

/s/ Michael Thiessen

-------------------------------------

By: Michael Thiessen

Chief Executive Officer

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EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(18 U.S.C. SECTION 1350)

In connection with the Annual Report of Punchline Entertainment, Inc. (the “Company”) on Form 10-K for the period ending July 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I Michael Thiessen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that:

iv.

The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and Result of operations of the company.

IN WITNESS WHEREOF, the undersigned has executed this certification as of the 29^th day of October, 2010.

/s/ Michael Thiessen

-------------------------------------

By: Michael Thiessen

Chief Financial Officer

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