- Quarterly Report (10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 2008

OR

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

For the transition period from
_____________
to
____________

Commission File Number:
___________ 000-30781 ______________

TERRA ENERGY RESOURCES, LTD.
(Formerly TERRA MEDIA, LTD. )
(Exact name of registrant as specified in its character)

Delaware	71-0913458
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

225 Franklin Avenue

Midland Park, NJ 07432

[phone]
(Issuer's Telephone Number)

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 is a large accelerated filer, an accelerated filer, or a non-accelerator filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer   ¨       Accelerated filer ¨        Non-accelerated filer x

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 Registrant’s common stock outstanding as of September 30, 2008 was 44,694,500 Shares.

	Table of Contents
Special Note Regarding Forward Looking Information		3
PART I
Item 1.	Financial Statements:
	Consolidated Balance Sheet as of September 30, 2008 (unaudited) and December 31, 2007
	(audited);	4
	Unaudited Consolidated Statements of Operations for the nine months ended September 30,
	2008 (unaudited) and for the year ended December 31, 2007;	5
	Unaudited Consolidated Statement of Stockholders Equity as of September 30, 2008 and for
	the year ended December 31, 2007;	6 - 7
	Unaudited Consolidated Statement of Cash Flows for the nine months ended September 30,
	2008 (unaudited) and year ended December, 31, 2007; and	8 - 9
	Notes to Consolidated Financial Statements	11 -17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of
	Operations	17
Item 3.	Controls and Procedures	23
PART II
Item 1.	Legal Proceedings	23
Item 2.	Unregistered Sales of Equity Securities and use of Proceeds	24
Item 3.	Defaults Upon Senior Securities	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	25
Item 6.	Exhibits	35
SIGNATURE		35

 

QUARTERLY REPORT ON FORM 10-Q FOR

TERRA ENERGY RESOURCES, LTD.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

To the extent that the information presented in this Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 discusses financial projections, information or expectations about the products or markets of our company, or otherwise makes statements about the future events, such statements are forward-looking. We are making these forward-looking statements in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from such forward-looking statements. These risks and uncertainties are described, among other places in this Quarterly Report, in “Management’s Discussion and Analysis.” Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

In addition, we disclaim any obligations to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report. When considering such forward-looking statements, readers should keep in mind the risks referenced above and the other cautionary statements in this Quarterly Report.

PART I

ITEM 1. FINANCIAL STATEMENTS

     The condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading.

     In the opinion of the Company, all adjustments, consisting of only normal recurring adjustments necessary to present fairly the financial position of the Company as of September 30, 2008, and the results of its operations and changes in its financial position from January 1, 2008 through September 30, 2008, have been made. The results of its operations for such interim period are not necessarily indicative of the results to be expected for the entire year. These condensed financial statements should be read in conjunction with the financial statements and note thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2007.

TERRA ENERGY RESOURCES, LTD.
(formerly Terra Media, Ltd.)
(a development stage company)
CONSOLIDATED BALANCE SHEET
		Unaudited
		September 30,					December 31,
				2008			2007
ASSETS
Current Assets
Cash			$	192		$	2,048
Prepaid corporate taxes				250			250
Total current assets				442			2,298
Property and equipment				3,201			5,343
Other assets
Capitalized software costs				51,000			42,000
Total assets	$	54,643		$	49,641
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities
Accrued expenses	$	50,000				$	50,000
Officer loan payable		28,534					26,666
Payroll taxes payable							1,868
Total current liabilities		78,534					78,534
Shareholders' Equity (Deficiency)
Common stock, $.001 par value;
Authorized 100,000,000 shares;
issued and outstanding at
September 30, 2008 and December 31,
2007 there are 44,694,500 and
44,694,500, respectively				44,694			44,694
Preferred stock $.001 par value;
Authorized 5,000,000 shares;
No shares issued and outstanding				0			0
Additional paid-in capital		347,324					338,324
Deficit		(415,909	)		(411,911	)
Total shareholders' equity (deficiency)				(23,891	)		(28,893	)
Total liabilities and shareholders'
equity (deficiency)	$	54,643		$	49,641
See notes to financial statements.

 

 

 

TERRA ENERGY RESOURCES, LTD.
(formerly Terra Media, Ltd.)
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
		Unaudited				Unaudited				Unaudited
		for the				For the				For the period
		Nine months				Nine months				inception
		Ended September 30,				ended September 30,				(Apr. 7, 2004) to
		2008				2007			September 30, 2008
Sales	$	-0	-		$	0		$		584
Cost of goods sold	$	-0	-			0				195
Gross profit	$	-0	-			0				389
Operating expenses
Selling, general and
administrative
expenses		1,850				14,336				90,141
Non cash compensation
Issuance of shares of
Common stock for
Consulting expense										276,300
Non cash compensation
Issuance of shares of
Common stock in payment
Legal expense										40,000
Depreciation expense		2,148				2,142				9,857
Total operating expenses		3,998				16,478				416,298
Loss before provision
for income taxes		(3,998	)			(16,478)				(415,909)
Net loss		(3,998)				$(16,478)		$		(415,909)
Basic and diluted (loss) per
common stock
Net loss per share -
basic and diluted		(.00)			$	(.00)
Weighted average common
shares outstanding		44,694,500				44,694,500
See notes to financial statements .

TERRA ENERGY RESOURCES, LTD.
(formerly Terra Media, Ltd.)
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
		Unaudited			Unaudited
		For the			For the
		three months			three months
		Ended September 30,			ended September 30,
		2008			2007
Sales	$	-0	-	$	0
Cost of goods sold	$	-0	-		0
Gross profit	$	-0	-		0
Operating expenses
Selling, general and
administrative
expenses		800			7,624
Non cash compensation
Issuance of shares of
Common stock for
Consulting expense
Non cash compensation
Issuance of shares of
Common stock in payment
Legal expense
Depreciation expense		714			714
Total operating expenses		864			8,338
Loss before provision
for income taxes		(1,514	)		(8,338	)
Net loss	$	(1,514	)	$	(8,338	)
Basic and diluted (loss) per
common stock
Net loss per share -
basic and diluted	$	(.00	)	$	(.00	)
Weighted average common
shares outstanding		44,694,500			44,694,500
See notes to financial statements .

TERRA ENERGY RESOURCES, LTD.
(formerly Terra Media, Ltd.)
(a development stage company)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
						Additional								Shareholders'
		Number of		Capital		Paid -In								Equity
		Shares		Stock		Capital						Deficit Total
Issuance of shares
Of common stock
On April 7, 2004		29,209,400	$	29,209			$	(19,209	)				$	10,000
Sales of shares of
Common stock through
Private placement		1,775,000		1,775			$	3,225						5,000
Issuance of shares of
Common stock in
Consideration for
Consulting fees		4,970,000		4,970				195,330						200,300
Issuance of shares of
Common stock in
Consideration for
Legal fees		710,000		710				39,290						40,000
Contributed capital
Value of capitalized
Software								6,000						6,000
Contributed capital
Officer loan converted
To capital contribution								118						118
Net loss for the period
Of inception (April 7,
2004) to December 31,
2004											(249,792	)		(249,792)
Balance
December 31, 2004		36,664,400		36,664				224,754			(249,792	)		11,626
Sales of shares of
Common stock through
Private placement		1,988,000		1,988				3,612						5,600
Capital contribution
Capitalized software
Costs								12,000						12,000
Issuance of
Common stock in
Consideration for
Consulting fees		5,687,100		5,687				70,313						76,000
Capital contribution
Cash								1,500						1,500

Net loss for the
Year ended
December 31, 2005										(82,204)			(82,204)
Balance -
December 31, 2005			44,339,500	$		44,339	$		312,179					$	(331,996)							$	24,522
Capital contribution
Capitalized software
Costs									12,000														12,000
Net loss for the
year ended
December 31, 2006										(53,051)			(53,051)
Balance -
December 31, 2006			44,339,500	$		44,339	$		324,179					$	(385,047)							$	(16,529)
Capital contribution
Capitalized software									12,000														12,000
Sale of shares of
Common stock			355,000			355			2,145														2,500
Net loss for the
year ended
December 31, 2007										(26,864)			(26,864)
Balance-
December 31, 2007			44,694,500		$	44,694		$	338,324						$(411,911)							$	(28,893)
Capital contribution
Capitalized software									9,000														9,000
Net Loss for the nine Months ended
September 30, 2008															(3,998)								(3,998)
Balances
September 30, 2008		44,694,500	$	44,694	$	347,324		$	(415,909)			$	(23,891)
See notes to financial statements .

 

TERRA RESOURCES, LTD. INC.
(formerly Terra Media, Ltd.)
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
		Unaudited								Unaudited						Unaudited
		For the								For the						For the period
		nine months								nine months ended						from inception
		Ended September 30,								September 30,						(Apr. 7, 2004) to
		2008		2007			September 30, 2008
Operating Activities:
Net loss	$	(3,998)						$		(16,478		)		$		(415,909)
Adjustments to reconcile
net loss to net cash
provided by (used in)
operating activities
Depreciation		2,148								2,142						9,857
Common stock issued for
Consulting services																276,300
Common stock issued for
Legal services																40,000
Changes in operating
assets and liabilities
Prepaid NJ Corporate
Taxes																	(250)
Payroll taxes payable		(1,868)			)						1,200						-0		_
Accrued liabilities
Corporate taxes payable															50,000
Net cash provided by
(used in) operating
activities		(3,718	)				(13,136)				(40,002)
Investing Activities:
Purchase of office
Equipment							(3,915	)			(13,058	)
Net cash used in investing
Activities							(3,915	)			(13,058	)
Financing Activities:
Officer loan payable		1,862								18,835						28,534

Sale of shares of
Common stock					2,500			13,100
Capital contribution								9,000
Cash capital
Contribution								2,618
Net cash provided by
financing activities		1,862			21,335			53,252
Net increase (decrease)
in cash		(1,856	)		4,284			192
Cash - beginning		2,048			102			-0	-
Cash - end	$	192		$	4,386		$	192
Supplemental Information
Interest paid	$	-0	-	$	-0	-	$	-0	-
Income taxes paid	$	-0	-	$	-0	-	$	-0	-
Noncash Transactions:
Issuance of shares of
Common stock as
Consulting fees							$	276,300
Issuance of shares
Common stock as
Legal fees							$	40,000
Contribution of
Contributed capital-
Capitalized software
Development costs	$	9,000		$	9,000		$	51,000
Office loan reclassed
To contributed capital							$	3,918
See notes to financial statement .

 

TERRA ENERGY RESOURCES, LTD.
(formerly Terra Media, Ltd.)
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - Summary of Significant Accounting Policies

Nature of Operations

      Terra Media, Ltd. (the ”Company”) was formed on February 28, 2001 as a Delaware corporation with 105,000,000 shares of capital stock authorized. Of which 100,000,000 shares are common stock; $.001 par value and 5,000,000 shares are preferred stock; $.001 par value. The Company lay dormant until June 30, 2006 when the Company was reorganized with the contribution of all the shares of common stock of Ding Dong School, Ltd., a company organized under the laws of the State of New Jersey on April 7, 2004. Both companies are controlled by Thomas P. Monahan, President.

      The Company is a producer and distributor of computer software and video educational materials on CD and DVD formatted disks. The Company also maintains a website on the World Wide Web with the URL “learningisbasic.com”.

Basis of Presentation / Going Concern

      The consolidated financial statements have been prepared for purposes of registration with the Securities and Exchange Commission ("SEC"), and have been prepared in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) which contemplates continuation of the Company as a going concern.

      However, the Company has sustained substantial operating losses since inception aggregating $411,911 for the period from inception until December 31, 2007. These factors raise substantial doubt about the Company's ability to continue as a going concern. The recovery of assets and continuation of future operations are dependent upon the Company's ability to obtain additional debt or equity financing and its ability to generate revenues sufficient to continue pursuing its business purposes. The Company is actively pursuing financing to fund future operations. The operations of the Company to date have been funded by the Company’s President through the contribution of cash and the payment of various expenses aggregating $20,000, the sale of 3,763,000 shares of common stock at $.003 per share aggregating $10,600 and an officer loan of $28,534 and the sale of 355,000 shares of common stock at $.007 per share for an aggregate of $2,500.

Nature of Business

On June 2, 2008, the volume in the Company’s Common Stock was non-existent. By increasing the number of shares of the Company’s Common Stock outstanding without altering the aggregate economic interest in the Company represented by the shares, the Board of Directors believes that the volume in the Company’s trading market will increase and a stable market price of the Common Stock will likely develop at a significantly higher price per share than the Common Stock outstanding before giving effect to the Forward Stock 
Split. This may enhance the Company's access to capital and increase the Company's flexibility in responding to anticipated capital requirements.

      In addition he Company is changing its name to “Terra Energy Resources, Ltd.” to reflect the Company’s decision to focus more of its resources on providing energy solutions to the government and consumer markets. The Company will continue to operate its educational software business under the fictitious names “Terra Media”, “Learning is Basic” and “eSchoolRoom”.

On June 2, 2008 the Company amended its Certificate of Incorporation to accomplish the following:

		1.	change the name of the Company to Terra Energy Resources, Ltd.;
		2.	to increase the authorized capital stock of the Company to 100,000,000 shares of common stock and 5,000,000 shares of preferred stock having a par value of $.001 per share and
		3.	Forward stock split of the Company's issued and outstanding shares of Common Stock to 44,694,500 shares.

On June 2, 2008, the 9 shareholders of the Company agreed to contribute various amounts of their shares of common stock aggregating 920,000 to the Company for cancellation.

On June 2, 2008, Thomas Monahan, President, contributed 9,588,600 of his 10,000,000 shares to the Company for cancellation.

On June 2, 2008, Dr. John Swint, Director, contributed 98,400 shares of his 102,500 shares to the Company for cancellation.

On On June 2, 2008, the Company authorized the forward splitting of the Company’s shares of common stock from 629,500 to 44,694,500 shares of common stock.

      The Company is subject to a number of risks similar to those of other earlier-stage technology companies. These risks include, but are not limited to, rapid technological change, dependence on key personnel, competing new product introductions and other activities of competitors; the successful development and marketing of its products, and the need to obtain adequate additional capital necessary to fund future operations. Since its inception on April 7, 2004, the Company has devoted its efforts principally to creating initial computer software products, research and development and accumulation of content for additional titles, business development activities and raising capital. As a result, the Company is considered a development stage company pursuant to Statement of Financial Accounting Standards (SFAS) No. 7, Accounting and Reporting by Development Stage Enterprises. Accumulated deficit for the period from inception (April 7, 2004) through September 30, 2008 was $414,389.

      The Company's future capital requirements will depend upon many factors, including progress with marketing its technologies, competing technological and market developments, and its ability to establish collaborative arrangements, effective commercialization, marketing activities and other arrangements.

      As of September 30, 2008, the Company has been funded through the resources of management through the contributions of cash from the Company’s President aggregating $27,710, the payment of expenses by the Company’s President aggregating $9,000, and through the sale of 1,775,000 shares of common stock for a cash consideration of $5,000. As of December 31, 2005, the Company has sold an additional 1,988,000 shares of common stock at $.003 per share and aggregating $5,600 in cash. In addition, Thomas P. Monahan has contributed and additional $21,868 in cash to the Company’s operations and the sale of 355,000 shares of common stock at $.007 per share for an aggregate of $2,500.

Going Concern

      The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company has incurred net losses of $415,909 for the period from inception April 7, 2004 to September 30, 2008. There is no assurance that the Company can reverse its operating losses, or that it can raise additional capital to allow it to continue its planned operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. These financial statements do not include any adjustments relating to the r ecoverability of recorded asset amounts that might be necessary as a result of the above uncertainty.

      Management expects that the Company will continue to experience negative cash flows from operations and net losses for the foreseeable future or until the Company completes enough software and video educational titles to implement a successful marketing program. Management feels that a total of 16 titles representing courses in mathematics and science for grades K through 8 will be sufficient to generate enough sales to bring the Company to break even. Management has completed five computer software titles relating to the teaching of Basic English for foreign speaking people. The Company’s planned public offering resulted in the sale of an aggregate of $2,500 or 5,000 shares of common stock. As such the continued operations of the Company will primarily depend the resources of Mr. Monahan and the positive cash flows from profitable operations.

      Since the public offering was closed with very minimal proceeds the Company believes that it can continue to run its operations only by operating at minimal staffing and relying on the services of the Thomas Monahan to provide the funds and skills required to continue operations and complete the designing and computer programming of the required educational titles and enable the Company to complete its marketing plans.

      Since the planned public offering closed with very minimal proceeds, management anticipates that it will substantially reduce the Company's operating expenses to the minimum required to support the continued development of its technology. Mr. Monahan has agreed to provide the additional funds as needed to ensure the continuation of the Company and to provide the programming and technical skills needed to complete the planned software and video titles on CD and DVD formatted disks. There can be no assurance that Mr. Monahan will be able to complete the titles in a timely manner to take advantage of the void in the market place for this form of educational materials in these formats. There can be no assurance that the Company's negative cash flow will not necessitate ceasing of operations entirely.
 

Property and Equipment

Property and equipment are carried at cost. Depreciation has been provided using straight-line and accelerated methods over the estimated useful lives of the assets. Repairs and maintenance are expensed as incurred, and renewals and betterments are capitalized.
 
  Deferred Income Taxes

      The Company recognizes deferred income tax assets and liabilities for the expected future income tax consequences of temporary differences between the carrying amounts and the income tax bases of assets and liabilities and the effect of future income tax planning strategies to reduce any deferred income tax liability.

Use of Estimates

      The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.

  On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, accounts receivable allowance, fair value of investments, fair value of acquired intangible assets and goodwill, useful lives of intangible assets and property and equipment, deemed value of common stock for the purpose of determining stock-based compensation, and income taxes, among others. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

The Company’s board of directors determines the fair market value of the Company’s common stock in the absence of a public market for these shares.

  Fair Value of Financial Instruments

      The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, short-term investments, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of their short maturities.

Software Development Costs

      The Company accounts for purchased technology and software development costs in accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed". Under SFAS No. 86, the Company is required to test for recoverability of its capitalized software costs as of each balance sheet date or an interim period if events and circumstances indicate that the carrying amount may not be recoverable. Impairment is recorded as the excess of the unamortized cost over the expected future net realizable value of the products.

Software development costs subsequent to the establishment of technological feasibility are capitalized and amortized to non-cash cost of software. Based on the Company's product development process, technological feasibility is established upon completion of all planning, designing, coding and testing activities. Such costs are amortized over the estimated life of the product. For the period from inception April 7, 2004 to September 30, 2008, the Company has capitalized an aggregate of $51,000. Amortization of software costs for the period from inception, April 7, 2004 to September 30, 2008 was $-0-.
 

Cash and Cash Equivalents and Short-Term Investments

      The Company invests its excess cash in money market funds and in highly liquid debt instruments of the U.S. government, its agencies and municipalities. All highly liquid investments with stated maturities of three months or less from date of purchase are classified as cash equivalents; all highly liquid investments with stated maturities of greater than three months are classified as short-term investments.

Offering Costs

      Deferred offering costs incurred by the Company in connection with the proposed registration statement will be expensed as incurred.

Advertising Costs

      Advertising costs are expensed as incurred. For the period from inception (April 7, 2004) to September 30, 2008 and 2007 in advertising costs totaled $-0-.

Net Income (Loss) Per Share

      Per share data has been computed and presented pursuant to the provisions of SFAS No. 128, earnings per share. Net income (loss) per common share - basic is calculated by dividing net income (loss) by the weighted average number of common shares outstanding during the period.
 

Impacts of Recent accounting pronouncements

      New accounting statements issued, and adopted by the Company, include the following:

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109." This interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in SFAS No. 109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding de-recognition, classification, and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This statement defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure related to the use of fair value measures in financial statements. The Statement is to be effective for the Company's financial statements issued in 2008; however, earlier application is encouraged. The Company is currently evaluating the timing of adoption and the impact that adoption might have on its financial position or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach, as those terms are defined in SAB 108. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement's year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. If a Company determines that an adjustment to prior year financial statements is required upon adoption of SAB 108 and does not elect to restate its previous financial statements, then it must recognize the cumulative effect of applying SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities with a corresponding adjustment to the fiscal 2006 opening balance in retained earnings. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not have an impact on the Company's consolidated financial statements.

In December 2006, FASB Staff Position No. EITF 00-19-2, "Accounting for Registration Payment Arrangements," was issued. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, "Accounting for Contingencies." The Company believes that its current accounting is consistent with the FSP.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115", under which entities will now be permitted to measure many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. The Company is currently assessing the impact, if any, the adoption of SFAS 159 will have on its financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

1 - Property and Equipment

Property and equipment is summarized as follows:
 

	Estimated
	Useful Lives		December 31,		September 30,
	Years		2007		2008
Office equipment	5 - 10	$	13,058	$	13,058
Less: Accumulated depreciation			7,715		9,857
		$	5,343	$	3,201

 
Depreciation expense for the nine months ended September 30, 2008 and 2007 and for the period from inception (April 7, 2004) to September 30, 2008 is $2,142, $2,142 and 9,857 respectively.
 

2- Related Party Transactions

      As of September 30, 2008, Thomas Monahan has advanced the Company through officer loans $28,534.

      The Company occupies office space rent free on a month to month basis at 225 Franklin Avenue, Midland Park, New Jersey.

     The Company has accumulated capitalized software development costs at September 30, 2008 of $51,000 and contributed these amounts to the Company as additional paid in capital. These costs represent the fair market value of time contributed to the Company by Thomas Monahan, President.
 

3- Employment Contracts

The Company is currently negotiating with Catherine Ballonqui to establish an employment contract. No terms of these negotiations have been disclosed.
 

4 - Deferred Income Taxes

      For period from inception, April 7, 2004, to September 30, 2008, the Company had approximately $415,909 of net operating loss carry forwards available, which expire in various years through December 31, 2022. The significant component of the Company's deferred tax asset as of September 30, 2008 is as follows:

		September 30,
		2008
Non-Current
Net operating loss carry forwards	$	415,909
Evaluation allowance for
deferred tax asset		(415,909)
	$	--

SFAS No. 109 requires a valuation allowance to be recorded when it is more likely than not that some or all of the deferred tax asset will not be realized. At September 30, 2008 a valuation allowance for the full amount of the net deferred tax asset was recorded.

5 – Sale of Common Stock

      On April 7, 2004, Ding Dong School, Ltd. issued an aggregate of 29,528,900 shares of common stock valued at $.001 per share to Thomas Monahan, President in consideration for cash of $1,000 and made payments of company expenses aggregating $9,000.

      As of December 31, 2004, Ding Dong School, Ltd. sold an aggregate of 1,775,000 shares of common stock in consideration for $5,000 or $.003 per share through a private placement to approximately 16 individuals.

      As of December 31, 2004, Ding Dong School, Ltd. issued an aggregate of 710,000 shares of common stock valued at $40,000 or $.056 per share to Mr. Roger Fidler, Esq. in consideration for legal services.

         As of December 31, 2004, Ding Dong School, Ltd. issued an aggregate of 4,970,000 shares of common stock to eight individuals in consideration for educational consulting services valued at $200,300 or $.04 per share relating to the design of educational materials including developing the curriculum and content of the Company’s educational software and video products.

      As of December 31, 2005, Ding Dong School, Ltd. sold an additional 1,988,000 shares of common stock through a private placement to approximately 17 individuals at $.003 per share aggregating $5,600.

      As of December 31, 2005, Ding Dong School, ltd. issued an aggregate of 5,687,100 shares valued at $76,000 or $.013 per share as follows: 5,396,000 shares of common stock each to 5 individuals as payment for translation services of the Company’s software content in Russian, Chinese, Portuguese and Spanish and an aggregate of 291,100 shares to Dr. John Swint in consideration for consulting services relating to development of the Company’s curriculum for the educational courses being developed on CD and DVD formatted disks.

      As of June 15, 2006, the Company issued 44,694,500 to certain Ding Dong School, Ltd. shareholders of record as of December 31, 2005 the Company’s predecessor, in exchange for 44,694,500 Ding Dong School, Ltd. shares, pursuant to the Plan of Share Reorganization, dated June 15, 2006.

As of December 31, 2007, the Company has sold an aggregate of 355,000 shares of common stock for an aggregate of $2,500 at $.007 per share through our Registered offering.

6 – Subsequent Events

On October 23, 2008, pursuant to the terms of a Stock Purchase Agreement, Catherine Balloqui purchased 29,358,003 shares of the issued and outstanding common stock of Terra Energy Resources, Ltd. (the “Company”) from Thomas P. Monahan and John Swint, shareholders of the Company, for $241,350 in cash placed into attorney's escrow and a contractual obligation to pay an additional $300,000 in cash not later than November 26, 2008.  Failure to make the final payment will result in a reversion off control to Mr. Monahan. The total of 29,358,003 shares represents 66% of the outstanding common stock of the Company. Catherine Balloqui used personal funds to purchase the shares of the Company.   As part of the acquisition, and pursuant to the Stock Purchase Agreement the following changes to the Company’s directors and officers have occurred:

 

o	As of October 23, 2008, ­ Catherine Balloqui was appointed to the Board of Directors of the Company and as the Chief Executive Officer, Principal Financial Officer and Secretary.
o	Thomas P. Monahan then resigned as the Chairman of the Board, Company’s President, Chief Executive Officer, Secretary, Chief Financial Officer, and Treasurer.
o	Also as of October 23, 2008, John Swint resigned as a director of the Company

Item 2. Management's Discussion and Analysis

This quarterly report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "our company believes," "management believes" and similar language. These forward-looking statements are based on our current expectations and are subject to certain risks, uncertainties and assumptions, including those set forth in the following discussion and under the heading "- Risk Factors" in our Form 10-KSB for the fiscal year ended December 31, 2007. Our actual results may differ materially from results anticipated in these forward-looking statements. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. In addition, our historical financial performance is not necessarily indicative of the results that may be expected in the future and we believe that such comparisons cannot be relied upon as indicators of future performance.

To the extent that statements in the quarterly report is not strictly historical, including statements as to revenue projections, business strategy, outlook, objectives, future milestones, plans, intentions, goals, future financial conditions, future collaboration agreements, the success of the Company's development, events conditioned on stockholder or other approval, or otherwise as to future events, such statements are forward-looking, All forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements, and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements contained in this annual report are subject to certain risks and uncertainties that could cause actual results to differ materially from the statements made. Other important factors that could cause actual results to differ materially include the following: business conditions and the amount of growth in the Company's industry and general economy; competitive factors; ability to attract and retain personnel; the price of the Company's stock; and the risk factors set forth from time to time in the Company's SEC reports, including but not limited to its annual report on Form 10-KSB; its quarterly reports on Forms 10-QSB; and any reports on Form 8-K. In addition, the company disclaims any obligation to update or correct any forward-looking statements in all the Company's annual reports and SEC filings to reflect events or circumstances after the date hereof.
 

Plan of Operation

      The statements contained in this prospectus are not purely historical statements, but rather include what we believe are forward-looking statements. The forward-looking statements are based on factors set forth in the following discussion and in the discussions under "Risk Factors" and "Business." Our actual results could differ materially from results anticipated in these forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements
 

Overview

      We are a development stage corporation that creates, produces, publishes, markets and distributes educational and training materials and courses in the form of CDs, DVDs, and downloadable files. The Company will operate mainly through its website, www.eschoolroom.com, where browsers can test the Company’s products. The www.eschoolroom.com website also provides an internet link to the Company’s website, www.learningisbasic.com, where browsers can make their purchase. In addition the Company changed its name to “Terra Resources, Ltd. Inc.” to reflect the Company’s decision to focus more of its resources on providing energy solutions to the government and consumer markets.  

On June 2, 2008, the volume in the Company’s Common Stock was non-existent. By increasing the number of shares of the Company’s Common Stock outstanding without altering the aggregate economic interest in the Company represented by the shares, the Board of Directors believes that the volume in the Company’s trading market will increase and a stable market price of the Common Stock will likely develop at a significantly higher price per share than the Common Stock outstanding before giving effect to the Forward Stock Split. This may enhance the Company's access to capital and increase the Company's flexibility in responding to anticipated capital requirements.

      In addition he Company is changing its name to “Terra Energy Resources, Ltd.” to reflect the Company’s decision to focus more of its resources on providing energy solutions to the government and consumer markets. The Company will continue to operate its educational software business under the fictitious names “Terra Media”, “Learning is Basic” and “eSchoolRoom”.

On June 2, 2008 the Company amended its Certificate of Incorporation to accomplish the following:

1.	change the name of the Company to Terra Energy Resources, Ltd.;
2.	to increase the authorized capital stock of the Company to 100,000,000 shares of common stock and 5,000,000 shares of preferred stock having a par value of $.001 per share and
3.	Forward stock split of the Company's issued and outstanding shares of Common Stock to 44,694,500 shares.

On June 2, 2008, the 9 shareholders of the Company agreed to contribute various amounts of their shares of common stock aggregating 920,000 to the Company for cancellation.

On June 2, 2008, Thomas Monahan, President, contributed 9,588,600 of his 10,000,000 shares to the Company for cancellation.

On June 2, 2008, Dr. John Swint, Director, contributed 98,400 shares of his 102,500 shares to the Company for cancellation.

On On June 2, 2008, the Company authorized the forward splitting of the Company’s shares of common stock from 629,500 to 44,694,500 shares of common stock.

Events and Uncertainties Critical to Our Business

      We have had limited operations and like all new businesses face certain uncertainties, including expenses, difficulties, complications and delays frequently encountered in connection with conducting operations, including capital requirements and management's potential underestimation of initial and ongoing costs. We have had little or no revenues since our inception. In 2004, we sold an aggregate of $584 in CDs. Also, there is no guarantee that we may be able to generate any interest in our product that will result in any sales in the future. There is no guarantee that we will be able to generate sufficient sales to make our operations profitable. We may continue to have little or no sales and continue to sustain losses in the future. If we continue to sustain losses we will be forced to curtail our operations and go out of business. Our success depends in a large part on our ability to create additional titles to create a catalog of titles to offer and implement a successful marketing and sales plan. While we are currently seeking to hire additional computer programmers and teacher’s to consult with as to educational content there is no guarantee that these efforts will result in any substantial sales. Because of lack of funding, we are unable to hire a dedicated programming and educational consulting team who will devote their efforts to helping us design and create new educational titles in a timely manner.

      If we are able to obtain funding to become fully operational, there is no guarantee that we will be able to find personnel who will be able to work closely with us to help design and create new educational titles to ship orders, including special orders, made via the internet.
 

Critical Accounting Policies

      Our financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The critical accounting policies that affect our more significant estimates and assumptions used in the preparation of our financial statements are reviewed and any required adjustments are recorded on a monthly basis.
 

Revenue Recognition

      Revenue is recognized when products are shipped or services are rendered.
 

Software Development Costs

      The Company accounts for purchased technology and software development costs in accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed". Under SFAS No. 86, the Company is required to test for recoverability of its capitalized software costs as of each balance sheet date or an interim period if events and circumstances indicate that the carrying amount may not be recoverable. Impairment is recorded as the excess of the unamortized cost over the expected future net realizable value of the products.

      Software development costs subsequent to the establishment of technological feasibility are capitalized and amortized to non-cash cost of software. Based on the Company's product development process, technological feasibility is established upon completion of all planning, designing, coding and testing activities. Such costs are amortized over the estimated life of the product. For the period from inception April 7, 2004 to September 30, 2008 and for the nine  months ended September 30, 2008, the Company has capitalized an aggregate of $51,000 and $9,000 respectively. Amortization of software costs for the period from inception, April 7, 2004 to September 30, 2008 and for the nine months ended September 30, 2008 are $-0- and $-0- respectively.

Website Development Costs

      Website development costs consist principally of outside consultants and related expenses. We follow the provisions of Emerging Issues Task Force (“EITF”) Issue No. 00-2, “Accounting for Website Development Costs,” which provides guidance in accounting for costs incurred to develop a website. Our website is being continually changed on a regular basis as the business model continues to evolve. Accordingly, due to the uncertainty of our future products, these costs are expensed as incurred and are included in website development costs.

Research and Development

Research and development costs are charged to expense as incurred.

Stock Based Compensation

As permitted under Statement of Financial Accounting Standard ("SFAS") No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure" ("SFAS 148"), which amended SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), we have elected to continue to follow the intrinsic value method in accounting for its stock-based employee compensation arrangements as defined by Accounting Principles Board financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders.

Off-Balance Sheet Arrangements

We do not have any commercial commitments or off balance sheet financing. Our commitments under our operating leases are described in Note 10 to our consolidated financial statements.

Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and related interpretations including "Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation," an interpretation of APB No. 25. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant.

New Accounting Pronouncements

      New accounting statements issued, and adopted by the Company, include the following:

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109." This interpretation provides guidance for recognizing and measuring uncertain tax positions, as defined in SFAS No. 109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition that a tax position must meet for any of the benefit of an uncertain tax position to be recognized in the financial statements. Guidance is also provided regarding de-recognition, classification, and disclosure of uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company does not expect that this interpretation will have a material impact on its financial position, results of operations, or cash flows.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). This statement defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosure related to the use of fair value measures in financial statements. The Statement is to be effective for the Company's financial statements issued in 2008; however, earlier application is encouraged. The Company is currently evaluating the timing of adoption and the impact that adoption might have on its financial position or results of operations.

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when quantifying Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 requires companies to evaluate the materiality of identified unadjusted errors on each financial statement and related financial statement disclosure using both the rollover approach and the iron curtain approach, as those terms are defined in SAB 108. The rollover approach quantifies misstatements based on the amount of the error in the current year financial statement, whereas the iron curtain approach quantifies misstatements based on the effects of correcting the misstatement existing in the balance sheet at the end of the current year, irrespective of the misstatement's year(s) of origin. Financial statements would require adjustment when either approach results in quantifying a misstatement that is material. Correcting prior year financial statements for immaterial errors would not require previously filed reports to be amended. If a Company determines that an adjustment to prior year financial statements is required upon adoption of SAB 108 and does not elect to restate its previous financial statements, then it must recognize the cumulative effect of applying SAB 108 in fiscal 2006 beginning balances of the affected assets and liabilities with a corresponding adjustment to the fiscal 2006 opening balance in retained earnings. SAB 108 is effective for interim periods of the first fiscal year ending after November 15, 2006. The adoption of SAB 108 did not have an impact on the Company's consolidated financial statements.

In December 2006, FASB Staff Position No. EITF 00-19-2, "Accounting for Registration Payment Arrangements," was issued. The FSP specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with SFAS No. 5, "Accounting for Contingencies." The Company believes that its current accounting is consistent with the FSP.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an Amendment of FASB Statement No. 115", under which entities will now be permitted to measure   many financial instruments and certain other assets and liabilities at fair value on an instrument-by-instrument basis. This Statement is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS 157. The Company is currently assessing the impact, if any, the adoption of SFAS 159 will have on its financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

We expect to be subject to some seasonal fluctuations in its operating results, with revenues in November and December and other popular shopping holidays expected to be higher because of relationship of purchasing gifts and needed items for friends and family members being specifically associated with these occasions.
 

Plan of Operations

     

We had sales of $584 during the period from inception April 7, 2004 to September 30, 2008 and $-0- for the nine months ended September 30, 2008, the Company has no revenues. The main reason for the decrease was that we were reorganizing and that we expect to creating new titles and redesigning our products and did not have adequate funding divide our time between.

On June 2, 2008, the volume in the Company’s Common Stock was non-existent. By increasing the number of shares of the Company’s Common Stock outstanding without altering the aggregate economic interest in the Company represented by the shares, the Board of Directors believes that the volume in the Company’s trading market will increase and a stable market price of the Common Stock will likely develop at a significantly higher price per share than the Common Stock outstanding before giving effect to the Forward Stock Split. This may enhance the Company's access to capital and increase the Company's flexibility in responding to anticipated capital requirements.

     

In addition he Company changed its name to “Terra Energy Resources, Ltd.” to reflect the Company’s decision to focus more of its resources on providing energy solutions to the government and consumer markets. The Company will continue to operate its educational software business under the fictitious names “Terra Media”, “Learning is Basic” and “eSchoolRoom”.

    

During the next year and as we create more titles, we expect to increase our marketing and sales efforts. According to a recent article in Business Week and as a result of various speeches by President Bush concerning the failure of our education system to address our three weaknesses, that being in the areas of mathematics, science and the large percentage of the American population who cannot speak English.

Accordingly, we believe there is a substantial market for easy to use, and comprehensive virtual textbooks on computer. In the next twelve months, management intends to take a number of actions that it believes will enable our business to successfully participate in this growing segment of the education market. Management intends to attend trade shows to promote our products. We also intend to complete the design and programming of our website “learningisbasic.com” to be used to offer and sell our CD and DVD products. Management estimates that it will cost us approximately $18,000 to attend upcoming trade shows, all of which has been, and if necessary will continue to be, funded by our officers, directors and sales until such time as we are able to complete a public offering that is presently ongoing. In addition, our President, Thomas P. Monahan, will utilize his accrued air miles to cover all travel and hotel costs. There are no formal or written agreements with respect to the advance of funds to us by our officers. Such funds will be disbursed on an as needed basis until the Offering closes. Thomas P. Monahan, has advanced funds to us to cover the costs associated with the filing of this Registration Statement, including, attorneys and accountants fees and SEC filing fees. Our officers, directors and affiliates are not legally bound to provide funding to us. If Mr. Monahan does not pay for these expenses, we will be forced to obtain funding. We currently do not have any arrangements to obtain additional financing. In view of our limited operating history, our ability to obtain additional funds is limited. Additional financing may only be available, if at all, upon terms which may not be commercially advantageous to us. As of March 31, 2008, Thomas Monahan has advanced an aggregate of $26,813 through officer loans. If we are unable to complete this offering, and we are not able to obtain funding to commence sales and marketing of our product, and Mr. Monahan cannot dedicate the needed time to complete the design and computer programming of additional titles as a result we may be forced to go out of business.

     

We have begun to review all indications of interest which we have received from various infomercial companies as a way to promote our products. The success of an infomercial featuring our products is dependent on, among other things, having a compatible script director who understands our products and is able to highlight the benefits of our products in a short running time and the ability to get air time placement on channels such as WWOR and the WPIX Channels to reach our target market. In addition, in view of our lack of adequate funding, we may be forced to give up a bigger profit margin to ensure that the infomercial is available for airing. There is no guarantee that we will be able to find an infomercial company who can successfully produce an infomercial on our behalf or that we will generate any sales from the infomercial. Management anticipates that it will cost a minimum of $50,000 and up to $300,000 to successfully produce an infomercial. Management anticipates that it will use a portion of the proceeds raised in the Offering to produce an infomercial.

      We are currently exploring the attractiveness of certain distribution and marketing arrangements with third parties to enhance distribution of our products. These efforts have involved meeting with strategic partners, and having discussions regarding our products and market opportunities. We anticipate that the cost for entering into such arrangements will entail our attorney's fees for the negotiation of such agreements. To date, we have not e ntered into any agreements with any third parties and do not have any plans to enter into any such arrangement until we successfully complete the Offering. There is no guarantee that we will be able to complete any agreements with third parties that will have a positive effect on our sales, or that we will achieve successful and profitable results from our distribution and marketing efforts. There is also no guarantee that we will be able to successfully complete the Offering. If we are unable to complete the Offering, we may be forced to cease operations and go out of business.
 

Liquidity and Capital Resources

      As of September 30, 2008 and December 31, 2007, we had cash of $192 and $2,048 respectively. Our current cash balance as of as of November 6, 2008 is $120. As of September 30, 2008, net cash used by operating activities aggregated $(3,718). Based upon our current cash reserves and forecasted operations, we believe that we will need to obtain at least $250,000 in outside funding to implement our plan of operation over the next twelve months. Based on our current cash balance, and the desire of Catherine Ballonqui to continue funding our operations at a minimal level, management believes that we can satisfy our cash requirements for the next five months. Our President, Catherine Ballonqui, has indicated his preparedness to fund our business until we are able to complete this offering. However, there are no formal or written agreements with respect to the advance of funds to the Company by our officers, directors and affiliates for payment of said costs. Accordingly, our officers, directors and other affiliates are not legally bound to provide funding to us. Because of our limited operations, if our officers and directors do not pay for our expenses, we will be forced to obtain funding. We currently do not have any arrangements to obtain additional financing from other sources. In view of our limited operating history, our ability to obtain additional funds is limited. Additional financing may only be available, if at all, upon terms which may not be commercially advantageous to us.

      The working capital deficiency at September 30, 2008 was $78,092 as compared to working capital of December 31, 2007 was $76,236. These factors create substantial doubt about our ability to continue as a going concern. The recovery of assets and the continuation of future operations are dependent upon our ability to obtain additional debt or equity financing and our ability to generate revenues sufficient to continue pursuing our business purpose.

      As of December 31, 2004, the Company has been funded through the resources of management through the contributions of cash from the Company’s President, aggregating $1,118, the payment of expenses by Thomas P. Monahan aggregating $9,000, and through the sale of 25,000 shares of common stock for a cash consideration of $5,000. As of December 31, 2005, the Company has sold an additional 28,000 shares of common stock at $.20 per share and aggregating $5,600 in cash. In addition, Mr. Monahan has contributed and additional $1,500 in cash to the Company’s operations and has advanced the Company an aggregate of $1,165 as of December 31, 2007. We do not expect positive cash flow from operations in the near term. Our operations presently are generating negative cash flow, and we do not expect positive cash flow from operations in the near term. We believe that the proceeds from the shares of common stock sold by us pursuant to the Offering will sustain our operations, allow us to complete designated CD and DVD titles and implement our marketing plan. Due to the operating losses that we have suffered from the date of our organization, in their report on the annual consolidated financial statements for fiscal year ended December 31, 2007, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse affect on our business, financial condition or operating results.
 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS AND PURCHASES OF EQUITY SECURITIES

      The only sales of unregistered securities of the Registrant during the past three fiscal years were:

Common Stock

     

As of December 31, 2004, the Company has issued an aggregate of 1,001,500 shares of common stock to eight individuals in consideration for educational consulting services valued at $200,300 or $.20 per share On April 7, 2004, Terra Media, Ltd. issued an aggregate of 10,000,000 shares of common stock valued at $.001 per share to Thomas Monahan, President in consideration for cash of $1,000 and made payments of company expenses aggregating $9,000.

    

  On April 7, 2004, Ding Dong School, Ltd. issued an aggregate of 10,000,000 shares of common stock valued at $.001 per share to Thomas Monahan, President in consideration for cash of $1,000 and made payments of company expenses aggregating $9,000.

   

   As of December 31, 2004, the Company sold an aggregate of 25,000 shares of common stock in consideration for $5,000 or $.20 per share through a private placement to approximately 16 individuals.

     

As of December 31, 2004, the Company has issued an aggregate of 200,000 shares of common stock valued at $40,000 or $.20 per share to Mr. Roger Fidler, Esq. in consideration for legal services relating to the design of educational materials including developing the curriculum and content of the Company’s educational software and video products.

      

  As of December 31, 2005, the Company sold an additional 28,000 shares of common stock through a private placement to approximately 17 individuals at $.20 per share aggregating $5,600.

     

As of December 31, 2005, the Company issued an aggregate of 380,000 shares valued at $76,000 or $.20 per share as follows: 280,000 shares of common stock each to 5 individuals as payment for translation services of the Company’s software content in Russian, Chinese, Portuguese and Spanish and an aggregate of 100,000 shares to Dr. John Swint in consideration for consulting services relating to development of the Company’s curriculum for the educational courses being developed on CD and DVD formatted disks.

     

As of June 15, 2006, the Company issued 11,634,500 to certain Ding Dong School, Ltd. shareholders of record as of December 31, 2005 the Company’s predecessor, in exchange for 11,634,500 Ding Dong School, Ltd. shares, pursuant to the Plan of Share Exchange and Reorganization, dated June 15, 2006.

As of December 31, 2007, the Company has sold an aggregate of 355,000 shares of common stock for an aggregate of $2,500 at $.007 per share through our Registered offering.

On October 23, 2008, pursuant to the terms of a Stock Purchase Agreement, Catherine Balloqui purchased 29,358,003 shares of the issued and outstanding common stock of Terra Energy Resources, Ltd. (the “Company”) from Thomas P. Monahan and John Swint, shareholders of the Company, for $241,350 in cash placed into attorney's escrow and a contractual obligation to pay an additional $300,000 in cash not later than November 26, 2008.  Failure to make the final payment will result in a reversion off control to Mr. Monahan.   The total of 29,358,003 shares represents 66% of the outstanding common stock of the Company. Catherine Balloqui used personal funds to purchase the shares of the Company.

ITEM 3. DEFAULTS ON SENIOR SECURITIES

Not applicable.

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

      Registrant submitted no matters to a vote of its security holders during its fiscal year ended December 31, 2007.

ITEM 5. OTHER INFORMATION
Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

The Company filed one Form 8-K during the fourth quarter of 2008 on October 23, 2008.

Exhibit No.

	Description
	3.1	Certifications.
	3.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
*	4.1 Form of certificate evidencing shares of common stock.

* Previously filed by reference from Form SB-2 filed with the Commission on November 13, 2006.

SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this quarterly report upon Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized on this 14th day of  November, 2008.

TERRA ENERGY RESOURCES, LTD.

BY:   /s/   Catherine Ballonqui
Catherine Ballanqui, President, Secretary, Treasurer,
Director, and Chief Financial Officer
and Controller (Principal Accounting Officer)