Attached files
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EX-32.1 - EXHIBIT 32.1 - Oxford City Football Club, Inc. | ex32_1.htm |
EX-31.1 - EXHIBIT 31.1 - Oxford City Football Club, Inc. | ex31_1.htm |
EX-31.2 - EXHIBIT 31.2 - Oxford City Football Club, Inc. | ex31_2.htm |
EXCEL - IDEA: XBRL DOCUMENT - Oxford City Football Club, Inc. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q /A
(Amendment No. 1)
[X] | Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended December 31, 2011 | |
[ ] | Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to __________ | |
Commission File Number: 333-153294 |
Smart Kids Group, Inc.
(Exact name of registrant as specified in its charter)
Florida | 05-0554762 |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
Harvard Square, One Mifflin Place 4th Floor, Cambridge, Massachusetts |
(Address of principal executive offices) |
(780) 222-6257 |
(Registrant’s telephone number, including area code) |
Suite 234, 9768-170 St. Edmonton, AB Canada T5T 5L4 |
(Former name, former address and former fiscal year, if changed since last report) |
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 [X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No
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 (Do not check if a smaller reporting company) | [X] 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
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 11,525,045 as of February 14, 2012.
EXPLANATORY NOTE
This filing contains restated financial statements of Smart Kids Group, Inc. for the period ended December 31, 2011 and 2010. Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees were also expensed during the year ended June 30, 2011. In accordance with Staff Accounting Bulletin Topic 5A, Expenses of Offering, this should have been charged against the gross proceeds of the offering. Additionally a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and was later issued in March 2012. In July 2011, the Company entered into a Common Stock Purchase Warrant agreement with the same vendor for legal services. As of December 31, 2011, the fair value of the warrants of $43,986 and expenses of $24,700 were not recognized, resulting in an understatement of professional fees for the period ended December 31, 2011.
As a result of the errors stated above, the Company determined that there were significant changes in the Company’s Balance Sheets, Statements of Operations, and Statements of Cash Flow for the three months ended December 31, 2011 and 2010.
The following errors were found for the three and six months ended December 31, 2010 and for the period from inception (February 11, 2003) to December 31, 2011:
· | Accounts payable and accrued expenses were understated by $2,112 due to unrecorded legal fees; |
· | Common stock payable was understated by $74,000 due to the granting of stock for finder’s fees and financing fees; |
· | Accumulated deficit during the development stage was understated by $76,112; |
· | Loss on settlement of accounts payable was understated by $63,000 for the three and six months ended December 31, 2010 due to the settlement of accounts payable of $3,500 with stock valued at $66,500; |
· | Finance and interest expense was understated by $7,500 for the three and six months ended December 31, 2010 due to unrecorded financing fees; |
· | Net income was overstated by $70,500 for the three months ended December 31, 2010; |
· | Net loss was understated by $70,500 for the six months ended December 31, 2010; and |
· | Net loss per common share was understated by $0.02. |
The effects on our previously issued December 31, 2010 financial statements are as follows:
Balance Sheet
December 31, 2010 | December 31, 2010 | |||||||||||
As filed | Adjustments | Restated | ||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
Accounts payable and accrued expenses | $ | 100,513 | $ | 2,112 | $ | 102,625 | ||||||
Total current liabilities | $ | 644,677 | $ | 2,112 | $ | 646,789 | ||||||
Common stock payable | $ | 5,500 | $ | 74,000 | $ | 79,500 | ||||||
Accumulated deficit during the development stage | $ | (2,793,825 | ) | $ | (76,112 | ) | $ | (2,869,937 | ) | |||
Total liabilities and stockholders’ deficit | $ | 138,491 | $ | - | $ | 138,491 |
2 |
Statement of Operations
Three months ended | Three months ended | |||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Total operating expense | $ | (144,670 | ) | $ | 63,000 | $ | (81,670 | ) | ||||
Income before other expenses | $ | 144,670 | $ | (63,000 | ) | $ | 81,670 | |||||
Finance and interest expense | $ | (7,413 | ) | $ | (7,500 | ) | $ | (14,913 | ) | |||
Total other expenses | $ | (7,413 | ) | $ | (7,500 | ) | $ | (14,913 | ) | |||
Net income | $ | 137,257 | $ | (70,500 | ) | $ | 66,757 | |||||
Net income per common share-basic | $ | 0.05 | $ | (0.03 | ) | $ | 0.02 | |||||
Net income per common share-dilutive | $ | 0.05 | $ | (0.03 | ) | $ | 0.02 | |||||
Weighted average-dilutive | $ | 2,725,181 | $ | 395,000 | $ | 3,120,181 |
Six months ended | Six months ended | |||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Total operating expense | $ | 176,849 | $ | 63,000 | $ | 239,849 | ||||||
Loss before other expenses | $ | (176,849 | ) | $ | (63,000 | ) | $ | (239,849 | ) | |||
Finance and interest expense | $ | (40,213 | ) | $ | (7,500 | ) | $ | (47,713 | ) | |||
Total other expenses | $ | (40,213 | ) | $ | (7,500 | ) | $ | (47,713 | ) | |||
Net loss | $ | (217,062 | ) | $ | (70,500 | ) | $ | (287,562 | ) | |||
Net loss per common share-basic | $ | (0.09 | ) | $ | (0.02 | ) | $ | (0.11 | ) |
Statement of Cash Flows
Six months ended | Six months ended | |||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Net loss | $ | (217,062 | ) | $ | (70,500 | ) | $ | (287,562 | ) | |||
Issuance of common stock-financing fees | $ | 18,400 | $ | 7,500 | $ | 25,900 | ||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 |
3 |
The following errors were found for the three and six months ended December 31, 2011 and for the period from inception (February 11, 2003) to December 31, 2011:
· | Accounts payable and accrued expenses were understated by $26,812 due to unrecorded legal fees; |
· | Additional paid-in capital was overstated by $20,814 due to the Company not recognizing the granting of warrants valued at $43,986, offset by $64,800 due to incorrectly expensing finder’s fees; |
· | Common stock payable was understated by $74,000 due to the granting of stock for finder’s fees and financing fees; |
· | Accumulated deficit during the development stage was understated by $79,998; |
· | Legal and professional fees was understated by $24,700 for the three months ended December 31, 2011 due to unrecorded legal fees; |
· | Legal and professional fees was understated by $68,686 for the six months ended December 31, 2011 due to unrecorded legal fees and the granting of warrants; |
· | Legal and professional fees was understated by $9,498 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Loss on settlement of accounts payable was understated by $63,000 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Finance and interest expense was understated by $7,500 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Net loss was understated by $24,700 and $68,686 for the three and six months ended December 31, 2011; |
· | Net loss per common share were understated by $0.01 for the three and six months ended December 31, 2011; |
· | Net loss was understated by $79,998 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Cash used for accounts payable and accrued expenses were understated by $24,700 for the six months ended December 31, 2011 and $30,312 for the period from inception (February 11, 2003) to December 31, 2011; and |
· | Non-cash investing and financing activities for stock issued for accounts payable, accrued expenses and note payable were understated by $3,500 for the period from inception (February 11, 2003) to December 31, 2011. |
4 |
The effects on our previously issued December 31, 2011 financial statements are as follows:
Balance Sheet
December 31, 2011 | December 31, 2011 | |||||||||||
As filed | Adjustments | Restated | ||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
Accounts payable and accrued expenses | $ | 181,377 | $ | 26,812 | $ | 208,189 | ||||||
Total current liabilities | $ | 754,083 | $ | 26,812 | $ | 780,895 | ||||||
Additional paid in capital | $ | 3,262,447 | $ | (20,814 | ) | $ | 3,241,633 | |||||
Common stock payable | $ | 81,643 | $ | 74,000 | $ | 155,643 | ||||||
Accumulated deficit during the development stage | $ | (3,713,060 | ) | $ | (79,998 | ) | $ | (3,793,058 | ) | |||
Total liabilities and stockholders’ deficit | $ | 386,168 | $ | - | $ | 386,168 |
Statement of Operations
Three months ended | Three months ended | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Legal and professional fees | $ | 161,347 | $ | 24,700 | $ | 186,047 | ||||||
Total operating expenses | $ | 230,826 | $ | 24,700 | $ | 255,526 | ||||||
Loss before other expenses | $ | (230,826 | ) | $ | (24,700 | ) | $ | (255,526 | ) | |||
Net loss | $ | (231,681 | ) | $ | (24,700 | ) | $ | (256,381 | ) | |||
Net loss per common share-basic and dilutive | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) |
Six months ended | Six months ended | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Legal and professional fees | $ | 276,750 | $ | 68,686 | $ | 345,436 | ||||||
Total operating expenses | $ | 415,960 | $ | 68,686 | $ | 484,646 | ||||||
Loss before other expenses | $ | (415,960 | ) | $ | (68,686 | ) | $ | (484,646 | ) | |||
Net loss | $ | (423,181 | ) | $ | (68,686 | ) | $ | (491,867 | ) | |||
Net loss per common share-basic and dilutive | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.06 | ) |
5 |
From inception | From inception | |||||||||||
(February 11, 2003) | (February 11, 2003) | |||||||||||
to | to | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustment | Restated | ||||||||||
Legal and professional fees | $ | 1,341,239 | $ | 9,498 | $ | 1,350,737 | ||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Total operating expense | $ | 3,374,672 | $ | 72,498 | $ | 3,447,170 | ||||||
Loss before other expenses | $ | (3,374,672 | ) | $ | (72,498 | ) | $ | (3,447,170 | ) | |||
Finance and interest expense | $ | (333,643 | ) | $ | (7,500 | ) | $ | (341,143 | ) | |||
Total other expenses | $ | (338,388 | ) | $ | (7,500 | ) | $ | (345,888 | ) | |||
Net loss | $ | (3,713,060 | ) | $ | (79,998 | ) | $ | (3,793,058 | ) |
Statement of Cash Flows
Six months ended | Six months ended | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Net loss | $ | (423,181 | ) | $ | (68,686 | ) | $ | (491,867 | ) | |||
Fair value of warrants | $ | — | $ | 43,986 | $ | 43,986 | ||||||
Accounts payable and accrued expenses | $ | 28,685 | $ | 24,700 | $ | 53,385 |
Statement of Cash Flows
From inception | From inception | |||||||||||
(February 11, 2003) | (February 11, 2003) | |||||||||||
to | to | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Net loss | $ | (3,713,060 | ) | $ | (79,998 | ) | $ | (3,793,058 | ) | |||
Issuance of common stock-services | $ | 504,225 | $ | (64,800 | ) | $ | 439,425 | |||||
Issuance of common stock-financing fees | $ | 286,900 | $ | 7,500 | $ | 294,400 | ||||||
Fair value of warrants | $ | — | $ | 43,986 | $ | 43,986 | ||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Accounts payable and accrued expenses | $ | 498,696 | $ | 30,312 | $ | 529,008 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Stock issued for accounts payable, accrued expenses, and note payable | $ | 969,119 | $ | 3,500 | $ | 972,619 |
6 |
TABLE OF CONTENTS |
Page | |
PART I – FINANCIAL INFORMATION | ||
Item 1: | Financial Statements | F-1 |
Item 2: | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 8 |
Item 3: | Quantitative and Qualitative Disclosures About Market Risk | 13 |
Item 4: | Controls and Procedures | 13 |
PART II – OTHER INFORMATION
| ||
Item 1: | Legal Proceedings | 14 |
Item 1A: | Risk Factors | 14 |
Item 2: | Unregistered Sales of Equity Securities and Use of Proceeds | 14 |
Item 3: | Defaults Upon Senior Securities | 16 |
Item 4: | Mine Safety Disclosures | 16 |
Item 5: | Other Information | 16 |
Item 6: | Exhibits | 16 |
7 |
PART I - FINANCIAL INFORMATION
SMART KIDS GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
December 31, | June 30, | |||||||
2011 | 2011 | |||||||
(Restated) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 538 | $ | 4,595 | ||||
Prepaids | 382,653 | 11,750 | ||||||
Total current assets | 383,191 | 16,345 | ||||||
Fixed assets | ||||||||
Equipment, net of accumulated depreciation of $907 and $737, respectively | 227 | 340 | ||||||
Investment in unconsolidated investee | — | 99 | ||||||
Other assets | ||||||||
Software development costs, net of accumulated amortization of $2,750 and $1,375, respectively | 2,750 | 4,125 | ||||||
Total assets | $ | 386,168 | $ | 20,909 | ||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 208,189 | $ | 215,751 | ||||
Accrued expenses – related parties | 572,706 | 572,206 | ||||||
Total current liabilities | 780,895 | 787,957 | ||||||
Stockholders' deficit | ||||||||
Preferred stock: $0.0001 par value; authorized 40,000,000 shares; issued and outstanding: 0 and 0, respectively | — | — | ||||||
Common stock: $0.0001 par value; authorized 1,800,000,000 shares; issued and outstanding: 10,547,545 and 5,387,025, respectively | 1,055 | 539 | ||||||
Additional paid-in capital | 3,241,633 | 2,362,447 | ||||||
Common stock payable | 155,643 | 171,157 | ||||||
Accumulated deficit during the development stage | (3,793,058 | ) | (3,301,191 | ) | ||||
Total stockholders' deficit | (394,727 | ) | (767,048 | ) | ||||
Total liabilities and stockholders' deficit | $ | 386,168 | $ | 20,909 |
The accompanying notes are an integral part of these condensed financial statements.
F-1 |
SMART KIDS GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Unaudited)
From inception | ||||||||||||||||||||
For the three months ended | For the six months ended | (February 11, 2003) | ||||||||||||||||||
December 31, | December 31, | to December 31, | ||||||||||||||||||
2011 (Restated) | 2010 (Restated) | 2011 (Restated) | 2010 (Restated) | 2011 (Restated) | ||||||||||||||||
Operating expenses | ||||||||||||||||||||
Salaries and wages | $ | 39,301 | $ | 25,406 | $ | 71,807 | $ | 25,406 | $ | 1,429,761 | ||||||||||
Legal and professional fees | 186,047 | 27,160 | 345,436 | 53,866 | 1,350,737 | |||||||||||||||
General and administrative expense | 12,209 | 4,654 | 24,130 | 36,459 | 173,222 | |||||||||||||||
Sub-licensing expense | 15,000 | (258,930 | ) | 30,000 | 4,078 | 360,137 | ||||||||||||||
Allowance on stock receivable | — | 57,040 | — | 57,040 | 57,040 | |||||||||||||||
Impairment of equity investment | 2,969 | — | 13,273 | — | 13,273 | |||||||||||||||
Loss on settlement of accounts payable | — | 63,000 | — | 63,000 | 63,000 | |||||||||||||||
Total operating expenses | 255,526 | (81,670 | ) | 484,646 | 239,849 | 3,447,170 | ||||||||||||||
(Loss) income before other expenses | (255,526 | ) | 81,670 | (484,646 | ) | (239,849 | ) | (3,447,170 | ) | |||||||||||
Other expenses | ||||||||||||||||||||
Finance and interest expense | (855 | ) | (14,913 | ) | (7,221 | ) | (47,713 | ) | (341,143 | ) | ||||||||||
Loss on conversion of note payable | — | — | — | — | (4,745 | ) | ||||||||||||||
Total other expenses | (855 | ) | (14,913 | ) | (7,221 | ) | (47,713 | ) | (345,888 | ) | ||||||||||
Net (loss) income | $ | (256,381 | ) | $ | 66,757 | $ | (491,867 | ) | $ | (287,562 | ) | $ | (3,793,058 | ) | ||||||
Net (loss) income per common share- basic | $ | (0.03 | ) | $ | 0.02 | $ | (0.06 | ) | $ | (0.11 | ) | |||||||||
Net (loss) income per common share- dilutive | $ | (0.03 | ) | $ | 0.02 | $ | (0.06 | ) | $ | (0.11 | ) | |||||||||
Weighted average number of common shares outstanding- basic | 10,150,227 | 2,725,181 | 8,708,873 | 2,551,002 | ||||||||||||||||
Weighted average number of common shares outstanding- dilutive | 10,150,227 | 3,120,181 | 8,708,873 | 2,551,002 |
The accompanying notes are an integral part
of these condensed financial statements.
F-2 |
SMART KIDS GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
From inception | ||||||||||||
Six months ended | (February 11, 2003) | |||||||||||
December 31, | to December 31, | |||||||||||
2011 (Restated) | 2010 (Restated) | 2011 (Restated) | ||||||||||
Cash flows from operating activities: | ||||||||||||
Net loss | $ | (491,867 | ) | $ | (287,562 | ) | $ | (3,793,058 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Issuance of common stock- services | 193,130 | 22,863 | 439,425 | |||||||||
Issuance of common stock- financing fees | — | 25,900 | 294,400 | |||||||||
Fair value of warrants | 43,986 | — | 43,986 | |||||||||
Loss on settlement of accounts payable | — | 63,000 | 63,000 | |||||||||
Loss on conversion of note payable | — | — | 4,745 | |||||||||
Allowance on stock receivable | — | 57,040 | 57,040 | |||||||||
Depreciation and amortization | 1,488 | 113 | 12,232 | |||||||||
Deferred financing fee | — | 15,000 | 15,000 | |||||||||
Impairment of equity investment | 13,273 | — | 13,273 | |||||||||
Changes in current assets and liabilities: | ||||||||||||
Organizational costs | — | — | (8,575 | ) | ||||||||
Accrued payable and accrued expenses | 53,385 | (9,569 | ) | 529,008 | ||||||||
Accrued expenses- related parties | 53,500 | 20,465 | 1,448,655 | |||||||||
Net cash used in operating activities | (133,105 | ) | (92,750 | ) | (880,869 | ) | ||||||
Cash flows from investing activities: | ||||||||||||
Investment in unconsolidated investee | (13,174 | ) | — | (13,273 | ) | |||||||
Purchase of equipment | — | — | (1,134 | ) | ||||||||
Net cash used in investing activities | (13,174 | ) | — | (14,407 | ) | |||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from the issuance of stock | 142,222 | 58,763 | 849,945 | |||||||||
Proceeds from equity draw down agreement | — | 33,968 | 45,020 | |||||||||
Proceeds from note payable | — | — | 5,849 | |||||||||
Payment on deferred financing fees | — | — | (5,000 | ) | ||||||||
Net cash provided by financing activities | 142,222 | 92,731 | 895,814 | |||||||||
(Decrease) increase in cash | (4,057 | ) | (19 | ) | 538 | |||||||
Cash, beginning of period | 4,595 | 105 | — | |||||||||
Cash, end of period | $ | 538 | $ | 86 | $ | 538 |
The accompanying notes are an integral part of these condensed financial statements.
F-3 |
SMART KIDS GROUP, INC.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Continued)
From inception | ||||||||||||
Six months ended | (February 11, 2003) | |||||||||||
December 31, | to December 31, | |||||||||||
2011 | 2010 (Restated) | 2011 | ||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Interest | $ | — | $ | — | $ | — | ||||||
Income taxes | $ | — | $ | — | $ | — | ||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||
Stock issued for prepaid expenses | $ | 382,653 | $ | — | $ | 394,403 | ||||||
Stock issued for equity draw down | $ | — | $ | 9,500 | $ | 63,650 | ||||||
Stock issued for software development | $ | — | $ | — | $ | 5,500 | ||||||
Stock issued for accounts payable, accrued expenses, and note payable | $ | — | $ | 3,500 | $ | 972,619 | ||||||
Payment of accounts payable by shareholder | $ | — | $ | — | $ | 240,000 |
The accompanying notes are an integral part of these condensed financial statements.
F-4 |
NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Smart Kids Group, Inc. (“the Company”) was formed on February 11, 2003 (date of inception) under the laws of the State of Florida. The Company licenses technology and develops educational content and software.
As of December 31, 2011, the Company is a development stage company. A development stage enterprise is a company that is devoting substantially all of its efforts to establishing a new business and either planned principal operations have not commenced or planned principal operations have commenced but there has been no significant revenue. From February 11, 2003 (date of inception) through December 31, 2011, the Company did not realize any revenues and has not commenced its principal operations.
On April 23, 2010, the Company purchased ownership in Smart Kids Productions Inc., a Canadian corporation, incorporated on May 4, 2009, of which the Company has a 40% interest ownership. The corporation has no assets or liabilities.
On October 14, 2011, the Company created SKGI Acquisition Corp., a Nevada corporation, a wholly-owned subsidiary of the Company. This subsidiary has been dormant as of December 31, 2011. The subsidiary has no assets or liabilities.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The interim unaudited financial statements should be read in conjunction with the financial statements included in the Form 10-K for the year ended June 30, 2011. In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made. Operating results for the three and six months ended December 31, 2011 are not necessarily indicative of the results that may be expected for the year ended June 30, 2012.
The reporting currency of the Company is the U.S. dollar. The Company has one bank account located in Canada and as a result, has re-measured the account from Canadian dollars to U.S. dollars. The resulting translation adjustment has been recorded as an operating expense.
As used in these notes to the condensed financial statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to Smart Kids Group, Inc. and, unless the context indicates otherwise, its consolidated subsidiary, SKGI Acquisition Corp. These condensed consolidated financial statements include all accounts of the Company and its subsidiary. All significant intercompany transactions and accounts have been eliminated in consolidation. Significant accounting policies disclosed therein have not changed except as noted below.
Use of Estimates
The preparation of financial information in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial information and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Going Concern
The accompanying unaudited condensed financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. The Company has not begun generating revenue, is considered a development stage company, has experienced recurring net operating losses, had a net loss of $491,867 and $287,562 for the six months ended December 31, 2011 and 2010, respectively, accumulated deficit of $3,793,058 and a working capital deficiency of $397,704 at December 31, 2011.
F-5 |
Management believes that additional capital will be required to fund operations through December 31, 2012 and beyond, as it attempts to generate revenues, and develops new products. Management intends to raise capital through additional equity offerings. There can be no assurance that the Company will be successful in obtaining financing at the level needed or on terms acceptable to the Company. These conditions 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.
The Company’s operations are subject to certain additional risks and uncertainties including, among others, dependence on outside suppliers and manufacturers, competition, dependence on its exclusive license and relationship with the licensor, uncertainties regarding patents and proprietary rights, dependence on key personnel, and other business risks. In addition, there is no assurance, assuming the Company is successful in raising additional capital that the Company will be successful in achieving profitability or positive cash flow.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2011 and June 30, 2011 the Company had no cash equivalents.
Stockholders’ Equity
The Company has properly charged its offering costs directly attributable to a proposed or actual offering of securities against
the gross proceeds of the offerings. We have recorded such costs as a reduction of equity.
Issued
In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, result of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
NOTE 2. CORRECTION FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2010
The financial statements for the periods ended December 31, 2011 and 2010 have been restated for the following matter. Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees were also expensed during the year ended June 30, 2011. In accordance with Staff Accounting Bulletin Topic 5A, Expenses of Offering, this should have been charged against the gross proceeds of the offering. Additionally a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and was later issued in March 2012. In July 2011, the Company entered into a Common Stock Purchase Warrant agreement with the same vendor for legal services. As of December 31, 2011, the fair value of the warrants of $43,986 and expenses of $24,700 were not recognized, resulting in an understatement of professional fees for the period ended December 31, 2011.
As a result of the errors stated above, the Company determined that there were significant changes in the Company’s Balance Sheets, Statements of Operations, and Statements of Cash Flow for the three months ended December 31, 2011 and 2010 and for the period from inception (February 11, 2003) to December 31, 2011.
F-6 |
The following errors were found for the three and six months ended December 31, 2010:
· | Accounts payable and accrued expenses were understated by $2,112 due to unrecorded legal fees; |
· | Common stock payable was understated by $74,000 due to the granting of stock for finder’s fees and financing fees; |
· | Accumulated deficit during the development stage was understated by $76,112; |
· | Loss on settlement of accounts payable was understated by $63,000 for the three and six months ended December 31, 2010 due to the settlement of accounts payable of $3,500 with stock valued at $66,500; |
· | Finance and interest expense was understated by $7,500 for the three and six months ended December 31, 2010 due to unrecorded financing fees; |
· | Net income was overstated by $70,500 for the three months ended December 31, 2010; |
· | Net loss was understated by $70,500 for the six months ended December 31, 2010; and |
· | Net loss per common share was understated by $0.02. |
The effects on our previously issued December 31, 2010 financial statements are as follows:
Balance Sheet
December 31, 2010 | December 31, 2010 | |||||||||||
As filed | Adjustments | Restated | ||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
Accounts payable and accrued expenses | $ | 100,513 | $ | 2,112 | $ | 102,625 | ||||||
Total current liabilities | $ | 644,677 | $ | 2,112 | $ | 646,789 | ||||||
Common stock payable | $ | 5,500 | $ | 74,000 | $ | 79,500 | ||||||
Accumulated deficit during the development stage | $ | (2,793,825 | ) | $ | (76,112 | ) | $ | (2,869,937 | ) | |||
Total liabilities and stockholders’ deficit | $ | 138,491 | $ | - | $ | 138,491 |
Statement of Operations
Three months ended | Three months ended | |||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Total operating expense | $ | (144,670 | ) | $ | 63,000 | $ | (81,670 | ) | ||||
Income before other expenses | $ | 144,670 | $ | (63,000 | ) | $ | 81,670 | |||||
Finance and interest expense | $ | (7,413 | ) | $ | (7,500 | ) | $ | (14,913 | ) | |||
Total other expenses | $ | (7,413 | ) | $ | (7,500 | ) | $ | (14,913 | ) | |||
Net income | $ | 137,257 | $ | (70,500 | ) | $ | 66,757 | |||||
Net income per common share-basic | $ | 0.05 | $ | (0.03 | ) | $ | 0.02 | |||||
Net income per common share-dilutive | $ | 0.05 | $ | (0.03 | ) | $ | 0.02 | |||||
Weighted average-dilutive | $ | 2,725,181 | $ | 395,000 | $ | 3,120,181 |
F-7 |
Six months ended | Six months ended | |||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Total operating expense | $ | 176,849 | $ | 63,000 | $ | 239,849 | ||||||
Loss before other expenses | $ | (176,849 | ) | $ | (63,000 | ) | $ | (239,849 | ) | |||
Finance and interest expense | $ | (40,213 | ) | $ | (7,500 | ) | $ | (47,713 | ) | |||
Total other expenses | $ | (40,213 | ) | $ | (7,500 | ) | $ | (47,713 | ) | |||
Net loss | $ | (217,062 | ) | $ | (70,500 | ) | $ | (287,562 | ) | |||
Net loss per common share-basic | $ | (0.09 | ) | $ | (0.02 | ) | $ | (0.11 | ) |
Statement of Cash Flows
Six months ended | Six months ended | |||||||||||
December 31, 2010 | December 31, 2010 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Net loss | $ | (217,062 | ) | $ | (70,500 | ) | $ | (287,562 | ) | |||
Issuance of common stock-financing fees | $ | 18,400 | $ | 7,500 | $ | 25,900 | ||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 |
F-8 |
The following errors were found for the three and six months ended December 31, 2011 and for the period from inception (February 11, 2003) to December 31, 2011:
· | Accounts payable and accrued expenses were understated by $26,812 due to unrecorded legal fees; |
· | Additional paid-in capital was overstated by $20,814 due to the Company not recognizing the granting of warrants valued at $43,986, offset by $64,800 due to incorrectly expensing finder’s fees; |
· | Common stock payable was understated by $74,000 due to the granting of stock for finder’s fees and financing fees; |
· | Accumulated deficit during the development stage was understated by $79,998; |
· | Legal and professional fees was understated by $24,700 for the three months ended December 31, 2011 due to unrecorded legal fees; |
· | Legal and professional fees was understated by $68,686 for the six months ended December 31, 2011 due to unrecorded legal fees and the granting of warrants; |
· | Legal and professional fees was understated by $9,498 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Loss on settlement of accounts payable was understated by $63,000 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Finance and interest expense was understated by $7,500 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Net loss was understated by $24,700 and $68,686 for the three and six months ended December 31, 2011; |
· | Net loss per common share were understated by $0.01 for the three and six months ended December 31, 2011; |
· | Net loss was understated by $79,998 for the period from inception (February 11, 2003) to December 31, 2011; |
· | Cash used for accounts payable and accrued expenses were understated by $24,700 for the six months ended December 31, 2011 and $30,312 for the period from inception (February 11, 2003) to December 31, 2011; and |
· | Non-cash investing and financing activities for stock issued for accounts payable, accrued expenses and note payable were understated by $3,500 for the period from inception (February 11, 2003) to December 31, 2011. |
The effects on our previously issued December 31, 2011 financial statements are as follows:
Balance Sheet
December 31, 2011 | December 31, 2011 | |||||||||||
As filed | Adjustments | Restated | ||||||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||||||
Accounts payable and accrued expenses | $ | 181,377 | $ | 26,812 | $ | 208,189 | ||||||
Total current liabilities | $ | 754,083 | $ | 26,812 | $ | 780,895 | ||||||
Additional paid in capital | $ | 3,262,447 | $ | (20,814 | ) | $ | 3,241,633 | |||||
Common stock payable | $ | 81,643 | $ | 74,000 | $ | 155,643 | ||||||
Accumulated deficit during the development stage | $ | (3,713,060 | ) | $ | (79,998 | ) | $ | (3,793,058 | ) | |||
Total liabilities and stockholders’ deficit | $ | 386,168 | $ | - | $ | 386,168 |
F-9 |
Statement of Operations
Three months ended | Three months ended | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Legal and professional fees | $ | 161,347 | $ | 24,700 | $ | 186,047 | ||||||
Total operating expenses | $ | 230,826 | $ | 24,700 | $ | 255,526 | ||||||
Loss before other expenses | $ | (230,826 | ) | $ | (24,700 | ) | $ | (255,526 | ) | |||
Net loss | $ | (231,681 | ) | $ | (24,700 | ) | $ | (256,381 | ) | |||
Net loss per common share-basic and dilutive | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) |
Six months ended | Six months ended | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Legal and professional fees | $ | 276,750 | $ | 68,686 | $ | 345,436 | ||||||
Total operating expenses | $ | 415,960 | $ | 68,686 | $ | 484,646 | ||||||
Loss before other expenses | $ | (415,960 | ) | $ | (68,686 | ) | $ | (484,646 | ) | |||
Net loss | $ | (423,181 | ) | $ | (68,686 | ) | $ | (491,867 | ) | |||
Net loss per common share-basic and dilutive | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.06 | ) |
From inception | From inception | |||||||||||
(February 11, 2003) | (February 11, 2003) | |||||||||||
to | to | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustment | Restated | ||||||||||
Legal and professional fees | $ | 1,341,239 | $ | 9,498 | $ | 1,350,737 | ||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Total operating expense | $ | 3,374,672 | $ | 72,498 | $ | 3,447,170 | ||||||
Loss before other expenses | $ | (3,374,672 | ) | $ | (72,498 | ) | $ | (3,447,170 | ) | |||
Finance and interest expense | $ | (333,643 | ) | $ | (7,500 | ) | $ | (341,143 | ) | |||
Total other expenses | $ | (338,388 | ) | $ | (7,500 | ) | $ | (345,888 | ) | |||
Net loss | $ | (3,713,060 | ) | $ | (79,998 | ) | $ | (3,793,058 | ) |
F-10 |
Statement of Cash Flows
Six months ended | Six months ended | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Net loss | $ | (423,181 | ) | $ | (68,686 | ) | $ | (491,867 | ) | |||
Fair value of warrants | $ | — | $ | 43,986 | $ | 43,986 | ||||||
Accounts payable and accrued expenses | $ | 28,685 | $ | 24,700 | $ | 53,385 |
Statement of Cash Flows
From inception | From inception | |||||||||||
(February 11, 2003) | (February 11, 2003) | |||||||||||
to | to | |||||||||||
December 31, 2011 | December 31, 2011 | |||||||||||
As Filed | Adjustments | Restated | ||||||||||
Net loss | $ | (3,713,060 | ) | $ | (79,998 | ) | $ | (3,793,058 | ) | |||
Issuance of common stock-services | $ | 504,225 | $ | (64,800 | ) | $ | 439,425 | |||||
Issuance of common stock-financing fees | $ | 286,900 | $ | 7,500 | $ | 294,400 | ||||||
Fair value of warrants | $ | — | $ | 43,986 | $ | 43,986 | ||||||
Loss on settlement of accounts payable | $ | — | $ | 63,000 | $ | 63,000 | ||||||
Accounts payable and accrued expenses | $ | 498,696 | $ | 30,312 | $ | 529,008 | ||||||
Non-cash investing and financing activities: | ||||||||||||
Stock issued for accounts payable, accrued expenses, and note payable | $ | 969,119 | $ | 3,500 | $ | 972,619 |
F-11 |
NOTE 3. PREPAID EXPENSE
As of December 31, 2011 and June 30, 2011, the Company had prepaid expenses of $382,653 and $11,750. For the six months ended December 31, 2011, prepaid expense of $558,000 was paid through the issuance of the Company’s common stock of which $187,097 has been expensed.
NOTE 4. UNCONSOLIDATED INVESTEE
As of September 30, 2011 , the Company paid $13,174 to its unconsolidated investee, Smart Kids Productions, (“SK Productions”) as an investment. The Company has an agreement with SK Productions for the re-packaging of the Company’s intellectual property relating to Be Alert Bert®. As of December 31, 2011, the Company determined that its investment in SK Productions should be fully impaired due to Production’s continued net loss, and recognized an impairment of unconsolidated investees of the $13,174 investment, and the initial investment of $99 in May 2010.
NOTE 5. RELATED PARTY TRANSACTIONS
Accrued expenses – related parties
December 31, | June 30, | |||||||
2011 | 2011 | |||||||
Unpaid officer compensation | $ | 572,524 | $ | 549,023 | ||||
Sub-license expense | 183 | 23,183 | ||||||
Total accrued expenses – related parties | $ | 572,707 | $ | 572,206 |
As of December 31, 2011 and June 30, 2011, the Company incurred amounts due to related parties of $572,707 and $572,206. The liability consists of payments due under employment agreements of $572,524 to our Chief Executive Officer and Chief Operating Officer and sub-licensing fees of $183 for the intellectual property with Smart Kids International Holdings, Inc., (“SKIH”). As of December 31, 2011 and June 30, 2011, $475,558 of unpaid officer compensation is due to the former Chief Executive Officer, Paul Andrew Ruppanner who was terminated pursuant to Section 1.7 (c)(4) of his employment agreement dated August 1, 2005 (Exhibit 10-4) as filed in an Form 8-K dated April 27, 2010. The remaining $96,966 as of December 31, 2011, is due to our Chief Operating Officer. All accrued expenses – related parties have been expensed in the Condensed Consolidated Statement of Operations in the period incurred.
NOTE 6. STOCKHOLDERS’ EQUITY
The authorized common stock of the Company consists of 1,800,000,000 shares of common stock with par value of $0.0001 and 40,000,000 shares of preferred stock. As of December 31, 2011 and June 30, 2010 the Company had 10,547,545 and 5,387,025 common stock and zero preferred stock outstanding.
In October 2011, upon majority of votes by the Company’s stockholders, the Company affected a 100 to 1 reverse stock split of its outstanding common stock. All share amounts have been retroactively restated to reflect this reverse split. The reverse split was approved by FINRA on December 12, 2011 and effected in January 2012.
On August 8, 2011, the Company issued 600,000 (post split) shares of restricted common stock valued at $0.22 (post split) per share or $132,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 13, 2011, the agreement date.
On August 8, 2011, the Company issued 300,000 (post split) shares of restricted common stock valued at $0.22 (post split) per share or $66,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 25, 2011, the agreement date.
On August 8, 2011, the Company issued 350,000 (post split) shares of restricted common stock valued at $0.25 (post split) per share or $87,500 as a prepayment of consulting services. The shares were valued at the fair market value on July 20, 2011, the agreement date.
F-12 |
On August 8, 2011, the Company issued 600,000 (post split) shares of restricted common stock valued at $0.25 (post split) per share or $150,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 19, 2011, the agreement date. In accordance with the consulting agreement, an additional 600,000 (post split) shares are due contingent upon the Company’s stock value exceeding a minimum of $0.03 per share for 20 consecutive days.
On August 8, 2011, the Company issued 50,000 (post split) shares of restricted common stock valued at $0.23 (post split) per share or $11,500 as a prepayment of consulting services. The shares were valued at the fair market value on July 8, 2011, the agreement date.
On August 8, 2011, the Company issued 300,000 (post split) shares of restricted common stock valued at $0.19 (post split) per share or $57,000 as a prepayment of consulting services. The shares were valued at the fair market value on September 1, 2011, the agreement date.
On August 10, 2011, the Company issued 13,333 (post split) shares of restricted common stock valued at $0.15 (post split) per share or $2,000 for consulting services. The shares were valued at the fair market value on July 30, 2011 per the terms of the agreement.
On August 17, 2011, the Company issued 540,000 (post split) shares of restricted common stock valued at $0.12 (post split) per share or $64,800 for finder’s fees and recorded as a reduction of equity. The shares were valued at the fair market value on April 28, 2011, the agreement date.
On August 17, 2011, the Company issued 125,000 (post split) shares of restricted common stock for cash consideration of approximately $0.04 (post split) per share or $5,283.
On August 17, 2011, the Company issued 25,000 (post split) shares of restricted common stock valued at $0.20 (post split) per share or $5,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 17, 2011, the grant date.
On August 17, 2011, the Company issued 25,000 (post split) shares of restricted common stock valued at $0.20 (post split) per share or $5,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 17, 2011, the grant date.
On August 17, 2011, the Company issued 513,000 (post split) shares of restricted common stock for cash consideration of approximately $0.11 (post split) per share or $58,246.
On September 14, 2011, the Company issued 13,334 (post split) shares of restricted common stock valued at $0.19 (post split) per share or $2,533 for consulting services. The shares were valued at the fair market value on August 31, 2011, per the terms of the agreement.
On September 22, 2011, the Company issued 400,000 (post split) shares of restricted common stock valued at $0.11 (post split) per share or $44,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 19, 2011, the agreement date.
On September 22, 2011, the Company issued 10,000 (post split) shares of restricted common stock valued at $0.15 (post split) per share or $1,500 for services. The shares were valued at the fair market value on September 21, 2011, the agreement date.
On October 25, 2011, the Company issued 380,000 (post split) shares of restricted common stock valued at $0.13 (post split) per share or $49,400 as payment for accrued sub-licensing fees. The shares were valued at the fair market value on October 14, 2011, the grant date.
On October 25, 2011, the Company issued 300,000 (post split) shares of restricted common stock for cash consideration of approximately $0.10 (post split) per share or $29,406.
On October 25, 2011, the Company issued 468,825 (post split) shares of restricted common stock valued at $0.13 (post split) per share or $60,947 as payment for outstanding accounts payables. The shares were valued at the fair market value on October 14, 2011, the grant date.
F-13 |
On December 5, 2011, the Company issued 150,000 (post split) shares of restricted common stock valued at $0.05 (post split) per share or $7,500 as payment for accrued sub-licensing fees. The shares were valued at the fair market value on December 2, 2011, the grant date.
On December 29, 2011, the Company purchased 3,000 (post split) shares of its common stock for $1.00. Concurrently with the purchase, the shares were retired. The shares were originally valued at $300.
Warrants
In July 2011, the Company entered issued 200,000 warrants with an exercise price of $0.0001 per share for seven years in connection with unpaid legal fees. The warrants vested immediately and were fair valued at $43,986. No warrants were exercised as of September 30, 2011.
The fair value of the warrants were estimated on the date of grant using the Black-Scholes option valuation model that uses the assumption noted in the following table. Expected volatilities are based on volatilities from a comparable company given the limited historical stock information of the Company. The expected term of the warrant granted is determined using the actual period of time that the warrants granted were excerised. The risk-free rate for the period within the contractual life of the warrant is based on the U.S. Treasury bond rate in effect at the time of grant for bonds with maturity dates at the estimated term of the warrant.
December 31, 2011 | ||||
Expected volatility | 369.56 | % | ||
Weighted-average volatility | 146.85 | % | ||
Expected dividends | — | |||
Expected term (in years) | 1.00 | |||
Risk-free rate | 0.170 | % |
Warrants | Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
Outstanding at June 30, 2011 | — | $ | — | $ | — | |||||||||||
Granted | 200,000 | 0.0001 | 1.0 | — | ||||||||||||
Exercised, forfeited or expired | — | — | — | — | ||||||||||||
Outstanding at December 31, 2011 | 200,000 | $ | 0.0001 | 1.0 | $ | — | ||||||||||
Exercisable at December 31, 2011 | 200,000 | $ | 0.0001 | 1.0 | $ | — |
Non-vested Warrants | Warrants | Weighted-Average Grant-Date Fair Value | ||||||||
Non-vested at June 30, 2011 | — | $ | — | |||||||
Granted | 200,000 | 0.22 | ||||||||
Vested | (200,000 | ) | (0.22 | ) | ||||||
Forfeited | — | — | ||||||||
Non-vested at December 31, 2011 | — | $ | — |
F-14 |
Stock payable
As of December 31, 2011, the Company received cash consideration of $81,643 for the purchase of restricted common stock. The shares have not been issued as of December 31, 2011.
As of December 31, 2011, the Company granted 350,000 (post split) shares of common stock as payment towards accounts payables totaling $3,500. The shares were valued at $66,500, and have not been issued as of December 31, 2011. The company has incurred a loss on settlement of accounts payable of $63,000.
As of December 31, 2011, the Company granted 30,000 (post split) shares of common stock valued at $7,500 as finder’s fees that has not been issued as of December 31, 2011.
NOTE 7. SUBSEQUENT EVENTS
Subsequent to December 31, 2011, the Company had the following stock transactions:
On October 17, 2011, the Company, entered into a merger transaction with Paragon GPS Inc., a Delaware corporation (“Paragon”), pursuant to an Agreement and Plan of Merger, by and among the Company, SKGI Acquisition Corp., and Paragon as filed in a Form 8-K on October 18, 2011, and amended on October 26, 2011. On January 4, 2012, the Company elected to terminate the agreement as filed in a Form 8-K on January 5, 2012.
On January 26, 2012, the Company entered into an agreement (the “Agreement”) with WMX Group, Inc. (“WMX”), amended on February 7, 2012 as filed in a Form 8-K on February 7, 2012. Pursuant to the Agreement, WMX agreed to provide consulting services to the Company in exchange for a 45% non-dilutable equity stake in the Company.
On January 31, 2012, the Company issued 540,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $53,493.
On January 31, 2012, the Company issued 25,000 shares of restricted common stock valued at $0.05 or $1,250 for interest.
On February 9, 2012, the Company issued 100,000 shares of restricted common stock valued at $0.012 or $1,220 for services. The stock was valued at the fair market value on January 22, 2012, the grant date.
On February 13, 2012, the Company issued 312,500 shares of restricted common stock valued at $0.08 or $25,000 in accordance with an agreement with a third party for funding. The shares were issued for due diligence fees valued at the fair market value on February 12, 2012, the grant date.
F-15 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview
We are a development stage company incorporated in the State of Florida on February 11, 2003 that holds the rights to intellectual property of the Be Alert Bert® character and his friends. The intellectual property contains educational and entertainment media product, including television shows, videos, music, and books owned by Smart Kids International Holdings, Inc., a company owned by our Chief Executive Officer and Director, Richard Shergold.
Our business plan for the next twelve months is to refurbish, edit and repackage our existing product line of television shows, videos and books for media placement and retail sale. This plan includes locating distribution channels for our products and associated marketing efforts. We estimate that we will need approximately $350,000 to accomplish these tasks. As such, we are currently searching for avenues of financing to accomplish these goals.
In addition to repackaging our existing products for sale, we intend to develop new media products based on our licensed intellectual property. We are working on a series of television shows titled the “The Adventures of Bert and Claire.” We are also working to launch a website to display, market and retail our products named, “the Smartkids Community” (www.smartkidscommunity.com). We intend to charge an annual membership fee (after a 30 day trial period) of $19.99 per family which will provide them with access to some of our content and through which they will be able to purchase our videos, music, books and other content that we either sublicense or produce. We launched our company website in April, 2011 (www.smartkidsgroup.com), but our design is contingent on the availability of financing. To develop our new television series and launch our interactive website, we will need roughly $2 million in capital.
We have also launched a community-oriented Smart Kids Travel Company, our website is smartkidsgroup.com. This will be a full service travel agency capable of fulfilling vacation and business needs. It will also focus on the travel needs of the members of the Smart Kids Community. Smart Kids Travel is managed by Gary Javorsky, a seasoned travel agency owner, with over 20 years experience selling travel products and services. Through the Smart Kids Travel Website, customers will be able to research destinations, attractions, accommodations and so much more, with departures from across Canada and the United States to any destination around the world. Customers will be able to compare prices from the most popular travel suppliers and contact the Smart Kids Travel Agency to make reservations with the assistance of a personal travel consultant who will make sure that the customer receives exactly what is wanted at the very best price available. In the near future, Smart Kids Travel will post specials oriented towards kids and great family vacations that will give both children and their family’s memorable experiences that will last a lifetime.
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The financial statements for the periods ended December 31, 2011 and 2010 have been restated for the following matter. Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees were also expensed during the year ended June 30, 2011. In accordance with Staff Accounting Bulletin Topic 5A, Expenses of Offering, this should have been charged against the gross proceeds of the offering. Additionally a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and was later issued in March 2012. In July 2011, the Company entered into a Common Stock Purchase Warrant agreement with the same vendor for legal services. As of December 31, 2011, the fair value of the warrants of $43,986 and expenses of $24,700 were not recognized, resulting in an understatement of professional fees for the period ended December 31, 2011.
As a result of the errors stated above, the Company determined that there were significant changes in the Company’s Balance Sheets, Statements of Operations, and Statements of Cash Flow for the three months ended December 31, 2011 and 2010.
As filed in a Form 8-K on October 18, 2011 and amended on October 26, 2011, we entered into a merger transaction with Paragon GPS Inc. (“Paragon”). On January 4, 2012, we elected to terminate the agreement due to Paragon being unable to provide us with an audit of its financial statements, which was a necessary condition to close the transaction. Our relationship with Paragon remains positive and we expect to establish a business partnership in the future.
On January 26, 2012, the Company entered into an agreement (the “Agreement”) with WMX Group, Inc. (“WMX”), amended on February 7, 2012 as filed in a Form 8-K on February 7, 2012. Pursuant to the Agreement, WMX agreed to provide consulting services to the Company in exchange for a 45% non-dilutable equity stake in the Company.
On January 31, 2012, the Company issued 540,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $53,493.
On January 31, 2012, the Company issued 25,000 shares of restricted common stock valued at $0.05 or $1,250 for interest.
On February 9, 2012, the Company issued 100,000 shares of restricted common stock valued at $0.012 or $1,220 for services. The stock was valued at the fair market value on January 22, 2012, the grant date.
On February 13, 2012, the Company issued 312,500 shares of restricted common stock valued at $0.08 or $25,000 in accordance with an agreement with a third party for funding. The shares were issued for due diligence fees valued at the fair market value on February 12, 2012, the grant date.
Results of Operations
Revenues. We had no revenues from our inception on February 11, 2003 to December 31, 2011. We do not expect to achieve revenues until we are able to successfully implement our business plan.
Operating expenses . Our operating expenses include licensing expenses, salaries and wages, general and administrative expenses, legal and professional fees. For the three months ended December 31, 2011, we incurred an operating loss of $255,526 compared to an operating income of $81,670 for the three months ended December 31, 2010, a change of 413%. This was primarily due to the termination in the 3DFV sub-licensing agreement in which the Company no longer had the obligation to pay the unpaid sub-licensing fee of $258,930, and a decrease in loss on settlement of accounts payable of $63,000, and allowance for stock receivables of $57,040 due to the Company not having any additional equity drawdown agreements. This was offset by an increase in salaries and wages of $13,895 due to the reinstatement of salaries in January 2011, legal and professional fees of $158,887 due to an increase primarily in accounting and consulting fees, an increase in general and administrative expenses of $7,555, and the impairment of equity investments of $2,969 as of December 31, 2011.
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For the six months ended December 31, 2011, we incurred an operating loss of $484,646 compared to an operating loss of $239,849 for the six months ended December 31, 2010, a change of 102%. This was primarily due to an increase in salary and wages of $46,401 due to the reinstatement of salaries in January 2011, legal and professional fees of $291,570 due to an increase in accounting and consulting fees, the issuance of warrants in connection with outstanding legal fees, sub-licensing expense of $25,922 due to the reinstatement of the sub-licensing fee in January 2011, and impairment of equity investment of $13,273. This was offset by the decrease in general and administrative expenses of $12,329, loss on settlement of accounts payable of $63,000, and allowance for stock receivable of $57,040 due to the Company not having any additional equity drawdown agreements.
We anticipate operating expenses to increase in the next twelve months in accordance with our business plan to refurbish, edit and repackage our existing product line of television shows, videos and books for media placement and retail sale.
Net Loss . We had a net loss of $256,381 for the three months ended December 31, 2011 compared to a net income of $66,757 for the three months ended December 31, 2011. The decrease of net income of $323,138 was primarily due to that stated above and a decrease of finance and interest expense of $14,058 and loss on conversion of debt of $63,000.
We had a net loss of $491,867 for the six months ended December 31, 2011 compared to a net loss of $287,562 for the six months ended December 31, 2010. The increase in net loss of $204,305 was due to that stated above, offset by a decrease in finance and interest expense of $40,492 and loss on conversion of debt of $63,000.
Liquidity and Capital Resources
As of December 31, 2011, we had total current assets of $383,191 and total assets in the amount of $386,168. Our total current liabilities as of December 31, 2011 were $780,895. We had an accumulated deficit of $3,793,058 and a working capital deficit of $397,704 as of December 31, 2011.
Cash used in operating activities increased to $133,105 for the six months ended December 31, 2011 compared to $92,750 for the six months ended December 31, 2010 as a result of an increase in stock issued for services, the granting of warrants, impairment of equity investment, prepaid expenses, accounts payable and accrued expenses, and due to related parties. This was offset by a decrease in stock issued for financing, loss on settlement of accounts payable, loss on conversion of note payable, allowance for stock receivables, and deferred financing fees.
Cash used in investing activities increased to $13,174 for the six months ended December 31, 2011 compared to no cash used in investing activities for the six months ended December 31, 2010. The increase was due to the investment in unconsolidated investee of $13,174.
Cash flows provided by financing activities during the six months ended December 31, 2011 increases to $142,222 compared to $92,731 for the six months ended December 31, 2010, due to an increase in proceeds from the issuance of common stock offset by a decrease in proceeds from an equity drawdown agreement.
Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.
Going Concern
At December 31, 2011, we had $538 cash on-hand and an accumulated deficit of $ 3,793,058 , and as noted throughout this report and our financial statements and notes thereto, our independent auditors have expressed their substantial doubt as to our ability to continue as a going concern as of December 31, 2011. We anticipate incurring significant losses in the future. We do not have an established source of revenue sufficient to cover our operating costs. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.
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The financial statements included in this quarterly report have been prepared assuming that we will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.
Management’s plans include the raising of capital through the equity markets to fund future operations, seeking additional acquisitions, and generating of revenue through our business. However, even if we do raise sufficient capital to support our operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where we will generate profits and positive cash flows from operations. These matters raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.
Use of Estimates
The preparation of financial information in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial information and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Stock Based Compensation
Stock based compensation is accounted for using the Equity-Based Payments to Non-Employee Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.
Shares issued to employees are expensed upon issuance.
Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Software Development Cost
Costs incurred internally in creating a computer software product are charged to expense when incurred as research and development until technological feasibility has been established for the product. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.
Revenue and Cost Recognition
The Company recognizes
revenue using the accrual method of accounting wherein revenue is recognized when earned and expenses and costs are recognized
when incurred. Since inception of the business on February 11, 2003 through December 31, 2011, the Company has not realized any
revenue.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
A smaller reporting company is not required to provide the information required by this Item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2011. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer. Based upon that evaluation, our Chief Executive Officer concluded that, as of December 31, 2011, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of December 31, 2011, our disclosure controls and procedures were not effective:
§ | We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function; |
§ | We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert for the Company. The Board of Directors is comprised of two (2) members of management. As a result, there may be lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by the Company; and |
§ | Documentation of all proper accounting procedures is not yet complete. |
§ | Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees were also expensed during the year ended June 30, 2011. In accordance with Staff Accounting Bulletin Topic 5A, Expenses of Offering, this should have been charged against the gross proceeds of the offering. Additionally a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and was later issued in March 2012. In July 2011, the Company entered into a Common Stock Purchase Warrant agreement with the same vendor for legal services. As of December 31, 2011, the fair value of the warrants of $43,986 and expenses of $24,700 were not recognized, resulting in an understatement of professional fees for the period ended December 31, 2011. |
Due to the material weakness in internal control over financial reporting, we determined that the previously issued financial condition and results of operations disclosed in the our Annual Report on Form 10-K as of and for the year ended June 30, 2011 and the our Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, September 30, 2011 and December 31, 2011 could no longer be relied upon. This Form 10-Q/A for the three and six months ended December 31, 2011 amends the December 31, 2011 and 2010 consolidated financial statements. See Note 2.
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Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we have implemented the following changes:
§ | We have engaged an accounting firm that specializes in smaller reporting companies to perform our internal bookkeeping and external financial reporting; |
§ | We have engaged a new securities legal counsel to perform consulting services and to review our filings for regulation compliance; |
§ | Expanding our current board of directors to include additional independent individuals willing to perform directorial functions; and |
§ | Increasing our workforce in preparation for exiting the development stage and commencing revenue producing operations. |
Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the all the material weaknesses identified above.
Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants. Failure to obtain financing will prevent us from curing any of the above stated deficiencies. To reduce the risk of material misstatements we have increased our segregation of duties by engaging an accounting firm to perform our internal record keeping and external financial reporting function.
Changes in Internal Control over Financial Reporting
None.
PART II – OTHER INFORMATION
We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.
A smaller reporting company is not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On August 8, 2011, the Company issued 600,000 (post split) shares of restricted common stock valued at $0.22 (post split) per share or $132,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 13, 2011, the agreement date.
On August 8, 2011, the Company issued 300,000 (post split) shares of restricted common stock valued at $0.22 (post split) per share or $66,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 25, 2011, the agreement date.
On August 8, 2011, the Company issued 350,000 (post split) shares of restricted common stock valued at $0.25 (post split) per share or $87,500 as a prepayment of consulting services. The shares were valued at the fair market value on July 20, 2011, the agreement date.
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On August 8, 2011, the Company issued 600,000 (post split) shares of restricted common stock valued at $0.25 (post split) per share or $150,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 19, 2011, the agreement date.
On August 8, 2011, the Company issued 50,000 (post split) shares of restricted common stock valued at $0.23 (post split) per share or $11,500 as a prepayment of consulting services. The shares were valued at the fair market value on July 8, 2011, the agreement date.
On August 8, 2011, the Company issued 300,000 (post split) shares of restricted common stock valued at $0.19 (post split) per share or $57,000 as a prepayment of consulting services. The shares were valued at the fair market value on September 1, 2011, the agreement date.
On August 10, 2011, the Company issued 13,333 (post split) shares of restricted common stock valued at $0.15 (post split) per share or $2,000 for consulting services. The shares were valued at the fair market value on July 30, 2011, per the terms of the agreement.
On August 17, 2011, the Company issued 540,000 (post split) shares of restricted common stock valued at $0.12 (post split) per share or $64,800 for finder’s fees as a reduction of equity. The shares were valued at the fair market value on April 28, 2011, the agreement date.
On August 17, 2011, the Company issued 125,000 (post split) shares of restricted common stock for cash consideration of approximately $0.04 (post split) per share or $5,283.
On August 17, 2011, the Company issued 25,000 (post split) shares of restricted common stock valued at $0.20 (post split) per share or $5,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 17, 2011, the grant date.
On August 17, 2011, the Company issued 25,000 (post split) shares of restricted common stock valued at $0.20 (post split) per share or $5,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 17, 2011, the grant date.
On August 17, 2011, the Company issued 513,000 (post split) shares of restricted common stock for cash consideration of approximately $0.11 (post split) per share or $58,246.
On September 14, 2011, the Company issued 13,334 (post split) shares of restricted common stock valued at $0.19 (post split) per share or $2,533 for consulting services. The shares were valued at the fair market value on August 31, 2011, per the terms of the agreement.
On September 22, 2011, the Company issued 400,000 (post split) shares of restricted common stock valued at $0.11 (post split) per share or $44,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 19, 2011, the agreement date.
On September 22, 2011, the Company issued 10,000 (post split) shares of restricted common stock valued at $0.15 (post split) per share or $1,500 for services. The shares were valued at the fair market value on September 21, 2011, the agreement date.
On October 25, 2011, the Company issued 380,000 (post split) shares of restricted common stock valued at $0.10 (post split) per share or $38,000 as payment for accrued sub-licensing fees. The shares were valued at the fair market value on October 14, 2011, the grant date.
On October 25, 2011, the Company issued 300,000 (post split) shares of restricted common stock for cash consideration of $29,406 or approximately $0.10 (post split) per share.
On December 5, 2011, the Company issued 150,000 (post split) shares of restricted common stock valued at $0.10 (post split) per share or $15,000 as payment for accrued sub-licensing fees. The shares were valued at the fair market value on December 2, 2011, the grant date.
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On December 29, 2011, the Company purchased 3,000 (post split) shares of its common stock for $1.00. Concurrently with the purchase, the shares were retired. The shares were originally valued at $300.
These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable.
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Smart Kids Group, Inc. | |
Date: | June 8, 2012 |
By: /s/ Thomas Guerriero Thomas Guerriero Title: Chief Executive Officer |
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