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EX-10.1 - AGREEMENT TO CONVERT DEBT - Sibling Group Holdings, Inc.sibe_ex10z1.htm
EX-32.1 - CERTIFICATION - Sibling Group Holdings, Inc.sibe_ex32z1.htm
EX-10.2 - AGREEMENT TO CONVERT DEBT - Sibling Group Holdings, Inc.sibe_ex10z2.htm
EX-10.3 - CONSULTING AGREEMENT - Sibling Group Holdings, Inc.sibe_ex10z3.htm
EX-31.1 - CERTIFICATION - Sibling Group Holdings, Inc.sibe_ex31z1.htm
EX-10.4 - CONSULTING AGREEMENT - Sibling Group Holdings, Inc.sibe_ex10z4.htm




 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


(Mark One)

 

þ

Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2012.


¨

Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from              to              .


Commission file number:  0-28311


SIBLING GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


TEXAS

76-027334

(State or other jurisdiction of
incorporation or organization)

(IRS Employer
Identification Number)


1355 Peachtree Street, Suite 1159, Atlanta, GA 30309

(Address of Principal Executive Office)   (Postal Code)


(404) 551-5274

(Registrant’s telephone number, including area code)


_______________________________________________________

(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.  þ 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).  þ 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.


Large accelerated filer

¨

 

 

Accelerated filer

¨

 

Non-accelerated filer

¨

 

 

Smaller reporting company

þ

 


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


Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 16,871,070 shares of common stock are issued and outstanding as of November 30, 2012. All share and per share amounts in this Quarterly report on Form 10-Q reflect the 1 for 100 reverse stock split of the registrant’s common stock which took effect on the filing of the Amended and Restated Certificate of Formation with the Secretary of the State of Texas, August 21, 2012.

 

 









TABLE OF CONTENTS


 

 

Page

                  

 

                  

 

PART I.  FINANCIAL INFORMATION

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

1

 

Condensed Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011

1

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011 (unaudited), and the period from June 10, 2010 (inception) to September 30, 2012 (unaudited)

2

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011 (unaudited), and the period from June 10, 2010 (inception) to September 30,2012 (unaudited)

3

 

Condensed Consolidated Statements of Stockholder’s Equity (Deficit) for the period June 10, 2010 (inception) to September 30, 2012 (unaudited)

4

 

Notes to Unaudited Consolidated Financial Statements

6

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

14

ITEM 4.

CONTROLS AND PROCEDURES

16

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

17

ITEM 6.

EXHIBITS

17

 

SIGNATURES

18




i






PART I.  FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

As used herein the terms “Company,” “we,” “our”, and “us” refer to Sibling Group Holdings, Inc., formerly, Sibling Entertainment Group Holdings, Inc., a Texas corporation, unless otherwise indicated.  In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented.  The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.


SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Condensed Consolidated Balance Sheets


 

 

September 30,

2012

 

 

December 31,

2011

 

 

 

(unaudited)

 

 

 

 

ASSETS

   

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash in bank

 

$

2

 

 

$

63

 

Total current assets

 

 

2

 

 

 

63

 

Total assets

 

$

2

 

 

$

63

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

465,155

 

 

$

575,821

 

Accrued liabilities

 

 

28,404

 

 

 

23,122

 

Amounts due to related parties

 

 

40,159

 

 

 

71,298

 

Note payable to related party

 

 

 

 

 

5,000

 

Short-term notes payable

 

 

78,500

 

 

 

62,500

 

Derivative liability

 

 

34,137

 

 

 

34,137

 

Total current liabilities

 

 

646,355

 

 

 

771,878

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' deficit:

 

 

 

 

 

 

 

 

Preferred; no par, 10,000,000 shares authorized; none issued or outstanding

 

 

 

 

 

 

Convertible series common stock; $0.0001 par value; 10,000,000 shares authorized; none and 9,879,854 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively

 

 

 

 

 

988

 

Common stock; $0.0001 par value; 500,000,000 shares authorized; 15,871,070 and 715,939 shares issued and outstanding as of September 30, 2012 and December 31, 2011, respectively

 

 

1,588

 

 

 

7,160

 

Additional paid-in capital

 

 

4,417,184

 

 

 

1,965,632

 

Accumulated deficit

 

 

(5,065,125

)

 

 

(2,745,595

)

Total stockholders’ deficit

 

 

(646,353

)

 

 

(771,815

)

Total liabilities and stockholders’ deficit

 

$

2

 

 

$

63

 


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




1






SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Operations

(Unaudited)


 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

Cumulative

amounts

for the

period from

June 10,

2010

(inception) to

September 30,

 

 

 

2012

 

 

2011

 

 

2012

 

 

2011

 

 

2012

 

Operating expenses:

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative costs

 

$

(77,997

)

 

$

164,954

 

 

$

2,227,493

 

 

$

507,742

 

 

$

4,555,922

 

Professional fees

 

 

57,555

 

 

 

52,567

 

 

 

84,066

 

 

 

87,348

 

 

 

334,487

 

(Income) Loss from operations

 

 

(20,442

)

 

 

217,521

 

 

 

2,311,559

 

 

 

595,090

 

 

 

4,890,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

4,577

 

 

 

2,199

 

 

 

7,971

 

 

 

7,709

 

 

 

18,855

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

 

 

 

79,445

 

 

 

108,050

 

 

 

 

4,577

 

 

 

2,199

 

 

 

7,971

 

 

 

87,154

 

 

 

126,905

 

Net income (loss)

 

$

15,865

 

 

$

(219,720

)

 

$

(2,319,530

)

 

$

(682,244

)

 

$

(5,017,314

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per common share, basic and diluted

 

$

0.00

 

 

$

(0.36

)

 

$

(0.79

)

 

$

(1.16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net income/loss per common share, basic and diluted

 

 

7,280,442

 

 

 

612,279

 

 

 

2,931,688

 

 

 

588,194

 

 

 

 

 


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




2






SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)


 

 

Nine Months Ended

September 30,

 

 

Cumulative

amounts

for the

period from

June 10,

2010

(inception) to

September 30,

 

 

 

2012

 

 

2011

 

 

2012

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,319,530

)

 

$

(682,244

)

 

$

(5,017,314

)

Adjustments to reconcile net loss to net cash flows provided by (used in) operating activities:

   

 

 

 

 

 

 

 

 

 

 

 

Equity issued for compensation

 

 

1,858,007

 

 

 

200

 

 

 

2,328,007

 

Common stock issued for directors’ fees

 

 

 

 

 

 

 

 

470,000

 

Common stock issued in settlement of liabilities

 

 

 

 

 

35,000

 

 

 

155,930

 

Loss on extinguishment of debt

 

 

 

 

 

 

79,445

 

 

 

108,050

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

 

 

 

99,283

 

 

 

314,704

 

Accounts payable

 

 

476,318

 

 

 

286,409

 

 

 

1,040,723

 

Accrued liabilities

 

 

5,282

 

 

 

7,709

 

 

 

(21,527

)

Derivative liability

 

 

 

 

 

 

 

 

34,137

 

Amounts due to related parties

 

 

(31,139

)

 

 

162,540

 

 

 

538,691

 

Net cash flows used in operating activities

 

 

(11,061

)

 

 

(11,658

)

 

 

(48,598

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

 

 

 

 

 

10,000

 

 

 

10,000

 

Proceeds from short-term notes payable

 

 

11,000

 

 

 

2,500

 

 

 

13,500

 

Proceeds from notes payable

 

 

 

 

 

 

 

 

30,000

 

Capital contribution

 

 

 

 

 

 

 

 

100

 

Repayments of notes payable to related parties

 

 

 

 

 

 

 

 

(5,000

)

Net cash flows provided by financing activities

 

 

11,000

 

 

 

12,500

 

 

 

48,600

 

Net change in cash

 

 

(61

)

 

 

842

 

 

 

2

 

Cash at beginning of period

 

 

63

 

 

 

 

 

 

 

Cash at end of period

 

$

2

 

 

$

842

 

 

$

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

$

 

 

$

 

 

 

 

 

Income taxes

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activity:

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued to settle liabilities to be settled in stock

 

$

564,677

 

 

$

 

 

 

 

 

Stock issued to settle related party liabilities and accrued expenses

 

$

22,305

 

 

$

 

 

 

 

 


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




3






SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Stockholders’ Deficit

For the Periods Ended June 10, 2010 (Inception) to September 30, 2012

(Unaudited)


 

 



Convertible Series

Common Stock

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Deficit

Accumulated

During

Development

Stage

 

 

Treasury

Stock

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 10, 2010 (date of inception)

  

 

 

  

$

 

  

 

 

  

$

 

  

$

100

 

  

$

 

  

$

 

  

$

100

 

Reverse merger recapitalization

 

 

9,879,854

 

 

 

988

 

 

 

466,358

 

 

 

47

 

 

 

4,517

 

 

 

(47,812

)

 

 

 

 

 

 

(42,260

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(334,430

)

 

 

 

 

 

 

(334,430

)

Balance at December 31, 2010

 

 

9,879,854

 

 

 

988

 

 

 

466,358

 

 

 

47

 

 

 

4,617

 

 

 

(382,242

)

 

 

 

 

 

(376,590

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for cash at $0.02 per share

 

 

 

 

 

 

 

 

 

 

5,714

 

 

 

57

 

 

 

9,999

 

 

 

 

 

 

 

 

 

 

 

10,056

 

Common stock issued for fees accrued during merger

 

 

 

 

 

 

 

 

 

 

20,000

 

 

 

2

 

 

 

39,998

 

 

 

 

 

 

 

 

 

 

 

40,000

 

Common stock issued for prepaid expenses at $0.09 per share

 

 

 

 

 

 

 

 

 

 

25,000

 

 

 

3

 

 

 

224,997

 

 

 

 

 

 

 

 

 

 

 

225,000

 

Common stock issued for liabilities to be settled in stock at $0.09 and $0.05 per share

 

 

 

 

 

 

 

 

 

 

83,465

 

 

 

8

 

 

 

190,922

 

 

 

 

 

 

 

 

 

 

 

190,930

 

Common stock issued for settlement of accrued expenses at $0.05 per share (loss on extinguishment of debt of $17)

 

 

 

 

 

 

 

 

 

 

8,333

 

 

 

1

 

 

 

41,665

 

 

 

 

 

 

 

 

 

 

 

41,666

 

Common stock issued for settlement of amounts due to related parties at $0.05 per share, and $0.20 per share (loss on extinguishment of debt of $63)

 

 

 

 

 

 

 

 

 

 

47,969

 

 

 

5

 

 

 

488,527

 

 

 

 

 

 

 

 

 

 

 

488,532

 

Common stock issued for consulting fees at $0.20 per share

 

 

 

 

 

 

 

 

 

 

20,000

 

 

 

2

 

 

 

399,998

 

 

 

 

 

 

 

 

 

 

 

400,000

 

Common stock issued for settlement of accounts payable at $0.13 per share

 

 

 

 

 

 

 

 

 

 

3,600

 

 

 

 

 

 

72,000

 

 

 

 

 

 

 

 

 

 

 

72,000

 

Common stock issued for directors’ fees at $0.13 per share

 

 

 

 

 

 

 

 

 

 

34,000

 

 

 

3

 

 

 

469,997

 

 

 

 

 

 

 

 

 

 

 

470,000

 

Common stock issued for services at $0.20 per share

 

 

 

 

 

 

 

 

 

 

1,500

 

 

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

 

 

30,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,363,353

)

 

 

 

 

 

 

(2,363,353

)

Balance at December 31, 2011

 

 

9,879,854

 

 

$

988

 

 

 

715,939

 

 

$

72

 

 

$

1,972,720

 

 

$

(2,745,595

)

 

 

 

 

$

(771,815

)




4






SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Stockholders’ Deficit (Continued)

For the Periods Ended June 10, 2010 (Inception) to September 30, 2012

(Unaudited)


 

 



Convertible Series

Common Stock

 

 

Common Stock

 

 

Additional

Paid-in

Capital

 

 

Deficit

Accumulated

During

Development

Stage

 

 

Treasury

Stock

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2011

 

 

9,879,854

 

 

$

988

 

 

 

715,939

 

 

$

72

 

 

$

1,972,720

 

 

$

(2,745,595

)

 

$

 

 

$

(771,815

)

Common stock issued for settlement of notes payable to related party at $0.04 per share

 

 

 

 

 

 

 

 

 

 

5,576

 

 

 

1

 

 

 

22,304

 

 

 

 

 

 

 

 

 

 

 

22,305

 

Common stock issued for liabilities to be settled in stock at $0.04 per share

 

 

 

 

 

 

 

 

 

 

5,328

 

 

 

 

 

 

21,307

 

 

 

 

 

 

 

 

 

 

 

21,307

 

Common stock issued for consulting fees at $0.03 per share

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

1

 

 

 

29,999

 

 

 

 

 

 

 

 

 

 

 

30,000

 

Series common stock reacquired at $4.13 per share

 

 

(430,010

)

 

 

 

 

 

 

 

 

 

 

 

 

 

1,828,007

 

 

 

 

 

 

 

(1,828,007

)

 

 

 

Series common stock issued in consideration of compensation at $4.13 per share

 

 

430,010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,828,007

 

 

 

1,828,007

 

Series common stock reacquired at $0.012 per share

 

 

(80,010

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

145,000

 

 

 

 

 

 

 

(145,000

)

 

 

 

Series common shares for compensation at $1.81 per share

 

 

80,010

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

145,000

 

 

 

145,000

 

Common stock issued for settlement of accounts payable at $0.006 per share

 

 

 

 

 

 

 

 

 

 

50,000

 

 

 

5

 

 

 

29,995

 

 

 

 

 

 

 

 

 

 

 

30,000

 

Fractional shares and rounding

 

 

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

 

3

 

 

 

5

 

 

 

 

 

 

 

3

 

Conversion of series common to common

 

 

(9,879,854

)

 

 

(989

)

 

 

14,947,216

 

 

 

1,495

 

 

 

(506

)

 

 

 

 

 

 

 

 

 

 

 

Cancellation of series common issued for compensation

 

 

 

 

 

 

 

 

 

 

(120,055

)

 

 

(12

)

 

 

(144,988

)

 

 

 

 

 

 

 

 

 

 

(145,000

)

Common stock issued for settlement of accounts payable at $2.00 per share

 

 

 

 

 

 

 

 

 

 

257,000

 

 

 

26

 

 

 

513,344

 

 

 

 

 

 

 

 

 

 

 

513,370

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,319,530

)

 

 

 

 

 

 

(2,319,530

)

Balance at September 30, 2012

 

 

 

 

$

 

 

 

15,871,070

 

 

$

1,588

 

 

$

4,417,184

 

 

$

(5,065,125

)

 

$

 

 

$

(646,353

)


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





5






SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.  Description of Business


Sibling Group Holdings, Inc. (“SIBE” or the “Company”) was incorporated under the laws of the State of Texas on December 28, 1988, as “Houston Produce Corporation”.  On June 24, 1997, the Company changed its name to “Net Masters Consultants, Inc.”  On November 27, 2002, the Company changed its name to “Sona Development Corporation” in an effort to restructure the business image to attract prospective business opportunities.  The Company’s name changed on May 14, 2007 to “Sibling Entertainment Group Holdings, Inc.,” in New York City.  The Company’s business plan called for focusing on large group sales of tickets to New York based entertainment shows, mostly Broadway plays.  The Company intended to create a full-featured Internet website and registered the domain name Stageseats.com on May 14, 2009.  The Company hired an existing industry expert to head the entity and to execute the business plan.  The Company started booking tickets in April 2009 and continued until November 27, 2009 when it closed the business due to its manager’s abrupt resignation and lack of funding to continue the business.  In September 2009, the executives of SIBE discussed several different methods of obtaining intellectual property from which to launch the next Broadway play.  During the three month period ended December 31, 2009, the Company continued to engage in additional capital-raising efforts.  During fiscal 2010, the Company continued to pursue additional opportunities in the entertainment industry as well as synergistic opportunities in other industries.

On December 30, 2010, SIBE entered into a Securities Exchange Agreement with NEWCO4EDUCATION, LLC (“N4E”), a new entity formed on June 10, 2010, and the members of N4E.  Pursuant to the Securities Exchange Agreement, SIBE acquired N4E in exchange for 8,839,869 shares of SIBE’s newly authorized convertible series common stock.  For accounting purposes, the acquisition has been treated as an acquisition of SIBE by N4E and as a recapitalization of N4E’s equity.  N4E is the surviving and continuing entity and the historical financials following the reverse merger transaction will be those of N4E.  As part of the recapitalization of N4E, the equity transactions since its inception have been retroactively restated to include the equivalent shares of the Company’s common stock received in the merger.  Accordingly, the statement of changes in shareholders’ deficit reflects the restatement of these transactions.  The unaudited condensed consolidated financial statements are based on the historical consolidated financial statements of N4E after giving effect to the reverse merger.  In conjunction with the acquisition of N4E, the company issued 1,039,985 shares of its series common stock pursuant to debt conversion agreements with the holders of the Company's Series AA Debentures and related warrants.

On August 9, 2012, the Company held its Annual Shareholder meeting and voted on a number of issues, including i) changing the name of the Company to “Sibling Group Holdings, Inc.”, ii) a conversion of the previously issued series common stock into common stock at a ratio of 151.127 shares of common stock for each share of series common stock, iii) a reverse split of common stock at a 100:1 ratio, and iv) a number of other changes to the corporate structure and shareholder rights.  All of the proposed actions were approved by a majority of the shares eligible to vote.  As a result of these actions, as of September 30, 2012, there were 15,871,070 shares of common stock outstanding, and no preferred stock issued.

The Company, through N4E, focuses on providing services and technology aimed at increasing the performance in educational settings and operates through two divisions, its Educational Management Organization (EMO) and its Technology and Services Group (TSG).  The EMO intends to provide school management services, primarily within the charter school arena.  The TSG division is focused on the development and deployment of software, systems and procedures to enhance the rate of learning in both primary and secondary education.  The Company, which is headquartered in Atlanta, Georgia, is considered a development stage company in accordance with ASC 915, “Development Stage Entities.”

Liquidity and Going Concern

The unaudited consolidated financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has not generated any revenues or completed development of any commercially acceptable products or services to date, and has incurred losses of $5,017,314 since inception, and further significant losses are expected to be incurred during the Company’s development stage.  The Company will depend almost exclusively on outside capital through the issuance of common shares, debentures, and other loans, and advances from related parties to finance ongoing operating losses.



6





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations.  There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs.  The accompanying unaudited condensed consolidated financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

2.  Interim Financial Statements and Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.  Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for completed financial statements.  In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments), which the Company considers necessary for a fair presentation of those financial statements.  The results of operations and cash flows for the nine months ended September 30, 2012 may not necessarily be indicative of results that may be expected for any succeeding quarter or for the entire fiscal year.  The information contained in this quarterly report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements, included in our annual report on Form 10-K, as amended, as of and for the year ended December 31, 2011 filed with the Securities and Exchange Commission (the “SEC”).

Significant accounting policies are described in Note 2 to the consolidated financial statements included in Item 8 of the Company’s annual report on Form 10-K as of December 31, 2011.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, which are evaluated on an ongoing basis, and that affect the amounts reported in the Company's unaudited consolidated financial statements and accompanying notes.  Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the amounts of revenues and expenses that are not readily apparent from other sources, and actual results could differ from those estimates and assumptions.

Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company's net loss or cash flows.

3.  Stock-Based Compensation

The Company accounts for stock-based compensation in accordance ASC 718, “Compensation – Stock Compensation.”  Under the provisions of ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value as calculated by the Black-Scholes-Merton (BSM) option-pricing model and/or market price of conversion shares, and is recognized as expense over the requisite service period.  The BSM model requires various highly judgmental assumptions including volatility and expected option life.  If any of the assumptions used in the BSM model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period.  In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest.  The Company estimates the forfeiture rate based on historical experience.  Further, if the extent of the Company’s actual forfeiture rate is different from the estimate, then the stock-based compensation expense is adjusted accordingly.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 505-50 “Equity Based Payments to Non-Employees.”  Costs are measured at the estimated fair market value of the consideration received, or the estimated fair value of the equity instruments issued, whichever is more reliably measurable.  The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by the standards.



7





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


4.  Loss Per Share

The Company computes loss per share in accordance with ASC 260, “Earnings Per Share,” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations.  This guidance requires companies that have multiple classes of equity securities to use the “two-class” or “if converted method” in computing earnings per share.  We compute loss per share using the two-class method.  The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings.  Under the two-class method, earnings per common share are computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted average number of common shares outstanding for the period.  In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted average shares outstanding during the period.  The Company has no common equivalent shares outstanding for warrants to purchase common stock to include for the calculation of diluted net loss per share.

5.  Due to Related Parties

Gerald F. Sullivan was contracted through December 31, 2010 as a consultant to provide advisory services on a nonexclusive basis.  At December 31, 2010 the Company owed approximately $32,000 to Mr. Sullivan for these provided services.  The Company entered into an agreement on March 1, 2011 as amended June 1, 2011 with Gerald F. Sullivan to convert debt for consulting services originally incurred with the formation and development of strategy and business plans in exchange for the Company’s restricted Common Stock in the aggregate of 17,000 shares for accrued compensation of approximately $51,000.  The Company owed him a balance of approximately $40,159 at September 30, 2012 for consulting services and cash advances made to the Company for operating expenses.

6.  Income Taxes

The provision for income taxes includes federal, state, local and foreign taxes.  Income taxes are accounted for under the liability method.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled.  The Company evaluates the realizability of our deferred tax assets and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.  A valuation allowance has been recorded to offset all deferred tax assets due to uncertainty of realizing the tax benefits of the underlying operating loss and tax credit carry forwards over their carry forward periods.  The Company had no significant deferred tax liabilities as of September 30, 2012 and December 31, 2011.

The Company accounts for uncertain tax positions using a “more-likely-than-not” threshold for recognizing and resolving uncertain tax positions.  The evaluation of uncertain tax positions is based on factors including, but not limited to, changes in tax law, the measurement of tax positions taken or expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstances related to a tax position.  The Company evaluates this tax position on a quarterly basis.  The Company also accrues for potential interest and penalties, if applicable, related to unrecognized tax benefits in income tax expense.  As of September 30, 2012 and December 31, 2011, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required.



8





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


7.  Notes Payable

Short-Term Notes Payable

Short-term notes payable consist of the following:

(in thousands)

September 30,

2012

 

December 31,

2011

 

Short-Term Note

$

48,500

 

$

32,500

 

Series AA Debenture

 

30,000

 

 

30,000

 

Total Short Term Notes

$

78,500

 

$

62,500

 

In October 2010, the Company issued a short-term note (the “Note”) to a third-party investor in the principal amount of $33,000, having a three-month term and bearing interest at an annual rate of 12.0%.  As further consideration for this obligation, the Company issued a two-year warrant for the purchase of the Company’s restricted common stock.  The number of shares to be issued pursuant to the exercise of the warrant will be calculated as the principal amount of the Note divided by 80% of the 10 day closing price of the Company’s common stock on the date of exercise.  The terms of the Note also provide that if a liquidity event were to occur prior to the term of the Note, then the full principal outstanding, together with any interest due and outstanding, shall become payable in full.  As of September 30, 2012 and December 31, 2011, the Company recorded accrued interest of approximately $7,000 and $5,000, respectively, in connection with this short-term note payable.

Series AA Debenture

On December 30, 2010, the Company entered into Conversion Agreements with all but one of the holders of the Series AA Debentures (the “Debentures”) previously issued by SIBE and held on that date.  Pursuant to the Conversion Agreements, the holders accepted a total of 1,039,985 shares of Convertible Series Common Stock and 100% of the membership interests of a new, wholly-owned subsidiary of SIBE, Debt Resolution, LLC (DR LLC), in full settlement of their Debentures, underlying warrants and accrued interest as of that date.  The Conversion Agreements released all claims that 43 of the holders of the Debentures had, have, or might have against SIBE.  Following this transaction, the Company now has a Debenture balance of $30,000 and accrued interest of $18,748 and $17,626 as of September 30, 2012 and December 31, 2011, respectively, which is in default.

8.  Derivative Financial Instruments

Our derivative financial instruments consist of embedded and free-standing derivatives related primarily to the $33,000 short term note. The embedded derivatives include the conversion features at 80% of market. In addition, under the accounting standards, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” the Company is required to classify certain other non-employee stock options and warrants (free-standing derivatives) as liabilities.  The accounting treatment of derivative financial instruments requires that the Company record the derivatives at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date.  The fair value of all derivatives at both September 30, 2012 and December 31, 2011 was $34,137.  Any change in fair value of these instruments will be recorded as non-operating, non-cash income or expense at each reporting date.  If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge.  If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income.  At September 30, 2012 and December 31, 2011, the derivative was valued primarily using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 327%, risk free interest rate of 1.20%, and expected life of one year.




9





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The accounting guidance establishes a fair value hierarchy based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflect the Company's own assumptions of market participant valuation (unobservable inputs).  A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.  The accounting guidance establishes three levels of inputs that may be used to measure fair value:

·

Level 1 - Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;

·

Level 2 - Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or

·

Level 3 - Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement.

The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers.  Where appropriate the Company’s or the counterparty’s non-performance risk is considered in determining the fair values of liabilities and assets, respectively.

The following tables summarize the Company’s liabilities measured at fair value on a nonrecurring basis in the Company’s consolidated balance sheets at September 30, 2012 and December 31, 2011:


 

 

Fair Value Measurements at September 30, 2012

(in thousands)

 

Fair Value at

September 30,

2012

 

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

 

Significant

Other

Observable

Inputs

(Level 2)

 

Significant

Unobservable

Inputs

(Level 3)

Derivative securities

 

$

34,137

 

$

 

$

 

$

34,137

Total liabilities measured at fair value

 

$

34,137

 

$

 

$

 

$

34,137


 

 

Fair Value Measurements at December 31, 2011

(in thousands)

 

Fair Value at

December 31,

2011

 

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

 

Significant

Other

Observable

Inputs

(Level 2)

 

Significant

Unobservable

Inputs

(Level 3)

Derivative securities

 

$

34,137

 

$

 

$

 

$

34,137

Total liabilities measured at fair value

 

$

34,137

 

$

 

$

 

$

34,137




10





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


9.  Stockholders’ Equity

On December 30, 2010, pursuant to authority granted in the Company’s certificate of formation, the Board of Directors approved a new series of common stock to effect a debt settlement.  As a result, the 100,000,000 authorized shares of common stock are now divided into 10,000,000 shares of series common stock (“Series Common Stock”) and 90,000,000 shares of common stock (“Common Stock”).

Series Common Stock

Series Common Stock automatically converts into Common Stock upon a two-thirds vote by the holders of the Series Common Stock.  The holders of Series Common Stock enjoy certain anti-dilution rights whereby the holders of the Series Common Stock will always enjoy a 95% ownership of the Common Stock outstanding as if the holders of the Series Common Stock had converted their shares.

On December 30, 2010, the Company issued 8,839,869 shares of its Series Common Stock pursuant to a Securities Exchange Agreement by and among the Company, N4E, and the N4E Members.  Six individual holders of the Series Common Stock entered into stock restriction agreements whereby these six individuals agreed to continue to render services to the Company for up to two years, through December 30, 2012.  If an individual does not fulfill the two year term under the Stock Restriction Agreement, the Company may purchase a pro-rata portion of the Series Common Stock held by that individual for $1.00.  If the individual terminates his employment before December 30, 2011, then the Company may repurchase, or cancel, 67% of the Series Common Stock holdings subject to the Stock Restriction Agreement.  If the individual terminates his employment between December 30, 2011 and December 31, 2012, then the Company may repurchase, or cancel, 33.34% of his Series Common Stock holdings.  These individuals were founders of the Company and are paid separately for current services.  Any changes as a result of these claw back provisions are considered to be capital and have no effect on the operations of the Company.  

In connection with the acquisition of N4E, the Company issued 1,039,985 shares of its Series Common Stock pursuant to debt conversion agreements with the holders of the Company’s Series AA Debentures and related warrants.

Reacquisition and Reissuance of Series Common Stock

During the three months ended March 31, 2012 the Company negotiated the return of 430,010 shares of Series Common Stock.  The acquired Series Common Stock do not trade, therefore the Company valued such Series Common Stock using its comparable common stock equivalent.  The trading price of the Common Stock on the date of reacquisition of the Series Common Stock was $0.03 per share.  As a result, the Company recorded the fair value of the Series Common Stock to treasury stock in the approximate amount of $1,828,000.

During the three month period ended March 31, 2012, the Company issued 350,000 shares and 80,010 shares of Series Common Stock to two consultants, respectively, and recorded compensation expense of approximately $1,828,000.  The compensation expense was calculated by multiplying the 430,010 shares, in the aggregate, of the Series Common Stock, on an as converted basis, times the trading price of $0.03 as of March 30, 2012.  The compensation expense is reported as general and administrative expense in the unaudited consolidated statements of operations for the three and nine months ended September 30, 2012.



11





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


On May 24, 2012, the Company reacquired 80,100 shares of the Series Common Stock previously issued to a consultant during March 30, 2012.  The trading price of the Common Stock on the date of reacquisition of the Series Common Stock was approximately $0.012 per share.  As a result, the Company recorded the fair value of the Series Common Stock to treasury stock in the approximate amount of $145,000.

On May 28, 2012, the Company issued 80,100 shares of the previously reacquired Series Common Stock to an employee for an aggregate purchase price of $1.00.  The trading price on the date of reissuance of the Company’s common stock was approximately $0.012.  As a result, the Company eliminated the cost of $145,000 from treasury stock and recorded the difference between the purchase price and previous acquisition cost of $145,000 as compensation expense.

On August 21, 2012, the effective date of the Series Common conversion to shares of common stock, as part of the conversion, the Company cancelled the common shares issued in conversion for the Series Common shares attributable to the May 28, 2012 transaction. As a result, the Company reversed the compensation expense in the amount of $145,000 previously recorded.

Conversion of Series Common Stock and 100:1 Reverse Split

In conjunction with actions taken at the Annual Shareholders Meeting on August 9, 2012, all Series Common Stock shares were converted into common stock at a ratio of 1.51 per share, when taking into effect a reverse split at a 100:1 ratio which was also approved at the meeting. All share amounts reflect the effect of the reverse split shares including those applicable to periods prior to the reverse stock split.

Common Stock

During the nine month period ended September 30, 2012, the Company issued the following shares of Common Stock:

·

In January, 2012, the Company issued 5,328 shares of common stock valued at approximately $21,000, or $4.00 per share, to Oswald Gayle, the former CFO, in full satisfaction of all amounts owed to him for his services. As a part of his resignation he tendered 200,000 shares of series common stock which he had acquired as a result of his position as a founding member of NEWCO4EDUCATION, LLC.

·

In January, 2012, the Company issued 5,576 shares of common stock valued at approximately $22,000, or $4.00 per share, to Steve Carlson, the former CEO, in partial satisfaction of amounts owed to him for his services.

·

In February 2012, the Company issues 10,000 shares of common stock values at $30,000, or $3.00 per share, to The Partnership of Atlanta Incorporated for consulting services.

·

In June 2012, the Company issued 50,000 shares of restricted common stock valued at $30,000, or $0.60 per share, to five individuals in partial satisfaction of certain amounts owed to Meshugeneh LLC for consulting services. An additional 500,000 shares were issued in connection with this transaction in September 2012.

·

In August 2012, 14,827,161 shares of common stock were issued in connection with the conversion of the series common into common stock.

·

In September 2012, the Company rescinded the series common issued and converted into 120,015 shares of common stock to an individual in connection with compensation for services valued at $145,000.

·

In September 2012, the Company issued 257,000 shares of common stock valued at $513,370 or $2.00 per share to two individuals in satisfaction of accounts payable balances owed for services and expense advances made on behalf of the Company.

Effective August 9, 2012, the Company’s stockholders approved an increase in authorized capital stock to 500 million shares.

Preferred Stock

Effective August 9, 2012, the Company’s stockholders approved an amendment to Article IV of the Certificate of Formation to authorize a class of preferred stock. The total number of preferred shares that the Company is authorized to issue is 10 million. The stockholders have empowered the Board of Directors to set and determine the designations, preferences, limitations and relative rights of the shares. None of the authorized preferred shares have been issued to date.




12





SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


10.  NEWCO4EDUCATION, LLC Merger

On December 30, 2010, the Company, pursuant to a Securities Exchange Agreement, acquired all of the outstanding membership interests of NEWCO4EDUCATION, LLC by issuance of 8,839,869 shares of Convertible Series Common Stock.  Each share of Series Common Stock entitles the holder thereof to a number of votes equal to the series conversion ratio determined as of the record date on all matters submitted to a vote of the stockholders of the Corporation.  The holders of Series Common Stock shall be entitled to receive dividends when, as, and if declared by the Board of Directors out of funds legally available for that purpose.  The Exchange Agreement was contingent on the consummation of two other transactions, which were completed, as discussed below.

On December 29, 2010, the Company entered into a Loan Assignment Agreement with Sibling Theatricals, Inc. (“STI”) and Debt Resolution, LLC (“DR LLC”), a newly formed subsidiary of the Company.  Pursuant to the Loan Assignment Agreement, the Company assigned the Loan Receivable with STI and the related accrued interest receivable and certain related liabilities underlying these theatrical assets for one-million membership interests in DR LLC.  The Company’s ownership interest in DR LLC was subsequently transferred to the Series AA Debenture holders as part of the settlement of those debt obligations, which are further described below.  The Company effectively exited the theatricals business as a result of these transactions.

On December 30, 2010, the Company entered into Conversion Agreements with all but one of the holders of the Series AA Debentures which were held as of that date.  Pursuant to the Conversion Agreements, the holders accepted a total of 1,039,985 shares of Convertible Series Common Stock and 100% of the membership interests of DR LLC in full settlement of their Debentures, underlying warrants and accrued interest as of that date.  The Conversion Agreements released all claims that 43 of the holders of the Debentures had, have, or might have against the Company.

11.  Recent Accounting Pronouncements

All new accounting pronouncements issued but not yet effective or adopted have been deemed to be not relevant to the Company and, accordingly, are not expected to have a material impact once adopted.

12.  Legal Proceedings

The Company may at times become involved in litigation or legal proceedings as a normal course of business, but there are no noteworthy legal proceedings being pursued as of the date of this quarterly report.

13.  Subsequent Events

The Company evaluated all events or transactions that occurred after the balance sheet date through the date when the Company issued these unaudited consolidated financial statements.  During this period, the Company did not have any material recognizable subsequent events, other than those described below.

On October 9, 2012, the Company issued 500,000 shares of its common stock at a value of $0.05 per share, for a total value of $25,000, to Steeltown Consultants, LLC in connection with consulting services.


On November 10, 2012, the Company issued 500,000 shares of its common stock at a value of $1.25 Per share for a total value of $625,000, to Ahmad Arfaania in connection with consulting services.




13





Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes 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.  We have based these forward-looking statements on our current expectations and projections about future events.  These forward-looking statements are subject to known and unknown risk, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “would”, “expect”,” plan”,” anticipate”, “believe”, “estimate”, “continue”, or the negative of such terms or other similar expressions.  Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other Securities and Exchange Commission filings.  The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report.

The statements contained in sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” with the exception of historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements.  These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize.  These forward looking statements include, but are not limited to, statements concerning:

·

our anticipated financial performance and business plan;

·

the sufficiency of existing capital resources;

·

our ability to raise additional capital to fund cash requirements for future operations;

·

our to generate revenues to fund future operations;

·

the volatility of the stock market; and

·

general economic conditions.

We wish to caution readers that our operating results are subject to various risks and uncertainties that could cause our actual results to differ materially from those discussed or anticipated; including the factors set forth in the section entitled “Risk Factors” included elsewhere in this report.  We also wish to advise readers not to place any undue reliance on the forward-looking statements contained in this report, which reflect our beliefs and expectations only as of the date of this report.  We assume no obligation to update or revise these forward-looking statements to reflect new events or circumstances or any changes in our beliefs or expectations, other that is required by law.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our mission is to utilize advanced technology and education management techniques to enhance and accelerate the delivery of 21st century learning using multiple teaching and learning modalities on a global basis.  We intend to accomplish this mission by accessing funds from the public capital markets and melding them into a unified strategy that will help to accelerate the improvement of K-12 education across the globe.  Our desired result will be better educated children, a sustainable and cost effective teaching model for K-12 education, and reduced dependence on governmental funding.

Critical Accounting Policies

Our critical accounting policies are summarized in Note 2 to our consolidated financial statements included in Item 8 of our annual report on Form 10-K for the fiscal year ended December 31, 2011.  However, certain of our accounting policies require the application of significant judgment by our management, and such judgments are reflected in the amounts reported in our financial statements.  In applying these policies, our management uses its judgment to determine the appropriate assumptions to be used in the determination of estimates.  Those estimates are based on our historical experience, terms of existing contracts, our observance of market trends, information provided by our strategic partners and information available from other outside sources, as appropriate.  Actual results may differ significantly from the estimates contained in our unaudited consolidated financial statements.  There have been no changes to our critical accounting policies during the fiscal quarter ended September 30, 2012.



14





Results of Operations

For the three and nine months ended September 30, 2012, our operations included satisfying continuous public disclosure requirements and the continued focus on the development and deployment of software, systems, and procedures to enhance the rate of learning in both primary and secondary education.  We took steps to create specifications for our initial internet-based offerings, to seek qualified vendors to supply software and systems, and we have begun the process of developing a marketing plan for its deployment.  We have engaged a digital advertising and marketing agency to support our needs in an outsourcing arrangement, and have rolled out new product identifications.  We continue to seek qualified executives in support of our plans for growth, and we expect to expand both the management team and our Board of Directors during the near term.  We experienced some delays as a result of staffing changes, and now expect our initial offerings to be available late in the fourth quarter of fiscal 2012 or the early part of the first quarter in 2013, a delay of several months from our original schedule.

We have not generated revenues since our inception and we cannot determine when we will generate revenue from operations.  We expect to continue to operate at a loss for the foreseeable future.  In order to act upon our operating plan as discussed herein, we must be able to raise sufficient funds from debt financing and/or new investment from private investors.  Although we continue our efforts to attract the necessary capital to act upon our operating plan, there can be no assurance that we will be able to raise sufficient funds, if at all.

For the three and nine month periods ended September 30, 2012, we recorded a net income of $15,865 and a net loss of $2,319,530, respectively.  For the period from inception to September 30, 2012, we recorded an aggregate net loss of $5,017,314.  Our net loss is primarily attributable to general and administrative expenses.  The net income for the three months ending September 30, 2012, resulted from the reversal of compensation expense which related to the cancellation of stock issued in June, 2012. A large portion of the cumulative general and administrative expenses as of September 30, 2012 were related to the issuance of stock in connection with converting certain accrued expenses related to fees earned by management and consultants engaged in certain activities, including but not limited to, consultation with respect to management, marketing, strategic planning, corporate organization and structure, financial matters in connection with the operation of our business, expansion of services, evaluation of acquisition and business opportunities and review and advice regarding our overall progress, needs and condition.

Liquidity and Capital Resources

We are in the development stage and, since inception, have experienced significant changes in liquidity, capital resources and shareholders’ equity.  We had current and total assets of $2 as of September 30, 2012 and $63 as of December 31, 2011.  Our working capital deficit was $646,353 and $771,815 as of September 30, 2012 and December 31, 2011, respectively.  Our stockholders’ deficit is $646,353 and $771,815 as of September 30, 2012 and December 31, 2011, respectively.

We have had no capital expenditures for the period from June 10, 2010 (inception) to September 30, 2012, and have no plans for the purchase of any plant or equipment in the foreseeable future.

We will depend almost exclusively on outside capital through the issuance of common shares and advances from related and other parties to finance ongoing operating losses.  Our ability to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations.  There can be no assurance that we will be able to raise the necessary funds when needed to finance its ongoing costs.  These factors raise substantial doubt about our ability to continue as a going concern.  The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

We estimate that we will require at least $1,000,000 in additional funding over the next 12 months to develop our new business.  Presently, we have no liquid assets with which to meet our current expenses.  Current and anticipated capital needs may vary based on our acquisition strategy and opportunities, or technology development activities.  As a result, we may raise capital through the issuance of debt, the sale of equity, or a combination of both.

We do not presently have any firm commitments for additional working capital and there are no assurances that such capital will be available to us when needed or upon terms and conditions which are acceptable to us.  If we are able to secure additional working capital through the sale of equity securities, the ownership interests of our current stockholders will be diluted.  If we raise additional working capital through the issuance of debt or additional dividend paying securities, our future interest and dividend expenses will increase.



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If we are unable to secure additional working capital as needed, our ability to develop new business, generate sales, meet our operating and financing obligations as they become due, or continue our business and operations could be in jeopardy.

As of September 30, 2012, the corporate offices are located at 1355 Peachtree Street, Suite 1159, Atlanta, GA 30309.  We rent a single office from an executive office provider with multiple locations nationwide, and the rent is approximately $900 per month.

We currently have no full time employees and there are no immediate plans to add employees.  The individuals working for the benefit of the Company are generally part time, and have been compensated primarily through the issuance of stock, or accrued expenses underlying consulting agreements.

Off-Balance Sheet Arrangements

As of September 30, 2012, we did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

ITEM 4.

CONTROLS AND PROCEDURES

Management’s Report on Disclosure Controls and Procedures

The Company’s management has previously identified what it believes are deficiencies in the Company’s disclosure controls and procedures.  The deficiencies in our disclosure controls and procedures included (i) lack of segregation of duties and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms.

The Company intends to take corrective action to ensure that information required to be disclosed by the Company pursuant to the reports that the Company files or submits to the SEC is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.  As a result of the deficiencies in the Company’s disclosure controls and procedures, management has concluded that the Company’s disclosure controls and procedures are not effective.

Changes in Internal Control Over Financial Reporting

During the three months ended September 30, 2012, we continued our comprehensive evaluation relating to the effectiveness of disclosure controls and procedures.  As a result of such review, we have implemented several changes, among which included:

·

We have started the documentation of formal policies and procedures necessary to adequately review significant accounting transactions.

·

We have more specifically defined existing key controls, and developed additional controls, applicable to the review of significant accounting transactions and the accounting treatment of such transactions.

·

We have enhanced the documentation regarding conclusions reached in the implementation of generally accepted accounting principles; and

·

added additional levels of review by qualified personnel of the application of each key control.

During the nine months ended September 30, 2012, other than actions in connection with the changes noted above, there were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 



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PART II.  OTHER INFORMATION

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On August 21, 2012, in connection with the reclassification and reverse split of the Company's common stock pursuant to the Amended and Restated Certificate of Formation, all of the Company's outstanding series common stock were converted into 14,827,161 shares of common stock.

On September 30, 2012, the Company issued 257,000 shares of common stock valued at $513,370 or $2.00 per share to Richard Smyth and Meshugeneh, LLC in satisfaction of accounts payable balances owed for services and expense advances made on behalf of the Company.

On October 3, 2012, the Company issued 500,000 shares of its common stock at a value of $0.05 per share, for a total value of $25,000, to Steeltown Consulting Group, LLC in connection with consulting services.

On October 30, 2012, the Company issued 500,000 shares of its common stock at a value of $1.25 per share for a total value of $625,000, to Ahmad Arfaania in connection with consulting services.

Exemption from Registration

The securities issued during the three months ended September 30, 2012 were issued without registration with the Securities and Exchange Commission, pursuant to Section 4(2) of the Securities Act of 1933, as amended.  The securities are offered and sold only to accredited investors as defined in Regulation D.  This exemption applies because the Company did not make any public offer to sell any securities, but rather, the Company only offered securities to persons known to the Company to be accredited investors and only sold securities to persons who represented to the Company in writing that they are accredited investors.

ITEM 6.

EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits and are incorporated herein by this reference.




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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.


 

Sibling Entertainment Group Holdings, Inc.

 

 

 

 

 

 

By:

/s/ Gerald F. Sullivan

 

 

 

Gerald F. Sullivan

 

 

 

Chief Executive and Financial Officer, and Director

 

 

 

(Principal Executive, Financial Accounting Officer)

 


Dated:  December 11, 2012




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INDEX TO EXHIBITS


Exhibit No.

 

Description

10.1*

 

Debt Conversion agreement dated September 30, 2012, between the Company and Richard Smyth.

10.2*

 

Debt Conversion agreement dated September 30, 2012, between the Company and Meshugeneh, LLC.

10.3*

 

Consulting Agreement dated October 3, 2012, between the Company and Steeltown Consulting Group, LLC.

10.4*

 

Consulting Agreement dated October 30, 2012, between the Company and Ahmad Arfaania.

31.1*

 

Certification of Principal Chief Executive Officer and Chief Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.

32.1**

 

Certification of Principal Executive, Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS**

 

XBRL Instance Document.

101.SCH**

 

XBRL Taxonomy Extension Schema Document.

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF**

 

XBRL Taxonomy Extension Definition Linkbase Document.

———————

*

Filed with this report.

**

Furnished with this report in accordance with Rule 406T of Regulation S-T, the information in these exhibits shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act or otherwise subjected to liability under that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.