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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-K


(Mark One)

þ

Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2013.

 

  

¨

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


Commission file number: 000-28311


SIBLING GROUP HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


Texas

76-0270334

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)


1355 Peachtree Street, Suite 1150, Atlanta, GA 30309

(Address of principal executive offices) (Zip Code)


(404) 551-5274

(Registrant’s telephone number, Including Area Code)


Securities registered under Section 12(g) of the Exchange Act:

Common stock, par value $0.0001


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


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


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


Indicate by check mark whether the registrant has submitted electronically and posted in its corporate Website, 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 such shorter period that the registrant was required to submit and post such files). Yes þ  No ¨


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K ¨.


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


Large Accelerated Filer

¨

 

Accelerated Filer

¨

Non-Accelerated Filer

¨

 

Smaller Reporting Company

þ


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

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold as of the last business day of the registrant's most recently completed second fiscal quarter. $3,351,378 on June 30, 2013.


Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 39,114,792 shares of common stock are outstanding as of April 11, 2014.


DOCUMENTS INCORPORATED BY REFERENCE

None.

 

 





 


SIBLING GROUP HOLDINGS, INC.

 

TABLE OF CONTENTS

 

 

 

 

Page

 

Part I

 

Item 1

Business

1

Item 1A

Risk Factors

6

Item 1B

Unresolved Staff Comments

 

Item 2

Properties

13

Item 3

Legal Proceedings

13

Item 4

Mine Safety Disclosures

13

 

 

 

 

Part II

 

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

14

Item 6

Selected Financial Data

14

Item 7

Management’s Discussion and Analysis of Financial Condition and Results of Operations

14

Item 7A

Quantitative and Qualitative Disclosures About Market Risk

16

Item 8

Financial Statements and Supplementary Data

16

Item 9

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

17

Item 9A

Controls and Procedures

17

Item 9B

Other Information

18

 

 

 

 

Part III

 

Item 10

Directors, Executive Officers and Corporate Governance

19

Item 11

Executive Compensation

21

Item 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

23

Item 13

Certain Relationships and Related Transactions, and Director Independence

24

Item 14

Principal Accounting Fees and Services

24

 

 

 

 

Part IV

 

Item 15

Exhibits, Financial Statements Schedules

25

 

 

 

Signatures

 

28


 







 


FORWARD-LOOKING STATEMENTS


This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act”). The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations and financial condition to differ materially are discussed in greater detail under Item 1A – “Risk Factors” of this report.


We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.







 


PART I


ITEM 1.

BUSINESS

 

General.

 

As used herein the terms “Company,” “we,” “our”, and “us” refer to Sibling Group Holdings, Inc., a Texas corporation (formerly known as Sona Development Corporation) and its subsidiaries. We were incorporated under the laws of the State of Texas on December 28, 1988 as Houston Produce Corporation and changed our name on May 14, 2007, to Sibling Entertainment Group Holdings, Inc. to align our corporate identity with our planned entry into the entertainment business. Although we were unable to complete an acquisition of an entertainment company, we actively pursued opportunities in film, theater, real estate, management, and music publishing during the first three quarters of 2010. In September 2010, the Company determined that the funding required to continue the entertainment business was not available to the Company. 

 

Effective December 30, 2010, the Company exited the entertainment and theatricals business by transferring all of the Company’s entertainment and theatricals assets to Debt Resolution, LLC. In connection with the acquisition of Newco4education, LLC (N4E), we entered into Conversion Agreements with all but one of the 44 holders of our 13% Series AA Secured Convertible Debentures, whereby such holders converted the principal and accrued interest of the Series AA Secured Convertible Debentures and the related warrants into shares of Debt Resolution, LLC and 1,039,985 shares of the Company’s common stock. The Company’s agreement with the holders of the Series AA Debentures included consent to the acquisition of Newco4Education, LLC and a release of claims against the Company.

 

Effective December 30, 2010, we acquired N4E for 8,839,869 shares of the Company’s common stock and thereby entered the education services and technology business.

 

  

·

Effective August 21, 2012, The Companys corporation name was changed to Sibling Group Holdings, Inc.

 

 

 

  

·

The Companys authorized capital stock was increased and reclassified to effect a 1 for 100 share reverse stock split. The Companys authorized capital is now 510 million shares, divided into 500,000,000 shares of Common Stock, par value $.0001 and 10,000,000 shares of Preferred Stock, par value $.0001. Each 100 shares of the Company’s common stock, par value $.01 outstanding prior to August 21, 2012 was converted into 1 share of the Company’s Common Stock, par value $.0001.

 

After giving effect to the reclassification and reverse stock split of the common stock outstanding prior to August 21, 2012 and the conversion of our common stock into Common Stock, par value $.0001 created by the Restated Certificate, there were 15,736,859 shares of Common Stock, par value $.0001 issued and outstanding as of August 21, 2012. At December 31, 2013, there were 32,005,628 shares of common stock issued and outstanding and no shares of preferred stock had been issued.

 

Education Business Plan

 

N4E was formed June 10, 2010, to pursue business opportunities created from the growing popularity of charter schools and to improve educational opportunities for students across the United States through the development of innovative curricula, computer based education tools, and tools for improvement teacher performance. We intend to use the N4E business plan and methodologies to acquire educational management organizations and to manage and operate both charter and private schools as one component of our business strategy to grow a large scale business that will manage and operate pre-K, K-12 and higher education schools and develop and license curricula, computer based education services, and school operation and management tools throughout the United States and internationally. Our Board of Directors and management team has substantial experience in education operations, as well as technology and internet based software.

 



1



 


Plan of Operation

 

We believe 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 education across the globe. Our desired result will be better educated children, a sustainable and cost effective teaching model for pre-K, K-12 and higher education, and reduced dependence on governmental funding. During the previous year we continued to target the K-12 education market, primarily aimed at charters schools, to include Pre-K, K-12 and higher education, in both private and public education. We believe this market may enable us faster market penetration, without the administrative and political complexities associated with public schools, and more specifically charter schools within the public education market.

 

To accomplish this mission we continued our development of the following two primary divisions:

 

The Teaching Alliance

 

In late 2011, we formed The Teaching Alliance, an internal division, based in Atlanta, Georgia. The Teaching Alliance houses the education management organization (EMO) for the Company which we expect to accomplish through acquisitions of school management businesses. Our management sees tremendous opportunities in the school management area, particularly within the charter school area nationally, and with private school and tutoring operations internationally. The Teaching Alliance intends to acquire existing EMOs. Management believes that economies of scale will be recognized via repeatable best practices combined with improved administrative, and learning technologies. With this approach Management intends to reduce spending on outdated processes, content, and technologies. We expect to improve operating margins by replacing outmoded approaches with a more cost effective learning approach, and use of better quality administrative tools and processes, while increasing the quality of the education experience. At this point, while we have identified a number of acquisition opportunities that fit this area, we have not closed on any transactions in this area, and we have none under contract.

 

Education Innovation

 

In 2011, after surveying providers of technology in the educational arena, we formed another internal division, Education Innovation, to hold our technology operations, and decided that it will be based in Atlanta, Georgia. This business unit will provide applications and content to facilitate teaching and learning and improve efficiencies within school administration.

 

Management believes that the use of technology in the teaching process, generally known as "technology enhanced learning," is expanding rapidly, and we intend to be a key player, by facilitating the distribution of existing solutions, as well as providing certain proprietary solutions. Our initial efforts will focus on aggregating teaching materials, both conventional and technology based, so that educators working in the traditional classroom, in blended learning environments, and in online environments can readily access proven materials as they construct the curriculum needed in their particular situation. Many teaching professionals have lessons they have authored, and we would like to empower and motivate them to distribute the materials to others.

 

Education Innovation will initially seek to develop two primary technology based offerings. The first is a "Learning Exchange" application we intend to call The Schoolhouse Warehouse™, a cloud based application which creates a solution for the rapid, low cost, global distribution of high quality educational content. Fully mobile content may be available. When fully operational, The Schoolhouse Warehouse™ approach will provide courses, curricula, and learning materials to students in any learning environment from home schooling to private, or public schools. We also intend for these materials to be incorporated for use with any SCORM (Sharable Content Object Reference Model is a standard for e-learning software) compliant Learning Management System (LMS). We are currently evaluating a new standard, referred to as “TIN CAN,” and it may be necessary to support that new standard as it, and our intended products, are developed.

 



2



 


The Schoolhouse Warehouse™ is intended to provide a marketplace that may enable individual educators, learning content and application developers, and possibly large commercial providers to provide or sell their content on a domestic and international basis. User ratings and reviews of each piece of content will help drive choice and promote competition to improve educational content. Private authors as well as corporate developers will be compensated via an online "app store" approach, similar to the Apple™, Intel™, or Android™ app stores, except that it is solely focused on the vertical market of educational materials. The Company is targeting a late Q2 of 2014 initial beta release date. This software development has been delayed from our earlier estimates, in part due to the change in the market requirements. When initially conceived, this was to be an e-commerce only site. Now, with the increased need for online courses, it is being expanded to include a learning portal, which will allow the user to actually take the course online, and be monitored as they would in a classroom environment.

 

A second offering will be a proprietary Learning Management System (LMS) called The Learning Resource, primarily aimed at the K-12 marketplace. We intend to integrate The Learning Resource with Education Innovation's anticipated proprietary product offerings. The Learning Resource will be designed to integrate with The Schoolhouse Warehouse. Management believes these integrations will assist administrators and teachers in building curriculum, including required and recommended learning materials delivered to students as course assignments.

 

We intend for The Learning Resource to have the capability to administer online testing, assessment, and grading. The Learning Resource design will manage content provided by the Schoolhouse Warehouse™, or other curriculum, as well as classroom events, and/or teacher developed courses/assignments. It provides user interface portals, and custom reporting applications that are specific to administrators, teachers, students, and parents. We did not complete development of a beta release of the Learning Resource in 2013 and now expect a beta release in late 2014.

 

Acquisitions

 

During 2013 we continued our review of the market for suitable acquisition targets. We intend to review situations as they arise with a focus on educational technology and education management businesses, including schools, at all age levels. We have interest in Pre-K, grades K-12, higher education, and career training. We seek to deliver curriculum and systems for the efficient education of students, and teaching professionals. Most all of the systems and software required is the same no matter the age, or grade level, and as such, to the extent we can develop or acquire a delivery system, it could then simply be populated with courses applicable to the age, grade level or subject matter needed.

 

Specifically, we would like to offer specialized curriculum beyond traditional learning, to include science, technology, engineering and math, or STEM; English as a second language, or ESL; social and emotional learning, known as SEL; special education, called SpEd in the industry; career, technical and agricultural education, or CTAE, which is especially valuable in smaller, rural settings, and other areas, especially where the topic is designed to promote employment on completion, as we see a growing need for career paths, where higher education may not be required.

 

We have seen a number of innovative curriculum providers, working both inside public education, as complementary curriculum, and operating total outside the public education markets, and in corporate educational settings. We had an agreement to acquire one such business, Funutation, Inc., but abandoned that effort in mid 2013 because of issues arising out of an inability to complete an audit of their prior financial records.

 

During Q1 2013 we began an effort to develop a professional development course set aimed at the Pre-K market for teachers. In order to meet qualifications in Georgia, as well as other states, teachers must be accredited and a key part of that is the completion of a “CDA” course set. This effort should produce revenues in 2014, and we believe many other states will embrace this CDA standard for teacher licensing, providing a large market opportunity.

 

During Q2 2013 we acquired the assets and operations of Classchatter and Classchatter Plus, a provider of software to the public school market that allows for communications between the teacher and the students using blogging like functionality. Classchatter is a free product, and we are revamping Classchatter Plus, as a paid for application. The functionality of this application is key for successful implementation of blended learning in the school, an area which we believe will see much growth in coming years.

 

During Q3 2013 we acquired the assets and operations of PLC Consultants, a provider of professional development courses for teachers in the area of special education, often referred to as SpEd. The courses are currently being re-written for a more easily deployed environment, and we think there is significant long term potential in this area, as 12% of students in the US public school system are currently deemed to be “special education” students.

 



3



 


During Q4 2013 we began a development effort aimed at a series of courses for “social and emotion learning”, or SEL. Many states have separate line item budgets for SEL learning, and it has been recognized as key to removing obstacles for learning in many student groups. We have a process in place to author these courses, and are continuing to review the possible acquisition of existing courses as well. We expect to have revenue from this area in 2014.

 

During Q4 2013 we began an effort to identify curriculum for career, technical and agricultural education, known as CTAE. As many students seek work upon completion of high school and defer on higher education, this type of training is increasing in its demand. We have looked at several possible acquisitions in this area, but do not have a specific target at this time. We will continue to explore this area during 2014.

 

During Q4 2013 we entered into an agreement to acquire the assets and operations of Blendedschools.net, a provider of online curriculum, testing, assessment and reporting to school districts using a blended learning approach. This group has an 11 year history, and currently services 168 school districts, primarily in Pennsylvania and Ohio. They are a non-for-profit entity, and as such the transaction is subject to review and approval of several regulatory bodies. We applied for the prerequisite approvals in late 2013, and received the required approvals to proceed in March 2014. Subject to completion of documentation and due diligence, we expect to close this transaction within the second quarter of 2014.

 

Our goal is to complete one or more acquisitions of schools and education management organizations, and to complete our technology development initiatives. Our educational technology offerings can be easily leveraged in a captive educational management situation, and we can use the student body to further test and develop new features, systems and learning tools. We generally seek to structure transactions with a significant “earn-out” component and issuance of unregistered common stock. We cannot be sure that any of the transactions under consideration will be completed, or that our preferred transaction structure will be accepted in the marketplace.

 

About Blended Learning

 

Blended learning is a formal education program in which a student learns at least in part through online delivery of content and instruction with some element of student control over time, place, path or pace. While still attending a “brick-and-mortar” school structure, face-to-face classroom methods are combined with computer-mediated activities.  Proponents of blending learning cite the opportunity for data collection and customization of instruction and assessment as two major benefits of this approach.


Government Regulation Impacting this Industry


Federal and State Education Programs.

 

The charter schools we seek to manage will receive funds from federal and state programs to be used for specific educational purposes. If, on behalf of those schools, we fail to comply with the requirements of the various programs, we could be required to repay the funds and those schools could be determined ineligible for receipt of future federal funds. We intend to develop and implement policies and procedures that are intended to comply with the regulations and requirements of these programs. For example, Title I of the Elementary and Secondary Education Act of 1965 supports educationally disadvantaged children in areas of high poverty, Title II, Part A, provides funding for the professional development of teachers, Title II, Part D, provides funding for technology programs, Title VII, provides funding for bilingual education programs, Title V, provides funding for innovative education programs, and the Public Charter School Program, provides start-up funding for charter schools. Although we contemplate that we will receive federal and state funds indirectly through local school boards and charter boards, our receipt of these funds will likely subject us to extensive governmental regulation and scrutiny.

 

We could lose all or part of the funds we intend to receive if we fail to comply with applicable statutes or regulations, if the federal or state authorities reduce the funding for the programs, or if the charter schools we intend to manage are determined to be ineligible to receive funds under such programs. To the extent that the laws and regulations governing federal and state programs change or are interpreted in a manner that would prevent charter schools from using federal funds to pay for the services we intend to provide, the loss of all or part of these funds would hurt our business.

 



4



 


No Child Left Behind Act. (“NCLB”)

 

This act is the 2001 reauthorization of the Elementary and Secondary Education Act of 1965. It contains numerous requirements pertaining to the receipt of a range of federal funds, including Title I. Two significant requirements of NCLB are standards pertaining to teacher qualifications and the requirement that schools make adequate yearly progress ("AYP") toward state standards for students. The AYP requirements must be met not only by the aggregate school population, but also by ethnic/racial subgroups, students with disabilities, and English language learners. Schools that fail to make AYP toward meeting state standards may lose some of their student enrollment due to school choice provisions, may be required to allocate a portion of their Title I funding toward the provision of supplemental services to some students, and may be subject to state takeover or other forms of district or state intervention. Failure to meet teacher qualification and related standards may result in the loss of NCLB funds at the school or district that failed to meet the Act's requirements.

 

Individuals with Disabilities in Education Act.

 

This act requires that students with qualified disabilities receive an appropriate education through special education and related services provided in a manner reasonably calculated to enable the child to receive educational benefit in the least restrictive environment. Our responsibility to provide the potentially extensive services required by this act varies depending on state law, type of school, and the terms of management agreements that we intend to enter into with charter schools. We would be generally responsible for ensuring the requirements of this act are met in the charter schools we intend to manage, unless state law assigns that responsibility to another entity. If we were to be found in violation of this act in one of the charter schools we intend to manage, we may incur costs relating to the provision of compensatory education services, and may be liable for reasonable attorney fees incurred by the families of individual students with disabilities.

 

Family Educational Rights and Privacy Act.

 

The charter schools we intend to manage may be subject to the federal Family Educational Rights and Privacy Act, which protects the privacy of a student's educational record, and generally prohibits a school from disclosing a student's records to a third party without the prior consent of his or her parents. The law also gives parents certain rights with respect to their minor children's education records. The failure of the charter schools we intend to manage to comply with this law may result in termination of their eligibility to receive federal education funds.

 

Federal Civil Rights Laws.

 

The charter schools we intend to manage must comply with federal civil rights laws or those schools could be determined ineligible to receive funds from federal programs or face criminal or civil penalties. These laws include the following:

 

 

·

Title VI of the Civil Rights Act of 1964. Title VI prohibits recipients of federal financial assistance from discriminating on the basis of race, color, or national origin.

 

 

 

 

·

Title IX of the Education Amendments of 1972. Title IX prohibits discrimination on the basis of gender by recipients of federal financial assistance.

 

 

 

 

·

Section 504 of the Rehabilitation Act of 1973. Section 504 prohibits discrimination on the basis of disability by recipients of federal financial assistance.

 

 

 

 

·

Americans with Disabilities Act of 1990. This act prohibits discrimination in employment against a qualified individual with a disability and requires that buildings, facilities, and vehicles associated with public services be accessible to individuals with disabilities.

 

 

 

 

·

Age Discrimination Act of 1975. This act prohibits recipients of federal financial assistance from discriminating on the basis of age.

 

 

 

 

·

Age Discrimination in Employment Act of 1967. This act prohibits discrimination on the basis of age in employment.

 

 

 

 

·

Equal Pay Act of 1963. This act prohibits discrimination on the basis of gender in the payment of wages.




5



 



 

·

Title VII of the Civil Rights Act of 1964. Title VII prohibits discrimination on the basis of gender in employment.

 

 

 

 

·

Drug-Free Workplace Act of 1988. The Drug-Free Workplace Act requires a recipient of federal funds to certify that it provides a drug-free workplace. If we were to violate the certification and reporting requirements of this act, then we could be determined ineligible to receive federal funds.

 

State Regulations.

 

We are also subject to state statutory and regulatory requirements in the states in which we operate. All states have standards for the operation of schools concerning, for example, the length of the school year, curriculum, hours of the school day, physical education and other areas. We could be in violation of the management agreements we intend to enter into with charter boards or school districts if we were to fail to comply with these standards.

 

We believe that once we begin our educational services business, we will be in substantial compliance with all governmental regulations applicable to our business. We will employ a number of external resources to assist us in complying with our regulatory obligations. These external resources will include outside regulatory providers and consultants. As we expand our business, we will be required to raise additional capital to cover the expected increase in costs to hire and train additional internal and external resources to ensure we remain in substantial compliance with our governmental obligations.

 

ITEM 1A.

RISK FACTORS

 

The risk factors in this section describe the material risks to our business, prospects, results of operations, financial condition or cash flows, and should be considered carefully. In addition, these factors constitute our cautionary statements under the Private Securities Litigation Reform Act of 1995 and could cause our actual results to differ materially from those projected in any forward-looking statements (as defined in such act) made in this Annual Report on Form 10-K. Investors should not place undue reliance on any such forward-looking statements. Any statements that are not historical facts and that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “intends,” “plans,” “believes” and “projects”) may be forward-looking and may involve estimates and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements.


Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.


Risks Related to Our Business

 

Effective December 30, 2010, We Entered A New Business; This Makes It Difficult To Evaluate Our Business

 

We have yet to enter into any agreement to acquire an EMO or manage a school at any grade level. We have not recorded any revenue from our new business initiatives. Our management team has only recently begun to work together, and has no experience in operating educational management organizations and charter schools. We have no operating history on which you can base your evaluation of our business and prospects. Accordingly, the Company should be evaluated in light of the expenses, delays, uncertainties, and other difficulties frequently encountered by unseasoned business enterprises entering new markets with unproven products. No assurance can be given that the Company will ever achieve profitable operations. Our failure to address these expenses, delays, uncertainties, and other difficulties could cause our operating results to suffer and result in the loss of all or part of your investment.

 



6



 


We Have A History Of Losses And Expect Losses In The Future

 

The Company has incurred losses since inception. We do not currently own, operate, or have agreements to acquire any school operations and therefore have no revenues. As a result of our technology initiatives and existing, and anticipated operating expenses, we expect to incur substantial net losses for the foreseeable future. Our ability to become profitable will depend upon our ability to generate and sustain revenue that is greater than our expenses. In order to generate revenue, we will need to enter into management agreements with charter schools, acquire other EMOs, and successfully acquire, and successfully launch our technology initiatives, or develop and license curricula, computer based education services, and school operation and management tools. Our ability to execute our business plans, and generate revenue, will be dependent, in part, on our ability to obtain financing sufficient to execute our business plan. Even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our common stock, our ability to raise capital, and our ability to continue operations.

 

Political risks

 

Charter Schools are authorized by state statutes. State legislatures may amend these statutes and the amendments may be unfavorable to our business. Courts may declare these statutes unconstitutional in whole or in part. In either event, we may be unable to grow our business and the market price of our common stock would be adversely affected.

 

The Private, For-Profit Management Of Charter Schools Is A Relatively New And Uncertain Industry, And It May Not Become Publicly Accepted

 

Our future is highly dependent upon the development, acceptance, and expansion of the market for private, for-profit management of charter schools. This market has only recently developed. The development of this market has been accompanied by significant press coverage and public debate concerning for-profit management of charter schools. If this business model fails to gain acceptance among the general public, educators, politicians and school boards, we may be unable to grow our business and the market price of our common stock would be adversely affected.

 

The Success Of Our Business Depends On Our Ability To Improve The Academic Achievement Of The Students Enrolled In Our Schools, And We May Face Difficulties In Doing So In The Future

 

We believe that the success of our business will be dependent, among other things, upon our ability to demonstrate general improvements in academic performance at the charter schools we intend to manage and operate. We anticipate that the management agreements with schools will contain performance requirements related to test scores and other measures of student achievement. If average student performance at our schools increases, whether due to improvements in achievement over time by individual students in our schools or changes in the average performance levels of new students entering our schools, aggregate absolute improvements in student performance will be more difficult to achieve. If academic performance at our schools declines, or simply fails to improve, we could lose business and our reputation could be seriously damaged, which would impair our ability to gain new business or renew existing school management agreements.

 

We Could Incur Losses At Our Schools If We Are Unable To Enroll Enough Students

 

We expect that the amount of revenue we will receive for operating schools will be dependent on the number of students enrolled, while the majority of the facility, operating, and on-site administrative costs will be fixed. Therefore, achieving site-specific enrollment objectives will be an important factor in our ability to achieve satisfactory financial performance at any particular school. We may be unable to expand or maintain enrollment. To the extent we are unable to meet enrollment objectives at a school, the school will be less financially successful and our financial performance will be adversely affected.

 

We Desire Rapid Growth, Which May Strain Our Resources And May Not Be Sustainable

 

We desire to grow rapidly. Rapid growth may strain our managerial, operational, and other resources. If we are to manage our rapid growth successfully, we will need to hire and retain management personnel and other employees. We must also develop and improve our operational systems, procedures, and controls on a timely basis. If we fail to successfully manage our growth, we could experience client dissatisfaction, cost inefficiencies and lost growth opportunities, which could harm our operating results. We cannot guarantee that we will continue to grow at our historical rate.

 



7



 


We May Not Be Able To Attract And Retain Highly Skilled Principals And Teachers In The Numbers Required To Grow Our Business

 

Once we have acquired EMOs with management agreements with charter schools or entered into management agreements with charter schools, our success is likely to depend to a high degree upon our ability to attract and retain highly skilled school principals and teachers. We may need to hire new principals and new teachers to address turnover at managed schools. Currently, there is a well-publicized nationwide shortage of teachers and other educators in the United States. In addition, we may find it difficult to attract and retain principals and teachers for a variety of reasons, including the following:

 

  

·

Our teachers may be required to work a longer day and a longer year than most public schools;

 

 

 

  

·

Our schools may be located in challenging locations, such as low-income urban areas, which may make attracting principals and teachers more difficult; and

 

 

 

  

·

We will likely impose more accountability on principals and teachers than do public schools as a whole.

 

These factors may increase the challenge we face in an already difficult market for attracting principals and teachers. Other EMO’s have experienced higher levels of turnover among teachers than is generally found in public schools nationally, which we attribute in part to these factors. If we fail to attract and retain principals and teachers in sufficient numbers or of a sufficient quality, we could experience client dissatisfaction and lost growth opportunities, which would adversely affect our business.

 

Our Business Could Suffer If We Lose The Services Of Key Executives

 

Our future success depends upon the continued services of a number of our key executive personnel, particularly our Chairman of the Board of Directors, our President, and our Chief Financial Officer. These executives will be instrumental in determining our strategic direction and focus and in publicly promoting the concept of private management of public schools. If we lose the services of either these or any of our other executive officers or key employees, our ability to grow our business would be seriously compromised and the market price of our common stock may be adversely affected. We do not maintain any key man insurance on any of our executives.

 

Our Management Agreements Will Be Terminable Under Specified Circumstances And Generally Expire After A Term Of Five Years

 

We expect that our school management agreements will generally have a term of five years. When we expand by adding an additional school under an existing management agreement, the term with respect to that school generally expires at the end of the initial five-year period. We have no experience in negotiating school management agreements, and we cannot be assured that any school management agreements will be negotiated or renewed. In addition, school management agreements may be terminable by the school district or charter board at will, with or without good reason, and our school management agreements may be terminated for cause, including a failure to meet specified educational standards, such as academic performance based on standardized test scores. In addition, as a result of changes within a school district, such as changes in the political climate, we could from time to time face pressure to permit a school district or charter board to terminate our school management agreement even if they do not have a legal right to do so. If we fail to renew a significant number of school management agreements at the end of their term, or if school management agreements are terminated prior to their expiration, our reputation and financial results would be adversely affected.

 

Our Management Agreements Will Involve Financial Risk

 

Our school management agreements will provide that we will operate a school in return for per- pupil funding that generally does not vary with our actual costs. To the extent our actual costs under a school management agreement exceed our budgeted costs, or our actual revenue is less than planned because we are unable to enroll as many students as we anticipated or for any other reason, we would lose money at that school. We expect that our school management agreements will require us to continue operating a school for the duration of the school management agreement even if it becomes unprofitable to do so.

 



8



 


We May Need To Advance Or Loan Money To Charter Schools Or Their Related Charter Holding Equity That May Not Be Repaid

 

We may have to loan charter boards funds to finance the purchase or renovation of school facilities we manage or for other reasons. Loans to charter schools may be accelerated upon termination of the corresponding management agreement with the charter school. If these advances or loans are not repaid when due, our financial results could be adversely affected.

 

We Could Become Liable For Financial Obligations Of Charter Boards

 

We could have facility financing obligations for charter schools we no longer operate, because the terms of our facility financing obligations for some charter schools might exceed the term of the management agreement for those schools. While the charter board is generally responsible for locating and financing its own school building, the holders of school charters, which are often non-profit organizations, typically do not have the resources required to obtain the financing necessary to secure and maintain the school building. For this reason, if we want to obtain a management agreement with a particular charter board, we may help the charter board arrange for the necessary financing. For some of the charter schools we expect to manage, we may enter into a long-term lease for the school facility which may exceed the initial term of the management agreement. If our management agreements were to be terminated, or not renewed in these charter schools, our obligations to make lease payments would continue, which could adversely affect our financial results for the school building, typically in the form of loan guarantees or cash advances. Although the term of these arrangements may be coterminous with the term of the corresponding management agreement, our guarantee may not expire until the loan is repaid in full. The lenders under these facilities may not be committed to release us from our obligations unless replacement credit support is provided. The default by any charter school under a credit facility that we have guaranteed could result in a claim against us for the full amount of the borrowings. Furthermore, in the event any charter board becomes insolvent or has its charter revoked, our loans and advances to the charter board may not be recoverable, which could adversely affect our financial results.

 

We Expect Our Market To Become More Competitive

 

We expect the market for providing private, for-profit management of schools will become increasingly competitive. A variety of companies and entities could enter the market, including colleges and universities, other private companies that operate higher education or professional education schools, and others. Our existing competitors and these new market entrants could have financial, marketing and other resources significantly greater than ours. We will also compete for charter school funding with existing public schools that may pursue alternative reform initiatives, such as magnet schools and inter- district choice programs. In addition, in jurisdictions where voucher programs have been authorized, we will compete with existing private schools for public tuition funds.

 

Voucher programs provide for the issuance by local or other governmental bodies of tuition vouchers to parents worth a certain amount of money that they can redeem at any approved school of their choice, including private schools. If we are unable to compete successfully against any of these existing or potential competitors, our revenues could be reduced, resulting in increased losses.

 

Failure To Raise Necessary Additional Capital Could Restrict Our Growth And Hinder Our Ability To Compete

 

We are not certain when we will have positive cash flow, if at all. We expect that we will regularly need to raise funds in order to operate our business and may need to raise additional funds in the future. We cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If we issue additional equity securities, stockholders may experience dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to take advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated requirements, which could seriously harm our business.

 



9



 


We Expect To Derive A Substantial Portion Of Our Revenues From Public School Funding, Which Is Dependent On Support From Federal, State, And Local Governments. Changes Or Reductions In Funding For Public School Systems Could Reduce Our Revenues And Cash Flows And Negatively Impact Our Margins And Impede The Growth Of Our Business.

 

The availability of funding to purchase our products and services is subject to many factors that affect government spending. These factors include downturns in general economic conditions, like those which we are currently experiencing, that can reduce government tax revenues and may affect education funding, emergence of other priorities that can divert government funding from educational objectives, periodic changes in government leadership that can change spending priorities, and the government appropriations process, which is often slow and unpredictable. In many instances, customers rely on specific funding appropriations to purchase our products. Curtailments, delays, or reductions in this funding can delay or reduce revenues and cash flow we had otherwise forecasted to receive.

 

If We Are Unable To Adapt Our Products And Services To Technological Changes, To The Emergence Of New Computing Devices And To More Sophisticated Online Services, We May Lose Market Share And Service Revenue, And Our Business Could Suffer.

 

We need to anticipate, develop and introduce new products, services and applications on a timely and cost effective basis that keeps pace with technological developments and changing customer needs. We may encounter difficulties responding to these changes that could delay our introduction of products and services or require us to make larger than anticipated investments to maintain existing products. Software industries are characterized by rapid technological change and obsolescence, frequent product introductions, and evolving industry standards. Accordingly, it is difficult to predict the problems we may encounter in developing versions of our products and services and we may need to devote significant resources to the creation, support and maintenance of our products and services. If we fail to develop or sell products and services cost effectively that respond to these or other technological developments and changing customer needs, we may be unable to successfully market our products and services and our revenue and business could materially suffer.

 

Misuse Or Misappropriation Of Our Proprietary Rights Or Inadvertent Infringement By Us On The Rights Of Others Could Adversely Affect Our Results Of Operations.

 

The intellectual property rights in the software we intend to develop will be essential to our business. We intend to rely on a combination of the laws of copyrights, trademarks, and trade secrets, as well as license agreements, employment and employment termination agreements, third-party non-disclosure agreements, and other methods to protect our proprietary rights. We intend to enforce our intellectual property rights when we become aware of any infringements or potential infringements and believe they warrant such action. If we were unsuccessful in our ability to protect these rights, our operating results could be adversely affected. Third parties may assert infringement claims against us in the future. We may be required to modify our products, services or technologies or obtain a license to permit our continued use of those rights. We may not be able to do so in a timely manner or upon reasonable terms and conditions. Failure to do so could harm our business and operating results. In addition, we leverage certain third party generated products through license and/or royalty agreements and we have the risk that certain of these relationships will not continue or that the underlying products will not be properly supported or updated by the third parties.

 

If Our Security Measures Are Breached And Unauthorized Access Is Obtained To Our Web-Based Products, They May Be Perceived As Not Being Secure, Customers May Curtail Or Stop Using These Products And We May Incur Significant Legal And Financial Exposure And Liabilities.

 

We may develop web-based products that involve the storage of certain personal information with regard to the teachers and students using these products. If our security measures are breached and unauthorized access to this information occurs, our reputation will be damaged, our business may suffer, and we could incur significant liability. Because the techniques used to attempt unauthorized access to such systems change frequently and generally are not recognized until attempted on a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the security of our system could be harmed and we could lose sales and customers.

 



10



 


Claims Relating To Content Available On Or Accessible From, Our Web Sites May Subject Us To Liabilities And Additional Expense.

 

If we develop web-based products that incorporate content not under our direct control including content from, and links to, third-party web sites, and content uploaded by our customers, we could be subject to claims relating to this content. In addition to exposing us to potential liability, claims of this type could require us to change our web sites in a manner that could be less attractive to our customers and divert our financial and development resources.

 

We Rely On Government Funds For Specific Education Programs, And Our Business Could Suffer If We Fail To Comply With Rules Concerning The Receipt And Use Of The Funds

 

We expect to benefit from funds from federal and state programs to be used for specific educational purposes. Funding from the federal government under Title I of the Elementary and Secondary Education Act provides federal funds for children from low-income families. A number of factors relating to these government programs could lead to adverse effects on our business:

 

These programs have strict requirements as to eligible students and allowable activities. If we or the charter schools that we intend to manage fail to comply with the regulations governing the programs, we or the charter schools that we intend to manage could be required to repay the funds or be determined ineligible to receive these funds, which would harm our business.

 

If the income demographics of a district's population were to change over the life of a management agreement for a charter school, resulting in a decrease in Title I funding for the charter school, we would receive less revenue for operating the charter school and our financial results could suffer.

 

Funding from federal and state education programs is allocated through formulas. If federal or state legislatures or, in some case, agencies were to change the formulas, we could receive less funding and the growth and financial performance of our business would suffer.

 

Federal, state and local education programs are subject to annual appropriations of funds. Federal or state legislatures or local officials could drastically reduce the funding amount of appropriation for any program, which would hurt our business and our ability to grow.

 

The authorization for the Elementary and Secondary Education Act, including Title I, has expired and this act is being funded by Congress on an interim appropriation basis. If Congress does not reauthorize or continue to provide interim appropriation for the Elementary and Secondary Education Act, we would receive less funding and our growth and financial results would suffer. Most federal education funds are administered through state and local education agencies, which allot funds to charter boards. These state and local education agencies are subject to extensive government regulation concerning their eligibility for federal funds. If these agencies were declared ineligible to receive federal education funds, the receipt of federal education funds by the charter schools we intend to manage could be delayed, which could in turn delay our payment from the charter schools we intend to manage. In addition, we could become ineligible to receive these funds if any of our high-ranking employees commit serious crimes.

 

We Could Be Subject To Extensive Government Regulation Because We Benefit From Federal Funds, And Our Failure To Comply With Government Regulations Could Result In The Reduction Or Loss Of Federal Education Funds

 

Because we expect to benefit from federal funds, we must also comply with a variety of federal laws and regulations not directly related to any federal education program, such as federal civil rights laws and laws relating to lobbying. Our failure to comply with these federal laws and regulations could result in the reduction or loss of federal education funds which would cause our business to suffer. In addition, our management agreements are potentially covered by federal procurement rules and regulations because our school district and charter board clients pay us, in part, with funds received from federal programs. Federal procurement rules and regulations generally require competitive bidding, awarding contracts based on lowest cost and similar requirements. If a court or federal agency determined that a management agreement was covered by federal procurement rules and regulations and was awarded without compliance with those rules and regulations, then the management agreement could be voided and we could be required to repay any federal funds we received under the management agreement, which would hurt our business.

 



11



 


Risks Related to Our Securities

 

Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.

 

Since our common stock is thinly traded, its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:

 

  

·

the trading volume of our shares;

 

 

 

  

·

the number of securities analysts, market-makers and brokers following our common stock;

 

 

 

  

·

changes in, or failure to achieve, financial estimates by securities analysts;

 

 

 

  

·

new products or services introduced or announced by us or our competitors;

 

 

 

  

·

actual or anticipated variations in quarterly operating results;

 

 

 

  

·

conditions or trends in our business industries;

 

 

 

  

·

announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

 

 

 

  

·

additions or departures of key personnel;

 

 

 

  

·

sales of our common stock; and

 

 

 

  

·

general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.

 

You may have difficulty reselling shares of our common stock, either at or above the price you paid, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a company’s securities. A securities class action suit against us could result in substantial legal fees, potential liabilities and the diversion of management’s attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the “pink sheets” and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.

 

Our common stock is subject to the “penny stock” regulations, which are likely to make it more difficult to sell.

 

Our common stock is considered a “penny stock,” which generally is a stock trading under $5.00 and not registered on a national securities exchange or quoted on the Nasdaq National Market. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. These rules generally have the result of reducing trading in such stocks, restricting the pool of potential investors for such stocks, and making it more difficult for investors to sell their shares once acquired. Prior to a transaction in a penny stock, a broker-dealer is required to:

 

  

·

deliver to a prospective investor a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market;

 

 

 

  

·

provide the prospective investor with current bid and ask quotations for the penny stock;

 

 

 

  

·

explain to the prospective investor the compensation of the broker-dealer and its salesperson in the transaction;

 

 

 

  

·

provide investors monthly account statements showing the market value of each penny stock held in the their account; and

 

 

 

  

·

make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction.

 



12



 


These requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to the penny stock rules. Since our common stock is subject to the penny stock rules, investors in our common stock may find it more difficult to sell their shares.

 

Future sales of shares of our common stock by our stockholders could cause our stock price to decline.

 

Future sales of shares of our common stock could adversely affect the prevailing market price of our stock. If our significant stockholders sell a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Moreover, the perception in the public market that stockholders might sell shares of our stock could depress the market for our shares. If our significant stockholders sell substantial amounts of our common stock in the public market, such sales could create a circumstance commonly referred to as an “overhang,” in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price we deem reasonable or appropriate.

 

We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

 

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant. As of the date of this report, our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.

 

ITEM 2.

PROPERTIES

 

The Company does not own any real or personal property. The Company maintains an office at 1355 Peachtree St, Ste 1350 Atlanta, GA 30309 and pays rent of $1,000 per month, on a month to month basis, for the use of the space. We have two (2) full time employees. All other contributors are retained as consultants, who work from locations which are not owned or leased by the Company.

 

ITEM 3.

LEGAL PROCEEDINGS

 

We are not presently a party to any material litigation, nor to the knowledge of management is any litigation threatened against us that may materially affect us.

 

ITEM 4.

MINE SAFETY DISCLOSURES

 

Not Applicable.

 



13



 


PART II

 

ITEM 5.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASE OF EQUITY SECURITIES

 

Our common stock is quoted on the OTCQB and is traded under the symbol “SIBE”.  On April 10, 2014, the closing sale price for our common stock was $0.1350 on the OTCQB.  The following table sets forth the range of high and low bid prices for our common stock for the periods indicated. The information reflects inter-dealer prices, without retail mark-ups, mark-downs or commissions and may not necessarily represent actual transactions.

 

Year

  

Quarter Ending

  

High

  

Low

2013

  

31-Dec

  

$0.13

  

$0.031

 

  

30-Sep

  

$0.395

  

$0.035

 

  

30-Jun

  

$0.27

  

$0.081

 

  

31-Mar

  

$1.99

  

$0.11

2012

  

31-Dec

  

$1.99

  

$0.05

 

  

30-Sep

  

$1.99

  

$0.10

 

  

30-Jun

  

$2.90

  

$0.60

 

  

31-Mar

  

$6.00

  

$2.00

 

Record Holders

 

As of April 11, 2014, there were approximately 183 stockholders of record holding a total of 39,114,792 shares of common stock and an unknown number of additional holders whose stock is held in “street name”. Holders of common stock vote as a single class on all matters which our stockholders are entitled to vote. Each share of common stock is entitled to one vote and shares ratably in any dividends declared by our board of directors. Holders of the common stock have no preemptive rights and no right to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock.

 

Dividends

 

The Company has not declared any cash dividends since inception and does not anticipate paying any dividends in the foreseeable future. The payment of dividends is within the discretion of the board of directors and will depend on the Company’s earnings, capital requirements, financial condition, and other relevant factors. There are no restrictions that currently limit the Company’s ability to pay dividends on its common stock other than those generally imposed by applicable state law.

 

Recent Sales of Unregistered Securities

 

None.

 

ITEM 6.

SELECTED FINANCIAL DATA.


Not applicable to a smaller reporting company.

 

ITEM 7.

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

 

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this report contain forward-looking statements that involve risks and uncertainties. Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,” “plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in the subsections entitled “Forward-Looking Statements and Factors That May Affect Future Results and Financial Condition” below and the subsection entitled “Risk Factors” above. The following discussion should be read in conjunction with our financial statements and notes thereto included in this report.

 



14



 


Results of Operations

 

The Company did not generate any revenues within the twelve months of operation during the year ended December 31, 2013. The Company’s net loss amounted to $1,175,290. The net loss was primarily the result of the expenses surrounding the developmental costs, completion of audits and management and overhead associated with the educational services businesses.

 

The 2013 operating expenses were mainly related to accrued expenses for management, consulting, legal and advisory services surrounding the move from entertainment related business activities, into the educational services and technology area, and for normal financial reporting and SEC compliance. We retained consultants to assist us in development of curriculum, businesses, and in operations, using our unregistered common stock as compensation.

 

In 2013 management focused its efforts on refinement of its EMO and technology business efforts and the marketing plans associated with the roll-out of its technology business. We evaluated a number of acquisitions both in the educational management area, and the educational technology arena. We recruited new members for our Board of Directors, and for our management team.

 

We have not yet completed any significant financings for the Company, and have funded our operations to this point with either nominal advances from management, or through the issuance of our common stock, either in lieu of compensation, or in settlement of debt. Until such time as we complete a significant financing it is unlikely that we will be able to move forward with our plans.

 

Capital Expenditures

 

The Company expended no amounts on capital expenditures for the period from June 10, 2010 (inception) to December 31, 2013.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of $496,423 and no cash and a $82,000 of intangible assets as of December 31, 2013 and a working capital deficit of $672,462 and $0 of cash as of December 31, 2012. As a result, our current cash position is not sufficient to fund our cash requirements during the next twelve months, including operations and capital expenditures.


Net cash provided by operating activities was $1,197 for the year ended December 31, 2013, compared to net cash used of $12,260 for the year ended December 31, 2012. The increase of $13,457 was primarily a result of a reduction in net loss partially offset by reductions in issuances of common stock for services and fees.


Net cash used in financing activities during the year ended December 31, 2013 was $1,197 compared to cash provided by financing activities of $12,197 for the year ended December 31, 2012. Cash used in financing activities was primarily a result of repayment of a cash overdraft.

 

Cash Requirements

 

The Company is in the development stage. The Company is subject to the risks associated with activities of development stage companies. We currently have limited sources of capital, including the public and private placement of equity securities and the possibility of debt. Additional sources of debt will be limited, and we cannot provide assurance that these sources of funds will be available in the future. The Company will take sufficient action to raise additional debt and or equity as the markets will allow. At December 31, 2013, the Company had total current assets of $1,725 consisting of prepaid expenses and intangible assets of $82,000. Stockholders’ deficit in the Company was $414,423 at December 31, 2013.

 



15



 


Critical Accounting Policies 

 

(a)

Use of Estimates

 

The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

(b)

Income Taxes

 

The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

(c)

Financial Instruments

 

In accordance with the requirements of Financial Accounting Standards Board Accounting Standard Codification (“ASC”) 825-10-50, “Financial Instruments-Disclosure,” the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, promissory notes, accounts payable and amounts due to related parties approximate fair values due to the short-term maturity of the instruments.

 

Effect of Recent Accounting Pronouncements

 

All new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted.

 

Going Concern

 

The 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, has a working capital deficiency of $496,423 at December 31, 2013 and has incurred a loss of $7,559,912 since inception, and further significant losses are expected to be incurred in the Company’s development stage. The Company will depend almost exclusively on outside capital through the issuance of common shares, and advances from related parties to finance ongoing operating losses. 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. These factors raise substantial doubt about the ability of the Company 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.

 

Off-Balance Sheet Arrangements


There are no 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.


ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


Not applicable.


ITEM 8.

FINANCIAL STATEMENTS

 

The requirements of this Item can be found beginning on page F-1 in this Annual Report.




16



 


ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

None.

 

ITEM 9A.

CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Our management conducted an evaluation, with the participation of our President who is our principal executive officer and our Chief Financial Officer who is our principal financial and accounting officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our President and Chief Financial Officer concluded that as a result of the material weakness in our internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2013.

 

Management’s Annual Report on Internal Control over Financial Reporting


Management is responsible for the preparation of our consolidated financial statements and related information. Management uses its best judgment to ensure that the consolidated financial statements present fairly, in material respects, our financial position and results of operations in conformity with generally accepted accounting principles.

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in the Securities Exchange Act of 1934. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls including the possibility of human error and overriding of controls. Consequently, an ineffective internal control system can only provide reasonable, not absolute, assurance with respect to reporting financial information.


Our internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.


Under the supervision of management, including our President and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission published in 1992 and subsequent guidance prepared by the Commission specifically for smaller public companies. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of December 31, 2013. We have identified the following material weaknesses as of December 31, 2013: (i) lack of segregation of duties, (ii) lack of sufficient resources to ensure compliance with GAAP and the rule and regulations of the SEC, especially with regards to equity based transactions and tax accounting expertise, (iii) inadequate security over information technology and (iv) 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 control deficiencies resulted in audit adjustments to the Company’s 2013 annual financial statements.


Remediation of Material Weaknesses in Internal Control

 

We believe that the material weaknesses as reported will eventually be fully remediated, once we obtain sufficient working capital to hire the proper personnel for segregation of duties and with appropriate knowledge of SEC and GAAP accounting.  In addition, 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.

 



17



 


Our management, including our President and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.


This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's Report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only Management's Report in this annual report.

 

Changes in Internal Controls over Financial Reporting

 

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.

OTHER INFORMATION..

 

None.

 



18



 


PART III

 

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

 

Set forth below are the names and ages of our directors and executive officers and their principal occupations at present and for at least the past five years.

 

Name

  

Age

  

Positions and Offices

  

Appointed

  

Resigned

Amy Lance

  

47

  

Chairman of the Board of Directors

  

10/04/13

  

In place

Mack Leath(1)

  

55

  

Director and Secretary

  

10/04/13

  

In place

Andrew Honeycutt

  

71

  

Director, Audit Committee member

  

11/03/12

  

In place

  

  

  

  

  

  

  

  

  

Dave Saba

  

47

  

President and Director

  

02/01/14

  

In place

Maurine Findley

  

55

  

Chief Financial Officer and Director

  

03/06/14

  

In place

———————

(1)

Mr. Leath resigned as President on February 1, 2014 when Dave Saba became our President.

 

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors. The following are the names and present principal occupations or employment, and material occupations, positions, offices or employments for the past five years, of each directors and executive officers of the Company that currently serve on the Board of Directors.

 

Board members during the period:

 

Ms. Amy Lance, age 46, joined the Board and as Chairman of the Board on 10/8/13, to fill the vacancy created with the resignation of Neal Sessions. Ms. Lance has extensive business experience, and is a leading figure in the not-for-profit community in the Southeastern, US, providing consulting and research support to a number of not-for-profit entities. Ms. Lance graduated from The University of Georgia with a BA in Business Management in 1988.

 

As the Chairman of the Board of Directors of our company, Ms. Lance brings our board her considerable experience in the strategic planning and growth of companies and qualifies her to continue to serve as a director or our company.

 

Mr. Mack Leath, age 56, joined the Board of Directors, on 10/8/13, and also became the Secretary of the Company. As well Mr. Leath was appointed to an operating role as the President of the Corporation. He is an experienced business executive, with an emphasis on sales and marketing as well as start-up oriented financing transactions. He operates a sales representation business in the chemicals field, and is involved with a number of software ventures as an advisor. He was responsible for all aspects of the day to day operations of the Company until the appointment of Dave Saba as President on 2/1/14, at which time he stepped down as President, but remains as Secretary and a Board member. Mr. Leath graduated from North Carolina State University with a B.S. in Business Administration; 1986.

 

As a Director of our company, Mr. Leath brings our board his considerable experience in the strategic planning and growth of companies and qualifies him to continue to serve as a director or our company.


Andrew Honeycutt, age 71, Dr. Andrew Honeycutt holds a Doctorate in Business from Harvard, and an MBA from Boston University. Andrew has an extensive background in education and the teaching profession and his experience includes positions with a number of HBCU's (Historical Black Colleges and Universities). He served as Dean and Director at a number of colleges and universities and successfully implemented virtual classes and remote teaching technologies. From 2007-present, Dr. Honeycutt has been the Distinguished Business Fellow and Director of the Business Undergraduate Program, Shorter College, Rome, GA. From 2005 to 2007, he was Dean of the Akio Morita School of Business, Anaheim University.

 

As a Director of our company, Mr. Honeycutt brings our board his considerable experience in the strategic planning and growth of companies and qualifies him to continue to serve as a director or our company.




19



 


Dave Saba, age 47, joined the Board and became President of the Company on February 1, 2014. Mr. Saba is a successful business executive, graduating from the Naval Academy in 1983 with a bachelor’s degree in Engineering, and, in 1990, was awarded a Masters in Engineering Management from the University of South Florida. Before founding AcceleratingEd, he was COO for the Math + Science Initiative, Inc.  The National Math + Science Initiative is focused on transforming schools in the United States through innovative programs with a budget of over $45 million annually. Prior to that he was CEO of Laying the Foundation, Inc. which provides teacher training and support. He has had other senior management roles in manufacturing, engineering and healthcare, as well as his experience in education.

 

As a Director of our company, Mr. Saba brings our board his considerable experience in the strategic planning and growth of companies and qualifies him to continue to serve as a director or our company.


Maurine Findley, age 55, joined the Board and became Chief Financial Officer and a member of the board of directors on March 6, 2014. Ms. Findley has over 30 years experience in financial reporting and management, with an emphasis in the education field. She has a bachelor’s degree in economics from the University of California, Irvine, which was awarded in 1983, and has completed graduate studies at University of California, Irvine and Utah State University, Logan, Utah. She began her accounting career at KPMG Peat Marwick. From September 2012 to February 2014, she was CFO for Education Management, Inc., an equity backed education company operating seven diploma and degree granting campuses. From August 2009 until September 2012 she was the CFO for Tall Oak Learning, LLC, an equity backed company investigating post-secondary education acquisition targets and opportunities throughout southwest United States, including the acquisition of Southern Careers Institute, a seven campus system. Prior to that she held senior management and Board Member positions in a number of higher education and related educational operations groups including nine years as Controller, then Treasurer for Corinthian Colleges. During that period Corinthian experienced a 500% growth in revenues. She has also held senior finance positions in publicly traded manufacturing and software development situations.

 

As a Director of our company, Ms. Findley brings our board her considerable experience in the strategic planning and growth of companies and qualifies her to continue to serve as a director or our company.


Disclosure of Family Relationships.

 

None

 

Board of Directors Committees

 

Our securities are not quoted on an exchange that has requirements that a majority of our Board members be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors, nor are we required to establish or maintain an Audit Committee or other committee of our Board of Directors.


Dr. Honeycutt and Amy Lance serve on audit committee to review and act on and report to the board of directors with respect to various auditing and accounting matters, including the recommendations and performance of independent auditors, the scope of the annual audits, fees to be paid to the independent auditors, and internal accounting and financial control policies and procedures. Amy Lance and Mack Leath serve on the compensation committee to review and recommend compensation provided to officers and directors of the Company.

 

Code of Ethics

 

The Company has adopted a Code of Ethics within the meaning of Item 406(b) of Regulation S-B of the Securities Exchange Act of 1934. The Code of Ethics applies to directors and senior officers, such as the principal executive officer, principal financial officer, controller, and persons performing similar functions. The Company originally incorporated its Code of Ethics in Form 10K filed with the SEC on March 30, 2004 and referenced as Exhibit 14 to this Form 10-K. Further, the Company’s Code of Ethics is available in print, at no charge, to any security holder who requests such information by contacting the Company.

 



20



 


Compliance with Section 16(a) of the Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% stockholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports they file.  Based on our review of the copies of such forms received by us, or written representations that no other reports were required, and to the best of our knowledge, we believe that all of our officers, directors, and owners of 10% or more of our common stock filed all required Forms 3, 4, and 5 with the exception of Ms. Lance who failed to file a Form 3 and a Form 4 disclosing one transaction, Mr. Leath who failed to file a Form 3 and a Form 4 disclosing one transaction, Mr. Honeycutt who failed to file a Form 3 and a Form 4 disclosing one transaction, Mr. Hanlon who failed to file a Form 4 disclosing one transaction, Mr. Sullivan who failed to file a Form 3 and a Form 4 disclosing one transaction, Mr. Saba who failed to file a Form 3 and a Form 4 disclosing one transaction and Ms. Findley who failed to file a Form 3 and a Form 4 disclosing two transactions.


ITEM 11.

EXECUTIVE COMPENSATION.

 

Executive Compensation

 

The following table sets forth certain compensation information for: (i) our principal executive officer or other individual serving in a similar capacity during fiscal 2013; (ii) our two most highly compensated executive officers other than our principal executive officer who were serving as executive officers at December 31, 2013 whose compensation exceed $100,000; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, 2013. Compensation information is shown for the fiscal years ended December 31, 2013 and 2012:


SUMMARY COMPENSATION TABLE

 

Name and

principal position

(a)

 

Year

(b)

 

Salary

($)

(c)

 

Bonus

($)

(d)

 

Stock

Awards

($)

(e)

 

Option

Awards

($)

(f)

 

Non-Equity

Incentive Plan

Compensation

($)

(g)

 

Nonqualified

Deferred

Compensation

Earnings ($)

(h)

 

All

Other

Compensation

($)

(i)

 

Total

($)

(j)

Neal Sessions 1

 

2013

 

$20,000

 

$0

 

$180,863

 

$0

 

$0

 

$0

 

$0

 

$200,863

  

  

2012

  

$10,000

 

$0

 

$256,000

 

$0

 

$0

 

$0

 

$0

 

$266,000

Pierce Sullivan 2

  

2013

  

$0

 

$0

 

$109,500

 

$0

 

$0

 

$0

 

$0

 

$109,500

  

  

2012

  

$0

 

$0

 

$128,000

 

$0

 

$0

 

$0

 

$0

 

$128,000

Mack Leath 3

  

2013

  

$10,000

 

$0

 

$26,100

 

$0

 

$0

 

$0

 

$0

 

$36,100

  

  

2012

  

$0

 

$0

 

$0

 

$0

 

$0

 

$0

 

$0

 

$0

———————

1.

Mr. Sessions was a Director and served as our Chief Financial Officer effective 12/1/12 and was appointed Interim Chief Executive Officer effective 12/28/12, and served in those roles until his resignation on 9/30/13. Mr. Sessions total compensation during the period consisted of the payment of $20,000 in cash, and the issuance of 450,000 shares of our unregistered common stock at the time of his resignation, valued at $84,863. Further, he received 550,000 shares of unregistered common stock as compensation as a member of the Board of Directors during 2013.


2.

Mr. Sullivan was a Director and was appointed Secretary effective 12/28/12, and served in those roles until his resignation on 12/31/13. Mr. Sullivan received 200,000 shares of common stock for services on the Board of Directors for 2012 and 300,000 shares of common stock for services on the Board of Directors for 2013.


3.

Mr. Leath became a Director effective 10/8/13 and received 500,000 shares of common stock for services on the Board of Directors for 2013 valued at $26,100 at the time of issuance. Mr. Leath was also paid $5,000 per month for his role as President and Secretary, starting in November 2013, and was issued a total of 142,857 shares of our common stock in consideration of $10,000 in payment for his salary as President during the year ended 12/31/13.




21



 


Employment Agreements with Executive Officers


In connection with the appointment of Dave Saba as President and a Director of the Company on February 1, 2014, we agreed to Mr. Saba a base salary of $160,000 per year, and he is eligible for an additional bonus of $80,000, as well as other compensation as determined by the Board of Directors. Mr. Saba’s compensation will accrue until sufficient financing is in place for ongoing operations. As is the current policy for all directors, Mr. Saba will receive 350,000 shares of our unregistered common stock upon joining the Board, as well as 150,000 shares of unregistered common stock as the 2014 stipend for all Board members. His total shares owned are 1,500,000, including 800,000 that were issued in consideration for the acquisition of AcceleratingED, LLC in February 2014, 200,000 from a prior consulting agreement for services during 2013, and 500,000 shares in conjunction with his appointment to the Board of Directors.

 

In connection with the appointment of Maurine Findley as our Chief Financial Officer and a Director on March 6, 2014, we agreed to pay her a base salary of $160,000 per year, and she is eligible for an additional bonus of $80,000, as well as other compensation as determined by the Board of Directors. Her compensation will accrue until sufficient financing is in place for ongoing operations. We also awarded Ms. Findley 1,000,000 shares of unregistered common stock as a bonus on March 6, 2014. As is the current policy for all directors, Ms. Findley will receive 350,000 shares of unregistered common stock upon joining the Board, as well as 150,000 shares of unregistered common stock as the 2014 stipend for all Board members.

 

Outstanding Equity Awards at Fiscal Year End

 

The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards for each named executive officer outstanding as of December 31, 2013:

 

  

  

OPTION AWARDS

  

STOCK AWARDS

Name

(a)

  

Number of

securities

underlying

unexercised

options

(#)

exercisable

(b)

  

Number of

securities

underlying

unexercised

options

(#)

unexercisable

(c)

  

Equity

incentive plan

awards:

Number of

securities

underlying

unexercised

unearned

options

(#)

(d)

  

Option

exercise

price

($)

(e)

  

Option

expiration

date

(f)

  

Number

of shares

or units

of stock

that have

not

vested

(#)

(g)

  

Market

value of

shares or

units of

stock

that have

not

vested

($)

(h)

  

Equity

incentive

plan

awards:

Number of

unearned

shares, units

or other

rights that

have

not vested

(#)

(i)

  

Equity

incentive

plan awards:

Market or

payout value

of unearned

shares, units

or other

rights that

have

not vested

(#)

(j)

Neal Sessions

  

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

Pierce Sullivan

  

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

Mack Leath

  

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0

 

0


Incentive and Non-qualified Stock Option and Stock Award Plans

 

On December 28, 2012, the Board of Directors approved the issuance of (1) 200,000 shares of common stock to each Director who joined the Board in 2012 and (2) 150,000 shares of common stock in lieu of cash directors fees to each member of the Board of Directors for services as a member of the Board of Directors in 2013. This was modified in October 2013 to allow for 350,000 shares on joining the Board, and all active Directors received an additional shares of our unregistered common stock to reflect this adjustment. All shares approved for issuance by the Board of Directors on December 28, 2012 were subject to a “reverse vesting” provision, such that 50% of the shares awarded to a Director are automatically cancelled if that Director does not complete 12 months of service, measured from January 1, 2013, unless the termination results from a merger or change of control of the Company. In October 2013, recognizing that a significant change in the Board membership was needed, the vesting provisions were waived for all parties.

 

The following table provides information concerning the compensation of our Board members for their services as members of our Board of Directors for 2013. The value attributable to any option awards is computed in accordance with FASB ASC Topic 718. The assumptions made in the valuations of the option awards are included in the Notes to our Consolidated Financial Statements for the year ended December 31, 2013 appearing elsewhere in this report.

 



22



 


Director Compensation


Name

(a)

  

Fees

earned or

paid in

cash

($)

(b)

  

Stock

awards

($)

(c)

  

Option

awards

($)

(d)

  

Non-equity

Incentive

Plan

Compensation

($)

(e)

  

Nonqualified

Deferred

Compensation

earnings

($)

(f)

  

All other

compensation

($)

(g)

  

Total

($)

(h)

Michael Hanlon(1)

 

 

$109,500

 

 

 

 

 

$109,500

Andrew Honeycutt (2)

  

 

$109,500

 

 

 

 

 

$109,500

Amy Lance(3)

  

 

$26,100

 

 

 

 

 

$26,100

Mack Leath(4)

  

 

$26,100

 

 

 

 

 

$26,100


(1)

Mr. Hanlon resigned as a Director on December 31, 2013. Mr. Hanlon received 200,000 shares of common stock for services on the Board of Directors for 2012 and 300,000 shares of common stock for services on the Board of Directors for 2013.

(2)

Mr. Honeycutt received 200,000 shares of common stock for services on the Board of Directors for 2012 and 300,000 shares of common stock for services on the Board of Directors for 2013.

(3)

Ms. Lance received 500,000 shares of common stock for services on the Board of Directors for 2013 valued at $26,100 at the time of issuance.

(4)

Mr. Leath received 500,000 shares of common stock for services on the Board of Directors for 2013 valued at $26,100 at the time of issuance.  Mr. Leath was also paid $5,000 per month for his role as President and Secretary, starting in November 2013, and was issued a total of 142,857 shares of our common stock in consideration of $10,000 in payment for his salary as President during the year ended 12/31/13.  Compensation as our President is not reflected in the table above.

 

ITEM 12.

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


The following table sets forth, as of April 11, 2014, the number of shares of our common stock beneficially owned by (i) any holder of more than five percent, (ii) each of our executive officers and directors, and (iii) our directors and executive officers as a group. Unless otherwise noted, the business address of each individual listed below is c/o Sibling Group Holdings, Inc., 1355 Peachtree Street, Suite 1159, Atlanta, GA 30309. The beneficial ownership (1) percentages reflected in the table below are based on 39,114,792 shares of our common stock as of April 11, 2014.


Name of Beneficial Owner

  

Beneficial

Ownership

of Common (1)

  

Percent of

Common

Greater than 5% Shareholders

  

  

  

  

Foundation For Innovation in Education, Inc.(2)

  

3,938,234

  

10.07%

  

  

  

  

  

Directors and Officers

  

  

  

  

Amy Lance, Chairman

  

   670,000

  

  1.71%

Mack Leath, Director

  

1,018,412

  

  2.60%

Andrew Honeycutt, Director

  

   650,000

  

  1.66%

Dave Saba, Director and President

  

1,633,333

  

  4.18%

Maurine Findley, CFO

  

1,500,000

  

  3.83%

 

  

  

  

  

All directors and executive officers as a group (five people)

  

5,471,745

  

13.99%

———————

*

Less than 1%

(1)

"Beneficial ownership" generally means any person who, directly or indirectly, has or shares voting or investment power with respect to a security or has the right to acquire such power within 60 days. Shares of common stock subject to options or warrants that are currently exercisable or exercisable within 60 days of December 31, 2013 are deemed outstanding for computing the ownership percentage of the person holding such options, but are not deemed outstanding for computing the ownership percentage of any other person. Restricted stock is included in the beneficial ownership amounts even though it may not be transferred

(2)

The board of directors of Foundation for Innovation in Education, Inc., an Internal Revenue Code Sec. 501(c)(3) company, has voting and dispositive control over securities held by this company.

 



23



 


ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

 

Transactions with Related Parties.

 

Share Awards.

 

We compensate our directors for their services as directors by awards of unregistered shares of our common stock with an issuance on joining the Board, and a stipend for their service during the year. During the year ended December 31, 2012, we made awards of 200,000 shares to each of Andrew Honeycutt, Peirce Sullivan, Michael Hanlon, and Neal Sessions, and allocated 150,000 each for their service in 2013. During October 2013 the policy was amended to award 350,000 to each director on joining the Board, and as such an adjustment was made for directors at that time, resulting in the additional issuance of 150,000 each to Honeycutt, Sullivan and Hanlon. Upon joining the Board in October 2013, Amy Lance and Mack Leath were awarded 350,000 shares, and an additional 150,000 shares for their service during the year.

 

Note and Accounts Payable Conversions.

 

In September 2013, the Company issued 450,000 shares of common stock valued at $84,863, or $0.189 per share, to Neal Sessions, in conjunction with his resignation from all positions in the Company, in full satisfaction of all amounts owed to him for his services.

 

ITEM 14.

PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The following table shows the fees that were billed for the audit and other services provided by Liggett, Vogt & Webb P.A. for the fiscal years ended December 31, 2013 and 2012.


  

  

2013

  

  

2012

  

  

  

  

  

  

  

  

Audit Fees

  

$

17,000

  

  

$

13,000

  

Audit-Related Fees

  

  

  

  

  

  

Tax Fees

  

  

  

  

  

  

All Other Fees

  

  

  

  

  

  

Total

  

$

17,000

  

  

$

13,000

  


Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.


Audit-Related Fees — This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the Securities and Exchange Commission, other accounting consulting and other audit services.


Tax Fees — This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.


All Other Fees — This category consists of fees for other miscellaneous items.


Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent registered public accounting firm.  Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board, or, in the period between meetings, by a designated member of Board. Any such approval by the designated member is disclosed to the entire Board at the next meeting.  




24



 


PART IV


ITEM 15.

EXHIBITS, FINANCIAL STATEMENTS SCHEDULES.

 

(a) 

1.

  

Financial Statements

  

  

  

The consolidated financial statements and Report of Independent Registered Public Accounting Firm are listed in the “Index to Financial Statements and Schedules” on page F – 1 and included on pages F - 2 through F - 15.

 

  

2.

  

Financial Statement Schedules

 

All schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission (the “Commission”) are either not required under the related instructions, are not applicable (and therefore have been omitted), or the required disclosures are contained in the financial statements included herein.

 

  

3.

  

Exhibits (including those incorporated by reference).

 

 

 

 

Exhibit No.

 

Description

2.1

 

Securities Exchange Agreement by and among Sibling Entertainment Group Holdings, Inc., Newco4Education I, LLC and the members of Newco4Education I, LLC dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

3.1(a)

 

Certificate of Designation (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

3.1(b)

 

Amended and Restated Certificate of Formation as filed with the Texas Secretary of State on August 15, 2012 and effective as of August 21, 2012 (Incorporated herein by reference to the Form 8-K as filed with the Commission on August 23, 2012).

3.2

 

Bylaws of the Company (Incorporated herein by reference to the Form 10-SB/A as filed with the Commission on April 18, 2000).

10.1

 

Loan Assignment Agreement by and among Sibling Entertainment Group Holdings, Inc., Sibling Theatricals, Inc., and Debt Resolution, LLC dated as of December 29, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.2

 

Form of Conversion Agreement, by and between Sibling Entertainment Group Holdings, Inc. and each holder of 13% Series AA Debentures (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.3

 

Lock-Up Agreement by and between Sibling Entertainment Group Holdings, Inc. and Mitchell Maxwell dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.4

 

Lock-Up Agreement by and between Sibling Entertainment Group Holdings, Inc. and Ray Meyers dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.5

 

Stock Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Gerry L. Bedore Jr. dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.6

 

Stock Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Timothy G. Drake dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.7

 

Stock Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Oswald Gayle dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.8

 

Stock Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Amy Savage-Austin dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.9

 

Stock Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Stephen C. Carlson dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).




25



 



10.10

 

Stock Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and A. Dixon McLeod dated as of December 30, 2010 (Incorporated herein by reference to the Form 8-K as filed with the Commission on January 6, 2011).

10.11

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Gerald F. Sullivan dated as of March 1, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.12

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Stephen C. Carlson dated as of March 1, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.13

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Oswald A. Gayle dated as of March 1, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.14

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Oswald A. Gayle dated as of October 1, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.15

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Stephen C. Carlson dated as of October 1, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.16

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Gerald Sullivan dated as of October 24, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.17

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Steve Carlson dated as of October 24, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.18

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Oswald Gayle dated as of October 24, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.19

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Amy Austin dated as of October 24, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.20

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Gerry Bedore dated as of October 24, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.21

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Tim Drake dated as of October 24, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.22

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Rob Copenhaver dated as of November 18, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.23

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Michael Hanlon dated as of November 18, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.24

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and William Hanby dated as of November 18, 2011 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.25

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Oswald Gayle dated as of January 31, 2012 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.26

 

Memorandum Agreement by and between Sibling Entertainment Group Holdings, Inc. and Steve Carlson dated as of January 31, 2012 (Incorporated herein by reference to the Form 10-K as filed with the Commission on April 30, 2012).

10.27

 

Modification to Master Agreement by and between Sibling Entertainment Group Holdings, Inc. and The Partnership of Atlanta, Inc. dated May 9, 2012 (Incorporated herein by reference to the Form 10-Q as filed with the Commission on May 21, 2012).

10.28

 

Restricted Stock Purchase and Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Blackstone Partners, LLC dated as of March 30, 2012 (Incorporated herein by reference to the Form 10-Q as filed with the Commission on May 21, 2012).



26



 



10.29

 

Restricted Stock Purchase and Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Atlanta Capital Partners, LLC dated as of March 30, 2012 (Incorporated herein by reference to the Form 10-Q as filed with the Commission on May 21, 2012).

10.30

 

2012 Sibling Group Holdings, Inc. Stock Incentive Plan (Incorporated herein by reference to the Form 8-K as filed with the Commission on August 23, 2012).

10.31

 

Series Common Stock Cancellation Memorandum between Sibling Group Holdings, Inc. and Atlantic Capital dated May 22, 2012 (Incorporated herein by reference to the Form 10-Q as filed with the Commission on October 5, 2012).

10.32

 

Form of Restricted Stock Purchase and Restriction Agreement (Incorporated herein by reference to the Form 10-Q as filed with the Commission on October 5, 2012).

10.33

 

Restricted Stock Purchase and Restriction Agreement between Sibling Entertainment Group Holdings, Inc. and Meshugeneh, LLC dated June 30, 2012 (Incorporated herein by reference to the Form 10-Q as filed with the Commission on October 5, 2012).

10.34

 

Debt Conversion agreement dated September 30, 2012, between the Company and Richard Smyth (Incorporated herein by reference to the Form 10-Q as filed with the Commission on December 11, 2012).

10.35

 

Debt Conversion agreement dated September 30, 2012, between the Company and Meshugeneh, LLC (Incorporated herein by reference to the Form 10-Q as filed with the Commission on December 11, 2012).

10.36

 

Consulting Agreement dated October 3, 2012, between the Company and Steeltown Consulting Group, LLC (Incorporated herein by reference to the Form 10-Q as filed with the Commission on December 11, 2012).

10.37

 

Consulting Agreement dated October 30, 2012, between the Company and Ahmad Arfaania (Incorporated herein by reference to the Form 10-Q as filed with the Commission on December 11, 2012).

10.38

 

Asset Purchase Agreement dated November 25, 2013, between BLSCH Acquisition, LLC and Blendedschools.net (Incorporated herein by reference to the Form 8-K as filed with the Commission on March 10, 2014).

10.39

 

Debt Conversion Agreement dated April 25, 2013, between the Company and Meshugeneh LLC (Incorporated herein by reference to the Form 10-Q as filed with the Commission on March 27, 2014).

10.40

 

Consulting Agreement dated May 1, 2013, between the Company and Robert Hill (Incorporated herein by reference to the Form 10-Q as filed with the Commission on March 27, 2014).

10.41

 

Asset Purchase Agreement dated May 31, 2013, between the Company and ClassChatter.com LLD and Daniel J. DeLuca (Incorporated herein by reference to the Form 10-Q as filed with the Commission on March 27, 2014).

10.42

 

Consulting Agreement dated June 1, 2013, between the Company and Daniel J. DeLuca (Incorporated herein by reference to the Form 10-Q as filed with the Commission on March 27, 2014).

10.43

 

Asset Purchase Agreement between the Company and the principals of PLC Consultants, LLC dated July 5, 2013 (Incorporated herein by reference to the Form 10-Q as filed with the Commission on March 28, 2014).

10.44*

 

Form of Consulting Agreement.

10.45*

 

Form of Agreement to Convert Debt

14.1

 

Code of Ethics dated March 1, 2004 (Incorporated herein by reference to the Form 10-K as filed with the Commission on March 30, 2004).

31.1*

 

Section 302 Certificate of Chief Executive Officer.

31.2*

 

Section 302 Certificate of Principal Financial and Accounting Officer.

32.1*

 

Section 906 Certificate of Chief Executive Officer and Principal Financial and Accounting Officer.

101.INS**

 

XBRL Instance Document.

101.SCH**

 

XBRL Taxonomy Extension Schema Document.

101.CAL**

 

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF**

 

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB**

 

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE**

 

XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

 

———————

*

Filed herewith

**

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of this Annual Report on Form 10-K for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 



27



 


SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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 Group Holdings, Inc.

  

  

  

Date: April 16, 2014 

By:

/s/ Dave Saba

  

  

Dave Saba, President 



Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


Signature

 

Title

 

Date

  

  

  

  

 

/s/ Dave Saba

  

Chief Executive Officer and Director (principal executive officer)

  

April 16, 2014

Dave Saba

  

  

  

 

  

  

  

  

 

/s/ Maurine Findley

  

Chief Financial Officer and Director (principal financial and accounting officer)

  

April 16, 2014

Maurine Findley

  

  

 

  

  

  

  

 

/s/ Amy Lance

  

Director

  

April 16, 2014

Amy Lance

  

  

  

 

  

  

 

  

 

/s/ Mack Leath

  

Director

  

April 16, 2014

Mack Leath

  

  

  

 

  

  

 

  

 

/s/ Andrew Honeycutt

  

Director

  

April 16, 2014

Andrew Honeycutt

  

 

  

 

  

  

  

  

 







28



 


INDEX TO FINANCIAL STATEMENTS


 

Page

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F-2

 

 

CONSOLIDATED BALANCE SHEETS

F-3

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

F-4

 

 

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

F-5

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

F-7

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

F-8




F-1



 


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Stockholders and Directors

Sibling Group Holdings, Inc.

(A Development Stage Company)

Atlanta, Georgia


We have audited the accompanying consolidated balance sheets of Sibling Group Holdings, Inc. (A Development Stage Company) as of December 31, 2013 and 2012 and the related statements of operations, changes in stockholders’ deficit, and cash flows for each of the years then ended December 31, 2013 and 2012. We have also audited the amounts presented for the period January 1, 2012 to December 31, 2013, included in the statements of stockholders’ deficit and in the total amounts presented in the statements of operations and cash flows for the period from June 10, 2010 (inception) to December 31, 2013. We did not audit the period June 10, 2010 (inception) to December 31, 2011. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.


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


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Sibling Group Holdings, Inc. as of December 31, 2013 and 2012 and the results of its operations and its cash flows for each of the years ended December 31, 2013 and 2012, and the amounts presented for the period January 1, 2012 to December 31, 2013 included in the statements of stockholders’ deficit and in the total amounts presented in the statements of operations and cash flows for the period from June 10, 2010 (inception) to December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.


The accompanying financial statements have been prepared assuming that Sibling Group Holdings, Inc. will continue as a going concern. As more fully described in Note 1, the Company has incurred recurring operating losses and will have to obtain additional capital to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.


 

/s/ Liggett, Vogt & Webb, P.A.

 

Liggett, Vogt & Webb, P.A

 

Certified Public Accountants


New York, NY

April 16, 2014





F-2



 



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Consolidated Balance Sheets


 

 

December 31,

 

 

 

2013

 

 

2012

 

ASSETS

 

 

 

 

 

 

  

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Prepaid expenses

 

$

1,725

 

 

$

 

Total current assets

 

 

1,725

 

 

 

 

  

 

 

 

 

 

 

 

 

Intangible assets

 

 

82,000

 

 

 

 

  

 

 

 

 

 

 

 

 

Total assets

 

$

83,725

 

 

$

 

  

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Cash overdraft

 

$

 

 

$

1,197

 

Accounts payable

 

 

434,290

 

 

 

498,641

 

Accrued liabilities

 

 

31,358

 

 

 

43,965

 

Amounts due to related parties

 

 

 

 

 

50,159

 

Short-term notes payable

 

 

32,500

 

 

 

78,500

 

Total current liabilities

 

 

498,148

 

 

 

672,462

 

  

 

 

 

 

 

 

 

 

Stockholders' deficit

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

Convertible series common stock, $0.0001 par value; 10,000,000 shares authorized; none issued or outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 500,000,000 shares authorized; 32,002,628 and 18,701,070 issued and outstanding at December 31, 2013 and 2012

 

 

3,201

 

 

 

1,871

 

Additional paid-in capital

 

 

7,190,100

 

 

 

5,758,101

 

Deficit accumulated during the development stage

 

 

(7,607,724

)

 

 

(6,432,434

)

Total stockholders' deficit

 

 

(414,423

)

 

 

(672,462

)

  

 

 

 

 

 

 

 

 

Total liabilities and stockholders' deficit

 

$

83,725

 

 

$

 


See accompanying notes to consolidated financial statements.




F-3



 



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Consolidated Statements of Operations


 

 

Year ended

December 31,

 

 

Cumulative

from June 10,

2010

(Inception) to

December 31,

 

 

 

2013

 

 

2012

 

 

2013

(Unaudited)

 

Operating expenses

 

 

 

 

 

 

 

 

 

General and administrative

 

$

4,786

 

 

$

3,575,123

 

 

$

5,908,338

 

Professional fees

 

 

1,171,708

 

 

 

94,270

 

 

 

1,516,399

 

Total operating expenses

 

 

1,176,494

 

 

 

3,669,393

 

 

 

7,424,737

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,176,494

)

 

 

(3,669,393

)

 

 

(7,424,737

)

  

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Other income

 

 

1,197

 

 

 

 

 

 

1,197

 

Interest income (expense)

 

 

7

 

 

 

(17,445

)

 

 

(28,322

)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(108,050

)

Total other income (expense)

 

 

1,204

 

 

 

(17,445

)

 

 

(135,175

)

  

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,175,290

)

 

$

(3,686,838

)

 

$

(7,559,912

)

  

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

$

(0.06

)

 

$

(0.58

)

 

 

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding, basic and diluted

 

 

21,351,260

 

 

 

6,402,762

 

 

 

 

 


See accompanying notes to consolidated financial statements.




F-4



 


SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Consolidated Statements of Stockholders’ Deficit

For the Periods Ended June 10, 2010 (Inception) to December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Convertible Series

 

 

 

 

 

 

 

 

Additional

 

 

During the

 

 

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

Development

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stage

 

 

Stock

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 (Unaudited)

 

 

9,879,854

 

 

 

988

 

 

 

466,358

 

 

 

47

 

 

 

4,617

 

 

 

(382,242

)

 

 

 

 

 

(376,590

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

Common shares issued for cash at $2.00 per share

 

 

 

 

 

 

 

 

5,714

 

 

 

1

 

 

 

9,999

 

 

 

 

 

 

 

 

 

10,000

 

Common shares issued for fees accrued during merger

 

 

 

 

 

 

 

 

20,000

 

 

 

2

 

 

 

39,998

 

 

 

 

 

 

 

 

 

40,000

 

Common shares issued for prepaid expenses at $9.00 per share

 

 

 

 

 

 

 

 

25,000

 

 

 

3

 

 

 

224,997

 

 

 

 

 

 

 

 

 

225,000

 

Common shares issued for liabilities to be settled in stock at $2.00 per share, and
$5.00 per share

 

 

 

 

 

 

 

 

83,465

 

 

 

8

 

 

 

190,922

 

 

 

 

 

 

 

 

 

190,930

 

Common shares issued for settlement of accrued expenses at $5.00 per share (loss on
extinguishment of $16,666)

 

 

 

 

 

 

 

 

8,333

 

 

 

1

 

 

 

41,665

 

 

 

 

 

 

 

 

 

41,666

 

Common shares issued to settle amounts due to related parties at $5.00 per share, and
$20.00 per share (loss on extinguishment of $62,779)

 

 

 

 

 

 

 

 

47,969

 

 

 

5

 

 

 

488,527

 

 

 

 

 

 

 

 

 

488,532

 

Common shares issued for consulting fees at $20.00 per share

 

 

 

 

 

 

 

 

20,000

 

 

 

2

 

 

 

399,998

 

 

 

 

 

 

 

 

 

400,000

 

Common shares issued for settlement of accounts payable at $13.00 per share

 

 

 

 

 

 

 

 

3,600

 

 

 

 

 

 

72,000

 

 

 

 

 

 

 

 

 

72,000

 

Common shares issued for Director's fees at $13.00 per share

 

 

 

 

 

 

 

 

34,000

 

 

 

3

 

 

 

469,997

 

 

 

 

 

 

 

 

 

470,000

 

Common shares issued for services at $20.00 per share

 

 

 

 

 

 

 

 

1,500

 

 

 

 

 

 

 

30,000

 

 

 

 

 

 

 

 

 

30,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,363,353

)

 

 

 

 

 

(2,363,353

)

Balance at December 31, 2011 (Unaudited)

 

 

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 $4.00 per share

 

 

 

 

 

 

 

 

5,576

 

 

 

1

 

 

 

22,304

 

 

 

 

 

 

 

 

 

22,305

 

Common stock issued for liabilities to be settled in stock at $4.00 per share

 

 

 

 

 

 

 

 

5,328

 

 

 

 

 

 

21,307

 

 

 

 

 

 

 

 

 

21,307

 

Common stock issued for consulting fees at $3.00 per share

 

 

 

 

 

 

 

 

10,000

 

 

 

1

 

 

 

29,999

 

 

 

 

 

 

 

 

 

30,000

 

Series common stock reacquired at $4.13 per share

 

 

(430,000

)

 

 

 

 

 

 

 

 

 

 

 

1,828,007

 

 

 

 

 

 

(1,828,007

)

 

 

 

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

 

 

430,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,828,007

 

 

 

1,828,007

 

Series common stock reacquired at $0.012 per share

 

 

(80,010

)

 

 

 

 

 

 

 

 

 

 

 

145,000

 

 

 

 

 

 

(145,000

)

 

 

 

Series common stock issued in consideration of compensation at $1.81 per share

 

 

80,010

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

145,000

 

 

 

145,000

 

Common stock issued for settlement of accounts payable at $0.60 per share

 

 

 

 

 

 

 

 

50,000

 

 

 

5

 

 

 

29,995

 

 

 

 

 

 

 

 

 

30,000

 

Fractional shares and rounding

 

 

 

 

 

 

 

 

66

 

 

 

 

 

 

3

 

 

 

(1

)

 

 

 

 

 

2

 

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

 

Common stock issued for consulting fees at $0.05 per share

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

24,950

 

 

 

 

 

 

 

 

 

25,000

 

Common stock issued for consulting fees at $1.25 per share

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

624,950

 

 

 

 

 

 

 

 

 

625,000

 

Common stock issued for consulting fees at $0.64 per share

 

 

 

 

 

 

 

 

280,000

 

 

 

28

 

 

 

179,172

 

 

 

 

 

 

 

 

 

179,200

 

Common stock issued for Director’s fees at $0.64 per share

 

 

 

 

 

 

 

 

1,550,000

 

 

 

155

 

 

 

511,845

 

 

 

 

 

 

 

 

 

512,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,686,838

)

 

 

 

 

 

(3,686,838

)

Balance at December 31, 2012

 

 

 

 

$

 

 

 

18,701,070

 

 

$

1,871

 

 

$

5,758,101

 

 

$

(6,432,434

)

 

$

 

 

$

(672,462

)


(Continued)



F-5



 


SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Consolidated Statements of Stockholders’ Deficit (Continued)

For the Periods Ended June 10, 2010 (Inception) to December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Convertible Series

 

 

 

 

 

 

 

 

Additional

 

 

During the

 

 

 

 

 

 

 

 

 

Common

 

 

Common

 

 

Paid-In

 

 

Development

 

 

Treasury

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Stage

 

 

Stock

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2012

 

 

 

 

$

 

 

 

18,701,070

 

 

$

1,871

 

 

$

5,758,101

 

 

$

(6,432,434

)

 

$

 

 

$

(672,462

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for Director’s fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

480,000

 

 

 

 

 

 

 

 

 

480,000

 

Common stock issued for services at $0.23 per share

 

 

 

 

 

 

 

 

27,754

 

 

 

3

 

 

 

6,497

 

 

 

 

 

 

 

 

 

6,500

 

Common stock issued for services at $0.20 per share

 

 

 

 

 

 

 

 

50,497

 

 

 

5

 

 

 

9,995

 

 

 

 

 

 

 

 

 

10,000

 

Common stock issued for services at $0.17 per share

 

 

 

 

 

 

 

 

60,606

 

 

 

6

 

 

 

9,994

 

 

 

 

 

 

 

 

 

10,000

 

Common stock issued for services at $0.24 per share

 

 

 

 

 

 

 

 

55,786

 

 

 

6

 

 

 

13,495

 

 

 

 

 

 

 

 

 

13,501

 

Common stock issued for services at $0.10 per share

 

 

 

 

 

 

 

 

136,365

 

 

 

14

 

 

 

13,486

 

 

 

 

 

 

 

 

 

13,500

 

Common stock issued for services at $0.05 per share

 

 

 

 

 

 

 

 

702,087

 

 

 

70

 

 

 

35,034

 

 

 

 

 

 

 

 

 

35,104

 

Common stock issued for services at $0.0484 per share

 

 

 

 

 

 

 

 

547,521

 

 

 

55

 

 

 

26,445

 

 

 

 

 

 

 

 

 

26,500

 

Common stock issued for services at $0.036 per share

 

 

 

 

 

 

 

 

6,250,000

 

 

 

625

 

 

 

226,784

 

 

 

 

 

 

 

 

 

227,409

 

Common stock issued for services at $0.08 per share

 

 

 

 

 

 

 

 

255,556

 

 

 

25

 

 

 

20,419

 

 

 

 

 

 

 

 

 

20,444

 

Common stock issued for services at $0.09 per share

 

 

 

 

 

 

 

 

1,044,444

 

 

 

104

 

 

 

93,896

 

 

 

 

 

 

 

 

 

94,000

 

Common stock issued for services at $0.03 per share

 

 

 

 

 

 

 

 

100,000

 

 

 

10

 

 

 

2,990

 

 

 

 

 

 

 

 

 

3,000

 

Common stock issued for services at $0.115 per share

 

 

 

 

 

 

 

 

647,826

 

 

 

65

 

 

 

74,435

 

 

 

 

 

 

 

 

 

74,500

 

Common stock issued for services at $0.057 per share

 

 

 

 

 

 

 

 

4,813

 

 

 

 

 

 

275

 

 

 

 

 

 

 

 

 

275

 

Common stock issued for services at $0.07 per share

 

 

 

 

 

 

 

 

692,857

 

 

 

69

 

 

 

48,431

 

 

 

 

 

 

 

 

 

48,500

 

Common stock issued for prepaid expenses at $0.057 per share

 

 

 

 

 

 

 

 

30,187

 

 

 

3

 

 

 

1,722

 

 

 

 

 

 

 

 

 

1,725

 

Common stock issued for settlement of account payable at $0.23 per share

 

 

 

 

 

 

 

 

257,040

 

 

 

26

 

 

 

59,350

 

 

 

 

 

 

 

 

 

59,376

 

Common stock issued for settlement of account payable at $0.05 per share

 

 

 

 

 

 

 

 

50,000

 

 

 

5

 

 

 

2,495

 

 

 

 

 

 

 

 

 

2,500

 

Common stock issued for settlement of account payable at $0.135 per share

 

 

 

 

 

 

 

 

50,000

 

 

 

5

 

 

 

6,720

 

 

 

 

 

 

 

 

 

6,725

 

Common stock issued for settlement of account payable at $0.07 per share

 

 

 

 

 

 

 

 

74,314

 

 

 

7

 

 

 

5,195

 

 

 

 

 

 

 

 

 

5,202

 

Common stock issued for settlement of account payable at $0.187 per share

 

 

 

 

 

 

 

 

150,000

 

 

 

15

 

 

 

27,985

 

 

 

 

 

 

 

 

 

28,000

 

Common stock issued for settlement of account payable at $0.08 per share

 

 

 

 

 

 

 

 

500,000

 

 

 

50

 

 

 

40,110

 

 

 

 

 

 

 

 

 

40,160

 

Common stock issued for settlement of account payable at $0.087 per share

 

 

 

 

 

 

 

 

125,714

 

 

 

13

 

 

 

10,987

 

 

 

 

 

 

 

 

 

11,000

 

Common stock issued for settlement of accrued interest payable at $0.087 per share

 

 

 

 

 

 

 

 

17,143

 

 

 

2

 

 

 

1,498

 

 

 

 

 

 

 

 

 

1,500

 

Common stock issued for settlement of accrued interest payable at $0.12 per share

 

 

 

 

 

 

 

 

100,000

 

 

 

10

 

 

 

11,990

 

 

 

 

 

 

 

 

 

12,000

 

Common stock issued for settlement of note payable at $0.087 per share

 

 

 

 

 

 

 

 

57,143

 

 

 

6

 

 

 

4,994

 

 

 

 

 

 

 

 

 

5,000

 

Common stock issued for settlement of note payable at $0.12 per share

 

 

 

 

 

 

 

 

250,000

 

 

 

25

 

 

 

29,975

 

 

 

 

 

 

 

 

 

30,000

 

Common stock issued for settlement of related party payable at $0.05 per share

 

 

 

 

 

 

 

 

450,000

 

 

 

45

 

 

 

84,863

 

 

 

 

 

 

 

 

 

84,908

 

Common stock issued for purchase of intangible asset at $0.18 per share

 

 

 

 

 

 

 

 

316,905

 

 

 

31

 

 

 

57,969

 

 

 

 

 

 

 

 

 

58,000

 

Common stock issued for purchase of intangible asset at $0.24 per share

 

 

 

 

 

 

 

 

300,000

 

 

 

30

 

 

 

23,970

 

 

 

 

 

 

 

 

 

24,000

 

Net loss, year ended December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,175,290

)

 

 

 

 

 

(1,175,290

)

Balance at December 31, 2013

 

 

 

 

$

 

 

 

32,005,628

 

 

$

3,201

 

 

$

7,190,100

 

 

$

(7,607,724

)

 

$

 

 

$

(414,423

)


See accompanying notes to consolidated financial statements.




F-6



 


SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

Consolidated Statements of Cash Flows

 

 

 

Year ended

December 31,

 

 

Cumulative

from

June 10,

2010

(Inception) to

December 31,

 

 

 

2013

 

 

2012

 

 

2013

 

 

 

 

 

 

 

 

 

(Unaudited)

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,175,290

)

 

 

(3,686,838

)

 

 

(7,559,912

)

Adjustments to reconcile net less to net cash provided by (used in) operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Common stock issued for consulting fees

 

 

 

 

 

3,146,192

 

 

 

3,146,192

 

Common stock issued for directors fees

 

 

572,700

 

 

 

512,000

 

 

 

1,554,700

 

Common stock issued for services

 

 

490,533

 

 

 

128,000

 

 

 

1,088,533

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

108,050

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

77,612

 

 

 

(77,181

)

 

 

564,835

 

Accrued liabilities

 

 

893

 

 

 

20,843

 

 

 

156,823

 

Liabilities settled in stock

 

 

 

 

 

 

 

 

(5,965

)

Derivative liability

 

 

 

 

 

(34,137

)

 

 

 

Prepaid expenses

 

 

 

 

 

 

 

 

314,704

 

Due to related parties

 

 

34,749

 

 

 

(21,139

)

 

 

583,440

 

Net cash provided by (used in) operating activities

 

 

1,197

 

 

 

(12,260

)

 

 

(48,600

)

  

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Repayment of cash overdraft

 

 

(1,197

)

 

 

1,197

 

 

 

 

Common stock issued for cash

 

 

 

 

 

 

 

 

10,000

 

Proceeds from short-term notes payable

 

 

 

 

 

11,000

 

 

 

13,500

 

Proceeds from notes payable

 

 

 

 

 

 

 

 

30,000

 

Repayments of related party notes payable

 

 

 

 

 

 

 

 

(5,000

)

Capital contribution

 

 

 

 

 

 

 

 

100

 

Net cash provided by financing activities

 

 

(1,197

)

 

 

12,197

 

 

 

48,600

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Net change in cash

 

$

 

 

$

(63

)

 

$

 

Cash, beginning of period

 

 

 

 

 

63

 

 

 

 

Cash, end of period

 

$

 

 

$

 

 

$

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

 

 

$

 

Cash paid for income taxes

 

$

 

 

$

 

 

$

 

  

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash operating and financing activities

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of short term note payable to accounts payable

 

$

11,000

 

 

$

 

 

$

 

Common stock issued for settlement of note payable

 

$

35,000

 

 

$

 

 

$

 

Common stock issued for settlement of account payable

 

$

141,963

 

 

$

564,677

 

 

$

 

Common stock issued for settlement of accrued interest payable

 

$

13,500

 

 

$

 

 

$

 

Common stock issued for prepaid expenses

 

$

1,725

 

 

$

 

 

$

 

Common stock issued for settlement of related party payable

 

$

84,908

 

 

$

22,305

 

 

$

 

Common stock issued for purchase of intangible asset

 

$

82,000

 

 

$

 

 

$

 


See accompanying notes to consolidated financial statements.




F-7



 


SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2013 and 2012

 

Note 1 - Nature of Operations and Basis of Presentation

 

(a)

Organization

 

Sibling Group Holdings, Inc., referenced as the “SIBE,” “Company,” “we,” “our,” and “us” 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. Our name changed on May 14, 2007 to “Sibling Entertainment Group Holdings, Inc.” and on August 15, 2012 the Company name was changed to “Sibling Group Holdings, Inc.” Prior to December 30, 2010, our business plan called for focusing on large group sales of tickets to New York based entertainment shows.

 

On December 30, 2010, SIBE entered into a Securities Exchange Agreement with NEWCO4EDUCATION, LLC (“N4E”), a newly formed entity on June 10, 2010, and the members of N4E. Pursuant to the Securities Exchange Agreement, SIBE has acquired N4E in exchange for 8,839,869 shares of SIBE’s newly authorized convertible series common stock. For accounting purposes, the acquisition was 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 are 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 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 our series common stock pursuant to debt conversion agreements with the holders of the Company's Series AA Debentures and related warrants.

 

The Company focuses on providing services and technology aimed at increasing the performance in educational settings and operates through two (2) 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. It is based in Atlanta, Georgia. The Company is considered a development stage company in accordance with ASC 915, “Development Stage Entities”.

 

(b)

Basis of Presentation

 

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiary, N4E.All significant intercompany transactions and balances have been eliminated.

 

(c)

Going Concern

 

The 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 $7,559,912 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.

 

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 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.

 



F-8



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



Note 2 - Summary of Significant Accounting Policies

 

(a)

Use of Estimates

 

The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

 

(b)

Income Taxes

 

The Company utilizes Financial Accounting Standards Board Codification (‘ASC”), ASC 740, “Accounting for Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities, and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the period in which the differences are expected to affect taxable income.

 

(c)

Financial Instruments


In accordance with the requirements of ASC 820, “Financial Instruments, Disclosures about Fair Value of Financial Instruments,” the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, accounts payable, and amounts due to related parties approximate fair values due to the short-term maturity of the instruments.


Certain assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2013 are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements. FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.


The statement requires fair value measurement be classified and disclosed in one of the following three categories:


Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;


Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and


Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

 

(d)

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.

 



F-9



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



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 ASC 505-50.

 

(e)

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” of “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 excluded all common equivalent shares outstanding for warrants to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented.

 

(f)

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.

 

Note 3 – Acquisition Activity


We completed the acquisition of two internet properties, ClassChatter.com and ClassChatterLive.com. Both had been developed by an individual with a background in STEM and Blended Learning educational technology. The sites are being revised as to their appearance to be more intuitive as to their purpose. They are expected to become the base modules for a full, end-to-end solution for e-learning through the addition of applications that use the classroom membership such as grade books, behavior monitoring, class interaction and course interaction. The total consideration given was the issuance of 319,000 shares of restricted common stock, which has been fair valued at $58,000. The seller has been retained as a consultant and is expected to continue the development on a part time basis.


During the period ended September 30, 2013 we completed the acquisition of the assets and operations of PLC Consultants, LLC, whose business is focused on special education training and certification, primarily for education professionals in the K-12 area. The web site and underlying course library is being converted to a more conventional format. The total consideration given in the transaction was 300,000 shares of restricted stock, which has been fair valued at $24,000. We have retained one of their founders under a consulting agreement, and increased the scope of responsibility to include a) an expanded special education course library, and b) a similar library addressing the training needs of teaching professionals in other specialized curriculum.


Once these intangibles have been placed in service we will commence amortizing them over a three year period.

 

Note 4 - Due to Related Parties

 

On December 31, 2012 the amount due to related parties was $50,159, consisting of $10,000 for accrued compensation due to the former CEO and CFO, Neas Sessions and $40,159 due to Gerald F. Sullivan, former Chairman of the Board, for cash advances made to the company for operating expenses.  Both of these obligations were settled during 2013.

 



F-10



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



The Company entered into an agreement on October 1, 2011 with Stephen C. Carlson, former CEO, to convert debt for services as CEO for the period April 1, 2011 to September 30, 2011. The company owed him a balance of $16,000 at December 31, 2012, including a $5,000 note payable described below. These obligations were settled during 2013.

 

Notes Payable –Related Party

 

On January 21, 2011 Stephen C. Carlson loaned the Company $5,000 in the form of a Promissory Note with an annual interest rate of 3.0%. There was balance due of $5,000 due on this loan at December 31, 2012 and $1,621 in accrued interest on this note at December 31, 2012.

 

Note 5 - Short-Term Notes Payable

 

Short term notes payable consists of the following:


  

  

December 31,

  

  

  

2012

  

  

2011

  

Short Term Note

  

$

 2,500

  

  

$

48,500

  

Outstanding Debenture

  

 

30,000

  

  

 

30,000

  

Total Short Term Notes

  

$

32,500

  

  

$

78,500

  


At December 31, 2013 and December 31, 2012 the Company had a note payable balance of $2,500 and $48,500 respectively. This represents short term notes with annual interest rates ranging from 10% to 12%. At December 31, 2013 and 2012 these notes had accrued interest in the amount of $383 and $10,692, respectively.

 

On December 30, 2010, the Company entered into Conversion Agreements with all but one of the holders of the Series AA 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 one-hundred percent (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 $19,875 and $22,173 as of December 31, 2013 and 2012, respectively, which is in default.

 

Note 6 - Income Taxes

 

The Company accounts for income taxes under FASB ASC 740 –. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. ASC 740 also requires that uncertain tax positions are evaluated in a two-step process, whereby (1) it is determined whether it is more likely than not that the tax positions will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more likely-than-not recognition threshold, the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the related tax authority would be recognized.

 

The Company had net operating loss carryforwards available to offset future taxable income approximating $4.0 million as of December 31, 2013, which expire through 2033. The Company has determined that realization of a deferred tax asset that has resulted from the net operating losses is not likely and therefore a full valuation allowance has been recorded against this deferred income tax asset. There are no other material deferred tax positions recorded by the Company.

 



F-11



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



If the Company had more than a 50% change in ownership over a three year period, then the net operating loss carryforwards are limited as to its use under Internal Revenue Code Section 382. We believe the multiple events over the past few years have triggered Section 382 limitations, but no formal study has been under taken, as the Company has not filed its income tax returns in several years.


Income tax expenses and effective income tax rates for the years ended December 31, 2013 and 2012 consist of the following:

 

  

  

2013

  

  

2012

  

Current taxes (federal and state benefit)

  

$

(448,000

)

  

$

(1,401,000

)

Permanent differences

  

  

404,000

 

  

  

1,437,000

 

Valuation allowance (NOL utilized)

  

  

44,000

 

  

  

(36,000

)

Effective income tax rate

  

  

0

%

  

  

0

%


The effective income tax rate for the years ended December 31, 2013 and 2012 differ from the U.S. Federal statutory income tax rate as follows:


 

 

2013

 

 

2012

 

Federal statutory income tax rate

 

 

(34

%)

 

 

(34

%)

State income taxes, net of federal benefit

 

 

(4

%)

 

 

(4

%)

Permanent differences

 

 

34

%

 

 

39

%

Valuation Allowance ( benefit )

 

 

4

%

 

 

(1

%)

Effective income tax rate

 

 

0

%

 

 

0

%


The Company has not filed its tax returns for several years.

 

Note 7 – Reverse Merger with NEWCO4EDUCATION, LLC

 

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 will entitle 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 follows:

 

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 1 million membership interests in DR LLC. The Company's ownership interest in DR LLC was transferred to the Series AA debenture holders the next day as part of the settlement of those debt obligations (see 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 convertible debentures 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 one-hundred percent (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.

 



F-12



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



Note 8 - Capital Stock


On December 30, 2010, 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 on that date, were 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 converted into Common Stock upon a two-thirds vote by the holders of the Series Common Stock. The holders of Series Common Stock enjoyed 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 had the right to purchase a pro-rata portion of the Series Common Stock held by that individual for $1.00. If the individual terminated his employment before December 30, 2011, then the Company had the right to repurchase, or cancel, 67% of the Series Common Stock holdings subject to the Stock Restriction Agreement. If the individual terminated his employment between December 30, 2011 and December 31, 2012, then the Company had the right to repurchase, or cancel, 33.34% of his Series Common Stock holdings. These individuals were founders of the Company and were 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, by the trading price of $0.03 as of March 30, 2012. The compensation expense is reported as general and administrative expense in the statement of operations for the year ended December 31, 2012.

 

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.




F-13



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



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 connection 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 first quarter, 2011, the Company took steps to significantly reduce outstanding debts associated with the acquisition of N4E by issuance of the Company’s common stock as follows:

 

On January 14, 2011, the Company entered into an agreement with Mr. Richard Smyth, pursuant to which the Company issued 24,715 shares of common stock valued at $49,430, in payment of consulting services rendered to N4E in connection with the formation and development of the strategy and business plans of N4E.

 

On January 14, 2011, the Company entered into an agreement with Meshugeneh LLC, pursuant to which the Company issued 42,500 shares of common stock valued at $85,000 in payment of consulting services rendered to N4E in connection with the formation and development of the strategy and business plans of N4E.

 

On January 14, 2011, the Company entered into an agreement with Betsey V. Peterzell, pursuant to which the Company issued 10,750 shares of common stock valued at $51,500 in payment of legal services rendered to N4E.

 

On January 14, 2011, the Company entered into an agreement with Michael Baybak, pursuant to which the Company issued 20,000 shares of common stock valued at $40,000 for services rendered to the Company in connection with the acquisition of N4E.

 

On March 1, 2011, as amended June 1, 2011, the Company entered into an agreement with Viraxid Corporation, pursuant to which the Company issued 8,333 shares of common stock valued at $41,666 for accounting and bookkeeping services rendered to N4E.

 

On March 1, 2011, the Company entered into an agreement with Gerald F. Sullivan, Chairman, pursuant to which the Company issued 17,000 shares of common stock valued at $85,000 for services rendered to the Company in connection with the formation and development of strategy and business plans of N4E. These were issued on March 31, 2011.

 

On October 24, 2011, the Company entered into an agreement with Gerald F. Sullivan, Chairman, pursuant to which the Company issued 2,000 shares of common stock valued at $40,000, as an incentive bonus. These were issued on October 24, 2011.

 

On March 1, 2011, the Company entered into an agreement with Stephen C. Carlson, CEO, pursuant to which the Company issued 9,666 shares of common stock valued $48,334, for consulting services rendered to N4E in connection with the development of strategy and business plans of N4E and for services rendered to the Company as CEO during the first quarter of 2011. These were issued on March 31, 2011.

 

On October 1, 2011, the Company entered into an agreement with Stephen C. Carlson, CEO, pursuant to which the Company issued 5,967 shares of common stock valued $119,349 to convert debt for services as CEO for the period April 1, 2011 to September 30, 2011. These were issued on October 3, 2011.




F-14



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



On October 24, 2011, the Company entered into an agreement Stephen C. Carlson, CEO, pursuant to which the Company issued 2,000 shares of common stock valued at $40,000, as an incentive bonus. These were issued on October 24, 2011.

 

On March 1, 2011, the Company entered into an agreement with Oswald A. Gayle, CFO, pursuant to which the Company issued 4,722 shares of common stock valued at $23,614 for services rendered to the Company as CFO during the first quarter of 2011.

 

On October 1, 2011, the Company entered into an agreement with Oswald A. Gayle, CFO, pursuant to which the Company issued 6,611 shares of common stock valued at $132,235 to convert debt for services as CFO for the period April 1, 2011 to September 30, 2011.

 

On October 24, 2011, the Company entered into an agreement Oswald A. Gayle, CFO, pursuant to which the Company issued 2,000 shares of common stock valued at $40,000, as an incentive bonus. These were issued on October 24, 2011.

 

On October 24, 2011, the Company entered into an agreement with Dr. Amy Savage-Austin, a director, pursuant to which the Company issued 2,000 shares of common stock valued at $40,000 as an incentive bonus. These were issued on October 24, 2011.

 

On October 24, 2011, the Company entered into an agreement with Dr. Gerry L. Bedore, Jr., a key advisor, pursuant to which the Company issued 10,000 shares of common stock valued at $200,000 as an incentive bonus. These were issued on October 24, 2011.

 

On October 24, 2011, the Company entered into an agreement with Dr. Timothy G. Drake, a key advisor, pursuant to which the Company issued 10,000 shares of common stock valued at $200,000 as an incentive bonus. These were issued on October 24, 2011.

 

On November 18, 2011, the Company entered into an agreement with Robert Copenhaver, a director, pursuant to which the Company issued 10,000 shares of common stock valued at $130,000 as an incentive bonus. These were issued on November 18, 2011.

 

On November 18, 2011, the Company entered into an agreement with Michael Hanlon, a director, pursuant to which the Company issued 10,000 shares of common stock valued at $130,000 as an incentive bonus. These were issued on November 18, 2011.

 

On November 18, 2011, the Company entered into an agreement with William W. Hanby, a key advisor, pursuant to which the Company issued 10,000 shares of common stock valued at $130,000 as an incentive bonus. These were issued on November 18, 2011.

 

For the period January 1, 2011 through December 31, 2011, the Company sold 5,714 shares at a price of $0.0175 per share or $10,000 in the aggregate to one accredited investor.


During the year ended December 31, 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.




F-15



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



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, 14,947,216 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 120,055 shares of common stock to an individual in connection with compensation for services valued at $145,000.


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.


In December 2012, the Company issued 800,000 shares of common stock valued at $512,000 or $0.64 per share to various Board of Directors members for services. In addition the Company issued 750,000 shares of common stock valued at $480,000 or $0.64 per share to various members of the Board of Directors for services to be rendered in 2013.  The value of these shares will be expensed ratably in 2013.


In December 2012, the Company issued 200,000 shares of common stock to its Chief Executive Officer valued at $128,000 or $0.64 per share for past and future services.


In December 2012, the Company issued 80,000shares of common stock to two consultants valued at $51,200 or $0.64 per share for consulting services.


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


Through 2013 year-to- date, the Company issued the following shares of Common Stock:


On April 25, 2013, the Company issued 257,040 shares of common stock valued at $59,376 or $0.23 per share for the settlement of accounts payable.


On May 1, 2013, the Company issued 27,754 shares of common stock valued at $6,500 or $0.23 per share for consulting services.


On May 30, 2013, the Company issued 316,905 shares of common stock valued at $58,000 or $0.18 per share for the purchase of intangible assets.


On June 1, 2013, the Company issued 50,497 shares of common stock valued at $10,000 or $0.20 per share for consulting services.


On July 1, 2013, the Company issued 39,394 shares of common stock valued at $6,500 or $0.165 per share for consulting services pursuant to a Consulting Agreement.


On July 1, 2013, the Company issued 21,212 shares of common stock valued at $3,500 or $.165 per share for consulting services pursuant to a Consulting Agreement.




F-16



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



On August 1, 2013, the Company issued 26,860 shares of common stock valued at $6,500 or $0.2420 per share for consulting services pursuant to a Consulting Agreement.


On August 1, 2013, the Company issued 14,463 shares of common stock valued at $3,500 or $.2420 per share for consulting services pursuant to a Consulting Agreement.


On August 16, 2013, the Company issued 300,000 shares of common stock valued at $24,000 for the purchase of intangible assets pursuant to an Asset Purchase Agreement between the Company and the principals of PLC Consultants, LLC.


On August 17, 2013, the Company issued 14,463 shares of common stock valued at $3,500 or $.2420 per shares for consulting services pursuant to a Consulting Agreement.


On September 1, 2013, the Company issued 65,657 shares of common stock valued at $6,500 or $.099 per share for consulting services pursuant to a Consulting Agreement.


On September 1, 2013, the Company issued 35,354 shares of common stock valued at $3,500 or $.099 per share for consulting services pursuant to a Consulting Agreement.


On September 1, 2013, the Company issued 35,354 shares of common stock valued at $3,500 or $.099 per shares for consulting services pursuant to a Consulting Agreement.

 

On September 30, 2013 the Company issued 450,000 shares of common stock to Neal Sessions, valued at $.05 per share in conversion of all outstanding expenses, at an expense of $22,500 to the Company, in conjunction with his resignation from all positions with the Company.


On September 30, 2013 the Company issued 94,392 shares of common stock valued at $4,720 or $.05 as a one time bonus for work performed under a Consulting Agreement.


On September 30, 2013 the Company issued 300,183 shares of common stock valued at $15,009 or $.05 as a one time bonus for work performed under a Consulting Agreement.


On September 30, 2013 the Company issued 307,512 shares of common stock valued at $15,376 or $.05 as a one time bonus for work performed under a Consulting Agreement.


On September 30, 2013 the Company issued 50,000 shares of common stock valued at $2,500 or $.05 for the conversion of an outstanding debt.


During the three months ended December 31, 2013, the Company issued 8,197,517 shares of common stock pursuant to Consulting Agreements. The stock issued was fair valued at prices ranging from $0.04 to $0.12 per share for a total fair value of $402,044.


During the three months ended December 31, 2013, the Company issued 1,450,000 shares of common stock in accordance with the Company’s Board of Directors’ compensation policy. The shares issued were fair valued at prices ranging from $0.04 to $0.09 for a total fair value of $92,700.


During the three months ended December 31, 2013, the Company issued 1,250,000 shares of common stock in conversion of outstanding debts. The stock issued was fair valued at $0.09 per share for a total fair value of $93,702.


Note 9 – Commitments and Contingencies


During 2013, the Company entered into seven consulting agreements where the consultants will be paid a total of $35,000 per month. All fees will be paid in common stock on the first day of each month valued at 110% of the closing share price during the final ten trading days of the previous month.




F-17



SIBLING GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 2013 and 2012



Note 10 – Subsequent Events


During the period of January 1 through March 6, 2014, the Company issued 2,732,779 shares of common stock pursuant to Consulting Agreements. The stock issued was fair valued at prices ranging from $0.05 to $0.09 per share for a total fair value of $207,500.


During the period of January 1 through March 6, 2014, the Company issued 1,450,000 shares of common stock in accordance with the Company’s Board of Directors’ compensation policy. The shares issued were fair valued at prices ranging from $0.08 to $0.10 for a total fair value of $126,000.


During the period of January 1 through March 6, 2014, the Company issued 501,386 of common stock in conversion of outstanding debts. The stock issued was fair valued at prices ranging from $0.05 to $0.10 per share for a total fair value of $43,333.


During the period of January 1 through March 6, 2014, the Company issued 800,000 shares of common stock fair valued at $0.10 per share or $80,000 pursuant to an Asset Purchase Agreement.


During the period of January 1 through March 6, 2014, the Company issued 1,000,000 shares of common stock fair valued at $0.08 or $80,000 as part of an employment package with the Company’s new Chief Financial Officer.


During the period of January 1 through March 6, 2014, the Company sold 625,000 shares of common stock at $0.08 for a total fair value of $50,000. There were no stipulations, conditions or requirements under the sale.





F-18