Oxford City Football Club, Inc. - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Oxford City Football Club, Inc.	Financial_Report.xls
EX-31.2 - EXHIBIT 31.2 - Oxford City Football Club, Inc.	ex31_2.htm
EX-32.1 - EXHIBIT 32.1 - Oxford City Football Club, Inc.	ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - Oxford City Football Club, Inc.	ex31_1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended March 31, 2012

[ ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from __________ to __________

	Commission File Number: 333-153294

Smart Kids Group, Inc.

(Exact name of registrant as specified in its charter)

Florida	05-0554762
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

Harvard Square, One Mifflin Place 4th Floor, Cambridge, Massachusetts

(Address of principal executive offices)

(780) 222-6257

(Registrant’s telephone number, including area code)

Suite 234, 9768-170 St. Edmonton, AB Canada T5T 5L4

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

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

[ ] Large accelerated filer	[ ] Accelerated filer
[ ] Non-accelerated filer (Do not check if a smaller reporting company)	[X] Smaller reporting company

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 18,022,357 as of May 15, 2012.

Table of Contents

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements	F-1
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	6
Item 4:	Controls and Procedures	6
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	8
Item 1A:	Risk Factors	8
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3:	Defaults Upon Senior Securities	9
Item 4:	Mine Safety Disclosures	9
Item 5:	Other Information	9
Item 6:	Exhibits	9

Table of Contents

PART I - FINANCIAL INFORMATION

SMART KIDS GROUP, INC.

(A Development Stage Company)

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31,			June 30,
	2012			2011
ASSETS
Current assets
Cash	$	4,573		$	4,595
Prepaids		316,628			11,750
Total current assets		321,201			16,345
Fixed assets
Equipment, net of accumulated depreciation of $964 and $737, respectively		170			340
Investment in unconsolidated investee		—			99
Other assets
Deferred financing fee		25,000			—
Software development costs, net of accumulated amortization of $3,438 and $1,375, respectively		2,063			4,125
Total assets	$	348,434		$	20,909
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	228,312		$	215,751
Accrued expenses – related parties		598,141			572,206
Total current liabilities		826,453			787,957

Stockholders' deficit
Preferred stock: $0.0001 par value; authorized 40,000,000 shares; issued and outstanding: 0 and 0, respectively		—			—
Common stock: $0.0001 par value; authorized 1,800,000,000 shares; issued and outstanding: 18,022,357 and 5,387,025, respectively		1,802			539
Additional paid-in capital		3,561,803			2,362,447
Common stock payable		4,136			171,157
Accumulated deficit during the development stage		(4,045,760	)		(3,301,191	)
Total stockholders' deficit		(478,019	)		(767,048	)
Total liabilities and stockholders' deficit	$	348,434		$	20,909

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

F-1

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SMART KIDS GROUP, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Operations

(Unaudited)

													From inception
	For the three months ended						For the nine months ended						(February 11, 2003)
	March 31,						March 31,						to March 31,
	2012			2011			2012			2011			2012
				(Restated)						(Restated)
Operating expenses
Salaries and wages	$	33,000		$	48,225		$	104,807		$	73,631		$	1,462,761
Legal and professional fees		191,821			128,560			537,257			182,426			1,542,558
General and administrative expense		12,881			8,721			37,011			19,423			186,103
Sub-licensing expense		15,000			15,000			45,000			44,835			375,137
Allowance on stock receivable		—			—			—			57,040			57,040
Impairment of equity investment		—			—			13,273			—			13,273
Total operating expenses		252,702			200,506			737,347			377,355			3,636,872

Loss before other expenses		(252,702	)		(200,506	)		(737,347	)		(377,355	)		(3,640,372	)

Other expenses
Finance and interest expense		—			(8,057	)		(7,221	)		(55,770	)		(341,143	)
Loss on conversion of AP, accrued expenses and note payable		—			(4,745	)		—			(67,745	)		(67,745	)
Total other expenses		—			(12,802	)		(7,221	)		(123,515	)		(408,888	)

Net loss	$	(252,702	)	$	(213,308	)	$	(744,568	)	$	(500,870	)	$	(4,045,760	)
Net loss per common share- basic and dilutive	$	(0.02	)	$	(0.05	)	$	(0.08	)	$	(0.17	)
Weighted average number of common shares outstanding- basic and dilutive		10,547,517			3,922,942			9,917,145			3,002,646

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

F-2

Table of Contents

SMART KIDS GROUP, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

							From inception
	Nine months ended						(February 11, 2003)
	March 31,						to March 31,
	2012			2011			2012
					(Restated)
Cash flows from operating activities:
Net loss	$	(744,568	)	$	(500,870	)	$	(4,045,760	)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock- services		360,290			92,614			610,086
Issuance of common stock- financing fees		—			25,900			294,400
Loss on conversion of AP, accrued expenses and note payable		—			67,745			67,745
Allowance on stock receivable		—			57,040			57,040
Depreciation and amortization		2,233			858			12,977
Deferred financing fee		—			15,000			15,000
Impairment of equity investment		13,273			—			13,273
Fair value of warrants		43,986			—			43,986
Changes in current assets and liabilities:
Organizational costs		—			—			(8,575	)
Prepaid expense		(1,767	)		(500	)		(1,767	)
Accounts payable and accrued expenses		73,508			45,804			545,632
Accrued expenses- related parties		83,661			41,223			1,478,816
Net cash used in operating activities		(169,384	)		(155,186	)		(917,147	)

Cash flows from investing activities:
Investment in unconsolidated investee		(13,173	)		—			(13,273	)
Purchase of equipment		—			—			(1,134	)
Net cash used in investing activities		(13,173	)		—			(14,407	)

Cash flows from financing activities:
Proceeds from the issuance of stock		182,535			109,793			890,258
Proceeds from equity draw down agreement		—			49,580			45,020
Proceeds from note payable		—			—			5,849
Payment on deferred financing fees		—			—			(5,000	)
Net cash provided by financing activities		182,535			159,373			936,127

(Decrease) increase in cash		(22	)		4,187			4,573
Cash, beginning of period		4,595			112			—
Cash, end of period	$	4,573		$	4,299		$	4,573

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

F-3

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SMART KIDS GROUP, INC.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(Continued)

					From inception
	Nine months ended				(February 11, 2003)
	March 31,				to March 31,
	2012		2011		2012
			(Restated)
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	—	$	—	$	—
Income taxes	$	—	$	—	$	—

Supplemental disclosure of non-cash investing and financing activities:
Stock issued for prepaid expenses	$	304,878	$	91,801	$	316,628
Stock issued for equity draw down	$	—	$	45,418	$	63,650
Stock issued for software development	$	—	$	5,500	$	5,500
Stock issued for AP, accrued expenses, and note payable	$	118,672	$	21,500	$	977,344
Stock issued for deferred financing fees	$	25,000	$	—	$	25,000
Stock issued for finders’ fees	$	84,853	$	—	$	84,853
Payment of accounts payable by shareholder	$	—	$	—	$	240,000

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

F-4

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SMART KIDS GROUP, INC.

(A Development Stage Company)

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Smart Kids Group, Inc. (“the Company”) was formed on February 11, 2003 (date of inception) under the laws of the State of Florida. The Company licenses technology and develops educational content and software.

As of March 31, 2012, the Company is a development stage company. A development stage enterprise is a company that is devoting substantially all of its efforts to establishing a new business and either planned principal operations have not commenced or planned principal operations have commenced but there has been no significant revenue. From February 11, 2003 (date of inception) through March 31, 2012, the Company did not realize any revenues and has not commenced its principal operations.

On April 23, 2010, the Company purchased ownership in Smart Kids Productions Inc., a Canadian corporation, incorporated on May 4, 2009, of which the Company had a 40% interest ownership. On February 24, 2012, the Company decided to release its 40% interest in Smart Kids Productions to its 60% owner for $1. The corporation had no assets or liabilities.

On October 14, 2011, the Company created SKGI Acquisition Corp., a Nevada corporation, a wholly-owned subsidiary of the Company. This subsidiary has been dormant as of March 31, 2012. The subsidiary has no assets or liabilities.

On October 17, 2011, the Company, entered into a merger transaction with Paragon GPS Inc., a Delaware corporation (“Paragon”), pursuant to an Agreement and Plan of Merger, by and among the Company, SKGI Acquisition Corp., and Paragon as filed in a Form 8-K on October 18, 2011, and amended on October 26, 2011. On January 4, 2012, the Company elected to terminate the agreement as filed in a Form 8-K on January 5, 2012.

On January 26, 2012, the Company entered into an agreement (the “Agreement”) with WMX Group, Inc. (“WMX”), amended on February 7, 2012 as filed in a Form 8-K on February 7, 2012. Pursuant to the Agreement, WMX agreed to provide consulting services to the Company in exchange for a 45% non-dilutable equity stake in the Company. On March 8, 2012, the Company and WMX entered into a termination agreement (the “Termination Agreement”) to terminate the Agreement and Addendum. The parties are in negotiations to structure a reverse merger agreement that would obviate the consulting arrangement and the business relationship reflected by the Agreement and Addendum as filed in a Form 8-K on March 9, 2012. As a result of the Termination Agreement, the parties returned all shares issued under the Agreement and Addendum as of March 31, 2012.

On April 30, 2012, the Company entered into an Agreement and Plan of Merger with WMX as filed in a Form 8-K on May 4, 2012. See Note 7.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The interim unaudited financial statements should be read in conjunction with the financial statements included in the Form 10-K for the year ended June 30, 2011. In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made. Operating results for the three and nine months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ended June 30, 2012.

The reporting currency of the Company is the U.S. dollar. The Company has one bank account located in Canada and as a result, has re-measured the account from Canadian dollars to U.S. dollars. The resulting translation adjustment has been recorded as an operating expense.

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As used in these notes to the condensed financial statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to Smart Kids Group, Inc. and, unless the context indicates otherwise, its consolidated subsidiary, SKGI Acquisition Corp. These condensed consolidated financial statements include all accounts of the Company and its subsidiary. All significant intercompany transactions and accounts have been eliminated in consolidation. Significant accounting policies disclosed therein have not changed except as noted below.

Use of Estimates

The preparation of financial information in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial information and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Going Concern

The accompanying unaudited condensed financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. The Company has not begun generating revenue, is considered a development stage company, has experienced recurring net operating losses, had a net loss of $744,568 and $500,870 for the nine months ended March 31, 2012 and 2011, respectively, accumulated deficit of $4,045,760 and a working capital deficiency of $505,252 at March 31, 2012.

Management believes that additional capital will be required to fund operations through December 31, 2012 and beyond, as it attempts to generate revenues, and develops new products. Management intends to raise capital through additional equity offerings. There can be no assurance that the Company will be successful in obtaining financing at the level needed or on terms acceptable to the Company. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company’s operations are subject to certain additional risks and uncertainties including, among others, dependence on outside suppliers and manufacturers, competition, dependence on its exclusive license and relationship with the licensor, uncertainties regarding patents and proprietary rights, dependence on key personnel, and other business risks. In addition, there is no assurance, assuming the Company is successful in raising additional capital that the Company will be successful in achieving profitability or positive cash flow.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2012 and June 30, 2011 the Company had no cash equivalents.

Stockholders' Equity

The Company has properly charged its offering costs directly attributable to a proposed or actual offering of securities against the gross proceeds of the offerings. We have recorded such costs as reduction of equity.

Adopted

In May 2011, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update that amends the accounting standard on fair value measurements. The accounting standard update provides for a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. generally accepted accounting principles and International Financial Reporting Standards. The accounting standard update changes certain fair value measurement principles, clarifies the application of existing fair value measurement, and expands the fair value measurement disclosure requirements, particularly for Level 3 fair value measurements. The amendments in this accounting standard update are to be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011. The adoption of this accounting standard update became effective for the reporting period beginning January 1, 2012. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows

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In June 2011, the FASB issued an accounting standard update which requires the presentation of components of other comprehensive income with the components of net income in either (1) a continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or (2) two separate but consecutive statements. This accounting standard update eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity, and is effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05,” to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows

Issued

In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, result of operations or cash flows.

In December 2011, the FASB issued Accounting Standard Update 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification” to clarify that when a parent (reporting entity) ceases to have a controlling financial interest (as described in ASC subtopic 810-10, Consolidation) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in subtopic 360-20, Property, Plant and Equipment, to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. Under this new guidance, even if the reporting entity ceases to have a controlling financial interest under subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. This amendment is applicable to us prospectively for deconsolidation events occurring after June 15, 2012. The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations, or cash flows.

In December 2011, The FASB issued Accounting Standards Update 2011-11, "Disclosures about Offsetting Assets and Liabilities." This update requires entities to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope of this update includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and lending arrangements. The Company is required to adopt this update retrospectively for periods beginning after January 1, 2013. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2013. Management does not anticipate that adoption will have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.

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NOTE 2. CORRECTION FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2011

The financial statements for the three and nine months ended March 31, 2011 have been restated for the following matters. Prior to the issuance of the original filing on Form 10-Q for the quarter ended March 31, 2011, the Company determined that software development costs of $406,612 and previously capitalized cost of goods sold of $475,558 reported in the Company’s annual report in Form 10-K for the year ended June 30, 2010 included sub-licensing fees of $270,000 ($30,000 incurred for the year ended June 30, 2010) and officer salaries of $612,200 ($28,000 incurred for the year ended June 30, 2010) did not meet the capitalization criteria of the FASB ASC 350-40 “Internal Use Software”. As of March 31, 2011, the prior auditor was no longer independent and management determined that the financial statements for the year ended June 30, 2010 needed to be re-audited. In January 2011, the Company engaged a new auditor to re-audit the financial statements as of and for the year ended June 30, 2010 and audit the financial statements as of and for the year ended June 30, 2011 concurrently. Additionally, an accounting firm was engaged that specializes in smaller reporting companies, to perform its internal bookkeeping and external financial reporting.

Additionally, prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on conversion of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of the accounts payable with 354,864 shares of common stock. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees were expensed during the year ended June 30, 2011. In accordance with Staff Accounting Bulletin Topic 5A, Expenses of Offering, this should have been charged against the gross proceeds of the offering. Additionally common stock payable valued at $7,500 for financing fees was unaccounted for and issued in March 2012. In July 2011, the Company entered into a Common Stock Purchase Warrant agreement with the same vendor. As of December 31, 2011, the fair value of the warrants of $43,986 and expenses of $24,700 were not recognized, resulting in an understatement of professional fees for the period ended December 31, 2011. As of the date of this current report, management of the Company has not had sufficient time to determine the impact of these errors on its financial condition, results of operations or cash flows reporting in prior periods. Accordingly, the financial condition and results of operations disclosed in the Company’s Annual Report on Form 10-K as of and for the year ended June 30, 2011 and the Company’s Quarterly Reports on Form 10-Q for the periods ended September 30, 2011 and December 31, 2011 will be amended subsequent to the filing of this report.

The Company determined that there were changes in the Company’s Balance Sheet, Statement of Operations, and Statement of Cash Flows for the three and nine months ended March 31, 2011. Accordingly, the unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2011 have been restated as disclosed.

The following errors were found for the three and nine months ended March 31, 2011:

Software development costs of $6,562 previously capitalized did not meet the capitalization criteria of FASB ASC 350-40 “Internal use Software”;
A 40% investment in Smart Kids Productions Inc., a Canadian company, of $99 was not recognized;
Accounts payable and accrued expenses were overstated by $76,226 primarily due to the payment of accounts payable by a shareholder;
Due to related parties was understated by $42,292 related to accrued officer compensation;
Common stock decreased $47,927 due to a 100 to 1 stock split in October 2011;
Additional paid-in capital was overstated by $102,014 off set by an increase of $47,927 due to a 100 to 1 stock split in October 2011;
Common stock payable was understated by $74,000 due to the granting of stock for outstanding accounts payable;
Common stock receivable was overstated by $1,980 in connection with the Equity Drawdown Agreement;
Accumulated deficit during the development stage was overstated by $47,749;
Other comprehensive loss of $5,756 was not included in accumulated deficit during the development stage;
Operating expenses for the three months ended March 31, 2011 were overstated by $2,180. This was due to the decrease in salaries and wages of $3,701, reclassification of depreciation expense of $1,682, and sub-licensing expense of $25,757. This was offset by the increase in legal and professional fees of $1,972 and general and administrative expenses of $26,988;
Operating expenses for the nine months ended March 31, 2011 were overstated by $42,950. This was due to the decrease in salaries and wages of $4,131, legal and professional fees of $4,666, allowance of stock receivable of $33,560, and re-classification of depreciation expense of $1,795. This was offset by the increase of general and administrative expenses of $1,202;

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Finance and interest expense was understated by $12,500 and overstated by $14,400 for the three and nine months ended March 31, 2011;
Loss on conversion of debt was understated by $63,000 for the nine months ended March 31, 2011;
Foreign currency translation adjustment of $344 and $477 should have been reported as an operating expense for the three and nine months ended March 31, 2011;
Net loss was understated by $11,743 and overstated by $32,206 as a result of the errors mentioned above for the three and nine months ended March 31, 2011;
Issuance of common stock for services was understated by $69,089 due to the amortization stock issued for prepaid expenses;
Issuance of common stock for financing fees were understated by $7,500 due to an unrecorded stock payable;
Deferred financing fees were understated by $15,000 due to the expensing of the fee as of March 31, 2011;
Depreciation and amortization was overstated by $937 due to the incorrect amortization of software development costs;
Cash used for prepaid expenses were overstated by $72,052 due to the issuance of stock for prepaid expenses instead of cash;
Cash used for accounts payable and accrued expenses were understated by $15,597; and
The proceeds from the issuance of stock were overstated by $237 due to a foreign exchange translation.

The effects on our previously issued March 31, 2011 financial statements are as follows:

Condensed Balance Sheet

	March 31,						March 31,
	2011						2011
	As Filed			Adjustments			Restated
ASSETS
Cash	$	4,299		$	—		$	4,299
Prepaid expenses		92,301			—			92,301
Fixed assets		397			—			397
Investment in unconsolidated investee		—			99			99
Software development costs		11,375			(6,562	)		4,813
Total assets	$	108,372		$	(6,463	)	$	101,909

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and accrued expenses	$	229,378		$	(76,226	)	$	153,152
Due to related parties		510,729			42,292			553,021
Total liabilities		740,107			(33,934	)		706,173
Common stock		48,411			(47,927	)		484
Additional paid-in capital		2,440,974			(54,087	)		2,386,887
Stock payable		20,049			74,000			94,049
Stock receivable		(4,420	)		1,980			(2,440	)
Accumulated deficit during the development stage		(3,130,993	)		47,749			(3,083,244	)
Other comprehensive loss		(5,756	)		5,756			—
Total stockholders’ deficit		(631,735	)		27,471			(604,264	)
Total liabilities and stockholders’ deficit	$	108,372		$	(6,463	)	$	101,909

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Condensed Statement of Operations and Comprehensive Loss

		For the Three Months Ended March 31, 2011						For the Three Months Ended March 31, 2011
		As Filed			Adjustments			Restated
Salaries and wages	$	51,926		$	(3,701	)	$	48,225
Legal and professional fees		126,588			1,972			128,560
Depreciation and amortization		1,682			(1,682	)		—
General and administrative expenses		(18,267	)		26,988			8,721
Sub-licensing expense		40,757			(25,757	)		15,000
Total operating expense		202,686			(2,180	)		200,506
Loss before other expenses		(202,686	)		2,180			(200,506	)
Finance and interest expense		6,343			(14,400	)		(8,057	)
Loss on conversion of debt		(4,745	)		—			(4,745	)
Total other expense		1,598			(14,400	)		(12,802	)
Net loss		(201,088	)		(12,220	)		(213,308	)
Foreign currency translation adjustment		(477	)		477			—
Total comprehensive income	$	(201,565	)	$	(11,743	)	$	(213,308	)

Net loss per common share- basic and diluted	$	(0.05	)				$	(0.05	)
Weighted average number of common shares outstanding- basic and diluted		3,922,942						3,922,942

		For the Nine Month Ended March 31, 2011						For the Nine Months Ended March 31, 2011
		As Filed			Adjustments			Restated
Salaries and wages	$	77,762		$	(4,131	)	$	73,631
Legal and professional fees		187,092			(4,666	)		182,426
Depreciation and amortization		1,795			(1,795	)		—
General and administrative expenses		18,221			1,202			19,423
Sub-licensing expense		44,835			—			44,835
Allowance of stock receivable		90,600			(33,560	)		57,040
Total operating expense		420,305			(42,950	)		377,355
Loss before other expenses		(420,305	)		42,950			(377,355	)
Finance and interest expense		(43,270	)		(12,500	)		(55,770	)
Loss on conversion of debt		(4,745	)		(63,000	)		(67,745	)
Total other expense		(48,015	)		(75,500	)		(123,515	)
Net loss		(468,320	)		32,550			(500,870	)
Foreign currency translation adjustment		(344	)		344			—
Total comprehensive loss	$	(468,664	)	$	32,206		$	(500,870	)

Net loss per common share- basic and diluted	$	(0.16	)				$	(0.17	)
Weighted average number of common shares outstanding- basic and diluted		3,002,646						3,002,646

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Condensed Statement of Cash Flows

	For the Nine Months Ended March 31, 2011						For the Nine Months Ended March 31, 2011
	As Filed			Adjustments			Restated
Net loss	$	(468,320	)	$	(32,550	)	$	(500,870	)
Issuance of common stock- services		23,525			69,089			92,614
Issuance of common stock- financing fees		18,400			7,500			25,900
Deferred financing fees		—			15,000			15,000
Loss on conversion of AP, accrued expenses and note payable		4,745			63,000			67,745
Allowance of stock receivable		90,600			(33,560	)		57,040
Depreciation and amortization		1,795			(937	)		858
Prepaid expense		71,552			(72,052	)		(500	)
Accounts payable and accrued expenses		61,401			(15,597	)		45,804
Accrued expenses-related parties		41,223			—			41,223
Net cash used in operating activities		(155,079	)		(107	)		(155,186	)

Proceeds from the issuance of stock		110,030			(237	)		109,793
Proceeds from equity draw down		49,580			—			49,580
Net cash provided by financing activities		159,610			(237	)		159,373
Effect of exchange rate		(344	)		344			—
Increase in cash		4,187			—			4,187
Cash, beginning of year		112			—			112
Cash, end of period	$	4,299		$	—		$	4,299

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NOTE 3. PREPAID EXPENSE

As of March 31, 2012 and June 30, 2011, the Company had prepaid expenses of $316,628 and $11,750. For the nine months ended March 31, 2012, prepaid expense of $594,000 was paid through the issuance of the Company’s common stock of which $290,889 has been expensed.

NOTE 4. UNCONSOLIDATED INVESTEE

As of September 30, 2011, the Company paid $13,174 to its unconsolidated investee, Smart Kids Productions, (“SK Productions”) as an investment. The Company has an agreement with SK Productions for the re-packaging of the Company’s intellectual property relating to Be Alert Bert®. As of December 31, 2011, the Company determined that its investment in SK Productions should be fully impaired due to Production’s continued net loss, and recognized an impairment of unconsolidated investees of the $13,173 investment, and the initial investment of $99 in May 2010. On February 24, 2012, the Company decided to release its 40% interest in Smart Kids Productions to its 60% owner for $1. The corporation had no assets or liabilities.

NOTE 5. RELATED PARTY TRANSACTIONS

Accrued expenses – related parties

	March 31,		June 30,
	2012		2011
Unpaid officer compensation	$	584,299	$	549,023
Sub-license expense		13,842		23,183
Total accrued expenses – related parties	$	598,141	$	572,206

As of March 31, 2012 and June 30, 2011, the Company incurred amounts due to related parties of $598,141 and $572,206. The liability consists of payments due under employment agreements of $584,299 to our Chief Executive Officer and Chief Operating Officer and sub-licensing fees of $13,842 for the intellectual property with Smart Kids International Holdings, Inc., (“SKIH”). As of March 31, 2012 and June 30, 2011, $475,558 of unpaid officer compensation is due to the former Chief Executive Officer, Paul Andrew Ruppanner who was terminated pursuant to Section 1.7 (c)(4) of his employment agreement dated August 1, 2005 (Exhibit 10-4) as filed in an Form 8-K dated April 27, 2010. The remaining $108,740 as of March 31, 2012, is due to our Chief Operating Officer. All accrued expenses – related parties have been expensed in the Condensed Consolidated Statement of Operations in the period incurred.

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NOTE 6. RESERVE EQUITY FINANCING AGREEMENT

On March 12, 2012, the Company entered into a Reserve Equity Financing Agreement and a Registration Rights Agreement (the “Agreements”) with AGS Capital Group, LLC (the “Investor”) to purchase up to $20 million of the Company’s common stock. The Company plans to file a registration statement to register the AGS Capital shares and other equity capital requirements. The Investor commitment provides the Company with the flexibility to obtain capital in increments of up to $500,000, subject to trading volume limitations, as growth capital is needed. The facility sets the purchase price at 92% of the Market Price as defined in the Reserve Equity Financing Agreement attached hereto. The Company expects to fully utilize the $20,000,000 Commitment Amount in order to accelerate project milestones and fund corporate growth.

In connection with Agreements, the Company required to issue $25,000 worth of restricted stock to Investor prior to the execution of the Agreements for the Investor’s structuring, legal, administrative and due diligence costs associated with the proposed transaction. The Company issued 312,500 shares of restricted common stock valued at $0.08 per share or $25,000 to the Investor on the February 13, 2012 as payment of deferred financing fees. The Company anticipates starting receive future funding after completing the Merger with WMX Group, Inc. as disclosed in Note 8.

NOTE 7. STOCKHOLDERS’ EQUITY

The authorized common stock of the Company consists of 1,800,000,000 shares of common stock with par value of $0.0001 and 40,000,000 shares of preferred stock. As of March 31, 2012 and June 30, 2011 the Company had 18,022,357 and 5,387,025 common stock and zero preferred stock outstanding.

In October 2011, upon majority of votes by the Company’s stockholders, the Company affected a 100 to 1 reverse stock split of its outstanding common stock. All share amounts have been retroactively restated to reflect this reverse split. The reverse split was approved by FINRA on December 12, 2011 and effected in January 2012.

On August 8, 2011, the Company issued 600,000 (post split) shares of restricted common stock valued at $0.22 (post split) per share or $132,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 13, 2011, the agreement date.

On August 8, 2011, the Company issued 300,000 (post split) shares of restricted common stock valued at $0.22 (post split) per share or $66,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 25, 2011, the agreement date.

On August 8, 2011, the Company issued 350,000 (post split) shares of restricted common stock valued at $0.25 (post split) per share or $87,500 as a prepayment of consulting services. The shares were valued at the fair market value on July 20, 2011, the agreement date.

On August 8, 2011, the Company issued 600,000 (post split) shares of restricted common stock valued at $0.25 (post split) per share or $150,000 as a prepayment of consulting services. The shares were valued at the fair market value on July 19, 2011, the agreement date. In accordance with the consulting agreement, an additional 600,000 (post split) shares are due contingent upon the Company’s stock value exceeding a minimum of $0.03 per share for 20 consecutive days. The additional 600,000 shares were issued on March 29, 2012 and value at $0.1 per share or $60,000 as professional expense. The shares were valued at the fair market value on March 6, 2012, the 20^th consecutive day the Company’s stock value exceeding a minimum of $0.03 per share.

On August 8, 2011, the Company issued 50,000 (post split) shares of restricted common stock valued at $0.23 (post split) per share or $11,500 as a prepayment of consulting services. The shares were valued at the fair market value on July 8, 2011, the agreement date.

On August 8, 2011, the Company issued 300,000 (post split) shares of restricted common stock valued at $0.19 (post split) per share or $57,000 as a prepayment of consulting services. The shares were valued at the fair market value on September 1, 2011, the agreement date.

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On August 10, 2011, the Company issued 13,333 (post split) shares of restricted common stock valued at $0.15 (post split) per share or $2,000 for consulting services. The shares were valued at the fair market value on July 30, 2011 per the terms of the agreement.

On August 17, 2011, the Company issued 540,000 (post split) shares of restricted common stock valued at $0.12 (post split) per share or $64,800 for finders’ fees and recorded as reduction of equity. The shares were valued at the fair market value on April 28, 2011, the agreement date.

On August 17, 2011, the Company issued 125,000 (post split) shares of restricted common stock for cash consideration of approximately $0.04 (post split) per share or $5,283.

On August 17, 2011, the Company issued 25,000 (post split) shares of restricted common stock valued at $0.20 (post split) per share or $5,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 17, 2011, the grant date.

On August 17, 2011, the Company issued 513,000 (post split) shares of restricted common stock for cash consideration of approximately $0.11 (post split) per share or $58,246.

On September 14, 2011, the Company issued 13,334 (post split) shares of restricted common stock valued at $0.19 (post split) per share or $2,533 for consulting services. The shares were valued at the fair market value on August 31, 2011, per the terms of the agreement.

On September 22, 2011, the Company issued 400,000 (post split) shares of restricted common stock valued at $0.11 (post split) per share or $44,000 as a prepayment of consulting services. The shares were valued at the fair market value on August 19, 2011, the agreement date.

On September 22, 2011, the Company issued 10,000 (post split) shares of restricted common stock valued at $0.15 (post split) per share or $1,500 for services. The shares were valued at the fair market value on September 21, 2011, the agreement date.

On October 25, 2011, the Company issued 380,000 (post split) shares of restricted common stock valued at $0.13 (post split) per share or $49,400 as payment for accrued sub-licensing fees. The shares were valued at the fair market value on October 14, 2011, the grant date.

On October 25, 2011, the Company issued 300,000 (post split) shares of restricted common stock for cash consideration of approximately $0.10 (post split) per share or $29,406.

On October 25, 2011, the Company issued 468,825 (post split) shares of restricted common stock valued at $0.13 (post split) per share or $60,947 as payment for outstanding accounts payables. The shares were valued at the fair market value on October 14, 2011, the grant date.

On December 5, 2011, the Company issued 150,000 (post split) shares of restricted common stock valued at $0.05 (post split) per share or $7,500 as payment for accrued sub-licensing fees. The shares were valued at the fair market value on December 2, 2011, the grant date.

On December 29, 2011, the Company purchased 3,000 (post split) shares of its common stock for $1.00. Concurrently with the purchase, the shares were retired. The shares were originally valued at $300.

On February 2, 2012, the Company issued 520,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $51,463.

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On February 2, 2012, the Company issued 25,000 shares of restricted common stock valued at $0.05 per share or $1,250 for finders’ fees and recorded as reduction of equity. The shares were valued at the fair market value on December 4, 2011, the grant date.

On February 8, 2012, the Company issued 20,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $2,030.

On February 13, 2012, the Company issued 100,000 shares of restricted common stock valued at $0.01 per share or $1,220 as payment for services. The shares were valued on January 22, 2012, the agreement date.

On February 13, 2012, the Company issued 312,500 shares of restricted common stock valued at $0.08 per share or $25,000 as payment of deferred financing fees in accordance with that filed in a Form 8-K on March 23, 2012. The shares were valued on February 12, 2012, the date of the agreement.

On February 14, 2012, the Company issued 82,730,482 shares of restricted common stock in accordance with an agreement with WMX for consulting services in exchange for a 45% non-dilutable equity stake in the Company. The agreement was terminated on March 8, 2012, and all shares returned as of March 31, 2012.

On February 22, 2012, the Company issued 30,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $2,986.

On February 23, 2012, the Company issued 1,666,667 shares of restricted common stock for cash consideration of approximately $0.003 per share or $5,038.

On February 23, 2012, the Company issued 22,500 shares of restricted common stock valued at $0.11 per share or $2,363 for finders’ fees and recorded as reduction of equity. The shares were valued on February 22, 2012, the grant date.

On February 23, 2012, the Company issued 45,000 shares of restricted common stock valued at $0.11 per share or $4,725 as payment for accrued officer compensation. The shares were valued on February 22, 2012, the grant date.

On February 27, 2012, the Company issued 27,000,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $27,189. The Company issued 26,730,000 shares in error due to issuing the shares at pre-reverse split amounts. The shares are being returned to the Company as of March 31, 2012.

On February 27, 2012, the Company issued 354,864 shares of free trading common stock valued at $0.19 per share or $66,500 as payment for services. The shares were valued on November 16, 2010, the grant date.

On February 27, 2012, the Company issued 199,819 shares of free trading common stock valued at $0.0001 per share or $19.50 upon the exercising of 194,955 warrants.

On March 13, 2012, the Company issued 200,000 shares of restricted common stock valued at $0.01 per share or $2,440 for finders’ fees and recorded as reduction of equity. The shares were valued on January 31, 2012, the grant date.

On March 13, 2012, the Company issued 183,322 shares of restricted common stock for cash consideration of approximately $0.03 per share or $5,540.

On March 13, 2012, the Company issued 300,000 shares of restricted common stock valued at $0.12 per share or $36,000 for prepaid services. The shares were valued on March 1, 2012, the issuance date per agreement.

On March 29, 2012, the Company issued 30,000 shares of restricted common stock valued at $0.25 per share or $7,500 for finders’ fees and recorded as reduction of equity. The shares were valued on October 23, 2010, the grant date.

On March 29, 2012, the Company issued 600,000 shares of restricted common stock valued at $0.10 per share or $60,000 for services. The shares were valued on March 6, 2012, the date the Company’s stock value exceeded a minimum of $0.03 per share for 20 consecutive days per the terms of a service agreement.

On March 29, 2012, the Company issued 2,550,000 shares of restricted common stock for cash consideration of approximately $0.01 per share or $25,704.

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On March 29, 2012, the Company issued 50,000 shares of restricted common stock valued at $0.13 per share or $6,500 for finders’ fees and recorded as reduction of equity. The shares were valued on November 16, 2011, the date of the agreement.

The Company received cash consideration of $2,006 for the purchase of restricted common stock. The shares have not been issued as of March 31, 2012, and have been properly recorded as stock payable.

The Company granted shares of common stock for services of $2,130. The shares have not been issued as of March 31, 2012, and have been properly recorded as stock payable.

Warrants

In July 2011, the Company issued 200,000 warrants with an exercise price of $0.0001 per share for seven years in connection with unpaid legal fees. The warrants vested immediately and were fair valued at $43,986. As of March 31, 2012, 199,819 warrants were exercised.

The fair value of the warrants were estimated on the date of grant using the Black-Scholes option valuation model that uses the assumption noted in the following table. Expected volatilities are based on volatilities from a comparable company given the limited historical stock information of the Company. The expected term of the warrant granted is estimated at half of the contractual term and represents the period of time that the warrant granted are expected to be outstanding. The risk-free rate for the period within the contractual life of the warrant is based on the U.S. Treasury bond rate in effect at the time of grant for bonds with maturity dates at the estimated term of the warrant.

	March 31, 2012
Expected volatility		369.56	%
Expected dividends		—
Expected term (in years)		1.00
Risk-free rate		0.170	%

Warrants		Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
	Outstanding at June 30, 2011		—		$	—			$	—
	Granted		200,000			0.0001		1.0		—
	Exercised		(199,819	)		—		—
	Forfeited		(181	)		—		—
	Outstanding at March 31, 2012		—		$	—		1.0	$	—
	Exercisable at March 31, 2012		—		$	—		1.0	$	—

On February 27, 2012, the service provider has exercised the warrants to purchase 200,000 shares by using the cashless exercise. The actual numbers of shares issued to the service provider were 199,819 shares; the remaining 181 shares have been cancelled due to the cashless exercise.

Non-vested Warrants		Warrants			Weighted-Average Grant-Date Fair Value
	Non-vested at June 30, 2011		—		$	—
	Granted		200,000			0.22
	Vested		(199,819	)		(0.22	)
	Forfeited		(181	)		—
	Non-vested at March 31, 2012		—		$	—

Common stock payable

The Company received cash consideration of $2,006 for the purchase of restricted common stock. The shares have not been issued as of March 31, 2012.

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The Company granted shares of common stock for services of $2,130. The shares have not been issued as of March 31, 2012.

NOTE 8. SUBSEQUENT EVENTS

On April 30, 2012, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with WMX Group, Inc and SKGI Acquisition Corp., a wholly-owned subsidiary of the Company (“Acquisition Sub”), pursuant to which Acquisition Sub merged with and into WMX (the “Merger”) with the filing of the Articles of Merger with the Nevada Secretary of State on May 1, 2012 and became a wholly-owned subsidiary of the Company. In accordance with the terms of the Merger Agreement, at the closing an aggregate of 104,042,523 shares of the Company’s common stock will be issued to the holders of WMX’s common stock in exchange for their shares of WMX. Each of the Company, WMX and Acquisition Sub provided customary representations and warranties, covenants and conditions in the Merger Agreement.

Upon the closing of the Merger, Richard Shergold resigned as President and Chief Executive Officer, Lisa Yakiwchuk resigned as Secretary and Marcel Scherger resigned as a director of the Company. Thomas Anthony Guerriero was appointed as Chief Executive Officer, Syed Gilani was appointed President, and Anthony Guerriero was appointed as Secretary and Treasurer. Additionally, Richard Shergold will remain a director and Lisa Yakiwchuk will continue her role as Chief Operating Officer and director. Finally, Thomas Anthony Guerriero and Anthony Guerriero were appointed as directors. See the Form 8-K filed on May 5, 2012.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview of our Business

WMX’s Business

WMX is a diversified holding company with several divisions:

WMX Trade Division (www.wmxtrade.com)

WMX Trade offers a proprietary trading platform for the buying and selling of real products on their website in several market segments across the globe. World Mercantile Exchange is trademarked both domestically in the US and around the world. WMX also owns the proprietary trademark rights to: World Commodity Exchange, World Precious Metals Exchange, World Livestock Exchange. In other words, WMX is introducing a new method of trade where buyers and sellers across the globe use WMX to facilitate the exchange of real products. In order to ensure the utmost safety and security compliance, WMX provides the most comprehensive third party screening process for members making it one of the safest and most secure websites to transact business in the world. In addition to the technology and screening process, WMX offers customer service for its WMX Members and professional support, global marketing consulting, global reach, ISO compliance, and eco-friendly sustainability.

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WMX IP Division (www.wmxip.com)

The World Intellectual Property Exchange will be officially launched in 4^th Quarter of 2012 and has been in development with over 10,000 hours of development with one purpose in mind, to become the world’s leading portal to search, buy, sell, and trade IP. The World Intellectual Property Exchange is trademarked. WMX also has acquired all trademark rights associated with: World Patent Exchange, World Copyright Exchange, World Trademark Exchange. WMXIP.com offers a proprietary platform for searching, buying, selling, and trading all forms of IP. In other words, the World Intellectual Property Exchange is introducing a new method of trade where buyers and sellers across the globe use WMX to facilitate the exchange of real products.

Smart Kids Group, Inc. Division (www.smartkidsgroup.com)

Smart Kids has created, developed, and produced a cutting edge children’s digital education and entertainment company, which was a publically trading company (OTCBB:SKGP). The company develops, distributes and licenses quality children’s Edutainment products through a variety of media including television, video, retail, direct marketing, and the Internet. Using child safety awareness as its unifying theme, Smart Kids’ characters and related products serve a uniquely viable market niche which combines entertainment, educational programming and merchandising – all of which address parents’ and children’s concerns about keeping safe and aware of their surroundings in their homes, their communities, and in an increasingly uncertain world. WMX plans to generate revenue by distribution of the existing IP of Smart Kids programming. They are expected to release their 26 episode 6 DVD set in 2012 for sale.

The Harvard Think Tank Division (www.theharvardthinktank.com)

The Harvard Think Tank website was recently launched. It is a website that will allow companies and entrepreneurs from around the world to reach out to WMX for help to take their company to the next level. The goal with The Harvard Think Tank is to give people a platform where they can pitch their game-changing idea to those involved with the Think Tank and if the team likes the pitch they can provide financing, advice, and assistance in building the venture, like an incubator for new ventures. As a result, The Harvard Think Tank has become the Company’s venture capital arm. WMX anticipates generating revenue by receiving subscription fees, services, and equity.

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Plan For Crisis Division (www.planforcrisis.com)

WMX has recently launched their Plan For Crisis Division. WMX plans on obtaining clients to conduct safety & security audits and providing organizational development, by implementing the Plan For Crisis Proprietary Protocols, customized for each client. Plan For Crisis provides intervention and prevention programs with over 90 protocols for each specialization. Plan For Crisis provides analysis in preparing organizations around the world for crisis, emergencies and disasters. WMX plans to generate revenue from providing a plethora of services and charging fees for these services.

Paragon GPS Division (www.paragongps.com)

WMX has licensed patent pending advanced GSM/GPRS Enhanced Cell ID technology that tracks the current position of a personal tracking device, even when it is moving. To locate the device, the device transmits the roaming signal to contact the nearby antenna tower, but the process does not require an active call. GSM localisation is then done by multilateration based on the signal strength to nearby antenna masts . Personal Tracking, which includes location based service that discloses the actual coordinates of the tracking device, is a technology used by telecommunication companies to approximate where a mobile phone, and thereby also its user (bearer), temporarily resides. The more properly applied term locating refers to the purpose rather than a positioning process. Such service is offered as an option of the class of location-based services. Our new GSM/GPRS product line includes the KidTracker Pro, PeopleTracker Pro, CarTracker Pro, KeyTracker Pro and PetTracker Pro which utilize cellular tower triangulation to conveniently and accurately track the location of any asset, person, pet or mobile object.

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Overview of Financial Reporting

This filing contains restated financial statements of Smart Kids Group, Inc. as of and for the three and nine months ended March 31, 2011. Prior to the issuance of the original filing on Form 10-Q for the quarter ended December 31, 2010, the Company determined that software development costs of $406,612 and previously capitalized costs of goods sold of $475,558 reported on the Company’s annual report in Form 10-K for the year ended June 30, 2010 included sub-licensing fees of $270,000 ($30,000 incurred for the year ended June 30, 2010) and officer salaries of $612,200 ($28,000 incurred for the year ended June 30, 2010) did not meet the capitalization criteria of the FASB ASC 350-40 “Internal Use Software”. As of March 31, 2011, the prior auditor was no longer independent and management determined that the financial statements for the year ended June 30, 2010 needed to be re-audited. In January 2011, the Company engaged a new auditor to re-audit the financial statements as of and for the year ended June 30, 2010 and audit the financial statements as of and for the year ended June 30, 2011 concurrently. Additionally, an accounting firm was engaged that specializes in smaller reporting companies, to perform its internal bookkeeping and external financial reporting.

The Company determined that there were changes in the Company’s Balance Sheet, Statement of Operations, Stockholders’ Deficit, and Statement of Cash Flow as of and for the three and nine months ended March 31, 2011. Accordingly, the unaudited condensed consolidated financial statements for the three and nine months ended March 31, 2011 have been restated as disclosed.

As filed in a Form 8-K on October 18, 2011 and amended on October 26, 2011, we entered into a merger transaction with Paragon GPS Inc. (“Paragon”). On January 4, 2012, we elected to terminate the agreement due to Paragon being unable to provide us with an audit of its financial statements, which was a necessary condition to close the transaction. Our relationship with Paragon remains positive and we expect to establish a business partnership in the future.

On February 10, 2012, the Company appointed Thomas Anthony Guerriero as Chairman of the Board of Directors of the Company.

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Results of Operations

Revenues. We had no revenues from our inception on February 11, 2003 to March 31, 2012. We do not expect to achieve revenues until we are able to successfully implement our business plan.

Operating expenses. Our operating expenses include licensing expenses, salaries and wages, general and administrative expenses, legal and professional fees. For the three months ended March 31, 2012, we incurred an operating loss of $252,702 compared to an operating loss of $200,504 for the three months ended March 31, 2011, a change of 26%. This was primarily due to a decrease in salary and wages of $15,225, offset by an increase in legal and professional fees of $63,261 due to greater consulting fees and an increase in general and administrative expenses of $4,160 for the three months ended March 31, 2012.

For the nine months ended March 31, 2012, we incurred an operating loss of $737,347 compared to an operating loss of $377,355 for the nine months ended March 31, 2011, a change of 95%. This was primarily due to an increase in salary and wages of $31,176 due to the reinstatement of salaries in January 2011, an increase in legal and professional fees of $354,831 due to an increase in accounting and an increase in consulting fees, general and administrative expenses of $17,588 and impairment of equity investment of $13,273. This was offset by the decrease in allowance for stock receivable of $57,040 due to the Company not having any equity drawdown agreements.

We anticipate operating expenses to increase in the next twelve months in accordance with our business plan to refurbish, edit and repackage our existing product line of television shows, videos and books for media placement and retail sale. As of March 31, 2012, we have prepaid approximately $1,767 for 1,000 units of our existing product line.

Net Loss. We had a net loss of $252,702 for the three months ended March 31, 2012 compared to a net loss of $213,308 for the three months ended March 31, 2011. The increase of net loss of $39,394 was primarily due to that stated above.

We had a net loss of $744,568 for the nine months ended March 31, 2012 compared to a net loss of $500,870 for the nine months ended March 31, 2011. The increase in net loss of $243,698 was due to that stated above, offset by a decrease in finance and interest expense of $48,549 and loss on conversion of AP, accrued expenses and note payable of $67,745.

Liquidity and Capital Resources

As of March 31, 2012, we had total current assets of $321,201 and total assets in the amount of $348,434. Our total current liabilities as of March 31, 2012 were $826,453. We had an accumulated deficit of $4,045,760 and a working capital deficit of $505,252 as of March 31, 2012.

Cash used in operating activities increased to $169,384 for the nine months ended March 31, 2012 compared to $155,186 for the nine months ended March 31, 2011 as a result of an increase in stock issued for services, impairment of equity investment, fair value of warrants issued, prepaid expenses, accounts payable and due to related parties. This was offset by a decrease in stock issued for financing, allowance for stock receivables, loss on conversion of AP, accrued expenses and note payable, and deferred financing fees paid in cash.

Cash used in investing activities increased to $13,173 for the nine months ended March 31, 2012 compared to no cash used in investing activities for the nine months ended March 31, 2011. The increase was due to the investment in unconsolidated investee of $13,173.

Cash flows provided by financing activities during the nine months ended March 31, 2012 increased to $182,535 compared to $159,373 for the nine months ended March 31, 2011, due to an increase in proceeds from the issuance of common stock offset by a decrease in proceeds from an equity drawdown agreement.

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Based upon our current financial condition, we do not have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund operations through increased sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

Going Concern

At March 31, 2012, we had $4,573 cash on-hand and an accumulated deficit of $4,045,760, and as noted throughout this report and our financial statements and notes thereto, our independent auditors have expressed their substantial doubt as to our ability to continue as a going concern as of March 31, 2012. We anticipate incurring significant losses in the future. We do not have an established source of revenue sufficient to cover our operating costs. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.

The financial statements included in this quarterly report have been prepared assuming that we will continue as a going concern, which contemplates the recoverability of assets and the satisfaction of liabilities in the normal course of business.

Management’s plans include the raising of capital through the equity markets to fund future operations, seeking additional acquisitions, and generating of revenue through our business. However, even if we do raise sufficient capital to support our operating expenses and generate adequate revenues, there can be no assurances that the revenue will be sufficient to enable us to develop business to a level where we will generate profits and positive cash flows from operations. These matters raise substantial doubt about our ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Use of Estimates

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

Stock Based Compensation

Stock based compensation is accounted for using the Equity-Based Payments to Non-Employee Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.

Shares issued to employees are expensed upon issuance.

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Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Software Development Cost

Costs incurred internally in creating a computer software product are charged to expense when incurred as research and development until technological feasibility has been established for the product. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.

Revenue and Cost Recognition

The Company recognizes revenue using the accrual method of accounting wherein revenue is recognized when earned and expenses and costs are recognized when incurred. Since inception of the business on February 11, 2003 through March 31, 2012, the Company has not realized any revenue.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2012. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer. Based upon that evaluation, our Chief Executive Officer concluded that, as of March 31, 2012, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2012, our disclosure controls and procedures were not effective:

-	We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function;
-	We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert for the Company. The Board of Directors is comprised of two (2) members of management. As a result, there may be lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by the Company; and
-	Documentation of all proper accounting procedures is not yet complete.
-	Prior to the issuance of the original filing on Form 10-Q for the quarter ended December 31, 2010, we determined that software development costs of $406,612 and previously capitalized costs of goods sold of $475,558 reported on the Company’s annual report in Form 10-K for the year ended June 30, 2010 included sub-licensing fees of $270,000 ($30,000 incurred for the year ended June 30, 2010) and officer salaries of $612,200 ($28,000 incurred for the year ended June 30, 2010) did not meet the capitalization criteria of the FASB ASC 350-40 “Internal Use Software”.

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Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on conversion of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of the accounts payable with 354,864 shares of common stock. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees were expensed during the year ended June 30, 2011. In accordance with Staff Accounting Bulletin Topic 5A, Expenses of Offering, this should have been charged against the gross proceeds of the offering. Additionally common stock payable valued at $7,500 for financing fees was unaccounted for and issued in March 2012. In July 2011, the Company entered into a Common Stock Purchase Warrant agreement with the same vendor. As of December 31, 2011, the fair value of the warrants of $43,986 and expenses of $24,700 were not recognized, resulting in an understatement of professional fees for the period ended December 31, 2011.

Due to the material weakness in internal control over financial reporting, we determined that the previously issued financial condition and results of operations disclosed in the our Annual Report on Form 10-K as of and for the year ended June 30, 2011 and our Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, September 30, 2011 and December 31, 2011 can no longer be relied upon. This Form 10-Q for the three and nine months ended March 31, 2012 amends the March 31, 2011 consolidated financial statements. See Note 2.

As of the date of this current report, management has not had sufficient time to determine the impact of these errors on its financial condition, results of operations or cash flows reporting in prior periods. Accordingly, the financial condition and results of operations disclosed in the our Annual Report on Form 10-K as of and for the year ended June 30, 2011 and our Quarterly Reports on Form 10-Q for the periods ended September 30, 2011 and December 31, 2011 will be amended subsequent to the filing of this report.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we have implemented the following changes:

▪	We have engaged an accounting firm that specializes in smaller reporting companies to perform our internal bookkeeping and external financial reporting;

▪	We have engaged a new securities legal counsel to perform consulting services and to review our filings for regulation compliance;

▪	We have expanded our current board of directors to include additional independent individuals willing to perform directorial functions; and

▪	We have increased our workforce in preparation for exiting the development stage and commencing revenue producing operations.

Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants. Failure to obtain financing will prevent us from curing any of the above stated deficiencies. To reduce the risk of material misstatements we have increased our segregation of duties by engaging an accounting firm to perform our internal record keeping and external financial reporting function.

Changes in Internal Control over Financial Reporting

None

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A. Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On February 2, 2012, the Company issued 520,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $51,463.

On February 8, 2012, the Company issued 20,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $2,030.

On February 22, 2012, the Company issued 30,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $2,986.

On February 23, 2012, the Company issued 1,666,667 shares of restricted common stock for cash consideration of approximately $0.03 per share or $5,038.

On February 27, 2012, the Company issued 199,819 shares of free trading common stock valued at $0.0001 per share or $19.50 upon the exercising of 194,955 warrants.

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On March 13, 2012, the Company issued 183,322 shares of restricted common stock for cash consideration of approximately $0.03 per share or $5,540.

On March 29, 2012, the Company issued 2,550,000 shares of restricted common stock for cash consideration of approximately $0.01 per share or $25,704.

These securities were issued pursuant to Section 4(2) of the Securities Act and/or Rule 506 promulgated thereunder. The holders represented their intention to acquire the securities for investment only and not with a view towards distribution. The investors were given adequate information about us to make an informed investment decision. We did not engage in any general solicitation or advertising. We directed our transfer agent to issue the stock certificates with the appropriate restrictive legend affixed to the restricted stock.

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Smart Kids Group, Inc.

Date:	May 21, 2012

	By: /s/ Thomas Guerriero Thomas Guerriero Title: Chief Executive Officer

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