Oxford City Football Club, Inc. - FORM 10-K/A

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - Oxford City Football Club, Inc.	ex32_1.htm
EX-31.1 - EXHIBIT 31.1 - Oxford City Football Club, Inc.	ex31_1.htm
EX-31.2 - EXHIBIT 31.2 - Oxford City Football Club, Inc.	ex31_2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K /A

(Amendment No. 1)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal year ended June 30, 2011

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

	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)		(I.R.S. Employer Identification No.)

Harvard Square, One Mifflin Place 4th Floor, Cambridge, Massachusetts		02138
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number: (780) 222-6257

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

Title of each class	Name of each exchange on which registered
none	not applicable

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

Title of each class
Common Stock, par value of $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 [X]

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

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

Indicate by check mark whether the registrant 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 (§ 229.405 of this chapter) during the preceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] 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. Yes [ ] No [X]

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

Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

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 last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. As of December 31, 2010, the aggregate market value of shares held by non-affiliates (based on the closing price of $0.0015 on that date) was approximately $248,885.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 925,169,172 as of September 28, 2011.

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EXPLANATORY NOTE

This filing contains restated financial statements of Smart Kids Group, Inc. for the years ended June 30, 2011 and 2010. Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees also 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 a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and later issued in March 2012.

As a result of the errors stated above, the Company determined that there were significant changes in the Company’s Balance Sheets, Statements of Operations, Stockholders’ Deficit, and Statements of Cash Flow for the years ended June 30, 2011 and 2010 and for the period from inception (February 11, 2003) to June 30, 2011. Item 7, Item 8 and Item 9A have been updated to reflect the restatements for the years ended June 30, 2011 and 2010.

The following errors were found for the year ended June 30, 2010:

Accounts payable and accrued expenses were understated by $5,612 due to unrecorded legal fees;

Accumulated deficit during the development stage was understated by $5,612;

Legal and professional fees were understated by $5,612 due to unrecorded legal fees; and

Net loss for the year ended June 30, 2010 was understated by $5,612.

The effects on our previously issued June 30, 2010 financial statements are as follows:

Balance Sheet

	June 30, 2010						June 30, 2010
	As filed			Adjustments			Restated
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and accrued expenses	$	110,079		$	5,612		$	115,691
Total current liabilities	$	633,778		$	5,612		$	639,390
Accumulated deficit during the development stage	$	(2,576,762	)	$	(5,612	)	$	(2,582,374	)
Total liabilities and stockholders’ deficit	$	15,769		$	-		$	15,769

Statement of Operations

	For the Year Ended						For the Year Ended
	June 30, 2010						June 30, 2010
	As Filed			Adjustments			Restated
Legal and professional fees	$	170,392		$	5,612		$	176,004
Total operating expense	$	382,121		$	5,612		$	387,733
Loss before other expenses	$	(382,121	)	$	(5,612	)	$	(387,733	)
Net loss	$	(653,819	)	$	(5,612	)	$	(659,431	)
Net loss per common share - basic	$	(0.01	)		-		$	(0.01	)

Statement of Cash Flows

	For the Year Ended						For the Year Ended
	June 30, 2010						June 30, 2010
	As Filed			Adjustments			Restated
Net loss	$	(653,819	)	$	(5,612	)	$	(659,431	)
Accounts payable and accrued expenses	$	25,060		$	5,612		$	30,672

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Statement of Stockholders’ Deficit

	Total stockholders’						Total stockholders’
	Deficit June 30, 2010						Deficit June 30, 2010
	As filed			Adjustments			Restated
Net loss	$	(653,819	)	$	(5,612	)	$	(659,431	)

The following errors were found for the year ended June 30, 2011 and for the period from inception (February 11, 2003) to June 30, 2011:

Accounts payable and accrued expenses were understated by $2,112 due to unrecorded legal fees;

Additional paid-in capital was overstated by $64,800 due to incorrectly expensing finder’s fees;

Common stock payable was understated by $74,000 due to the granting of stock for finder’s fees and financing fees;

Accumulated deficit during the development stage was understated by $11,312;

Legal and professional fees were overstated by $64,800 for the year ended June 30, 2011, and $59,188 for the period from inception (February 11, 2003) to June 30, 2011 due to incorrectly expensing finder’s fees;

Loss on settlement of accounts payable was understated by $63,000 due to the settlement of accounts payable of $3,500 with stock valued at 66,500 for the year ended June 30, 2011, and for the period from inception (February 11, 2003) to June 30, 2011;

Finance and interest expense was understated by $7,500 for the year ended June 30, 2011, and for the period from inception (February 11, 2003) to June 30, 2011;

Net loss for the year ended June 30, 2011 was understated by $5,700 for the year ended June 30, 2011, and $11,312 for the period from inception (February 11, 2003) to June 30, 2011;

Issuance of common stock – services was overstated by $64,800 for the year ended June 30, 2011, and for the period from inception (February 11, 2003) to June 30, 2011 due to incorrectly expensing finder’s fees;

Issuance of common stock- financing fees was understated by $7,500 for the year ended June 30, 2011, and for the period from inception (February 11, 2003) to June 30, 2011 due to unrecorded financing fees;

Cash used for accounts payable and accrued expenses were understated by $5,612 for the period from inception (February 11, 2003) to June 30, 2011; and

Non-cash investing and financing activities for stock issued for accounts payable, accrued expenses and note payable were understated by $3,500 for the period from inception (February 11, 2003) to June 30, 2011.

The effects on our previously issued June 30, 2011 financial statements are as follows:

Balance Sheet

	June 30, 2011						June 30, 2011
	As filed			Adjustments			Restated
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and accrued expenses	$	213,639		$	2,112		$	215,751
Total current liabilities	$	785,845		$	2,112		$	787,957
Additional paid-in capital	$	2,373,916		$	(64,800	)	$	2,309,116
Common stock payable	$	97,157		$	74,000		$	171,157
Accumulated deficit during the development stage	$	(3,289,879	)	$	(11,312	)	$	(3,301,191	)
Total liabilities and stockholders’ deficit	$	20,909		$	-		$	20,909

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Statement of Operations

	Year ended						Year ended
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Legal and professional fees	$	405,827		$	(64,800	)	$	341,027
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Total operating expenses	$	653,648		$	(1,800	)	$	651,848
Loss before other expenses and income taxes	$	(653,648	)	$	1,800		$	(651,848	)
Finance and interest expense	$	(54,724	)	$	(7,500	)	$	(62,224	)
Total other expenses	$	(59,469	)	$	(7,500	)	$	(66,969	)
Net loss	$	(713,117	)	$	(5,700	)	$	(718,817	)
Net loss per common share - basic	$	0.00		$	-		$	0.00

	From inception						From inception
	(February 11, 2003)						(February 11, 2003)
	to						to
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Legal and professional fees	$	1,064,489		$	(59,188	)	$	1,005,301
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Total operating expenses	$	2,958,712		$	3,812		$	2,962,524
Loss before other expenses and income taxes	$	(2,958,712	)	$	(3,812	)	$	(2,962,524	)
Finance and interest expense	$	(326,422	)	$	(7,500	)	$	(333,922	)
Total other expenses	$	(331,167	)	$	(7,500	)	$	(338,667	)
Net loss	$	(3,289,879	)	$	(11,312	)	$	(3,301,191	)

Statement of Cash Flows

	For the year ended						For the year ended
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Net loss	$	(713,117	)	$	(5,700	)	$	(718,817	)
Issuance of common stock- services	$	261,095		$	(64,800	)	$	196,295
Issuance of common stock- financing fees	$	18,400		$	7,500		$	25,900
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Non-cash investing and financing activities:
Stock issued for accounts payable, accrued expenses, and note payable	$	18,000		$	3,500		$	21,500

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	From inception						From inception
	(February 11, 2003)						(February 11, 2003)
	to						to
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Net loss	$	(3,289,879	)	$	(11,312	)	$	(3,301,191	)
Issuance of common stock- services	$	311,095		$	(64,800	)	$	246,295
Issuance of common stock- financing fees	$	286,900		$	7,500		$	294,400
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Accounts payable and accrued expenses	$	470,011		$	5,612		$	475,623
Non-cash investing and financing activities:
Stock issued for accounts payable, accrued expenses, and note payable	$	855,172		$	3,500		$	858,672

Statement of Stockholders’ Deficit

	Total stockholders’						Total stockholders’
	Deficit June 30, 2011						Deficit June 30, 2011
	As filed			Adjustments			Restated
Issuance of common stock-services	$	108,992		$	(64,800	)	$	44,192
Issuance of common stock-financing fees	$	18,400		$	7,500		$	25,900
Issuance of common stock for settlement of AP, accrued expense and note payable	$	18,000		$	66,500		$	84,500
Net loss	$	(713,117	)	$	(5,700	)	$	(718,817	)

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TABLE OF CONTENTS

		Page

PART II
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 8.	Financial Statements and Supplementary Data	10
Item 9A	Control and Procedure	11
	Signatures	13

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

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

Overview

We are a development stage company incorporated in the State of Florida on February 11, 2003 that holds the rights to intellectual property of the Be Alert Bert® character and his friends. The intellectual property contains educational and entertainment media product, including television shows, videos, music, and books owned by Smart Kids International Holdings, Inc., a company owned by our Chief Executive Officer and Director, Richard Shergold.

In the next twelve months, we plan on repackaging our existing products for sale and developing new media products based on our licensed intellectual property. Please see Item 1, Business for an overview of the Company plans. We launched our Company website in April, 2011, (www.smartkidsgroup.com) . To development our new television series and continue improvements of our interactive website and business plan, we will need roughly $2.3 million in capital. Because capital is a prerequisite to the implementation of our business plan, we have been actively searching for financing opportunities. As such, we need additional capital to continue as a going concern.

Results of Operations for the years ended June 30, 2011 and 2010

Revenues. We had no revenues from our inception on February 11, 2003 to June 30, 2011. We do not expect to achieve revenues until we are able to successfully implement our business plan.

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Operating expenses . Our operating expenses include salaries and wages, professional fees, general and administrative, sub-licensing fees, and an allowance for stock receivable. For the year ended June 30, 2011, we incurred an operating loss of $651,848 compared to an operating loss of $387,733 for the year ended June 30, 2010, a change of (68%). This increase was primarily due to greater legal and professional fees of $165,023 primarily due to consulting and accounting fees, sub-licensing fees of $29,533, loss on settlement of accounts payable of $63,000, and an allowance for stock receivable of $57,040 associated with our equity drawdown agreement. The increase was offset by a decrease in salaries and wages of $62,217 due to our Board of Directors passing a resolution, with the acceptance of our officers, for the Company to no longer incur any accrued unpaid officers’ salaries effective January 1, 2010. On January 1, 2011, our Board of Directors reinstated the salaries of our remaining two officers’ salaries at a lower rate.

We anticipate operating expenses to increase in the next twelve months in accordance with our business plan to refurbish, edit and repackage our existing product line of television shows, videos and books for media placement and retail sale.

Net Loss . We had a net loss of $718,817 for the year ended June 30, 2011 compared to a net loss of $659,431, respectively, for the year ended June 30, 2010. The decrease was primarily due to the increase in operating expenses stated above offset by a decrease in finance and interest expense of $209,474 due to less stock issued to existing stock holders as a good faith financing expense.

Liquidity and Capital Resources

As of June 30, 2011, we had total current assets of $16,345 and total assets in the amount of $20,909. Our total current liabilities as of June 30, 2011 were $787,957. We had an accumulated deficit of $3,301,191 and a working capital deficit of $771,612 as of June 30, 2011.

Cash used in operating activities decreased to $182,915 for the year ended June 30, 2011 compared to $226,428 for the year ended June 30, 2010 as a result of a decrease in financing fees, offset by an increase in stock for services, allowance for stock receivable, prepaid expenses, and accounts payable and accrued expenses.

Cash used in investing activities decreased to zero for the year ended June 30, 2011 compared to $99 for the year ended June 30, 2010.

Cash provided by financing activities decreased for the year ended June 30, 2011 to $187,407 compared to $226,552 for the year ended June 30, 2010. The decrease was due to a decrease in the issuance of stock for cash, offset by an increase in proceeds from the equity draw down agreement.

Our accrued expenses due to related parties increased to $572,206 as of June 30, 2011 compared to $517,850, for the year ended June 30, 2010. The increase was due to greater accrued officer salaries and sub-licensing expenses.

On March 18, 2010, we entered into a drawdown equity financing agreement and registration rights agreement (collectively the “Agreements”) with Auctus Private Equity Fund, LLC (“Auctus”), the selling stockholder. In accordance with the Agreements, Auctus committed, subject to certain conditions, to purchase up to $10 million of our common stock over a term of up to two years.

All 38,000,000 free trading shares registered on our Form S-1 effective May 26, 2010 have been issued to Auctus. We received cash proceeds of $52,020 and were notified that all of the shares had been sold and recognized an allowance for stock receivable of $57,040 as of June 30, 2011.

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 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.

Research and Development

We will not be conducting any product research or development during the next 12 months.

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Off Balance Sheet Arrangements

As June 30, 2011, there were no off balance sheet arrangements.

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 statements 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 statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

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 detailed 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 in 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 June 30, 2011, the Company has not realized any revenue.

Stock Based Compensation

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

Shares issued to employees are expensed upon issuance.

Stock based compensation for employees is accounted for using the Stock Based Compensation Topic of the FASB ASC. We use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. 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 .

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Item 8. Financial Statements and Supplementary Data

Audited Financial Statements:

F-1	Report of Independent Registered Public Accounting Firm
F-2	Balance Sheets as of June 30, 2011 and 2010 (Restated)
F-3	Statements of Operations for the Years Ended June 30, 2011 and June 30, 2010 and the period from inception (February 11, 2003) to June 30, 2011(Restated)
F-4	Statement of Stockholders’ Deficit from inception (February 11, 2003) to June 30, 2011(Restated)
F-6	Statements of Cash Flows for the Years Ended June 30, 2011 and June 30, 2010 and the period from inception (February 11, 2003) to June 30, 2011(Restated)
F-8	Notes to Financial Statements(Restated)

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Report of Independent Registered Public Accounting Firm

To The Board of Directors and Stockholders

Smart Kids Group, Inc.

We have audited the accompanying balance sheets of Smart Kids Group, Inc. (A Development Stage Company) (the “Company”) as of June 30, 2011 and 2010, and the related statements of operations, stockholders’ deficit, and cash flows for the years then ended and for the period from inception (February 11, 2003) to September 30, 2011. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We did not audit the financial statements of Smart Kids Group, Inc. (A Development Stage Company) for the year ended June 30, 2009 and from inception (February 11, 2003) to June 30, 2009. Those statements were audited by other auditors whose report has been furnished to us and our opinion, in so far as it relates to the amounts included from inception (February 11, 2003) to June 30, 2009, is based solely on the report of other auditors.

We conducted our audits in accordance with 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 audits provide 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 Smart Kids Group, Inc. (A Development Stage Company) as of June 30, 2011 and 2010, and the results of their operations and cash flows for each of the years in the two-year period ended June 30, 2011 and from inception (February 11, 2003) to June 30, 2011 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, which raise substantial doubt about its 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 that might result from the outcome of this uncertainty.

As discussed in Note 2, the financial statements of Smart Kids Group, Inc. as of June 30, 2010, and for the year then ended were audited by other auditors who are no longer independent. Accordingly, the financial statements as of and for the year ended June 30, 2010 have been restated by us as more fully described in Note 2.

De Joya Griffith & Company, LLC

/s/ De Joya Griffith & Company, LLC

Henderson, Nevada

September 27, 2011, except from Note 2 as to which the date is June 6, 2012

F-1

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SMART KIDS GROUP, INC.

(A Development Stage Company)

Balance Sheets
(unaudited)

	June 30,			June 30,
	2011			2010
		(Restated)			(Restated)
ASSETS

Current assets
Cash	$	4,595		$	103
Prepaid expenses		11,750			—
Total current assets		16,345			103

Fixed assets
Equipment, net of accumulated depreciation of $737 and $567, respectively		340			567

Investment in unconsolidated investee		99			99

Other assets
Deferred financing fee		—			15,000
Software development costs, net of accumulated amortization of $1,375 and $0, respectively		4,125			—
Total assets	$	20,909		$	15,769

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities
Accounts payable and accrued expenses	$	215,751		$	115,691
Note payable		—			5,849
Accrued expenses-related parties		572,206			517,850
Total current liabilities		787,957			639,390
Total liabilities		787,957			639,390

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: 538,702,504 and 233,287,209, respectively		53,870			23,328
Additional paid-in capital		2,309,116			1,979,522
Common stock payable		171,157			19,553
Common stock receivable		—			(63,650	)
Accumulated deficit during the development stage		(3,301,191	)		(2,582,374	)
Total stockholders' deficit		(767,048	)		(623,621	)
Total liabilities and stockholders’ deficit		20,909			15,769

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

F-2

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SMART KIDS GROUP, INC.

(A Development Stage Company)

Statements of Operations

	Year Ended						From inception
	June 30,			June 30,			(February 11, 2003) to
	2011			2010			June 30, 2011
	(Restated)			(Restated)			(Restated)
Revenues	$	—		$	—		$	—
Cost of goods sold		—			—			—
Gross loss		—			—			—

Operating expenses
Salaries and wages		109,783			172,000			1,357,954
Legal and professional fees		341,027			176,004			1,005,301
General and administrative expenses		21,163			9,427			149,092
Sub-licensing expense		59,835			30,302			330,137
Allowance for stock receivable		57,040			—			57,040
Loss on settlement of accounts payable		63,000			—			63,000
Total operating expenses		651,848			387,733			2,962,524

Loss before other expenses and income taxes		(651,848	)		(387,733	)		(2,962,524	)

Other expenses
Finance and interest expense		(62,224	)		(271,698	)		(333,922	)
Loss on conversion of note payable		(4,745	)		—			(4,745	)
Total other expenses		(69,969	)		(271,698	)		(338,667	)

Loss before provision for income taxes		(718,817	)		(659,431	)		(3,301,191	)

Provision for income taxes		—			—			—

Net loss	$	(718,817	)	$	(659,431	)	$	(3,301,191	)

Net loss per common share – basic	$	0.00		$	(0.01	)
Weighted average number of common shares outstanding-basic		354,659,813			130,204,621

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

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Table of Contents

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statement of Stockholders’ Deficit

From Inception (February 11, 2003) to June 30, 2011

																Deficit accumulated
	Preferred Stock				Common Stock					Additional paid-in		Stock		Stock		During the development			Total Stockholders’
	Shares		Amount		Shares			Amount		capital		payable		receivable		stage			deficit
Balance at inception – February 11, 2003		—	$	—		—		$	—	$	—	$	—	$	—	$	—		$	—
Issuance of common stock		—		—		100			—		1		—				—			1
Net loss		—		—		—			—		—		—				—			—
Balance at June 30, 2003		—	$	—		100		$	—	$	1	$	—	$	—	$	—		$	1
Net loss		—		—		—			—		—		—				(81,584	)		(81,584	)
Balance at June 30, 2004		—	$	—		100		$	—	$	1	$	—	$	—	$	(81,584	)	$	(81,583	)
Issuance of common stock		—		—		121,178,500			12,118		87,914		—				—			100,032
Adjustment		—		—		(100	)		—		—		—				—			—
Net loss		—		—		—			—		—		—				(43,840	)		(43,840	)
Balance at June 30, 2005		—	$	—		121,178,500		$	12,118	$	87,915	$	—	$	—	$	(125,424	)	$	(25,391	)
Net loss		—		—		—			—		—		—				(230,908	)		(230,908	)
Balance at June 30, 2006		—	$	—		121,178,500		$	12,118	$	87,915	$	—	$	—	$	(356,332	)	$	(256,299	)
Net loss		—		—		—			—		—		—				(295,914	)		(295,914	)
Balance at June 30, 2007		—	$	—		121,178,500		$	12,118	$	87,915	$	—	$	—	$	(652,246	)	$	(552,213	)
Issuance of common stock		—		—		1,570,000			157		104,843		—				—			105,000
Net loss		—		—		—			—		—		—				(485,168	)		(485,168	)
Balance at June 30, 2008		—	$	—		122,748,500		$	12,275	$	192,758	$	—	$	—	$	(1,137,414	)	$	(932,381	)
Issuance of common stock- cash		—		—		—			—		—		134,600				—			134,600
Net loss		—		—		—			—		—		—				(785,529	)		(785,529	)
Balance at June 30, 2009		—	$	—		122,748,500		$	12,275	$	192,758	$	134,600	$	—	$	(1,922,943	)	$	(1,583,310	)

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

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Table of Contents

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statement of Stockholders’ Deficit

From Inception (February 11, 2003) to June 30, 2011 (continued)

	Preferred Stock				Common Stock				Additional			Stock			Stock			Deficit accumulated during			Total stockholders’
			Amount		Shares		Amount		paid-in capital			payable			receivable			the development stage			deficit
Balance at June 30, 2009		—	$	—		122,748,500	$	12,275	$	192,758		$	134,600		$	—		$	(1,922,943	)	$	(1,583,310	)
Issuance of common stock – cash		—		—		4,066,737		407		340,343			(115,047	)		—			—			225,703
Issuance of common stock – services		—		—		500,000		50		49,950			—			—			—			50,000
Issuance of common stock – drawdown equity agreement		—		—		10,000,000		1,000		62,650			—			(63,650	)		—			—
Issuance of common stock – finance fees		—		—		2,917,500		292		268,208			—			—			—			268,500
Issuance of common stock – accrued officer salaries/expense		—		—		93,054,472		9,304		825,613			—			—			—			834,917
Contribution of common stock by shareholder to pay accounts payable		—		—		—		—		240,000			—			—			—			240,000
Net loss		—		—		—		—		—			—			—			(659,431	)		(659,431	)
Balance at June 30, 2010 (Restated)		—	$	—		233,287,209	$	23,328	$	1,979,522		$	19,553		$	(63,650	)	$	(2,582,374	)	$	(623,621	)
Issuance of common stock- cash		—		—		132,025,000		13,203		116,380			12,804			—			—			142,387
Finder’s fee		—		—		—		—		(64,800	)		64,800			—			—			—
Issuance of common stock- services		—		—		11,375,001		1,138		43,054			—			—			—			44,192
Issuance of common stock- drawdown equity agreement		—		—		28,000,000		2,800		42,610			—			63,650			—			109,060
Issuance of common stock- financing fees		—		—		3,280,000		328		18,072			7,500			—			—			25,900
Issuance for software development costs		—		—		2,500,000		250		5,250			—			—			—			5,500
Issuance for prepaid services		—		—		113,235,294		11,323		152,528			—			—			—			163,851
Issuance for conversion of AP, accrued expense and note payable		—		—		15,000,000		1,500		16,500			66,500			—			—			84,500
Net loss		—		—		—		—		—			—			—			(718,817	)		(718,817	)
Balance at June 30, 2011 (Restated)		—	$	—		538,702,504	$	53,870	$	2,309,116		$	171,157		$	—		$	(3,301,191	)	$	(767,048	)

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

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Table of Contents

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statements of Cash Flows

	Year ended						From inception
	June 30,			June 30,			(February 11, 2003) to
	2011			2010			June 30, 2011
		(Restated)			(Restated)			(Restated)
Cash flows from operating activities:
Net loss	$	(718,817	)	$	(659,431	)	$	(3,301,191	)

Adjustments to reconcile net loss to net cash used by operating activities:
Issuance of common stock- services		196,295			50,000			246,295
Issuance of common stock- financing fees		25,900			268,500			294,400
Loss on settlement of accounts payable		63,000			—			63,000
Loss on conversion of note payable		4,745			—			4,745
Allowance for stock receivable		57,040			—			57,040
Depreciation and amortization		1,602			227			10,744
Deferred financing fee		15,000			—			15,000
Changes in operating assets and liabilities:
Organizational costs		—			—			(8,575	)
Accounts payable and accrued expenses		111,913			30,672			475,623
Accrued expenses-related parties		60,407			83,604			1,395,155
Net cash used in operating activities		(182,915	)		(226,428	)		(747,764	)

Cash flows from investing activities:
Investment in unconsolidated investee		—			(99	)		(99	)
Purchase of equipment		—			—			(1,134	)
Net cash used in investing activities		—			(99	)		(1,233	)

Cash flows from financing activities:
Proceeds from the issuance of stock		142,387			225,703			707,723
Proceeds from equity drawdown agreement		45,020			—			45,020
Proceeds from note payable		—			5,849			5,849
Payment on deferred financing fees		—			(5,000	)		(5,000	)
Net cash provided by financing activities		187,407			226,552			753,592

Net increase in cash		4,492			25			4,595
Cash, beginning of year		103			78			—
Cash, end of year	$	4,595		$	103		$	4,595

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

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Table of Contents

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statements of Cash Flows

(continued)

	Years ended				From inception
	June 30,		June 30,		(February 11, 2003)
	2011		2010		to March 31, 2011
	(Restated)		(Restated)		(Restated)
Supplemental disclosure of cash flow information:
Cash paid for
Interest	$	—	$	—	$	—
Income taxes	$	—	$	—	$	—

Non-cash investing and financing activities:
Stock issued for prepaid expense	$	11,750	$	—	$	11,750
Stock issued for equity drawdown agreement	$	—	$	63,650	$	63,650
Stock issued for software development	$	5,500	$	—	$	5,500
Stock issued for accounts payable, accrued expense and note payable	$	21,500	$	834,917	$	858,672
Payment of accounts payable by shareholder	$	—	$	240,000	$	240,000

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

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Table of Contents

SMART KIDS GROUP, INC.

(A Development Stage Company)

Notes to Financial Statements

(Restated)

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

BASIS OF PRESENTATION AND ORGANIZATION

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 used in these notes to the financial statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to Smart Kids Group, Inc. These financial statements include all accounts of the Company.

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 June 30, 2011, the Company did not realize any revenues and has not commenced its principal operations.

On April 23, 2010 the Company purchased a 40% interest ownership in Smart Kids Productions Inc., a Canadian corporation, incorporated on May 4, 2009. The remaining 60% is owned and operated by a third party. As of June 30, 2011 the corporation is in the development stage and has not commenced operations.

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.

GOING CONCERN

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. However, the Company has not begun generating revenue in the United States of America, is considered a development stage company, has experienced recurring net operating losses, had a net loss of $718,817 and $659,431 for the years ended June 30, 2011 and 2010, and a working capital deficiency of $771,612 at June 30 2011. Management believes that additional capital will be respectively required to fund operations through June 30, 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 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. 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.

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Table of Contents

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Cash

The Company considers highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. As of June 30, 2011 and June 30, 2010 the Company had no cash equivalents.

Concentrations

The Company maintains cash balances at a financial institution in Canada and the United States. The account at the Canada institution is insured by the Canadian Deposit Insurance Corporation (“CDIC”) up to $100,000 CAD. The account in the United States institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 USD. From time to time the Company’s cash balance may exceed the CDIC and FDIC limits. At June 30, 2011 and 2010, the Company did not have any accounts in excess of the CDIC or FDIC limits.

Fixed Assets

Property and equipment are stated at the lower of cost or fair value. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives on a straight-line basis. Estimated service lives of property and equipment is five years.

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.

Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on the differences between financial reporting basis and tax basis of the assets and liabilities and are measured using enacted tax rates that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recognized, when it is more likely than not, that such tax benefits will not be realized.

Stockholders’ Equity

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

Revenue and Cost Recognition

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Table of Contents

Stock Based Compensation

Shares issued to employees are expensed upon issuance.

Net Loss Per Common Share

Earnings per share is calculated in accordance with the Earnings per Share Topic of the FASB ASC. The weighted-average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share is computed using the weighted average number of shares plus dilutive potential common shares outstanding. Potentially dilutive common shares consist of employee stock options, warrants, and other convertible securities, and are excluded from the diluted earnings per share computation in periods where the Company has incurred net loss. During the years ended June 30, 2011 and 2010, respectively, the Company incurred a net loss, resulting in no potentially dilutive common shares.

Fair Value of Financial Instruments

The carrying amounts reflected in the balance sheets for cash, accounts payable and accrued expenses approximate the respective fair values due to the short maturities of these items. The Company does not hold any investments that are available-for-sale.

Fair Value Accounting

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The three levels of the fair value hierarchy are described below:

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 that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

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

F-10

Table of Contents

Adopted

In October 2009, the FASB issued changes to revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable's selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes became effective on January 1, 2011. The Company has determined that the adoption of these changes will not have an impact on financial position, results of operations or cash flows, as the Company does not currently have any such arrangements with its customers.

Issued

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance will become effective for the Company with the reporting period beginning July 1, 2011. The adoption of this guidance will not have a material impact on the Company's 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.

NOTE 2. RESTATEMENT FOR THE YEAR ENDED JUNE 30, 2011 AND 2010

The financial statements for the years ended June 30, 2011 and 2010 have been restated for the following matter. Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees also 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 a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and was later issued in March 2012.

As a result of the errors stated above, the Company determined that there were significant changes in the Company’s Balance Sheets, Statements of Operations, Stockholders’ Deficit, and Statements of Cash Flow for the years ended June 30, 2011 and 2010 and for the period from inception (February 11, 2003) to June 30, 2011. Item 7, Item 8, and Item 9A have been updated to reflect the restatements for the years ended June 30, 2011 and 2010.

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Table of Contents

The following errors were found for the year ended June 30, 2010:

Accounts payable and accrued expenses were understated by $5,612 due to unrecorded legal fees;

Accumulated deficit during the development stage was understated by $5,612;

Legal and professional fees were understated by $5,612 due to unrecorded legal fees; and

Net loss for the year ended June 30, 2010 was understated by $5,612.

The effects on our previously issued June 30, 2010 financial statements are as follows:

Balance Sheet

	June 30, 2010						June 30, 2010
	As filed			Adjustments			Restated
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and accrued expenses	$	110,079		$	5,612		$	115,691
Total current liabilities	$	633,778		$	5,612		$	639,390
Accumulated deficit during the development stage	$	(2,576,762	)	$	(5,612	)	$	(2,582,374	)
Total liabilities and stockholders’ deficit	$	15,769		$	-		$	15,769

Statement of Operations

	For the Year Ended						For the Year Ended
	June 30, 2010						June 30, 2010
	As Filed			Adjustments			Restated
Legal and professional fees	$	170,392		$	5,612		$	176,004
Total operating expense	$	382,121		$	5,612		$	387,733
Loss before other expenses	$	(382,121	)	$	(5,612	)	$	(387,733	)
Net loss	$	(653,819	)	$	(5,612	)	$	(659,431	)
Net loss per common share - basic	$	(0.01)		$	-		$	(0.01)

Statement of Cash Flows

	For the Year Ended						For the Year Ended
	June 30, 2010						June 30, 2010
	As Filed			Adjustments			Restated
Net loss	$	(653,819	)	$	(5,612	)	$	(659,431	)
Accounts payable and accrued expenses	$	25,060		$	5,612		$	30,672

Statement of Stockholders’ Deficit

	Total stockholders’						Total stockholders’
	Deficit June 30, 2010						Deficit June 30, 2010
	As filed			Adjustments			Restated
Net loss	$	(653,819	)	$	(5,612	)	$	(659,431	)

F-12

Table of Contents

The following errors were found for the year ended June 30, 2011 and for the period from inception (February 11, 2003) to June 30, 2011:

Accounts payable and accrued expenses were understated by $2,112 due to unrecorded legal fees;

Additional paid-in capital was overstated by $64,800 due to incorrectly expensing finder’s fees;

Common stock payable was understated by $74,000 due to the granting of stock for finder’s fees and financing fees;

Accumulated deficit during the development stage was understated by $11,312;

Legal and professional fees were overstated by $64,800 for the year ended June 30, 2011, and $59,188 from inception (February 11, 2003) to June 30, 2011 due to incorrectly expensing finder’s fees;

Loss on settlement of accounts payable was understated by $63,000 due to the settlement of accounts payable of $3,500 with stock valued at 66,500 for the year ended June 30, 2011, and from inception (February 11, 2003) to June 30, 2011;

Finance and interest expense was understated by $7,500 for the year ended June 30, 2011, and from inception (February 11, 2003) to June 30, 2011;

Net loss for the year ended June 30, 2011 was understated by $5,700 for the year ended June 30, 2011, and $11,312 from inception (February 11, 2003) to June 30, 2011;

Issuance of common stock – services was overstated by $64,800 for the year ended June 30, 2011, and from inception (February 11, 2003) to June 30, 2011 due to incorrectly expensing finder’s fees;

Issuance of common stock- financing fees was understated by $7,500 for the year ended June 30, 2011, and from inception (February 11, 2003) to June 30, 2011 due to unrecorded financing fees;

Cash used for accounts payable and accrued expenses were understated by $5,612 for the period from inception (February 11, 2003) to June 30, 2011; and

The effects on our previously issued June 30, 2011 financial statements are as follows:

Balance Sheet

	June 30, 2011						June 30, 2011
	As filed			Adjustments			Restated
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Accounts payable and accrued expenses	$	213,639		$	2,112		$	215,751
Total current liabilities	$	785,845		$	2,112		$	787,957
Additional paid-in capital	$	2,373,916		$	(64,800	)	$	2,309,116
Common stock payable	$	97,157		$	74,000		$	171,157
Accumulated deficit during the development stage	$	(3,289,879	)	$	(11,312	)	$	(3,301,191	)
Total liabilities and stockholders’ deficit	$	20,909		$	-		$	20,909

F-13

Table of Contents

Statement of Operations

	Year ended						Year ended
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Legal and professional fees	$	405,827		$	(64,800	)	$	341,027
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Total operating expenses	$	653,648		$	(1,800	)	$	651,848
Loss before other expenses and income taxes	$	(653,648	)	$	1,800		$	(651,848	)
Finance and interest expense	$	(54,724	)	$	(7,500	)	$	(62,224	)
Total other expenses	$	(59,469	)	$	(7,500	)	$	(66,969	)
Net loss	$	(713,117	)	$	(5,700	)	$	(718,817	)
Net loss per common share - basic	$	0.00		$	-		$	0.00

	From inception						From inception
	(February 11, 2003)						(February 11, 2003)
	to						to
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Legal and professional fees	$	1,064,489		$	(59,188	)	$	1,005,301
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Total operating expenses	$	2,958,712		$	3,812		$	2,962,524
Loss before other expenses and income taxes	$	(2,958,712	)	$	(3,812	)	$	(2,962,524	)
Finance and interest expense	$	(326,422	)	$	(7,500	)	$	(333,922	)
Total other expenses	$	(331,167	)	$	(7,500	)	$	(338,667	)
Net loss	$	(3,289,879	)	$	(11,312	)	$	(3,301,191	)

F-14

Table of Contents

Statement of Cash Flows

	For the year ended						For the year ended
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Net loss	$	(713,117	)	$	(5,700	)	$	(718,817	)
Issuance of common stock- services	$	261,095		$	(64,800	)	$	196,295
Issuance of common stock- financing fees	$	18,400		$	7,500		$	25,900
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Non-cash investing and financing activities:
Stock issued for accounts payable, accrued expenses, and note payable	$	18,000		$	3,500		$	21,500

	From inception						From inception
	(February 11, 2003)						(February 11, 2003)
	to						to
	June 30, 2011						June 30, 2011
	As Filed			Adjustment			Restated
Net loss	$	(3,289,879	)	$	(11,312	)	$	(3,301,191	)
Issuance of common stock- services	$	311,095		$	(64,800	)	$	246,295
Issuance of common stock- financing fees	$	286,900		$	7,500		$	294,400
Loss on settlement of accounts payable	$	—		$	63,000		$	63,000
Accounts payable and accrued expenses	$	470,011		$	5,612		$	475,623
Non-cash investing and financing activities:
Stock issued for accounts payable, accrued expenses, and note payable	$	855,172		$	3,500		$	858,672

Statement of Stockholders’ Deficit

	Total stockholders’						Total stockholders’
	Deficit June 30, 2011						Deficit June 30, 2011
	As filed			Adjustments			Restated
Issuance of common stock-services	$	108,992		$	(64,800	)	$	44,192
Issuance of common stock-financing fees	$	18,400		$	7,500		$	25,900
Issuance of common stock for settlement of AP, accrued expense and note payable	$	18,000		$	66,500		$	84,500
Net loss	$	(713,117	)	$	(5,700	)	$	(718,817	)

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NOTE 3. PREPAID EXPENSE

For the years ended June 30, 2011 and 2010, the Company had prepaid expenses of $11,750 and $0, respectively. For the year ended June 30, 2011, prepaid expenses of $163,851 was paid through the issuance of the Company’s common stock of which $152,103 has been expensed.

NOTE 4. NOTE PAYABLE

In March 2010 the Company entered into a three month, 20% note payable with a third party for $5,849. On March 10, 2011 the note payable was converted into 15,000,000 shares of restricted common stock at $0.0012 per share or $18,000 based on the fair value of the Company’s stock on March 10, 2011. The shares repaid the note payable of $5,849 principal and $1,203 interest, and a personal loan to the CEO of the Company which was accounted for as a reduction in accrued officer compensation of $6,203. The remaining $4,745 was recognized as a loss on conversion of debt as of June 30, 2011.

NOTE 5. RELATED PARTY TRANSACTIONS

Accrued expenses – related parties

	June 30, 2011		June 30, 2010

Unpaid officer compensation	$	549,023	$	517,850
Sub-license expense		23,183		—
Total accrued expenses – related parties	$	572,206	$	517,850

As of June 30, 2011, the Company incurred amounts due to related parties of $572,206. The liability consists of payments due under employment agreements of $549,023 to our Chief Executive Officer and Chief Operating Officer and sub-licensing fees of $23,183 for the intellectual property with Smart Kids International Holdings, Inc., (“SKIH”). As of June 30, 2011 and 2010, $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 $42,292 as of June 30, 2010, is due to our Chief Operating Officer. All accrued expenses – related parties have been expensed in the Statement of Operations in the year incurred. Effective January 1, 2010, the Company’s Board of Directors passed a resolution for the Company to no longer incur any sublicensing fees or accrue unpaid officers’ salaries until further notice.

Effective January 1, 2011, the Company reinstated the $5,000 a month officer compensation and the $5,000 a month sub-licensing fee. As of June 30, 2011, $23,183 has been accrued for unpaid sub-licensing fees. In June 2010, the Company issued 98,829,209 shares of restricted common stock in exchange for the outstanding and accrued officers’ salaries and sub-licensing fees as of December 31, 2009 in the amount of $816,897.

Sub-Licensing Agreement

On June 20, 2005, the Company entered into an exclusive sublicense agreement with SKIH, a company owned by the Chief Executive Officer and Director, Richard Shergold. This sub-license agreement gives the Company rights to the intellectual property relating to Be Alert Bert® and Full Motion FitnessTM, including the trademarks and all related products. This sub-license agreement requires the Company to pay licensing fees of $5,000 per month in exchange for the use of the trademarks, domain names and copyrights, concepts and characters and rights to manufacture, distribute, sell, advertise, and profit from the products relating to the Be Alert Bert® and Full Motion FitnessTM intellectual property.

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On January 1, 2010, SKIH agreed to waive the monthly payment obligation for a period of time until the Company is able to raise capital and refurbish the existing product line for reintroduction into the domestic and international markets. Effective January 1, 2011, the Company reinstated the $5,000 monthly sub-licensing fees. For the years ended June 30, 2011 and 2010, $30,000 of sub-licensing fees has been expensed.

Effective September 9, 2010, the Company and 3D Future Vision, Inc., a Florida corporation ("3DFV”), entered into a License Agreement on an exclusive basis for a term of twenty five (25) years. Pursuant to the License Agreement, 3DFV grants certain rights under its proprietary intellectual property related to the Gina D Brand Library® intellectual property inventory (“Licensed IP”) to the Company to make, have made, import, use, offer for sale, promote, distribute, sell products and processes, and otherwise commercially exploit the Licensed IP in all fields and any manner as deemed necessary in the sole discretion of the Company.

In consideration for the execution of the Sub-License Agreement and for the exclusivity of the license, the Company agreed to pay a one-time fee of $263,008 to the owners of 3DFV, Mr. Joseph DiFrancesco and his spouse Bernadette, and issue an amount of shares of the Company common stock to 3DFV equivalent to render 3DFV’s percentage of stock ownership in the Company equal to that of Mr. Richard Shergold, the Company’s then President and Co-Chairman. This issuance to 3DFV would have amounted to approximately 200,000,000 shares of the Company’s common stock. In addition, 3DFV’s President, Mr. Joseph DiFrancesco, was appointed as the Company’s Chief Executive Officer and Co-Chairman of the Board of Directors pursuant to a written consent of the majority shareholders of the Company in lieu of a meeting of shareholders. On December 15, 2010 the Company effectively terminated the License Agreement with 3DFV by mutual agreement between the parties. Shares issued in accordance with the License Agreement were returned and all obligations under the License Agreement have ceased. Effective December 22, 2010, Joseph DiFrancesco resigned from all positions as an officer of the Company and a member of the Board of Directors. At the time of termination the Company had issued to 3DFV 100,000,000 shares of restricted common stock, paid $4,078 of the one-time fee, and paid $24,257 as a sub-licensing fee. The stock was returned and cancelled on December 23, 2010 and the unpaid portion reported on the Company’s Statement of Operations as a reduction in licensing fees due to the termination of the license agreement.

Office Rent

The Company shares office space at the residence of the Co-Chairs of the Board located in Edmonton, Canada at no cost to the Company. For the years ended June 30, 2011 and 2010, the rent expense was zero.

NOTE 6. EQUITY DRAWDOWN FINANCING AGREEMENT

On March 18, 2010, the Company entered into a equity drawdown financing agreement and a registration rights agreement (collectively the “Agreements”) with Auctus Private Equity Fund, LLC (“Auctus”). In accordance with the Agreements, Auctus committed, subject to certain conditions, to purchase up to $10 million of the Company’s common stock over a term of up to two years. Although the Company is not mandated to sell shares under the Agreements, the Agreements gave the Company the option to sell to Auctus shares of common stock at a per share purchase price equal to 95% of the lowest closing price during the five trading days following the Company’s delivery of notice to Auctus (the “Notice”). At its option, the Company could set a floor price under which Auctus could not sell the shares which were the subject of the Notice.

Auctus was not required to purchase the shares, unless the shares which are subject to the Notice had been registered for resale and were freely tradable in accordance with the Federal securities laws, including the Securities Act of 1933. The Company registered 38,000,000 shares of common stock on the Company’s Form S-1, effective May 26, 2010. In addition, the Company agreed to pay Auctus the aggregate amount of $15,000 as an origination fee.

The Company issued all 38,000,000 shares of par value $0.0001 free trading common stock to Auctus in three issuances on June 25, 2010, September 21, 2010 and November 15, 2010. Upon issuance, the common stock was recognized a stock receivable. Subsequent to the June 25, 2010 issuance, the price of the Company’s common stock decreased significantly before Auctus was able to sell any stock. Auctus began selling the stock on the open market in September 2010. As a result of the lower stock price, Auctus was not able to sell the common stock at its original value. As of June 30, 2011, the Company has received cash proceeds of $52,020 ($7,000 of which was held by Auctus as down payment of the $15,000 origination fee) and was notified that all of the shares had been sold. The Company recognized an allowance for stock receivable of $57,040 as of June 30, 2011. As of June 30, 2010, a stock receivable of $63,650 was recognized. No additional shares have been issued to Auctus under the Agreements.

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The shares were issued as follows:

Issue Date	Shares Issued		Value Per Share		Issuance Valuation
June 35, 2010		10,000,000	$	0.0064	$	63,650
September 21, 2010		10,000,000	$	0.001		9,500
November 15, 2010		18,000,000	$	0.002		35,910
		38,000,000				109,060
Less allowance recorded during the year ended June 30, 2011						(57,040)
Less proceeds received during the year ended June 30, 2011						(52,020)
Stock receivable as of June 30, 2011					$	—

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 blank check preferred stock. As of June 30, 2011 and June 30, 2010 the Company had 538,702,504 and 233,287,209 common stock and zero preferred stock outstanding.

Effective November 25, 2010, upon majority of votes by the Company’s stockholders, the authorized capital stock of the Company was increased to 940,000,000 shares, including 900,000,000 shares of common stock and 40,000,000 shares of preferred stock, each with a par value of $0.0001 per share.

Effective July 12, 2011, upon majority of votes by the Company’s stockholders, the authorized capital stock of the Company was increased to 1,840,000,000 shares, including 1,800,000,000 shares of common stock, each with a par value of $0.0001 per share. Additionally, the designated 40,000,000 shares of preferred stock were amended to be blank check, each with a par value of $0.0001.

During the year ended June 30, 2005, the Company issued 121,178,500 shares of common stock valued at $100,032.

During the year ended June 30, 2006, the Company did not issue any shares of common stock.

During the year ended June 30, 2007, the Company did not issue any shares of common stock.

During the year ended June 30, 2008, the Company issued 1,570,000 shares of common stock valued at $105,000

During the year ended June 30, 2009, the Company did not issue any shares of common stock.

On September 4, 2009, the Company issued 550,000 shares of restricted common stock valued at $0.10 per share or $55,000 as financing fees.

On September 4, 2009, the Company issued 1,000,000 shares of restricted common stock valued at $0.08 per share or $80,000 as financing fees.

On October 1, 2009, the Company issued 200,000 shares of restricted common stock valued at $0.10 per share or $20,000 for services.

On October 2, 2009, the Company issued 100,000 shares of restricted common stock valued at $0.074 per share or $7,441 for cash consideration. On October 2, 2009, the Company issued 75,000 shares of restricted common stock valued at $0.076 per share or $5,663 for cash consideration.

On October 22, 2009, the Company issued 1,346,000 shares of restricted common stock valued at $0.10 per share or $134,600 for cash consideration. This stock was recognized as a stock payable as of June 30, 2009.

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On December 20, 2009, the Company issued 125,000 shares of restricted common stock valued at $0.074 per share or $9,300 for cash consideration.

On December 20, 2009, the Company issued 50,000 shares of restricted common stock valued at $0.10 per share or $5,000 for services per an agreement.

On December 20, 2009, the Company issued 62,500 shares of restricted common stock valued at $0.08 per share or $5,000 as financing fees.

On December 20, 2009, the Company issued 930,000 shares of restricted common stock valued at $0.10 per share or $93,000 as financing fees.

On January 4, 2010, the Company issued 1,750,000 shares of restricted common stock valued at $0.076 per share or $133,114 for cash consideration of $115,093 and direct payment to a vendor of $18,021.

On January 18, 2010, the Company issued 250,000 shares of restricted common stock valued at $0.078 per share or $19,484 for cash consideration.

On May 11, 2010, the Company issued 500,000 shares of restricted common stock valued at $0.079 per share or $39,355 for cash consideration.

On May 11, 2010, the Company issued 146,000 shares of restricted common stock valued at $0.067 per share or $9,815 for cash consideration.

On May 11, 2010, the Company issued 275,000 shares of restricted common stock valued at $0.10 per share or $27,500 as financing fees.

On May 11, 2010, the Company issued 100,000 shares of restricted common stock valued at $0.08 per share or $8,000 as financing fees.

On June 25, 2010, the Company issued 92,829,209 shares of restricted common stock valued at $0.009 per share or $816,897 for accrued payroll and accrued expenses.

On June 25, 2010, the Company issued 10,000,000 shares of restricted common stock valued at $0.006 per share or $63,650 in connection with the equity drawdown financing agreement. Upon issuance the stock was recorded as a stock receivable. See Note 6.

On June 30, 2010, the Company issued 250,000 shares of restricted common stock valued at $0.10 per share or $25,000 for services.

As of June 30, 2010, the Company received $19,553 for the purchase of 1,125,000 shares of restricted common stock. The shares were issued in July and September 2010.

On July 16, 2010, the Company issued 250,000 shares of restricted common stock valued at $0.01 per share or $2,500 as financing fees.

On July 16, 2010, the Company issued 1,000,000 shares of restricted common stock for cash consideration of $0.01 per share or $10,000, $5,000 of which was received in May and June 2010, and the stock subsequently issued in July 2010.

On July 16, 2010, the Company issued 125,000 shares of restricted common stock for cash consideration of $0.08 per share or $10,000. The cash was received in March 2010, and the stock subsequently issued in July 2010.

On September 7, 2010, the Company issued 2,200,000 shares of restricted common stock for cash consideration of $0.01 per share or $22,000, $5,000 of which was received in May and June 2010, and the stock subsequently issued in September 2010.

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On September 7, 2010, the Company issued 30,000 shares of restricted common stock valued at $0.01 per share or $3,000 as financing fees.

On September 7, 2010, the Company issued 3,000,000 shares of restricted common stock valued at $0.0043 per share or $12,900 as financing fees. The shares were valued at fair market value on July 16, 2010, the grant date.

On September 7, 2010, the Company issued 3,000,000 shares of restricted common stock valued at $0.006 per share or $18,000 for services. The shares were valued at fair market value on September 1, 2010, the grant date.

On September 7, 2010, the Company issued 1,000,000 shares of restricted common stock valued at $0.0043 per share or $4,300 for services. The shares were valued at fair market value on July 16, 2010, the grant date.

On September 7, 2010, the Company issued 250,000 shares of restricted common stock valued at $0.0012 per share or $300 for services. The shares were valued at fair market value on September 7, 2010, the grant date.

On September 7, 2010, the Company issued 100,000,000 shares of restricted common stock valued at $0.0001 per share or $10,000 in connection with the 3DFV exclusive licensing agreement. These shares were subsequently returned to the Company in December 2010 upon termination of the licensing agreement.

On September 21, 2010, the Company issued 10,000,000 shares of free trading common stock valued at $0.0010 per share or $9,500, in connection with the equity drawdown agreement. Upon issuance the stock was recorded as a stock receivable. See Note 6.

On September 22, 2010, the Company issued 500,000 shares of restricted common stock for cash consideration of $0.01 per share or $5,000.

On September 22, 2010, the Company issued 125,000 shares of restricted common stock valued at $0.0021 per share or $263 based on the fair value of the Company’s common stock on September 22, 2010 for services.

On November 15, 2010, the Company issued 18,000,000 shares of free trading common stock valued at $0.0020 per share or $35,910 in connection with the equity drawdown agreement in exchange for stock receivable. Upon issuance the stock was recorded as a stock receivable. The Company has received proceeds of $52,020 through the drawdown equity financing as of June 30, 2011. See Note 6.

On November 30, 2010, the Company issued 3,200,000 shares of restricted common stock in consideration for cash of $0.01 per share or $32,000.

On December 23, 2010, the Company issued 88,235,294 shares of restricted common stock valued at $0.0015 per share or $132,353 based on the fair value of the Company’s stock on December 23, 2010 as a prepayment for services to be received over six months starting January 2011.

On December 23, 2010, 100,000,000 shares of restricted common stock valued at $0.0001 per share or $10,000 were returned in connection with the cancellation of the 3DFV licensing agreement. See Note 4.

On March 10, 2011, the Company issued 76,250,000 shares of restricted common stock for cash consideration of $0.0004 per share or $30,981.

On March 10, 2011, the Company issued 2,500,000 shares of restricted common stock valued at $0.0015 per share or $3,750 based on the fair value of the Company’s stock on December 24, 2010 as prepayment for services to be received over twelve months starting January 2011.

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On March 10, 2011, the Company issued 20,000,000 shares of restricted common stock valued at $0.0012 per share or $24,000 based on the fair value of the Company’s stock on March 7, 2010 as prepayment for services to be received over six months starting March 2011.

On March 10, 2011, the Company issued 2,500,000 shares of restricted common stock valued at $0.0022 per share or $5,500 based on the fair market value of the Company’s stock on November 1, 2010 for software development costs.

On March 10, 2011, the Company issued 1,000,000 shares of restricted common stock valued at $0.0012 per share or $1,200 based on the fair market value of the Company’s stock on March 10, 2011 for services.

On March 10, 2011, the Company issued 15,000,000 shares of restricted common stock valued at $0.0012 per share or $18,000 based on fair market value of the Company’s stock on March 10, 2011 as repayment of a note payable of $6,000 principal and $1,203 accrued interest, and officer compensation of $6,052. The difference between the fair value of the stock and the liabilities settled of $4,745 was recognized as a loss on conversion of debt. See Note 4.

On April 15, 2011, the Company issued 1,000,000 shares of restricted common stock valued at $0.0012 per share or $1,200 based on the fair market value of the Company’s stock on April 15, 2011 for services.

On April 30, 2011, the Company issued 1,666,667 shares of restricted common stock valued at $0.0012 per share or $2,000 based on the fair market value of the Company’s stock on April 30, 2011 for services.

On April 30, 2011, the Company issued 48,750,000 shares of restricted common stock valued at $0.004 per share or $20,049 for cash consideration.

On June 13, 2011, the Company issued 250,000 shares of restricted common stock valued at $0.008 per share or $2,000 based on the fair market value of the Company’s stock on May 31, 2011 for services.

On June 13, 2011, the Company issued 1,416,667 shares of restricted common stock valued at $0.008 per share or $11,333 based on the fair market value of the Company’s stock on May 31, 2011 as a prepayment for services.

On June 30, 2011, the Company issued 869,565 shares of restricted common stock valued at $0.0023 per share or $2,000 based on the fair market value of the Company’s stock on June 30, 2011 for services.

On June 30, 2011, the Company issued 797,102 shares of restricted common stock valued at $0.0023 per share or $1,833 based on the fair market value of the Company’s stock on June 30, 2011 as a prepayment for services.

As of June 30, 2011, the Company has received $32,357 for the purchase of common stock and granted shares of common stock as a finder’s fee valued at $64,800, financing fee of $7,500, payment of accounts payable of $3,500 and loss on conversion of accounts payable of $63,000 that has not been issued as of June 30, 2011.

NOTE 8. INCOME TAX

We did not provide any current or deferred U.S. federal income tax provision or benefit for the period presented because we have experienced operating losses since inception. Per authoritative guidance pursuant to accounting for income tax and uncertainty in income taxes, when it is more likely than not that a tax asset cannot be realized through future income, the Company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.

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The components of the Company’s deferred tax asset as of June 30, 2011 and 2010 are as follows:

	2011			2010
Net operating loss carry forward	$	251,586		$	230,800
Non-deductible stock compensation		(68,703	)		—
Financing fees		(9,065	)		—
Allowance for stock receivable		(19,964	)		—
Loss on conversion of debt		(23,711	)
Change in valuation allowance		(130,143	)		(230,800	)
Net deferred tax asset	$	—		$	—

A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows:

	2011			2010			Since Inception
Tax at statutory rate (35%)	$	1,035,634		$	903,830		$	1,035,634
Valuation allowance		(1,035,634	)		(903,830	)		(1,035,634	)
Net deferred tax asset	$	—		$	—		$	—

The Company had no gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Company has not accrued any additional interest or penalties. No tax benefit has been reported in connection with the net operating loss carry forwards in the financial statements as the Company believes it is more likely than not that the net operating loss carry forwards will expire unused. Accordingly, the potential tax benefits of the net operating loss carry forwards are offset by a valuation allowance of the same amount. Net operating loss carry forwards of $2,958,954 start to expire in 2023.

The Company files income tax returns in the United States federal jurisdiction. The Company’s last tax return filed was for the year ended June 30, 2004. The Company will file its outstanding U.S. federal returns through June 30, 2011 upon the issuance of this filing. These U.S. federal returns are considered open tax years as of the date of these financial statements. No tax returns are currently under examination by any tax authorities.

NOTE 9. SUBSEQUENT EVENTS

Subsequent to June 30, 2011, the Company had the following stock transactions through September 28, 2011:

Effective July 12, 2011, upon majority of votes by the Company’s stockholders, the authorized capital stock of the Company was increased to 1,840,000,000 shares, including 1,800,000,000 shares of common stock, each with a par value of $0.0001 per share. Additionally, the designated 40,000,000 shares of preferred stock were amended to be blank check, each with a par value of $0.0001.
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.
On August 8, 2011, the Company issued 220,000,000 shares of restricted common stock for five consulting agreements, each for a two year period valued at $505,000.
On August 10, 2011, the Company issued 1,333,334 shares of restricted common stock valued at $0.0015 per share or $2,000 based on the fair market value of the Company’s stock on July 31, 2011 for services.
On August 17, 2011, the Company issued 59,000,000 shares of restricted common stock for services valued at $74,800.
On August 17, 2011, the Company issued 63,800,000 shares of restricted common stock for approximately $61,500 in cash.
On September 14, 2011, the Company issued 1,333,334 shares of restricted common stock for services valued at $2,533.
On September 22, 2011, the Company issued 41,000,000 shares of restricted common stock for services valued at $36,700.

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Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, Mr. Richard Shergold, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act as of a date within ninety (90) days prior to the filing of our June 30, 2011 Form 10-K.

Based upon that evaluation, our management has concluded that, as of June 30, 2011, our disclosure controls and procedures were not effective in timely alerting management to the material information relating to us that was required to be included in our periodic filings with the SEC.

Our Principal Executive Officer has concluded that our disclosure controls and procedures had the following material weaknesses:

▪ 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;

▪ Documentation of all proper accounting procedures is not yet complete; and

§ Prior to the issuance of the original filing in Form 10-Q for the quarter ended March 31, 2012, the Company determined that legal fees of $5,612 and a loss on settlement of accounts payable with common stock of $63,000 were not recorded in the accounting records. In November 2010, the Company entered into an agreement to pay $3,500 of accounts payable with 354,864 shares of common stock valued at $66,500. The common stock was issued in February 2012. Common stock valued at $64,800 as finder’s fees also 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 a common stock payable valued at $7,500 for financing fees was unaccounted for when it incurred in October 2010 and was later issued in March 2012.

Due to the material weakness in internal control over financial reporting, we determined that the previously issued financial condition and results of operations disclosed in the our Annual Report on Form 10-K as of and for the year ended June 30, 2011 and the our Quarterly Reports on Form 10-Q for the periods ended March 31, 2011, September 30, 2011 and December 31, 2011 could no longer be relied upon. This Form 10-K/A for the year ended June 30, 2011 amends the June 30, 2011 and 2010 consolidated financial statements.

To the extent reasonably possible given our limited resources, we intend to take measures to cure the aforementioned material weaknesses, including, but not limited to, the following:

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

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

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

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

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.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the registrant’s annual or interim financial statements will not be prevented or detected on a timely basis.

Our management, with the participation of its Chief Executive Officer, assessed the effectiveness of our internal control over financial reporting as of June 30, 2011. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of The Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on that assessment under such criteria, management concluded that our internal controls over financial reporting were not effective as of June 30, 2011 due to control deficiencies that constituted material weaknesses.

Management in assessing its internal controls and procedures for fiscal 2011 identified the material weaknesses stated above.

Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Changes in Controls and Procedures

In January 2011, the Company engaged new internal accountants and securities legal counsel. Due to the change in personnel, we consider this a change in our control process.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our independent 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 rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report. We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this annual report.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the 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.

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

	June 8, 2012

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.

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

	June 8, 2012

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