UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý | 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 SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO _______ |
Commission File No.: 0-28311
SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(Name of small business issuer specified in its charter)
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TEXAS |
| 76-027334 |
(State or other jurisdiction of |
| (I.R.S. Employer |
incorporation or organization) |
| Identification No.) |
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1355 Peachtree Street, Suite 1150 |
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Atlanta, GA |
| 30309 |
(Address of principal executive offices) |
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(404) 551-5274
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes T No £
Indicate by check mark whether the registrant has submitted electronically and posted in its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this Chapter) during the preceding 12 months or such shorter period that the registrant was required to submit and post such files).
Yes T No £
Indicate by check mark whether the registrant is a large accelerated filer, a non accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Section 12b-2 of the Exchange Act.
Large accelerated filer ____
| Accelerated filer ____ |
Non-accelerated filer ___ ( Do not check if a smaller reporting company) | 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 T
The number of shares outstanding of each of the registrants classes of common stock as of May 15, 2012 was 73,684,306 shares of Common stock and 9,879,854 shares of series common stock.
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TABLE OF CONTENTS | Page | ||
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PART I. |
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| ITEM 1. FINANCIAL STATEMENTS |
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| Balance Sheets as of March 31, 2012 (unaudited) and December 31, 2011 | 3 |
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| Statements of Operations for the three months ended March 31, 2012 and 2011, and the period from June 10, 2010 (inception) to March 31, 2012 (unaudited) | 4 |
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| Statements of Cash Flows for the three months ended March 31, 2012 and 2011, and the period June 10, 2010 (inception) to March 31, 2012 (unaudited) | 5 |
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| Statements of Stockholders Equity (Deficit) for the period June 10, 2010 (inception) to March 31, 2012 (unaudited) | 6 |
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| Notes to Financial Statements (unaudited) | 7-15 |
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| ITEM 2. MANAGEMENT'S PLAN OF OPERATION | 15 | |
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| ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 17 | |
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| ITEM 4. CONTROLS AND PROCEDURES | 17 | |
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PART II | 18 | ||
| ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 24 | |
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| ITEM 6. EXHIBITS | 25 | |
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| SIGNATURES | 26 |
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein the terms Company, we, our, and us refer to Sibling Entertainment Group Holdings, Inc., formerly, Sona Development Corp., a Texas corporation, unless otherwise indicated. In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.
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SIBLING ENTERTAINMENT GROUP HOLDINGS, INC. | |||||
(A Development Stage Company) | |||||
CONSOLIDATED BALANCE SHEETS | |||||
March 31, 2012 | December 31, 2011 | ||||
(Unaudited) | |||||
ASSETS | |||||
Current assets: | |||||
Cash in Bank | $ 0 | $ 63 | |||
Total current assets | $ 0 | $ 63 | |||
Total assets | $ 0 | $ 63 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT |
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Current liabilities: | |||||
Accounts payable | $ 728,314 | $ 575,822 | |||
Accrued liabilities | 25,380 | 23,122 | |||
Derivative liability | 34,137 | 34,137 | |||
Note payable related party | 5,000 | 5,000 | |||
Amounts due to related parties | 24,374 | 71,298 | |||
Short-term notes payable | 62,500 | 62,500 | |||
Total current liabilities | $ 879,705 | $ 771,880 | |||
Stockholders' deficit | |||||
Convertible series common stock, $.0001 par value, 10,000,000 shares authorized, 9,879,854 shares issued and outstanding | $ 988 | $ 988 | |||
Common stock, $.0001 par value, 90,000,000 shares authorized, 73,684,306 and 71,593,931 shares issued and outstanding | 7,369 | 7,160 | |||
Additional paid-in capital | 3,867,042 | 1,965,632 | |||
Accumulated deficit | (4,755,104) | (2,745,595) | |||
Total stockholders' deficit | (879,705) | (771,815) | |||
Total liabilities and stockholders' deficit | $ 0 | $ 63 |
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SIBLING ENTERTAINMENT GROUP HOLDINGS, INC. | ||||||
(A Development Stage Company) | ||||||
STATEMENT OF OPERATIONS | ||||||
(Unaudited) | ||||||
Cumulative amounts | ||||||
For the period from | ||||||
June 10, 2010 | ||||||
For The Three Months Ended March 31, | (Inception) to | |||||
2012 | 2011 | March 31, 2012 | ||||
Operating expenses: | ||||||
General and administrative costs | $ 1,971,897 | $ 181,090 | $ 4,300,325 | |||
Professional fees | 35,354 | 27,270 | 285,775 | |||
Loss from operations | (2,007,251) | (208,360) | (4,586,100) | |||
Non-operating income (expense): | ||||||
Interest expense | (2,258) | (3,327) | (13,142) | |||
loss on extinguishment of debt | 0 | (79,445) | (108,050) | |||
Net loss | $ (2,009,509) | $ (291,132) | $ (4,707,292) | |||
Loss per common share: | ||||||
Basic loss per share: | ||||||
Common stock | ($0.03) | ($0.01) | ||||
Weighted average number of common shares | ||||||
outstanding: | ||||||
Common stock | 72,639,119 | 54,933,069 |
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SIBLING ENTERTAINMENT GROUP HOLDINGS, INC. | |||||||
(A Development Stage Company) | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(Unaudited) | |||||||
Cumulative amounts | |||||||
For the period from | |||||||
June 10, 2010 | |||||||
For The Three Months Ended March 31, | (Inception) to | ||||||
2012 | 2011 | March 31, 2012 | |||||
OPERATING ACTIVITIES: | |||||||
Net loss | $ | (2,009,509) | (291,132) | (4,707,292) | |||
Adjustments to reconcile net loss to net cash provided by / (used in) operating activities: | |||||||
Equity issued to consultants | 1,858,007 | 200 | 2,298,007 | ||||
Common stock issued for directors fees | - | 470,000 | |||||
Common stock issued for services | - | 30,000 | |||||
Loss on extinguishment of debt | - | 79,445 | 108,050 | ||||
Changes in operating assets and liabilities: | |||||||
Accounts payable | 173,801 | 119,010 | 738,205 | ||||
Accrued Liabilities | 2,258 | 3,327 | (24,551) | ||||
Liabilities settled in stock | - | - | 155,930 | ||||
Derivative liability | - | - | 34,137 | ||||
Pre-paid expenses | - | 18,863 | 314,704 | ||||
Due to related parties | - | 70,342 | 569,830 | ||||
Net cash provided by (used in) operating activities | 24,557 | 55 | (12,980) | ||||
FINANCING ACTIVITIES: | |||||||
Common stock issued for cash | - | - | 10,000 | ||||
Proceeds from short-term notes payable | - | - | 2,500 | ||||
Repayments of notes payable related party' | (24,620) | - | (29,620) | ||||
Proceeds from notes payable | - | - | 30,000 | ||||
Capital contribution | - | 100 | |||||
Net cash provided by (used in) operating activities | (24,620) | - | 12,980 | ||||
NET INCREASE (DECREASE) IN CASH | (63) | 55 | - | ||||
CASH, BEGINNING OF PERIOD | 63 | - | - | ||||
CASH, END OF PERIOD | $ | 0 | 55 | - |
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(A Development Stage Company) | ||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT | ||||||||
FOR THE PERIODS ENDED JUNE 10, 2010 (Inception) To March 31, 2012 | ||||||||
(Unaudited) | ||||||||
Deficit | ||||||||
Accumulated | ||||||||
Additional | During | |||||||
Convertible Series | Common | Paid-in | Development | Treasury | ||||
| Common Shares | Amount | Shares | Amount | Capital | Stage | Stock | Total |
Balance at June 10, 2010 (Date of Inception) | -- | $ -- | $ -- | $ 100 | 100 | |||
Reverse merger recapitalization | 9,879,854 | 988 | 46,635,816 | 4,664 | (100) | (47,812) | $ -- | (42,260) |
Net loss | -- | -- | -- | -- | -- | (334,430) |
| 334,430 |
Balance at December 31, 2010 | 9,879,854 | 988 | 46,635,816 | 4,664 | -- | (382,242) | (376,590) | |
Common shares issued for cash at $0.02 per share | -- | -- | 571,429 | 57 | 9,943 | -- | 10,000 | |
Common shares issued for fees accrued during merger | -- | -- | 2,000,000 | 200 | 39,800 | -- | 40,000 | |
Common shares issued for prepaid expenses at $0.09 per share | -- | -- | 2,500,000 | 250 | 224,750 | -- | 225,000 | |
Common shares issued for liabilities to be settled in stock at $0.02 per share, and $.05 per share | -- | -- | 8,346,500 | 835 | 190,095 | -- | 190,930 | |
Common shares issued for settlement of accrued expenses at $0.05 per share (loss on | ||||||||
extinguishment of $16,666) | -- | -- | 833,334 | 83 | 41,583 | -- | 41,666 | |
Common shares issued to settle amounts due to related parties at $0.05 per share, | ||||||||
and $.20 per share (loss on extinguishment of $62,779) | -- | -- | 4,796,852 | 480 | 488,052 | -- | 488,532 | |
Common shares issued for consulting fees at $0.20 per share | -- | -- | 2,000,000 | 200 | 399,800 | -- | 400,000 | |
Common shares issued for settlement of accounts payable at $0.13 per share | -- | -- | 360,000 | 36 | 71,964 | -- | 72,000 | |
Common shares issued for Director's fees at $0.13 per share | -- | -- | 3,400,000 | 340 | 469,660 | -- | 470,000 | |
Common shares issued for services at $0.20 per share | -- | -- | 150,000 | 15 | 29,985 | -- | 30,000 | |
Net loss, year ended December 31, 2011 | -- | -- | -- | -- | -- | (2,363,353) |
| (2,363,353) |
Balance at December 31, 2011 | 9,879,854 | 988 | 71,593,931 | 7,160 | 1,965,632 | (2,745,595) | (771,815) | |
Common shares issued for settlement of notes payable - related party at $.04 per share | -- | -- | 557,600 | 56 | 22,248 | -- | 22,304 | |
Common shares issued for settlement of amounts owed $.04 per share | -- | -- | 532,775 | 53 | 21,255 | -- | 21,308 | |
Common shares issued for consulting fees at $0.03 per share | -- | -- | 1,000,000 | 100 | 29,900 | -- | 30,000 | |
Series common shares reacquired at $4.13 per share | (430,010) | -- | -- | 1,828,007 | -- | (1,828,007) | -- | |
Series common shares for compensation at $4.13 per share | 430,010 | -- | -- | -- | -- | 1,828,007 | 1,828,007 | |
Net loss, for period ended March 31, 2012 | -- | -- | -- | -- | -- | (2,009,509) | -- | (2,009,509) |
Balance at March 31, 2012 | 9,879,854 | $ 988 | 73,684,306 | $ 7,369 | $ 3,867,042 | $ (4,775,104) | $ -- | (879,705) |
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SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2012 AND 2011
(Unaudited)
Note 1 - Nature of Operations and Basis of Presentation
(a) Organization
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in The United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information necessary for a comprehensive presentation of financial position and results of operations. The interim results for the period ended March 31, 2012 are not necessarily indicative of results for the full fiscal year. It is managements opinion, however that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.
Sibling Entertainment Group Holdings, Inc., referenced as the SIBE, Company, we, our, and us was incorporated under the laws of the State of Texas on December 28, 1988, as Houston Produce Corporation. On June 24, 1997, the Company changed its name to Net Masters Consultants, Inc. On November 27, 2002, the Company changed its name to Sona Development Corporation in an effort to restructure the business image to attract prospective business opportunities. Our name changed on May 14, 2007 to Sibling Entertainment Group Holdings, Inc., in New York City. Our business plan then called for focusing on large group sales of tickets to New York based entertainment shows, mostly Broadway plays. We intended to create a full-featured Internet website and registered the domain name Stageseats.com on May 14, 2009. We hired an existing industry expert to head the entity and to execute the business plan. We started booking tickets in April 2009 and continued until November 27, 2009 when we closed the business due to our manager abruptly resigning and lack of funding to continue the business. In September 2009, the executives of SIBE discussed several different methods of obtaining intellectual property from which to launch the next Broadway play. In the fourth quarter of 2009, the Company continued to engage in additional capital efforts. During 2010, the Company continued to pursue additional opportunities in the entertainment industry as well as synergistic opportunities in other industries.
On December 30, 2010, Sibling Entertainment Group Holdings, Inc. (SIBE), entered into a Securities Exchange Agreement with NEWCO4EDUCATION, LLC (N4E), a newly formed entity on June 10, 2010, and the members of N4E. Pursuant to the Securities Exchange Agreement, SIBE has acquired N4E in exchange for 8,839,869 shares of SIBEs newly authorized convertible series common stock. For accounting purposes, the acquisition has been treated as an acquisition of SIBE by N4E and as a recapitalization of N4Es equity. N4E is the surviving and continuing entity and the historical financials following the reverse merger transaction will be those of N4E. As part of the recapitalization of N4E, the equity transactions since its inception have been retroactively restated to include the equivalent shares of the Companys common stock received in the merger. Accordingly, the statement of changes in shareholders deficit reflects the restatement of these transactions. The consolidated financial statements are based on the historical consolidated financial statements of N4E after giving effect to the reverse merger. In conjunction with the acquisition of N4E, the company issued 1,039,985 shares of our series common stock pursuant to debt conversion agreements with the holders of the Company's Series AA Debentures and related warrants.
The Company, through its wholly-owned subsidiary, N4E, focuses on providing services and technology aimed at increasing the performance in educational settings and operates through two (2) divisions, its Educational Management Organization (EMO) and its Technology and Services Group (TSG). The EMO intends to provide school management services, primarily within the charter school arena. The TSG division is focused on the development and deployment of software, systems and procedures to enhance the rate of learning in both primary and secondary education. It is based in Atlanta, Georgia. The Company is considered a development stage company in accordance with ASC 915, Development Stage Entities.
(b) Going Concern
The financial statements have been prepared on the basis of a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues or completed development of any commercially acceptable products or services to date, and has incurred losses of $4,707,292 since inception, and further significant losses are expected to be incurred during the Companys development stage. The Company will depend almost exclusively on outside capital through the issuance of common shares, debentures, and other loans, and advances from related parties to finance ongoing operating losses.
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The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
Note 2 - Summary of Significant Accounting Policies
(a) Use of Estimates
The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(b) Income Taxes
The Company utilizes Financial Accounting Standards Board Codification (ASC), ASC 740, Accounting for Income Taxes, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the estimated tax consequences in future years of differences between the tax bases of assets and liabilities, and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the period in which the differences are expected to affect taxable income.
(c) Financial Instruments
In accordance with the requirements of ASC 825, Financial Instruments, Disclosures about Fair Value of Financial Instruments, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, accounts payable, and amounts due to related parties approximate fair values due to the short-term maturity of the instruments.
(d) Stock-Based Compensation
The Company accounts for stock-based compensation in accordance ASC 718, Compensation Stock Compensation. Under the provisions of ASC 718, stock-based compensation cost is estimated at the grant date based on the awards fair value as calculated by the Black-Scholes-Merton (BSM) option-pricing model and/or market price of conversion shares, and is recognized as expense over the requisite service period. The BSM model requires various highly judgmental assumptions including volatility and expected option life. If any of the assumptions used in the BSM model change significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. The Company estimates the forfeiture rate based on historical experience. Further, if the extent of the Companys actual forfeiture rate is different from the estimate, then the stock-based compensation expense is adjusted accordingly.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with ASC 505-50 Equity Based Payments to Non-Employees. Costs are measured at the estimated fair market value of the consideration received, or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505-50.
(e) Loss per Share
The Company computes loss per share in accordance with ASC 260, Earnings Per Share, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. This guidance requires companies that have multiple classes of equity securities to use the two-class of if converted method in computing earnings per share. We compute loss per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings.
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(f) Derivative Financial Instruments
Our derivative financial instruments consist of embedded and free-standing derivatives related primarily to the $32,500 short term note. The embedded derivatives include the conversion features at 80% of market. In addition, under the accounting provisions, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock ," the Company is required to classify certain other non-employee stock options and warrants (free-standing derivatives) as liabilities. The accounting treatment of derivative financial instruments requires that the Company record the derivatives at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. The fair value of all derivatives at March 31, 2012 and December 31, 2011 totaled $34,137 and $34,137, respectively. Any change in fair value of these instruments will be recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income. At March 31, 2012 and December 31, 2011 the derivative was valued primarily using the Black-Scholes Option Pricing Model with the following assumptions: dividend yield of 0%, annual volatility of 327% to 327%, risk free interest rate of 1.20% to 1.20%, and expected life of one year.
The accounting guidance establishes a fair value hierarchy based on whether the market participant assumptions used in determining fair value are obtained from independent sources (observable inputs) or reflect the Company's own assumptions of market participant valuation (unobservable inputs). A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The accounting guidance establishes three levels of inputs that may be used to measure fair value:
Level 1Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2Quoted prices for identical assets and liabilities in markets that are inactive; quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; or
Level 3Prices or valuations that require inputs that are both unobservable and significant to the fair value measurement.
The Company considers an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and views an inactive market as one in which there are few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers. Where appropriate the Company's or the counterparty's non-performance risk is considered in determining the fair values of liabilities and assets, respectively.
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Description | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) |
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Derivative securities March 31, 2012 | $ -- | $ -- | $ 34,137 |
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Derivative securities December 31, 2011 | $ -- | $ -- | $ 34,137 |
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(g) Recent Accounting Pronouncements
In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, (ASU 2011-04). This standard results in a common requirement between the FASB and the International Accounting Standards Board for measuring fair value and disclosing information about fair value measurements. ASU 2011-04 is effective for fiscal years and interim periods beginning after December 15, 2011. The adoption of this accounting pronouncement did not have any effect on our financial position and results of operations.
All other new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted.
Note 3 - Due to Related Parties
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| March 31, 2012 |
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| December 31, 2011 |
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Due to significant shareholders |
| $ | 24,374 |
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| $ | 71,298 |
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Stephen C. Carlson was contracted through December 31, 2010 as a consultant to provide advisory services on a non-exclusive basis. At December 31, 2010 the Company owed $10,000 to Mr. Carlson for these provided services. On December 30, 2010, in conjunction with the acquisition of N4E, the Board of Directors of Sibling appointed Stephen C. Carlson as CEO, with a term of office that commenced December 31, 2010. The Company entered into an agreement on March 1, 2011 as amended June 1, 2011 with Stephen Carlson to convert debt for consulting services to N4E prior to the acquisition by the Company on December 30, 2010 and debt for services as CEO during the first quarter of 2011, in exchange for the Companys restricted Common Stock in the aggregate of 966,666 shares for an accrued amount of $29,000.
The Company entered into an agreement on October 1, 2011 with Stephen C. Carlson to convert debt for services as CEO for the period April 1, 2011 to September 30, 2011 in exchange for the Companys restricted Common Stock in the aggregate of 596,747 shares for an accrued amount of $44,756. The Company owed him a balance of $41,767 at December 31, 2011, including the $5,000 note payable described below. Mr. Carlson resigned as CEO and Board Member as of January 24, 2012. The Company issued 557,600 shares of common stock valued at $22,304 ($0.04 per share) to him in consideration of all accrued consulting fees as of January 24, 2012. As of result of the stock issuance, at March 31, 2012 the Company owed Mr. Carlson $16,154 for reimbursement of advances made on behalf of the Company, including the $5,000 note payable described below. Mr. Carlson surrendered 162,010 shares of series common stock in conjunction with his resignation.
Gerald F. Sullivan was contracted through December 31, 2010 as a consultant to provide advisory services on a nonexclusive basis. At December 31, 2010 the Company owed $32,000 to Mr. Sullivan for these provided services. The Company entered into an agreement on March 1, 2011 as amended June 1, 2011 with Gerald F. Sullivan to convert debt for consulting services originally incurred with the formation and development of strategy and business plans in exchange for the Companys restricted Common Stock in the aggregate of 1,700,000 shares for accrued compensation of $51,000. The Company owed him a balance of $14,364 at March 31, 2012 for cash advances made to the company for operating expenses.
On December 30, 2010, in conjunction with the acquisition of N4E, the Board of Directors of Sibling appointed Oswald A. Gayle as CFO of the Company with a term of office that commenced December 31, 2010. During this period, he accrued total compensation of $21,200. The Company entered into an agreement with Oswald A. Gayle on March 1, 2011 to convert debt for services as CFO during the first quarter of 2011 in exchange for the Companys restricted Common Stock in the aggregate of 472,266 shares for an accrued amount of $14,168. The Company entered into an agreement on October 1, 2011 with Oswald A. Gayle to convert debt for services as CFO for the period April 1, 2011 to September 30, 2011 in exchange for the Companys restricted Common Stock in the aggregate of 661,173 shares for an accrued amount of $49,588. The company owed him a balance of $21,308 at December 31, 2011. The Company accepted his resignation on February 12, 2012, and issued 532,775 shares of stock in consideration of accrued consulting fees of $21,308 through the date of his resignation. Mr. Gayle also surrendered 200,000 shares of series common stock as a part of his resignation. No further amounts are owed to Mr. Gayle.
In January 2012 the Company modified its relationship with Dixon McLeod, who was a founder of NEWCO4EDUCATION, LLC. Mr. McLeod had been issued 200,000 shares of series common stock in conjunction with the merger with the Company in December 2010. He surrendered 68,000 shares of series common stock at the time of his termination. This change was not as a result of any disagreements with the Company, and he remains available to the Company as a consultant on an as-needed basis. The shares of series common stock were subsequently reissued by the Company.
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NOTE 4 - Notes Payable - Related Party
On January 21, 2011 Stephen C. Carlson loaned the Company $5,000 in the form of a Promissory Note with an annual interest rate of 3.0%. There was a balance due of $5,000 due on this loan at March 31, 2012 and December 31, 2011. At March 31, 2012 and December 31, 2010 there was $594 and $469, respectively in accrued interest on this note.
| March 31, 2012 |
| December 31, 2011 |
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Short Term Note | $ | 32,500 |
| $ | 32,500 |
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Outstanding Debenture | $ | 30,000 |
| $ | 30,000 |
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Total Short Term Notes | $ | 62,500 |
| $ | 62,500 |
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At March 31, 2012 and December 31, 2011 the Company had a note payable balance of $32,500. This represents a short term note with an annual interest rate of 12.0%. In the event that a Liquidity Event occurs earlier than the agreed to three month period, then the full principal amount together with any interest due and outstanding, shall become payable in full no later than five business following the liquidity event, or the fifth business day following the Liquidity Event, whichever is earlier. As further consideration for this obligation, the Company agreed to issue warrants for the purchase of unregistered common stock to the Payee in an amount equal to the amount loaned under the agreement and, which shall expire in two years. The pricing for the purchase of the common stock shall be set at eighty percent (80%) of the ten day closing price of the stock of the target prior to the request for the issuance of the warrant by the Payee. At March 31, 2012 and December 31, 2011 this note had accrued interest in the amount of $6,038 and $5,027, respectively.
On December 30, 2010, the Company entered into Conversion Agreements with all but one of the holders of the Series AA debentures previously issued by SIBE and held on that date. Pursuant to the conversion agreements, the holders accepted a total of 1,039,985 shares of convertible series common stock and one-hundred percent (100%) of the membership interests of a new, wholly-owned subsidiary of SIBE, Debt Resolution, LLC (DR LLC) in full settlement of their debentures, underlying warrants and accrued interest as of that date. The Conversion Agreements released all claims that 43 of the holders of the debentures had, have, or might have against SIBE. Following this transaction, the Company now has a debenture balance of $30,000 and accrued interest of $18,748 and $17,626 as of March 31, 2012 and December 31, 2011, respectively, which is in default.
Note 5 Reverse Merger with NEWCO4EDUCATION, LLC
On December 30, 2010, the Company, pursuant to a Securities Exchange Agreement, acquired all of the outstanding membership interests of NEWCO4EDUCATION, LLC by issuance of 8,839,869 shares of convertible series common stock. Each share of series common stock will entitle the holder thereof to a number of votes equal to the series conversion ratio determined as of the record date on all matters submitted to a vote of the stockholders of the Corporation. The holders of Series Common Stock shall be entitled to receive dividends when, as, and if declared by the Board of Directors out of funds legally available for that purpose. The Exchange Agreement was contingent on the consummation of two other transactions, which were completed as follows:
On December 29, 2010, the Company entered into a Loan Assignment Agreement with Sibling Theatricals, Inc. ("STI") and Debt Resolution, LLC ("DR LLC"), a newly formed subsidiary of the Company. Pursuant to the Loan Assignment Agreement, the Company assigned the Loan Receivable with STI and the related accrued interest receivable and certain related liabilities underlying these theatrical assets for 1 million membership interests in DR LLC. The Company's ownership interest in DR LLC was transferred to the Series AA debenture holders the next day as part of the settlement of those debt obligations (see below). The Company effectively exited the theatricals business as a result of these transactions.
On December 30, 2010, the Company entered into Conversion Agreements with all but one of the holders of the Series AA convertible debentures held on that date. Pursuant to the conversion agreements, the holders accepted a total of 1,039,985 shares of convertible series common stock and one-hundred percent (100%) of the membership interests of DR LLC in full settlement of their debentures, underlying warrants and accrued interest as of that date. The Conversion Agreements released all claims that 43 of the holders of the debentures had, have, or might have against the Company.
Note 6 - Capital Stock
On December 30, 2010, the Board of Directors, pursuant to authority granted in the Companys certificate of formation created a a new series of common stock to effect a debt settlement. As a result, the 100,000,000 authorized shares of common stock are now divided into 2 series, 90,000,000 shares of equity common stock, and 10,000,000 shares of series common stock.
11
On December 30, 2010, the Company issued 8,839,869 shares of our series common stock pursuant to a Securities Exchange Agreement by and among the Company, N4E, and the N4E Members. Six shareholders of the series common stock entered into stock restriction agreements whereby these six individuals agreed to continue to render services to the Company for up to two years, through December 30, 2012. If the individual does not fulfill the two year term under the Stock Restriction Agreement the Company may purchase a pro-rata portion of the series common shares held by the shareholder for $1.00. If the individual terminates their employment before December 30, 2011 then the Company may repurchase, or cancel, 67% of the series common stock holdings subject to the Stock Restriction Agreement. If the individual terminates their employment between December 30, 2011 and December 31, 2012, then the Company may repurchase, or cancel, 33.34% of their series common stock holdings. These individuals were part of the founders of the Company and are paid separately for current services. Any changes as a result of these claw back provisions are considered to be capital and have no effect on the operations of the Company. As of December 30, 2011 and 2010 no shares have been reacquired by the Company as a result of termination by any of these individuals.
In conjunction with the acquisition of N4E, the Company issued 1,039,985 shares of our series common stock pursuant to debt conversion agreements with the holders of the Companys Series AA Debentures and related warrants.
During the first quarter, 2011, the Company took steps to significantly reduce outstanding debts associated with the acquisition of N4E by issuance of the Companys common stock as follows:
On January 14, 2011, the Company entered into an agreement with Mr. Richard Smyth, pursuant to which the Company issued 2,471,500 shares of common stock valued at $49,430, in payment of consulting services rendered to N4E in connection with the formation and development of the strategy and business plans of N4E.
On January 14, 2011, the Company entered into an agreement with Meshugeneh LLC, pursuant to which the Company issued 4,250,000 shares of common stock valued at $85,000 in payment of consulting services rendered to N4E in connection with the formation and development of the strategy and business plans of N4E.
On January 14, 2011, the Company entered into an agreement with Betsey V. Peterzell, pursuant to which the Company issued 1,075,000 shares of common stock valued at $51,500 in payment of legal services rendered to N4E.
On January 14, 2011, the Company entered into an agreement with Michael Baybak, pursuant to which the Company issued 2,000,000 shares of common stock valued at $40,000 for services rendered to the Company in connection with the acquisition of N4E.
On March 1, 2011, as amended June 1, 2011, the Company entered into an agreement with Viraxid Corporation, pursuant to which the Company issued 833,334 shares of common stock valued at $41,666 for accounting and bookkeeping services rendered to N4E.
On March 1, 2011, the Company entered into an agreement with Gerald F. Sullivan, Chairman, pursuant to which the Company issued 1,700,000 shares of common stock valued at $85,000 for services rendered to the Company in connection with the formation and development of strategy and business plans of N4E. These were issued on March 31, 2011.
On October 24, 2011, the Company entered into an agreement with Gerald F. Sullivan, Chairman, pursuant to which the Company issued 200,000 shares of common stock valued at $40,000, as an incentive bonus. These were issued on October 24, 2011.
On March 1, 2011, the Company entered into an agreement with Stephen C. Carlson, CEO, pursuant to which the Company issued 966,666 shares of common stock valued $48,334, for consulting services rendered to N4E in connection with the development of strategy and business plans of N4E and for services rendered to the Company as CEO during the first quarter of 2011. These were issued on March 31, 2011.
On October 1, 2011, the Company entered into an agreement with Stephen C. Carlson, CEO, pursuant to which the Company issued 596,747 shares of common stock valued $119,349 to convert debt for services as CEO for the period April 1, 2011 to September 30, 2011. These were issued on October 3, 2011.
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On March 1, 2011, the Company entered into an agreement with Oswald A. Gayle, CFO, pursuant to which the Company issued 472,266 shares of common stock valued at $23,614 for services rendered to the Company as CFO during the first quarter of 2011. These were issued on March 31, 2011.
On October 1, 2011, the Company entered into an agreement with Oswald A. Gayle, CFO, pursuant to which the Company issued 661,173 shares of common stock valued at $132,235 to convert debt for services as CFO for the period April 1, 2011 to September 30, 2011. These were issued on October 3, 2011.
On October 24, 2011, the Company entered into an agreement Oswald A. Gayle, CFO, pursuant to which the Company issued 200,000 shares of common stock valued at $40,000, as an incentive bonus. These were issued on October 24, 2011.
On October 24, 2011, the Company entered into an agreement with Dr. Amy Savage-Austin, a director, pursuant to which the Company issued 200,000 shares of common stock valued at $40,000 as an incentive bonus. These were issued on October 24, 2011.
On October 24, 2011, the Company entered into an agreement with Dr. Gerry L. Bedore, Jr., a key advisor, pursuant to which the Company issued 1,000,000 shares of common stock valued at $200,000 as an incentive bonus. These were issued on October 24, 2011.
On October 24, 2011, the Company entered into an agreement with Dr. Timothy G. Drake, a key advisor, pursuant to which the Company issued 1,000,000 shares of common stock valued at $200,000 as an incentive bonus. These were issued on October 24, 2011.
On November 18, 2011, the Company entered into an agreement with Robert Copenhaver, a director, pursuant to which the Company issued 1,000,000 shares of common stock valued at $130,000 as an incentive bonus. These were issued on November 18, 2011.
On November 18, 2011, the Company entered into an agreement with Michael Hanlon, a director, pursuant to which the Company issued 1,000,000 shares of common stock valued at $130,000 as an incentive bonus. These were issued on November 18, 2011.
On November 18, 2011, the Company entered into an agreement with William W. Hanby, a key advisor, pursuant to which the Company issued 1,000,000 shares of common stock valued at $130,000 as an incentive bonus. These were issued on November 18, 2011.
For the period January 1, 2011 through December 31, 2011, the Company sold 571,429 shares at a price of $0.0175 per share or $10,000 in the aggregate to one accredited investor.
In January, 2012, the Company issued 532,775 shares of common stock valued at $21,308 ($.04 per share) to Oswald Gayle, the former CFO, in full satisfaction of all amounts owed to him for his services. As a part of his resignation he tendered 200,000 shares of series common stock which he had acquired as a result of his position as a founding member of NEWCO4EDUCATION, LLC.
In January, 2012, the Company issued 557,600 shares of common stock valued at $22,304 ($0.04 per share) to Steve Carlson, the former CEO, in partial satisfaction of amounts owed to him for his services.
In February 2012, the Company issues 1,000,000 shares of common stock values at $30,000 ($0.03 per share) to The Partnership of Atlanta Incorporated for consulting services.
During the first quarter of 2012 the Company negotiated the return of 430,010 shares of series common stock. Since these series common shares reacquired do not trade, we valued such series common shares using their comparable common stock equivalent. Each series common stock converts into 141.7026889 shares of common stock, as of March 31, 2012, based on 73,684,306 shares outstanding. The trading price of the common stock on the day such series common stock was reacquired was $0.03 a share. As a result we recorded the fair value of the series common stock to treasury stock in the amount of $1,828,007. Within the same quarter we reissued the same amount of series common shares to two consultants. The trading price of the common stock on March 30th, 2012 was $0.03 a share for purposes of recording a fair value expense, using the same common stock equivalent approach. As result we recorded compensation expense in the amount of $1,828,007 for the 430,010 series common stock issued for services in the first quarter.
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Note 7 - Supplemental Cash Flow Information
Actual amounts paid for interest and income taxes for the 3 months ended March 31, 2012 and 2011 are as follows:
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| March 31, |
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|
| 2012 |
|
| 2011 |
|
| |||||||
Interest |
| $ | - |
|
| $ | - |
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| |||||
Income Taxes |
| $ | - |
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| $ | - |
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Non-cash Investing and Financing Transactions: |
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March 31, |
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| 2012 |
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| 2011 |
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Stock issued to settle liabilities to be settled in stock |
| $ | 21,308 |
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| $ | - |
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Stock issued for consulting fees / prepaid |
| $ | - |
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| $ | - |
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Stock issued to settle related party liabilities and accrued expenses |
| $ | 22,304 |
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| $ | - |
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Note 8 - Legal Proceedings
The Company may at times become involved in litigation or legal proceedings as a normal course of business, but there are no note worthy legal proceedings being pursued as of the date of this audit report.
Note 9 Subsequent Events
ASC Topic 855-10, Subsequent Events, requires the Company to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued. The Company has evaluated all other subsequent events through the date these consolidated financial statements were issued.
On April 9th, 2012, Rob Copenhaver, resigned as CEO of the Company to pursue another opportunity. Mr. Copenhaver will continue as a member of the Board of Directors and the Company looks forward to his continued contribution in this role.
CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risk, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as may, will, should, could, would, expect, plan, anticipate, believe, estimate, continue, or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading Risk Factors and those listed in our other Securities and Exchange Commission filings. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report.
The statements contained in sections titled Managements Discussion and Analysis of Financial Condition and Results of Operations, with the exception of historical facts are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which reflect our current expectations and beliefs regarding our future results of operations, performance, and achievements. These statements are subject to risks and uncertainties and are based upon assumptions and beliefs that may or may not materialize. These forward looking statements include, but are not limited to, statements concerning:
our anticipated financial performance and business plan;
the sufficiency of existing capital resources;
our ability to raise additional capital to fund cash requirements for future operations;
the ability of the Company to generate revenues to fund future operations;
the volatility of the stock market and;
general economic conditions.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
For the three months ended March 31, 2012, the Companys operations included satisfying continuous public disclosure requirements and the continued focus on the development and deployment of software, systems, and procedures to enhance the rate of learning in both primary and secondary education. The Company took steps to create specifications for its initial internet based offerings, to seek qualified vendors to supply software and systems, and we have begun the process of development of a marketing plan for its deployment. We have engaged a digital advertising and marketing agency to support our needs in an outsourcing arrangement, and have rolled out its new product identifications. We continue to seek qualified executives in support of our plans for growth, and we expect to expand both the management team, and our Board of Directors during the near term. We experienced some delays as a result of staffing changes, and now expect our initial offerings to be available during the summer of 2012, a delay of several months from our original schedule.
The Company has not generated revenues since inception and we cannot determine when we will generate revenue from operations and we expect to continue to operate at a loss for the foreseeable future. In order to act upon our operating plan discussed herein, we must be able to raise sufficient funds from (i) debt financing; or, (ii) new investments from private investors.
Net Loss
For the period from inception to March 31, 2012, the Company recorded a net loss of $4,707,292. The Companys net loss is primarily attributable to general and administrative expenses. A large portion of the cumulative general and administrative expenses as of March 31, 2012 were related to the issuance of stock in connection with converting certain of the accured expenses related to management, and to providing advice to undertake for, and consult with us, concerning management, marketing, consulting, strategic planning, corporate organization and structure, financial matters in connection with the operation of our business, expansion of services, acquisitions and business opportunities, and review and advice regarding our overall progress, needs and condition
Capital Expenditures
The Company expended no amounts on capital expenditures for the period from June 10, 2010 (inception) to March 31, 2012.
Liquidity and Capital Resources
The Company is in the development stage and, since inception, has experienced significant changes in liquidity, capital resources and shareholders equity. The Company had current and total assets of $0 and $63 respectively as of March 31, 2012 and December 31, 2011 . The working capital deficit was $879,705 at March 31, 2012. Net stockholders equity in the Company was $(879,705) at March 31, 2012.
We will require additional funding over the next 12 months estimated of at least $1,000,000 to develop our new business. Presently, we have only $0 worth of liquid assets with which to pay our expenses. Current and anticipated capital needs may vary based on our acquisitions, or technology development activities. As a result, we may raise capital through the issuance of debt, the sale of equity, or a combination of both.
We do not presently have any firm commitments for additional working capital and there are no assurances that such capital will be available to us when needed or upon terms and conditions which are acceptable to us. If we are able to secure additional working capital through the sale of equity securities, the ownership interests of our current stockholders will be diluted. If we raise additional working capital through the issuance of debt or additional dividend paying securities, our future interest and dividend expenses will increase.
If we are unable to secure additional working capital as needed, our ability to develop new business, increase sales, meet our operating and financing obligations as they become due or continue our business and operations could be in jeopardy.
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The Company has no current plans for the purchase or sale of any plant or equipment.
There are no full time employees at the Company. The Company has no current plans to add employees. The individuals working for the benefit of the Company are generally part time, and have been compensated primarily through the issuance of stock, or accrued expenses underlying consulting agreements.
Critical Accounting Policies
In Note 2 to the attached interim financial statements for the periods ended March 31, 2012 included in this Form 10-Q, we discuss those accounting policies that are considered significant in determining the results of operations and our financial position. We believe that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America.
(a) Use of Estimates
The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
(b) Income Taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
(c) Derivative Financial Instruments
Our derivative financial instruments consist of embedded and free-standing derivatives related primarily to the $32,500 short term note. The embedded derivatives include the conversion features at 80% of market. In addition, under the accounting provisions, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Companys Own Stock ," the Company is required to classify certain other non-employee stock options and warrants (free-standing derivatives) as liabilities. The accounting treatment of derivative financial instruments requires that the Company record the derivatives at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value of these instruments will be recorded as non-operating, non-cash income or expense at each reporting date. If the fair value of the derivatives is higher at the subsequent balance sheet date, the Company will record a non-operating, non-cash charge. If the fair value of the derivatives is lower at the subsequent balance sheet date, the Company will record non-operating, non-cash income. The Black-Scholes Option Pricing Model was utilized to fair value the derivative at March 31, 2012with the following assumptions: dividend yield of 0%, annual volatility of 327% to 327%, risk free interest rate of 1.20% to 1.20%, and expected life of one year.
(d) Financial Instruments
In accordance with the requirements of Accounting Standards Codification (ASC) 825, Financial Instruments, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, promissory notes, accounts payable and amounts due to related parties approximate fair values due to the short-term maturity of the instruments.
Effect of Recent Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. ASU No. 2011-04 is intended to improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs, by ensuring that fair value has the same meaning in U.S. GAAP and IFRSs and that their respective disclosure requirements are the same except for inconsequential differences in wording and style. The amendments in ASU No. 2011-04 apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entitys shareholders equity in the financial statements. Some of the disclosures required by ASU No. 2011-04 are not required for nonpublic entities.
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All other new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, hence are not expected to have any impact once adopted.
Going Concern
The Company has not generated any revenues or completed development of any commercially acceptable products or services to date, has a working capital deficiency of $879,705 at March 31, 2012 and has incurred losses of $4,707,292 since inception, and further significant losses are expected to be incurred in the Companys development stage.
The Company will depend almost exclusively on outside capital through the issuance of common shares, and advances from related parties to finance ongoing operating losses. The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
The Companys management has identified what it believes are deficiencies in the Companys disclosure controls and procedures. The deficiencies in the Companys disclosure controls and procedures resulted in failures to timely file periodic reports within the time periods specified in the SECs rules and forms.
The deficiencies in our disclosure controls and procedures included (i) lack of segregation of duties and (ii) lack of sufficient resources to ensure that information required to be disclosed by the Company in the reports that the Company files or submits to the SEC are recorded, processed, summarized, and reported, within the time periods specified in the SEC's rules and forms.
The Company intends to take corrective action to ensure that information required to be disclosed by the Company pursuant to the reports that the Company files or submits to the SEC is accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the three months ended March 31, 2012, we continued our comprehensive evaluation relating to the effectiveness of disclosure controls and procedures. As a result of such review, we have implemented several changes, among which included:
We have started the documentation of formal policies and procedures necessary to adequately review significant accounting transactions
We have more specifically defined existing key controls, and developed additional controls, applicable to the review of significant accounting transactions and the accounting treatment of such transactions
We have implemented a formal audit committee with a financial expert, and the Company now has the board oversight role within the financial reporting process
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We have added additional levels of review by qualified personnel of the application of each key control.
During the three months ended March 31, 2012, there were no other changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II.
ITEM 1A RISK FACTORS
Risks Related to Our Business
Our future operating results are highly uncertain. Before deciding to invest in us or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this annual report. If any of these risks actually occur, our business, financial condition or results of operations could be seriously harmed. In that event, the market price for our common stock could decline and you may lose all or part of your investment.
Effective December 30, 2010, We Entered A New Business; This Makes It Difficult To Evaluate Our Business
We have yet to enter into any agreement to acquire an EMO or manage a charter school. We have not recorded any revenue from our new business initiatives. Our management team has only recently begun to work together, and has no experience in operating educational management organizations and charter schools. We have no operating history on which you can base your evaluation of our business and prospects. Accordingly, the Company should be evaluated in light of the expenses, delays, uncertainties, and other difficulties frequently encountered by unseasoned business enterprises entering new markets with unproven products. No assurance can be given that the Company will ever achieve profitable operations. Our failure to address these expenses, delays, uncertainties, and other difficulties could cause our operating results to suffer and result in the loss of all or part of your investment.
We Have A History Of Losses And Expect Losses In The Future
The Company has incurred losses since inception. We do not currently own, operate, or have agreements to acquire any school operations and therefore have no revenues. As a result of our technology initiatives and existing, and anticipated operating expenses, we expect to incur substantial net losses for the foreseeable future. Our ability to become profitable will depend upon our ability to generate and sustain revenue that is greater than our expenses. In order to generate revenue, we will need to enter into management agreements with charter schools, acquire other EMOs, and successfully acquire, and successfully launch our technology initiatives, or develop and license curricula, computer based education services, and school operation and management tools. Our ability to execute our business plans, and generate revenue, will be dependent, in part, on our ability to obtain financing sufficient to execute our business plan. Even if we do achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis. Failure to become and remain profitable may adversely affect the market price of our common stock, our ability to raise capital, and our ability to continue operations.
Political risks
Charter Schools are authorized by state statutes. State legislatures may amend these statutes and the amendments may be unfavorable to our business. Courts may declare these statutes unconstitutional in whole or in part. In either event, we may be unable to grow our business and the market price of our common stock would be adversely affected.
The Private, For-Profit Management Of Charter Schools Is A Relatively New And Uncertain Industry, And It May Not Become Publicly Accepted
Our future is highly dependent upon the development, acceptance, and expansion of the market for private, for-profit management of charter schools. This market has only recently developed. The development of this market has been accompanied by significant press coverage and public debate concerning for-profit management of charter schools. If this business model fails to gain acceptance among the general public, educators, politicians and school boards, we may be unable to grow our business and the market price of our common stock would be adversely affected.
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We believe that the success of our business will be dependent, among other things, upon our ability to demonstrate general improvements in academic performance at the charter schools we intend to manage and operate. We anticipate that the management agreements with charter schools will contain performance requirements related to test scores and other measures of student achievement. If average student performance at our schools increases, whether due to improvements in achievement over time by individual students in our schools or changes in the average performance levels of new students entering our schools, aggregate absolute improvements in student performance will be more difficult to achieve. If academic performance at our schools declines, or simply fails to improve, we could lose business and our reputation could be seriously damaged, which would impair our ability to
gain new business or renew existing school management agreements.
We Could Incur Losses At Our Schools If We Are Unable To Enroll Enough Students
We expect that the amount of revenue we will receive for operating a charter school will be dependent on the number of students enrolled, while the majority of the facility, operating, and on-site administrative costs will be fixed. Therefore, achieving site-specific enrollment objectives will be an important factor in our ability to achieve satisfactory financial performance at any particular school. We may be unable to expand or maintain enrollment in the charter schools we manage. To the extent we are unable to meet enrollment objectives at a school, the school will be less financially successful and our financial performance will be adversely affected.
We Desire Rapid Growth, Which May Strain Our Resources And May Not Be Sustainable
We desire to grow rapidly. Rapid growth may strain our managerial, operational, and other resources. If we are to manage our rapid growth successfully, we will need to hire and retain management personnel and other employees. We must also develop and improve our operational systems, procedures, and controls on a timely basis. If we fail to successfully manage our growth, we could experience client dissatisfaction, cost inefficiencies and lost growth opportunities, which could harm our operating results. We cannot guarantee that we will continue to grow at our historical rate.
We May Not Be Able To Attract And Retain Highly Skilled Principals And Teachers In The Numbers Required To Grow Our Business
Once we have acquired EMOs with management agreements with charter schools or entered into management agreements with charter schools, our success is likely to depend to a high degree upon our ability to attract and retain highly skilled school principals and teachers. We may need to hire new principals and new teachers to address turnover at the charter schools we manage. Currently, there is a well-publicized nationwide shortage of teachers and other educators in the United States. In addition, we may find it difficult to attract and retain principals and teachers for a variety of reasons, including the following:
? charter schools generally require our teachers to work a longer day and a longer year than most public schools;
? charter schools tend to have a larger proportion of our schools in challenging locations, such as low-income urban areas, which may
make attracting principals and teachers more difficult; and
? charter schools generally impose more accountability on principals and teachers than do public schools as a whole.
These factors may increase the challenge we face in an already difficult market for attracting principals and teachers. Other EMOs have experienced higher levels of turnover among teachers than is generally found in public schools nationally, which we attribute in part to these factors. If we fail to attract and retain principals and teachers in sufficient numbers or of a sufficient quality, we could experience client dissatisfaction and lost growth opportunities, which would adversely affect our business.
Our Business Could Suffer If We Lose The Services Of Key Executives
Our future success depends upon the continued services of a number of our key executive personnel, particularly our Chairman of the Board of Directors, our Chief Executive Officer, or Chief Financial Officer. These executives will be instrumental in determining our strategic direction and focus and in publicly promoting the concept of private management of public schools. If we lose the services of either or any of our other executive officers or key employees, our ability to grow our business would be seriously compromised and the market price of our common stock may be adversely affected. We do not maintain any key man insurance on any of our executives.
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We expect that our school management agreements will generally have a term of five years. When we expand by adding an additional school under an existing management agreement, the term with respect to that school generally expires at the end of the initial five-year period. We have no experience in negotiating school management agreements, and we cannot be assured that any school management agreements will be negotiated or renewed. In addition, school management agreements may be terminable by the school district or charter board at will, with or without good reason, and our school management agreements may be terminated for cause, including a failure to meet specified educational standards, such as academic performance based on standardized test scores. In addition, as a result of changes within a school district, such as changes in the political climate, we could from time to time face pressure to permit a school district or charter board to terminate our school management agreement even if they do not have a legal right to do so. If we fail to renew a significant number of school management agreements at the end of their term, or if school management agreements are terminated prior to their expiration, our reputation and financial results would be adversely affected.
Our Management Agreements Will Involve Financial Risk
Our school management agreements will provide that we will operate a school in return for per- pupil funding that generally does not vary with our actual costs. To the extent our actual costs under a school management agreement exceed our budgeted costs, or our actual revenue is less than planned because we are unable to enroll as many students as we anticipated or for any other reason, we would lose money at that school. We expect that our school management agreements will require us to continue operating a school for the duration of the school management agreement even if it becomes unprofitable to do so.
We May Need To Advance Or Loan Money To Charter Schools Or Their Related Charter Holding Equity That May Not Be Repaid
We may have to loan charter boards funds to finance the purchase or renovation of school facilities we manage or for other reasons. Loans to charter schools may be accelerated upon termination of the corresponding management agreement with the charter school. If these advances or loans are not repaid when due, our financial results could be adversely affected.
We Could Become Liable For Financial Obligations Of Charter Boards
We could have facility financing obligations for charter schools we no longer operate, because the terms of our facility financing obligations for some charter schools might exceed the term of the management agreement for those schools. While the charter board is generally responsible for locating and financing its own school building, the holders of school charters, which are often non-profit organizations, typically do not have the resources required to obtain the financing necessary to secure and maintain the school building. For this reason, if we want to obtain a management agreement with a particular charter board, we may help the charter board arrange for the necessary financing. For some of the charter schools we expect to manage, we may enter into a long-term lease for the school facility which may exceed the initial term of the management agreement. If our management agreements were to be
terminated, or not renewed in these charter schools, our obligations to make lease payments would continue, which could adversely affect our financial results for the school building, typically in the form of loan guarantees or cash advances. Although the term of these arrangements may be coterminous with the term of the corresponding management agreement, our guarantee may not expire until the loan is repaid in full. The lenders under these facilities may not be committed to release us from our obligations unless replacement credit support is provided. The default by any charter school under a credit facility that we have guaranteed could result in a claim against us for the full amount of the borrowings. Furthermore, in the event any charter board becomes insolvent or has its charter revoked, our loans and advances to the charter board may not be recoverable, which could adversely affect our financial
results.
We Expect Our Market To Become More Competitive
We expect the market for providing private, for-profit management of charter schools will become increasingly competitive. A variety of companies and entities could enter the market, including colleges and universities, other private companies that operate higher education or professional education schools, and others. Our existing competitors and these new market entrants could have financial, marketing and other resources significantly greater than ours. We will also compete for charter school funding with existing public schools that may pursue alternative reform initiatives, such as magnet schools and inter- district choice programs. In addition, in jurisdictions where voucher programs have been authorized, we will compete with existing private schools for public tuition funds.
Voucher programs provide for the issuance by local or other governmental bodies of tuition vouchers to parents worth a certain amount of money that they can redeem at any approved school of their choice, including private schools. If we are unable to compete successfully against any of these existing or potential competitors, our revenues could be reduced, resulting in increased losses.
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We are not certain when we will have positive cash flow, if at all. We expect that we will regularly need to raise funds in order to operate our business and may need to raise additional funds in the future. We cannot be certain that we will be able to obtain additional financing on favorable terms, if at all. If we issue additional equity securities, stockholders may experience dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of common stock. If we cannot raise funds on acceptable terms, if and when needed, we may not be able to take advantage of future opportunities, grow our business or respond to competitive pressures or unanticipated requirements, which could seriously harm our business.
We Expect To Derive A Substantial Portion Of Our Revenues From Public School Funding, Which Is Dependent On Support From Federal, State, And Local Governments. Changes Or Reductions In Funding For Public School Systems Could Reduce Our Revenues And Cash Flows And Negatively Impact Our Margins And Impede The Growth Of Our Business.
The availability of funding to purchase our products and services is subject to many factors that affect government spending. These factors include downturns in general economic conditions, like those which we are currently experiencing, that can reduce government tax revenues and may affect education funding, emergence of other priorities that can divert government funding from educational objectives, periodic changes in government leadership that can change spending priorities, and the government appropriations process, which is often slow and unpredictable. In many instances, customers rely on specific funding appropriations to purchase our products. Curtailments, delays, or reductions in this funding can delay or reduce revenues and cash flow we had otherwise forecasted to receive.
If We Are Unable To Adapt Our Products And Services To Technological Changes, To The Emergence Of New Computing Devices And To More Sophisticated Online Services, We May Lose Market Share And Service Revenue, And Our Business Could Suffer.
We need to anticipate, develop and introduce new products, services and applications on a timely and cost effective basis that keeps pace with technological developments and changing customer needs. We may encounter difficulties responding to these changes that could delay our introduction of products and services or require us to make larger than anticipated investments to maintain existing products. Software industries are characterized by rapid technological change and obsolescence, frequent product introductions, and
evolving industry standards. Accordingly, it is difficult to predict the problems we may encounter in developing versions of our products and services and we may need to devote significant resources to the creation, support and maintenance of our products and services. If we fail to develop or sell products and services cost effectively that respond to these or other technological developments and changing customer needs, we may be unable to successfully market our products and services and our revenue and business could materially suffer.
Misuse Or Misappropriation Of Our Proprietary Rights Or Inadvertent Infringement By Us On The Rights Of Others Could Adversely Affect Our Results Of Operations.
The intellectual property rights in the software we intend to develop will be essential to our business. We intend to rely on a combination of the laws of copyrights, trademarks, and trade secrets, as well as license agreements, employment and employment termination agreements, third-party non-disclosure agreements, and other methods to protect our proprietary rights. We intend to enforce our intellectual property rights when we become aware of any infringements or potential infringements and believe they warrant such action. If we were unsuccessful in our ability to protect these rights, our operating results could be adversely affected. Third parties may assert infringement claims against us in the future. We may be required to modify our products, services or technologies or obtain a license to permit our continued use of those rights. We may not be able to do so in a timely manner or upon
reasonable terms and conditions. Failure to do so could harm our business and operating results. In addition, we leverage certain third party generated products through license and/or royalty agreements and we have the risk that certain of these relationships will not continue or that the underlying products will not be properly supported or updated by the third parties.
If Our Security Measures Are Breached And Unauthorized Access Is Obtained To Our Web-Based Products, They May Be Perceived As Not Being Secure, Customers May Curtail Or Stop Using These Products And We May Incur Significant Legal And Financial Exposure And Liabilities.
We may develop web-based products that involve the storage of certain personal information with regard to the teachers and students using these products. If our security measures are breached and unauthorized access to this information occurs, our reputation will be damaged, our business may suffer, and we could incur significant liability. Because the techniques used to attempt unauthorized access to such systems change frequently and generally are not recognized until attempted on a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the security of our system could be harmed and we could lose sales and customers.
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If we develop web-based products that incorporate content not under our direct control including content from, and links to, third-party web sites, and content uploaded by our customers, we could be subject to claims relating to this content. In addition to exposing us to potential liability, claims of this type could require us to change our web sites in a manner that could be less attractive to our customers and divert our financial and development resources.
We Rely On Government Funds For Specific Education Programs, And Our Business Could Suffer If We Fail To Comply With Rules Concerning The Receipt And Use Of The Funds
We expect to benefit from funds from federal and state programs to be used for specific educational purposes. Funding from the federal government under Title I of the Elementary and Secondary Education Act provides federal funds for children from low-income families. A number of factors relating to these government programs could lead to adverse effects on our business:
These programs have strict requirements as to eligible students and allowable activities. If we or the charter schools that we intend to manage fail to comply with the regulations governing the programs, we or the charter schools that we intend to manage could be required to repay the funds or be determined ineligible to receive these funds, which would harm our business.
If the income demographics of a district's population were to change over the life of a management agreement for a charter school, resulting in a decrease in Title I funding for the charter school, we would receive less revenue for operating the charter school and our financial results could suffer.
The authorization for the Elementary and Secondary Education Act, including Title I, has expired and this act is being funded by Congress on an interim appropriation basis. If Congress does not reauthorize or continue to provide interim appropriation for the Elementary and Secondary Education Act, we would receive less funding and our growth and financial results would suffer. Most federal education funds are administered through state and local education agencies, which allot funds to charter boards. These state and local education agencies are subject to extensive government regulation concerning their eligibility for federal funds. If these agencies were declared ineligible to receive federal education funds, the receipt of federal education funds by the charter schools we intend to manage could be delayed, which could in turn delay our payment from the charter schools we intend to manage. In addition, we could become ineligible to receive these funds if any of our high-ranking employees commit serious crimes.
We Could Be Subject To Extensive Government Regulation Because We Benefit From Federal Funds, And Our Failure To Comply With Government Regulations Could Result In The Reduction Or Loss Of Federal Education Funds
Because we expect to benefit from federal funds, we must also comply with a variety of federal laws and regulations not directly related to any federal education program, such as federal civil rights laws and laws relating to lobbying. Our failure to comply with these federal laws and regulations could result in the reduction or loss of federal education funds which would cause our business to suffer. In addition, our management agreements are potentially covered by federal procurement rules and regulations because our school district and charter board clients pay us, in part, with funds received from federal programs. Federal procurement rules and regulations generally require competitive bidding, awarding contracts based on lowest cost and similar requirements. If a court or federal agency determined that a management agreement was covered by federal procurement rules and regulations and was awarded
without compliance with those rules and regulations, then the management agreement could be voided and we could be required to repay any federal funds we received under the management agreement, which would hurt our business.
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Risks Related to Our Securities
Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
Since our common stock is thinly traded, its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:
Funding from federal and state education programs is allocated through formulas. If federal or state legislatures or, in some case, agencies were to change the formulas, we could receive less funding and the growth and financial performance of our business would suffer. Federal, state and local education programs are subject to annual appropriations of funds. Federal or state legislatures or local officials could drastically reduce the funding amount of appropriation for any program, which would hurt our business and our ability to grow.
the trading volume of our shares;
the number of securities analysts, market-makers and brokers following our common stock;
changes in, or failure to achieve, financial estimates by securities analysts;
new products or services introduced or announced by us or our competitors;
actual or anticipated variations in quarterly operating results;
You may have difficulty reselling shares of our common stock, either at or above the price you paid, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes.
These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, securities class action litigation has often been initiated following periods of volatility in the market price of a companys securities. A securities class action suit against us could result in substantial legal fees, potential liabilities and the diversion of managements attention and resources from our business. Moreover, and as noted below, our shares are currently traded on the pink sheets and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.
Because we are subject to the Penny Stock rules the level of trading activity in our stock may be reduced.
If a trading market does develop for our stock, it is likely we will be subject to the regulations applicable to "Penny Stock." The regulations of the SEC promulgated under the Exchange Act that require additional disclosure relating to the market for penny stocks in connection with trades in any stock defined as a penny stock. The SEC regulations define penny stocks to be any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Unless an exception is available, those regulations require the broker-dealer to deliver, prior to any transaction involving a penny stock, a standardized risk disclosure schedule prepared by the SEC, to provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the purchasers account, to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a stock that becomes subject to the penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage market investor interest in and limit the marketability of our common stock.
In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission, the FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock.
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Future sales of shares of our common stock could adversely affect the prevailing market price of our stock. If our significant stockholders sell a large number of shares, or if we issue a large number of shares, the market price of our stock could decline. Moreover, the perception in the public market that stockholders might sell shares of our stock could depress the market for our shares. If our significant stockholders sell substantial amounts of our common stock in the public market, such sales could create a circumstance commonly referred to as an overhang, in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price we deem reasonable or appropriate. Other situations include:
conditions or trends in our business industries;
announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
additions or departures of key personnel;
sales of our common stock; and
general stock market price and volume fluctuations of publicly-traded, and particularly microcap, companies.
deliver to a prospective investor a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market;
provide the prospective investor with current bid and ask quotations for the penny stock;
explain to the prospective investor the compensation of the broker-dealer and its salesperson in the transaction;
provide investors monthly account statements showing the market value of each penny stock held in the their account; and
make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchasers written agreement to the transaction.
We will issue additional shares of common stock upon conversion of our series common stock and may issue additional shares capital stock to raise capital or complete acquisitions, which would substantially reduce the equity interest of our current stockholders.
The outstanding shares of our series common stock automatically convert into 95% of the outstanding common stock (giving effect to the conversion) upon the vote of holders of two thirds of outstanding series common stock, voting as a separate series. In addition, we may issue a substantial number of additional shares of our common stock to complete a business combination or to raise capital. At this time, the Company is not aware of any intent of the holders of series common stock to vote to convert into common stock. The issuance of additional shares of our common stock may significantly reduce the equity interest of our existing stockholders and adversely affect prevailing market prices for our common stock.
We have not paid dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as the Board of Directors may consider relevant. As the date of this report, our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business. If we do not pay dividends, our common stock may be less valuable because a return on your investment will occur only if our stock price appreciates.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS)
In January, 2012, the Company issued 532,775 shares of restricted common stock valued at $21,308 ($.04 per share) to Oswald Gayle, the former CFO, in full satisfaction of all amounts owed to him for his services. As a part of his resignation he tendered 200,000 shares of series common stock which he had acquired as a result of his position as a founding member of NEWCO4EDUCATION, LLC.
In January, 2012, the Company issued 557,600 shares of restricted common stock valued at $22,304 ($0.04 per share) to Steve Carlson, the former CEO, in partial satisfaction of amounts owed to him for his services.
In February 2012, the Company issues 1,000,000 shares of restricted common stock values at $30,000 ($0.03 per share) to The Partnership of Atlanta Incorporated for consulting services.
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During the first quarter of 2012 the Company negotiated the return of 430,010 shares of series common stock. Since these series common shares reacquired do not trade, we valued such series common shares using their comparable common stock equivalent. Each series common stock converts into 141.7026889 shares of common stock, as of March 31, 2012, based on 73,684,306 shares outstanding. The trading price of the common stock on the day such series common stock was reacquired was $0.03 a share. As a result we recorded the fair value of the series common stock to treasury stock in the amount of $1,828,007. Within the same quarter we reissued the same amount of series common shares to two consultants. The trading price of the common stock on March 30th, 2012 was $0.03 a share for purposes of recording a fair value expense, using the same common stock equivalent approach. As result we recorded compensation expense in the amount of $1,828,007 for the 430,010 series common stock issued for services in the first quarter.
Exemption From Registration
The securities issued during the first quarter of 2012 were issued without registration with the Commission, pursuant to Section 4(2) of the Securities Act of 1933, as amended. The securities are offered and sold only to accredited investors as defined in Regulation D. This exemption applies because the Company did not make any public offer to sell any securities, but rather, the Company only offered securities to persons known to the Company to be accredited investors and only sold securities to persons who represented to the Company in writing that they are accredited investors.
ITEM 6. EXHIBITS
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page __ this Form 10-Q, and are incorporated herein by this reference.
Exhibit No. | Description |
|
|
10.1 | Modification to Master Agreement by and between Sibling Entertainment Group Holdings, Inc. and The Partnership of Atlanta, Inc. dated May 9, 2012* |
|
|
10.2 | Restricted Stock Purchase and Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Blackstone Partners, LLC dated as of March 30, 2012* |
|
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10.3 | Restricted Stock Purchase and Restriction Agreement by and between Sibling Entertainment Group Holdings, Inc. and Atlanta Capital Partners, LLC dated as of March 30, 2012* |
|
|
31.1 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, promulgated under the Securities and Exchange Act of 1934, as amended.* |
|
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32.1 | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002** |
* Filed herewith
**Furnished herewith
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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.
Dated: May 17, 2012 | Sibling Entertainment Group Holdings, Inc.
By: /s/ Gerald F. Sullivan Gerald F. Sullivan Chief Executive Officer, Chief Financial Officer, and Director (Principal Executive Officer and Principal Accounting Officer) |
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EX-31.1
I, Gerald F. Sullivan, as the registrant’s sole certifying officer certify that:
1.
I have reviewed this annual report on Form 10-Q of Sibling Entertainment Group Holdings, Inc. for the year ended March 31, 2012;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: May 17, 2012
/s/ Gerald F. Sullivan
Gerald F. Sullivan
Chairman of the Board of Directors
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Accounting Officer)
EX-31.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Gerald F. Sullivan, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
1.
The Annual Report on Form 10-Q of Sibling Entertainment Group Holdings, Inc., (the “ Company ”) for the period ended ended March 31, 2012 (the “ Report ”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 17, 2012
/s/ Gerald F. Sullivan
Gerald F. Sullivan
Chairman of the Board of Directors
Chief Executive Officer and Chief Financial Officer
(Principal Executive Officer and Principal Accounting Officer)
EXHIBIT 10.1
Modification to Master Agreement between The Partnership of Atlanta, Inc. (TPA), and Sibling Entertainment Group Holdings, Inc. (SIBE), dated May 9, 2012.
This document is a modification to an agreement (the “Master Agreement”) between TPA and SIBE (copy attached) which has an “effective date” of February 1, 2012. On further review, the Master Agreement lacks some information which would be beneficial to both parties, and therefore, is being modified though the execution of this modification document (the “Modification”).
1. According to both parties, the Master Agreement was actually signed by both parties on February 24, 2012, therefore February 24, 2012 is, in fact, the date of the Master Agreement;
2. The “effective date”, which is February 1, 2012, is, in fact, intend to refer to the date from which the work performed under the Master Agreement by TPA would be formally billed to SIBE, as prior to February 1, 2012, there was no formal agreement between the parties;
3. While there was no formal agreement in place prior to February 1, 2012, TPS nonetheless, did some work in anticipation of a formal agreement. SIBE has determined that the work performed prior to February 1, 2012, specifically in November 2011, December 2011, and January 2012, has value and can be utilized by SIBE. This work is detailed in Exhibit 1 of this Modification.
4. In consideration of the valuable and tangible work performed by TPA prior to February 1, 2012, SIBE has agreed to issue one million (1,000,000) shares of its common stock, and TPA has agreed to accept the shares as full payment for the products, artwork, consulting, services and any other actions provided by TPA. These shares are restricted according to Rule 144 of the Securities Act;
5. The shares of common stock provided for payment, as detailed above, are issued in conjunction with the execution of a SIBE Restricted Stock and Restriction Agreement, an executed copy of which is included at Exhibit 2 to this Modification. This executed copy includes (a) a full list of the actions performed by TPA, (b) a Qualified Investor Questionnaire form, and(c) a copy of the SEC web pages that generally describe the restrictions associate with Rule 144;
6. With regard to work performed by TPA after February 1, 2012, TPA desires to be compensation in cash, unless otherwise agreed in writing. TPA intends to bill SIBE at a rate of $150 per hour for the work performed for SIBE. Both parties agree that the $150 per hour rate is a “blended rate”, that the use of a single billing rate is beneficial to both parties, and that it is intended to be an average of the rates of the various employees of TPA if the individuals were being billed for their separate activities;
7. TPA intends to bill SIBE monthly a 'retainer' of ten thousand dollars ($10,000) per month, as described in the Master Agreement. After having reviewed the accounting treatment for SIBE, both parties agree that, for each month, TPA shall provide SIBE a detail of the work actually performed, with applicable charges, such that SIBE may accurately know the actual cost per month, which may be different than an amount that SIBE may accrue under the 'retainer' billing;
8. All actual charges are subject to review and approval, as defined in the Master Agreement;
9. TPA to provide SIBE with a Certificate of Good Standing;
10. TPA to provide SIBE with evidence of corporate authority to enter into the Master Agreement and this Modification;
11. Section 21 of the Master Agreement is amended by striking the numbers“34753.”;
12. Both parties agree that legal review of any artwork, trademarks and logos created for SIBE and its affiliated companies is the sole responsibility of SIBE, and that ownership for the artwork is that of SIBE once agency is paid in full, and for those products, artwork and services provided prior to Februrary 1, 2012, all items will be deemed paid in full on receipt by TPA of the certificate for 1,000,000 shares of SIBE common stock;
13. Section 6 of the Master Agreement is amended by striking in its entirety the words “Either party may terminate this Agreement at any time upon ninety (90) days prior written notice to the other party., provided that in no event may this Agreement be terminated by Client prior to the expiration of twelve (12) months from the commencement of the Term.”, and substituting in lieu thereof, the words “Either party may terminate this Agreement at any time upon ninety (90) days prior written notice to the other party.”
14. SIBE and TPA both acknowledge that SIBE has informed TPA of the financial condition of SIBE on a regular basis, and TPA recites that it has read the filings of SEC from January 2010, forward. SIBE intends to insure that TPA remains fully informed, and has, and will continue to, forward to TPA its public filings when available. TPA agrees to notify SIBE promptly of any changes in its financial condition.
The Partnership of Atlanta, Inc. Sibling Entertainment Group Holdings, Inc.
By: /s/David Arnold, President
By:/s/Gerald F. Sullivan, Chairman
Page 2 of 14
Key Deliverables from Work for Sibling Group Holdings
Full payment and ownership is covered by issuance of 1,000,000 shares of SIBE common stock
October 1, 20ll-January 31, 2012
Newco4education website copy
Sibling Group Holding website design
Sibling Group Holdings Messaging Strategies
Sibling Group Holding Brand Hierarchy
Sibling Group Holding Corporate Identity (logo options, design of application of identity
and tag lines)
Market research (Scarborough)
Market research and analysis Homeschooling
Market research and analysis Educations marketplace
Logo development for Sibling Divisions multiple options
CLIENT AGREEMENT
This Client Agreement (this “Agreement”) is made and entered into as of this 1st day of February, 2012 (the “Effective Date”) by and between The Partnership of Atlanta Incorporated, a Georgia corporation (“Agency”) and Sibling Entertainment Group Holdings, Inc., a Texas corporation (“Client”).
WHEREAS, Client desires to retain Agency to perform professional communication services for promotion of its products and/or services.
WHEREAS, Agency desires to provide professional communication services to Client for the benefit of Client’s affiliates.
WHEREAS, Client and Agency desire to set forth in writing the terms and conditions of their business relationship regarding provision of professional communication services by Agency to Client.
NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Services. Client hereby engages Agency to render the services described in Exhibit A, which is attached hereto and incorporated herein by reference, and such other services as may be agreed to in writing by Client and Agency from time to time. Such services are hereinafter referred to collectively as the "Services." Agency hereby accepts the engagement to provide the Services to Client on the terms and conditions set forth herein. Before Agency commences any Services, the parties shall first agree on a proposed budget for such Services, and the cost of such Services shall not exceed the cost contained in the proposed budget without the written consent of Client. Agency may also contract with third parties to assist it in providing the Services, or to provide products and/or services in addition to the Services (the “Third Party Services”) as needed. The Third Party Services may include, but shall not be limited to, creative, production, and printing services. Prior to providing or contracting for any Third Party Services, Agency shall submit via facsimile to Client a proposal and estimate of the cost of such Third Party Services for Client’s approval. Client shall either approve or reject such proposal and estimate within five (5) business days by signing it in the appropriate space provided and returning it to Agency electronically. Each approved proposal and estimate for Third Party Services shall be considered a part of this Agreement and shall be deemed incorporated herein by this reference without regard to whether such approved proposal and estimate is attached hereto. Copies of approved proposals and estimates for Third Party Services shall be retained by Agency at its offices.
2.
Term. The “Term” of this Agreement shall commence on the Effective Date and, unless sooner terminated as provide herein, shall end upon the completion of twenty-four (24) months.
3.
Compensation and Payment.
3.1
Compensation. For performance of the Services described in this Agreement, Client shall pay and compensate Agency as follows:
(a) For the Services set forth on Exhibit A and any other services, unless otherwise agreed:
(i) For the Services set forth on Exhibit A and any other services, unless otherwise agreed, monthly payments of $10,000, provided, that at the end of each calendar quarter, Agency shall compute the sum of the products of the hourly rates set forth on Exhibit B times the number of hours of work done on behalf of Client for the immediately preceding quarter by Agency
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personnel and if such sum is less that the amount paid by Client during such quarter, a credit shall be applied to the next month’s payment and if such sum is more than the amount paid by the Client during such quarter, Client shall pay the difference within fifteen (15) days of notice of such difference; and,
(ii)
within ten (10) days of the Effective Date, a certificate or certificates representing (1,000,000) shares of Client’s common stock, OTC symbol SIBE, (together with any other shares of Client’s common stock issued to Agency under this Agreement, the “Shares”), such Shares, upon issuance and delivery, to be duly and validly issued, fully-paid and non-assessable. These shares will have been deemed to be fully earned as of the date of this agreement, and the Client agrees to provide all documentation requirement to allow the Agency to clear the shares under Rule 144 of the Securities Act of 1934, or under a 'piggyback' registration with any other similarly issued shares.
(b)
For all media buying and placement Services, Client agrees that Agency shall bill Client monthly an amount which will yield Agency a commission equal in amount to fifteen percent (15%) of such gross media billings for all Client advertising placements by Agency during the month.
(c)
For any Third Party Services, Agency shall bill Client a gross amount which shall yield Agency a commission equal in amount to twenty-five percent (25%) of such gross billings for all Third Party Services for Client arranged and supervised by Agency;;
(d)
In addition to the compensation described above, Client agrees to reimburse Agency for Agency’s expenses incurred in providing these services, such as travel, long distance telephone calls and overnight delivery, courier services, and automobile mileage.
3.2
Payment. For Services performed by Agency on behalf of Client, Client agrees to make payments as follows:
(a) Amounts due for Services rendered and expenses incurred during the previous calendar month will be invoiced to Client monthly, on or before the tenth (10th) day of each month.
(b) Third Party Services will be invoiced in accordance with the terms of the proposal and estimate. Third Party Services, unless otherwise agreed, require Client payments to be made so that Agency has good funds in hand prior to the due date of Third Party Invoices, and Client will be invoiced sufficiently in advance to permit such payments. If a cash discount, prepayment or similar discount is available for any Third Party Services, Agency shall, if possible, invoice Client sufficiently in advance of the payment date so that Client may receive the benefit of such discount. In the event that the actual costs of any such Third Party Services exceed those contained in the approved proposal and estimate, Agency shall provide advance notice, with a detailed explanation of why the actual costs exceeded the proposal and/or estimate, to Client and seek Client’s approval before proceeding.
(c) Client will pay all media invoices directly, and all media buys shall be prior approved by the Client in writing before contracting for such placements.
(d) Unless otherwise agreed, Client shall pay all invoices within fifteen (15) days of receipt of the invoice. Amounts not paid on or before thirty (30) days from receipt of invoice shall be considered past due, and Client agrees to pay a late payment charge equal to the lesser of: (a) one and one-half percent (1.5%) per month, compounded, or (b) the maximum amount allowed by applicable law, applied against all past due amounts. Client shall also be liable for the payment of all fees and expenses, including attorney’s fees, reasonably incurred by Agency in collecting, or attempting to collect, any charges owed hereunder.
4.
Additions or Modifications to the Services.
4.1
During the First Twelve Months of the Term. Either party may request an addition or modification to the scope of the Services provided hereunder by submitting such request to the other party in writing at least ten (10) days prior to the date upon which such change would take effect. Any additions or modifications to the scope of Services must be agreed to by both parties in writing prior to being effective and shall be considered an amendment to this Agreement. The parties shall negotiate in good faith and use best efforts to work diligently to agree on a revised scope of Services, Budget, Fee Schedule and Retainer, as applicable. Upon Client’s request, Agency will submit electronically to Client a proposal and estimate of the cost of any additional or modified Services for Client’s approval. Client shall either approve or reject such proposal in writing within five (5) business days. Any approved proposals for additional or modified Services shall be considered a part of this Agreement and shall be deemed incorporated herein by this reference without regard to whether such approved proposal and estimate is attached hereto. No additional Services shall be performed by Agency until the parties agree upon a revised scope of Services, Budget, Fee Schedule and/or Retainer (if any).
4.2
During the Second Twelve-Months of Term. At least sixty (60) days prior to the expiration of the first twelve months of the Term, the parties shall meet to negotiate in good faith and use best efforts to work diligently to agree on a revised scope of Services, Retainer , and the issuance and delivery of additional Shares to apply during the remaining Term of the Agreement. No additional Services shall be performed by Agency following the completion of the first twelve months of the Term until the parties agree upon a revised scope of Services, Retainer, and issuance and delivery of additional Shares (if any). Notwithstanding the foregoing, neither party shall have any obligation to agree to continue this Agreement for any Renewal Term.
5.
Proprietary Information.
5.1
The parties acknowledge that during the Term of this Agreement, each may have access to Proprietary Information of the other, the disclosure or use of which may injure the other party. “Proprietary Information” shall include “Trade Secrets,” which shall have the meaning ascribed under Georgia law, and “Confidential Information,” which shall mean all other information of the disclosing party that, although not a Trade Secret, is not generally known outside of such party’s organization and which has or could have commercial value or other utility in the business in which the party is engaged or contemplates engaging, and which such party takes reasonable steps to keep secret. Confidential Information shall include, but not be limited to, the pricing and terms of this Agreement, any information relating to the disclosing party's technology, business affairs, and marketing or sales plans.
5.2
Neither party shall use, reveal or divulge Trade Secrets of the other party except in accordance with the terms and conditions of this Agreement. In addition, commencing on the Effective Date and continuing for a period of two (2) years from the termination of this Agreement, each party shall protect as confidential, and shall not disclose to any third party, any Confidential Information received from the disclosing party or otherwise discovered by the receiving party during the Term of this Agreement. The parties shall use Proprietary Information only for the purpose of this Agreement.
5.3
The foregoing restrictions on use and disclosure of Proprietary Information do not apply to information that: (a) is in the possession of the receiving party at the time of its disclosure and is not otherwise subject to obligations of confidentiality; (b) is or becomes publicly known, through no wrongful act or omission of the receiving party; (c) is received without restriction from a third party free to disclose it without obligation to the disclosing party; (d) is developed independently by the
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receiving party without reference to the Proprietary Information, or (e) is required to be disclosed by law, regulation, or court or governmental order.
6.
Termination. Either party may terminate this Agreement at any time upon ninety (90) days prior written notice to the other party., provided that in no event may this Agreement be terminated by Client prior to the expiration of twelve (12) months from the commencement of the Term. In addition, either party may terminate this Agreement without ninety (90) days prior notice for Cause. As to payment of invoices, “Cause” shall mean Client’s failure to pay any invoice within forty-five (45) days after the date of the invoice. For all other matters, “Cause” shall mean a breach by the other party of any material provision of this Agreement, provided that written notice of the breach has been given to the breaching party, and the breach has not been cured within ten (10) days after delivery of such notice (or such additional cure period as the non-breaching party may authorize). Notwithstanding the foregoing, each party may terminate this Agreement immediately upon written notice if the other party breaches the terms and conditions contained in Section 5 above (Proprietary Information). Upon termination of this Agreement for any reason, each party shall promptly return to the other all copies of any data, records, or materials of whatever nature or kind belonging to the other party, including all materials incorporating the Proprietary Information of the other party. If either party terminates this Agreement for reasons other than Cause, Agency shall, at Client’s written request, continue to provide the Services during the ninety (90) day period following the date notice of termination is given, and Client shall pay for the Services as set forth herein during that time. Agency agrees to give all reasonable cooperation toward terminating or transferring, with approval of third parties in interest, all contracts and other arrangements with advertising media or others for advertising space, facilities and talent, and other materials yet to be used, and all rights and claims thereto and therein, upon being duly released from the obligation thereof (recognizing that talent contracts with members of certain labor unions or guilds generally cannot be assigned except to signatories to the collective bargaining agreements governing the services rendered by such talent). Client agrees to pay all amounts due under such contracts and arrangements.
7.
Non-solicitation of Agency Employees. During the term of this agreement and for a period of eighteen (18) months following the termination of this agreement, Client shall not, either directly or indirectly, on Client’s own behalf or in the service of or on behalf of others, solicit, divert or appropriate to or for its own business or for any competing business or attempt to solicit, divert or appropriate to or for its own business or any competing business, any employee, independent contractor, or agent of the Agency.
8.
Exclusive Representation. During the Term of this Agreement, Agency shall not enter into an agreement for the provision of services similar to the Services with any other entity in connection with the sale of a product and/or service directly competitive with those of Client without the Client’s written consent. During the Term of this Agreement, Agency shall be the exclusive provider of services similar to the Services for Client.
9.
Agency of Record. During the Term of this Agreement, Agency shall act as agency of record for Client in connection with all media purchases, billing, and related account management. Client acknowledges that it is legally responsible for all advertising and any other media charges authorized by Agency on its behalf. In connection with Agency’s designation as agency of record for Client, Client shall execute an “Agency of Record Authorization” substantially in the form attached hereto as Exhibit C and incorporated herein by this reference.
10.
Approvals. Agency shall obtain Client’s approval for any advertising, publicity or other program and for any and all media selections made by Agency on Client’s behalf by delivering, faxing, e-mailing or otherwise transmitting the pertinent information about such advertising, publicity, program or media selection, including but not limited to copy and layout as appropriate, to Client. Client shall approve or reject Agency’s proposal for advertising, publicity, other programs or media selection, and shall deliver to
Agency written indication of such acceptance or rejection by US mail, personal deliver, facsimile or e-mail.
11.
Examination of Records. It is understood that Client may at any time during the life of this Agreement, and upon reasonable notice, examine Agency’s files and records pertaining to the handling of Client’s account.
12. Ownership of Intellectual Property. Following completion by Agency of any part of the Services defined in Exhibit A and payment in full by Client of any and all amounts due hereunder for such Services, all tangible and intangible output of the Services and all intellectual property developed directly as a result of or in the course of, Services rendered to Client by Agency, including without limitation, any and all research, documentation, logos, websites, copy, advertising layouts and other materials created by Agency hereunder, shall be deemed to be “works made for hire” and shall be the property of Client. Client understands that there may be limitations on the use and ownership of materials by virtue of the rights of third parties. The foregoing notwithstanding, Client agrees that any advertising, merchandising, packaging and similar plans and ideas prepared by Agency and submitted to Client (whether submitted separately or in conjunction with or as part of other material), but not used by Client, shall remain Agency’s property. Client agrees to return to Agency any copy, artwork, plates, or other physical embodiment of the creative work relating to any such ideas or plans that may be in Client’s possession upon termination. Client also hereby grants to Agency a perpetual non-exclusive royalty-free worldwide license to use Client’s name and any intellectually property developed as a result of or in the course providing the Services for promotion of the Agency and the Agency’s business.
13.
Limited Warranty. Agency represents and warrants that all Services performed pursuant to this Agreement will be of professional quality and will conform to generally accepted industry standards and that Agency will devote its best efforts to the performance of the Services. Agency also warrants that it will comply fully with all applicable laws, regulations, statutes and other government requirements. Agency make no representations as to the success of any of the Services and Agency makes no warranties except as specifically set forth in this Agreement and specifically disclaims any and all implied warranties.
14.
Disclaimer of Certain Damages. Neither party shall be liable to the other for any indirect, consequential, exemplary, special, incidental or punitive damages, including without limitation loss of use or lost business, revenue, profits, or goodwill, arising in connection with this Agreement, under any theory of tort, contract, indemnity, warranty, strict liability or negligence, even if the party knew or should have known of the possibility of such damages. Agency will endeavor to protect Client from any loss through failure of media or other vendors or suppliers to properly execute their commitments and obligations, but Agency shall not be responsible to Client for any such loss.
15.
Indemnification. Agency shall indemnify, defend and hold Client harmless from and against any and all claims, losses, suits, liabilities, or judgments suffered by Client, including reasonable attorneys fees and costs, arising from or related to any material prepared by Agency or at Agency’s direction, including but not limited to, any claim of libel, slander, piracy, plagiarism, invasion of privacy, or infringement of copyright or other intellectual property interest, except where such claim arises out of or is related to material supplied by Client to Agency and incorporated into or relied upon in any materials prepared by Agency. Client shall indemnify, defend and hold Agency harmless from and against any and all claims, losses, suits, liabilities, or judgments suffered by Agency, including reasonable attorneys fees and costs, arising from or related to the use by Agency of any material, including but not limited to information, copy, research, or data, supplied by Client to Agency or to material created by Agency or at the direction of Agency (and otherwise subject to the indemnification by Agency above) that is changed, modified, altered, or misused by Client. Information or data obtained by Agency from Client to substantiate claims
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made in advertising or marketing materials shall be deemed to be “material supplied by Client to Agency” for purposes of this Section.
16.
Misleading Advertising. Nothing herein contained shall be deemed to require that Agency undertake any campaign, prepare any advertising material or publicity, or cause publication of any advertisement or article that, in Agency’s judgment, would be misleading, indecent, libelous, unlawful or otherwise prejudicial to Client’s or Agency’s interests. The Agency will retain legal counsel and have said counsel review all advertising that the Agency produces to ensure that all recommended advertising complies with all federal, state and local laws and regulations. The Agency will advise the Client of Agency’s counsel’s legal comments in a timely fashion so that the comments may be appropriately considered.
17.
Assignment. Neither party may assign this Agreement or any of its rights hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, Agency may utilize subcontractors as necessary and desirable for it to perform the Services.
18.
Service Marks, Trademarks and Name. Neither party shall: (a) use any service mark or trademark of the other party; or (b) refer to the other party in connection with any advertising, promotion, press release or publication unless it obtains the other party’s prior written approval.
19. Governing Law and Venue. This Agreement shall be governed by the laws of the State of Georgia without regard to its choice of law principles. Any disputes between the parties to this Agreement shall be settled by arbitration in accordance with the Rules of Commercial Arbitration of the American Arbitration Association then in effect, such arbitration to be held in Fulton County, Georgia.
20.
Force Majeure. Any delay in or failure of performance by either party under this Agreement shall not be a breach of this Agreement if and to the extent caused by events beyond the reasonable control of the party affected, including without limitation, acts of God, embargoes, governmental restrictions, strikes, riots, wars or other military action, civil disorders, rebellion, fires, floods, vandalism, or sabotage. Market conditions and/or fluctuations (including a downturn of Client’s business) shall not be deemed force majeure events. The party whose performance is affected by such events shall promptly notify the other party, giving details of the force majeure circumstances, and the obligations of the party giving such notice shall be suspended to the extent caused by the force majeure and so long as the force majeure continues, and the time for performance of the affected obligation hereunder shall be extended by the length of the delay caused by the force majeure event.
21.
Notice. Except as otherwise specifically provided herein, all notices, requests, or other communications (excluding invoices) hereunder shall be in writing and either transmitted via overnight courier, electronic mail, hand delivery or certified or registered mail, postage prepaid and return receipt requested to the parties at the addresses set forth at the 34753end of this Agreement. Notices will be deemed to have been given when received. Either party may designate a different address by notice to the other given in accordance with this Section.
22.
Waiver. Neither party’s failure, at any time, to enforce any right or remedy available to it under this Agreement shall be construed to be a waiver of such party's right to enforce each and every provision of this Agreement in the future.
23.
Severability. All provisions of this Agreement are severable, and the unenforceability or invalidity of any of the provisions will not affect the validity or enforceability of the remaining provisions. The remaining provisions will be construed in such a manner as to carry out the full intention of the parties.
24.
Section Titles. Section titles or references used in this Agreement have no substantive meaning or content and are not a part of this Agreement.
25.
Survival. The provisions of this Agreement, which by their nature are intended to survive this Agreement, shall survive the termination or expiration of the Agreement.
26.
Representations of Client. Client represents to Agency that:
26.1 Organization. The Client is a corporation duly organized, validly existing, and in good standing under the laws of the State of Texas, has corporate power to carry omits business as it is now being conducted, and is qualified to do business in every jurisdiction in which the character and location of the assets owned by it or the nature of the business transacted by it requires qualification or in which failure to so qualify would have a material adverse impact on it. No proceeding is pending, or to the knowledge of the Client, threatened, involving the Client, in which it is alleged that the nature of its business makes qualification necessary in any additional jurisdiction.
26.2 Authority. The Client has the full right, power, and authority to enter into this Agreement and each agreement, document, and instrument to be executed and delivered by the Client pursuant to this Agreement and to carry out the transactions contemplated hereby and thereby. No waiver or consent of any person is required in connection with the execution, delivery, and performance by the Client of this Agreement and each agreement, document, and instrument to be executed and delivered by the Client pursuant to this Agreement. The Shares to be issued to the Agency are, and when delivered pursuant to this Agreement will be, (i) duly authorized, validly issued, and outstanding; (ii) fully paid, non-assessable, and free of preemptive rights, but shall be marked with a legend as required under Rule 144 of the Securities Act of 1933; and (iii) free and clear of any and all pledges, claims, restrictions (other than Rule 144 related), charges, liens, security interests, encumbrances, or other interests of third parties of any nature whatsoever. The Agency agrees that it has read all filings of the Client it deems necessary made with the Securities and Exchange Commission and the Client agrees that such filings are true and accurate as of the date of the filings.
26.3 Financial Statements. Client has delivered to Agency its financial statements for the period ended September 30, 2011, as filed with the Securities and Exchange Commission, and reviewed by the Agency. The Client's financial statements fairly present the financial condition of the Client at the dates of said statements and the results of its operations for the periods covered thereby and will be prepared in accordance with generally accepted accounting principles and practices consistently applied and consistent with the books and records of the Client.
26.4 Absence of Certain Changes. Since December 31, 2011, except as noted in the filings and press releases for the Client, there has not been any operation of the Client out of the ordinary course of business or any change in the financial condition, properties, assets, liabilities, business, prospects or operations of the Client which change, by itself or in conjunction with all other such changes, has been or is likely to be materially adverse with respect to the Client;
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26.5 Litigation. There are no lawsuits, actions or administrative, arbitration or other proceedings or governmental investigations pending or threatened against or relating to the Client or the Client's properties or business. The Client has not entered into or been subject to any consent decree, compliance order, or administrative order with respect to any property owned, operated, leased, or used by the Client. The Client has not received any request for information, notice, demand letter, administrative inquiry, or formal or informal complaint or claim with respect to any property owned, operated, leased, or used by the Client or any facilities or operations thereon. There are no existing or, to the knowledge of the Client, threatened product liability, warranty, or other similar claims, or any facts upon which a claim of such nature could be based, against the Client for services or products which are defective or fail to meet any service or product warranties which could reasonably be expected to have a material adverse effect on the Client.
26.6 Compliance with Laws. The Client is not in material violation of any laws, rules, or regulations which apply to the conduct of its business or any facilities or property owned, leased, operated, or used by the Client.
27. Piggy-Back Registration Rights. If at any time or from time to time, Client shall decide to register any of its common stock, either for its own account or the account of a security holder or holders, in a registration statement covering the sale of Company's common stock under the Securities Act of 1933, as amended, the Company will: (1) promptly give to Agency written notice thereof; and (2) include in such registration statement (and any related qualification under blue sky laws) all the Shares specified in a written request, made within 30 days after receipt of such written notice from Client.
28.
Entire Agreement. This Agreement (and any Exhibits and other documents incorporated herein by reference) constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all other representations, understandings or agreements that are not expressed herein, whether oral or written. Except as otherwise set forth herein, no amendment to this Agreement shall be valid unless in writing and signed by both parties.
{Signatures Appear on the Following Page}
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date.
Agency:
Client:
The Partnership of Atlanta Incorporated
Sibling Entertainment Group Holdings, Inc
By: /s/David Arnold
By:/s/ Rob Copenhave
Title: President
Title: CEO
3475 Piedmont Road, Suite 400
2180 Satellite Blvd., Suite 400
Atlanta, GA 30305
Duluth, GA 30096
{KH193434.DOC}
-1-
EXHIBIT A
AGENCY SERVICES
A.
Advertising Campaign Development
B.
Creative development
C.
Direct Response Marketing (traditional and digital)
D.
Digital and Traditional Media Planning and Placements
E.
Digital and Online Marketing
F.
Graphic and Web Design Services
G.
Market Analysis and Strategic Planning
H.
Sales Promotion Development
EXHIBIT B
All services performed by Agency personnel billed at $150.00 per hour.
1.1.
EXHIBIT C
AGENCY OF RECORD AUTHORIZATION
In consideration of the mutual promises and agreements contained in that certain Client Agreement (the “Client Agreement”) by and between The Partnership of Atlanta Incorporated, (“The Partnership”) a Georgia corporation located at 3475 Piedmont Road, Suite 400, Atlanta,, Georgia 30305 and, Sibling Entertainment Group Holdings, Inc., (“Sibling”) a Texas corporation located at 2180 Satellite Blvd., Suite 400, Duluth, Georgia 30096, The Partnership is hereby appointed as agency of record for Sibley as its duly authorized agent, to arrange and make in its name all media purchases, billing and related account management.
Sibley shall be legally responsible for all advertising and media placement charges incurred on its behalf and shall indemnify, defend and hold harmless The Partnership from any and all liability arising from or related to expenses for advertising or media placements on Sibley or Newco4eductaion’s behalf.
This Agency of Record Authorization is effective for all advertising and media placements made by The Partnership on Sibley or Newco4education’s behalf pursuant to the Client Agreement and for any subsequent billing related to such advertising and media placements. This Agency of Record Authorization terminates upon termination of the Client Agreement.
The Partnership of Atlanta Incorporated
Print Name: /s/David Arnold
Signature: ___________________
Title: _______________________
Sibling Entertainment Group Holdings, Inc.
Print Name: ___________________
Signature: /s/ Rob Copenhaver
Title: ________________________
(i)
{KH193434.DOC}
-3-
restricted stock Purchase and Restriction Agreement
THIS RESTRICTED STOCK PURCHASE AND RESTRICTION AGREEMENT (the “Agreement”) is made and entered into as of the 24th day of February, 2012 (the “Effective Date”) by and between SIBLING ENTERTAINMENT GROUP HOLDINGS, INC., a Delaware corporation (“SIBE”) and The Partnership of Atlanta, Inc., a Georgia corporation (“Purchaser”).
Agreement
For and in consideration of the premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree:
2. Definitions
The following capitalized terms are used in this Agreement with the meanings thereafter ascribed.
3. Purchase and Sale.
3.1. Purchase.
SIBE, with the approval of its Board of Directors, hereby issues, sells, and delivers to Purchaser and Purchaser hereby purchases from SIBE one million (1,000,000) shares of Common Stock of SIBE (the “Subject Shares”), where the price paid for the shares shall be the tangible value received for all work, consulting, artwork, and all other rights to work products delivered to the Company as of February 1, 2012, as described in Exhibit B, attached herein, upon the terms and subject to the conditions set forth in this Agreement. All parties agree that these shares have been ‘fully earned” and paid for as of February 1, 2012. Purchaser represents to SIBE that Purchaser:
(a) is an “accredited investor” as such term is defined in Rule 501 of Regulation D, promulgated under the Securities Act of 1933 and the information concerning Purchaser on the Investor Questionnaire attached Exhibit A, is true and correct in all material respects.
(b) Purchaser acknowledges that Purchaser has reviewed and is familiar with the information in the Company’s disclosures, available from access via EDGAR to SIBE’s SEC filings including its Form 10, Form 8-K and Form 10-K for the two most recent fiscal years at www.sec.gov.
(c) The Subject Shares are being acquired for Purchaser's own account without the participation of any other person, with the intent of holding the Subject Shares for investment, without the intent of participating, directly or indirectly, in a distribution of the Subject Shares, and not with a view to, or for resale in connection with, any distribution of the Subject Shares.
(d) Purchaser has such knowledge and experience in financial, tax, and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in SIBE and of protecting Purchaser’s interests in connection with this transaction. Purchaser recognizes and acknowledges that Purchaser’s investment in SIBE involves a high degree of risk. Purchaser is able to bear the risk of a complete loss of Purchaser's investment in the Subject Shares.
(e) Purchaser understands and agrees that the Subject Shares will be issued and sold without registration under federal or applicable state law relating to the registration of securities, in reliance on the exemptions from registration under the Securities Act provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder and that the Subject Shares cannot be offered for sale, sold, or transferred by Purchaser other than pursuant to: (A) an effective registration under the Securities Act or in a transaction otherwise in compliance with the Securities Act and (B) evidence satisfactory to SIBE of compliance with the applicable securities laws of other jurisdictions. SIBE shall be entitled to rely upon an
opinion of counsel satisfactory to it with respect to compliance with the above laws. Purchaser understands and agrees that SIBE has no obligation to register the Subject Shares or to comply with any exemption available for sale of the Subject Shares without registration. Certificates evidencing the Subject Shares shall contain a legend indicating that the Subject Shares have not been registered 1933 Act or the securities laws of any other jurisdiction and referring to the restrictions on transferability and sale of the Subject Shares and any transfer agent of SIBE shall be instructed to require compliance with the conditions of such legends.
(f) Purchaser has had the opportunity to ask questions of and receive answers from SIBE and any person acting on its behalf, and to obtain all material information reasonably available with respect to Purchaser and its affairs, and has received satisfactory answers to all such questions and received all documents and other information requested of Purchaser.
(g) Acceptance by Purchaser of the certificate representing the Subject Shares shall constitute a confirmation by Purchaser that all agreements and representations made herein are true and correct at such time. Purchaser has full power and authority to execute, deliver, and perform this Agreement without the consent or approval of any other person which has not been obtained on or prior to the date hereof. This Agreement is the legal, binding, and valid obligation of Purchaser, enforceable against Purchaser in accordance with its terms and shall inure to the benefit of SIBE, its successors and assigns.
4. Miscellaneous.
4.1. SIBE Representations.
SIBE represents and warrants that: () this Agreement and the issuance of the Subject Shares has been duly authorized by the Board of Directors, () this Agreement constitutes a legal, valid, and binding obligation of SIBE, enforceable against SIBE in accordance with its terms, () the Subject Shares are fully paid and nonassessable, and free and clear of any and all encumbrances and restrictions, other than restrictions on transfer imposed by applicable securities laws and the restrictions imposed by the terms of this Agreement; () SIBE shall fully cooperate in causing the restrictive legends to be removed from the certificate(s) evidencing the Conversion Shares to the extent permitted by Rule 144; and () SIBE shall not initiate any action to cancel, reduce, stop transfer, or terminate the Subject Shares or the Conversion Shares or interfere with the lawful disposition of the Subject Shares or the Conversion Shares in accordance with Rule 144. The summary disclosure from the SEC investor web site has been printed and is attached to this document in Exhibit C.
4.2. Legends.
Each certificate evidencing Subject Shares shall bear the following legends:
“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933(“THE ACT”) AND ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144
UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH
IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.”
4.3. Governing Laws.
This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to its conflicts of laws rules. The parties agree that any appropriate state court sitting in Fulton County, Georgia or any Federal Court sitting in the Northern District of Georgia (Atlanta Division) (collectively, the “Permitted Courts”), shall have exclusive jurisdiction of any case or controversy arising under or in connection with this Agreement and shall be a proper forum in which to adjudicate such case or controversy, and each party irrevocably: () consents to the jurisdiction of the Permitted Courts in such
{KH193434.DOC}
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actions, () agrees not to plead or claim that such litigation brought in the Permitted Courts has been brought in an inconvenient forum, and () waives the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party. In any suit, arbitration, mediation, or other proceeding to enforce any right or remedy under this Agreement or to interpret any provision of this Agreement, the prevailing party will be entitled to recover its costs, including reasonable attorneys’ fees, and all costs and fees incurred on appeal or in a bankruptcy or similar action.
4.4. Successors.
This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.
4.5. Notice.
Except as otherwise specified herein, all notices and other communications under this Agreement shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.
4.6. Severability.
In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.
4.7. Entire Agreement.
This Agreement expresses the entire understanding and agreement of the parties with respect to the transactions contemplated herein and the subject matter described herein.
4.8. Headings.
Section headings used herein are for convenience of reference only and shall not be considered in construing this Agreement.
4.9. Specific Performance.
In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are thereby aggrieved shall have the right to specific performance and a temporary or permanent injunction without showing any actual damage, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.
4.10. Construction.
The language used in this Agreement, including the documents, instruments, agreements, exhibits, schedules, and annexes hereto will be deemed to be language chosen by the parties to express their mutual intent, and no rule of strict construction shall be implied against any party.
4.11. Amendment.
This Agreement may be amended, supplemented, and modified only by a written instrument duly executed by the parties hereto.
4.12.
Waiver.
The failure of any party hereto to require the performance of any provisions of this Agreement shall in no manner affect the right to enforce the same. No waiver by any party hereto of any provisions or of any breach of any provisions of this Agreement shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision or breach of any other provision of this Agreement. No waiver of any provision or any breach of any provision of this Agreement shall be valid or binding on the parties hereto unless made in a writing signed by an authorized representative of the party against whom the same is sought to be enforced.
4.13. Further Assurance.
Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
4.14. Counterparts.
This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set forth above.
Sibling Group Entertainment Holdings, Inc.
By:/s/Gerald T. Sullivan
Gerald F. Sullivan, Chairman
The Partnership of Atlanta, Inc.
By:/s/ David Arnold
David Arnold, President
EXHIBIT A
INCLUDE A QUALIFIED INVESTOR QUESTIONAIRE
EXHIBIT B
INCLUDE THE SIBE DELIVERABLES AS OF 2-1-12
EXHIBIT C
INCLUDE THE SEC PRINT ON RULE 144
{KH193434.DOC}
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Exhibit 10.2
RESTRICTED STOCK PURCHASE AND RESTRICTION AGREEMENT
THIS RESTRICTED STOCK PURCHASE AND RESTRICTION AGREEMENT (the Agreement) is made and entered into as of the 30th day of March, 2012 (the Effective Date) by and between SIBLING ENTERTAINMENT GROUP HOLDINGS, INC., a Delaware corporation (SIBE) and BLACKSTONE PARTNERS, LLC, a Georgia limited liability company (Purchaser).
Agreement
For and in consideration of the premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree:
1.
Definitions
The following capitalized terms are used in this Agreement with the meanings thereafter ascribed.
Conversion Date means the date all of the outstanding Series Common Stock is converted into Common Stock pursuant to Section 5 of the Certificate of Designation of Powers, Preferences, and Rights of Series Common Stock of SIBE filed with the Secretary of State of Texas December 31, 2010.
Effective Date of Termination means the effective date of Termination of Employment as determined in good faith by the Board of Directors based upon the facts and circumstances including the dates set forth in any notice of termination provided by SIBE or Purchaser, and if no notice of termination is given by SIBE or Purchaser, the date on which such Purchaser last performs the duties or services of Purchasers employment or other relationship with SIBE, as determined by the Board of Directors. The determination of the Board of Directors is final, binding, and nonappealable.
Restrictions Termination Date means the first to occur of (a) the 3rd anniversary of the Effective Date or (b) the Conversion Date.
Termination of Employment means the termination of the relationship between Purchaser and SIBE (or its parents or subsidiaries) pursuant to which Purchaser provides services to SIBE (or its parents or subsidiaries) as a consultant, advisor, or any other capacity.
2.
Purchase and Sale.
2.1.
Purchase.
SIBE, with the approval of its Board of Directors, hereby issues, sells, and delivers to Purchaser and Purchaser hereby purchases from SIBE 350,000 shares of Series Common Stock of SIBE (the
Subject Shares) for One Dollar ($1.00), upon the terms and subject to the conditions set forth in this Agreement. Purchaser represents to SIBE that Purchaser:
(a)
is an accredited investor as such term is defined in Rule 501 of Regulation D, promulgated under the Securities Act of 1933 and the information concerning Purchaser on the Investor Questionnaire attached Exhibit A, is true and correct in all material respects.
(b)
Purchaser acknowledges that Purchaser may obtain access via EDGAR to SIBEs SEC filings including its Form 10, and Form 10-K for the two most recent fiscal years at www.sec.gov.
(c)
The Subject Shares are being acquired for Purchaser's own account without the participation of any other person, with the intent of holding the Subject Shares for investment, without the intent of participating, directly or indirectly, in a distribution of the Subject Shares, and not with a view to, or for resale in connection with, any distribution of the Subject Shares.
(d)
Purchaser has such knowledge and experience in financial, tax, and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in SIBE and of protecting Purchasers interests in connection with this transaction. Purchaser recognizes and acknowledges that Purchasers investment in SIBE involves a high degree of risk. Purchaser is able to bear the risk of a complete loss of Purchaser's investment in the Subject Shares.
(e)
Purchaser understands and agrees that the Subject Shares will be issued and sold without registration under federal or applicable state law relating to the registration of securities, in reliance on the exemptions from registration under the Securities Act provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder and that the Subject Shares cannot be offered for sale, sold, or transferred by Purchaser other than pursuant to: (A) an effective registration under the Securities Act or in a transaction otherwise in compliance with the Securities Act and (B) evidence satisfactory to SIBE of compliance with the applicable securities laws of other jurisdictions. SIBE shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws. Purchaser understands and agrees that SIBE has no obligation to register the Subject Shares or to comply with any exemption available for sale of the Subject Shares without registration. Certificates evidencing the Subject Shares shall contain a legend indicating that the Subject Shares have not been registered 1933 Act or the securities laws of any other jurisdiction and referring to the restrictions on transferability and sale of the Subject Shares and any transfer agent of SIBE shall be instructed to require compliance with the conditions of such legends.
(f)
Purchaser has had the opportunity to ask questions of and receive answers from SIBE and any person acting on its behalf, and to obtain all material information reasonably available with respect to Purchaser and its affairs, and has received satisfactory answers to all such questions and received all documents and other information requested of Purchaser.
(g)
Acceptance by Purchaser of the certificate representing the Subject Shares shall constitute a confirmation by Purchaser that all agreements and representations made herein are true and correct at such time. Purchaser has full power and authority to execute, deliver, and perform this Agreement without the consent or approval of any other person which has not been obtained on or prior to the date hereof. This Agreement is the legal, binding, and valid obligation
of Purchaser, enforceable against Purchaser in accordance with its terms and shall inure to the benefit of SIBE, its successors and assigns.
3.
Restrictions.
3.1.
Companys Right to Repurchase Restricted Subject Shares.
Upon Termination of Employment of Purchaser prior to the Restrictions Termination Date, all Restricted Subject Shares shall be forfeited without any further action by SIBE or Purchaser and cancelled on the stock transfer books of SIBE, effective as of 5:00 p.m. eastern time on the Effective Date of Termination. For purposes of this Agreement: Restricted Subject Shares as of any particular date means the number of Subject Shares minus the number of Unrestricted Subject Shares on such date; and Unrestricted Subject Shares as of any particular date means the number of Subject Shares multiplied by the applicable percentage from the table below for the applicable time, provided however, that from and after the Conversion Date all Subject Shares shall be Unrestricted Subject Shares.
3.2.
Transfer Restrictions.
Purchaser agrees that Restricted Subject Shares are non-transferable prior to the Restrictions Termination Date. Purchaser agrees that Purchaser shall not sell, assign, transfer, grant options to purchase, or hypothecate Restricted Subject Shares at any time prior to the Restrictions Termination Date.
3.3.
Effect of Conversion.
The Common Stock issuable upon conversion of the Subject Shares (the Conversion Shares) is not subject to the restrictions in Sections 3.1and 3.2 of this Agreement, which automatically terminate on the Conversion Date.
4.
Miscellaneous.
4.1.
SIBE Representations.
SIBE represents and warrants that: () this Agreement and the issuance of the Subject Shares has been duly authorized by the Board of Directors, () this Agreement constitutes a legal, valid, and binding obligation of SIBE, enforceable against SIBE in accordance with its terms, () the Subject Shares are fully paid and nonassessable, and free and clear of any and all encumbrances and restrictions, other than restrictions on transfer imposed by applicable securities laws and the restrictions imposed by the terms of this Agreement; () SIBE shall fully cooperate in causing the restrictive legends to be removed from the certificate(s) evidencing the Conversion Shares to the extent permitted by Rule 144; and () SIBE shall not initiate any action to cancel, reduce, stop transfer, or terminate the Subject Shares or the Conversion Shares or interfere with the lawful disposition of the Subject Shares or the Conversion Shares in accordance with Rule 144.
4.2.
Legends.
Each certificate evidencing Subject Shares shall bear the following legends:
On the face of the certificate:
transfer of the shares evidenced by this certificate is restricted in accordance with conditions printed on the reverse of this certificate.
On the reverse:
the shares evidenced by this certificate are subject to, and transferable only in accordance with, that certain stock restriction agreement, a copy of which is on file at the principal office of the issuer. no transfer or pledge of the shares evidenced hereby may be made except in accordance with, and subject to, the provisions of said agreement.
shares of stock represented by this certificate have been acquired by the Purchaser for investment purposes only and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with or exempt from such laws, and upon evidence satisfactory to the issuer of compliance with or exemption from such laws, as to which the issuer may rely upon an opinion of counsel satisfactory to the issuer.
Purchaser agrees upon request to promptly surrender the certificates representing Subject Shares to SIBE so that SIBE may affix the foregoing legends thereto.
4.3.
Governing Laws.
This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to its conflicts of laws rules. The parties agree that any appropriate state court sitting in Fulton County, Georgia or any Federal Court sitting in the Northern District of Georgia (Atlanta Division) (collectively, the Permitted Courts), shall have exclusive jurisdiction of any case or controversy arising under or in connection with this Agreement and shall be a proper forum in which to adjudicate such case or controversy, and each party irrevocably: () consents to the jurisdiction of the Permitted Courts in such actions, () agrees not to plead or claim that such litigation brought in the Permitted Courts has been brought in an inconvenient forum, and () waives the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party. In any suit, arbitration, mediation, or other proceeding to enforce any right or remedy under this Agreement or to interpret any provision of this Agreement, the prevailing party will be entitled to recover its costs, including reasonable attorneys fees, and all costs and fees incurred on appeal or in a bankruptcy or similar action.
4.4.
No Employment Right.
This Agreement shall not be construed as giving Purchaser the right to any continued employment, or other relationship, with SIBE.
4.5.
Successors.
This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.
4.6.
Notice.
Except as otherwise specified herein, all notices and other communications under this Agreement shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.
4.7.
Severability.
In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.
4.8.
Entire Agreement.
This Agreement expresses the entire understanding and agreement of the parties with respect to the transactions contemplated herein and the subject matter described herein.
4.9.
Headings.
Section headings used herein are for convenience of reference only and shall not be considered in construing this Agreement.
4.10.
Specific Performance.
In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are thereby aggrieved shall have the right to specific performance and a temporary or permanent injunction without showing any actual damage, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.
4.11.
Construction.
The language used in this Agreement, including the documents, instruments, agreements, exhibits, schedules, and annexes hereto will be deemed to be language chosen by the parties to express their mutual intent, and no rule of strict construction shall be implied against any party.
4.12.
Amendment.
This Agreement may be amended, supplemented, and modified only by a written instrument duly executed by the parties hereto.
4.13.
Waiver.
The failure of any party hereto to require the performance of any provisions of this Agreement shall in no manner affect the right to enforce the same. No waiver by any party hereto of any provisions or of any breach of any provisions of this Agreement shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision or breach of any other provision of this Agreement. No waiver of any provision or any breach of any provision of this Agreement shall be valid or binding on the parties hereto unless made in a writing signed by an authorized representative of the party against whom the same is sought to be enforced.
4.14.
Further Assurance.
Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
4.15.
Counterparts.
This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set forth above.
Sibling Group Entertainment Holdings, Inc. | Blackstone Partners, LLC |
By: /s/ Rob Copenhaver Rob Copenhaver, CEO | By: /s/Gerardo M. Balboni II Gerardo M. Balboni II, Manager |
Exhibit 10.3
RESTRICTED STOCK PURCHASE AND RESTRICTION AGREEMENT
THIS RESTRICTED STOCK PURCHASE AND RESTRICTION AGREEMENT (the “Agreement”) is made and entered into as of the 30th day of March, 2012 (the “Effective Date”) by and between SIBLING ENTERTAINMENT GROUP HOLDINGS, INC., a Delaware corporation (“SIBE”) and ATLANTA CAPITAL PARTNERS, LLC , a Georgia limited liability company (“Purchaser”).
Agreement
For and in consideration of the premises, the mutual covenants contained herein, and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree:
1. Definitions
The following capitalized terms are used in this Agreement with the meanings thereafter ascribed.
“Conversion Date” means the date all of the outstanding Series Common Stock is converted into Common Stock pursuant to Section 5 of the Certificate of Designation of Powers, Preferences, and Rights of Series Common Stock of SIBE filed with the Secretary of State of Texas December 31, 2010.
“Effective Date of Termination” means the effective date of Termination of Employment as determined in good faith by the Board of Directors based upon the facts and circumstances including the dates set forth in any notice of termination provided by SIBE or Purchaser, and if no notice of termination is given by SIBE or Purchaser, the date on which such Purchaser last performs the duties or services of Purchaser’s employment or other relationship with SIBE, as determined by the Board of Directors. The determination of the Board of Directors is final, binding, and nonappealable.
“Holding Period” means a period of ninety (90) days that commences on the Effective Date of Termination.
“Price” means the aggregate purchase price for all Restricted Subject Shares of $1.00, regardless of the number of Restricted Subject Shares purchased.
“Restrictions Termination Date” means the first to occur of (a) the 3rd anniversary of the Effective Date or (b) the Conversion Date.
“Termination of Employment” means the termination of the relationship between Purchaser and SIBE (or its parents or subsidiaries) pursuant to which Purchaser provides services to SIBE (or its parents or subsidiaries) as a consultant, advisor, or any other capacity.
2. Purchase and Sale.
2.1. Purchase.
SIBE, with the approval of its Board of Directors, hereby issues, sells, and delivers to Purchaser and Purchaser hereby purchases from SIBE 80,010 shares of Series Common Stock of SIBE (the “Subject Shares”) for One Dollar ($1.00), upon the terms and subject to the conditions set forth in this Agreement. Purchaser represents to SIBE that Purchaser:
(a) is an “accredited investor” as such term is defined in Rule 501 of Regulation D, promulgated under the Securities Act of 1933 and the information concerning Purchaser on the Investor Questionnaire attached Exhibit A, is true and correct in all material respects.
(b) Purchaser acknowledges that Purchaser may obtain access via EDGAR to SIBE’s SEC filings including its Form 10, and Form 10-K for the two most recent fiscal years at www.sec.gov.
(c) The Subject Shares are being acquired for Purchaser's own account without the participation of any other person, with the intent of holding the Subject Shares for investment, without the intent of participating, directly or indirectly, in a distribution of the Subject Shares, and not with a view to, or for resale in connection with, any distribution of the Subject Shares.
(d) Purchaser has such knowledge and experience in financial, tax, and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in SIBE and of protecting Purchaser’s interests in connection with this transaction. Purchaser recognizes and acknowledges that Purchaser’s investment in SIBE involves a high degree of risk. Purchaser is able to bear the risk of a complete loss of Purchaser's investment in the Subject Shares.
(e) Purchaser understands and agrees that the Subject Shares will be issued and sold without registration under federal or applicable state law relating to the registration of securities, in reliance on the exemptions from registration under the Securities Act provided by Sections 3(b) and/or 4(2) thereof and the rules and regulations promulgated thereunder and that the Subject Shares cannot be offered for sale, sold, or transferred by Purchaser other than pursuant to: (A) an effective registration under the Securities Act or in a transaction otherwise in compliance with the Securities Act and (B) evidence satisfactory to SIBE of compliance with the applicable securities laws of other jurisdictions. SIBE shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws. Purchaser understands and agrees that SIBE has no obligation to register the Subject Shares or to comply with any exemption available for sale of the Subject Shares without registration. Certificates evidencing the Subject Shares shall contain a legend indicating that the Subject Shares have not been registered 1933 Act or the securities laws of any other jurisdiction and referring to the restrictions on transferability and sale of the Subject Shares and any transfer agent of SIBE shall be instructed to require compliance with the conditions of such legends.
(f) Purchaser has had the opportunity to ask questions of and receive answers from SIBE and any person acting on its behalf, and to obtain all material information reasonably available with respect to Purchaser and its affairs, and has received satisfactory answers to all such questions and received all documents and other information requested of Purchaser.
(g) Acceptance by Purchaser of the certificate representing the Subject Shares shall constitute a confirmation by Purchaser that all agreements and representations made herein are true and correct at such time. Purchaser has full power and authority to execute, deliver, and perform this Agreement without the consent or approval of any other person which has not been obtained on or prior to the date hereof. This Agreement is the legal, binding, and valid obligation of Purchaser, enforceable against Purchaser in accordance with its terms and shall inure to the benefit of SIBE, its successors and assigns.
3. Restrictions.
3.1. Company’s Right to Repurchase Restricted Subject Shares.
(a) Upon Termination of Employment of Purchaser prior to the Restrictions Termination Date, all Restricted Subject Shares shall be forfeited without any further action by SIBE or Purchaser and cancelled on the stock transfer books of SIBE, effective as of 5:00 p.m. eastern time on the Effective Date of Termination. For purposes of this Agreement: “Restricted Subject Shares” as of any particular date means the number of Subject Shares minus the number of Unrestricted Subject Shares on such date; and “Unrestricted Subject Shares” as of any particular date means the number of Subject Shares multiplied by the applicable percentage from the table below for the applicable time, provided however, that from and after the Conversion Date all Subject Shares shall be Unrestricted Subject Shares.
Date | Percentage of Subject Shares which are Unrestricted Subject Shares |
From the Effective Date until the day before the 1st anniversary of the Effective Date ............................................ | 0% |
From the 1st anniversary of the Effective Date until the day before the 2nd anniversary of the Effective Date ................... | 33.33% |
From the 2nd anniversary of the Effective Date until the day before the 3rd anniversary of the Effective Date ..................... | 66.67% |
From and after the 3rd anniversary of the Effective Date ........ | 100.00% |
(b) If SIBE elects to exercise its right to purchase Restricted Subject Shares pursuant to this Section 3.1, SIBE shall give written notice of such election to Purchaser (or the personal representative, executor, or administrator of Purchaser, as the case may be). The closing of any purchase of Restricted Subject Shares pursuant to Section 3.1 shall take place at the principal office of SIBE not earlier than thirty (30), nor later than forty-five (45) days after the date of SIBE’s written notice of its election to exercise its right to purchase such Restricted Subject Shares.
(c) At the closing of any purchase of Restricted Subject Shares pursuant to Section 3.1, Purchaser shall deliver all certificates representing the Restricted Subject Shares to be purchased, properly endorsed for transfer, and SIBE shall pay Purchaser the Price.
3.2. Transfer Restrictions. Purchaser agrees that Restricted Subject Shares are non-transferable prior to the Restrictions Termination Date. Purchaser agrees that Purchaser shall not sell, assign, transfer, grant options to purchase, or hypothecate Restricted Subject Shares at any time prior to the Restrictions Termination Date.
3.3. Effect of Conversion. The Common Stock issuable upon conversion of the Subject Shares (the “Conversion Shares”) is not subject to the restrictions in Sections 3.1and 3.2 of this Agreement, which automatically terminate on the Conversion Date.
4. Miscellaneous.
4.1. SIBE Representations. SIBE represents and warrants that: (a) this Agreement and the issuance of the Subject Shares has been duly authorized by the Board of Directors, (b) this Agreement constitutes a legal, valid, and binding obligation of SIBE, enforceable against SIBE in accordance with its terms, (c) the Subject Shares are fully paid and non-assessable, and free and clear of any and all encumbrances and restrictions, other than restrictions on transfer imposed by applicable securities laws and the restrictions imposed by the terms of this Agreement; (d) SIBE shall fully cooperate in causing the restrictive legends to be removed from the certificate(s) evidencing the Conversion Shares to the extent permitted by Rule 144; and (e) SIBE shall not initiate any action to cancel, reduce, stop transfer, or terminate the Subject Shares or the Conversion Shares or interfere with the lawful disposition of the Subject Shares or the Conversion Shares in accordance with Rule 144.
4.2. Legends. Each certificate evidencing Subject Shares shall bear the following legends:
On the face of the certificate:
“TRANSFER OF THE SHARES EVIDENCED BY THIS CERTIFICATE IS RESTRICTED IN ACCORDANCE WITH CONDITIONS PRINTED ON THE REVERSE OF THIS CERTIFICATE.”
On the reverse:
“THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO, AND TRANSFERABLE ONLY IN ACCORDANCE WITH, THAT CERTAIN STOCK RESTRICTION AGREEMENT, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. NO TRANSFER OR PLEDGE OF THE SHARES EVIDENCED HEREBY MAY BE MADE EXCEPT IN ACCORDANCE WITH, AND SUBJECT TO, THE PROVISIONS OF SAID AGREEMENT.”
“SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED BY THE PURCHASER FOR INVESTMENT PURPOSES ONLY AND NOT FOR RESALE, TRANSFER OR DISTRIBUTION, HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF APPLICABLE STATE AND FEDERAL SECURITIES LAWS, AND MAY NOT BE OFFERED FOR SALE, SOLD OR TRANSFERRED OTHER THAN PURSUANT TO EFFECTIVE REGISTRATION UNDER SUCH LAWS, OR IN TRANSACTIONS OTHERWISE IN COMPLIANCE WITH OR EXEMPT FROM SUCH LAWS, AND UPON EVIDENCE SATISFACTORY TO THE ISSUER OF COMPLIANCE WITH OR EXEMPTION FROM SUCH LAWS, AS TO WHICH THE ISSUER MAY RELY UPON AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER.”
Purchaser agrees upon request to promptly surrender the certificates representing Subject Shares to
SIBE so that SIBE may affix the foregoing legends thereto.
4.3. Governing Law. This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Georgia, without regard to its conflicts of laws rules. The parties agree that any appropriate state court sitting in Fulton County, Georgia or any Federal Court sitting in the Northern District of Georgia (Atlanta Division) (collectively, the “Permitted Courts”), shall have exclusive jurisdiction of any case or controversy arising under or in connection with this Agreement and shall be a proper forum in which to adjudicate such case or controversy, and each party irrevocably: (f) consents to the jurisdiction of the Permitted Courts in such actions, (g) agrees not to plead or claim that such litigation brought in the Permitted Courts has been brought in an inconvenient forum, and (h) waives the right to object, with respect to such suit, action, or proceeding, that such court does not have jurisdiction over such party. In any suit, arbitration, mediation, or other proceeding to enforce any right or remedy underthis Agreement or to interpret any provision of this Agreement, the prevailing party will be entitled torecover its costs, including reasonable attorneys’ fees, and all costs and fees incurred on appeal or in abankruptcy or similar action.
4.4. No Employment Right. This Agreement shall not be construed as giving Purchaser the right to any continued employment, or other relationship, with SIBE.
4.5. Successors. This Agreement shall be binding upon and inure to the benefit of the heirs, legal representatives, successors, and permitted assigns of the parties.
4.6. Notice. Except as otherwise specified herein, all notices and other communications under this Agreement shall be in writing and shall be deemed to have been given if personally delivered or if sent by registered or certified United States mail, return receipt requested, postage prepaid, addressed to the proposed recipient at the last known address of the recipient. Any party may designate any other address to which notices shall be sent by giving notice of the address to the other parties in the same manner as provided herein.
4.7. Severability. In the event that any one or more of the provisions or portion thereof contained in this Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, the same shall not invalidate or otherwise affect any other provisions of this Agreement, and this Agreement shall be construed as if the invalid, illegal or unenforceable provision or portion thereof had never been contained herein.
4.8. Entire Agreement. This Agreement expresses the entire understanding and agreement of the parties with respect to the transactions contemplated herein and the subject matter described herein.
4.9. Headings. Section headings used herein are for convenience of reference only and shall not be considered in construing this Agreement.
4.10. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are thereby aggrieved shall have the right to specific performance and a temporary or permanent injunction without showing any actual damage, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative.
4.11. Construction. The language used in this Agreement, including the documents, instruments, agreements, exhibits, schedules, and annexes hereto will be deemed to be language chosen by the parties to express their mutual intent, and no rule of strict construction shall be implied against any party.
4.12. Amendment. This Agreement may be amended, supplemented, and modified only by a written instrument duly executed by the parties hereto.
4.13. Waiver. The failure of any party hereto to require the performance of any provisions of this Agreement shall in no manner affect the right to enforce the same. No waiver by any party hereto of any provisions or of any breach of any provisions of this Agreement shall be deemed or construed either as a further or continuing waiver of any such provision or breach or as a waiver of any other provision or breach of any other provision of this Agreement. No waiver of any provision or any breach of any provision of this Agreement shall be valid or binding on the parties hereto unless made in a writing signed by an authorized representative of the party against whom the same is sought to be enforced.
4.14. Further Assurance. Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
4.15. Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set forth above.
Sibling Group Entertainment Holdings, Inc.
By:/s/ Gerald F. Sullivan
Gerald F. Sullivan, Chairman
Atlanta Capital Partners, LLC.
By:/s/
Tax ID is 20-1361629507
North Little Victoria Rd., Woodstock, GA 30189\
Note 3 - Due To Related Parties
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Mar. 31, 2012
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Related Party Transactions | ||||||||||||||||||||||||||||
Note 3 - Due To Related Parties | Note 3 - Due to Related Parties
Stephen C. Carlson was contracted through December 31, 2010 as a consultant to provide advisory services on a non-exclusive basis. At December 31, 2010 the Company owed $10,000 to Mr. Carlson for these provided services. On December 30, 2010, in conjunction with the acquisition of N4E, the Board of Directors of Sibling appointed Stephen C. Carlson as CEO, with a term of office that commenced December 31, 2010. The Company entered into an agreement on March 1, 2011 as amended June 1, 2011 with Stephen Carlson to convert debt for consulting services to N4E prior to the acquisition by the Company on December 30, 2010 and debt for services as CEO during the first quarter of 2011, in exchange for the Companys restricted Common Stock in the aggregate of 966,666 shares for an accrued amount of $29,000.
The Company entered into an agreement on October 1, 2011 with Stephen C. Carlson to convert debt for services as CEO for the period April 1, 2011 to September 30, 2011 in exchange for the Companys restricted Common Stock in the aggregate of 596,747 shares for an accrued amount of $44,756. The Company owed him a balance of $41,767 at December 31, 2011, including the $5,000 note payable described below. Mr. Carlson resigned as CEO and Board Member as of January 24, 2012. The Company issued 557,600 shares of common stock valued at $22,304 ($0.04 per share) to him in consideration of all accrued consulting fees as of January 24, 2012. As of result of the stock issuance, at March 31, 2012 the Company owed Mr. Carlson $16,154 for reimbursement of advances made on behalf of the Company, including the $5,000 note payable described below. Mr. Carlson surrendered 162,010 shares of series common stock in conjunction with his resignation.
Gerald F. Sullivan was contracted through December 31, 2010 as a consultant to provide advisory services on a nonexclusive basis. At December 31, 2010 the Company owed $32,000 to Mr. Sullivan for these provided services. The Company entered into an agreement on March 1, 2011 as amended June 1, 2011 with Gerald F. Sullivan to convert debt for consulting services originally incurred with the formation and development of strategy and business plans in exchange for the Companys restricted Common Stock in the aggregate of 1,700,000 shares for accrued compensation of $51,000. The Company owed him a balance of $14,364 at March 31, 2012 for cash advances made to the company for operating expenses.
On December 30, 2010, in conjunction with the acquisition of N4E, the Board of Directors of Sibling appointed Oswald A. Gayle as CFO of the Company with a term of office that commenced December 31, 2010. During this period, he accrued total compensation of $21,200. The Company entered into an agreement with Oswald A. Gayle on March 1, 2011 to convert debt for services as CFO during the first quarter of 2011 in exchange for the Companys restricted Common Stock in the aggregate of 472,266 shares for an accrued amount of $14,168. The Company entered into an agreement on October 1, 2011 with Oswald A. Gayle to convert debt for services as CFO for the period April 1, 2011 to September 30, 2011 in exchange for the Companys restricted Common Stock in the aggregate of 661,173 shares for an accrued amount of $49,588. The company owed him a balance of $21,308 at December 31, 2011. The Company accepted his resignation on February 12, 2012, and issued 532,775 shares of stock in consideration of accrued consulting fees of $21,308 through the date of his resignation. Mr. Gayle also surrendered 200,000 shares of series common stock as a part of his resignation. No further amounts are owed to Mr. Gayle.
In January 2012 the Company modified its relationship with Dixon McLeod, who was a founder of NEWCO4EDUCATION, LLC. Mr. McLeod had been issued 200,000 shares of series common stock in conjunction with the merger with the Company in December 2010. He surrendered 68,000 shares of series common stock at the time of his termination. This change was not as a result of any disagreements with the Company, and he remains available to the Company as a consultant on an as-needed basis. The shares of series common stock were subsequently reissued by the Company. |