EX-99.1 31 v084285_ex99-1.htm
 
SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
 
BALANCE SHEETS
   
March 31,
  
December 31,
  
   
2007
  
2006
  
   
(Unaudited)
      
   
$
  
$
  
ASSETS
              
CURRENT
              
Cash
    
136
   
345
 
     
136
   
345
 
INVESTMENT (Note 7)
    
1
   
1
 
     
137
   
346
 
               
LIABILITIES AND STOCKHOLDERS' (EQUITY) DEFICIT
              
               
CURRENT
              
Accounts payable and accrued liabilities
    
23,930
   
17,900
 
Amounts due to a related party (Note 3)
    
50,517
   
215,572
 
     
74,447
   
233,472
 
COMMITMENT (Note 8)
              
               
STOCKHOLDERS' DEFICIT
              
Capital Stock (Note 5)
              
Authorized
              
100,000,000 common shares with par value of $0.0001
              
Issued and outstanding
              
13,074,066 common shares
              
(December 31, 2006 - 11,976,705)
    
1,307
   
1,197
 
Additional paid-in capital
    
3,288,424
   
2,860,905
 
Deficit accumulated during the development stage
    
(3,364,041
)
  
(3,095,229
)
     
(74,310
)
  
(233,127
)
     
137
   
346
 

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

4

(A Development Stage Company)
 
STATEMENTS OF OPERATIONS
(Unaudited)
   
 
Three months ended
 
Cumulative Amounts From
December 28,1988 (inception)
to March 31, 2007
  
   
March 31,
  
   
2007
  
2006
  
   
$
  
$
  
$
  
General and administrative costs
    
60,655
   
43,163
   
2,408,937
 
Recovery of consulting fees
    
-
   
-
   
(45,000
)
     
(60,655
)
  
(43,163
)
  
(2,363,937
)
Interest income
    
-
   
-
   
2,047
 
Interest expense
    
(208,157
)
  
(53,075
)
  
(458,105
)
Gain on forgiveness of debt
    
-
   
-
   
8,000
 
Write down of promissory notes (Note 7)
    
-
   
(50,000
)
  
(552,046
)
Net loss for the year
    
(268,812
)
  
(146,238
)
  
(3,364,041
)
                     
Loss per common share
- basic and diluted
    
(0.02
)
  
(0.04
)
      
                     
Weighted average common shares
- basic and diluted
    
12,635,122
   
11,250,705
       

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

5

(A Development Stage Company)
STATEMENTS OF CASH FLOWS
December 28, 1988 ( Inception) to March 31, 2007
(Unaudited)

   
 
Three months ended
  
Cumulative Amounts From
December 28,1988 (inception)
to March 31, 2007
  
   
March 31,
  
   
2007
  
2006
  
   
$
  
$
  
$
  
OPERATING
                    
Net loss
    
(268,812
)
  
(146,238
)
  
(3,364,041
)
Adjustments to reconcile net loss to cash used by operating activities:
Common stock issued for consulting fees
    
-
   
52,500
   
853,400
 
Common stock issued for services
    
-
   
-
   
70,830
 
Common stock issued for finance costs
    
-
   
-
   
187,500
 
Beneficial conversion feature
on convertible debt
    
208,157
   
-
   
208,157
 
Common stock issued for organization costs
    
-
   
-
   
33
 
Common stock issued for other services
    
-
   
-
   
79,903
 
Gain on forgiveness of debt
    
-
   
-
   
(8,000
)
Write down of promissory notes
    
-
   
50,000
   
552,047
 
Changes in non-cash working capital items
                    
Accounts payable and accrued liabilities
    
6,031
   
26,198
   
456,026
 
Accrued and unpaid amounts
due to related parties
    
15,167
   
-
   
67,048
 
     
(39,458
)
  
(17,540
)
  
(897,098
)
                     
CASH FLOWS FROM INVESTING ACTIVITIES
            
Promissory notes
    
-
   
(50,000
)
  
(550,000
)
Loan to Smart Card Technologies Co. Ltd.
    
-
   
-
   
(600,000
)
 
    
-
   
(50,000
)
  
(1,150,000
)
                     
CASH FLOWS FROM FINANCING ACTIVITIES
            
Advances from a related party
    
39,250
   
50,000
   
606,368
 
Loans payable
    
-
   
-
   
680,000
 
Common stock issued for cash
    
-
   
-
   
760,867
 
     
39,250
   
50,000
   
2,047,235
 
                     
NET INCREASE (DECREASE) IN CASH
    
(208
)
  
(17,540
)
  
137
 
CASH, BEGINNING OF PERIOD
    
345
   
28,644
   
-
 
CASH, END OF PERIOD
    
137
   
11,104
   
137
 
 
SUPPLEMENTAL CASH FLOW INFORMATION AND
NON-CASH INVESTING AND FINANCING ACTIVITIES (Note 6)
 
The accompanying notes are an integral part of these financial statements.
 
6

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Developmental Stage Company)

STATEMENT OF STOCKHOLDERS' DEFICIT
December 28, 1988 ( Inception) to March 31, 2007
 
   
Common Stock
  
Additional
Paid-in
  
Stock
 
Deficit
Accumulated
During the
Development
      
   
Shares
  
Amount
  
Capital
  
Subscriptions
  
Stage
  
Total
  
   
 
  
$
  
$
  
$
  
$
  
$
  
                           
Balance at December 28, 1998 (date of inception)
    
-
   
-
   
-
   
-
   
-
   
-
 
Stock issued for organization costs
    
33,000
   
33,000
   
(32,967
)
  
-
   
-
   
33
 
Net loss
    
-
   
-
   
-
   
-
   
(33
)
  
(33
)
Balances at December 31, 1988 to December 31, 1996
    
33,000
   
33,000
   
(32,967
)
  
-
   
(33
)
  
-
 
                                       
1,000 for 1 stock split
    
32,967,000
   
-
   
-
   
-
   
-
   
-
 
Cancelled 30,000,000 shares
    
(30,000,000
)
  
(32,700
)
  
32,700
   
-
   
-
   
-
 
Stock issued for cash at $5.00 per share
    
20,000
   
2
   
99,998
   
-
   
-
   
100,000
 
Net loss
    
-
   
-
   
-
   
-
   
(80,025
)
  
(80,025
)
Balance at December 31, 1997
    
3,020,000
   
302
   
99,731
   
-
   
(80,058
)
  
19,975
 
                                       
Stock issued for services at $0.10 per share
    
95,000
   
10
   
9,490
   
-
   
-
   
9,500
 
Stock issued for cash at $0.14 per share
    
52,800
   
5
   
7,795
   
(2,722
)
  
-
   
5,028
 
Net loss
    
-
   
-
   
-
   
-
   
(33,798
)
  
(33,798
)
Balance at December 31, 1998
    
3,167,800
   
317
   
117,016
   
(2,722
)
  
(113,856
)
  
705
 
                                       
                                       
Net loss
    
-
   
-
   
-
   
-
   
(66,662
)
  
(66,662
)
Balance at December 31, 1999
    
3,167,800
   
317
   
117,016
   
(2,722
)
  
(180,518
)
  
(65,957
)
                                       
2 for 1 stock split
    
3,167,800
   
317
   
(317
)
  
-
   
-
   
-
 
 
7
 
Stock issued for consulting fees at $2.00 per share
   
320,000
   
32
   
639,968
   
-
   
-
   
640,000
 
Stock issued to settle trade payables at $2.00 per share
   
20,540
   
2
   
41,078
   
-
   
-
   
41,080
 
Stock issued for services at $2.00 per share
   
11,960
   
2
   
23,918
   
-
   
-
   
23,920
 
Stock issued per preemptive rights
    
192
   
-
   
17
   
-
   
-
   
17
 
Stock subscriptions received
    
-
   
-
   
-
   
2,722
   
-
   
2,772
 
Net loss
    
-
   
-
   
-
   
-
   
(1,018,914
)
  
(1,018,914
)
Balance at December 31, 2000
    
6,688,292
   
670
   
821,680
   
-
   
(1,199,432
)
  
(377,082
)
                                       
Stock issued for consulting fees and payables at $0.08 per share
   
687,500
   
68
   
54,932
   
-
   
-
   
55,000
 
Stock issued at $0.08 per share for rent payable
    
535,000
   
54
   
42,746
   
-
   
-
   
42,800
 
Net loss
    
-
   
-
   
-
   
-
   
(227,672
)
  
(227,672
)
Balance at December 31, 2001
    
7,910,792
   
792
   
919,358
   
-
   
(1,427,104
)
  
(506,954
)
                                       
1 for 10 reverse stock split
    
(7,119,708
)
  
(713
)
  
713
   
-
   
-
   
-
 
Stock subscribed for converted debts
    
-
   
-
   
-
   
641,953
   
-
   
641,953
 
Net loss
    
-
   
-
   
-
   
-
   
(180,733
)
  
(180,733
)
Balance at December 31, 2002
    
791,084
   
79
   
920,071
   
641,953
   
(1,607,837
)
  
(45,734
)
                                       
Stock issued for cash at $0.10 per share
    
280,000
   
28
   
27,972
   
-
   
-
   
28,000
 
Stock issued for converted debts
    
5,598,947
   
560
   
641,393
   
(641,953
)
  
-
   
-
 
Stock issued for debt settlement at $0.20 per share
    
280,538
   
28
   
56,080
   
-
   
-
   
56,108
 
Stock issued for debt settlement at $0.20 per share
    
52,500
   
5
   
10,495
   
-
   
-
   
10,500
 
Stock issued for debt settlement at $0.10 per share
    
50,000
   
5
   
4,995
   
-
   
-
   
5,000
 
Net loss
    
-
   
-
   
-
   
-
   
(100,115
)
  
(100,115
)
Balance at December 31, 2003
    
7,053,069
   
705
   
1,661,006
   
-
   
(1,707,952
)
  
(46,241
)
                                       
Stock issued for debt settlement at $0.10 per share
    
735,782
   
73
   
73,505
   
-
   
-
   
73,578
 
Stock issued for debt settlement at $0.10 per share
    
50,000
   
5
   
4,995
   
-
   
-
   
5,000
 
Stock issued for services at $0.15 per share
    
65,000
   
6
   
9,744
   
-
   
-
   
9,750
 
Stock issued for debt settlement at $0.10 per share
    
86,000
   
9
   
8,591
   
-
   
-
   
8,600
 
Stock issued for debt settlement at $0.16 per share
    
277,314
   
28
   
44,717
   
-
   
-
   
44,745
 
Stock issued for cash at $0.35 per share
    
871,572
   
87
   
304,963
   
-
   
-
   
305,050
 
 
8
 
Subscriptions receivable
    
-
   
-
   
-
   
(35,000
)
  
-
   
(35,000
)
Net loss
    
-
   
-
   
-
   
-
   
(447,411
)
  
(447,411
)
Balance at December 31, 2004
    
9,138,737
   
913
   
2,107,521
   
(35,000
)
  
(2,155,363
)
  
(81,929
)
                                       
Stock issued for cash at $0.35 per share
    
914,288
   
91
   
319,909
   
-
   
-
   
320,000
 
Stock issued for debt settlement at $0.10 per share
    
1,147,680
   
115
   
114,653
   
-
   
-
   
114,768
 
Stock issued for debt settlement at $0.50 per share
    
50,000
   
5
   
24,995
   
-
   
-
   
25,000
 
Subscriptions received
    
-
   
-
   
-
   
35,000
   
-
   
35,000
 
Net loss
    
-
   
-
   
-
   
-
   
(407,256
)
  
(407,256
)
Balance at December 31, 2005
    
11,250,705
   
1,124
   
2,567,078
   
-
   
(2,562,619
)
  
5,583
 
                                       
Stock issued for finance costs
at $0.35 per share (Note 7)
    
150,000
   
15
   
52,485
   
-
   
-
   
52,500
 
Stock issued for consulting fees at $0.36 per share
    
100,000
   
10
   
35,990
   
-
   
-
   
36,000
 
Stock issued for consulting fees at $0.40 per share
    
176,000
   
18
   
70,382
   
-
   
-
   
70,400
 
Stock issued for finance costs
At $0.45 per share (Note 7)
    
300,000
   
30
   
134,970
   
-
   
-
   
135,000
 
Net loss
    
-
   
-
   
-
   
-
   
(532,610
)
  
(532,610
)
Balance at December 31, 2006
    
11,976,705
   
1,197
   
2,860,905
   
-
   
(3,095,229
)
  
(233,127
)
                                       
Beneficial conversion feature on convertible debt
    
-
   
-
   
208,157
   
-
   
-
   
208,157
 
Stock issued for conversion of debt
    
1,097,361
   
110
   
219,362
   
-
   
-
   
219,472
 
Net loss
    
-
   
-
   
-
   
-
   
(268,812
)
  
(268,812
)
Balance at March 31, 2007 (Unaudited)
    
13,074,066
   
1,307
   
3,288,424
   
-
   
(3,364,041
)
  
(74,310
)
 
The accompanying notes are an integral part of these financial statements.
9

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 1 - Nature of Operations and Basis of Presentation

(a) Organization

Sibling Entertainment Group Holdings, Inc., formerly, Sona Development Corp. (the “Company") was incorporated as Houston Produce Corporation under the laws of the State of Texas on December 28, 1988. The Company was organized primarily for the purpose of importing fruits and vegetables from Latin America for sale in the United States market and it was dormant until its reactivation in March 1997. In June 1997, the Company changed its name to Net Master Consultants, Inc. On December 28, 2002, the Company changed its name to Sona Development Corp. On May 14, 2007, the Company changed its name to Sibling Entertainment Group Holdings, Inc. The Company is currently pursuing a potential merger with Sibling Entertainment Group, Inc. ("Sibling"), an entertainment development and production company based in New York City, as described in Note 8. The Company is considered a development stage company in accordance with Statement of Financial Accounting Standards (SFAS) No. 7.

(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, has a working capital deficiency of $74,311 at March 31, 2007 and has incurred losses of $3,364,041 since inception, and further significant losses are expected to be incurred in the Company’s development stage. The Company will depend almost exclusively on outside capital through the issuance of common shares, and advances from related parties to finance ongoing operating losses. The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. These factors raise substantial doubts 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.

10

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

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 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) Foreign Currency Translation

The Company considers the U.S. dollar its functional currency. Monetary assets and liabilities resulting from foreign currency transactions are translated into U.S. dollar equivalents using the year end conversion rates. Revenues, expenses, receipts and payments are translated throughout the year at exchange rates prevailing at the date of the transaction. Exchange gains and losses are included in the loss for the year.

(c) 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.
 
(d) Financial Instruments
 
In accordance with the requirements of SFAS No. 107, “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.
 
11

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 2 - Summary of Significant Accounting Policies (continued)

(e) Stock-Based Compensation

On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based Payment, which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. In January 2005, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107, which provides supplemental implementation guidance for SFAS No. 123R. SFAS No. 123R eliminates the ability to account for stock-based compensation transactions using the intrinsic value method under Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and instead generally requires that such transactions be accounted for using a fair-value-based method. The Company uses the Black-Scholes-Merton (“BSM”) option-pricing model to determine the fair-value of stock-based awards under SFAS No. 123R, consistent with that used for pro forma disclosures under SFAS No. 123, Accounting for Stock-Based Compensation. The Company has elected the modified prospective transition method as permitted by SFAS No. 123R and accordingly prior periods have not been restated to reflect the impact of SFAS No. 123R. The modified prospective transition method requires that stock-based compensation expense be recorded for all new and unvested stock options, restricted stock, restricted stock units, and employee stock purchase plan shares that are ultimately expected to vest as the requisite service is rendered beginning on January 1, 2006 the first day of the Company’s fiscal year 2006. Stock-based compensation expense for awards granted prior to January 1, 2006 is based on the grant date fair-value as determined under the pro forma provisions of SFAS No. 123. As the Company did not grant any stock options in 2005, no pro forma information is provided.

Prior to the adoption of SFAS No. 123R, the Company measured compensation expense for its employee stock-based compensation plans using the intrinsic value method prescribed by APB Opinion No. 25. The Company applied the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, as if the fair-value-based method had been applied in measuring compensation expense. Under APB Opinion No. 25, when the exercise price of the Company’s employee stock options was equal to the market price of the underlying stock on the date of the grant, no compensation expense was recognized.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18. 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 EITF 96-18.

12

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 2 - Summary of Significant Accounting Policies (continued)

(f) Loss per Share

The Company computes loss per share in accordance with SFAS No. 128, “Earnings per Share” which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic loss per share is computed by dividing net loss available to common shareholders by the weighted average number of outstanding common shares during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period including stock options and warrants, using the treasury method, and preferred stock, using the if-converted method. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive.

(g) Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of FASB Statements No. 133 and 140”, to simplify and make more consistent the accounting for certain financial instruments. SFAS No. 155 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, to permit fair value remeasurement for any hybrid financial instrument with an embedded derivative that otherwise would require bifurcation, provided that the whole instrument is accounted for on a fair value basis. SFAS No. 155 amends SFAS No. 140, “Accounting for the Impairment or Disposal of Long-Lived Assets”, to allow a qualifying special-purpose
entity to hold a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 applies to all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006, with earlier application allowed. This standard is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This statement requires all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable, and permits for subsequent measurement using either fair value measurement with changes in fair value reflected in earnings or the amortization and impairment requirements of Statement No. 140. The subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value eliminates the necessity for entities that manage the risks inherent in servicing assets and servicing liabilities with derivatives to qualify for hedge accounting treatment and eliminates the characterization of declines in fair value as impairments or direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year beginning after September 15, 2006. This adoption of this statement is not expected to have a significant effect on the Company’s future reported financial position or results of operations.

13

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 2 - Summary of Significant Accounting Policies (continued)

(g) Recent Accounting Pronouncements (continued)

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” This Statement requires an employer to recognize the over funded or under funded status of a defined benefit post retirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position, and to recognize changes in that funded status in the year in which the changes occur through comprehensive income.  SFAS No. 158 is effective for fiscal years ending after December 15, 2006. The Company does not expect that the implementation of SFAS No. 158 will have any material impact on its financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measures”. This Statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), expands disclosures about fair value measurements, and applies under other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, the FASB anticipates that for some entities, the application of SFAS No. 157 will change current practice. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, which for the Company would be the fiscal year beginning January 1, 2008. The Company is currently evaluating the impact of SFAS No. 157 but does not expect that it will have a material impact on its financial statements.

In September 2006, the SEC issued Staff Accounting Bulletin (“SAB”) No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.” SAB No. 108 addresses how the effects of prior year uncorrected misstatements should be considered when quantifying misstatements in current year financial statements. SAB No. 108 requires companies to quantify misstatements using a balance sheet and income statement approach and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. SAB No. 108 is effective for periods ending after November 15, 2006. The Company is currently evaluating the impact of adopting SAB No. 108 but does not expect that it will have a material effect on its financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities”. This Statement permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing the impact of SFAS No. 159 on its financial position and results of operations.

14

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 3 - Due to Related Parties

Related party payables consist of the following:

   
March 31, December 31,
  
   
2007
  
2006
  
Due to a significant shareholder (a)
    
21,813
   
199,572
 
Unsecured payable to a shareholder with no specific terms and due on demand (b)
    
16,000
   
16,000
 
Due to an officer (c)
    
1,627
   
-
 
Due to a company with a director in common (d)
    
11,077
   
-
 
   
$
50,517
  
$
215,572
  
 
The following represents related party transactions paid or accrued during the three months ended March 31, 2007 and 2006.

   
2007
  
2006
  
Consulting fees paid or accrued to a significant shareholder (a)
    
35,000
   
10,500
 
Rent paid or accrued to a shareholder (b)
    
3,000
   
3,000
 
Consulting fees paid or accrued to a director (c)
  
$
10,500
  
$
9,000
  
   
$
48,500
  
$
22,500
  
 
The above transactions are in the normal course of operation and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

(a) At March 31, 2007 and December 31, 2006 the amount of $21,813 and $199,572, respectively was due to a significant shareholder for cash loans and interest, consulting fees and reimbursable expenses. As of March 31, 2007 the Company was indebted to this shareholder for cash loans of $11,850 which bear interest at a rate of 10% per annum and is due from the proceeds of the next financing arranged by the Company. At March 31, 2007, the Company had accrued $192 of interest on the loans. The loans are unsecured and due on demand. If the loan is not paid in full from the proceeds of the Company’s next financing, the lender will also be entitled to a one-time late charge equal to 2% of the outstanding principal amount of the loan. Overdue payments will bear interest at 12% per annum until paid.

At March 31, 2007, the Company was also indebted $9,771 to this shareholder for consulting fees and reimbursable expenses. This additional debt bears no interest and has no set terms of repayment.
 
15

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 3 - Due to Related Parties (continued)

In February of 2007, the Company issued 1,097,361 shares at .$20 per share to this significant shareholder in settlement of an outstanding balance of $219,472 for cash loans, accrued interest, reimbursable expenses and consulting fees. The settlement resulted in a charge to interest expense of $208,157 as a result of a beneficial conversion feature.

(b) In May of 2005, the Company entered into an agreement with a shareholder for office rent and expenses at $1,000 per month. The Company terminated this rental agreement in December 2006.

(c) On December 1, 1999, the Company entered into a consulting agreement with the Company’s sole officer. The agreement has an automatic renewal provision unless terminated by either party.

(d) At March 31, 2007, the amount of $11,077 (2005 - $Nil) was due to a company with a common director for cash loans and interest. The Company was indebted to this related company for cash loans of $11,000 which bear interest at a rate of 10% per annum. At March 31, 2007, the Company had accrued $77 of interest on the loans. The loans are unsecured and due on demand.

(e) See Note 5 for additional related party transactions.

Note 4 - Income Taxes

The Company accounts for its income taxes in accordance with FASB No. 109, “Accounting for Income Taxes.” As of December 31, 2006, the Company had net operating loss carry forwards that may be available to reduce future years’ taxable income and will expire commencing in 2015. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carryforwards.
Note 5 - Capital Stock

(a) Stock options

The Company has not issued any options on its common stock to date and has not recorded any stock-based compensation with respect to stock options.

(b) Stock issuances

In February of 2007, the Company issued 1,097,361 shares at $.20 per share to a significant shareholder in settlement of an outstanding balance of $219,472 for cash loans, accrued interest, reimbursable expenses and consulting fees. The settlement resulted in a charge to interest expense of $208,157 as a result of a beneficial conversion feature.

16

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 5 - Capital Stock (continued)

(b) Stock issuances (continued)

On September 15, 2006, the Company issued 300,000 shares of common stock with a fair value of $135,000 to a shareholder as partial consideration for bridge financing.

On May 30, 2006, the Company issued 126,000 shares of common stock with a fair value of $31,500 to a shareholder for consulting fees.

On May 30, 2006, the Company issued 50,000 shares of common stock with a fair value of $20,000 to a director for consulting fees.

On May 8, 2006, the Company issued 100,000 shares of common stock with a fair value of $36,000 to a director for consulting fees.

On February 17, 2006, the Company issued 150,000 shares of common stock with a fair value of $52,500 to a shareholder as partial consideration for $50,000 in bridge financing from the shareholder.


Actual amounts paid for interest and income taxes for the three months ended March 31, 2007 and 2006 are as follows:
 
   
Three months ended March 31,
  
   
2007
  
2006
  
Interest
  
$
-
  
$
-
  
Income taxes
  
$
-
  
$
-
  
               
 
17

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 6 - Supplemental Cash Flow Information (continued)

During the three months ended March 31, 2007, the Company issued:

In February of 2007, the Company issued 1,097,361 shares at $.20 per share to a significant shareholder in settlement of an outstanding balance of $219,472 for cash loans, accrued interest, reimbursable expenses and consulting fees. The settlement resulted in a charge to interest expense of $208,157 as a result of a beneficial conversion feature.

During the year ended December 31, 2006, the Company issued:

(a) 126,000 shares of common stock with a fair value of $31,500 to a shareholder for consulting fees.

(b) 150,000 shares of common stock with a fair value of $56,000 to a director for consulting fees.

(c) 450,000 shares of common stock with a fair value of $187,500 to a shareholder as partial consideration for bridge financing.

Note 7 - Investment

Proposed Idea One Merger
On May 20, 2004, as amended November 1 and 19, 2004, December 28, 2004, March 22, 2005, April 22, 2005, July 15, 2005, and November 14, 2005, the Company entered into a letter of intent, with Idea One, a private company involved in the development of battery cell technology. The letter of intent did not culminate in a definitive agreement.

Over the term of the letter of intent the Company loaned Idea One a total of $550,000 through a series of convertible promissory notes. These notes were written down to $1 as of December 31, 2005 as management determined they were not collectible and further, if the Idea One shares were received, it was not possible to determine their value.

As of April 30, 2006, the Company agreed to convert the outstanding balance, including accrued interest, of $595,642, at $0.40 per share, to 1,489,106 common shares of Idea One, in full satisfaction of the loan receivable. The Idea One shares were received in the second quarter of 2006. As of March 31, 2007 and December 31, 2006, these shares are recorded at $1.

18

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
March 31, 2007 (Unaudited)

Note 8 - Proposed Merger with Sibling

On June 28, 2006, as amended December 15, 2006, the Company executed a definitive agreement of acquisition and plan of reorganization with Sibling Entertainment Group, Inc. ("Sibling"), an entertainment development and production company based in New York City. Under the reorganization, which is subject to shareholder approval, the Company is to acquire each of Sibling's four wholly owned subsidiaries: Sibling Theatricals, Inc., Sibling Pictures, Inc., Sibling Music Corp., Sibling Properties, Inc. and three wholly owned subsidiaries of Sibling Pictures, Inc., all of which own and or control each of Sibling's respective divisions and operations of live-stage theatrical operations, music, independent feature films and theatrical real estate.

The definitive agreement anticipates a share exchange pursuant to which the Company will issue up to 33,267,472 shares of common stock for all the issued and outstanding shares of the Sibling subsidiaries on the closing date. The Company will further grant 16,239,972 share purchase warrants with terms ranging from 3 to 5 years at exercise prices ranging from $0.275 a share to $1.00 per share.

On February 9, 2007, the Company held a special meeting of shareholders to approve an Agreement of Acquisition and Plan of Reorganization, as amended, to acquire four wholly owned subsidiaries: Sibling Theatricals, Inc., Sibling Pictures, Inc., Sibling Music Corp., and Sibling Properties, Inc. from Sibling Entertainment Group, Inc., to amend the Company’s articles of incorporation to effect a name change to “Sibling Entertainment Group, Inc.” and to elect four directors to join the Company’s current board of directors.

The shareholders approved the Agreement of Acquisition and Plan of Reorganization, approved the name change to Sibling Entertainment Group, Inc. and elected Maxwell Mitchell, Victoria Mitchell, James Cardwell and Richard Bernstein to the Company’s board of directors.

The closing of the Agreement of Acquisition and Plan of Reorganization remains subject to the applicable registration requirements of the Securities Exchange Act of 1934, as amended. The Company intends to close the acquisition of the Sibling Entertainment Group, Inc. subsidiaries as soon as is practicable.
 
On May 14, the Company changed its name to “Sibling Entertainment Group Holdings, Inc.”
 
19