UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q /A

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2011
[ ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to __________
	Commission File Number: 333-153294

Smart Kids Group, Inc.

(Exact name of registrant as specified in its charter)

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

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

(Address of principal executive offices)

(780) 222-6257

(Registrant’s telephone number)

2005 Tree Fork Lane, Suite 109, Longwood, FL 32750

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

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

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 485,102,503 as of May 16, 2011.

EXPLANATORY NOTE

Following the filing of the Form 10-Q for the period ending March 31, 2011, the Registrant determined that it had inadvertently included an incorrect version of the financial statements in the version filed with EDGAR on May 16, 2011. This Amendment Number 1 to the Form 10-Q is being filed to incorporate the correct version of the financial statements which had been reviewed by our Registered Independent Certified Public Accounting Firm resulting in a correction to sub-licensing expense from inception (February 11, 2003) to March 31, 2011 in the Statements of Operations and Comprehensive Loss, change in accrued expenses – related parties for the nine months ended March 31, 2011 in the Statements of Cash flows, and the re-formatting of the Balance Sheets, Statements of Operations and Comprehensive Loss, and the Statements of Cash Flows to include subtotal underlines.

Subsequent to the issuance of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, we determined that sub-licensing expense from inception (February 11, 2003) to March 31, 2011 should have been $314,835 in the Statement of Operations and Comprehensive Loss, and change in accrued expenses – related parties for the nine months ended March 31, 2011 should have been $41,223 in the Statement of Cash Flows. These corrections have no effect on net income or cash used in operating activities, as subtotals were reported correctly in the original issuance.

This Amendment Number 1 is not intended to restate the financial statements as disclosed in Note 2 of our financial statements in the Form 10-Q and this Form 10-Q/A, as those restated financials statements will be filed at a subsequent date.

In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, currently dated certifications by our Chief Executive Officer is filed as exhibits to this Amendment. This Form 10-Q/A – Amendment Number 1, replaces the previous filing in its entirety.

2

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1:	Financial Statements	4
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	9
Item 4:	Controls and Procedures	9
PART II – OTHER INFORMATION
Item 1:	Legal Proceedings	10
Item 1A:	Risk Factors	10
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3:	Defaults Upon Senior Securities	10
Item 4:	(Removed and Reserved)	10
Item 5:	Other Information	10
Item 6:	Exhibits	11

3

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:
F-1	Balance Sheets as of March 31, 2011 and June 30, 2010 (unaudited);
F-2	Statements of Operations for the three and nine months ended March 31, 2010 and 2011 and period from February 11, 2003 (Inception) to March 31, 2011 (unaudited);
F-3	Statements of Cash Flows for the nine months ended March 31, 2010 and 2011 and period from February 11, 2003 (Inception) to March 31, 2011 (unaudited);
F-4	Notes to Financial Statements;

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2011 are not necessarily indicative of the results that can be expected for the full year.

4

SMART KIDS GROUP, INC.

(A Development Stage Company)

Balance Sheets

	March 31, 2011			June 30, 2010
	(Unaudited)			(Unaudited)
ASSETS
Current assets
Cash	$	4,299		$	112
Prepaids		92,301			-
Total current assets		96,600			112
Fixed assets
Equipment, net of accumulated depreciation of $737 and $567, respectively		397			567
Other assets
Software development costs, net of accumulated amortization of $1,625 and $0, respectively		11,375			-
Total assets	$	108,372		$	679
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	229,378		$	169,181
Accrued expenses – related parties		510,729			475,558
Note payable		-			6,000
Total current liabilities		740,107			650,739
Stockholders' deficit
Preferred stock: $0.0001 par value; authorized 40,000,000 shares; issued and outstanding: 0 and 0, respectively		-			-
Common stock: $0.0001 par value; authorized 900,000,000 shares; issued and outstanding: 484,102,503 and 234,562,209, respectively		48,411			23,456
Additional paid-in capital		2,440,974			1,994,569
Common stock receivable, net of allowance of $90,600 and $0, respectively		(4,420	)		-
Common stock payable		20,049			-
Accumulated deficit during the development stage		(3,130,993	)		(2,662,673	)
Other comprehensive loss
Foreign currency translation adjustment		(5,756	)		(5,412	)
Total stockholders' deficit		(631,735	)		(650,060	)
Total liabilities and stockholders' deficit	$	108,372		$	679

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

F-1

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statements of Operations and Comprehensive Loss

(Unaudited)

													From inception
													(February 11,
	For the three months ended						For the nine months ended						2003) to
	March 31,			March 31,			March 31,			March 31,			March 31,
	2011			2010			2011			2010			2011
Revenues	$	—		$	—		$	—		$	—		$	—
Cost of goods sold		—			—			—			—			549,159
Gross loss		—			—			—			—			(549,159	)
Operating expenses
Salaries and wages		51,926			—			77,762			151,196			647,358
Legal and professional fees		126,588			40,049			187,092			108,910			896,564
Depreciation and amortization		1,682			57			1,795			170			10,937
General and administrative expenses		(18,267	)		13,560			18,221			61,130			164,313
Impairment of software development		—			—			—			—			136,612
Sub-licensing expense		40,757			—			44,835			—			314,835
Allowance on stock receivable		—			—			90,600			—			90,600
Total operating expenses		202,686			53,666			420,305			321,406			2,261,219
Operating loss		(202,686	)		(53,666	)		(420,305	)		(321,406	)		(2,810,378	)
Other expense
Finance and interest income (expense)		6,343			(69	)		(43,270	)		(254,319	)		(315,870	)
Loss on conversion of debt		(4,745	)		—			(4,745	)		—			(4,745	)
Total other income (expense)		1,598			(69	)		(48,015	)		(254,319	)		(320,615	)
Net loss		(201,088	)		(53,735	)		(468,320	)		(575,725	)		(3,130,993	)
Other comprehensive loss
Foreign currency translation adjustment		(477	)		—			(344	)		—			(5,756	)
Total comprehensive loss	$	(201,565	)	$	(53,735	)	$	(468,644	)	$	(575,725	)	$	(3,316,749	)
Net loss per common share - basic	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Weighted average number of common shares outstanding - basic		392,294,170			129,137,794			300,264,613			124,891,089

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

F-2

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

	Nine months ended March 31, 2011			Nine months ended March 31, 2010			From Inception (February 11, 2003) to March 31, 2011
Cash flows from operating activities
Net loss	$	(468,320	)	$	(575,725	)	$	(3,130,993	)
Adjustments to reconcile net loss to net cash used in operating activities
Issuance of common stock- services		23,525			35,000			61,025
Issuance of common stock- equity draw down		—			—			1,000
Issuance of common stock- financing fees		18,400			254,250			291,000
Issuance of common stock- accrued officer salaries		—			—			928,292
Issuance of common stock- accounts payable, accrued expense, and note payable		4,745			—			4,745
Write – off of consulting agreement, prior fees		—			—			185,000
Allowance of stock receivable		90,600			—			90,600
Depreciation and amortization		1,795			170			10,937
Impairment of software development		—			—			136,612
Sub-licensing expense		—			—			270,000
Changes in current assets and liabilities
Organizational costs		—			—			(8,575	)
Prepaid expense		71,552			—			71,552
Accounts payable and accrued expenses		61,401			(321	)		230,582
Accrued expenses – related parties		41,223			152,608			516,781
Net cash used in operating activities		(155,079	)		(134,018	)		(341,442	)
Cash flows from investing activities
Software/website development costs		—			(58,000	)		(406,612	)
Purchase of equipment		—			—			(1,134	)
Net cash used in investing activities		—			(58,000	)		(407,746	)
Cash flows from financing activities
Proceeds from the issuance of stock		110,030			234,000			569,063
Proceeds from equity draw down		49,580			—			49,580
Proceeds from note payable		—			6,000			6,000
Proceeds from stock subscriptions		—			—			134,600
Net cash provided by financing activities		159,610			240,000			759,243
Effect of exchange rate changes on cash		(344	)		—			(5,756	)
Increase in cash		4,187			47,982			4,299
Cash, beginning of period		112			78			—
Cash, end of period	$	4,299		$	48,060		$	4,299

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

F-3

SMART KIDS GROUP, INC.

(A Development Stage Company)

Statements of Cash Flows

(Unaudited)

(Continued)

	Nine months ended March 31, 2011		Nine months ended March 31, 2010		From Inception (February 11, 2003) to March 31, 2011
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	—	$	—	$	—
Income taxes	$	—	$	—	$	—
Supplemental schedule of non-cash investing and financing activities:
Stock issued for prepaid expense	$	163,853	$	—	$	163,853
Stock issued for equity draw down	$	144,600	$	—	$	144,600
Stock issued for software development	$	13,000	$	—	$	13,000
Stock issued for accounts payable, accrued expense, and note payable	$	13,255	$	—	$	13,255

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

F-4

SMART KIDS GROUP, INC.

(A Development Stage Company)

Notes to the Financial Statements

(Unaudited)

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

Nature of Business

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

As of March 31, 2011, the Company is a development stage company. A development stage enterprise is a company that is devoting substantially all of its efforts to establishing a new business and either planned principal operations have not commenced or planned principal operations have commenced but there has been no significant revenue. From February 11, 2003 (date of inception) through March 31, 2011, the Company did not realize any revenues and has not commenced its principal operations.

On April 23, 2010 the Company created Smart Kids Productions Inc., a Canadian corporation, incorporated on May 4, 2009, of which the Company has a 40% interest ownership. As of March 31, 2011 the corporation has been dormant.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with United States generally accepted accounting principles (US GAAP) for interim financial information and in accordance with professional standards promulgated by the Public Company Accounting Oversight Board (PCAOB). During the current period the Company has determined that the software development cost asset of $406,612 reported in the Company’s Annual Report on Form 10-K for the year ended June 30, 2010 as well as the Company’s Quarterly Report on Form 10-Q for the quarters ended September 30, 2010, and December 31, 2010 included sublicensing fees of $270,000 ($30,000 of which was incurred for the year ended June 30, 2010) which did not meet the capitalization criteria of the Financial Accounting Standards Board (“FASB”) Codification (“FASB ASC”) 350-40 “Internal Use Software”. Additionally, internally developed software costs of $136,612 were obsolete as of June 30, 2010 and not impaired in accordance with FASB ASC 350-40 “Internal Use Software”. As of June 30, 2010 the Company had not generated any revenues associated with the internally developed software and removed websites from the internet that operated on this obsolete technology. As of the date of this filing, the prior auditor is no longer independent and management has determined that the financial statements for the year ended June 30, 2010 must be re-audited. At this time management does not know if any additional changes will be made as a result of the re-audit for the year ended June 30, 2010. Accordingly, the financial condition and results of operations disclosed in prior periods can no longer be relied upon. Therefore, the interim unaudited financial statements should not be read in conjunction with the financial statements included in the Form 10-K for the year ended June 30, 2010. In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made except for the correction of errors noted above. Operating results for the nine months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended June 30, 2011.

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

As used in these notes to the financial statements, the terms the “Company”, “we”, “us”, “our” and similar terms refer to Smart Kids Group, Inc. These financial statements include all accounts of the Company. The results of the nine months ended March 31, 2011 are not necessarily indicative of the results to be expected for the pending full year ended June 30, 2011. Significant accounting policies disclosed therein have not changed except as noted below.

Reclassifications

Certain reclassifications, which have no effect on net loss, have been made to the prior period financial statements to conform to the current presentation. Specifically, $6,000 of a note payable was segregated from accounts payable and accrued expenses, other comprehensive loss due to foreign currency translations of $5,412 was segregated from the accumulated deficit during the development stage on the Company’s Balance Sheets, depreciation expense of $170 was determined to be an operating expense and reclassified to operating expenses, and financing expense (formerly stock issued for past consideration) was determined to be an other expense and reclassified out of operating expenses in the Statements of Operations and Comprehensive Loss.

F-5

 Use of Estimates

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

Going Concern

The accompanying unaudited financial statements have been prepared in conformity with US GAAP, which contemplate continuation of the Company as a going concern. The Company has not begun generating revenue, is considered a development stage company, has experienced recurring net operating losses, had a net loss of $468,320 and $575,725 for the nine months ended March 31, 2011 and 2010, respectively, accumulated deficit of $3,130,993 and a working capital deficiency of $643,507 at March 31, 2011.

These factors raise substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

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

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

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with an original maturity of three months or less to be cash equivalents. As of March 31, 2011 and June 30, 2010 the Company had no cash equivalents.

Earnings per share

The Company follows ASC Topic 260 to account for the earnings per share. Basic earning per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earning per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding. During periods when common stock equivalents, if any, are anti-dilutive they are not considered in the computation.

Fair Value of Financial Instruments

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

Fair Value Accounting

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

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

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

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

F-6

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

Software Development Cost

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

For the nine months ended March 31, 2011, the Company capitalized $13,000 in internal software development costs.

Adopted

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

Issued

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

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

NOTE 2. CORRECTION FOR THE YEAR ENDED JUNE 30, 2010

The financial statements for the year ended June 30, 2010 have been corrected for the following matters. Prior to the issuance of the original filing on Form 10-Q for the quarter ended December 31, 2010, the Company determined that software development cost of $406,612 reported in the Company’s annual report on Form 10-K for the year ended June 30, 2010 as well as the Company’s quarterly reports on Form 10-Q for the quarters ended September 30, 2010 and December 31, 2010 included sublicensing fees of $270,000 ($30,000 which was incurred for the year ended June 30, 2010) which did not meet the capitalization criteria of the FASB ASC 350-40 “Internal Use Software”. Additionally, internally developed software costs of $136,612 were obsolete as of June 30, 2010 and not impaired in accordance with FASB ASC 350-40 “Internal Use Software”. As of June 30, 2010 the Company had not generated any revenues associated with the internally developed software and websites that operated on the obsolete technology were removed from the internet.

As of the date of this filing, the prior auditor is no longer independent and management has determined that the financial statements for the year ended June 30, 2010 must be re-audited. At this time management does not know if any additional changes will be made as a result of the re-audit for the year ended June 30, 2010. Accordingly, the financial condition and results of operations disclosed in prior periods can no longer be relied upon.

F-7

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

Balance Sheet

	June 30, 2010						June 30, 2010
	As filed			Adjustment			(Unaudited)
Other Assets
Software development costs, net	$	406,612		$	(406,612	)	$	—
Total assets	$	407,291		$	(406,612	)	$	679
Stockholders’ Deficit
Accumulated deficit during the development stage	$	(2,261,473	)	$	(406,612	)	$	(2,668,085	)
Total Stockholders’ Deficit	$	(243,448	)	$	(406,612	)	$	(650,060	)

Statements of Operations and Comprehensive Loss

	For the Year Ended June 30, 2010						For the Year Ended June 30, 2010
	As Filed			Adjustment			(Unaudited)
Operating expenses
Impairment of software development costs	$	—		$	136,612		$	136,612
Sub-licensing expense		—			30,000			30,000
Total operating expenses		419,186			166,612			585,798
Net loss		(1,167,601	)		(166,612	)		(1,334,213	)
Total comprehensive loss	$	(1,172,730	)	$	(166,612	)	$	(1,339,342	)
Net loss per common share (basic and diluted)	$	(0.01	)	$	—		$	(0.01	)

	From inception (February 11, 2003) to June 30, 2010						From inception (February 11, 2003) to June 30, 2010
	As Filed			Adjustment			(Unaudited)
Operating expenses
Impairment of software development costs	$	—		$	136,612		$	136,612
Sub-licensing expense		—			270,000			270,000
Total operating expenses		1,425,160			406,612			1,831,772
Net loss		(2,256,061	)		(406,612	)		(2,662,673	)
Total comprehensive loss	$	(2,261,473	)	$	(406,612	)	$	(2,668,085	)

Statements of Cash Flows

	For the Year Ended June 30, 2010						For the Year Ended June 30, 2010
	As Filed			Adjustment			(Unaudited)
Cash flows from operating activities
Net loss	$	(1,172,730	)	$	(166,612	)	$	(1,339,342	)
Impairment of software development costs		—			136,612			136,612
Sub-licensing expense		—			30,000			30,000
Cash flows used by operating activities	$	(671,554	)	$	—		$	(671,554	)

F-8

	From inception (February 11, 2003) to June 30, 2010						From inception (February 11, 2003) to June 30, 2010
	As Filed			Adjustment			(Unaudited)
Cash flows from operating activities
Net loss	$	(2,261,473	)	$	(406,612	)	$	(2,668,085	)
Impairment of software development costs		—			136,612			136,612
Sub-licensing expense		—			270,000			270,000
Cash flows used by operating activities	$	(185,775	)	$	—		$	(185,775	)

Statement of Stockholders’ Deficit for the year ended June 30, 2010

	Deficit accumulated during the development stage						Deficit accumulated during the development stage
	As filed			Adjustment			(Unaudited)
Comprehensive loss	$	(1,172,730	)	$	(406,612	)	$	(1,579,342	)

NOTE 3. PREPAID EXPENSE

As of March 31, 2011 the Company has entered into four, six to twelve month agreements with a third parties for consulting services. The Company has issued a total of 113,235,294 shares of common stock valued at $163,853 based on the fair value of the common stock at the grant date. As of March 31, 2011 the Company has expensed $72,052 of the prepaid expense to professionals. There were no prepaid expenses as of June 30, 2010.

NOTE 4. NOTE PAYABLE

In March 2010 the Company entered into a three month, 20% note payable with a third party for $6,000. As of June 30, 2010 the note payable has been reclassified out of accounts payable. On March 10, 2011 the note payable was converted into 15,000,000 shares of restricted common stock at $0.0012 per share or $18,000 based on the fair value of the Company’s stock on March 10, 2011. The shares repaid the note payable of $6,000 principal and $1,203 interest, and a personal loan to the CEO of the Company which was accounted for as a reduction in accrued officer compensation of $6,052. The remaining $4,745 was recognized as a loss on conversion of debt as of March 31, 2011.

NOTE 5. RELATED PARTY TRANSACTIONS

Accrued expenses – related parties

	March 31, 2011		June 30, 2010
Unpaid officer compensation	$	495,729	$	475,558
Sub-license expense		15,000		—
Total accrued expenses – related parties	$	510,729	$	475,558

As of March 31, 2011 and June 30, 2010, the Company incurred amounts due to related parties of $510,729 and $475,558, respectively. The liability consists of payments due under employment agreements and sub-licensing fees to the officers of the Company. As of March 31, 2011, $475,558 of unpaid officer compensation is due to the former Chief Executive Officer, Paul Andrew Ruppanner. Effective January 1, 2010, the Company’s Board of Directors passed a resolution for the Company to no longer incur any sublicensing fees or accrue unpaid officers’ salaries until further notice.

Effective January 1, 2011, the Company reinstated the $5,000 a month officer compensation and the $5,000 a month sub-licensing fee. As of March 31, 2011, $15,000 has been accrued for unpaid sub-licensing fees.

Sub-Licensing Agreement

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

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On January 1, 2010, SKIH agreed to waive the monthly payment obligation for a period of time until the Company is able to raise capital and refurbish the existing product line for reintroduction into the domestic and international markets. Effective January 1, 2011, the Company reinstated the $5,000 monthly sub-licensing fees. As of March 31, 2011, $15,000 of sub-licensing fees has been accrued for.

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

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

Office Rent

The Company shares office space at the residence of the Co-Chairs of the Board located in Edmonton, Canada and Longwood, Florida at no cost to the Company. For the nine months ended March 31, 2011 and 2010, the rent expense was zero.

NOTE 6. DRAWDOWN EQUITY FINANCING AGREEMENT

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

As of March 31, 2011, all 38,000,000 free trading shares registered on the Company’s Form S-1 effective May 26, 2010 has been issued to Auctus. Per the Agreement, the valuation of the issuances is determined as the higher of 75% of the average lowest closing price of the Company’s common stock ten days prior to the issuance or the lowest close price of the Company’s common stock five consecutive trading days after the issuance.

The shares were issued as follows:

Issue Date	Shares Issued		Value Per Share		Issuance Valuation
June 25, 2010		10,000,000	$	0.0091	$	91,200
September 21, 2010		10,000,000	$	0.0021		21,000
		38,000,000				144,600
Less allowance						(90,600	)
Less proceeds						(49,580	)
Stock receivable					$	4,420

The original issuance on June 25, 2010 was valued at par. The Company revisited the valuation method in the second quarter and determined that the shares were under valued and the difference recorded in the second quarter. The difference between the par and revaluation was deemed to be immaterial to the financial statements as the stock receivable would have been reduced due to the Company’s determination that the balance was not collectable in full.

Each issuance of stock was recognized as a stock receivable. As of March 31, 2011, the Company has received cash proceeds of $49,580. The Company has analyzed the collectability of the receivable as of March 31, 2011 and has determined that $90,600 of the remaining balance is uncollectable due to the Company’s stock price and lack of trading volume. The $90,600 has been recorded as an allowance of stock receivable as of March 31, 2011. The Company has recognized a net stock receivable of $4,420 in relation to the Agreement as of March 31, 2011.

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NOTE 7. STOCKHOLDERS’ EQUITY

The authorized common stock of the Company consists of 900,000,000 shares of common stock with par value of $0.0001 and 40,000,000 shares of preferred stock. As of March 31, 2011 and June 30, 2010 the Company had 484,102,503 and 234,562,209 common stock and zero preferred stock outstanding.

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

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

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

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

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

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

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

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

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

On September 7, 2010, the Company issued 250,000 shares of restricted common stock valued at $0.03 per share or $7,500 for software development costs per an agreement.

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

On September 21, 2010, the Company issued 10,000,000 shares of free trading common stock valued at $0.0001 per share or $1,000, in connection with the drawdown equity financing agreement and registration rights agreement in exchange of stock receivable.

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

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

On November 15, 2010, the Company issued 18,000,000 shares of free trading common stock valued at $0.0018 per share or $32,400 in connection with the drawdown equity financing agreement and registration rights agreement in exchange of stock receivable. Upon issuance the stock was recorded as a stock receivable. As of March 31, 2011 the Company determined that proceeds of $90,600 would not be received and appropriately reduced the stock receivable. The Company has received proceeds of approximately $49,580 through the drawdown equity financing as of March 31, 2011. See Note 6.

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

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On December 22, 2010, the Company granted Richard Shergold 214,354,600 shares of restricted common stock valued at $0.0015 per share or $321,532 based on the fair value of the Company’s stock on December 22, 2010 in accordance with the sublicensing and licensing agreement with SKHI and 3DFV. Effective December 15, 2010 the 3DFV agreement was terminated and in February 2011 the Company issued a resolution to cancel the granting of all 214,354,600 shares due to Richard Shergold.

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

On December 23, 2010, 100,000,000 shares of restricted common stock valued at $0.0001 per share or $10,000 were returned in connection with the cancellation of a licensing agreement. See Note 5.

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

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

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

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

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

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

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

As of March 31, 2011, the Company received cash consideration of $20,049 for 48,750,000 shares of restricted common stock at a value of $0.004 per share. The shares have not been issued as of March 31, 2011.

NOTE 8. SUBSEQUENT EVENTS

On April 15, 2011 the Company issued 1,000,000 shares of restricted common stock at a value of $0.0012 per share or $1,200 as a retainer for consulting services.

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

Forward-Looking Statements

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

Overview

We are a development stage company incorporated in the State of Florida on February 11, 2003. From our inception, we have not generated any revenues and have incurred a net loss of $468,320 for the nine months ended March 31, 2011. As of March 31, 2011, we had $4,299 in cash on hand, total assets of $108,372, total liabilities of $740,107, and an accumulated deficit during the development stage of $3,310,993. In our Auditor’s report included in their audit for fiscal years ended June 30, 2010 and 2009, they expressed substantial doubt as to our ability to continue as a going concern.

Based on intellectual property that we sublicense from an affiliate company, we have the intellectual rights to educational and entertainment media products, including television shows, video, music and books, related to the Be Alert Bert® character and his friends. We also have developed fitness media products, including television shows and Tai Chi fitness programs, that we have branded Full Motion Fitness^TM. Our media products are intended to entertain and educate families with a particular focus on personal safety, health and fitness and related issues. Because of the dual focus on education and entertainment, we sometimes refer to our products as “EDUtainment products.”

All intellectual property relating to Be Alert Bert® and Full Motion Fitness^TM, including the trademarks and all related products, were obtained under an exclusive sublicense agreement we entered into with Smart Kids International Holdings, Inc., (“SKIH”), a company owned by our Chief Executive Officer and Director, Richard Shergold. This sublicense agreement has been effective since June 20, 2005, and requires us to pay licensing fees of $5,000 per month in exchange for our use of the trademarks, domain names and copyrights, concepts and characters and rights to manufacture, distribute, sell, advertise, and profit from the products relating to the Be Alert Bert® and Full Motion Fitness ^TM intellectual property. Our sublicense also permits us to create new stories and products utilizing the sublicensed intellectual property and to license and otherwise profit from those newly created stories and products. The term of the sublicense agreement is for 25 years, with an option to extend in perpetuity.

On January 1, 2010, SKIH agreed to waive our monthly payment obligation for a period of time until we are able to raise capital and refurbish our existing product line for reintroduction into the domestic and international markets. Effective January 1, 2011, the $5,000 per month licensing fee has been reinstated.

Under our sublicense, we have rights to numerous television shows, music videos, books and other media related to the Be Alert Bert® and Full Motion Fitness^TM property concepts. We have roughly 54 television shows, 15 music videos and several books (completed and under development) associated with Be Alert Bert® and 31 health videos and television shows under Full Motion Fitness^TM. Before we were formed in February 2003 and before we entered into the sublicense agreement, these media products were already available and distributed in the United States, Canada and various international markets. The airing time under the television contracts for those media products concluded in the United States and Canada about four years ago and internationally last year.

Our business plan for the next twelve months is to refurbish, edit and repackage our existing product line of television shows, videos and books for media placement and retail sale. This plan includes locating distribution channels for our products and associated marketing efforts. We estimate that we will need approximately $350,000 to accomplish these tasks. As such, we are currently searching for avenues of financing to accomplish these goals.

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In addition to repackaging our existing products for sale, we intend to develop new media products based on our licensed intellectual property. We are working on a series of television shows titled the “The Adventures of Bert and Claire.” We are also working to launch a website to display, market and retail our products named, “the Smartkids Community” (www.smartkidscommunity.com). We intend to charge an annual membership fee (after a 30 day trial period) of $19.99 per family which will provide them with access to some of our content and through which they will be able to purchase our videos, music, books and other content that we either sublicense or produce. We launched our company website in April, 2011 (www.smartkidsgrop.com), but our design is contingent on the availability of financing. To develop our new television series and launch our interactive website, we will need roughly $2 million in capital.

Because capital is a prerequisite to the implementation of our business plan, we have been actively searching for financing opportunities. We have no current capital sources currently available for our $2,350,000 estimated budget. As such, we need additional capital to continue as a going concern.

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

In consideration for the execution of the License Agreement and for the exclusivity of the license, we agreed to pay a one-time fee of $263,008 to the owners of 3DFV, Mr. Joseph DiFrancesco and his spouse Bernadette, and issue an amount of shares of our common stock to 3DFV equivalent to render 3DFV’s percentage of stock ownership in our company equal to that of Mr. Richard Shergold, our Chief Executive Officer and Director.

On December 15, 2010 the Company effectively terminated the License Agreement with 3DFV by mutual agreement between the parties. Shares issued in accordance with the License Agreement were returned and all obligations under the License Agreement have ceased. Effective December 22, 2010, Joseph DiFrancesco resigned from all positions as an officer of the Company and a member of the Board of Directors. At the time of termination the Company had issued to 3DFV 100,000,000 shares of restricted common stock and paid $4,078 of the one-time fee. The stock was returned and cancelled on December 23, 2010 and the unpaid portion of the one-time fee liability removed. The stock was returned and cancelled on December 23, 2010 and the unpaid portion reported on the Company’s Condensed Statements of Operations and Comprehensive Loss as a reduction in licensing fees due to the termination of the license agreement.

During the current period the Company has determined that the software development cost asset of $406,612 reported in the Company’s Annual Report on Form 10-K for the year ended June 30, 2010 as well as the Company’s Quarterly Report on Form 10-Q for the quarters ended September 30, 2010, and December 31, 2010 included sublicensing fees of $270,000 ($30,000 which was incurred for the year ended June 30, 2010) which did not meet the capitalization criteria of the Financial Accounting Standards Board (“FASB”) Codification (“FASB ASC”) 350-40 “Internal Use Software”. Additionally, internally developed software costs of $136,612 were obsolete as of June 30, 2010 and not impaired in accordance with FASB ASC 350-40 “Internal Use Software”. As of June 30, 2010 the Company had not generated any revenues associated with the internally developed software and removed websites from the internet that operated on this obsolete technology. As of the date of this filing, the prior auditor is no longer independent and management has determined that the financial statements for the year ended June 30, 2010 must be re-audited. At this time management does not know if any additional changes will be made as a result of the re-audit for the year ended June 30, 2010. Accordingly, the financial condition and results of operations disclosed in prior periods can no longer be relied upon. Therefore, the interim unaudited financial statements should not be read in conjunction with the financial statements included in the Form 10-K for the year ended June 30, 2010. In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made except for the correction of errors noted above. Operating results for the nine months ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ended June 30, 2011.

Results of Operations

Revenues. We had no revenues from our inception on February 11, 2003 to March 31, 2011. We do not expect to achieve revenues until we are able to successfully implement our business plan.

6

Operating expenses. Our operating expenses include licensing expenses, salaries and wages, general and administrative expenses, legal and professional fees. For the three months ended March 31, 2011, we incurred an operating loss of $202,686 compared to an operating loss of $53,666 for the three months ended March 31, 2010, a change of 278%. This was due to an increase in salaries and wages to $51,926 due to the reinstatement of monthly salaries for two officers, professional fees of $126,558 primarily due to accounting fees, and sub-licensing fees of $40,757 due to the reinstatement of monthly licensing fees effective January 1, 2011. This was offset by a gain of $18,267 in general and administrative expenses due to the reclassification of expenses for the three months ended March 31, 2011. For the three months ended March 31, 2011 $24,557 was reclassified out of general and administrative expenses to licensing fees and $13,167 of financing and interest expense was reclassified into professional fees.

Our total operating expenses increased 31% to $420,305 for the nine months ended March 31, 2011 compared to $321,406 for the nine months ended March 31, 2010. This was primarily due to the decrease in salaries and wages of $73,734 due to the halt in salary accruals between January 2010 to December 2010 and the decrease in general and administrative expenses of $41,286. The decrease was offset by an increase of $78,182 in professional fees, $44,835 in licensing fees due to the reinstatement of the license fee to SKIH and 3DFV’s then active licensing agreement, and $90,600 due to an allowance of stock receivables in association with the Company’s equity drawdown agreement.

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

Net Loss. We had a net loss of $201,088 for the three months ended March 31, 2011 compared to a net loss of $53,735 for the three months ended March 31, 2010. The increase of $147,353 was primarily due to the increase in operating expenses stated above, and a $4,745 due to a loss on conversion of debt. This was offset by interest income of $6,343 due to re-valuations of stock issued for financing costs for the three months ended March 31, 2011.

We had a net loss of $468,320 for the nine months ended March 31, 2011 compared to $575,725 for the nine months ended March 31, 2010. The decrease of 19% was due to a decrease of finance and interest expense of $211,049 due to less stock being issued to past investors, offset by the increases mentioned above.

Liquidity and Capital Resources

As of March 31, 2011, we had total current assets of $96,600 and total assets in the amount of $108,372. Our total current liabilities as of March 31, 2011 were $740,107. We had an accumulated deficit of $3,130,993 and a working capital deficit of $643,507 as of March 31, 2011.

Cash used in operating activities increased to $155,079 for the nine months ended March 31, 2011 compared to $134,018 for the nine months ended March 31, 2010 as a result of a decrease in stock issued for financing fees and due to related parties, offset by an increase in an allowance for stock receivables, prepaid expenses and accounts payables.

The Company had no investing activities during the nine months ended March 31, 2011 compared to $58,000 used in investing activities for the nine months ended March 31, 2010. The decrease was due to no cash paid for software development costs.

Cash flows provided by financing activities during the nine months ended March 31, 2011 was $159,610 compared to $240,000 for the nine months ended March 31, 2011 and consisted primarily of a decrease in proceeds from issuances of stock for cash consideration and offset by the increase in proceeds from the equity drawdown agreement.

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

All 38,000,000 free trading shares registered on our Form S-1 effective May 26, 2010 have been issued to Auctus. To date, we have received cash proceeds of $49,580 from the Agreements. We have analyzed the collectability of the receivable and have determined that $90,600 of the remaining balance is uncollectable due to our stock price and lack of trading volume.

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

7

Going Concern

At March 31, 2011, we had $4,299 cash on-hand and an accumulated deficit of $3,130,993, and as noted throughout this report and our financial statements and notes thereto, our independent auditors have expressed their substantial doubt as to our ability to continue as a going concern as of June 30, 2010. We anticipate incurring significant losses in the future. We do not have an established source of revenue sufficient to cover our operating costs. Our ability to continue as a going concern is dependent upon our ability to successfully compete, operate profitably and/or raise additional capital through other means. If we are unable to reverse our losses, we will have to discontinue operations.

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

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

Off-Balance Sheet Arrangements

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

Critical Accounting Policies

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

Use of Estimates

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

Stock Based Compensation

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

Shares issued to employees are expensed upon issuance.

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

Software Development Cost

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

For the nine months ended March 31, 2011, the Company capitalized $13,000 in internal software development costs.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2011. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer. Based upon that evaluation, our Chief Executive Officer concluded that, as of March 31, 2011, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of March 31, 2011, our disclosure controls and procedures were not effective:

§ We were unable to maintain any segregation of duties within our financial operations due to our reliance on limited personnel in the finance function;

§ We do not have an independent Board of Directors, nor do we have a board member designated as an independent financial expert for the Company. The Board of Directors is comprised of two (2) members of management. As a result, there may be lack of independent oversight of the management team, lack of independent review of our operating and financial results, and lack of independent review of disclosures made by the Company; and

§ Documentation of all proper accounting procedures is not yet complete.

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

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

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

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

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

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

Since the recited remedial actions will require that we hire or engage additional personnel, these material weaknesses may not be overcome in the near term due to our limited financial resources. Until such remedial actions can be realized, we will continue to rely on the advice of outside professionals and consultants.

We anticipate that these initiatives will be at least partially, if not fully, implemented by June 30, 2011, subject to our ability to obtain sufficient future financing and subject to our ability to produce revenue in the short term. Failure to obtain financing will prevent us from curing any of the above stated deficiencies. To reduce the risk of material misstatements we have increased our segregation of duties by engaging an accounting firm to perform our internal record keeping and external financial reporting function.

Changes in Internal Control over Financial Reporting

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

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A: Risk Factors

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

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

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

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

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

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

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

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

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

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

Item 3. Defaults upon Senior Securities

None

Item 4. (Removed and Reserved)

Item 5. Other Information

None

Item 6. Exhibits

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

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Smart Kids Group, Inc.
Date:	May 19, 2011
	By: /s/ Richard Shergold Richard Shergold Title: Chief Executive Officer and Director

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