28 Feb 12 10-Q: SMART KIDS GROUP INC.
10-Q: SMART KIDS GROUP INC.
(EDGAR Online via COMTEX) — 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:
We are a development stage company incorporated in the State of Florida on February 11, 2003 that holds the rights to intellectual property of the Be Alert Bert(R) character and his friends. the intellectual property contains educational and entertainment media product, including television shows, videos, music, and books owned by Smart Kids International Holdings, inc., a company owned by our Chief Executive Officer and Director, Richard Shergold.
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.
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” (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 (smartkidsgroup.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.
We have also launched a community-oriented Smart Kids Travel Company, our website is smartkidsgroup.com. this will be a full service travel agency capable of fulfilling vacation and business needs. It will also focus on the travel needs of the members of the Smart Kids Community. Smart Kids Travel is managed by Gary Javorsky, a seasoned travel agency owner, with over 20 years experience selling travel products and services. Through the Smart Kids Travel Website, customers will be able to research destinations, attractions, accommodations and so much more, with departures from across Canada and the United States to any destination around the world. Customers will be able to compare prices from the most popular travel suppliers and contact the Smart Kids Travel Agency to make reservations with the assistance of a personal travel consultant who will make sure that the customer receives exactly what is wanted at the very best price available. in the near future, Smart Kids Travel will post specials oriented towards kids and great family vacations that will give both children and their family’s memorable experiences that will last a lifetime.
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This filing contains restated financial statements of Smart Kids Group, inc. as of and for the three and six months ended December 31, 2010. Prior to the issuance of the original filing on Form 10-Q for the quarter ended December 31, 2010, the Company determined that software development costs of $406,612 and previously capitalized costs of goods sold of $475,558 reported on the Company’s annual report in Form 10-K for the year ended June 30, 2010 included sub-licensing fees of $270,000 ($30,000 incurred for the year ended June 30, 2010) and officer salaries of $612,200 ($28,000 incurred for the year ended June 30, 2010) did not meet the capitalization criteria of the FASB ASC 350-40 “Internal use Software”. as of March 31, 2011, the prior auditor was no longer independent and management determined that the financial statements for the year ended June 30, 2010 needed to be re-audited. in January 2011, the Company engaged a new auditor to re-audit the financial statements as of and for the year ended June 30, 2010 and audit the financial statements as of and for the year ended June 30, 2011 concurrently. Additionally, an accounting firm was engaged that specializes in smaller reporting companies, to perform its internal bookkeeping and external financial reporting.
As a result of the change in control over financial reporting mentioned above, the Company determined that there were changes in the Company’s Balance Sheet, Statement of Operations, Stockholders’ Deficit, and Statement of Cash Flow as of and for the three and six months ended December 31, 2010. accordingly, the unaudited condensed consolidated financial statements for the three and six months ended December 31, 2010 have been restated as disclosed.
As filed in a Form 8-K on October 18, 2011 and amended on October 26, 2011, we entered into a merger transaction with Paragon GPS inc. (“Paragon”). on January 4, 2012, we elected to terminate the agreement due to Paragon being unable to provide us with an audit of its financial statements, which was a necessary condition to close the transaction. our relationship with Paragon remains positive and we expect to establish a business partnership in the future.
On January 26, 2012, the Company entered into an agreement (the “Agreement”) with WMX Group, inc. (“WMX”), amended on February 7, 2012 as filed in a Form 8-K on February 7, 2012. Pursuant to the Agreement, WMX agreed to provide consulting services to the Company in exchange for a 45% non-dilutable equity stake in the Company.
On January 31, 2012, the Company issued 540,000 shares of restricted common stock for cash consideration of approximately $0.10 per share or $53,493.
On January 31, 2012, the Company issued 25,000 shares of restricted common stock valued at $0.05 or $1,250 for interest.
On February 9, 2012, the Company issued 100,000 shares of restricted common stock valued at $0.012 or $1,220 for services. the stock was valued at the fair market value on January 22, 2012, the grant date.
On February 13, 2012, the Company issued 312,500 shares of restricted common stock valued at $0.08 or $25,000 in accordance with an agreement with a third party for funding. the shares were issued for due diligence fees valued at the fair market value on February 12, 2012, the grant date.
Results of Operations
Revenues. we had no revenues from our inception on February 11, 2003 to December 31, 2011. we do not expect to achieve revenues until we are able to successfully implement our business plan.
Operating expenses. our operating expenses include licensing expenses, salaries and wages, general and administrative expenses, legal and professional fees. for the three months ended December 31, 2011, we incurred an operating loss of $230,826 compared to an operating income of $144,670 for the three months ended December 31, 2010, a change of 259%. this was primarily due to the termination in the 3DFV sub-licensing agreement in which the Company no longer had the obligation to pay the unpaid sub-licensing fee of $258,930, and a decrease in allowance for stock receivables of $57,040 due to the Company not having any additional equity drawdown agreements. this was offset by an increase in salaries and wages of $13,895 due to the reinstatement of salaries in January 2011, legal and professional fees of $134,187 due to an increase primarily in accounting and consulting fees, an increase in general and administrative expenses of $7,555, and the impairment of equity investments of $2,969 as of December 31, 2011.
For the six months ended December 31, 2011, we incurred an operating loss of $415,960 compared to an operating loss of $176,849 for the six months ended December 31, 2010, a change of 135%. this was primarily due to an increase in salary and wages of $46,401 due to the reinstatement of salaries in January 2011, legal and professional fees of $222,884 due to an increase in accounting and consulting fees, sub-licensing expense of $25,922 due to the reinstatement of the sub-licensing fee in January 2011, and impairment of equity investment of $13,273. this was offset by the decrease in general and administrative expenses of $12,329 and allowance for stock receivable of $57,040 due to the Company not having any additional equity drawdown agreements.
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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 $231,681 for the three months ended December 31, 2011 compared to a net income of $137,257 for the three months ended December 31, 2011. the decrease of net income of $368,943 was primarily due to that stated above.
We had a net loss of $423,181 for the six months ended December 31, 2011 compared to a net loss of $217,062 for the six months ended December 31, 2010. the increase in net loss of $206,119 was due to that stated above, offset by a decrease in finance and interest expense of $32,992.
Liquidity and Capital Resources
As of December 31, 2011, we had total current assets of $383,191 and total assets in the amount of $386,168. our total current liabilities as of December 31, 2011 were $754,083. we had an accumulated deficit of $3,713,060 and a working capital deficit of $370,892 as of December 31, 2011.
Cash used in operating activities increased to $133,105 for the six months ended December 31, 2011 compared to $92,749 for the six months ended December 31, 2010 as a result of an increase in stock issued for services, impairment of equity investment, prepaid expenses, accounts payable and due to related parties. this was offset by a decrease in stock issued for financing, allowance for stock receivables, and deferred financing fees.
Cash used in investing activities increased to $13,174 for the six months ended December 31, 2011 compared to no cash used in investing activities for the six months ended December 31, 2010. the increase was due to the investment in unconsolidated investee of $13,174.
Cash flows provided by financing activities during the six months ended December 31, 2011 increases to $142,222 compared to $92,731 for the six months ended December 31, 2010, due to an increase in proceeds from the issuance of common stock offset by a decrease in proceeds from an equity drawdown agreement.
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.
At December 31, 2011, we had $538 cash on-hand and an accumulated deficit of $3,713,060, 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 December 31, 2011. 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.
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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 accounted for using the Stock Based Compensation Topic of the FASB ASC. we use the fair value method for equity instruments granted to employees and will use the Black Scholes model for measuring the fair value of options, if issued. the stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.
Software Development Cost
Costs incurred internally in creating a computer software product are charged to expense when incurred as research and development until technological feasibility has been established for the product. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product.
Revenue and Cost Recognition
The Company recognizes revenue using the accrual method of accounting wherein revenue is recognized when earned and expenses and costs are recognized when incurred. Since inception of the business on February 11, 2003 through December 31, 2011, the Company has not realized any revenue.
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25 Feb 12 Bookkeeping Outsourcing: Planned Route to Success
Bookkeeping is one of the most important sections of any business organization as it is not only responsible for managing the monetary transactions but also provide the company with some of the best financial solutions and techniques that in turn, are important for its planned growth. the rise and fall in the graph of any business enterprise mainly depends on its bookkeeping department and for this reason only, accurate and proper management of accounts, data and statistics is very essential for ensuring consistent growth. However, it is a well established fact that the entire procedure of bookkeeping is extremely grueling in terms of time, labor, hard work, experience and professionalism. Hence, recruiting a heavy workforce that has the capability of acute efficiency and proper accounting knowledge is quite a task. Bookkeeping outsourcing is an absolute solution to this trouble, where an external aid of human resources is used for the better accomplishment of several bookkeeping issues.
Bookkeeping is the methodical procedure of recording each and every economic and monetary business transaction of an organization. all good bookkeeping outsourcing firms are well recruited with efficient as well as experienced bookkeepers, who are capable enough of handling all sorts of jobs such as creating monthly financial reports, annual reports, invoice generation and etc. In the present corporate world, every efficient business organization is taking the assistance of bookkeeping outsourcing firms, to ensure quick and appropriate management of their bookkeeping department.
Internet has made it extremely easy to get associated with any diligent bookkeeping firm. Clients can easily maintain a direct contact with their concerned bookkeepers through the medium of online services. In addition to this, they can also maintain a check over the execution of the work and can guide them thoroughly whenever required. another factor that has acted as a catalyst in the popularity of bookkeeping outsourcing is its cost effectiveness. If considered accurately, the total expenditure of employing a good bookkeeping outsourcing team is much lesser in comparison to the amount used to maintain your in-house accountants. moreover, owners are also not expected to pay bonuses, allowances or other such perks.
The main purpose of entertaining the services of any bookkeeping outsourcing firm, is earning good amount of benefits for the company. An outsourcing firm can efficiently manage all the duties, right from managing the routine data entry to creating the annual financial reports. all you need to do is select a reputed outsourcing firm that can deliver to your expectations and requirements. Make efforts to settle an agreement with the firm, on a contractual basis, so that you can legally reserve their assistance for a good period. the most advantageous aspect of bookkeeping outsourcing is that it is an affordable and effective concept utilized to share the ever increasing burden of your bookkeeping staff. so if your company is not making the estimated profit percentage, then you should seriously consider a good outsourcing firm. one does not have to bother over the trivial issues of heavy expenses or other demands of the outsourced employees, as they are highly professional, reliable and reasonable with their demands.
21 Feb 12 Online Bookkeeping Services – Why it is Redefining Bookkeeping
With modernization, different techniques and services made possible in physical world are also available through the virtual world of the internet. this includes the online bookkeeping services. the online bookkeeping services give the companies, whether big or small scale, the convenience of easy access to bookkeeping services the way a physical person does.
Every business owner can take advantage of the online bookkeeping services available nowadays. the transactions are done through the internet which means that there is no necessity for physical contacts of the agreeing parties. furthermore, the bookkeeping services will be catered right to the company’s door when the needs arise. the online services are just as competitive as the physical ones.
There are many other benefits in getting online bookkeeping services. Foremost, bookkeeping is essential in monitoring the financial development or failure of the company. Having the financial records regularly updated would make it easy for the business owner to determine the current status of his business. an effective financial system will be a basis for success and further development of the business. since online bookkeeping services are available anytime, the company owner does not necessarily have to hire another person to do the job, a secured internet connection will eliminate the hassle.
Another reason why online bookkeeping services should be retained is that they help provide the necessary information that will critically affect major company decisions. for instance, the evaluation of financial consequences takes a big part in every decision that the owner will make. without the reliable financial information and accurate records, it will be intricate to project the impacts of a certain course or action. It must be noted that profitability is revealed only with accurate records.
In addition, the company can easily acquire bank financing and other sources for capital with proper bookkeeping. Generally, the most appropriate time to obtain financing is when the projected statements for the current and prior years will have good impacts through the requested loan. this means that the annual financial records must be maintained to provide basis for loans. furthermore, when the business reached the point that requires a partner and investors, a clear financial picture will encourage the prospective associates. this will be derived from the daily record keeping.
In preparing the budget, online bookkeeping services are also essential. It is the budget that keeps the business going on by controlling the expenditures and forecasting the needed cash. When the company seeks for financing, the budget will serve as the determinant for the bank if the business is stable.
Online bookkeeping services also cater the preparation for income tax returns. With good financial records, it is easier to prepare the accurate income tax returns and filing will always be on time. this will help the owner avoid the charges for overdue payments.
Finally, with online bookkeeping services, it will be easier to fairly distribute profits. If the business is operating in partnership or corporation, a good bookkeeping will determine the accurate distribution of profits. If the in-charged person or service works properly, the business will surely find its way to success since the company will be more concentrated in developing the products and services than fixing its records.
20 Feb 12 A Discount on Accounting, if Not on Taxes
An app from H&R Block allows users to file taxes by taking a photograph of their W-2 forms.
If you file the 1040EZ tax form, this is not your year to file for an extension.
That is because H&R Block is offering its mobile tax app and service, which can be used to file a 1040EZ form, free until Feb. 29.
You may wonder, “Who in their right mind would file taxes by phone?” as it turns out, for EZ form users, filing by phone makes sense. that is because all you have to do is take a photo of your W-2 form and all of the information will be entered on the EZ form for you. Right now the app is available only for the iPhone, but H&R Block said an Android version was on the way, due around Feb. 22.
Block isn’t the only company offering an app with these features. the well known D.I.Y. financial program TurboTax also has a free app, SnapTax, but downloading the app is where the free part stops. if you actually want to file using TurboTax, it costs $20.
H&R Block also plans to charge for its service after Feb. 29, although it hasn’t said what the cost will be.
What does H&R Block get out of this? well, TurboTax is well ensconced with lots of satisfied customers, so Block wants to give filers a reason to try its product.
If you use Block’s app, you get the same guarantees as if you use its other electronic-filing products. that includes audit support and audit representation, and Block will pay up to $10,000 in penalties and interest if the app makes an error. (Without digging into the fine print, that looks about the same as the TurboTax guarantee.)
With so little wiggle room on the 1040EZ form, the Block app may not get you a big break from the taxman, but until Feb. 29, it gets you a small break from the tax accountant.
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