Sibling (SIBE) 10-Q 2009 Q3 Quarterly report

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ      Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2009.

¨       Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to ..

Commission file number: 0-28311

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(Exact name of small business issuer as specified in its charter)

TEXAS (State or other jurisdiction of incorporation or organization) 76-027334 (IRS Employer Identification Number)

333 Hudson Street, Suite, New York, NY 10013

(Address of Principal Executive Office)          (Postal Code)

(212) 414-9600

(Issuer’s telephone number)

Check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes      þ              No      ¨

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

Yes      þ              No      ¨

The number of outstanding shares of the registrant’s common stock, $0.0001 par value (the only class of voting stock), as of May 20, 2009 was 13,074,066.

TABLE OF CONTENTS

			Page
PART I.
	ITEM 1. FINANCIAL STATEMENTS			3
		Balance Sheet as of March 31, 2009 (unaudited) and December 31, 2008		4
		Statement of Operations for the three months ended March 31, 2009 and 2008 and the period December 28, 1988 (inception) to March 31, 2009  (unaudited)		5
		Statement of Cash Flows for the three months ended March 31, 2009 and 2008 and the period December 28, 1988 (inception) to March 31, 2009  (unaudited)		6
		Statement of Stockholder’s Equity (Deficit) for the period December 28, 1988 (inception) to March 31, 2009 (unaudited)		8
		Notes to Financial Statements (unaudited)		11
	ITEM 2. MANAGEMENT'S PLAN OF OPERATION			21
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			22
	ITEM 4T. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES			22
PART II.				23
	ITEM 1. LEGAL PROCEEDINGS			23
	ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			23
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES			23
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			23
	ITEM 5. OTHER INFORMATION			23
	ITEM 6. EXHIBITS			23
	SIGNATURES			24
INDEX TO EXHIBITS				25

PART I

ITEM 1. FINANCIAL STATEMENTS

As used herein the terms “Company,” “we,” “our”, and “us” refer to Sibling Entertainment Group Holdings, Inc., formerly, Sona Development Corp., a Texas corporation, unless otherwise indicated. In the opinion of management, the accompanying unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of operations for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

3

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(A Development Stage Company)

BALANCE SHEET

	March 31, 2009			December 31, 2008
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	—		$	—
Escrow with Attorney		1,000			1,000
Deposits		604			604
Total current assets		1,604			1,604
Receivable from Related Party		2,954,116			2,858,304
INVESTMENT		1			1
TOTAL ASSETS	$	2,955,721		$	2,859,909
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	505,955		$	395,066
Amounts due to a related party		287,625			275,209
Short-term Loan Payable, net of discount		2,555,000			2,555,000
Total current liabilities	$	3,348,580		$	3,225,275
STOCKHOLDERS' EQUITY (DEFICIT)
Capital Stock , $0.0001 par value; 100,000,000 shares authorized; 13,074,066 issued and outstanding,	$	1,307		$	1,307
Additional paid-in capital		3,982,824			3,982,824
Deficit accumulated during the development stage		(4,376,990	)		(4,349,497	)
Total stockholder’s equity (deficit)		(392,859	)		(365,366	)
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY	$	2,955,721		$	2,859,909

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

4

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(A Development Stage Company)

STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended, March 31,						Cumulative Amounts From December 28,1988 (Inception) to March 31,
	2009			2008			2009
General and administrative costs	$	25,604		$	34,621		$	2,965,483
Recovery of consulting fees								(45,000	)
Gain (Loss) from operations		(25,604	)		(34,621	)		(2,920,483	)
Non-operating income (expense)
Interest income		95,813			83,039			626,114
Interest expense		(97,702	)		(260,913	)		(1,538,575	)
Gain on forgiveness of debt								8,000
Write down of promissory notes								(552,046	)
Net Loss		(27,493	)		(212,495	)		(4,376,990	)
Loss per common share - basic and diluted		(.00	)		(0.02	)
Weighted average common shares - basic and diluted		13,074,066			13,074,066

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

5

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

	March 31,					Cumulative Amounts From December 28,1988 (inception) to March 31,
	2009			2008		2009
OPERATING ACTIVITIES
Net loss		(27,493	)	(212,495	)	(4,376,990	)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Common stock issued for consulting fees		—		—		853,400
Common stock issued for services		—		—		70,830
Common stock issued for finance costs		—		—		187,500
Beneficial conversion feature on convertible debt		—		—		208,157
Amortization of debt discount		—		177,129		679,400
Common stock issued for organization costs		—		—		33
Interest accrection on related party notes		(95,813	)	(86,289	)	(626,259	)
Common stock issued for other services		—		—		79,903
Gain on forgiveness of debt		—		—		(8,000	)
Write down of promissory notes		—		—		552,047
Changes in non-cash working capital items		—		—		—
Accounts payable and accrued liabilities		110,890		90,159		835,716
Advances and deposits		—		—		(604	)
Accrued and unpaid amounts due to related parties		12,416		27,921		369,283
Net cash used in operating activities		(0	)	(3,575	)	(1,175,584	)
Net cash used investing activities:
Promissory notes		—		—		(550,000	)
Proceeds from repayment of related party interest		—		3,575		228,150
Advances to related party		—		—		(2,555,000	)
Loan to Smart Card Technologies Co. Ltd.		—		—		(600,000	)
Net cash used in investing activities		0		3,575		(3,476,850	)

6

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(A Development Stage Company)

STATEMENTS OF CASH FLOWS

(Unaudited)

	March 31,			Cumulative Amounts From December 28, 1988 (inception) to March 31,
	2009		2008	2009
Advances from related parties		—	—		656,568
Proceeds from loan/short term debt		—	—		3,235,000
Escrow Account		—	—		—
Common stock issued for cash		—	—		760,867
Net cash provided by financing activities		—	—		4,652,435
NET INCREASE (DECREASE) IN CASH		—	—		—
CASH, BEGINNING OF PERIOD		—	—		—
CASH, END OF PERIOD		—	—		—

SUPPLEMENTAL CASH FLOW INFORMATION AND NON-CASH INVESTING AND FINANCING ACTIVITIES (Note 6)

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

7

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(A Developmental Stage Company)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

December 28, 1988 (Inception) to March 31, 2009

													Deficit
													Accumulated
							Additional						During the
	Common Stock						Paid-in			Stock			Development
	Shares			Amount			Capital			Subscriptions			Stage			Total
Balance at December 28, 1988 (date of inception)		—			—			—			—			—			—
Stock issued for organization costs		33,000		$	33,000		$	(32,967	)		—			—		$	33
Net loss		—			—			—			—		$	(33	)		(33	)
Balances at December 31, 1988 to December 31, 1996		33,000			33,000			(32,967	)		—			(33	)		—
1,000 for 1 stock split		32,967,000			—			—			—			—			—
Cancelled 30,000,000 shares		(30,000,000	)		(32,700	)		32,700			—			—			—
Stock issued for cash at $5.00 per share		20,000			2			99,998			—			—			100,000
Net loss		—			—			—			—			(80,025	)		(80,025	)
Balance at December 31, 1997		3,020,000			302			99,731			—			(80,058	)		19,975
Stock issued for services at $0.10 per share		95,000			10			9,490			—			—			9,500
Stock issued for cash at $0.14 per share		52,800			5			7,795		$	(2,722	)		—			5,028
Net loss		—			—			—			—			(33,798	)		(33,798	)
Balance at December 31, 1998		3,167,800			317			117,016			(2,722	)		(113,856	)		705
Net loss		—			—			—			—			(66,662	)		(66,662	)
Balance at December 31, 1999		3,167,800			317			117,016			(2,722	)		(180,518	)		(65,957	)
2 for 1 stock split		3,167,800			317			(317	)		—			—			—
Stock issued for consulting fees at $2.00 per share		320,000			32			639,968			—			—			640,000
Stock issued to settle trade payables at $2.00 per share		20,540			2			41,078			—			—			41,080
Stock issued for services at $2.00 per share		11,960			2			23,918			—			—			23,920
Stock issued per preemptive rights		192			—			17			—			—			17
Stock subscriptions received		—			—			—			2,722			—			2,772
Net loss		—			—			—			—			(1,018,914	)		(1,018,914	)
Balance at December 31, 2000		6,688,292			670			821,680			—			(1,199,432	)		(377,082	)

8

												Deficit Accumulated
							Additional					During the
	Common Stock						Paid-in		Stock			Development
	Shares			Amount			Capital		Subscriptions			Stage			Total
Stock issued for consulting fees and payables at $0.08 per share		687,500			68			54,932		—			—			55,000
Stock issued at $0.08 per share for rent payable		535,000			54			42,746		—			—			42,800
Net loss		—			—			—		—			(227,672	)		(227,672	)
Balance at December 31, 2001		7,910,792			792			919,358		—			(1,427,104	)		(506,954	)
1 for 10 reverse stock split		(7,119,708	)		(713	)		713		—			—			—
Stock subscribed for converted debts		—			—			—		641,953			—			641,953
Net loss		—			—			—		—			(180,733	)		(180,733	)
Balance at December 31, 2002		791,084			79			920,071		641,953			(1,607,837	)		(45,734	)
Stock issued for cash at $0.10 per share		280,000			28			27,972		—			—			28,000
Stock issued for converted debts		5,598,947			560			641,393		(641,953	)		—			—
Stock issued for debt settlement at $0.20 per share		280,538			28			56,080		—			—			56,108
Stock issued for debt settlement at $0.20 per share		52,500			5			10,495		—			—			10,500
Stock issued for debt settlement at $0.10 per share		50,000			5			4,995		—			—			5,000
Net loss		—			—			—		—			(100,115	)		(100,115	)
Balance at December 31, 2003		7,053,069			705			1,661,006		—			(1,707,952	)		(46,241	)
Stock issued for debt settlement at $0.10 per share		735,782			73			73,505		—			—			73,578
Stock issued for debt settlement at $0.10 per share		50,000			5			4,995		—			—			5,000
Stock issued for services at $0.15 per share		65,000			6			9,744		—			—			9,750
Stock issued for debt settlement at $0.10 per share		86,000			9			8,591		—			—			8,600
Stock issued for debt settlement at $0.16 per share		277,314			28			44,717		—			—			44,745
Stock issued for cash at $0.35 per share		871,572			87			304,963		—			—			305,050
Subscriptions receivable		—			—			—		(35,000	)		—			(35,000	)
Net loss		—			—			—		—			(447,411	)		(447,411	)
Balance at December 31, 2004		9,138,737			913			2,107,521		(35,000	)		(2,155,363	)		(81,929	)

9

									Deficit
									Accumulated
					Additional				During the
	Common Stock				Paid-in		Stock		Development
	Shares		Amount		Capital		Subscriptions		Stage			Total
Stock issued for cash at $0.35 per share		914,288		91		319,909		—		—			320,000
Stock issued for debt settlement at $0.10 per share		1,147,680		115		114,653		—		—			114,768
Stock issued for debt settlement at $0.50 per share		50,000		5		24,995		—		—			25,000
Subscriptions received		—		—		—		35,000		—			35,000
Net loss		—		—		—		—		(407,256	)		(407,256	)
Balance at December 31, 2005		11,250,705		1,124		2,567,078		—		(2,562,619	)		5,583
Stock issued for finance costs at $0.35 per share (Note 7)		150,000		15		52,485		—		—			52,500
Stock issued for consulting fees at $0.36 per share		100,000		10		35,990		—		—			36,000
Stock issued for consulting fees at $0.40 per share		176,000		18		70,382		—		—			70,400
Stock issued for finance costs At $0.45 per share (Note 7)		300,000		30		134,970		—		—			135,000
Net loss		—		—		—		—		(532,610	)		(532,610	)
Balance at December 31, 2006		11,976,705		1,197		2,860,905		—		(3,095,229	)		(233,127	)
Beneficial conversion feature on convertible debt		—		—		208,157		—		—			208,157
Stock issued for conversion of debt		1,097,361		110		219,362		—		—			219,472
Debt forgiveness - related party debt		—		—		16,000		—		—			16,000
Warrants Issued with Loans Payable		—		—		678,400		—		—			678,400
Net loss		—		—		—		—		(850,438	)		(850,438	)
Balance at December 31, 2007		13,074,066		1,307		3,982,824		—		(3,945,668	)		38,463
Net loss		—		—		—		—		(403,829	)		(403,829	)
Balance at December 31, 2008		13,074,066		1,307		3,982,824		—		(4,349,497	)		(365,366	)
Net loss		—		—		—		—		(27,493	)		(27,493	)
Balance at March 31, 2009		13,074,066		1,307		3,982,824		—		(4,376,990	)		(392,859	)

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

10

SIBLING ENTERTAINMENT GROUP HOLDINGS, INC.

(A Development Stage Company)

NOTES TO INTERIM FINANCIAL STATEMENTS

March 31, 2009

1 - Organization and Basis of Presentation

(a) Organization

Sibling Entertainment Group Holdings, Inc., formerly Sona Development Corp. (the “Company”) was incorporated as Houston Produce Corporation under the laws of the State of Texas on December 28, 1988. The Company was organized primarily for the purpose of importing fruits and vegetables from Latin America On December 28, 2002, the Company changed its name to Sona Development Corp. The Company is currently pursuing a potential merger with Sibling Entertainment Group, Inc. ("Sibling"), an entertainment development and a production company based in New York City, as described in Note 10. The Company is considered a development stage company in accordance with Statement of Financial Accounting Standards (SFAS) No. 7.

(b) Basis of Presentation and Going Concern

The accompanying unaudited financial statements have been prepared in accordance with (i) accounting principles generally accepted in the United State of America (“GAAP”) for interim financial information and (ii) the rules of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q. The financial statements do not include all of the information and footnote disclosures required by GAAP for complete financial statements. These statements should be read in conjunction with Sibling’s audited financial statements and notes thereto for the year ended December 31, 2008, included in Form 10-K filed with the SEC on April 15, 2009. In the opinion of management, the accompanying unaudited financial statements include all adjustments, primarily consisting of normal adjustments, necessary for the fair presentation of the balance sheet and results of operations for the interim period. The results of operations for the three months ended March 31, 2009 are not necessarily indicative of the results of operations to be expected for the full year ending December 31, 2009. The financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company has not generated any revenues or completed development of any commercially acceptable products or services to date and has incurred losses of $4,376,990 since inception, and further significant losses are expected to be incurred in the Company’s development stage. The Company will depend almost exclusively on outside capital through the issuance of common shares, and advances from related parties to finance ongoing operating losses. The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations.

On June 1, 2009, the Company has $2,555,000 of principal due on the Series AA debentures including approximately $412,128 of accrued interest and as of March 31, 2009 and additional accrued interest of $63,875 the remainder of the term of the debentures.  The collectability of outstanding notes receivable by related parties cannot be guaranteed.  These factors raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.

11

2 - Summary of Significant Accounting Policies

(a) Use of Estimates

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

(b) Income Taxes

The Company utilizes SFAS No. 109, “Accounting for Income Taxes", which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financials statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financials reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the period in which the difference are expected to affect taxable income.

(c) Financial Instruments

In accordance with the requirements of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, accounts payable, amounts due to related parties and short term loans payable approximate fair values due to the short-term maturity of the instruments.

(d) Stock-Based Compensation

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

12

Note 2 - Summary of Significant Accounting Policies - (d) Stock-Based Compensation continued

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

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force (“EITF”) in Issue No. 96-18. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.

(f) Loss per Share

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

13

3 - Related Party Receivable

In conjunction with a short-term financing, the amounts received were lent to a related party, Sibling Theatrical Inc. at an annual interest rate of 15% payable quarterly. As of March 31, 2009, the balance due was $2,954,116 including accrued interest income of $399,116.

4 - Due to Related Parties

Related party payables consist of the following:

	March 31, 2008		December 31, 2008
Due to a significant shareholder (a)	$	123,374	$	123,106
Unsecured payable to a shareholder with no specific terms and due on demand (b)		—		—
Due to an officer (c)		—		—
Due to a company with a director in common (d)		164,251	$	152,103
	$	287,625	$	275,209

The following represents related party transactions paid or accrued during the three months ended March 31, 2009 and 2008.

	2009		2008
Consulting fees paid or accrued to a significant shareholder (a)	$	10,500	$	10,500
Rent paid or accrued to a shareholder (b)		—		—
Consulting fees paid or accrued to a director (d)		—		—
	$	10,500	$	10,500

The above transactions are in the normal course of operation and are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

(a) At March 31, 2009, the amount of $123,374 was due to a significant shareholder for cash loans and interest, consulting fees and reimbursable expenses. As of March 31, 2009, the Company was indebted to this shareholder for cash loans of $21,600 which bear interest at a rate of 10% per annum and is due from the proceeds of the next financing arranged by the Company. At March 31, 2009, the Company had accrued $5,244of interest on the loans. The loans are unsecured and due on demand. If the loan is not paid in full from the proceeds of the Company’s next financing, the lender will also be entitled to a one-time late charge equal to 2% of the outstanding principal amount of the loan. Overdue payments will bear interest at 12% per annum until paid.

14

Note 4 - Due to Related Parties continued

At March 31, 2009, the Company was indebted $96,530 to this shareholder for consulting fees and reimbursable expenses. This additional debt bears no interest and has no set terms of repayment.

(b) At March 31, 2009, the amount of $164,251 was due to a company with a common director for loans, interest and reimbursable expenses. The Company was indebted to this related company for loans of $51,450 which bear interest at a rate of 10% per annum. At March 31, 2009, the Company had accrued $8,841 of interest on the loans. The loans are unsecured and due on demand. In addition, the Company owed $103,960 for reimbursable expenses, which bear no interest.

5 - Short-Term Notes Payable

During the period of May through August of 2007, the Company borrowed $2,555,000 from various individuals payable in six months from the date of borrowing at an annual interest rate of 13% through June 1, 2008, or at an annual interest rate of 15% if extended to June 1, 2009. In conjunction with this financing, the lenders received for each unit equal to $10,000, 10,000 stock purchase warrants to purchase 10,000 shares of common stock at $1.00/share and 10,000 stock purchase warrants to purchase 10,000 shares of common stock at $ 2.50/share. The warrants expire within five years of the loan. The value of these warrants using the Black-Sholes method was $678,400 and was recorded as a discount to the debt is amortized over the life of the debt. The fair value of the warrants were estimated using the following assumptions:

Expected volatility	-	61%
Expected dividends	-	0
Expected term	-	5 years
Risk-free rate	-	5.25%

If the Company undertakes an underwritten public offering of securities for a total subscription of $6,000,000, prior to the Maturity Date, in lieu of repayment of principal and interest on the Notes, at the Note holder’s option, the Note holder may acquire securities in the Qualified Offering in the amount of such principal and interest. 

6 - Income Taxes

The Company accounts for its income taxes in accordance with FASB No. 109, “Accounting for Income Taxes.” As of March 31, 2009, the Company had net operating loss carry forwards that may be available to reduce future years’ taxable income and will expire commencing in 2015. Availability of loss usage is subject to change of ownership limitations under Internal Revenue Code 382. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.

7 - Capital Stock

(a) Stock options

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

(b) Stock issuances

For the period January 1, 2009 though March 31, 2009, the Company did not issue any new shares of common stock.

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Note 8 - Supplemental Cash Flow Information

Actual amounts paid for interest and income taxes for the three months ended March 31, 2009 and 2008 are as follows:

	Three months ended March  31,
	2009		2008
Interest	$	—	$	3,575
Income taxes	$	—	$	—

9 - Investment

Proposed Merger with Idea One

The Company entered into a letter of intent on May 20, 2004 (as amended through November 2005), with Idea One, Inc., a private company involved in the development of battery cell technology,. The letter of intent did not culminate in a definitive agreement.

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

As of April 30, 2006, the Company agreed to convert the outstanding balance, including accrued interest, of $595,642, at $0.40 per share, to 1,489,106 common shares of Idea One, Inc., in full satisfaction of the loan receivable. The Idea One, Inc. shares were received in the second quarter of 2006. As of March 31, 2009, these shares are recorded at $1.

10 - Proposed Merger with Sibling

On February 9, 2007, the share holders of the Company approved an Agreement of Acquisition and Plan of Reorganization, as amended, to acquire four wholly owned subsidiaries: Sibling Theatricals, Inc., Sibling Pictures, Inc., Sibling Music Corp., and Sibling Properties, Inc. from Sibling Entertainment Group, Inc an entertainment development and production company based in New York City

Under the reorganization, the Company is to acquire each of Sibling's four wholly owned subsidiaries and three wholly owned subsidiaries of Sibling Pictures, Inc., all of which own and or control each of Sibling's respective divisions and operations of live-stage theatrical operations, music, independent feature films and theatrical real estate.

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

The closing of the Agreement of Acquisition and Plan of Reorganization remains subject to the applicable registration requirements of the Securities Exchange Act of 1934, as amended. The Company intends to close the acquisition of the Sibling Entertainment Group, Inc. subsidiaries as soon as is practicable.

On August 13, 2007, the Agreement as amended anticipates a share exchange pursuant to which the Company will issue up to 37,208,900 shares of common stock for all the issued and outstanding shares of Sibling’s subsidiaries on the closing date and will issue up to 571,340 additional shares reserved for convertible debentures and consulting agreements. The Company will further deliver 26,657,424 purchase warrants with terms ranging from 3 to 5 years at exercise prices ranging from $0.275 a share to $1.00 per share to certain shareholders of Sibling as part of the consideration for the transaction.

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CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risk, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “would”, “expect”,” plan”,” anticipate”, “believer”, “estimate”, “continue”, or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other Securities and Exchange Commission filings. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report.

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Plan of Operation

The Company’s plan of operation for the coming year, as discussed above, is to close the definitive agreement with Sibling Entertainment Group Holdings, Inc., or, in the event that a definitive agreement is not closed, to identify and acquire an alternative business opportunity. The Company does not plan to limit its options to any particular industry, but will evaluate each alternative opportunity on its merits.

On February 9, 2007, we held a special meeting of shareholders to approve an Agreement of Acquisition and Plan of Reorganization, as amended, to acquire the following subsidiaries of Sibling:

· Sibling Theatricals Inc.

· Sibling Pictures, Inc. (including three subsidiaries)

· Sibling Music Corp.

· Sibling Properties, Inc.

In addition, the articles of incorporation were to be amended to change the name of the Company to “Sibling Entertainment Group Holdings, Inc.” and to elect four directors to join the current Board of Directors.

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

The closing of the Agreement of Acquisition and Plan of Reorganization remains subject to the applicable registration requirements of the Securities Exchange Act of 1934, as amended.

Subsequent to our February 9, 2007 shareholders meeting, the SEC has advised us that we are required to file a Form S-4 registration statement with the SEC and have such S-4 registration statement declared effective by the SEC to close our transaction with Sibling Entertainment Group, Inc. We filed the Form S-4 registration statement on August 13, 2007.   The Form S-4 is still under review by the SEC and may be deemed abandoned after one year and a new Form S-4 may be required to be filed before further review by the SEC.  Based on the requirement to file an S-4 registration statement, we may change the structure of the transaction with Sibling Entertainment Group, Inc.

On May 14, 2007, the Company changed its name to Sibling Entertainment Group Holdings, Inc.

Specifically, upon the closing of the Agreement, we plan to continue Sibling’s business as follows:

· Purchase and exploitation of literary rights as well as investments in the production of both film and live-stage events including the following:

· “WHITE NOISE - A Cautionary Tale”  A theatrical musical developed and produced with Holly Way & Company and others through White Noise Productions Development LLC and White Noise Development LP to open in New Orleans with Le Petit Theatre Du Vieuz Carre during July 2009.   After a limited run, it is the intention to transfer the production to a Broadway stage in New York City.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION – Continued

· The management of Adrenaline MMA Inc. (“Adrenaline”) for the production and promotion of Mixed Martial Arts (“MMA”) Events. Adrenaline Global headed by Monte Cox intends to produce several fighting events over the next several years.

· HATS! - A Musical for the Rest of Your Life” (“HATS!”) is based upon the women and spirit of Red Hat Society, Inc. (“RHS”). The musical premiered in Denver, Colorado at the New Denver Civic Theatre on October 7, 2006 and ran through December 31, 2006 and subsequently had two productions.: Harrah’s New Orleans Hotel & Casino (New Orleans) from January 25, 2007 to April 21, 2007; and the Royal George Theatre in Chicago, Illinois from April 20, 2007 to July 29, 2007. 

· An exclusive license with Samuel French, Inc. to manage and license all future production of HATS!

· Optimize revenue by licensing the HATS! trademarks and by selling HATS! Cast Album through Sibling Music, Inc.

· Development of a new musical, subject to negotiations, with the world-renowned comedian and entertainer Jerry Lewis, based upon his book “DEAN & ME,” a story of his life with Dean Martin.

· The continued distribution and selling of the HATS! cast album through retail, theatrical venue and internet outlets and the production of additional cast albums of other future productions.

· Strategic investments in third party theatrical productions.

· Development of an independent film production business by leveraging the acquisition of SPI and its subsidiaries Sibling Pictures Fund, LLC.  

· Growing our management and consulting business with regional not-for-profit and professional theatre companies

· Ongoing consulting to the management of the Denver Civic Theatre, Inc.  (a not-for-profit organization, "DCT") for which our officers and directors serve as members of its board of directors.

· Formation of alliances with companies that possess rights or agreements desired by us including an ongoing relationship with Sibling Entertainment, Inc.

Our plan to coordinate the efforts between film, theatre, real estate, management and music publishing follow the natural synergies that exist between the various industries and their components. It is sometimes more difficult to develop a new theatrical project without securing the venue, and owning sufficient theatres provides the ability for a production company combined with a theatre owner to assure a production access needed to advance a commercial project. It is planned that when we do have our own theatrical production to present in our own theaters, the production will be able to rent our venues creating a source of sustaining income.

As both a theatre owner/manager and presenter of original works, the long-term income derived from the licensing of literary rights may benefit us in two ways. Many literary works developed for the stage may also have potential as a feature film.  Access and acquisition cost barriers may be reduced with a common producer of both film and theatre. As we continue to develop a management company for both real estate and theatrical productions, we will be able to secure additional revenue sources common to the industry.

Another natural synergy between the theatre and movie industries includes music publishing originated or released in association with a musical or a movie. We continue to seek partners and potential companies for acquisition within the recording and music publishing industry.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - Continued

Our plan of operations is based on the assumptions that the Form S-4 will be declared effective by the SEC and that the Agreement of Acquisition and Plan of Reorganization with Sibling Entertainment Group, Inc. will close.  There can be no guarantee that these events will actually occur.

Results of Operations

For the three months ended March 31, 2009, the Company’s operations were limited to satisfying continuous public disclosure requirements, seeking our alternative business opportunities, and entering into an agreement with Sibling.

The Company has not generated revenues since inception and due to the nature of our search for a suitable business opportunity, cannot determine whether we will ever generate revenue from operations and may continue at a loss.

Net Loss

For the period from inception to March 31, 2009, the Company recorded a net loss of $4,376,990. The Company’s net loss is primarily attributable to general and administrative expenses and the write down of promissory notes. The general and administrative expenses include incorporation costs, offering costs, accounting costs, and costs associated with the preparation of disclosure documentation in connection with registration pursuant to the Exchange Act of 1934.

We expect to continue to operate at a loss through fiscal 2009 and cannot determine whether we will ever generate revenues from operations.

Capital Expenditures

The Company expended no amounts on capital expenditures for the period from December 28, 1988 (inception) to March 31, 2009.

Liquidity and Capital Resources

The Company is in the development stage and, since inception, has experienced significant changes in liquidity, capital resources and shareholders’ equity. The Company had current and total assets of $1,604 and $2,955,721 respectively as of March 31, 2009. These assets consist of an escrow with an attorney of $1,000, a related party receivable of $ 2,954,116, and investments of $1. Net stockholders equity in the Company was $ (392,859) at March 31, 2009.

The Company borrowed an aggregate of $51,450 as of March 31, 2009 from Sibling Entertainment Group, Inc. (“SEGI”) on several convertible promissory notes. The convertible promissory notes, as amended, bore interest of 10% per annum payable upon demand.

Our plan is to coordinate the efforts between film theatre, real estate, management and publishing following the natural synergies that exist between the various industries and their components. It is sometimes more difficult to develop a new theatrical project without securing the venue and owning sufficient theaters provide the ability for a production company, combined with a theatre owner, to assure a production the access needed to advance a commercial project.  When we have our own theatrical production to present in our theatres, the production will be able to rent our venues creating a source of sustaining income.

Should the anticipated acquisition of Sibling Entertainment Group, Inc. be abandoned, the Company will most likely have to obtain loans from shareholders or pursue alternative private equity placements in order to maintain its continuous disclosure requirements until such time as an alternative acquisition or merger candidate is identified. The Company anticipates that an incremental increase in legal, accounting and other costs will be associated with the business combination with SEGI.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - Continued

The Company’s current assets are insufficient to conduct its plan of operation over the next twelve (12) months whether or not the acquisition of Sibling Entertainment Group, Inc. is completed. No assurances can be given that funding is available or would be available to the Company on acceptable terms. Our inability to obtain funding would have a material adverse affect on our plan of operation.

The corporate offices continue to be hosted in the SEGI offices in New York, New York. This was done in 2007 to reduce Company general and administrative expenses.

The Company has no current plans for the purchase or sale of any plant or equipment.

There are no employees at the Company.  The Company has no current plans to make any changes in the number of employees.

Critical Accounting Policies

In Note 2 to the attached interim financial statements for the periods ended March 31, 2009 and 2008 included in this Form 10-Q, we discuss those accounting policies that are considered significant in determining the results of operations and our financial position. We believe that the accounting principles utilized by us conform to accounting principles generally accepted in the United States of America.

a) Use of Estimates

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

(b) Income Taxes

The Company follows the liability method of accounting for income taxes. Under this method, deferred income tax assets and liabilities are recognized for the estimated tax consequences attributable to differences between the financial statement carrying values and their respective income tax basis (temporary differences). The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(c) Financial Instruments

In accordance with the requirements of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The carrying values of cash, promissory notes, accounts payable and amounts due to related parties approximate fair values due to the short-term maturity of the instruments.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - Continued

Going Concern

The financial statements have been prepared on the basis of a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any revenues or completed development of any commercially acceptable products or services to date, has a working capital deficiency of $3,346,976 at March 31, 2009 and has incurred losses of $4,376,990 since inception, and further significant losses are expected to be incurred in the Company’s development stage. The Company will depend almost exclusively on outside capital through the issuance of common shares, and advances from related parties to finance ongoing operating losses. The ability of the Company to continue as a going concern is dependent on raising additional capital and ultimately on generating future profitable operations. There can be no assurance that the Company will be able to raise the necessary funds when needed to finance its ongoing costs. These factors raise substantial doubt about the ability of the Company to continue as a going concern. The accompanying financial statements do not include any adjustments relative to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty. 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is subject to certain market risks, including changes in interest rates and currency exchange rates.  The Company does not undertake any specific actions to limit those exposures.

ITEM 4T. EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

a)     Evaluation of disclosure controls and procedures.

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the interim or annual financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

The Company’s management did not assess the effectiveness of the Company’s internal control over financial reporting as of March 31, 2009 in accordance with a recognized framework, due to its lack of resources. However, we have identified what we believe to be material weaknesses.

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.

The material weaknesses identified were (i) lack of segregation of duties, (ii) lack of sufficient resources with SEC, generally accepted accounting principals (GAAP) and tax accounting expertise; and (iii) inadequate security over information technology.

Because of these material weaknesses, management concluded that the Company did not maintain effective internal control over financial reporting as of March 31, 2009, This report does not include an attestation report of our registered public accounting firm regarding our internal controls over financial reporting. The disclosure contained under this Item 8A was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the disclosure under this Item 8A in this annual report.

 (b)     Changes in internal controls over financial reporting.

 The Company is in the process of correcting the internal control deficiencies through ongoing remediation efforts. However, these efforts individually and in the aggregate may not be sufficient to fully eliminate the weakness that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

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PART II

ITEM 1. LEGAL PROCEEDINGS

On December 29, 2008, Highlands Capital, Inc., a Colorado corporation, brought an action against Sibling Entertainment Group Holdings, Inc., Sibling Entertainment Group, Inc., Sibling Theatricals, Inc. and Mitchell Maxwell in the District Court, Denver County of Colorado, Case No. 2009CV537; Division: 1.  The Company has engaged Evans & McFarland, LLC in Denver, CO to act as litigation counsel for this matter.  The lawsuit involves issues related to Highlands Capital’s consulting services agreement with one or more of the Defendants and Highland Capital’s participation under the Company’s Series AA debentures and other loans and investments with the other defendants.  The Company obtained dismissal of several of the Plaintiff’s claims, leaving only a breach of contract claim pending against the Company.  The Company has since filed an answer and asserted various counterclaims against Highland Capital.  The Company and the other defendants will vigorously defend against this action.

On April 13, 2009, the Company was notified by counsel that Agnieska Golabek and Slawomir Wrobel have brought an action against Sibling Entertainment Group Holdings, Inc., Theatricals, Inc., Richfield Sports, LLC,  Worldwide MMA LLC, James Cardwell, Mitchell Maxwell and Richard Burnstein in their individual and corporate capacities in the District Court, Denver County of Colorado, Filing ID. 24570904 Division: 2.  To the best of the Company’s knowledge, the Complaint has not yet been served on any Defendants.  The lawsuit involves a loan, investment, and/or acquisition of an interest in Sibling Theatricals, Inc.’s mixed martial arts venture.  The plaintiffs in this action have no contractual or other relationship with the Company, and appear to have no grounds for bringing a legal action against the Company.  If served, the Company will most likely seek an immediate dismissal of the action against it.  The Company and other defendants are reviewing the complaint in more detail, and will vigorously defend against this action.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS ON SENIOR SECURITIES

During the period of May through August of 2007, the Company borrowed $2,555,000 from various individuals payable on June 1, 2008 (the “Original Maturity Date”) at an annual interest rate of 13% (the “Notes”). The Notes shall be extended an additional year; and bear interest at a rate of 15% per annum and payable quarterly.  The Company does not anticipate a new offering of debt or equity securities, or securities convertible into debt or equity securities prior to the Maturity Date.    As of May 20, 2009, $412,128 of accrued interest is currently past due.

ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits required to be attached by Item 601 of Regulation S-B are listed in the Index to Exhibits on page 26 this Form 10-Q, and are incorporated herein by this reference.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, hereunto duly authorized, this 20th day of May 2009.

Sibling Entertainment Group Holdings, Inc.

May 20, 2009

/s/ Mitchell Maxwell

Mitchell Maxwell

Chief Executive Officer

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INDEX TO EXHIBITS

Exhibit No.	Page No.	Description
31.1	26	Certification of the Chief Executive Officer pursuant to Rule 13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	27	Certification of the Chief financial Offer pursuant to Rule 13aq-14 of the Securities and Exchange Act of 1934 as amended as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	28	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	29	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Incorporated from prior filings made with the Securities and Exchange Commission.

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