Restatement

9 Months Ended

Sep. 30, 2011

Note 11 Restatement

During April 2011, the Company discovered material errors associated with the financial statements issued for the nine months ended September 30, 2010.

The Company identified a material Lease License Agreement between the Company and an entity controlled by an officer of the Company. The Lease License Agreement provided for license payment of $0.50 per unit sold subject to a minimum monthly licensing fee of $2,750. The Company did not record the minimum monthly accrual.

The Company adjusted previously issued financial statements to reflect the following in connection with the restatement:

Consolidated Balance Sheet as of September 30, 2010:	As Restated			Adjustment			As Previously Reported

Total Assets	$	1,137,884		$	-		$	1,137,884

Current Liabilities	$	680.868		$	642		$	680,226
Total Shareholders’ Equity	$	457,016		$	(642	)	$	457,658
Total Liabilities and Shareholders’ Equity	$	1,137,884		$	-		$	1,137,884

Consolidated Statement of Operations for the Nine Months Ended September 30, 2010:

Total Revenues	$	341,295		$	-		$	341,295
Cost of Sales	$	(111,339	)	$	(24,750	)	$	(86,589	)
Gross Profit	$	229,956		$	(24,750	)	$	254,706
Total Operating Expenses	$	(885,260	)	$	-		$	(885,260	)
Total Other Income (Expenses)	$	2,343,918		$	158,125		$	2,185,793
Net Loss	$	(1,688,614	)	$	133,375		$	(1,555,239	)

The Company recorded an opening balance adjustment to accumulated deficit in the amount of $133,375 as of December 31, 2009. The restatement had no effect on earnings per share or cash.

BRAINY BRANDS COMPANY, INC. 10-Q