UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 20-F



|[   ] | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934                                                                          
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | OR                                                                                                                                                                      
|[X]   | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended July 31, 2006                                           
|      | OR                                                                                                                                                                      
|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _____________________ to ______________________
|      | OR                                                                                                                                                                      
|[   ] | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Date of event requiring this shell company report:                         
|      |                                                                                                                                                                         



Commission file number 000-50339



Sprout Development Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant's name into English)



Alberta, Canada

(Jurisdiction of incorporation or organization)



#21 Country Hills Gardens NW

Calgary, Alberta T3K 5G1

(Address of principal executive offices)



Securities registered or to be registered pursuant to Section 12(b) of the Act.



|Title of each class

None |  | Name of each exchange on which registered

None
|------------------------- |  | -----------------------------------------------



Securities registered or to be registered pursuant to Section 12(g) of the Act.

Class A Common Shares

|(Title of Class)
|----------------



Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

|(Title of Class)
|----------------











Indicate the number of outstanding shares of each of the issuer's capital or common stock as of the close of the period covered by the annual report:



18,000,000 shares of Class A Common stock as at July 31, 2006.



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

[   ]Yes  [X] No



If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

[   ]Yes  [X] No



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 is a large accelerated filer, an accelerated filers, or a non-accelerated filer.  See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.  (Check one):



|Large accelerated filer     [   ] | Accelerated filer     [   ] | Non-accelerated filer    [X]
|--------------------------------- | --------------------------- | ----------------------------



Indicate by check mark which financial statement item the registrant has elected to follow.

[   ] Item 17  [X] Item 18



If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                       [ X ]Yes  [  ] No



________________________________



(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)



Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

[  ]Yes  [  ] No













TABLE OF CONTENTS





PART I

1



Financial Information and Accounting Principles

1



Forward-Looking Statements

1



Exchange Rates

1



Item 1.

Identity of Directors, Senior Management and Advisors

2



Item 2.

Offer Statistics and Expected Timetable

2



Item 3.

Key Information

2



Item 4.

Information on the Company

7



Item 5.

Operating and Financial Review and Prospects

10



Item 6.

Directors, Senior Management and Employees

13



Item 7.

Major Shareholders and Related Party Transactions

15



Item 8.

Financial Information

15



Item 9.

The Offering and Listing

16



Item 10.

Additional Information

16



Item 11.

Quantitative and Qualitative Disclosures About Market Risk

20



Item 12.

Description of Securities Other than Equity Securities

20



PART II

20



Item 13.

Defaults, Dividend Arrearages and Delinquencies

20



Item 14.

Material Modifications to the Rights of Security Holders and Use of Proceeds.

20



Item 15.

Controls and Procedures

21



Item 16A. Audit Committee Financial Expert

21



Item 16B. Code of Ethics

21



Item 16C.  Principal Accountant Fees and Services

21



Item 16D. Exemptions from the Listing Standards for Audit Committees

21



Item 16E  Purchases of Equity Securities by the Issuer and Affiliated Purchasers

22



PART III

22



Item 17.

Financial Statements

22



Item 18.

Financial Statements

22



Item 19.

Exhibits

22



Signatures

23











PART I



Financial Information and Accounting Principles



The financial statements and summaries of financial information contained in this document are reported in United States dollars ("$") unless otherwise stated.  All such financial statements have been prepared in accordance with United States generally accepted accounting principles.



The consolidated financial statements of our company have been audited by Bateman & Co., Inc., P.C., registered public accounting firm  for the year ended July 31, 2006.



Forward-Looking Statements



Except for the statements of historical fact contained herein, some information presented in this annual report constitutes forward-looking statements.  When used in this annual report, the words "estimate", "project", "believe", "anticipate", "intend", "expect", "predict", "may", "should", the negative thereof or other variations thereon or comparable terminology are intended to identify forward-looking statements.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of our company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include those discussed in the section entitled "Risk Factors".  Although we have attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause actual results not to be as anticipated, estimated or intended.  There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.  Accordingly, prospective investors should not place undue reliance on forward-looking statements.  The forward-looking statements in this annual report speak only as to the date hereof.  We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.



As used in this annual report, the terms "we", "us" and "our" mean Sprout Development Inc., unless otherwise indicated.



Exchange Rates



All of the transactions undertaken by the Company for fiscal 2006 were in USD.  Certain of the transactions for fiscal 2005 were in Canadian dollar.  Therefore, since this annual report contains conversions of certain amounts in Canadian dollars into United States dollars based upon the exchange rate in effect at the end of the month or of the fiscal year to which the amount relates, or the exchange rate on the date specified. For such purposes, the exchange rate means the noon buying rate for United States dollars from the Bank of Canada. These translations should not be construed as representations that the Canadian dollar amounts actually represent such U.S. dollar amounts or that Canadian dollars could be converted into U.S. dollars at the rate indicated or at any other rate. The noon buying rate at the end of each of the two years ended July 31, the average of the noon buying rates on the last day of each month during each of such fiscal years and the high and low noon buying rate for each of such fiscal year's were as follows:



|                   | July 31
|------------------ | -------
|                   |        
|At end of period   |        
|Average for period |        
|High for period    |        
|Low for period     |        

1



Following is a table of the noon buying rates on the last day of each month for the last three months ended December 31, 2007:



|                   | October | November | December
|------------------ | ------- | -------- | --------
|At end of period   | 0.8907  | 0.8760   | 0.8581  
|Average for period | 0.8865  | 0.8801   | 0.8673  
|High for period    | 0.8966  | 0.8868   | 0.8759  
|Low for period     | 0.8783  | 0.8715   | 0.8581  



The noon buying rate as of January 15, 2007 was 1.1681.





ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS



Not Applicable



ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE



Not Applicable



ITEM 3.

KEY INFORMATION



SELECTED FINANCIAL DATA



The following tables summarize selected financial data for our Company prepared in accordance with United States generally accepted accounting principles for the years ended July 31, 2006 and 2005.  The information in the table was extracted from the financial statements and related notes included in this annual report and the reports that were previously filed and should be read in conjunction with such financial statements.



|                                            | For the Years Ended July 31
(US dollars, except per share amounts)
|------------------------------------------- | ------------------------------------------------------------------
|                                            | 2006                                                              
|Operating Revenues                          | Nil                                                               
|Income (loss) from Operations               | $(24,649)                                                         
|Net Income (loss)                           | $(23,666)                                                         
|Net Income (loss) from Operations per share | 0.00                                                              



|                           | As at July 31
(US dollars, except number of common shares issued and outstanding)
|-------------------------- | ---------------------------------------------------------------------------------
|                           | 2006                                                                             
|Total Assets               | $52,836                                                                          
|Total Stockholders' Equity | $52,836                                                                          
|Capital Stock              | $80,010                                                                          
|Number of Shares           | 18,000,000                                                                       



CAPITALIZATION AND INDEBTEDNESS



Not Applicable



REASONS FOR THE OFFER AND USE OF PROCEEDS



Not Applicable



2



RISK FACTORS



The information included in this annual report includes, or is based upon, estimates, projections or other forward-looking statements.  Such forward-looking statements include any projections or estimates made by us and our management in connection with our business operations.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes significantly, from any estimates, predictions, projections, assumptions or other future performance suggested herein.



Such estimates, projections or other forward-looking statements involve various risks and uncertainties as outlined below.  We caution the reader that important factors in some cases have affected and could affect actual results in the future, and cause actual results to differ from the results expressed in any such estimates, projections or other forward looking statements.  Prospective investors should consider carefully the risk factors set out below.



Risks Related to Business Issues



(1) Our operations to date have been limited to establishing the Company, its business plan, and conducting an informal market survey that was primarily based on Internet searches. We have generated no revenues to date.



Sprout Development is very small and only recently has it begun exploring its business opportunities in the divorce-related software industry. Since we are just starting our proposed operations, any investment in our company is at risk that our proposed new business may never be able to derive any revenues, make a profit or, if we do, it may take a very long time to do so.



(2) Our plan of operations  may not generate sufficient revenues and profits to cover expected expenditures in the foreseeable future. Additional funds may be needed and may not be available under reasonable terms, or at all.



As of the date of this filing, Sprout Development has received no revenues from its proposed business and none are expected in the next 12 months. Without additional capital, either from profits generated through our business, or from new equity invested in Sprout Development, the survival of Sprout Development may be at risk. As at July 31, 2006 we had stockholder's equity of $52,836 and working capital of $40,826. Since incorporation on July 19, 2004, our shareholder, Puroil, has been our only source of capital. We estimate that we have sufficient funds for supporting twelve months of current operations. If we are not able to generate profits from the operations of our business, we may need to raise additional capital. There is no assurance that we will be able to raise sufficient capital to meet our continuing needs, under terms we would consider to be acceptable. If we are unable to obtain additional financing as may be required in the future, we may not be able to implement our business and growth strategies, respond to changing business or economic conditions, withstand adverse operating results, consummate possible acquisitions or compete effectively in our marketplace. There can be absolutely no assurance that we will be successful in achieving sustained profitability or any of our financial objectives, for that matter.



(3) The potential market for our services may not develop as we expect and/or we may not be able to achieve the level of revenues we require in order reach, and/or sustain, profitability or to even continue to operate.



We have only informally researched the market to get an indication of the potential of our targeted market and management believes that the possible results of how we may be able to participate are unpredictable at this time. As a result of this unpredictability, our estimation of the potential market could be entirely wrong and, as a result, our proposed business may never achieve any sales or profits and may fail entirely.



3



(4) Our informal market study may prove incorrect about the market for our software and/or our ability to participate in this market, as we currently expect.



The evaluation of the market for the software has been done solely by our officers and directors. No independent analysis or study of either the market for the software or our ability to compete in such market has been done by any independent experts engaged by Sprout Development. The investor and/or shareholder is at risk if our studies have overestimated the market, underestimated the difficulty of our being able to participate in this market and to generate a profit, or both.



(5) We are attempting to create a commercially viable product based on a yet undeveloped software concept which could fail commercially and cause our company to fail.



The software concept which is licensed by our company is not accompanied by any developed software and all software related to this concept will need to be developed by the company prior to offering a commercial product.



Since the software is not yet developed, and does not yet even exist in any pre-developed form, it could be that the software is never developed and that the company fails to create a commercially viable product, or any product at all. If this occurs, the company would likely fail and you would lose your entire investment.



(6) We have not conducted any marketing tests or studies on our software concept and thus the concept could be a commercial failure.



There have been no market studies performed that could assist in determination of the desirability of the software concept and the whole concept could prove undesirable, unmarketable, and not capable of supporting a profitable business. Management is aware of other companies offering similar software to the Companys conceptual software but because those companies are private, the Company has no knowledge of revenues or profitability.



Because the concept is not developed or tested, and no conclusive market studies have been performed, the company could find that even in the case of developed software, there is insufficient demand, or no demand at all, for its software, in which case the company would likely fail and you would lose your entire investment.



(7) The license that we have acquired related to our software concept is non-exclusive and has not been patented and thus we might be susceptible to competition from any other licensees or the grantor of our license.



The license that has been granted to our company by our president, Mr. Cozac, is non-exclusive and not patented and Mr. Cozac could offer other licenses to other parties.



Our company has no right to exclude others from engaging in competitive activities. We have no patents upon which to rely and no non-competition agreement with Mr. Cozac. Therefore, Mr. Cozac could become involved with other companies that could compete with our company, which competition could result in the failure of our company and the loss of your entire investment.



(8) It is possible that disputes could arise between users and Sprout Development that could result in Sprout Development being named in litigation, and we have no insurance to cover this potential liability.



Sprout Development presently has no liability insurance coverage for such contingencies and we do not anticipate acquiring any in the future. If we are involved in any litigation resulting from our software licensing or acquisition activities, it is possible that we could be forced to expend substantial sums on legal fees even if there is no basis for naming Sprout Development as a defendant and even if we ultimately win in any such litigation. Any adverse decision in any litigation may result a financial judgment against us and, therefore, adversely affect our company, its business and operations, and our investors and shareholders.



4



(9) Our company has no history of earnings and uncertain future earnings.



To date, the Company has not engaged in any business or operations and has generated no revenues. There is no assurance it will generate any revenues from its proposed operations, or if it does, that such revenues, if any, will be sufficient to sustain operations.



(10) The uncertainty of additional capital places us at risk for continued operations and may result in shareholder dilution.



Sprout Development may not be able to raise funds as and when it may require them or may not be able to raise funds on suitable terms. Failure to obtain such financing as and when needed could delay or prevent our proposed business operations, which could adversely affect our financial condition and results of operations. If additional capital is raised through the sale of additional equity or convertible securities, dilution to the Company's stockholders is likely to occur.



(11) Our cash flow could be lower than anticipated due to slower than expected customer acceptance.



The Company has generated no cash flow and there is no assurance its proposed products or services will be accepted by anticipated customers, or that any such customers will accept the products and/or services at a time and in a manner that will produce revenues for the Company as and when required for operations.



(12) Protection of our intellectual property is limited.



We have not applied for protection of our business name as a service mark and are relying solely on common law intellectual property rights for protection. There is no assurance that we will be able to successfully defend our common law service mark if contested or infringed upon



(13) Our competitors are more well funded and more organized and further developed than we are and these competitive advantages may result in our inability to compete in our proposed market.



Our potential competitors may have significant competitive advantages, including greater market presence, name recognition and financial, technological and personnel resources, superior engineering and marketing capabilities, and significantly larger installed customer bases. As a result, some of our potential competitors may be able to raise capital at a lower cost than we can, and they may be able to adapt more swiftly to new or emerging technologies and changes in customer requirements, take advantage of acquisition and other opportunities more readily, and devote greater resources to the development, marketing and sale of products and services than we can. Also, our potential competitors' greater brand name recognition may require us to price our services at lower levels in order to win business. Our potential competitors' financial advantages may give them the ability to reduce their prices for an extended period of time if they so choose and this may have the effect of causing our business to fail.



Risks Related to Management Issues



(1) We are completely dependant on the skills, talents and experience of our management for the development of our business, which may not be adequate to ensure our future success, and may result in the failure of the business.



Because our management has limited direct experience in Web-based software within which we are planning to operate, investor funds may be at high risk of loss due to the inexperience of the officers and directors who will be making business decisions. This lack of experience may result in their inability to run a successful business.



(2) Sprout Development is completely dependent on its management for the product development and marketing and acquisition activities, if any.



Our current management comprise the only personnel available to develop and implement our proposed business and it is probable that we would not have sufficient capital to hire personnel to continue this work should

5



management for any reason cease or be unable to continue to work. Without personnel to supplement our officer and director management, we will not be able to continue to operate.



(3) New Investors and shareholders have little say in the management of our business, which could make it difficult for them to make changes in operations or management.



Our current officers, directors and major shareholders directly and indirectly own 77.7% of our common stock and will be in a position to continue to control Sprout Development. Such close control may be risky to the investor because our operation is dependent on a very few people who could lack ability in the pursuit of our operations.



(4) Our Management's potential conflict of interest could have a negative effect on our company's operations or business opportunities.



Members of our management team are not employed on a full-time or exclusive basis and are active in other businesses. Management is currently not in any conflicting situations.  Situations could arise, however, in which members of management enter into other businesses that draw time and attention away from our business and this may have a negative effect on us, possibly resulting in a failure of our business.



Risk Factors Related to Financial Issues



(1) No cash dividends are anticipated in the foreseeable future.



Sprout Development has not yet commenced operations, has not realized any income and has not, since incorporation, paid dividends. Furthermore, Sprout Development does not anticipate that it will pay dividends in the foreseeable future and thus the investor or shareholder will only profit by the increase in value of his shares. Our profits, if any, during the next several years are expected to be used to fund our ongoing operations and future business and market development.



(2) An investment in our stock may be illiquid.



Our stock is quoted for trading on the OTC Bulletin Board under the symbol SODVF but trading volume is very low.  This means that an investment in our stock should be regarded by an investor as being illiquid.



(3) The Company's Stock Price May Be Volatile.



In recent years and months, the U.S. stock market has experienced significant price and volume fluctuations. These fluctuations, which are often unrelated to the operating performances of specific companies, have had a substantial effect on the market price of stocks, particularly stocks like ours. It is also possible that the Company's operating results will not meet the expectations of its public market analysts, if any, which could have an adverse effect on the trading price of its common shares, assuming the stock ever trades, of which there is no assurance. Accordingly, the market price, if any, for the Company's common stock may fluctuate substantially.



(4) Our stock, will be low priced and the "penny stock" rules could make it difficult for your shares to be traded.



The Securities and Exchange Commission has adopted regulations that generally define a "penny stock" to be any equity security other than a security excluded from such definition by Rule 3a51-1.



Sprouts common stock is regarded as a penny stock, since its shares are not listed on a national stock exchange or quoted on the NASDAQ Market within the United States and its shares are less than $5.00 per share. The penny stock rules require a broker-dealer to deliver a standardized risk disclosure document prepared by the SEC, to provide the customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, monthly account statements showing the market value of each penny stock held in the customer's account, and to make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.  To the extent these requirements may be applicable, they will reduce the level of trading activity in the

6



secondary market for the common shares and may severely and adversely affect the ability of broker-dealers to sell the common shares.



(5) NASD sales practice requirements may also limit a stockholder's ability to buy and sell our stock.



In addition to the "penny stock" rules described above, the National Association of Securities Dealers (NASD) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information.  Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers.  The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.



(6) Potential Anti-Takeover Effect of Authorized Preferred Stock.



Sprout Development is authorized to issue 5,000,000 shares of no par value preferred stock with the rights, preferences, privileges and restrictions thereof to be determined by our board of directors. Preferred stock can thus be issued without the vote of the holders of our common stock. Rights could be granted to the holders of preferred stock that could reduce the attractiveness of Sprout Development as a potential takeover target, make the removal of management more difficult, or adversely impact the rights of holders of common stock. No preferred stock is currently outstanding, and we have no present plans for the issuance of any shares of preferred stock.





ITEM 4.

INFORMATION ON THE COMPANY



HISTORY AND DEVELOPMENT OF THE COMPANY



Sprout Development was incorporated in the Province of Alberta on July 19, 2004 with the intention of selling access to software that delivers a web enabled, collaborative approach to child custody communications for divorced parents to foster a non-confrontational environment.



The following narrative is the opinion of Sprout Management, which opinion is based solely on internet-based searches and reviews of web sites related to collaboration software, divorce, and child time management.  When a web site is identified, and/or an excerpt from a website is quoted, that website is identified solely to provide the reader with source material location. Sprout has no connection with any of the web sites reviewed or quoted.



What is Collaboration Software?



Collaborative software, also known as groupware, is software that integrates work on a single project by several concurrent users at separated workstations. For example, calendaring becomes more useful when more people are connected to the same electronic calendar and choose to keep their individual calendars up-to-date. An extension of groupware is collaborative development, software that allows several concurrent users to create and manage information in a website.

Groupware is sometimes divided into three categories depending on the level of collaboration. They are communication tools, conferencing tools, and collaborative management tools.

Electronic communication tools send messages, files, data, or documents between people and hence facilitate the sharing of information. Examples include:

•

e-mail

•

faxing

•

voice mail

7



•

Web publishing

Electronic conferencing tools also facilitate the sharing of information, but in a more interactive way. Examples include:

•

data conferencing - networked PCs share a common whiteboard that each user can modify

•

voice conferencing - telephones allow users to interact

•

video conferencing (and audio conferencing) - networked PCs share video or audio signals

•

discussion forums - a virtual discussion platform to facilitate and manage online text messages

•

chat rooms - a virtual discussion platform to facilitate and manage real-time text messages electronic meeting systems (EMS) - a conferencing system build into a room. The special purpose room will usually contain a large screen projector interlinked with numerous PCs.

Collaborative management tools facilitate and manage group activities. Examples include:

•

electronic calendars (also called time management software) - schedule events and automatically notify and remind group members

•

project management systems - schedule, track, and chart the steps in a project as it is being completed

•

workflow systems - collaborative management of tasks and documents within a knowledge-based business process

•

knowledge management systems - collect, organize, manage, and share various forms of information

•

Collaborative software can be either web based or desktop systems.

Large corporations typically have their own private systems called Intranets and Extranets, but small businesses and individuals can also benefit from similar systems called hosted services. Whatever the tool or the application of it, years of use have shown collaboration software to be extremely effective at streamlining and improving interactions between people.



How is collaboration software relevant to Sprout?

It is managements belief that collaboration software may help keep children from feeling trapped between the two people they love the most. Management also believes that whether parents are married, separated or divorced, children do not enjoy being in the middle. Thus, one of the most important things parents can do to protect their children is to communicate directly with one another instead of using their children as messengers.  Sprout believes that this is where the real value of collaboration software can be seen. Instead of exposing children to potential arguments where parents say things they dont mean and later regret, messages can be composed in a non-hostile setting and pondered before the submit button is pressed, all outside the earshot of their children. And by addressing issues as they arise rather than letting them pile up, parents can help circumvent heated discussions caused by having too many topics to discuss during a limited time period.

Like anything, collaboration software can be used as a weapon by divorced parents if they choose not to put their children first. But by using the software to plan events ahead of time and to communicate about parenting responsibilities, the chance for hostile interactions can be reduced, parents can be better organized, and children can be kept out of the middle. While collaboration software is not the magic elixir that guarantees the fighting will stop between parents, it can help to remove many of the potential opportunities for conflict and it can help the parents to have a more businesslike relationship for the sake of their childrens well being



Based on Sprout Managements opinion, which opinion is based in Internet-based searches, co-parenting can work smoothly if there is a color-coded calendar at each home. Each parent is represented by a particular color. In this way, even young children who cannot yet recognize letters can still associate one color with each parent. Consistency of the color assignments across households facilitates comfort in recognition for a young child.

8



Based on managements Internet-based search, Sprout Development believes that there may be a market in North America for a web-based product that provides easy to use web tools that will encourage cooperation, communication and consistency with the following modules;

Calendar Module: Allowing the divorced parents to create/view their childrens schedule on the internet.  This module will color code each child and parent for easy recognition of each family members activities.  Should any changes be made to the calendar by either parent an email, text message or pager message is delivered to the other parent to indicate that change.

Task List: Track who and when tasks are to be completed by each parent.

Message Board:  An organized communications tool that can be used to discuss family issues in a thoughtful non-confrontational way.

Bookshelf Module: of resources for the parents on mediation.

Statistics:  tracking of time each parent spends with each child.

Templates: Choose from a number of typical visitation schedules, modify an existing one or create a custom schedule.

Our current monthly overhead is minimal as the Company has no employees and limited operations.   We have no revenues as of the date of this report.



BUSINESS OVERVIEW



Since our incorporation, we have concentrated our efforts on formative activities, including organizing the corporation and proposed distribution of the shares of our common stock to our shareholders. Management is now seeking to establish relationships with distribution partners and/or to license existing software rather than developing the software internally.  Distributors could be organizations of family mediators that perform direct counseling to potential clients. Management intends to enter into negotiations for, and preparation of appropriate licensing agreements, pricing models, and revenue-sharing agreements with distribution partners. To date, the Company has not contacted any distribution companies but has contacted  two competitors with a view toward licensing their software. No licensing agreements are in place at this time.

Management is unaware of the rate at which revenues would be shared with channel distribution partners and does not expect to become aware of the sharing rate until successful negotiations have been completed. Since no arrangements or discussions with any potential distribution have been commenced by Sprout, it is not reasonable to assume at this time that Sprout will be able to successfully reach an agreement with a distribution partner.



Marketing



Through Internet-based searches, we have identified our target customers.  These target customers are the parents that are seeking mediated settlements with regard to children and visitation. This approach is based on the belief that those parents have the interests of the children in mind and would commit to using a tool such as ours if the tool was made available in a cost effective price point and easily delivered to the client.



Competition



To our companys knowledge, there is only one other company that offers direct competition to the web-based service we are proposing. That company also offers calendar, messaging, contact, diary and alert services that we also intend to offer.  We intend to compete with more focused marketing efforts to related channel distribution partners. We also intend to offer a low one time registration fee for the use of our website, compared to monthly charges that our competition uses.



We believe that other companies compete with a portion of our intended online services. These companies are mainly geared to business organizations or groups; they offer an online calendar program, a discussion board and a

9



task list. The apparent limitations with these companies is that the administrator of the calendar is the only person that can edit the events, therefore the information flows one way and there is no way of informing the users of the web calendar of changes to the calendar. We intend to compete with a web service focused on collaboration specifically between divorced parents as described earlier in this annual report.



Although these companies compete on a portion of Spouts intended business, the competitors could also provide the same services as Spout, therefore we would have to compete based on marketing efforts and price of the service.



Employees



Sprout Development plans to operate using contract employees rather than salaried employees so that overhead is kept to a minimum during the start-up stage of the Company. Contract employees are paid no pension or dental benefits and no filings, such as employment insurance and tax deductions, must be made to the government on their behalf.



As of the date of this annual report, Sprout Development operations are carried out by its President and director Darryl Cozac on a part time basis.Mr. Cozac plans to spend up to 10 hours per week on Sprout business and plans to allocate time to Sprout requirements as he sees fit, in his sole discretion. There are no full-time employees. There has been no salary or compensation paid, earned, or accrued and there are no plans to pay, earn, or accrue any compensation until such time as the Company has sufficient capital and/or revenues to do so, of which there is no assurance. The market studies, channel negotiations, and financing/acquisition activities, technical sales and service are to be provided by Mr. Cozac and James Durward, an unaffiliated Sprout shareholder. Mr. Durward provides his services free of charge and devotes time to Sprout as he see fit. The Company plans to hire a part time office manager as cash becomes available to do so, of which there is no assurance. All other activities are carried out by the officers and directors who currently provide, and will continue to provide, their services for no compensation until such time as Sprout Development can afford to pay for their services, of which there is no assurance. There is no compensation accrual or back pay allowance, and none is contemplated in the future.  However, for the fiscal year ended July 31, 2006, $10,000 was recorded as contributed capital for the value of management services contributed by the officers and directors for which no payment was made or shares were issued.  For the fiscal year ended July 31, 2005, nothing was recorded, as the amount was not considered material to the statements.



Regulatory Matters



We do not believe that there are any regulatory matters that may affect our business.



ORGANIZATIONAL STRUCTURE



As of the date of this filing the Company has no subsidiaries.



PROPERTY, PLANTS AND EQUIPMENT



Sprout owns an immaterial amount of computer equipment. Sprout owns no properties and is provided workspace at no cost by the President of the Company. This arrangement is expected to continue until the Company has sufficient revenues to pay for space.



ITEM 4A.

UNRESOLVED STAFF COMMENTS



Not Applicable



ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS



We believe that Sprout will have sufficient cash resources to operate at the present level of operations and expenditures for the next twelve months. However, we may need to obtain financing from either a debt or equity issue, or a combination with a third party that has sufficient cash flow to allow us to continue our operations. Our average operating costs are currently less than $1,200 monthly and are not expected to exceed this level within the next 12 months.

10



These general operating costs include:



a) web site development  average of $200 per month;

b) market research and administration  average $200 per month (includes market studies); and

c) public reporting costs -  average $800 per month.

Total - $1,200 average monthly expenses.



The costs set out below under Milestones are included in the average monthly operating costs. Depending upon a variety of factors that may affect our business plan and proposed operations, we may seek additional capital in the future, either through debt, equity or a combination of both. We may also acquire other assets through the issuance of stock. No assurances can be given that such efforts will be successful. We have no specific plans at present for raising additional capital or acquiring other assets.

.

The following is the history and projected future activities of the company in milestone format.



Milestones:



Development of the concept and preliminary planning for the introduction of the web-based software was completed in July, 2004 by the management of Sprout Development. This included internet-based searches for potential competitors and reviews of their relevant products, and potential distributors.



Sprout Development was incorporated on July 19, 2004 and subsequently funded by Puroil for initial operations.

A market study was conducted in 2005-2006.  This market study was comprised of Internet Searches, email exchanges and discussions with competitors. The nature of the study was to determine the general level of interest in the product, desired product features, commission rates, and pricing resistance points.  We previously thought that we had determined pricing structures but we now find that we have not yet determined what pricing module and channel distribution costs will be accepted for our business.

Development of the website was planned to commence immediately following completion of the study referred to above but we are now planning to attempt to license existing software rather than developing the software internally. We have contacted two competitors with a view toward licensing their software but we have not been able to come to terms at this time and we do not know if we will ever come to terms. The negotiation process may be lengthy and the outcome cannot be determined at this time. The Company plans to pursue its distribution channel marketing once such license is in place. This milestone should mark the first revenues for Sprout Development. Depending on the success of the marketing efforts, Sprout Development may need to obtain addition capital from loans or sale of additional equity.



Additional capital could be required in the case where Sprout Development fails to generate sufficient revenues from software sales to offset its operational costs. Sprout Development may also need to raise additional capital in the case where the Company desires to acquire another company and the other companys shareholders demand cash for their shares. While Sprout Development management will always consider merger and acquisition candidates to grow Sprout Development for the benefit of its shareholders, there are currently no merger and acquisition candidates known to Sprout Development management.



For the twelve month period commencing August 1, 2006,  Sprout Development intends to pursue the establishment of its stated business plans. There can be no assurance we will achieve these objectives, or any one of them.





Results of Operations



There have been no revenues from the date of incorporation on July 19, 2004 to the year ended July 31, 2006.  Sprout realized net losses for the twelve month period ended July 31, 2006 of $23,666 as compared to net losses of $12,966 for the twelve month period ended July 31, 2005.  The increase in the losses relates to contributed

11



management fees of $10,000 (2006) as compared to none (2005) and an increase in depreciation to $1,594  (2006)  from $266 (2005).



Sprout had total assets of $52,836 at July 31, 2006 and $67,394 (2005). These assets were comprised of $40,826 in cash (2006)  as compared to $58,290 in cash (2005), $11,213 in deferred registration costs (2006) as compared to $6,713  in deferred registration costs (2005) and $797 in computer equipment net of depreciation of $1,860 (2006) as compared to $2,391 in computer equipment net of depreciation of $266 (2005).  The reduction in assets was due to the net loss incurred.



Sprout had no total current liabilities as at July 31, 2006 as compared to current liabilities of $892 at July 31, 2005.



At July 31, 2006, Sprout had $40,826 in working capital, compared to $57,398 in working capital at July 31, 2005.



Liquidity and Capital Resources



At July 31, 2006, Sprout Developments  had total assets of $52,836 and no liabilities. We sold 18,000,000 shares of common stock for an aggregate of $80,010 total cash and the software license, prior to July 30, 2004.  We concurrently issued 4,000,000 common share purchase warrants exercisable for an additional 2,000,000 shares upon tender of two warrants plus $0.10 for one (1) share of the Company's common stock. All of the 4,000,000 share purchase warrants expired August 17, 2006 without exercise.  There can be no assurance that financing will be available to the Company in an amount and on terms acceptable to us, as and when required, or at all. Our President, Darryl Cozac, has committed to providing any funds needed to pay the costs of reporting for the next 12 months if the Company does not have sufficient funds on hand to pay such costs.



We have budgeted to spend $12,000 for operations and we do not expect to expend more than a maximum of $20,000 over the next 12 months from August 1, 2006 and we expect to keep costs at a minimum until such time as revenues are generated to cover any increased costs.



All of our funds have come from the sale of securities and we have not raised any funds since July 30, 2004.   We have no revenues and have not had any revenues for the last two fiscal years.



MATERIAL CAPITAL COMMITMENTS



Sprout does not have any material capital commitments.



RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.



Sprout Development has not undertaken any research and development that has resulted in the incurrence of any costs. Sprout Development will not be filing for any patent, trademark and trade name protection. It will be relying on applicable copyright laws for the protection of its proprietary software.



TREND INFORMATION



Sprout is not aware as of the filing of this annual report of any known trends, uncertainties, demands, commitments or events that are reasonably likely to have a material effect on its financial condition.



OFF-BALANCE SHEET ARRANGEMENTS



The Company has no off-balance sheet arrangements.



TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS



Sprout Development does not have any material obligations as of July 31, 2006.

12



SAFE HARBOR



The safe harbor provided in Section 27A of the Securities Act and Section 21E of the Exchange Act shall apply to forward-looking information provided pursuant to Item 5.E and F.  All information set out in Item 5.E.1 and 5.E.2 is deemed to be a forward-looking statement as that term is defined in the statutory safe harbors, except for historical facts.





ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



DIRECTORS AND SENIOR MANAGEMENT



The members of the board of directors serve until the next annual meeting of the stockholders, or until their successors have been elected. The officers serve at the pleasure of the board of directors. There are no agreements for any officer or director to resign at the request of any other person, and none of the officers or directors named below is acting on behalf of, or at the direction of, any other person.



The executive officers and directors of the Company and their ages are as follows:



|Name                                                               | Age | Position                 | Date Elected 
|------------------------------------------------------------------ | --- | ------------------------ | -------------
|Darryl Cozac
#21, Country Hills Garden NW
Calgary, Alberta
T3K 5G1 | 40  | President, CFO, director | July 19, 2004
|Jim Balsara
109 Cranleigh Bay SE
Calgary, Alberta
T3M 1H5          | 34  | Secretary/Treasurer      | July 19, 2004



Darryl Cozac



Mr. Cozac has served as President and director of Sprout Development Inc. since its incorporation in July 2004. Mr. Cozac is currently serving as Secretary and director of LogSearch Inc. From February 1, 2006, Mr. Cozac is also employed by NewCast Energy as a geological technician. From 1996 -2004 Mr. Cozac served as President and director and founding partner of Coachware Systems Inc. a privately held company that designed and developed software that is marketed to hockey coaches world-wide. Mr. Cozac is a certified engineering technologist (Alberta Society of Engineering Technologists) and has over 10 years experience in the petroleum data and software industry.



Jim Balsara



Mr. Balsara has served as a director of Sprout Development Inc. since its incorporation in July 2004. Since November 27, 2006, Mr. Balsara has been a consultant with Bell Business Solutions. He was formerly a Senior Systems Engineer at TELUS Inc. and has been involved with the Client Solutions business unit since 1999.  At TELUS Mr. Balsara has been involved in the marketing aspects and technical sales groups for various software packages and voice/video conferencing services served in a hosted TELUS built Internet Data Center located in Calgary, Alberta. Mr. Balsara earned a Bcomm in Marketing from the University of Calgaryin 1994 and an M.B.A. degree specializing in Information Systems from the University of Texas at Dallasin 1996.  He has earned various technical certifications such Microsofts MCSE in 1999 and Ciscos CCNA certification in 2002.



There are no family relationships among our officers, directors, or persons nominated for such positions.



No officer or director and no promoter or significant employee of Sprout Development has been involved in legal proceedings that would be material to an evaluation of our management.



None of our directors has been involved in any bankruptcy or criminal (excluding traffic violations and other minor offenses) proceedings. None of our directors is subject to any order, judgment or decree related to his involvement

13



in any type of business, securities or banking activities or has been found to have violated a federal or state securities or commodities law.



COMPENSATION



The Company has not paid any compensation to any members of its board of directors or management. The Company has no employees. No executive officer Sprout Development Inc. has earned a salary and bonus for any fiscal year since inception.   We do not have any stock option plans.  However, for the fiscal year ended July 31, 2006, $10,000 was recorded as contributed capital for the value of management services contributed by the officers and directors for which no payment was made or shares were issued.  For the fiscal year ended July 31, 2005, nothing was recorded, as the amount was not considered material to the statements.



COMPENSATION OF DIRECTORS



No director receives any form of compensation in his capacity as a director of Sprout.



BOARD PRACTICES



The directors are elected to serve until the next annual meeting of shareholders and until their successors have been elected. Executive officers serve at the discretion of the board of directors.  Mr. Cozac and Mr. Balsara have served as directors of our company from incorporation.



There are no employment contracts with any officers or directors



We do not have any standing audit, nominating, or compensation committees of the board of directors.  Our executive officers are elected annually by our board of directors and hold such positions until the following year or until his successor is duly elected by our board of directors.



EMPLOYEES



Other than the officers of the Company, there are no employees who are expected to make a significant contribution to the Company.



SHARE OWNERSHIP



The following table sets forth information, as of January 15, 2007, with respect to the beneficial ownership of the Companys  Class A common stock by each of the Company's officers and directors, and by the officers and directors of the Company as a group.



|TITLE OF CLASS        | BENEFICIAL OWNER                                  | AMOUNT AND NATURE OF BENEFICIAL OWNER          | PERCENT OF CLASS(1)
|--------------------- | ------------------------------------------------- | ---------------------------------------------- | -------------------
|Class A Common Shares | Darryl Cozac                                      | 13,990,800 Class A common shares held directly | 77.7%              
|Class A Common Shares | Jim Balsara                                       | 10,000 Class A common shares held directly     | *                  
|                      | All Officers and Directors as a group (2 persons) | 14,000,800 Class A common shares               | 77.7%              

*  Less than 1%.



(1) Based on 18,000,000 shares of Class A common stock presently outstanding as of the filing date of this annual report.

14



ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS



MAJOR SHAREHOLDERS



There are a total of 18,000,000 Class A common shares of the Company issued and outstanding as of the date of this report of which a total of 90 shareholders in Canada hold a total of 17,999,500 Class A common shares.



The following table sets forth information, as of January 15, 2007, with respect to the beneficial ownership of the Companys Class A common stock by each person known to be the beneficial owner of more than 5% of the outstanding Class A common stock.   Information is provided regarding beneficial ownership of Class A common stock if all outstanding options, warrants, rights and conversion privileges are exercised and additional shares of Class A common stock are issued.



|TITLE OF CLASS        | BENEFICIAL OWNER                                                    | AMOUNT AND NATURE OF BENEFICIAL OWNER | PERCENT OF CLASS(1)
|--------------------- | ------------------------------------------------------------------- | ------------------------------------- | -------------------
|Class A Common Shares | Darryl Cozac
#21, Country Hills Gardens NW
Calgary, Alberta
T3K 5G1 | 13,990,800                            | 77.7%              



(1) Based on 18,000,000 shares of Class A common stock presently outstanding as of the filing date of this annual report.



RELATED PARTY TRANSACTIONS



Since the date of inception, transactions in which a director or executive officer or nominee for election as a director, or any member of the immediate family of any director or executive officer of Sprout Development had, or is to have a direct or indirect material interest, are as follow:



On July 19, 2004, Sprout Development issued a total of 14,000,000 shares of Sprout Development common stock to Darryl Cozac, our President and member of the board of directors, and Mr. Jim Balsara, our Secretary and Treasurer and a member of the board of directors. Of these shares, 13,990,000 were issued to Mr. Cozac in consideration of cash in the amount of $10.00 and for the establishment of the company and contributing the software concept that was granted by Mr. Cozac under the License Agreement entered into between Mr. Cozac and Sprout Development.  Mr. Cozacs other 800 shares were received as a result of a dividend by Puroil Technology Inc., of which Mr. Cozac is a shareholder.The remaining 10,000 shares were issued to Mr. Balsara in consideration of $0.01. The shares were offered to Mr. Balsara at this price as an inducement to join the board of directors. This sale of securities was exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(2) for sales not involving a public offering.



On July 30, Sprout Development sold 4,000,000 units to Puroil for $0.02 per share, for a total of $80,000. The units consisted of 4,000,000 shares of common stock and 4,000,000 warrants exercisable into 2,000,000 shares of common stock at a price of $0.10 per share.  This sale was exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4 (1 1/2) for sales not involving a public offering, and was between two private parties.



INTERESTS OF EXPERTS AND COUNSEL



Not applicable.



ITEM 8.

FINANCIAL INFORMATION



FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION



15



The required audited financial statements for the fiscal year ending July 31, 2006 are provided at the end of this Annual Report starting on Page F-1.



LEGAL PROCEEDINGS



There are no legal proceedings to which we are a party and, to our knowledge, no such proceedings are pending.



DIVIDEND DISTRIBUTIONS



As we are a start-up company, we do not anticipate the payment of dividends in the foreseeable future.  Any future payment of dividends will be determined by our board of directors.



SIGNIFICANT CHANGES



Our management is not aware of any significant changes.



ITEM 9.

THE OFFER AND LISTING



OFFER AND LISTING DETAILS



Not applicable



PLAN OF DISTRIBUTION



Not applicable



MARKETS



Our common shares are quoted on the Over-the-Counter Bulletin Board (OTCBB) under the symbol SODVF.



SELLING SHAREHOLDERS



Not applicable



DILUTION



Not applicable



EXPENSES OF THE ISSUE



Not applicable



ITEM 10.

ADDITIONAL INFORMATION



SHARE CAPITAL



Not applicable



16





MEMORANDUM AND ARTICLES OF ASSOCIATION



The Company incorporates by reference herein the information set forth under the heading DESCRIPTION OF SECURITIESlocated in the Companys Form F-1, as amended, filed with the Securities and Exchange Commission on August 9, 2005.



EXCHANGE CONTROLS



There are no governmental laws, decrees or regulations in Canada relating to restrictions on the export or import of capital, or affecting the remittance of interest, dividends or other payments to non-residents. Dividends paid to U.S. residents, however, are subject to a 15% withholding tax or a 5% withholding tax for dividends if the shareholder is a corporation owning at least 10% of the outstanding voting shares of Sprout Development pursuant to Article X of the reciprocal tax treaty between Canada and the U.S.



Except as provided in the Investment Canada Act (the ICA), which has provisions that restrict the holding of voting shares by non-Canadians, there are no limitations specific to the rights of non-Canadians to hold or vote the common shares under the laws of Canada or the Province of Alberta, or in the charter documents of Sprout Development or its subsidiaries.  Management of Sprout Development believes that the following summary fairly describes those provisions of the ICA pertinent to an investment in Sprout Development by a person who is not a Canadian resident (a non-Canadian).



The ICA requires a non-Canadian making an investment which would result in the acquisition of control of a Canadian business (i.e. the gross value of the assets of which exceed a certain monetary threshold) to identify, notify, or file an application for review with the Investment Review Division of Industry Canada (IRD).



The notification procedure involves a brief statement of information about the investment on a prescribed form which is required to be filed with the IRD by the investor at any time up to 30 days following implementation of the investment.  It is intended that investments requiring only notification will proceed without government intervention unless the investment is in a specific type of business activity related to Canadas cultural heritage and national identity.



If an investment is reviewable under the ICA, an application for review in the form prescribed is normally required to be filed with the IRD prior to the investment taking place, and the investment may not be implemented until the review has been completed and the Minister of Industry Canada (Minister) (the Minister responsible for Investment Canada) is satisfied that the investment is likely to be of net benefit to Canada.  The Minister has up to 75 days to make this determination.  If the Minister is not satisfied that the investment is likely to be of net benefit to Canada, the non-Canadian must not implement the investment or, if the investment has been implemented, may be required to divest himself of control of the business that is the subject of the investment.



The following investments by non-Canadians are subject to notification under the ICA:



1.

An investment to establish a new Canadian business; and

2.

An investment to acquire control of a Canadian business that is not reviewable pursuant to the Act.



The following investments by a non-Canadian are subject to review under the ICA:



1.

An investment is reviewable if there is an acquisition of a Canadian business and the asset value of the Canadian business being acquired equals or exceeds the following thresholds:



(a)

For non-World Trade Organization (WTO)  investors, the threshold is $5 million for a direct acquisition and $50 million for an indirect acquisition; the $5 million threshold will apply however for an indirect acquisition if the asset value of the Canadian business being acquired exceeds 50% of the asset value of the global transaction;

(b)

Except as specified in paragraph (c) below, a threshold is calculated annually for reviewable direct acquisitions by or from WTO investors.  The threshold for 2004 is $227 million. Pursuant to Canadas international commitments, indirect acquisitions by or from WTO investors are not reviewable;

17



(c)

The limits set out in paragraph (a) apply to all investors for acquisitions of a Canadian business that:



(i)

engages in the production of uranium and owns an interest in a producing uranium property in Canada;

(ii)

provides any financial service;

(iii)

provides any transportation services; or

(iv)

is a cultural business.



2.

Notwithstanding the above, any investment which is usually only notifiable, including the establishment of a new Canadian business, and which falls within a specific business activity, including the publication and distribution of books, magazines, newspapers, film or video recordings, audio or video music recordings, or music in print or machine-readable form may be reviewed if an Order-in-Council directing a review is made and a notice is sent to the investor within 21 days following the receipt of a certified complete notification.



Generally, an acquisition is direct if it involves the acquisition of control of the Canadian business or of its direct or indirect Canadian parent and an acquisition is indirect if it involves the acquisition of control of a non-Canadian direct or indirect parent of an entity carrying on the Canadian business.  No change of voting control will be deemed to have occurred if less than one-third of the voting control of a Canadian corporation is acquired by an investor.



A WTO investor, as defined in the ICA, includes an individual who is a national of a member country of the WTO or who has the right of permanent residence in relation that WTO member, a government or government agency of a WTO investor-controlled corporation, a limited partnership, trust or joint venture that is neither WTO-investor controlled or Canadian controlled of which two-thirds of its board of directors, general partners or trustees, as the case may be, are any combination of Canadians and WTO investors.



The ICA exempts certain transactions from the notification and review provisions of ICA, including, among others: (a) an acquisition of voting shares if the acquisition were made in the ordinary course of that persons business as a trader or dealer in securities; (b) an acquisition of control of the company in connection with the realization of a security interest granted for a loan or other financial assistance and not for any purpose related to the provisions of the ICA; (c) the acquisition of voting interests by any person in the ordinary course of a business carried on by that person that consists of providing, in Canada, venture capital on terms and conditions not inconsistent with such terms and conditions as may be fixed by the Minister; and (d) acquisition of control of the company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the company, through the ownership of voting interests, remains unchanged.



TAXATION



The discussions below summarize the material tax considerations relevant to an investment in common shares by individuals and corporations who, for income tax purposes, are resident in the U.S. for purposes of the Convention (as hereinafter defined) and are not resident in Canada, who hold common shares as a capital asset, and who do not hold the common shares in carrying on a business through a permanent establishment in Canada or in connection with a fixed base in Canada (collectively, "Unconnected U.S. Shareholders" or "Holders"). The tax consequences of an investment in common shares by investors who are not Unconnected U.S. Shareholders may differ substantially from the tax consequences discussed herein. The discussion of U.S. tax consideration is addressed only to Unconnected U. S. Shareholders whose "functional currency" within the meaning of Section 985 of the Internal Revenue Code of 1986, as amended (the "Code"), is the U. S. dollar, and to U. S. citizens who are not residents in the U.S. for the purpose of the Convention, but who otherwise meet the definition of Unconnected U.S. Shareholders. Furthermore, the discussion of U.S. tax consideration does not address the tax treatment of Unconnected U. S. Shareholders that own, or are deemed for U.S. federal income tax purposes to own, 10% or more of the total combined voting power of all classes of voting stock of Sprout Development Inc.. The discussion of Canadian tax considerations does not address the tax treatment of a trust, company, organization or other arrangement that is a resident of the U.S. and that is generally exempt from U. S. tax.



This discussion does not address all of the income tax consequences that may be applicable to any Holder subject to special treatment under the U.S. federal income tax law or to any particular Holder in light of such Holder's particular facts and circumstances. Some Holders, including tax exempt entities, banks, insurance companies and persons who hold common shares as part of a hedging transaction may be subject to special or different rules not discussed below. The discussion of U.S. tax considerations is based on the provisions of the Code.

18



The discussion of Canadian tax consideration is based upon the provisions of the Income Tax Act (Canada), as amended from time to time (the "Tax Act"), the Convention between Canada and the U.S. with Respect to Taxes on Income and Capital, as amended from time to time (the "Convention"), and the Company's understanding of published administrative practices of Canada Customs and Revenue Agency and judicial decision, all of which are subject to change. The discussion does not take into account the tax laws of the various provinces or territories of Canada or the tax laws of the various state and local jurisdictions in the U. S.



U.S. Federal Income Tax Considerations



Unconnected U.S. Shareholders generally will treat the gross amount of the distributions paid by the Company, including the amount of any Canadian tax withheld, as foreign source dividend income for U.S. federal income tax purposes to the extent of the Company's current or accumulated earnings and profits, as computed for U.S. federal income tax purposes. Distribution in excess of that amount will reduce an Unconnected U.S. Shareholder's tax basis in the common shares, but not below zero, and the remainder, if any, will be treated as taxable capital gains. In general, in computing its U.S. federal income tax liability, an Unconnected U.S. Shareholder may elect for each taxable year whether to claim a deduction or, subject to the limitations described below, a credit for Canadian taxes withheld from dividends paid on its common shares. If the Unconnected U.S. Shareholder elects to claim a credit for such Canadian taxes, the election will be binding for all foreign taxes paid or accrued by the Shareholder for such taxable year. The Code applies various limitations on the amount of foreign tax credit that may be available to a U.S. taxpayer based upon the segregation of foreign source income into separate categories of income. The amount of credit which may be claimed with respect to the category of income to which the dividend is allocated, and to which the foreign taxes are attributable generally may not exceed the same portion of the U.S. tax on worldwide taxable income, before applying the foreign tax credit as the U.S. holder's foreign source taxable income allocation to such category bears to such U.S. holder's entire taxable income. The foreign tax credit is disallowed for dividends on stock unless a minimum holding period is satisfied and additional limitations may restrict the ability of some individuals to claim the foreign tax credit. Accordingly, we urge investors to consult their own tax advisors with respect to the potential consequences to them of the foreign tax credit limitations.



For U. S. federal income tax purposes, the amount of any distributions made on a common share to an Unconnected U.S. Shareholder in Canadian dollars is deemed to equal the U.S. dollar value of the Canadian dollars calculated by reference to the appropriate exchange rate in effect on the date of receipt of the distribution, regardless of whether the Canadian dollars are actually converted into U.S. dollars upon receipt. Unconnected U.S. Shareholders are urged to consult their own tax advisors regarding the treatment of foreign currency gain or loss, if any, on any Canadian dollars which are converted into U.S. dollars subsequent to receipt by the shareholder.



The sale of common shares generally will result in a gain or loss to the Holder in an amount equal to the difference between the amount realized and the Holder's adjusted cost basis in the shares. Provided that the Holder is not considered a "dealer' in the shares sold, gain or loss on the sale of the common shares will generally be capital gain or loss.



Capital losses are used to offset capital gains. Individual taxpayers may deduct the excess of capital losses over capital gains of up to US$3,000 a year, US$1,500 in the case of a married individual filing separately, from ordinary income. Non-corporate taxpayers may carry forward unused capital losses indefinitely.  Unused capital losses of a corporation may be carried back three years and carried forward five years.



Canadian Tax Considerations



Dividends received or deemed to be received, on the common shares by Unconnected U.S. Shareholders will be subject to Canadian withholding tax at the rate of 25%, subject to reduction under the Convention. Under the Convention, the maximum rate of withholding tax on such dividends is reduced to 15% if the beneficial owner of such dividends is an Unconnected U.S. Shareholder. However, that rate is reduced to 5% under the Convention if the beneficial owner of such dividends is an Unconnected U.S. Shareholder that is a corporation that owns at least 10% of the voting stock of the company.



An Unconnected U.S. Shareholder will not be subject to tax in Canada on any capital gain realized upon the disposition or deemed disposition of the common shares, provided that the common shares do not constitute "taxable Canadian property" of the shareholder within the meaning of the Tax Act.



19



Canada does not currently impose any estate taxes or succession duties.



DIVIDENDS AND PAYING AGENTS



Not applicable.



STATEMENTS BY EXPERTS



Not applicable



DOCUMENTS ON DISPLAY



All documents filed by our company have been filed with the Securities and Exchange Commission using the EDGAR (Electronic Data Gathering, Analysis and Retrieval) system.  The Securities and Exchange Commission maintains a web site on the Internet at the address http://www.sec.gov that contains reports, proxy information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.



SUBSIDIARY INFORMATION



The Company does not have any subsidiaries.





ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



Not applicable.





ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES



Not applicable.



PART II



ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES



None.



ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS.



None.



ITEM 15.

CONTROLS AND PROCEDURES





We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and acting Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.



At the end of the period covered by this annual report we carried out an evaluation, under the supervision and with the participation of our management, including our President and acting Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14.  Based upon the foregoing, our President and our acting Chief Financial Officer have concluded that our disclosure controls and procedures are effective.



20



There were no changes in our internal control over financial reporting that occurred during the year ended July 31, 2006, that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT





The Company presently does not have an audit committee.  The Board of Directors performs the same functions as an audit committee.  Since there are no independent members of the Board it is not feasible at this time to have an audit committee.



ITEM 16B.

CODE OF ETHICS



As of the date of this report, the Company has not adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.  The Company has targeted the fourth quarter of fiscal year 2007 to review and finalize the adoption of a code of ethics. Upon adoption, the Company plans to file a copy of its code of ethics with the Securities and Exchange Commission as an exhibit to its Annual Report for the year ending July 31, 2007.



ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES



The following table sets forth the fees billed to the Company for professional services rendered by the Company's principal accountant:

|Services           | 2006   | 2005   
|------------------ | ------ | -------
|Audit fees         | $3,885 | $4,053 
|Audit related fees | $263   | $6,560 
|Tax fees           | 0      | 0      
|Total fees         | $4,148 | $10,613

Audit fees consist of fees for the audit of the company's annual financial statements or the financial statements of the companys subsidiaries or services that are normally provided in connection with the statutory and regulatory filings of the annual financial statements.

Audit-related services include the review and preparation of the company's financial statements and quarterly reports that are not reported as Audit fees.  .

Tax fees included tax planning and various taxation matters.

Our board of directors pre-approves all services, audit and non-audit, to be provided to the Company by our independent auditors.  Our board of directors has pre-approved the provision, by our independent auditors, of specific audit, audit related, tax and other non-audit services as being consistent with auditor independence.  Requests or applications to provide services that require the specific pre-approval of our board of directors must be submitted to our board by the independent auditors, and the independent auditors must advise our board as to whether, in the independent auditor's view, the request or application is consistent with the Securities and Exchange Commission's rules on auditor independence.  Our board may delegate either type of pre-approval authority to one or more of its members.



Our board of directors has considered the nature and amount of the fees billed by Bateman & Co., Inc., P.C. and believes that the provision of the services for activities unrelated to the audit is compatible with maintaining the independence of Bateman & Co., Inc., P.C.



ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES



Not applicable



21



ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS



Not applicable



PART III



ITEM 17.

FINANCIAL STATEMENTS



See Item 18 below.



ITEM 18.

FINANCIAL STATEMENTS



The audited financial statements for the fiscal year ended July 31, 2006 are provided herein starting on page F-1.



ITEM 19.

EXHIBITS



|Exhibit Number | Exhibit Description                                                                                                                                                | Filed                                                                                                        
|-------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------------------------------------------------------------------
|3.1            | Articles of Incorporation                                                                                                                                          | Incorporated by reference to the Exhibits filed with Sprout Development Form F-1 on February 16, 2005.      
|3.2            | Bylaws                                                                                                                                                             | Incorporated by reference to the Exhibits filed with Sprout Development Form F-1 filed on October 14, 2004  
|4.1            | Warrant Agency Agreement                                                                                                                                           | Incorporated by reference to the Exhibits filed with Sprout Development Form F-1 filed on October 14, 2004  
|10.1           | License Agreement dated July 19, 2004 entered into with Daryl Cozac                                                                                                | Incorporated by reference to the Exhibits filed with Sprout Development Form F-1 filed on October 14, 2004  
|10.2           | Consulting Agreement with International Securities Group, Ltd., dated August 6, 2004                                                                               | Incorporated by reference to the Exhibits filed with Sprout Development Form F-1 filed on February 26, 2005.
|12             | Certifications required by Rule 13a-14(a) or Rule 15d-14(a), filed herewith.                                                                                       | Filed herewith                                                                                               
|13             | Certifications required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States code (18 U.S.C. 1350), filed herewith. | Filed herewith                                                                                               



22





SIGNATURES





The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.









SPROUT DEVELOPMENT INC.







/s/ Darryl Cozac

Darryl Cozac
President, CFO, Treasurer and Director
January 30, 2007

23



|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Index
to Financial Statements   

|Report of
Independent Registered Public Accounting Firm | F-2                                                                
|------------------------------------------------------- | -------------------------------------------------------------------
|                                                        |                                                                    
|Balance Sheet
-                                         |                                                                    
|                                                        | July 31, 2006                                                      
|                                                        |                                                                    
|Statement of
Operations:                                |                                                                    
|                                                        | For the periods ended July
31, 2006 and 2005                       
|                                                        |                                                                    
|Statement of
Stockholders' Equity:                      |                                                                    
|                                                        | For the period from
inception, July 19, 2004, through July 31, 2006
|                                                        |                                                                    
|Statement of
Cash Flows:                                |                                                                    
|                                                        | For the periods ended July
31, 2006 and 2005                       
|                                                        |                                                                    
|Notes to
Financial Statements:                          |                                                                    
|                                                        | July 31, 2006                                                      

F-1

---

|                             |  |                          
|---------------------------- |  | -------------------------
|Bateman &
Co., Inc., P.C.    |  |                          
|Certified Public
Accountants |  |                          
|                            
|                             |  |                          
|                             |  | 5 Briardale Court        
|                             |  | Houston, Texas 77027-2904
|                             |  | (713) 552-9800           
|                             |  | FAX (713) 552-9700       
|                             |  | www.batemanhouston. com  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM



To The Board of Directors and Stockholders 
Of Sprout Development Inc.

We have audited the accompanying balance sheet of
Sprout Development Inc., (a Alberta, Canada corporation and a
development stage enterprise) as of July 31, 2006, and the related
statements of operations, stockholders’ equity, and cash flows for the
each of the two years in the period ended July 31, 2006, and for the
period from inception, July 19, 2004, through July 31, 2006. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. The company is not required to have, nor
were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the company’s
internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position
of Sprout Development Inc. (a development stage enterprise) as of July
31, 2006, and the results of its operations and its cash flows for each
of the two years in the period ended July 31, 2006, and for the period
from inception, July 19, 2004, through July 31, 2006, in conformity
with U.S. generally accepted accounting principles.

BATEMAN & CO., INC., P.C.

Houston, Texas 
January 24, 2007

F-2

Member 
INTERNATIONAL ASSOCIATION OF PRACTISING ACCOUNTANTS 
Offices in Principal Cities Around The World

---

|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Balance
Sheets                  

|                                                                         |   | July 31, |  
|------------------------------------------------------------------------ | - | -------- | -
|                                                                         |   | 2006     |  
|                                                                         |   |          |  
|ASSETS                                                                   |   |          |  
|Current assets:                                                          |   |          |  
|Cash in
bank                                                             | $ | 40,826   |  
|Total current assets                                                     |   | 40,826   |  
|                                                                         |   |          |  
|Computer equipment, net of accumulated
depreciation of $1,860            |   | 797      |  
|                                                                         |   |          |  
|Other assets:                                                            |   |          |  
|Deferred
registration costs                                              |   | 11,213   |  
|Total assets                                                             | $ | 52,836   |  
|                                                                         |   |          |  
|                                                                         |   |          |  
|LIABILITIES                                                              |   |          |  
|Current liabilities:                                                     |   |          |  
|Accounts
payable and accrued expenses                                    | $ | -        |  
|Total current
liabilities                                                |   | -        |  
|Total liabilities                                                        |   | -        |  
|                                                                         |   |          |  
|STOCKHOLDERS' EQUITY                                                     |   |          |  
|Common stock, Class A voting shares, no
par value, unlimited authorized, |   |          |  
|18,000,000
shares issued and outstanding                                 |   | 80,010   |  
|Contributed capital                                                      |   | 10,000   |  
|Deficit accumulated
during the development stage                         |   | (37,174  | )
|Total stockholders'
equity                                               |   | 52,836   |  
|Total liabilities and stockholders' equity                               | $ | 52,836   |  

F-3

The accompanying notes are an integral part of
these statements.

---

|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Statements
of Operations        

|                                                   |   | Cumulative    |   |   |               |   |   |               |  
|-------------------------------------------------- | - | ------------- | - | - | ------------- | - | - | ------------- | -
|                                                   |   | Inception,    |   |   |               |   |   |               |  
|                                                   |   | July 19, 2004 |   |   |               |   |   |               |  
|                                                   |   | Through       |   |   | Year Ended    |   |   | Year Ended    |  
|                                                   |   | July 31, 2006 |   |   | July 31, 2006 |   |   | July 31, 2005 |  
|                                                   |   |               |   |   |               |   |   |               |  
|                                                   |   |               |   |   |               |   |   |               |  
|Revenues                                           | $ | -             |   | $ | -             |   | $ | -             |  
|                                                   |   |               |   |   |               |   |   |               |  
|General and administrative
expenses:               |   |               |   |   |               |   |   |               |  
|Professional fees                                  |   | 26,044        |   |   | 12,965        |   |   | 12,779        |  
|Management fees                                    |   | 10,000        |   |   | 10,000        |   |   | -             |  
|Depreciation                                       |   | 1,860         |   |   | 1,594         |   |   | 266           |  
|Other general and
administrative expenses          |   | 438           |   |   | 90            |   |   | 106           |  
|Total operating expenses                           |   | 38,342        |   |   | 24,649        |   |   | 13,151        |  
|Income
(loss) from operations                      |   | (38,342       | ) |   | (24,649       | ) |   | (13,151       | )
|                                                   |   |               |   |   |               |   |   |               |  
|Other income (expense):                            |   |               |   |   |               |   |   |               |  
|Interest income                                    |   | 1,168         |   |   | 983           |   |   | 185           |  
|Income
(loss) before taxes                         |   | (37,174       | ) |   | (23,666       | ) |   | (12,966       | )
|                                                   |   |               |   |   |               |   |   |               |  
|Provision (credit) for taxes
on income             |   | -             |   |   | -             |   |   | -             |  
|Net income (loss)                                  | $ | (37,174       | ) | $ | (23,666       | ) | $ | (12,966       | )
|                                                   |   |               |   |   |               |   |   |               |  
|                                                   |   |               |   |   |               |   |   |               |  
|Basic and diluted earnings
(loss) per common share |   |               |   | $ | (0.00         | ) | $ | (0.00         | )
|                                                   |   |               |   |   |               |   |   |               |  
|Weighted average number of
shares outstanding      |   |               |   |   | 18,000,000    |   |   | 18,000,000    |  

F-4

The accompanying notes are an integral part of
these statements.

---

|SPROUT DEVELOPMENT INC.           
|----------------------------------
|(A development stage enterprise)  
|Statements
of Stockholders' Equity

DeficitAccumulatedCommon Stock
      
      
      
      
      
      During theClass A
      
      
      
      
      
      Contributed
      
      
      DevelopmentShares
      
      
      Amount
      
      
      Capital
      
      
      Stage
      
      
      TotalInception, July 19, 2004
      
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -Shares issued for cash and software license
      
      18,000,000
      
      
      80,010
      
      
      
      
      
      
      
      
      80,010Development stage net income
(loss)
      
      
      
      
      
      
      
      
      
      
      (542
      )
      
      (542
      )Balances, July 31, 2004
      
      18,000,000
      
      $
      80,010
      
      $
      -
      
      $
      (542
      )
      $
      79,468Development stage net income (loss)
      
      
      
      
      
      
      
      
      
      
      (12,966
      )
      
      (12,966
      )Balances, July 31, 2005
      
      18,000,000
      
      $
      80,010
      
      $
      -
      
      $
      (13,508
      )
      $
      66,502Contributed services
      
      
      
      
      
      
      
      10,000
      
      
      
      
      
      10,000Development stage net income (loss)
      
      
      
      
      
      
      
      
      
      
      (23,666
      )
      
      (23,666
      )Balances, July 31, 2006
      
      18,000,000
      
      $
      80,010
      
      $
      10,000
      
      $
      (37,174
      )
      $
      52,836


F-5

The accompanying notes are an integral part of
these statements.

---

|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Statements
of Cash Flows        

|                                                   |   | Cumulative    |   |   |               |   |   |               |  
|-------------------------------------------------- | - | ------------- | - | - | ------------- | - | - | ------------- | -
|                                                   |   | Inception,    |   |   |               |   |   |               |  
|                                                   |   | July 19, 2004 |   |   |               |   |   |               |  
|                                                   |   | Through       |   |   | Year Ended    |   |   | Year Ended    |  
|                                                   |   | July 31, 2006 |   |   | July 31, 2006 |   |   | July 31, 2005 |  
|                                                   |   |               |   |   |               |   |   |               |  
|                                                   |   |               |   |   |               |   |   |               |  
|Cash flows from operating
activities:              |   |               |   |   |               |   |   |               |  
|Net income (loss)                                  | $ | (37,174       | ) | $ | (23,666       | ) | $ | (12,966       | )
|Adjustments to reconcile net
income (loss) to cash |   |               |   |   |               |   |   |               |  
|provided (used) by
development stage activities:   |   |               |   |   |               |   |   |               |  
|Contributed services, management fees              |   | 10,000        |   |   | 10,000        |   |   | -             |  
|Depreciation                                       |   | 1,860         |   |   | 1,594         |   |   | 266           |  
|Changes in
current assets and liabilities:         |   |               |   |   |               |   |   |               |  
|Accounts Payable and
Accrued Liabilities           |   | -             |   |   | (892          | ) |   | 592           |  
|Net
cash flows from operating activities           |   | (25,314       | ) |   | (12,964       | ) |   | (12,108       | )
|                                                   |   |               |   |   |               |   |   |               |  
|Cash flows from investing
activities:              |   |               |   |   |               |   |   |               |  
|Acquisition of computer equipment                  |   | (2,657        | ) |   | -             |   |   | (2,657        | )
|Net
cash flows from investing activities           |   | (2,657        | ) |   | -             |   |   | (2,657        | )
|                                                   |   |               |   |   |               |   |   |               |  
|Cash flows from financing
activities:              |   |               |   |   |               |   |   |               |  
|Proceeds from sale of common stock                 |   | 80,010        |   |   | -             |   |   | -             |  
|Less, Stock subscription
receivable, collected     |   |               |   |   |               |   |   |               |  
|after end of period                                |   | -             |   |   | -             |   |   | 10            |  
|Change in deferred
registration costs              |   | (11,213       | ) |   | (4,500        | ) |   | (6,713        | )
|Net cash flows from
financing activities           |   | 68,797        |   |   | (4,500        | ) |   | (6,703        | )
|Net
cash flows                                     |   | 40,826        |   |   | (17,464       | ) |   | (21,468       | )
|                                                   |   |               |   |   |               |   |   |               |  
|Cash and equivalents,
beginning of period          |   | -             |   |   | 58,290        |   |   | 79,758        |  
|Cash and equivalents, end of period                | $ | 40,826        |   | $ | 40,826        |   | $ | 58,290        |  
|                                                   |   |               |   |   |               |   |   |               |  
|Supplemental cash flow disclosures:                |   |               |   |   |               |   |   |               |  
|Cash paid for interest                             | $ | -             |   | $ | -             |   | $ | -             |  
|Cash paid for income taxes                         |   | -             |   |   | -             |   |   | -             |  

F-6

The accompanying notes are an integral part of
these statements.

---

|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Notes to Financial Statements   
|July
31, 2006 and 2005          

Note 1 - Organization and summary of significant
accounting policies:

Following is a summary of our organization and
significant accounting policies:

Organization and nature
of business –Sprout Development Inc. (identified in these
footnotes as “we” or the Company) is an Alberta, Canada corporation
incorporated on July 19, 2004. We are currently based in Calgary,
Alberta, Canada. We use a July 31 fiscal year for financial reporting
purposes.

Our president owns 78% of
our shares and Puroil Technology, Inc. of Calgary, Alberta, Canada,
owns 22% of our shares.

We intend to market web
based software that provides a non-confrontational method for parents
to communicate the schedules of their children in a co-parenting
environment.

To date, our activities
have been limited to formation, the raising of equity capital, and the
development of a business plan. We have engaged a financial consulting
firm to assist us in registering securities for trading by filing with
the U.S. Securities and Exchange Commission. In the current development
stage, we anticipate incurring operating losses as we implement our
business plan.

Basis of presentation -The
accounting and reporting policies of the Company conform to U.S.
generally accepted accounting principles applicable to development
stage enterprises. The financial statements have been presented in U.S.
dollars, which is our functional currency.

Use of estimates -The
preparation of financial statements in conformity with 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 amount of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.

Cash and cash
equivalents -For purposes of the statement of cash flows, we
consider all cash in banks, money market funds, and certificates of
deposit with a maturity of less than three months to be cash
equivalents.

Accounting for
long-lived assets– Impairment of long-lived assets is recognized
when the fair value of a long-lived asset is less than its carrying
value. At the end of the current year, no impairment of long-lived
assets had occurred, in management’s opinion.

Property and equipment
and depreciation –Property and equipment are stated at cost less
accumulated depreciation computed principally accelerated methods over
the estimated useful lives of the assets. Estimated lives of
depreciable assets are five years.

Deferred registration
costs– Legal and other expenses related to the filing of a
registration statement with the Securities and Exchange Commission, as
described in Note 3 below, will be deferred until the stock offering is
completed, at which time they will be charged against the proceeds of
the stock offering.

F-7

---

|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Notes to Financial Statements   
|July
31, 2006 and 2005          

Intangible assets –
We acquired a software license from our majority shareholders in
exchange for common stock. SEC rules dictate that transfers of
nonmonetary assets to a company by its promoters or shareholders in
exchange for stock prior to or at the time of the company's initial
public offering should be recorded at the transferors' historical cost
basis determined under generally accepted accounting principles. Since
the shareholders had no cost basis in the license, no value was
recorded for it.

Fair value of financial
instruments and derivative financial instruments- The carrying
amounts of cash, receivables, and current liabilities approximate fair
value because of the short maturity of these items. These fair value
estimates are subjective in nature and involve uncertainties and
matters of significant judgment, and, therefore, cannot be determined
with precision. Changes in assumptions could significantly affect these
estimates. We do not hold or issue financial instruments for trading
purposes, nor do we utilize derivative instruments in the management of
our foreign exchange, commodity price or interest rate market risks.

Canadian income taxes
- Deferred income taxes are reported for timing differences between
items of income or expense reported in the financial statements and
those reported for income tax purposes in accordance with Statement of
Financial Accounting Standards number 109 Accounting for Income
Taxes, which requires the use of the asset/liability method of
accounting for income taxes. Deferred income tax expenses and benefits
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and for
tax loss and credit carryforwards. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected
to be recovered or settled. The Company provides deferred taxes for the
estimated future tax effects attributable to temporary differences and
carryforwards when realization is more likely than not.

Net income per share of
common stock – We follow FASB Statements pertaining to Earnings
per Share, which require presentation of basic and diluted EPS on
the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. In the accompanying
financial statements, basic earnings per share of common stock is
computed by dividing net income by the weighted average number of
shares of common stock outstanding during the period. Because we
experienced an operating loss during the period, the calculation of
diluted earnings per share did not include the warrants described in
Note 5, below, as the calculation would have been antidilutive.

Note 2 – Future operations:

At July 31, 2006, we were not currently engaged in
an operating business and expect to incur development stage operating
losses until we commence operations and implement our business plan. We
intend to rely on our officers and directors to perform essential
functions without compensation until a business operation can be
commenced. Management believes we have sufficient capital to implement
our business plan and to complete a stock offering (see Note 3 below),
and thus will continue as a going concern during this period while the
plans are implemented. For the year ended July 31, 2006, $10,000 was
recorded as contributed capital for the value of management services
contributed by the officers and directors for which no payment was made
or shares were issued. For the year ended July 31, 2005, nothing was
recorded, as the amount was not considered material to the statements.

F-8

---

|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Notes to Financial Statements   
|July
31, 2006 and 2005          

Note 3 – Commitments:

We have engaged a financial consulting firm to
assist us in filing a registration statement with the U.S. Securities
and Exchange Commission to allow us to offer stock for sale to the
public. We believe that doing this will enable us to raise the capital
necessary to implement our business plan. Our financial consultant
agreed to perform the services necessary to file a Form F-1 with the
SEC, and to file with NASD to obtain an over-the-counter bulletin board
listing, for a fixed fee of $9,000, payable as prescribed milestones
are met. Additional compensation of $3,000 and 25,000 shares of common
stock are due upon the consultant’s successful efforts in placing us
with a market maker. Through July 31, 2006, $7,000 had been paid to the
firm under the agreement.

These and other related costs are being deferred
until the stock offering is completed, at which time they will be
charged against the proceeds of the stock offering.

The Form F-1 became effective August 17, 2005, and
the OTCBB listing became effective on November 13, 2006. Accordingly,
additional payments of $5,000 in cash and 25,000 shares of our common
stock will be made after July 31, 2006.

Note 4 - Canadian income tax:

We follow Statement of Financial Accounting
Standards Number 109 (SFAS 109), Accounting for Income Taxes.
Deferred income taxes reflect the net effect of (a) temporary
difference between carrying amounts of assets and liabilities for
financial purposes and the amounts used for income tax reporting
purposes, and (b) net operating loss carryforwards. No net provision
for Canadian income tax has been made in the accompanying statement of
operations because no recoverable taxes were paid previously.
Similarly, no deferred tax asset attributable to the net operating loss
carryforward has been recognized, as it is not deemed likely to be
realized.

The provision for refundable Canadian income tax
consists of the following:

| |                                                 |   | Year Ended |   |   | Year Ended |  
| | ----------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                 |   | July 31,   |   |   | July 31,   |  
| |                                                 |   | 2006       |   |   | 2005       |  
| | Refundable Canadian income tax
attributable to: |   |            |   |   |            |  
| | Current operations                              | $ | 8,000      |   | $ | 4,400      |  
| | Nondeductible expenses                          |   | (3,400     | ) |   | -          |  
| | Less, Change in valuation allowance             |   | (4,600     | ) |   | (4,400     | )
| | Net
refundable amount                           | $ | -          |   | $ | -          |  

The cumulative tax effect at the expected rate of
34% of significant items comprising our net deferred tax amount as of
July 31, 2006 is as follows:

F-9

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|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Notes to Financial Statements   
|July
31, 2006 and 2005          

| |                                     |   | July 31, |   |   | July 31, |  
| | ----------------------------------- | - | -------- | - | - | -------- | -
| |                                     |   | 2006     |   |   | 2005     |  
| | Deferred tax asset
attributable to: |   |          |   |   |          |  
| | Net operating loss carryover        | $ | 9.200    |   | $ | 4,600    |  
| | Less, Valuation
allowance           |   | (9,200   | ) |   | (4,600   | )
| | Net deferred tax asset              | $ | -        |   | $ | -        |  

At July 31, 2006, we had an unused net operating
loss carryover approximating $27,200 that is available to offset future
taxable income; it expires beginning in 2024.

Note 5 – Issuance of shares and warrants:

As of July 31, 2006, the Company had issued shares
of its Class A, voting, no par value common stock as follows:

Price PerDate
      Description
      Shares
      Price Per Share
      Amount07/19/04
      Shares issued for
cash and software
      13,990,000
      $0.000000715
      $10license*07/19/04
      Shares issued for
cash and software
      10,000
      $0.000000715
      -license*07/21/04
      Shares issued for
cash
      1,875,000
      $0.02
      37,50007/23/04
      Shares issued for cash
      1,300,000
      $0.02
      26,00007/26/04
      Shares issued for
cash
      625,000
      $0.02
      12,50007/28/04
      Shares issued for cash
      200,000
      $0.02
      4,00007/31/05
      Cumulative
Totals
      18,000,000
      
      $80,010


* Restricted shares issued to officers of the
Company were subscribed and issued at July 31, 2004, but not paid. The
subscriptions were fully paid on September 9, 2004. Pursuant to EITF
Abstract 85-1, the issuance of the shares has been recorded at July 31,
2004. In connection with the issuance of these shares, we also received
an exclusive software license for a divorced-parent,
child-time-management software concept. We have determined that the
software license had no fair value at the time of issuance. Moreover,
SEC rules dictate that transfers of nonmonetary assets to a company by
its promoters or shareholders in exchange for stock prior to or at the
time of the company's initial public offering should be recorded at the
transferors' historical cost basis determined under generally accepted
accounting principles. Therefore, since the shareholders had no cost
basis in the license, capital stock has been credited only in the
amount of the cash received.

In connection with the sale of 4,000,000 shares for
cash noted above, we also issued 4,000,000 warrants to the same
purchaser. The warrants became effective on August 17, 2005, concurrent
with the effective date of the Form F-1 that we filed, and expired one
year later. They allowed the holder to purchase 1 share of common stock
for each 2 warrants tendered, at a price of $0.10 per share. Under
certain circumstances, based on the performance of our stock on the
open market, we could have redeemed the warrants for $0.0001 per share.
At the time of issuance, management determined that the warrants did
not have any fair market value. None of the warrants were exercised by
August 17, 2006.

F-10

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|SPROUT DEVELOPMENT INC.         
|--------------------------------
|(A development stage enterprise)
|Notes to Financial Statements   
|July
31, 2006 and 2005          

We are also authorized to issue an unlimited number
of Class B voting common shares, Class C non-voting common shares, and
Class D non-voting common shares, and 5,000,000 shares of Class E
non-voting preferred shares. None of these other classes of shares had
been issued at the date of the financial statements.

Note 6 - New accounting pronouncements:The
following recent accounting pronouncements:

|• | FASB Statements         
|- | ------------------------
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  | •                       
|  |                         
|• | and FASB Interpretations
|  | •                       
|  | •                       
|  | •                       

are not currently expected to have a material effect
on our financial Statements.

F-11

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