ITEM 1. BUSINESS
Original Source Entertainment, Inc. (the “Company”, the “registrant”, “we”, “us”, “our”, or “Original Source”) was incorporated under the laws of the State of Nevada on August 20, 2009. We are a development stage company, formed to license songs to the television and movie industry. From our inception we have generated very little revenues, and our operations have been primarily limited to organizational, start-up, and capital formation activities. We have historically and currently have no employees other than our officers.
We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. We have not made any significant purchase or sale of assets, nor has the registrant been involved in any mergers, acquisitions or consolidations. We do not believe that we are a blank check registrant as that term is defined in Rule 419(a)(2) of Regulation C of the Securities Act of 1933, because we have a specific business plan and purpose. We do not have any definitive plans, proposals, arrangements or understandings with any representatives of the owners of any operating business or company regarding the possibility of an acquisition or merger.
In 2000, Lecia L. Walker assisted in launching Private Wavs, a successful music library which licenses music to television and film, along with her husband at that time. Part of her role in that endeavor was to do the market research, product and packaging design, sales and marketing. In 2007, she sold her interest in Private Wavs and in 2008, started a new music library under a DBA of Original Source Music. Since that time she has placed more than 1,100 songs under contract.
On August 21, 2009, Ms. Walker granted a license for a period of ten (10) years for the entire list of songs to the registrant under a License and Assignment Agreement. Pursuant to the License and Assignment Agreement, Ms. Walker was issued 3,000,000 of our common shares.
On March 5, 2014, Ms. Walker and E. Lynn Atwood, a former director, sold an aggregate of 3,500,000 shares of our common stock, representing approximately 69% of our issued and outstanding shares of common stock, to Amer Samad. As a result, Mr. Samad was appointed our Chief Executive Officer, and Ms. Walker resigned from all officer positions but remained a director subject to her resignation as such 10 days after the expected filing of a Schedule 14-F by the Company with the Securities and Exchange Commission. As of the date of filing of this Annual Report on Form 10-K, no such Schedule 14-F has been filed by the Company and the Company has no intention of doing so at this time.
Operations
Our business plan is to review music tracks written, produced, and performed by artists who have not already signed away their rights to their original works, then to attempt to contract those songs that we believe have the highest quality and potential for placement in television and film. The registrant intends to offer a wide variety of instrumental and vocal genres including pop, rock, R&B, jazz, country, singer/songwriter, new age, electronic, dance, funk, children's, adult contemporary, and more.
We contract with artists of all musical genres who own the publishing rights to their songs. We expect to sell the songs to television companies that produce shows for major television networks. We have signed contracts with approximately 217 artist/composers. The contracts give the registrant non-exclusive licensing rights and publishing rights in perpetuity. The artists retain writer's rights and are given exposure to television and film through the registrant's catalog.
Artists are referred to the registrant through advertisement, A&R companies, and referrals from friends, registrant signed artists, and other music industry acquaintances.
Customers have included the CBS, NBC and Warner Bros. television networks in Los Angeles, California (the home networks, not the local affiliates). Historically, Warner Bros. generated approximately 90% of our revenues, NBC generated approximately 5% of our revenues, and CBS generated approximately 5% of our revenues. A major production company whose name is proprietary has assisted in placing our music in these major networks and their efforts account for approximately 80% of the revenue received from those major networks. Our target customer includes all other major and minor television networks, production companies and film makers. We intend to reach such customer bases through marketing, advertising, and direct sales calls.
Our website's main purpose is to provide customers with immediate access to the registrant's catalog. To prevent illegal art exploitation, customers must have a login and password to access the registrant's website. Customers are given access to the website only after verification of their role in the professional production industry.
We intend to:
·Advertise through the placement of advertisements in film, television and music industry magazines and on film, television and music industry websites
·Market and promote the catalog by sending out regular e-mails and snail-mails highlighting particular artists, songs, or genres of music, and send out promotional products to promote branding and
·Create a sales team through the hiring of salespeople to research, contact and develop service relationships with new customers.
Typical initial revenues per use in a production vary from $500 to $5,000 or more depending on the potential exposure and audience reach. Royalty revenues have the same value range for the first public airing and are reduced for each re-run, but continue for every public airing forever.
We believe we will be able to attract recording artists to our development stage company as artists want public exposure for their original works and payment for that exposure, which we offer the potential of providing at no cost to the artist.
We intend to focus on the source music niche of music licensing, but provide music for background, and transitional uses as well. The source music niche is music that is coming from a source in the production and is heard by the characters in the production; such as music being played in a coffee house that the characters are in, or music being played on a radio in the production. Currently the registrant has more than 1,100 songs available for licensing, and expects to sign more songs to be added to the catalog to be made available for television and film applications. All genres of music are considered for addition to our catalog with a focus on vocal tracks. Signing new songs is a process which involves artist relations such as discussing the contract with the artist, and familiarizing the artist with royalties, performing rights organizations, and rights to their art. It also involves reviewing the songs submitted by the artist, deciding which songs to contract, making a contract offer to the artist, preparing, sending and signing the contracts, obtaining specific descriptions and details of the songs from the artists, converting the songs into a variety of digital formats and cataloguing the songs with the appropriate performing rights organization and the registrant's music catalog.
The customer has access to these songs in a variety of ways, including logging into our website at www.originalsourcemusic.com where they may search for several songs that are appropriate for their needs and download them directly into their production editing program.
Growth Strategy
We intend to focus on the addition of cues and transitional music for commercials and television programming transitions, something we believe our major competitors do not seem to do at present. Cues and transitional music is instrumental music that is played when commercials segue into and out of a program. Television programming transitions are the programming that transitions one show into another show or into or out of a commercial. By becoming more established in the source music niche, we expect that our company will be well known by key decision makers in the purchasing and licensing departments employed by our customers. By fostering such relationships, these decision makers may readily approve potential licenses in other areas of music placement such as cues and transitional music. Once we gain access to this market, our sales force is expected to begin to target potential customers such as news programs, weather programs, and advertising agencies.
We intend to examine signing genres of music that are in demand by potential customers but are not available from its competitors at present. We will also examine the creation of a recording label to give the general public access to purchasing the songs in its catalog.
Revenue
We receive revenues in two ways:
·Commercial productions pay licensing fees to place a track into their production.
·We own the publishing rights to all of our songs, and when a production containing a track licensed from the registrant is aired through a public venue, royalties are paid to the registrant by the assigned performing rights organization, such as American Society of Authors and Composers, Broadcast Music, Inc. or Society of European Stage Authors & Composers. These three performing rights organizations represent songwriters and publishers in the U.S. and their right to be compensated for having their music performed in public.
We do not anticipate that revenues will significantly increase until we are able to heavily market our catalog. If we are unable to raise the funds needed, which may be substantial, we may be unable to generate any material revenues.
Competition
The music industry is intensely competitive and fragmented. We intend to compete on the basis of price and selection against other small companies like ours, as well as large companies that have a similar business and large marketing companies.
Some of our major competitors are:
Heavy Hitters Music: Heavy Hitters Music has been in the music licensing business for over 30 years and we believe to be the pioneer of the source music niche. Their website boasts a catalog of over 10,000 music tracks.
MasterSource: We believe that MasterSource became the first real source music competitor for Heavy Hitters when it was formed in 1992 by Marc Ferrari. MasterSource seems to be the first and only competitor with tracks available to the general public.
Killer Tracks: Killer Tracks has been in business for twenty years according to their website, and offers over 2,200 digital albums from more than 20 global libraries. We believe only a small fraction of such digital albums includes source music.
Free Play Music: Free Play Music has a large variety of production music, and a growing number of source music tracks.
Sync Free Music: Sync Free Music has a large variety of production music, and a growing number of source music tracks.
Pump Audio: Pump Audio started in 2001 and is now part of Getty Images Music.
Patents and Trademarks
We do not, at this time, have any patents or trademarks.
Employees
At this time, we have no employees other than our executive officer who is also a director. All functions including development, strategy, negotiations and administration are currently being provided by our executive officer and directors.
We do not foresee any significant changes in the number of employees or consultants we will have over the next twelve months.
Reports to Security Holders
We file annual, quarterly and other reports with the Securities and Exchange Commission. Although we will not be required to deliver our annual or quarterly reports to security holders, we intend to forward this information to security holders upon receiving a written request to receive such information. The reports and other information filed by us will be available for inspection and copying at the public reference facilities of the Securities and Exchange Commission located at 100 F Street N.E., Washington, D.C. 20549.
Copies of such material may be obtained by mail from the Public Reference Section of the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission maintains a World Wide Website on the Internet at: http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.
ITEM 1A.
ITEM 1A. RISK FACTORS
Not applicable to a smaller reporting company.
ITEM 1B.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2.
ITEM 2. PROPERTIES
The address of our principal executive office is 24 Turnberry Dr., Williamsville NY 14221, in the offices of Mr. Samad supplied at no charge to the registrant. We believe that our current office space will be adequate for the foreseeable future. Our telephone number is (718)-902-740.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There is no litigation pending or threatened by or against Original Source.
ITEM 4.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
There has been no trading market for our common stock since inception. There can be no assurance that a trading market will ever develop or, if such a market does develop, that it will continue.
There were approximately 34 record holders of our common stock as of March 31, 2015.
Holders of our common stock are entitled to receive such dividends as may be declared by our board of directors. No dividends on our common stock have ever been paid, and we do not anticipate that cash dividends will be paid on our common stock in the foreseeable future.
No securities are authorized for issuance by the registrant under equity compensation plans.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable to a smaller reporting company.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
Statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operation, as well as in certain other parts of this Annual Report on Form 10-K (as well as information included in oral statements or other written statements made or to be made by Original Source) that look forward in time, are forward-looking statements made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, and assumptions and other statements which are other than statements of historical facts. Although Original Source believes such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements are subject to, and are qualified by, known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by those statements. These risks, uncertainties and other factors include, but are not limited to Original Source’s ability to estimate the impact of competition and of industry consolidation and risks, uncertainties and other factors set forth in Original Source’s filings with the Securities and Exchange Commission, including without limitation to this Annual Report on Form 10-K.
Original Source undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-K.
General
We were incorporated under the laws of the State of Nevada on August 20, 2009. We are a development stage company, formed to license songs to the television and movie industry. From our inception to date, we have generated very little revenues, and our operations have been limited to organizational, start-up, and capital formation activities. We currently have no employees other than our sole officer, who are also a director.
We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. We have not made any significant purchase or sale of assets, nor has the registrant been involved in any mergers, acquisitions or consolidations. We do not believe that we are a blank check registrant as that term is defined in Rule 419(a)(2) of Regulation C of the Securities Act of 1933, because we have a specific business plan and purpose. We do not have any definitive plans, proposals, arrangements or understandings with any representatives of the owners of any operating business or company regarding the possibility of an acquisition or merger.
On March 5, 2014, Lecia L. Walker and E. Lynn Atwood, a former director, sold an aggregate of 3,500,000 shares of our common stock, representing approximately 69% of our issued and outstanding shares of common stock, to Amer Samad. As a result, Mr. Samad was appointed our Chief Executive Officer, and Ms. Walker resigned from all officer positions but remained a director subject to her resignation as such 10 days after the expected filing of a Schedule 14-F by the Company with the Securities and Exchange Commission. As of the date of filing of this Annual Report on Form 10-K, no such Schedule 14-F has been filed by the Company and the Company has no intention of doing so at this time.
Critical Accounting Policies
The following discussion as well as disclosures included elsewhere in this Form 10-K are based upon our audited financial statements and notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. Original Source continually evaluates the accounting policies and estimates used to prepare the financial statements. Original Source bases its estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.
See also Note 1 to our consolidated financial statements in Item 8 of this Report.
Trends and Uncertainties
There are no material commitments for capital expenditures at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on our limited operations. There are no known causes for any material changes from period to period in one or more line items of Original Source’s financial statements.
Results of Operations for the Year Ended December 31, 2014 compared to the Year Ended December 31, 2013.
We generated revenue of $773 in 2014 compared to $1,249 in 2013. We incurred a net loss of $36,244 in 2014 compared to a net loss of $30,554 in 2013. General and administrative expenses and professional fees were $36,687 in 2014 compared to $26,342 in 2013, an increase of $10,345. General and administrative expenses, which consist of fees paid for legal, accounting, and auditing services, were incurred primarily to enable Original Source to satisfy the requirements of a reporting company.
Liquidity and Capital Resources
At December 31, 2014, Original Source had a cash balance of $205, which is a $320 decrease from the $525 balance at December 31, 2013. This decrease is a result our operating losses exceeding the financing we received from related party borrowings.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, Original Source has incurred losses of $36,244 and $30,554 for the years ended December 31, 2014 and 2013, respectively, and a working capital deficiency which raises substantial doubt about the Company’s ability to continue as a going concern.
Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms.
The Company’s continuation as a going concern is dependent upon its ability to ultimately attain profitable operations, generate sufficient cash flow to meet its obligations, and obtain additional financing as may be required. Our auditors have included a “going concern” qualification in their auditors’ report dated April 15, 2015. Such a “going concern” qualification may make it more difficult for us to raise funds when needed. The outcome of this uncertainty cannot be assured.
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve Original Source’s operating results.
Operating Activities
We used cash of $26,173 in operating activities in the twelve months ended December 31, 2014 compared to cash of $25,093 used in operating activities in the twelve months ended December 31, 2013. During the twelve months ended December 31, 2014 we incurred losses of $36,244 which were partially offset for cash flow purposes by an increase in accounts payable and accrued liabilities of $9,741 and by non-cash expenses of $330. By comparison, during the twelve months ended December 31, 2013 we incurred losses of $30,554 which we partially offset for cash flow purposes by non-cash expenses of $4,000 and an increase in accounts payable and accrued expenses of $1,461.
Investing Activities
We neither generated nor used cash in investing activities during the twelve months ended December 31, 2014 or 2013.
Financing Activities
For the year ended December 31, 2014, we received advances of $22,628 from a related party and a further $3,225 by way of convertible note payable from a former related party. As a result, we received net cash totaling $25,853 from financing activities during the year ended December 31, 2014.
By comparison, during the For the year ended December 31, 2013, we received $7,000 by way of note payable, $4,000 by way of convertible notes and by way of capital contribution, all form Mrs. Walker. Consequently, we received net cash provided by financing activities of $24,500 during the year ended December 31, 2013.
Recently Issued Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.
Off Balance Sheet Arrangements
None.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to a smaller reporting company.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements and corresponding notes thereto called for by this item appear at the end of this document commencing on page 20.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:
Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of December 31, 2014. Based on this evaluation, our chief executive officer and principal financial officer have concluded such controls and procedures to be ineffective as of December 31, 2014 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting:
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is the process designed by and under the supervision of our CEO and CFO, or the persons performing similar functions, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. Management has evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control over Financial Reporting - Guidance for Smaller Public Companies.
Under the supervision and with the participation of our CEO and CFO, or the persons performing similar functions, our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2014, and concluded that it is not effective because of the material weakness described below:
In connection with the preparation of our financial statements for the year ended December 31, 2014, due to resource constraints, material weaknesses became evident to management regarding our inability to generate all the necessary disclosure for inclusion in our filings with the Securities and Exchanges Commission due to the lack of resources and segregation of duties. A material weakness is a significant deficiency in one or more of the internal control components that alone or in the aggregate precludes our internal controls from reducing to an appropriately low level the risk that material misstatements in our consolidated financial statements will not be prevented or detected on a timely basis.
We intend to recruit experienced professionals, as our business conditions warrant, to ensure that we include all necessary disclosure in our filings with the Securities and Exchange Commission. Although we believe that this corrective step will enable management to conclude that the internal controls over our financial reporting are effective when the staff is trained, we cannot provide assurance that these steps will be sufficient. We may be required to expend additional resources to identify, assess and correct any additional weaknesses in internal control.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the registrant’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the registrant to provide only management’s report in this annual report.
Evaluation of Changes in Internal Control over Financial Reporting:
Under the supervision and with the participation of our CEO and CFO, or those persons performing similar functions, our management has evaluated changes in our internal controls over financial reporting that occurred during the quarter ended December 31, 2014. Based on that evaluation, our CEO and CFO, or those persons performing similar functions, did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Important Considerations:
The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
ITEM 9B.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
(a) Identity of Officers and Directors
Our bylaws provide that the number of directors who shall constitute the whole board shall be such number as the board of directors shall at the time have designated. Each director shall be selected for a term of one year and until his successor is elected and qualified. Vacancies are filled by a majority vote of the remaining directors then in office with the successor elected for the unexpired term and until the successor is elected and qualified.
The officers and directors are as follows:
Lecia L. Walker. Lecia L. Walker has been involved in the entertainment industry for over 27 years. From 2007 (inception) to 2014, Ms. Walker has owned and operated Original Source Music, Inc., a music library. From 2000 - 2007, Ms. Walker assisted in launching Private Wavs, a music library which licenses music to television and film. In preparation for the launch, she conducted the market research, product and packaging design, sales, and marketing for the entity.
While in school, Ms. Walker was an extra in the movie, Footloose, modeled for ZCMI department stores, and performed in various community, high school, and college productions. From 1997 to 1998, Ms. Walker interned at KZLA radio station in Los Angeles, CA where she gained extensive understanding of all aspects of radio. During 1997 and 1998, Ms. Walker was a DJ for KSBR radio in Orange County, CA and created and produced her own children's radio program, Bedtime Stories with Aunt Clara while there. From 1987 to 1997, Ms. Walker worked as a personal assistant for C.B. Walker, a singer/songwriter, where she learned the ins and outs of publishing and recording contracts, record sales, and top-10 radio hits in the United States and Europe. Ms. Walker received her bachelor's degree in biology from California State University Long Beach in 1993, and her master's degree in business administration from the University of Phoenix in 2010.
Ms. Walker resigned as our Chief Executive Officer, Chief Financial Officer and Controller on March 6, 2014.
Amer Samad. Amer Samad was appointed as Chief Executive Officer and as a director on March 6, 2014. Mr. Samad completed his undergraduate degree at the State University of New York at Buffalo with concentrations in Financial Analysis and Marketing. He later studied Real Estate Development and Real Estate Finance at the Massachusetts Institute of Technology and went on to found in November 2007, Samad Holdings & Construction Corp., a real estate development company based in Buffalo, New York that specializes in single-family residential and multi-family development in the United States and Canada. Since January 2013, Mr. Samad has been enrolled in the Masters in Business Administration program at Columbia Business School.
Directors are elected for one-year terms.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act requires Original Source's officers and directors, and persons who beneficially own more than ten (10%) percent of a class of equity securities registered pursuant to Section 12 of the Exchange Act, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the principal exchange upon which such securities are traded or quoted. Reporting Persons are also required to furnish copies of such reports filed pursuant to Section 16(a) of the Exchange Act with Original Source.
Based solely on review of the copies of such forms furnished to Original Source, Original Source's two directors did not file their reports in 2014 on a timely basis.
Code of Ethics
We have not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.
Corporate Governance
There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors. In addition to having no nominating committee for this purpose, we currently have no specific audit committee and no audit committee financial expert. Based on the fact that our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
None of our current or former executive officers or directors received any compensation for services in 2014 or 2013.
We do not have any arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.
Our directors and officers do not have unexercised options, stock that has not vested, or equity incentive plan awards.
We do not currently have a stock option plan. No individual grants of stock options, whether or not in tandem with stock appreciation rights known as SARs or freestanding SARs have been made to any executive officer or any director since our inception; accordingly, no stock options have been granted or exercised by any of the officers or directors since inception.
We do not have any long-term incentive plans that provide compensation intended to serve as incentive for performance. No individual grants or agreements regarding future payouts under non-stock price-based plans have been made to any executive officer or any director or any employee or consultant since our inception; accordingly, no future payouts under non-stock price-based plans or agreements have been granted or entered into or exercised by our officer or director or employees or consultants since inception.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2015, the number and percentage of our outstanding shares of common stock owned by (i) each person known to us to beneficially own more than 5% of our outstanding common stock, (ii) each director, (iii) each named executive officer, and (iv) all officers and directors as a group. Except as otherwise provided, the address of each such person is the Company’s address at 24 Turnberry Dr., Williamsville, NY 14221.
Based upon 5,073,000 outstanding common shares as of March 31, 2015.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Lecia L. Walker and Amer Samad are not independent as such term is defined by a national securities exchange or an inter-dealer quotation system. During the years ended December 31, 2014 and 2013, there were no transactions with related persons, other than (a) the License and Assignment Agreement with Ms. Walker discussed earlier in this Form 10-K, (b) the forgiveness of certain interest bearing and convertible notes payable to Ms. Walker discussed elsewhere in this Form 10-K, (c) the advance of $32,594 as of December 31, 2014 by Mr. Samad to pay for operating expenses of the Company and (d) as set forth below in this Item 13. See notes 3-5 of the Notes to the Audited Consolidated Financial Statements of the Company included in this Annual Report on Form 10-K.
Our administrative functions have been operated from the home of Ms. Walker and the offices of Mr. Samad. We do not pay Ms. Walker or Mr. Samad for use of such space.
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed and estimated to be billed for the fiscal years ended December 31, 2014 and 2013 for professional services rendered by our auditor for the audit of our annual financial statements and review of the financial statements included in our quarterly reports or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2014 and 2013, were approximately $10,850 and $7,500, respectively.
Audit Related Fees
The aggregate fees billed for the fiscal years ended December 31, 2014 and 2013 for assurance and related services by our auditor that are reasonably related to the performance of the audit or review of the registrant's financial statements for that fiscal year were $0 and $0.
Tax Fees
We did not incur any aggregate tax fees and expenses from our auditor for the 2014 and 2013 fiscal years for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
We did not incur any other fees from our auditor for the 2014 and 2013 fiscal years.
The board of directors, acting as the Audit Committee considered whether, and determined that, the auditor's provision of non-audit services was compatible with maintaining the auditor's independence. All of the services described above for fiscal year 2014 were approved by the board of directors pursuant to its policies and procedures.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)(1) List of financial statements:
Report of Independent Registered Public Accounting Firm
Consolidated balance sheets
Consolidated statements of operations
Consolidated statements of stockholders’ deficit
Consolidated statements of cash flows
Notes to consolidated financial statements
(a)(2) List of financial statement schedules included in Part IV hereof:
None.
The following exhibits are included herewith:
Exhibit No. Description
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certifications of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS* XBRL Instance Document(1)
101.SCH* XBRL Taxonomy Extension Schema Document(1)
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document(1)
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document(1)
101.LAB* XBRL Taxonomy Extension Label Linkbase Document(1)
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document(1)
__________
* XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
(1) To be filed by amendment.
Following are a list of exhibits which we previously filed in other reports which we filed with the SEC, including the Exhibit No., description of the exhibit and the identity of the Report where the exhibit was filed.
NO. DESCRIPTION FILED WITH DATE FILED
3.1 Articles of Incorporation Form S-1 October 10, 2010
3.2 Bylaws Form S-1 October 10, 2010
License and Assignment Agreement Dated August 21, 2009 Form S-1 October 10, 2010
ORIGINAL SOURCE ENTERTAINMENT, INC
Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Directors of
Original Source Entertainment, Inc.
Williamsville, NY
We have audited the accompanying balance sheets of Original Source Entertainment, Inc. as of December 31, 2014 and 2013 and the related statement of operations, changes in stockholders’ deficit and cash flows for the years then ended. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Original Source Entertainment, Inc. as of December 31, 2014 and 2013 and the related statement of operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements the Company has suffered losses from operations and currently does not have sufficient available funding to fully implement its business plan. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Wheat Ridge, formerly Arvada, Colorado
April 15, 2015
9605 West 49th Ave. Suite 200 Wheat Ridge, Colorado 80033 ~ Phone 303-968-3281 ~ Fax 303-456-7488 ~ www.cutlercpas.com
ORIGINAL SOURCE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of the consolidated financial statements
ORIGINAL SOURCE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
The accompanying notes are an integral part of the consolidated financial statements
ORIGINAL SOURCE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS' DEFICIT
The accompanying notes are an integral part of the consolidated financial statements
ORIGINAL SOURCE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of the consolidated financial statements
ORIGINAL SOURCE ENTERTAINMENT, INC.
NOTES TO THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2014 AND 2013
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Original Source Entertainment, Inc. (the “Company”), was incorporated in the State of Nevada on August 20, 2009 (“Inception”). The Company’s intent is to license songs to the television and music industry for use for use in television shows or movies. The Company has had limited activity and revenue to date.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s year-end is December 31.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of Original Source Entertainment, Inc. and its sole wholly owned subsidiary, Original Source Music, Inc. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Development Stage Company
The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities,” and among the additional disclosures required as a development stage company are that our financial statements were identified as those of a development stage company, and that the statements of operations, movement in stockholders’ equity (deficit) and cash flows disclosed activity since the date of our inception (August 20, 2009) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company elected to early adopt these provisions and consequently these additional disclosures are not included in these financial statements.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.
Accounts receivable
The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. At December 31, 2014 and 2013 the Company had no balance of accounts receivable.
Fair Value of Financial Instruments
FASB ASC 820-10 “Fair Value Measurements and Disclosures” defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This ASC also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).
The three levels of the fair value hierarchy are described below:
Level 1	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2	Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable data by correlation or other means.
Level 3	Inputs that are both significant to the fair value measurement and unobservable.
The carrying value of cash, accrued liabilities and loan payable - related party approximates their fair value due to their short-term maturity.
Property and equipment
Property and equipment are recorded at cost and depreciated under accelerated and straight line methods over each item's estimated useful life.
Long-Lived Assets
In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.
Income tax
The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company had no known material tax assets or liabilities as at December 31, 2014 and 2013.
Revenue recognition
The Company recognizes revenues in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” ("ASC-605"), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.
Products and services, geographic areas and major customers
The company derives revenue from the licensing of songs to the television and music industry. All fee revenues each year were domestic and to external customers.
Advertising costs
Advertising costs are expensed as incurred. The Company incurred no advertising costs during the twelve months ended December 31, 2014 or 2013.
Stock-based compensation
The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.
The Company did not have a stock compensation plan in operation during the twelve months ended December 31, 2014 or 2013.
Basic and Diluted Earnings (Loss) Per Share
The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period. Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive.
During the years ended December 31, 2014 and 2013, the Company did have potentially dilutive debt instruments outstanding that has been excluded from the earnings per share calculation, as such an inclusion would have been anti-dilutive due to losses incurred by the Company in both period and, therefore, basic and diluted earnings (loss) per share are equal in both periods.
Recent Accounting Pronouncements
We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company other than those relating to Development Stage Entities as discussed above.
NOTE 2. GOING CONCERN
The Company has suffered a loss from operations and has negative cash flows from operations, and in all likelihood will be required to make significant future expenditures in connection with marketing efforts along with general administrative expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. By doing so, the Company hopes to generate sufficient capital to execute its business plan of licensing songs to the television and music industry for use for use in television shows or movies on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.
NOTE 3: ADVANCES PAYABLE - RELATED PARTY
In support of the Company’s efforts and cash requirements, it may rely on advances from related parties until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. Amounts represent advances or amounts paid in satisfaction of liabilities. The advances are considered temporary in nature and have not been formalized by a promissory note.
During the twelve months ended December 31, 2014 a related party advanced to the Company $22,628 to pay for its operating expenses. As of December 31, 2014, the amount outstanding was $22,628. The note payable is non-interest bearing, due upon demand and unsecured.
The $952 loan balance at December 31, 2013 was forgiven in the year ended December 31, 2014. The gain on the forgiveness of this related party and recognized in additional paid in capital.
NOTE 4. NOTES PAYABLE - RELATED PARTY
Effective March 5, 2014, both of the interest bearing notes payable - related party, together with accrued interest of $1,242, were forgiven by the holder. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital.
NOTE 5. CONVERTIBLE NOTES PAYABLE - RELATED PARTY
(1)The convertible feature of the convertible note payable issued in the twelve months ended December 31, 2013 was valued at $16,000 on an intrinsic value basis. The valuation was based on the fact that 400,000 shares were issuable under the terms of note at $0.01 per share compared to the last cash price for the sale of the shares of $0.05. However, as the debt discount cannot exceed the face value of the loan note, $4,000 was recognized as a debt discount and amortized over the life of the loan note.
Effective March 5, 2014, both of these convertible notes payable - related party outstanding at December 31, 2013, were forgiven by the holder. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital.
On December 31, 2014 a former related party loaned the Company $3,255. The note is interest free until June 30, 2015 after which time it bear interest at 6%. The note is convertible at the option of the holder into shares of Original Source Music, Inc. common stock. The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note has a balance of $3,225 as of December 31, 2014 and matures on February 28, 2016. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded at beneficial conversion feature (capped at proceeds received) of $3,255. Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the effective interest rate method, over the life of the note.
NOTE 6. STOCKHOLDERS’ DEFICIT
Preferred Stock
The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001 per share.
No shares of preferred stock were issued and outstanding during the twelve months ended December 31, 2014 and 2013.
Common Stock
The Company is authorized to issue 45,000,000 shares of common stock with a par value of $0.001 per share.
During the twelve months ended December 31, 2014 the Company issued no shares of common stock.
As at December 31, 2014 there were 5,073,000 shares of common stock issued and outstanding.
Additional Paid in Capital
During the twelve months ended December 31, 2014, as described in Note 3, 4 and 5, related party shareholders forgave Company liabilities totaling $28,146. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital.
During the twelve months ended December 31, 2013, a shareholder contributed $13,500 to fund the Company’s ongoing activities. The shareholder did not receive any equity for the contribution and the contribution is not repayable. Accordingly this contribution has been credited to additional paid in capital.
NOTE 7 - INCOME TAXES
The Internal Revenue Code (“IRC”) allows net operating losses (“NOL's”) to be carried forward and applied against future profits for a period of twenty years.
We did not provide any current or deferred federal income tax provision or benefit for any of the periods presented in our consolidated financial statements because we have experienced losses since our inception. When it is more likely than not, that a tax asset cannot be realized through future income, we must record an allowance against any potential future tax benefit. We provided a full valuation allowance against our net deferred tax assets, consisting of net operating loss carry forwards, because we determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward periods.
We have not taken a tax position that, if challenged, would have a material effect on our consolidated financial statements for the years ended December 31, 2014 and 2013 as defined under ASC 740. We did not recognize any adjustment to our liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of our accumulated deficit on our consolidated balance sheets.
Our provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:
Changes in our cumulative net deferred tax assets consist of the following:
A reconciliation of our income taxes computed at the statutory rate is as follows:
NOTE 8. SUBSEQUENT EVENTS
In accordance with ASC 855-10, “Subsequent Events” the Company has analyzed its operations subsequent to December 31, 2014 to the date these financial statements were available to be issued and has determined that it does not have any material subsequent events to disclose in these financial statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ORIGINAL SOURCE ENTERTAINMENT, INC.
By: /s/ Amer Samad
Amer Samad
Chief Executive Officer
Dated: April 15, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Lecia L. Walker
Lecia L. Walker
Director
Dated: April 15, 2015
By: /s/ Amer Samad
Amer Samad
CEO and Director
Dated: April 15, 2015