SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) Securities Exchange Act of 1934 for Quarterly Period Ended June 30, 2014 |
-OR-
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities And Exchange Act of 1934 for the transaction period from _________ to________ |
Commission File Number: 333-169732
Original Source Entertainment, Inc.
(Exact name of Registrant in its charter)
| Nevada | 27-0863354 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
| 8201 South Santa Fe Drive #229, Littleton, CO | 80120 | |
| (Address of Principal Executive Offices | (Zip Code) |
Registrant's Telephone Number, Including Area Code: (303) 495-3728
Indicate by check mark whether the issuer (1) 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. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):
| Large accelerated filer | ¨ | Non-accelerated filer | ¨ | |
| Accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The number of outstanding shares of the registrant's common stock as of August 14, 2014 was 5,073,000 shares of its $.001 par value common stock.
ORIGINAL SOURCE ENTERTAINMENT, INC.
FORM 10-Q
INDEX
PART 1 – FINANCIAL INFORMATION
PART II - OTHER INFORMATION
| 1 |
Original Source Entertainment, Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
| June 30 2014 (unaudited) | December 31, 2013 (audited) | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 680 | $ | 525 | ||||
| Total current assets | 680 | 525 | ||||||
| Total Assets | $ | 680 | $ | 525 | ||||
| LIABILITIES & STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable – related party | $ | 8,370 | $ | 952 | ||||
| Note payable - related party | - | 22,000 | ||||||
| Convertible notes payable – related party | - | 6,000 | ||||||
| Accrued expenses | 11,702 | - | ||||||
| Accrued interest payable - related party | - | 1,864 | ||||||
| Total current liabilities | 20,072 | 30,816 | ||||||
| Total Liabilities | 20,072 | 30,816 | ||||||
| Stockholders' Deficit | ||||||||
| Preferred stock, $0.001 par value; 5,000,000 shares authorized; none issued and outstanding | - | - | ||||||
| Common stock, $0.001 par value; 45,000,000 shares authorized; 5,073,000 shares issued and outstanding as at June 30, 2014 and December 31, 2013, respectively | 5,073 | 5,073 | ||||||
| Additional paid in capital | 76,723 | 45,577 | ||||||
| Retained deficit | (101,188 | ) | (80,941 | ) | ||||
| Total Stockholders' Deficit | (19,392 | ) | (30,291 | ) | ||||
| Total Liabilities and Stockholders' Deficit | $ | 680 | $ | 525 | ||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
| 2 |
Original Source Entertainment, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(unaudited)
Three
Month | Three
Month | Six
Month | Six
Month | Cumulative | ||||||||||||||||
| Revenue earned during the development stage | $ | 303 | $ | 451 | $ | 468 | $ | 857 | $ | 9,601 | ||||||||||
| Cost of revenue | - | - | - | - | 2,138 | |||||||||||||||
| Gross profit | 303 | 451 | 468 | 857 | 7,463 | |||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| General and administrative | 16,322 | 15,246 | 20,385 | 18,637 | 102,457 | |||||||||||||||
| Total operating expenses | 16,322 | 15,246 | 20,385 | 18,637 | 102,457 | |||||||||||||||
| Income (Loss) from Operations | (16,019 | ) | (14,795 | ) | (19,917 | ) | (17,780 | ) | (94,994 | ) | ||||||||||
| Other and interest income (expense) | - | (4,327 | ) | (330 | ) | (4,650 | ) | (6,194 | ) | |||||||||||
| Income (loss) before provision for income taxes | (16,019 | ) | (19,122 | ) | (20,247 | ) | (22,430 | ) | (101,188 | ) | ||||||||||
| Income tax provision | - | - | - | - | - | |||||||||||||||
| Net Loss | $ | (16,019 | ) | $ | (19,122 | ) | $ | (20,247 | ) | $ | (22,430 | ) | $ | (101,188 | ) | |||||
| Net Loss Per Common Share: | ||||||||||||||||||||
| Net loss per common share - Basic and Diluted | $ | (0.00 | )* | $ | (0.00 | )* | $ | (0.00 | )* | $ | (0.00 | )* | ||||||||
| Weighted Average Number of Common Shares | ||||||||||||||||||||
| Outstanding - Basic and Diluted | 5,073,000 | 4,500,000 | 5,073,000 | 4,500,000 |
* denotes a loss of less than $(0.01) per share.
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
| 3 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS' DEFICIT
| Common Stock | ||||||||||||||||||||
| Shares | Amount ($0.001 Par) | Paid in Capital | Retained (Deficit) | Stockholders' Deficit | ||||||||||||||||
| Balances at August 30, 2009 – audited | - | $ | - | $ | - | $ | - | $ | - | |||||||||||
| Common stock issued for services | 3,000,000 | 3,000 | - | - | 3,000 | |||||||||||||||
| Common stock issued for cash | 1,000,000 | 1,000 | - | - | 1,000 | |||||||||||||||
| Net income (loss) for the period | - | - | - | (2,779 | ) | (2,779 | ) | |||||||||||||
| Balances at December 31, 2009 – audited | 4,000,000 | 4,000 | - | (2,779 | ) | (1,221 | ) | |||||||||||||
| Common stock issued for cash | 500,000 | 500 | - | - | 500 | |||||||||||||||
| Net income (loss) for the year | - | - | - | (6,044 | ) | (6,044 | ) | |||||||||||||
| Balances at December 31, 2010 - audited | 4,500,000 | 4,500 | - | (8,823 | ) | (4,323 | ) | |||||||||||||
| Common stock issued for cash | 573,000 | 573 | 28,077 | - | 28,650 | |||||||||||||||
| Net income (loss) for the year | - | - | - | (27,604 | ) | (27,604 | ) | |||||||||||||
| Balances at December 31, 2011 – audited | 5,073,000 | 5.,073 | 28,077 | (36,427 | ) | (3,277 | ) | |||||||||||||
| Net income (loss) for the year | - | - | - | (13,960 | ) | (13,960 | ) | |||||||||||||
| Balances at December 31, 2012 – audited | 5,073,000 | 5,073 | 28,077 | (50,387 | ) | (17,237 | ) | |||||||||||||
| Capital contribution from shareholder | - | - | 13,500 | - | 13,500 | |||||||||||||||
| Beneficial conversion feature of convertible note payable | - | - | 4,000 | - | 4,000 | |||||||||||||||
| Net income (loss) for the year | - | - | - | (30,554 | ) | (30,554 | ) | |||||||||||||
| Balances at December 31, 2013 – audited | 5,073,000 | 5,073 | 45,577 | (80,941 | ) | (30,291 | ) | |||||||||||||
| Forgiveness of convertible notes payable and accrued interest –related party | - | - | 6,952 | - | 6,952 | |||||||||||||||
| Forgiveness of notes payable and accrued interest –related party | - | - | 23,242 | - | 23,242 | |||||||||||||||
| Forgiveness of accounts payable – related party | - | - | 952 | - | 952 | |||||||||||||||
| Net income (loss) for the period | - | - | - | (20,247 | ) | (20,247 | ) | |||||||||||||
| Balances at June 30, 2014 – unaudited | 5,073,000 | $ | 5,073 | $ | 76,723 | $ | (101,188 | ) | $ | (19,392 | ) | |||||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
| 4 |
Original Source Entertainment, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six Month Period Ending June 30, 2014 | Six Month Period Ending June 30, 2013 | Cumulative From Inception (August 20,2009) Through June 30, 2014 | ||||||||||
| Operating Activities: | ||||||||||||
| Net Loss | $ | (20,247 | ) | $ | (22,430 | ) | $ | (101,188 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Accretion of debt discount | 330 | 4,000 | 4,330 | |||||||||
| Changes in Operating Assets and Liabilities- | ||||||||||||
| Accounts payable and accrued liabilities | 11,702 | 650 | 13,566 | |||||||||
| Accounts payable - related party | 8,370 | - | 9,322 | |||||||||
| Net Cash Provided by (Used in) Operating Activities | 155 | (17,780 | ) | (73,970 | ) | |||||||
| Investing Activities: | - | - | - | |||||||||
| Net Cash Used in Investing Activities | - | - | - | |||||||||
| Financing Activities: | ||||||||||||
| Notes payable – related party | - | 8,000 | 22,000 | |||||||||
| Notes payable | - | - | 6,000 | |||||||||
| Proceeds from issuance of common stock | - | 10,000 | 33.150 | |||||||||
| Capital contribution from shareholder | - | - | 13,500 | |||||||||
| Net Cash Provided by Financing Activities | - | 18,000 | 74,650 | |||||||||
| Net Change in Cash | 155 | 220 | 680 | |||||||||
| Cash - Beginning of Period | 525 | 1,118 | - | |||||||||
| Cash - End of Period | $ | 680 | $ | 1,338 | $ | 680 | ||||||
| Non-cash Financing and Investing Activities: | ||||||||||||
| Forgiveness of convertible notes payable and accrued interest –related party | $ | 6,952 | $ | - | $ | 6,952 | ||||||
| Forgiveness of convertible notes payable and accrued interest –related party | $ | 23,242 | $ | - | $ | 23,242 | ||||||
| Forgiveness of accounts payable – related party | $ | 952 | $ | - | $ | 952 | ||||||
| Supplemental Disclosures | ||||||||||||
| Cash paid in interest | $ | - | $ | - | $ | - | ||||||
| Cash paid for income taxes | $ | - | $ | - | $ | - | ||||||
The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.
| 5 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
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 and is in the developmental stage at this time.
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 filing of a Schedule 14-F by the Company with the Securities and Exchange Commission.
Basis of Presentation
The accompanying unaudited financial statements of Original Source Entertainment, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three and six month periods ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2013 included in our Form 10-K filed with the SEC.
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.
| 6 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
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 has not elected to early adopt these provisions and consequently these additional disclosures are 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 June 30, 2014 and December 31, 2013, the Company had no balance of accounts receivable.
Financial Instruments
The Company's financial instruments consist of cash, accounts payable related party and accrued expenses. The carrying value of the Company's financial instruments approximates their fair value because of the short maturity of these instruments
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.
| 7 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Income Taxes
Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes”. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years are subject to examination by Federal and state jurisdictions.
The Company classifies penalties and interest related to income taxes as income tax expense in the Statements of Operations.
Revenue recognition
The Company will recognize revenue 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 three and six months ended June 30, 2014 or 2013.
| 8 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
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 three and six month periods ended June 30, 2014 or 2013.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. During the three and six month periods ended June 30, 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 periods.
Recent Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations other than in respect of the adoption of the new regulations 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. There is no assurance that these events will be satisfactorily completed.
| 9 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
NOTE 3. NOTE PAYABLE - RELATED PARTY
| June 30, 2014 | December 31, 2013 | |||||||
| Balance due to a shareholder, unsecured, bears no interest until June 1, 2011, and 6% compounded monthly thereafter, with principal and interest due to be repaid in full at June 1, 2012. | $ | - | $ | 1,500 | ||||
| Balance due to a shareholder, unsecured, bears no interest until December 31, 2012 and 6% compounded monthly thereafter, with principal and interest due to be repaid in full at December 31, 2013. | - | 20,500 | ||||||
| Total | $ | - | $ | 22,000 | ||||
Effective March 5, 2014, both of these 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 4. CONVERTIBLE NOTES PAYABLE – RELATED PARTY
| June 30, 2014 | December 31, 2013 | |||||||
| Balance due to a shareholder, unsecured, bears no interest until December 31, 2010 and 6% compounded monthly thereafter, with principal and interest due to be repaid in full at December 31, 2013. The principal balance is convertible at the option of the holder into shares of the Company’s common stock at 50% of the lowest bid price of the Company’s common stock in the 5 days prior to conversion, if quoted on an exchange, or if not quoted, at double the par value. | $ | - | $ | 2,000 | ||||
| Balance due to a shareholder, unsecured, bears no interest until December 31, 2013 and 6% compounded monthly thereafter, with principal and interest due to be repaid in full at December 31, 2013. Any unpaid balance of principal or interest is convertible at the option of the holder into shares of the Company’s common stock at $0.01 per share | - | 4,000 | ||||||
| Total | $ | - | $ | 6,000 | ||||
| 10 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
NOTE 4. CONVERTIBLE NOTES PAYABLE – RELATED PARTY (continued)
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, together with accrued interest of $952, were forgiven by the holder. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital.
NOTE 5. 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 three and six months ended June 30, 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 three and six month periods ended June 30, 2014 the Company issued no shares of common stock.
As at June 30, 2014 there were 5,073,000 shares of common stock issued and outstanding.
Additional Paid in Capital
Effective March 5, 2014:
| - | the holder of both notes payable – related party forgave repayment of the principal balances of $22,000, together with accrued interest of $1,242. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital. |
| - | the holder of both of these convertible notes payable – related party forgave repayment of the principal balances of $6,000, together with accrued interest of $952. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital. |
| 11 |
ORIGINAL SOURCE ENTERTAINMENT, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013
AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014
NOTE 5. STOCKHOLDERS’ DEFICIT continued
| - | the creditor owning the balance of $952 of accounts payable related party forgave repayment of this liability. The gain arising on forgiveness of this liability has been recognized in additional paid in capital. |
NOTE 6. SUBSEQUENT EVENTS
In accordance with ASC 855-10. “Subsequent Events” the Company has analyzed its operations subsequent to June 30, 2014 to the date these financial statements were available to be issued on August 14, 2014 and has determined that it does not have any material subsequent events to disclose in these financial statements.
| 12 |
Item 2. 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 quarterly report on Form 10-Q (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 Quarterly Report on Form 10-Q.
Original Source undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.
Critical Accounting Policies
The following discussion as well as disclosures included elsewhere in this Form 10-Q are based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. These financial statements and accompanying notes 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.
Trends and Uncertainties
There are no material commitments for capital expenditure 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.
Liquidity and Capital Resources
At June 30, 2014, Original Source had a cash balance of $680, which represents a $155 increase from the $525 balance at December 31, 2013.
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 $20,247 and $22,430 for the six months ended June 30, 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 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.
| 13 |
Cash Flow from Operating Activities
During the six months ended June 30, 2014 we generated $155 from operating activities compared to $17,780 we used in operating activities during the six months ended June 30, 2013.
During the six months ended June 30, 2014 we incurred a loss of $20,247 which was offset for cash flow purposes by non-cash expenses of $330 and increases in accounts payable and accrued liabilities and accounts payable, related party of $11,702 and $8,370 respectively. By comparison, during the six months ended June 30, 2013 we incurred a loss of $22,430 which was offset for cash flow purposes by non-cash expenses of $4,000 and an increase in accounts payable and accrued liabilities and accounts payable of $650.
Cash Flow from Investing Activities
For the six months ended June 30, 2014 and 2013, we did not pursue any investing activities.
Cash Flow from Financing Activities
For the six months ended June 30, 2014, we did not pursue any financing activities.
By comparison during six months ended June 30, 2014 we received $18,000 from financing activities: we received $8,000 from notes payable–borrowings and $10,000 from the sale of shares of our common stock.
Results of Operations
Three months ended June 30, 2014 compared to the three months ended June 30, 2013
For the three months ended June 30, 2014, we earned revenues of $303. We had general and administrative expenses of $16,322. As a result, we had a net loss of $16,019 for the three months ended June 30, 2014.
For the three months ended June 30, 2013, we earned revenues of $451. We paid general and administrative expenses of $15,246, and interest expenses of $4,327. As a result, we had a net loss of $19,122 for the three months ended June 30, 2013.
The $3,103 decrease in net loss for the three months ended June 30, 2014 compared to the three months ended June 30, 2014 is primarily the result of the decreased interest expenses following the forgiveness of our related party debt in March 2014.
Six months ended June 30, 2014 compared to the six months ended June 30, 2013
For the six months ended June 30, 2014, we earned revenues of $468. We paid general and administrative expenses of $20,385 and interest expenses of $330. As a result, we had a net loss of $20,247 for the six months ended June 30, 2014.
Comparatively, for the six months ended June 30, 2013, we earned revenues of $857. We paid general and administrative expenses of $18,637 and interest expenses of $4,650. As a result, we had a net loss of $22,430 for the six months ended June 30, 2013.
The $2,183 decrease in net loss for the six months ended June 30, 2014 compared to the six months ended June 30, 2014 is primarily the result of the decreased interest expenses following the forgiveness of our related party debt in March 2014.
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.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations other than in respect of the adoption of the new regulations relating to Development Stage Entities as discussed above.
| 14 |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable for smaller reporting companies.
Item 4. Controls and Procedures
During the three months ended June 30, 2014, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 June 30, 2014. Based on this evaluation, our chief executive officer and principal financial officer have concluded such controls and procedures to be effective as of June 30, 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.
We were not subject to any legal proceedings during the three and six months ended June 30, 2014 and 2013 and currently we are not involved in any pending litigation or legal proceeding.
Not applicable for smaller reporting companies
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
No shares of unregistered common stock were sold during the three and six months ended June 30, 2014.
Item 3. Defaults Upon Senior Securities.
No shares of senior securities were issued or outstanding during the three and six months ended June 30, 2014.
Item 4. Mine Safety Disclosures
Not applicable
None
| 15 |
Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.INS** XBRL Instance Document
Exhibit 101.SCH** XBRL Taxonomy Extension Schema Document
Exhibit 101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document
Exhibit 101.DEF** XBRL Taxonomy Extension Definition Linkbase Document
Exhibit 101.LAB** XBRL Taxonomy Extension Label Linkbase Document
Exhibit 101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document
__________
* Filed herewith
**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.
Pursuant to the requirements 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.
Dated: August 18, 2014
ORIGINAL SOURCE ENTERTAINMENT, INC.
By: /s/ Amer Samad
Amer Samad
Chief Executive Officer
(Principal Executive Officer)
(Principal Financial Officer)
| 16 |
Exhibit 31
ORIGINAL SOURCE ENTERTAINMENT, INC.
CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Amer Samad, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Original Source Entertainment, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report, our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.
Date: August 18, 2014
| /s/ Amer Samad | |
| Amer Samad | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| (Principal Financial Officer) |
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Original Source Entertainment, Inc. (the "Company") on Form 10-Q for the quarter ended June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Amer Samad, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| /s/ Amer Samad | |
| Amer Samad | |
| Chief Executive Officer | |
| (Principal Executive Officer) | |
| (Principal Financial Officer) |
August 18, 2014