SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K

(Mark One)
 
xANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 31, 20112012
 
or
 
oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
Commission file number 333-108690
 
OSL HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
NEVADA98-0441032
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
1710 First Avenue60 Dutch Hill Road, Suite 15
New York,Orangeburg, NY
1002810962
(Address of principal executive offices)(Zip Code)
 
Registrant’s telephone number, including area code: 212-419-4900(845) 363-6776
 
Securities registered under Section 12(b) of the Exchange Act:
  
Title of each class registered:Name of each exchange on which registered:
NoneNone
 
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
(Title of class)
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act.
Yes o   No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o   No x
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the last 90 days. Yes xo No ox

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 (§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 o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. xo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 Large accelerated filer o
 Accelerated filer o
  
 Non-accelerated filer o  (do not check if smaller reporting company)
 Smaller reporting company x
  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes o  No þ

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter, February 28, 2011: $138,51129, 2012: $1,610,403

Number of the issuer’s Common Stock outstanding as of December 12, 2011:  59,368,2551, 2012:  117,121,248

Documents incorporated by reference: None.
Transitional Small Business Disclosure Format:   Yes x        No o
 
 
 
 
FORM 10-K
 
FOR THE YEAR ENDED AUGUST 31, 20112012
 
INDEX
INDEX

 
PART I  
   
Item 1.Business 3
Item 1A.Risk Factors 510
Item 1B.Unresolved Staff Comments 510
Item 2.Properties 510
Item 3.Legal Proceedings 510
Item 4.(Removed & Reserved)
Mine Safety Disclosures
 510
   
PART II  
   
Item 5.Market for the Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 511
Item 6.Selected Financial Data 611
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations 612
Item 7A.Quantitative and Qualitative Disclosure about Market Risk 918
Item 8.Financial Statements and Supplementary Data 918
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 918
Item 9A.Controls and Procedures 1019
Item 9B.Other Information 20
   
PART III  
   
Item 10.Directors, Executive Officers and Corporate Governance 1021
Item 11.Executive Compensation 1123
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 1224
Item 13.Certain Relationships and Related Transactions, and Director Independence 1325
Item 14.Principal Accounting Fees and Services 1326
   
PART IV  
   
Item 15.Exhibits, Financial Statement Schedules 1427
   
Signatures 1429
 
 
1
 
 
Unless specifically noted otherwise, this Annual Report on Form 10-K (this “Report”) reflects the business and operations of Red Rock Pictures Holdings, Inc., a Nevada corporation, prior to the share exchange with Office Supply Line, Inc., a Nevada company (“OSL”), which was completed on October 10, 2011 (the “Share Exchange”).  On October 17, 2011, we changed our name to OSL Holdings Inc, by filing a Certificate of Amendment to Articles of Incorporation with the State of Nevada to more accurately reflect our new business operations.  For a more complete discussion of the share exchange and the business and operations of OSL, please see our Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on October 19, 2011.

USE OF CERTAIN DEFINED TERMS

Except as otherwise indicated by the context, references in this report to “we,” “us,” “our,” “our Company,” or “the Company” are to the combined business of OSL Holdings Inc. and its consolidated subsidiaries.

In addition, unless the context otherwise requires and for the purposes of this report only:

·      
“Commission” refers to the Securities and Exchange Commission;
·      “Crisnic” refers to Crisnic Fund, S.A., a Costa Rican corporation;
·      “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;
·      “OSL” refers to Office Supply Line, Inc., a Nevada company;corporation and a wholly-owned subsidiary of the Company;
·      “Red Rock” refers to the Company while named Red Rock Pictures Holdings, Inc., a Nevada company;; and
·      “Securities Act” refers to the Securities Act of 1933, as amended.

CAUTIONARY STATEMENT RELATED TO FORWARD LOOKING STATEMENTS
 
This Annual Report on Form 10-K includes certain forward-looking statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, relating to revenue, revenue composition, earnings, projected plans, performance, contract procurement, demand trends, future expense levels, trends, in average headcount and gross margins, and the level of expected capital expenditures. Such forward-looking statements are based on the beliefs of, estimates made by, and information currently available to OSL Holdings Inc.our management and are subject to certain risks, uncertainties and assumptions. Any statements contained herein (including without limitation statements to the effect that the Company or management "estimates," "expects," "anticipates," "plans," "believes," "projects," "continues," "may," "will," "could," or "would" or statements concerning "potential" or "opportunity" or variations thereof or comparable terminology or the negative thereof) that are not statements of historical fact should be construed as forward-looking statements. The actual results of OSL Holdings Inc.the Company may vary materially from those expected or anticipated in these forward-looking statements. The realization of such forward-looking statements may be impacted by certain important unanticipated factors including those discussed in "Risk Factors" under Item 1A, and "Management's Discussion and Analysis of Financial Condition and Results of Operations," at pages 12-15. Because of these and other factors that may affect OSL Holdings Inc.’sthe Company’s operating results, past performance should not be considered as an indicator of future performance, and investors should not use historical results to anticipate results or trends in future periods. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Readers should carefully review the risk factors described in this and other documents that OSL Holdings Inc.the Company files from time to time with the Securities and Exchange Commission, ("SEC"), including subsequent Current Reports on Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K.
 
 
2
 

PART I
 
Item 1.  Business

Business Overview

OSL Holdings Inc. is a holding company that willintends to develop and/or acquire business units and/or business ventures with the purpose of collecting and transmitting real-time consumer and business sales data that facilitates the ability to create uniquesell data, manage electronic marketplaces, operate real-time loyalty rewards and proprietary technology platforms that first targettransact with buyers in multiple channels. Our business plan includes the affinity and diversity marketing channels.  following components:

●      We plan to sell data to major consumer brands for designated markets, such as urban retail, convenient and/or liquor stores.
●      We plan to facilitate developing electronic marketplaces with real time buy-side and sell side capabilities for multiple private & public markets.
●      We plan to operate a real-time loyalty rewards platform that can facilitate the earning and redemption of our currency at the point of the transaction (online, mobile, at retail) as well as on future transactions.

The Company will leverageplans on leveraging these lines of business units to connect buyers, sellers as well as channels that will clearly differentiate itself from the competitive landscape so that each venture can scale revenues and their respective offerings to their specific market(s) or across markets. TheWhen the Company is in the processhas sufficient financial resources, of which it can give no assurance, it plans on bringing onboard additional management talent with broad experience in technology, distribution, interactive &and affinity marketing andas well as the diversity markets to further our corporate strategy of entering our other lines of business. Currently, these lines of business are purely our aspirations.

An initial focus has been on building the foundations for the business units as well as focused on finalizing the development of our rewards technology platform that will initially leverage current and developing business relationships within the diversity and affinity marketplaces that have substantial membership bases. The intent of the rewards program is to design, develop, operate and market a loyalty program that is based on “reward currency” and is available for its members to earn and redeem in online ecommerce sites, brick and mortar retail stores, mobile and through other service providers. The offering is a combination of the loyalty program and the technology platform and marketplace. The benefits of the offering include a platform that can enable millions of members of the “loyalty program” to earn and redeem “reward currency” regardless of the payment method used when making a purchase (i.e. Visa, Amex, MasterCard, or cash) and to redeem the points both in retail stores, or when shopping online regardless of the payment method used to gain discounts on purchases. The program would allow retail merchants and online ecommerce site operators with a package of products and services for better business efficiency and for boosting sales and profitability.

Our mainwholly owned subsidiary, at this time, Office Supply Line, Inc. is an integrated marketer and distributor of “Products for the Office.” OSL differentiates itself from its competition by its innovative marketing programs and technology.  It operateswill operate in the competitive office supply market as a virtual distributor, leveraging the existing logistical capabilities of its suppliers who provide for inventory logistics, distribution and delivery. OSL focuseswill focus on the development and or acquisition of cutting edge technology, sales, marketing and customer service.

Another initial focus has been To a certain extent we expect OSL’s success to be dependent on building a business unit focused on finalizing the developmentsuccess of our rewards technology platform byOSL Rewards and our OSL Diversity business units as they will both promote and offer OSL products to their customers. At the end of the first quarter of calendar 2012 that will initially leverage current and developing business relationships within the diversity and affinity marketplaces that have substantial membership bases.present time, OSL has no customers or material assets.

We are also in substantive discussions with several potential acquisitions &and strategic partnerships that will expand our reach into Fortune 1000 corporations in Retail, Telecommunications, Publishing, Financeretail, telecommunications, publishing, and finance as well as reach into Local, Statelocal, state and Federal Government.federal government. The purpose of these discussions is to further secure major corporate contracts, access to additional membership bases, and expand our technology as well as retain the talent needed to execute our plan.

Our expectationCollectivity these business units are expected to create a transactional network that brings together brands, distributors, wholesalers, retailers (both online commerce and “brick and mortar” stores) and consumer’s audiences to accelerate commerce and value. The goal is to take advantage of these cross platform (the ability to purchase products online, through mobile device, or at retail stores), cross channel (the different channels that these initiatives will produce substantial contractspurchases occur in such as business to business (“B2C”), business to consumer (“B2B”), and public sectors (such as local, state and federal governments) and cross vertical (the motivation behind the purchase such as a diversity purchase, purchase to benefit a non-profit, or sustainability purchase of green products) commerce companies to enhance the overall offering of each.
3
The Company is in the firstdevelopment stage and has not generated revenues since inception. It has experienced recurring operating losses and negative cash flows from operations from September 16, 2010 (inception) to August 31, 2012. It also has a working capital deficit and stockholders’ deficit of $1,841,938 at August 31, 2012. We have less than $1,000 cash on hand which will not last. We expect a burn rate of at least $125,000 per month and will need to raise at least $500,000 by the end of the second quarter of calendar 20122013 to remain in business, of which we can give no assurance of success. Due to the "start-up" nature of our business, we expect to incur losses as and if we expand. To date, our cash flow requirements have been met by equity and debt financings. If we are unable to successfully sell additional securities in one or more offerings, generate sufficient profits or otherwise obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of our operations. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

The ability of the Company to continue its operations is dependent on Management's plans, which may include the raising of capital through debt and/or equity markets with substantial revenuesome additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur liabilities with certain related parties to sustain its existence.

The Company will require additional funding to finance the third quartergrowth of calendar 2012.its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated future revenues may be insufficient to meet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all.

Our Corporate History and Background

The Company was originally incorporated in Nevada on November 22, 2004 as Maneki Mining Inc. (“Maneki”), a development stage company in the business of mineral exploration. In August 2006, Red Rock Pictures, Inc. consummated a share exchange agreement, whereby 100% of its shares were acquired by Maneki in exchange for 1,800,000 shares of Maneki. On October 31, 2006, Maneki filed a certificate of amendment, changing the legal name of the corporation to Red Rock Pictures Holdings Inc.

Red Rock Pictures, Inc. was incorporated on August 18, 2006 under the laws of the State of Nevada and was acquired by Red Rock Pictures Holdings Inc. on August 31, 2006. The Company engaged in the business of developing, financing, producing and licensing feature-length motion pictures and direct response infomercials.
On June 6, 2008, the Company entered into a Stock for Stock Exchange Agreement (the “First Exchange Agreement”) with Studio Store Direct, Inc. (“SSD”) and all of the current SSD Shareholders.  Pursuant to the First Exchange Agreement, the Company acquired 100% of the assets of SSD by issuing 11,000,000 restricted common shares in exchange for all the issued and outstanding shares of SSD.  Further, SSD became a wholly owned subsidiary of the Company.  With the addition of SSD, the Company also operates as a traditional infomercial production and distribution company
On August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer at the time, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company, whereby Crisnic has agreed to provide funding to the Company.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010 and agreed to complete a 1 for 100 reverse stock split as soon as possible.  Subsequent to the reverse stock split, the Company also agreed to issue Crisnic 3,000,000 shares of the Company’s common stock.  Also subsequent to the reverse stock split, the Company will sell up to $1,500,000 in common stock and a registration rights agreement.  The number of shares and the purchase price of the shares in the primary offering shall be determined subsequent to a planned reverse split.   Lastly, and as a condition of funding, it was agreed that Reno Rolle will convert all outstanding past due salary into 5,000,000 newly issued shares of common stock.
3
The Company received the first tranche of $100,000 from Crisnic in August 2010.  The Company agreed to use the funds received from Crisnic to fund a proposed direct response marketing campaign and will share all adjusted gross receipts from the Campaign with Crisnic.

OSL was incorporated pursuant to the laws of the State of Nevada on September 16, 2010, as Office Supply Line, Inc.

Share Exchange of OSL

On October 10, 2011, we completed a Share Exchange with OSL whereby OSL exchanged all of the issued and outstanding shares of OSL in exchange for 50,000,000  shares of our common stock, par value $0.001 per share, which shares constituted approximately 77% of our issued and outstanding shares, as of and immediately after the consummation of the Share Exchange. As a result of the Share Exchange, OSL became our wholly owned subsidiary. All of our assets at the time of the Share Exchange were either spun-out or assigned, other than Red Rock Pictures, Inc. and SSD which remain our wholly owned subsidiaries, but currently have no operations. The Share Exchange transaction with OSL was treated as a reverse merger recapitalization, with OSL as the acquirer and the Company as the acquired party. Unless the context suggests otherwise, when we refer in this report to business and financial information for periods prior to the consummation of the Share Exchange, we are referring to the business and financial information of OSL.
 
4
Upon the closing of our Share Exchange with OSL, Anthony Gentile, a principal of Crisnic Fund S.A., resigned from all offices that he held at the Company effective immediately. In addition, Anthony Gentile and Kenneth G. Eade resigned from their positions as directors, which was effective on or about November 1, 2011. Additionally, M. Richard Cutler resigned from his position as a director, which was effective immediately.

Also upon the closing of our Share Exchange with OSL, our board of directors decreased its size from three to two members and appointed Eli Feder and Eric Kotch to fill the vacancies created by the resignation of Anthony Gentile, Kenneth G. Eade and M. Richard Cutler. In addition, our board of directors appointed Eli Feder to serve as our President and Chief Executive Officer and Eric Kotch as our Chief Financial Officer, Treasurer and Secretary, effective immediately at the closing of the Share Exchange with OSL.

As a result of our acquisition of OSL, OSL became our wholly owned subsidiary and we have assumed the business and operations of OSL. On October 17, 2011, we changed our name to OSL Holdings Inc, by filing a Certificate of Amendment to the Articles of Incorporation with the State of Nevada to more accurately reflect our new business operations.  Our

On November 16, 2012, the Board of Directors of the Company unanimously adopted a resolution approving an amendment to the Company’s Articles of Incorporation to effect a reverse split of the Company’s outstanding shares of Common Stock. As a result of the reverse stock symbolsplit, every one thousand shares of the common stock of the Company will be combined into one share of common stock. The Company expects to receive approval from FINRA to effect the reverse split and has changedfiled an amendment to “OSLH”its Articles of Incorporation to effect the reverse stock split as of January 2, 2013. Adoption of the reverse stock split, without taking into account the issuance of any additional shares of our common stock, will reduce the shares of common stock outstanding to approximately 117,121 shares of Common Stock (without taking into account adjustments for fractional shares).
 
Our Products

As a holding company our business units or business ventures will offer varied products.  OSL, our wholly owned subsidiary, currently offers thousands of items from 1,000 manufacturers. It provides technology products, traditional office products, office furniture, janitorial and break-room supplies and industrial products.  By partnering with the wholesaler, it can deliver any of these products from one of their strategically located 45 distribution centers providing same or next day delivery to more than 90% of the United States. We have a variety of catalogs which represents more than 27,000 different items.  OSL sees expansion of its products line as an important aspect of its growth strategy.
Industry Overview

There are very few people or companies that do not use office products.  The business is dominated by a limited number of firms – Staples, Office Depot and Office Max with Staples ($25 billion sales) by far the largest player; its revenues total more than the other two combined ($12 billion and $7 billion respectively).  The balance of the demand is serviced by 16,000 independent office products dealers who buy their goods primarily from two independent wholesalers - United Stationers ($6.5 billion sales and S.P. Richards ($3.5 billion, div. of Genuine Parts) – and directly from manufacturers (H-P, 3M, etc.).

Marketing

The office products market has largely been driven by two factors, price and personal relationships. Historically sales representatives created and maintained customer relationships. The advent of Staples eroded that model as price became the dominant business driver. The challenge with relationship base marketing is that it is expensive and has not been able to withstand price competition. The problem with price based marketing alone is that there is little customer loyalty and the low margins always endanger profitability. OSL’s marketing strategy is consistent with its goal of minimizing overhead and leveraging external relationships and resources. OSL has created a series of strategic marketing partnerships that each accomplishes two goals: 1) They transfer an emotion based customer relationship from the marketing partner to OSL; and 2) They leverage the marketing partner’s infrastructure including customer communications, events and volunteers.

Our Strategy

Our comprehensive corporate strategy is to generate attractive economic returns by capitalizing on our unique business model in collecting and transmitting real-time consumer and business data, developing electronic marketplaces within the diversity space as well as our loyalty rewards platform. We are creating a distributed model allowing purchases online, at retail, on mobile phones for B2C, B2B, government, and non-profit/charitable companies. The goal is to become the leading provider of consumer and business sales data, electronic marketplaces and loyalty rewards in the channels we focus in. The key elements of our strategy are:

●      
Expand our partner base. We intend to increase our market share by adding new partners with strong brand franchises who are seeking to leverage our real-time sales data, electronic marketplaces or loyalty rewards to generate revenues as well as provide value to their customers or audience. New partners could include companies with major brand names in specialty and full-line retail, consumer products, non-profits

●      
Internet and media. We expect to launch a rewards platform and B2B marketplace businesses online when funding permits

●      
Promote online/offline brands. We intend to build awareness and drive traffic to our businesses by capitalizing on the brand assets, large marketing databases and retail traffic of our partners. Each of our partners prominently features and promotes its brand and/or URL in its marketing and communications materials. We also plan to continue to selectively use a variety of online and offline marketing strategies to reach prospects, including but not limited to search marketing, direct mail, public relations, email programs and affinity relationships.

We believe this initiative will drive repeat purchases as purchasers become increasingly satisfied with their reward experiences and tools to transact business.

●      
Enhance the online transaction experience. We plan to continually enhance and expand our online marketplaces to address the evolving needs of our customers. We plan to invest in technology to maximize the flexibility and speed to market of our website www.officesupplyline.com as well as future websites that will be built. We intend to improve the presentation of our product offerings by taking advantage of the unique characteristics of the internet as a retail/selling medium. Specifically, we plan to develop features that improve the functionality, speed, navigation and ease of use of our websites.
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·      
Pursue growth by acquisitions or development of new business units. From time to time we will assess strategic development and acquisitions that are aligned with our goal of increasing our partner and customer base and/or expanding our product offerings.
Our strategy for each business unit will be unique for eachspecific to that business unit, vertical or industry segment with the common threadthreads of capturing and transmitting of real-time data, innovative use of technology, centric innovation, revenue scalability and access to deep audience segments. For example, our strategy for OSL’s consumer office products will rely heavily on internet marketing and our strategy for large corporate customers will rely more heavily on relationships and diversity benefits. Anotherleveraging our cross business unit added value benefits such as rewards, consumer data or supplier data. One example of this added value benefit, which will be one of the common threadthreads between all of our business units, will be the leveraging of our rewards platformplatform.

OSL Data

The OSL Data business will create a bridge between manufacturers/brands, suppliers and consumers to:
●      
Service the shopper in a better way by understanding their shopping habits and product needs;
●      
Support retailers by providing fact based information for their decision making process;
●      
Create product and store loyalty with the consumer by having their favorite products on the shelves; and
●      Develop effective retail execution at these stores.

OSL Data will provide the insights brands and suppliers need to operate more efficiently, service their customers and grow the brands through the use of a pool of data being supplied by a network of data points through point of sale (POS) systems deployed at retail locations currently not using POS.

Our business model is to provide brands, manufacturers and distributors with national, regional and real-time in store basket sales data, access to SKU (stock keeping unit) or PLU (price look up) data in real-time via reporting dashboards, ability to monitor your in-store promotions in real-time, compare PLU sales by category and sub category, access and study sales trends with current and historical data, receive real time alerts on sales and promotions by competitors, export data to excel, comma delimited, or PDF.

Our offering is expected to include three levels of service:

 ●     
First Level.  Deliver normalized, real-time via dashboards across markets of full basket sales data.
●     
Second Level. Enhanced data combines the real time data with over 1,000 point of data from various sources to make meaningful marketing campaigns and decisions.
●     
Third Level.  Offers promotional control with the ability to tie national rewards, instant promotions at POS, and follow-up promotional capabilities (SMS, E-mail and Direct Mail).

We are leveraging a POS system that requires very little training and support, is very easy to implement & Cloud based, where merchants/retailers are operational from the moment of installation. The POS includes inventory replenishment & EDI capability with product Dictionary in the system for various retail set-ups.

OSL Diversity

OSL Diversity’s mission is to provide a strategic sourcing and ecommerce portal powered by rewards that facilitates suppliers doing business with other suppliers, corporations and consumers. Our commitment is to bundle our services to benefit Minority/Women Business Enterprise ("M/WBE") to Corporate, M/WBE to M/WBE and overall capacity building. We believe we are developingcan grow rewards, ecommerce, strategic sourcing and preparingsocial tools for the diversity marketplace. The goal is to launch.  This platform will capitalize on various diversitybetter position suppliers to secure 1st and affinity2nd tier business opportunities with corporations and prime vendors, via mentor-protégé relationships and will provide prominent exposure to our product offerings within each vertical market as well as the broader digital marketplace. 

Corporate

Major corporate contracts generally require 1) competitive pricing, 2) technologic compatibility and 3) relationships.  OSL has been developing a comprehensive corporate strategy that includes pricing, development and the acquisition of technology and procuring experienced technology executives. In addition, OSL is developing a variety of strong diverse and affinity working relationships.employing appropriate profiling models.
 
 
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Strategic PartnershipsThe OSL Diversity marketplace will enable corporations to confidently connect with diverse suppliers. Our goal is to be a leading market maker that creates an environment for commerce that:

United Stationers (“United”)
●     is easy to use so that members can become proficient quickly;
●     has intuitive interfaces, reports and tools to reduce the learning curve;
●     provides a critical mass of participants so buyers can find the products and services they need, and sellers can locate interested buyers;
●     creates marketplace-to-marketplace interaction to give participants access to a larger or smaller "virtual" marketplace and audience as desired; and
●     is functionality rich enough to perform the range of commerce tasks from searching, sourcing, bidding, dynamic pricing, tracking, auditing and authorization management to catalog management.

OSL Rewards

OSL Rewards is expected to provide businesses with the largerability to drive more business by issuing and/or redeeming the reward currency to/from customers when shopping at the retail store, on their mobile phone or online. Funding availability will help determine when we can finalize the development of our rewards technology platform that would initially leverage current and developing business relationships within the diversity and affinity marketplaces that have substantial membership bases.

The intent of the two principal wholesale office supply companies servingreward offering is to design, develop, operate and market a loyalty program that is based on “reward currency” and is available for its members to earn and redeem the remaining 16,000 independentcurrency, regardless of the payment method they use when making a purchase (i.e. Visa, Amex, Mastercard, or cash), in online ecommerce sites, brick and mortar retail stores, mobile and through other service providers. The offering is a combination of the loyalty program and the technology platform and marketplace.

The offering would also allow retail merchants and online ecommerce site operators’ access to our membership base for better business efficiency, boosting sales and profitability while giving our partners the ability to offer value to their membership base.

Businesses would not need to make our rewards program the exclusive rewards programs. We will enter into marketing agreements with partners for exclusive and endorsed programs but it is not required. The benefit to the partner for exclusive use of our program is higher revenue sharing on the program. The competitive advantages of our program versus other programs a partner may use would vary based on the program the partner is then running. Advantages of our program are that our program is merchant (retailer) funded versus partner funded, the rewards will be portable from merchant to merchant—rewards earned by spending at one merchant can be redeemed at another merchant, revenue sharing for usage of issued rewards, as well as de minimus cost for the rewards issuer or partner.

One of the advantages for partners is revenue sharing from issuance of rewards when redeemed, as we share a percentage of revenue received from merchants with the issuers of the rewards. The market rates for merchants to redeem our member rewards will vary, but will be a percentage of the amount of discount redeemed; typically less than 20% of the equivalent redemption dollar amount. Additionally, we will also allow merchant partners to pay flat rate advertising fees or CPM’s (cost per thousand of advertised audience) rates for advertising space to increase exposure of their products/services or advertisements to members.

Office Supply Line (OSL)

One of our integral strategies for OSL is to be a virtual distributor, which allows OSL to offer products, starting with office products, dealers.  A $12.5 billion dollar publicthat we can offer without acquiring inventory and such related expenses such as warehouses, packers, truckers and return departments. We have chosen to market our products through either established office product companies and through soon to be affinity program relationships. For example, one aspect of our marketing strategy will be to market our product lines by leveraging any and all customer relationships we currently have or will have in the future to obtain additional contacts with whom we will try to establish revenue sharing agreements, advertising relationships, better pricing and more diverse product lines.
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While we have identified several strategic relationships and have had discussions with various companies, we have not yet formalized these agreements to date. These potential relationships, if and when formalized, are expected to give us access to millions of sales prospects for office supplies, as well as potential members for our developing rewards platform, which in turn should generate additional revenues for the companies.

Our Products

As a holding company, ($6.5 billionour business units will offer varied products by each business unit.

OSL Data

OSL Data will offer data at three service levels to customers. The first level is data and reporting. The second level is ability to enhance data and create custom reports, while the third levels adds the ability to create promotions or offers to consumers.

OSL Diversity

OSL Diversity will offer memberships to the marketplace to corporations, suppliers, and advocacy groups. Additionally, we will offer secondary services such as matchmaking, data management, data enhancement, human resource rewards programs, financing, consulting and advertising.

OSL Rewards

OSL Rewards will offer customers a funded and merchant funded loyalty and rewards programs to business customers, as well as create and operate a consumer loyalty and rewards program focused around everyday rewards to the end consumer for BtoC transactions.

Office Supply Line

OSL intends to offer thousands of items from over 1,000 manufacturers. It will provide technology products, traditional office products, $6 billionoffice furniture, janitorial and break room supplies), United inventories 65,000 items in 45 distribution centers throughout the United Statesbreak-room supplies and Mexico. United will provide all the logistical and inventory support for OSL. Orders placed by 3PM will be received by the customer the next dayindustrial products. By buying from multiple wholesalers, we can deliver any of these products from one of United’s 45their strategically located distribution centers.centers providing same or next day delivery to more than 90% of the United States. We have access to a variety of catalogs which represent more than 27,000 different items.

Marketing

General

Our marketing will vary for each business unit but we generally plan to build awareness and drive traffic to our businesses by capitalizing on the brand assets, large marketing databases and transactional traffic of our partners. We also plan to continue to selectively use a variety of online and offline marketing strategies to reach prospects, including but not limited to search marketing, direct mail, public relations, email programs and affinity relationships.

OSL Data

Initially, we will market our OSL Data business through a business development team who will utilize their current relationships to reach out to contacts and present our product offerings to brands, manufacturers and distributors.
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OSL Diversity

Initially, we will market our OSL Diversity business through a business development team who will utilize their current relationships to reach out to contacts and present our product offerings to advocacy groups, corporations and suppliers.

OSL Rewards

Initially, we will market our OSL Rewards business through a business development team who will utilize their current relationships to reach out to contacts and present our product offerings to merchants, brands, advocacy groups, and corporations. Once we have secured our merchant and membership partners we will utilize the marketing programs outlined in our marketing section.

Office Supply Line

One of our innovative approaches relates to diversity marketing. Most Fortune 500 companies have supplier diversity programs and publicize how much they spend with diverse suppliers, including minority owned business enterprises (MBE), women owned business enterprises (WBE), suppliers located in Historically Underutilized Business Zones (HUB Zones), and Service Disabled Veteran Owned Small Business Concerns (SDVOSBC). This spending is sometimes termed minority “credits,” or when the federal government requires this spending it is called “minority spend.” Many government contracts require that winning bidders demonstrate that they utilize a certain percentage of certified small business and/or minority businesses. Many large corporations constantly seek new ways to utilize their minority “credits” or “minority spend.” Few office products companies compete for that diversity business effectively, so we will partner with minority owned businesses and create custom marketing programs for their teams to secure and service this diversity business. Additionally, we will use the outlined marketing strategy to secure consumer transactions.

Customers

OSLEach business unit will maintain separate customer bases with the goal of creating agreements to cross promote or refer business relationships and customers. None of our business units currently has nohave any active customers.

Distribution

The Company willOSL intends to make use of the infrastructure and logistics offered by the United Stationersits suppliers’ national distribution centers allowing for next day delivery throughout the continental United States. OSL does not have any formal arrangements or agreements with any distributors.

Competition

TheEach business unit will have specific competitive landscapes as we launch and enter each market. Specifically, OSL have a competitive landscape that includes over 16,000 independent office supply dealers whose gross annual sales vary, running from $1,000,000 or less up to dealers that gross in the hundreds of millions of dollars annually. Additionally, retail competition includes substantial retailers such as Staples and Office Depot.  Max.

It is our intention to target “business to business” clients as well as the consumer market by implementing our unique reward offering. This approach is typically not consistent with the approach taken by independent office dealers. We believe that by virtue of this approach, we will position ourselves above the typical independent dealer in this competitive environment. Additionally, we plan to operate in a nimble and efficient manner with less management layers and shorter approval timelines for making changes in marketing, product offerings, and pricing as oppose to the major national chains.

Employees

As of October 10, 2011,December 1, 2012, we have twothree full time employees.
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Intellectual Property

The Company has no intellectual property.

Item 1A.  Risk Factors
 
Not required for smaller reporting companies.
 
Item 1B.  Unresolved Staff Comments
 
Not applicable tofor smaller reporting companies.
 
Item 2.  Properties

Prior to the Share Exchange, we did not lease any office space.  The spouse of the Company’s former Chief Executive Officer leased space for her personal business. The Company shared the facility, as required, at no cost.  

As a result of the Share Exchange, ourOur principal executive office are nowis located at 1710 First Avenue, New York,60 Dutch Hill Rd., Orangeburg, NY 10028.10962. This office is under a five year lease dated March 1, 2012 with first year rent of $2,000 per month with escalation clauses in subsequent years. The lease is cancellable after 30 months and would incur a three month penalty. The lease relates to an approximate 2,000 square foot office. We currently rent thisbelieve that our facilities are adequate to meet our current needs but are evaluating the need for additional office space on a short term basis and expect to rent larger space in the near future.as we expand our business.
Item 3.  Legal Proceedings
 
Prior to, and following, the Share Exchange, there were no pending legal proceedings to which the Company was a party or in which any former director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder was a party adverse to the Company or had a material interest adverse to the Company.

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affecteffect on our business, financial condition or operating results.

Item 4.  (Removed and Reserved)Mine Safety Disclosures
Not applicable.

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PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
 
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Market Information
 
Our common stock is traded on The OTC Bulletin BoardOTCQB under the symbol “OSLH.” As of the date of this Report, 59,368,255December 1, 2012, 117,121,248 shares of our common stock were issued and outstanding andoutstanding. Furthermore, we are obligated to issue, as security for a loan default, an aggregate of 650,001 shares of our preferred stock. Each share of preferred stock, werewhen issued, and outstanding.effectively would entitle the holder to 100 votes on all matters submitted to shareholders. The preferred stock will not be listed, traded or quoted on any national securities exchange or over the counter market.

Of the 59,368,255 shares of our common stock issued and outstanding, 57,219,959 of such shares are restricted shares.  None of these restricted shares are eligible for resale absent registration or an exemption from registration.  The exemption from registration provided by Rule 144 under the Securities Act is not available for these shares pursuant to Rule 144(i).
Price Range of Common Stock

The following table sets forth the high and low trade information for our common stock for each quarter for the previous two years. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
 
  High  Low 
Fiscal Year 2010      
   First quarter ended November 30, 2009 $.53  $.10 
   Second quarter ended February 28, 2010 $.88  $.26 
   Third quarter ended May 31, 2010 $.60  $.11 
   Fourth quarter ended August 31, 2010 $.70  $.13 
         
Fiscal Year 2010      
   First quarter ended November 30, 2010 $.40  $.12 
   Second quarter ended February 28, 2011* $38.00  $.10 
   Third quarter ended May 31, 2011 $.35  $.10 
   Fourth quarter ended August 31, 2011 $.15  $.10 
           

  High  Low 
Fiscal Year 2012      
   First quarter ended November 30, 2011 $.50  $.07 
   Second quarter ended February 28, 2012 $.50  $.05 
   Third quarter ended May 31, 2012 $.11  $.04 
   Fourth quarter ended August 31, 2012 $.05  $.01 
         
Fiscal Year 2011      
   First quarter ended November 30, 2010 $.40  $.12 
   Second quarter ended February 28, 2011* $38.00  $.10 
   Third quarter ended May 31, 2011 $.35  $.10 
   Fourth quarter ended August 31, 2011 $.15  $.10 
           
*There was one day during the second quarter of fiscal 2011 that the Company’s stock price was $38.00. Every other day during the second quarter the price was under $0.50.
 
Holders

As of the date of this ReportDecember 1, 2012, there were approximately 7375 holders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

Dividends

We have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends. Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

We do not have in effect any compensation plans under which our equity securities are authorized for issuance.
 
Item 6.  Selected Financial Data
 
We are not required to provide the information required by this Item because we are a smaller reporting company.
 
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Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

OSL Holdings Inc. is a holding company that willintends to develop and/or acquire business units and/or business ventures with the purpose of collecting and transmitting real-time consumer and business sales data that facilitates the ability to create uniquesell data, manage electronic marketplaces, operate real-time loyalty rewards and proprietary technology platforms that first targettransact with buyers in multiple channels. Our business plan includes the affinity and diversity marketing channels.  following components:

●     We plan to sell data to major consumer brands for designated markets, such as urban retail, convenient and/or liquor stores.
●     We plan to facilitate developing electronic marketplaces with real time buy-side and sell side capabilities for multiple private & public markets.
●     We plan to operate a real-time loyalty rewards platform that can facilitate the earning and redemption of our currency at the point of the transaction (online, mobile, at retail) as well as on future transactions.

The Company will leverageplans on leveraging these lines of business units to connect buyers, sellers as well as channels that will clearly differentiate itself from the competitive landscape so that each venture can scale revenues and their respective offerings to their specific market(s) or across markets. TheWhen the Company is in the processhas sufficient financial resources, of which it can give no assurance, it plans on bringing onboard additional management talent with broad experience in technology, distribution, interactive &and affinity marketing andas well as the diversity markets to further our corporate strategy of entering our other lines of business. Currently, these lines of business are purely our aspirations.

Our main subsidiaryCollectivity these business units are expected to create a transactional network that brings together brands, distributors, wholesalers, retailers (both online commerce and “brick and mortar” stores) and consumer’s audiences to accelerate commerce and value. The goal is to take advantage of these cross platform (the ability to purchase products online, through mobile device, or at this time, Office Supply Line, Inc.retail stores), cross channel (the different channels that purchases occur in such as business to business (“B2C”), business to consumer (“B2B”), and public sectors (such as local, state and federal governments) and cross vertical (the motivation behind the purchase such as a diversity purchase, purchase to benefit a non-profit, or sustainability purchase of green products) commerce companies to enhance the overall offering of each.

The Company is an integrated marketer and distributor of “Products for the Office.”  OSL differentiates itself from its competition by its innovative marketing programs and technology.  It operates in the competitive office supply market asdevelopment stage and has not generated revenues since inception. It has experienced recurring operating losses and negative cash flows from operations from September 16, 2010 (inception) to August 31, 2012. It also has a virtual distributor, leveraging the existing logistical capabilitiesworking capital deficit and stockholders’ deficit of its suppliers who provide for inventory logistics, distribution$1,841,938 at August 31, 2012. We have less than $1,000 cash on hand which will not last. We expect a burn rate of at least $125,000 per month and delivery. OSL focuses on the development and or acquisition of cutting edge technology, sales, marketing and customer service.

Another initial focus has been on building a business unit focused on finalizing the development of our rewards technology platformwill need to raise at least $500,000 by the end of the firstsecond quarter of calendar 20122013 to remain in business, of which we can give no assurance of success. Due to the "start-up" nature of our business, we expect to incur losses as and if we expand. To date, our cash flow requirements have been met by equity and debt financings. If we are unable to successfully sell additional securities in one or more offerings, generate sufficient profits or otherwise obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of our operations. For these reasons, our auditors believe that there is substantial doubt that we will initially leveragebe able to continue as a going concern.

The ability of the Company to continue its operations is dependent on Management's plans, which may include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur liabilities with certain related parties to sustain its existence.

The Company will require additional funding to finance the growth of its current and developing business relationships within the diversity and affinity marketplaces that have substantial membership bases.

We are also in substantive discussions with several potential acquisitions & strategic partnerships that will expand our reach into Fortune 1000 corporations in Retail, Telecommunications, Publishing, Financeexpected future operations as well as reach into Local, State and Federal Government.to achieve its strategic objectives. The purpose of these discussions isCompany believes its current available cash along with anticipated future revenues may be insufficient to further secure major corporate contracts, accessmeet its cash needs for the near future. There can be no assurance that financing will be available in amounts or terms acceptable to additional membership bases, expand our technology as well as talent needed to execute our plan.the Company, if at all.

Our expectation is that these initiatives will produce substantial contracts in the first quarter of calendar 2012 with substantial revenue by the third quarter of 2012.

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Recent Developments

Share Exchange with OSL

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On October 10, 2011, we completed a Share Exchangeshare exchange with OSL whereby OSL exchanged all of the issued and outstanding equity interests of OSL in exchange for 50,000,000  shares of our common stock, par value $0.001 per share. As a result of the Share Exchange, OSL became our wholly owned subsidiary. The share exchange transaction with OSL was treated as a recapitalization, with OSL as the acquirer and the Company as the acquired party.  As a result of our acquisition of OSL, we now own all of the issued and outstanding equity interests in OSL and we have assumed the business and operations of OSL and its subsidiaries.

As part of the Share Exchange, the Company entered into a Share Cancellation Agreement and Release (the "Crisnic Share"Share Cancellation Agreement") with Crisnic and OSL. Pursuant to the Share Cancellation Agreement, and Release, Crisnic agreed to cancel 14,130,000  shares in exchange for $10,000 and a Secured Promissory Note of OSL in the principal amount of $240,000 (the "Promissory"Crisnic Note"). As a security for thisUnder the terms of the Crisnic Note, OSL was required to pay Crisnic $50,000 on November 8, 2011, then $25,000 every subsequent week until December 27, 2011, and one final payment of $15,000 on January 3, 2012. The Promissory note is non-interest bearing. The Crisnic Note the Company issued Crisnicis secured by 650,001 shares of Series A Preferred Stock (the "Preferred Shares") which were placed into escrow,of the Company. Due to delays in raising financing, OSL was unable to meet the original repayment terms of the Crisnic Note. OSL has made intermittent payments and will be released based onthe current balance of $170,000 as of December 1, 2012 is currently due and payable. The Company and OSL recently received a written notice of default in accordance with the terms in an Escrow Agreement (the "Escrow Agreement") byof the Crisnic Note and among the Company OSL, Crisnic and Sichenzia Ross Friedman Ference Anslow LLP, as escrow agent. Theis obligated to issue the 650,001 Preferred Shares have 100:1 voting rights. Upon payment of the principal amount due under the Promissory Note the Preferred Shares will be cancelled. Upon an event of default under the Promissory Note, the Preferred Shares will be released to Crisnic.
Corporate Diversity Solutions, Inc.

In conjunction withOn December 15, 2011, the Share Exchange,Company acquired a 48% equity interest in Corporate Diversity Solutions, Inc., a New Jersey Corporation (“CDS”) and issued 200,000 shares of common stock valued at $10,000 in December 2011 to the shareholders of CDS to purchase this interest. The Company also entered into an Asset Assignment Agreement (the "Asset Assignment Agreement") byemployment agreement with an employee of CDS and among Reno Rolle ("Rolle"), Todd Wiseman ("Wiseman"), former principalsissued 500,000 shares valued at $25,000 in accordance with this agreement. The shares issued were valued at $0.05 per share, the trading price of the common stock on the date of the agreement. As part of the agreement, family members of the majority shareholders of the Company and Red Rock Direct (an entity managed by Rolle and Wiseman), pursuant to whichalso acquired a 2% equity interest in CDS. For financial reporting purposes, the Company assigned certaininitially believed its 48% ownership and the ownership of its assetsthe 2% interest of related individuals gave the Company effective control of CDS.
Pursuant to Red Rock Direct inthe terms of the agreement with CDS, all the departing shareholders of CDS (the “Departing Shareholders”) cancelled their shares of CDS. In consideration offor the cancelation of shares, CDS indemnified and relieved the Departing Shareholders from any liabilities incurred by CDS. Additionally, OSL requested that United Stationers Inc. (“United Stationers”), a supplier of CDS, release all Departing Shareholders from any liability, and OSL and CDS indemnify all Departing Shareholders until such release is obtained. United Stationers also requested that each of Eric Kotch, our CFO, Eli Feder, our President and CEO, and Office Supply Line, Inc., our wholly-owned subsidiary, guarantee the debt owed by CDS to United Stationers (the “Guarantee”).
On April 5, 2012, the Company announced that it was unable to complete a two year audit (the “Audit”) of CDS as required by the rules of the CompanySecurities and Exchange Commission and was therefore actively seeking to divest its ownership in CDS. The unrelated CDS shareholders returned $20,000 in cash advanced to CDS and 500,000 shares of Rolle (143,809 shares)OSLH previously issued to CDS employee Ken Scarpa have been returned. On June 5, 2012, United Stationers cancelled the personal guarantee of OSL, Eric Kotch and Wiseman (5 million shares due under an employment agreement), pursuant to Share Cancellation Agreements and Releases entered into among each of Rolle (and Lynn Rolle, the wife of Rolle) and Wiseman,Eli Feder. For financial reporting purposes at August 31, 2012, the Company and OSL;has determined that it never had effective control of CDS, and the assumption of certain indebtednesscosts of the Company by Red Rock Direct (the "Spin-Off"). The Company assetsacquisition totaling $27,297, comprising the issuance of its common shares (aggregate value of $20,000) and cash advances of $7,297 made to be assigned to Red Rock Direct include (i)CDS, have been reflected as a cost of abandoned acquisition on the Company's current direct response television commercial (hosted by Suzanne Somers) (the "Infomercial"), (ii)accompanying statement of operations for the book currently entitled The Anti-Aging Miracle by Dr. James William Forsythe, M.D., and any and all proceeds derived therefrom, including any health supplements sold as described in the Infomercial, (iii) the feature length film entitled "Endless Bummer", (iv) the book currently entitled Sleep and Grow Young by Dr. James William Forsythe, M.D, and (v) a management agreement with Mike Flynt (collectively, the "Assigned Assets").twelve months ended August 31, 2012.
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Existing Indebtedness

On October 12, 2011, the Company and the Exchange LLC (“Exchange LLC”), entered into Amendment No. 1 (the “Amendment”) to the senior secured convertible note in the principal amount of $100,000 in favor of Emerald.  Emerald

Pursuant to an agreement dated September 19, 2011, by and between Emerald and the Exchange LLC (“Exchange LLC”), Emerald assigned the senior secured convertible noteSenior Secured Convertible Note and an additional $100,000 of indebtedness (“the Additional Indebtedness”) owed to Emerald by the CompanyDebt to the Exchange LLC. On October 12, 2011, the Company and the Exchange LLC entered into Amendment No. 1 (the “Amendment”) to the Senior Secured Convertible Note and Additional Debt. Pursuant to the Amendment, inthe Additional Debt was forgiven by the Exchange LLC and the maturity date of the Senior Secured Convertible Note was extended to October 5, 2012. In consideration of the forgiveness by the Exchange LLC of the Additional IndebtednessDebt and extending the maturity date of the Senior Secured Convertible Note to October 5, 2012, the Company agreed to amend the conversion price inof the Senior Secured Convertible Note to $0.001. Any conversion of debt owed to the Exchange LLC under the Senior Secured Convertible Note must be approved by the Board of Directors of the Company and in the event that the Board of Directors does not approve such conversion request, the corresponding principal amount shall be due by the maturity date. The Company entered into amendment number 2 to the note on December 12, 2012, pursuant to which the maturity date was extended to October 5, 2013, and further provided that the conversion of the note shall not be affected by any reverse split of the Company’s common stock. There is no material relationship between the Company or its affiliates and the Exchange LLC, otherLLC.

Asher Enterprises

During the period November 15, 2011 to July 17, 2012, the Company issued four unsecured Convertible Notes (the “Convertible Notes”) to Asher Enterprises (“Asher”) in the aggregate amount of $150,500. The Convertible Notes are each due after one year from the date thereof and bear interest at 8% per annum where interest accrues and is payable in cash upon maturity provided that the elected conversion to common shares does not occur. Any amount of principal or interest on these Convertible Notes which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date until the past due amount is paid. At any time or times after 180 days from the date of the Notes and until the maturity dates, Asher is entitled to convert any portion of the outstanding and unpaid amount into fully paid and non-assessable shares of common stock. The conversion price will be based on a 49% discount to the average of the three lowest closing bid prices for the Company's common stock during the ten trading days immediately preceding a conversion date.
Each of the Convertible Notes include an anti-dilution provision that allows for the automatic reset of the conversion or exercise price upon any future sale of common stock instruments at or below the current exercise price. The Company considered the current FASB guidance of “Determining Whether an Instrument Indexed to an Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability or whether or not within the issuers’ control, means the instrument is not indexed to the issuers own stock. Accordingly, the Company determined that the conversion price of the Convertible Notes is not a fixed amount because they are subject to fluctuation based on the occurrence of future offerings or events. As a result, the Company determined that the conversion features are not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance.
During the twelve months ended August 31, 2012, the Company issued a total of 5,355,004 shares of common stock at an average conversion price of $0.007 or $39,000 as partial repayment to the Convertible Notes. Upon conversion, the Company recognized a beneficial conversion cost of $69,101 related to the difference between the conversion price and the market price of the stock at the date of conversion. As of August 31, 2012, the total remaining balance outstanding to Asher is $116,600, including accrued interest of $5,100.
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On November 8, 2012, the Company entered into a Securities Purchase Agreement dated as of October 19, 2012, with Asher, pursuant to which Asher purchased, and the Company issued, a convertible promissory note issued by the Company as of the same date in the principal amount of $22,500 (the “November 2012 Note”) with a maturity date of July 23, 2013. The interest rate of the Note is 8% per annum through the maturity date. The November 2012 Note is convertible into shares of the Company’s common stock (up to an amount that would result in Asher holding no more than 4.99% of the outstanding shares of common stock of the Company, subject to waiver by Asher) at any time beginning on the date that is 180 days following the date of the November 2012 Note and ending on the maturity date, valued at an agreed discount to market not to fall below a 59% discount to the average of the three lowest closing bid prices for the Company’s common stock during the ten days immediately preceding a conversion date, subject to certain exceptions described in the November 2012 Note. In the event the Company fails to deliver to Asher the common stock issuable upon conversion, the Company shall be required to pay to Asher $1,000 per day for each day beyond the due date until the Company so delivers the common stock (the “Conversion Penalty”). Furthermore, upon the occurrence and during the continuation of a “Conversion Default” (as defined in the November 2012 Note), the November 2012 Note shall become immediately due and payable and the Company shall pay to the holder, in full satisfaction of its obligations under the November 2012 Note, an amount equal to the Default Sum (as defined below), multiplied by 2. In the event the Company shall default in the payment of the November 2012 Note, the interest rate shall be increased to 22% per annum. Furthermore, upon the occurrence and during the continuation of any event of default with respect to failure to pay principal or interest when due at the Amendment.maturity date, the November 2012 Note shall become immediately due and payable and the Company shall pay to Asher, in full satisfaction of its obligations under the November 2012 Note, an amount equal to the Default Sum. “Default Sum” is defined as (a) the then outstanding principal amount of the November 2012 Note to the date of payment, plus (b) the accrued and unpaid interest on the unpaid principal amount of the November 2012 Note to the date of payment plus (c) default interest, if any, on the amounts referred to in clauses (a) and (b) plus (d) any amounts owed to Asher pursuant to the Conversion Penalty.

Besides the Notes disclosed here, there is no material relationship between the Company or its affiliates and Asher.

Panache Capital, LLC
During the period March 5, 2012 to April 26, 2012, the Company issued four convertible promissory notes (the "Panache Notes") to Panache Capital, LLC (the "Payee") for an aggregate amount of $250,000, with 10% annum interest. The Panache Notes are each due after one year from the date thereof. All past-due principal of the Panache Notes shall bear interest at 15%. There is a 25% prepayment fee. The Payee has the right to convert the Panache Notes, in its entirety or in part, into common stock of the Company. The conversion price is based on a 25% discount to the average of the three lowest closing bid prices for the Company's common stock during the ten trading days immediately preceding a conversion date. The Company determined the initial fair value of the beneficial conversion feature was approximately $83,333 and was recorded by the Company as a loan discount, which is being amortized as interest expense over the life of the Panache Notes. As of August 31, 2012, the unamortized balance of the Panache Notes discount was $47,861.
As of August 31, 2012, the total remaining balance outstanding to the Payee is $260,600, including accrued interest of $10,600.
On September 21, 2012, the Company issued a convertible promissory note to the Payee for the principal amount of $30,000, with a maturity date of September 21, 2013. The interest rate of the note is 10% per annum through the maturity date. The note is convertible into shares of the Company’s common stock at any time and from time to time, valued at an agreed discount to market not to fall below a 49% discount to the average of the three lowest closing bid prices for the Company’s common stock during the ten days immediately preceding a conversion date. In the event the Company fails to deliver to the Payee the common stock issuable upon conversion, the Company shall be required to pay to the Payee $2,000 per day for each day beyond the due date until the Company so delivers the common stock (the “Conversion Penalty”). In the event the Company shall default in the payment of the note, the interest rate shall be increased to 15% per annum. Furthermore, upon the occurrence and during the continuation of any event of default with respect to failure to pay principal or interest when due at the maturity date, the note shall become immediately due and payable and the Company shall pay to the Payee, in full satisfaction of its obligations under the note, an amount equal to the Default Sum. “Default Sum” is defined as (a) the then outstanding principal amount of the note to the date of payment, plus (b) the accrued and unpaid interest on the unpaid principal amount of the note to the date of payment plus (c) default interest, if any, on the amounts referred to in clauses (a) and (b) plus (d) any amounts owed to the Payee pursuant to the Conversion Penalty.

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On September 21, 2012, the Company entered into an amendment agreement (the “Amendment”) with the Payee, which amends the Panache Notes. Pursuant to the Amendment, the Company shall have the option, for 90 days after September 21, 2012 (the “Outside Date”), to redeem the Panache Notes for 100% of their outstanding principal and interest. Additionally, the Payee shall not, until the Outside Date and absent an event of default, convert any of the Panache Notes into Company common stock. Each of the Panache Notes were further amended to permit the Payee to convert the Panache Notes valued at a price not to fall below a 49% discount to the average of the three lowest closing bid prices for the Company common stock during the ten trading days immediately preceding a conversion date.

Besides the aforementioned notes, there is no material relationship between the Company or its affiliates and the Payee.

Continental Equities, LLC

On February 20, 2012, the Company issued a $67,365 unsecured promissory note (the “Profectus Note”) to Profectus, LLC (“Profectus”). The Profectus Note is due on demand bearing interest at 8% per annum where interest accrues. On August 13, 2012, Profectus transferred and assigned the Profectus Note to Continental Equities, LLC (“Continental”). Pursuant to the terms of such transfer and assignment, the Company canceled the Profectus Note and issued a new convertible promissory note to Continental in the principal amount of $67,000 (the “New Note”) with a maturity date of June 30, 2013. The interest rate of the New Note is 8% per annum through the maturity date. The New Note is convertible into shares of the Company’s common stock commencing on a date that is 30 days after the issue date of the New Note, at a price equal to the average of the lowest two intraday trading prices for the common stock during the five trading days period ending one trading day prior to the date the conversion notice is sent by Continental to the Company. The New Note is subject to customary anti-dilution and default provisions. In the event the Company shall default in the payment of the New Note, the interest rate shall be increased to 18% per annum.

As of August 31, 2012, the total remaining balance outstanding to Continental is $67,465, including accrued interest of $465.

Besides the Profectus Note and the New Note, there is no material relationship between the Company or its affiliates and Continental or Profectus.

Results of Operations

Comparison of Fiscal Yearsthe Twelve Months Ended August 31, 20112012 and from September 16, 2010 (inception) to August 31, 2011

Revenue

The Company had no revenues and $4,435 in revenues for the yearstwelve months ended August 31, 20112012 and from September 16, 2010 respectively.  
Impairment of capitalized production costs, net of deferred revenue
Impairment of capitalized production costs, net of deferred revenue, was $299,013 for the year ended(inception) to August 31, 2011.  Based on the market results of our testing of our projects in development, we determined that it was appropriate and consistent with generally accepted accounting procedures to expense the capitalized balance recorded as of August 31, 2011.   2011, respectively.

General and Administrative

General and administrative expenses were $391,638 and $964,357$1,424,793 for the yearstwelve months ended August 31, 2011 and2012 as compared to $200,454 from September 16, 2010 respectively.(inception) to August 31, 2011. The decrease of $572,720increase in expenses was primarily related to a reduction in stock based compensation.  As stock options granted in 2007 had fully vested and were expensed by the end of fiscal year 2010, no similar level of expense was recorded in fiscal year 2011.  The remaining difference was due to normal fluctuations in operating expenses based onCompany executing its business operations.

Interest Expense and Financing Costs
Interest expense was $80,300 compared to $115,000 forplan including the yearsrecent Share Exchange agreement. Expenses during the twelve months ended August 31, 2012 consisted primarily of professional service expenses and compensation expense. Expenses from inception to August 31, 2011 and 2010, respectively.   The reduction in interest expense was dueconsisted of primarily of bank fees.

Loss on Impairment of Software Development Costs

During the reduction in debt outstanding.  Ontwelve months ended August 13, 2010,31, 2012, the Company entered into an agreement with National Lampoon, Inc. (“NL”) in which NL agreeddetermined that the website under development was not going to assume the Company’s outstanding balanced owedbe utilized and recorded a charge of $185,800. No similar expense existed from September 16, 2010 (inception) to Williams-Laikin of $1,941,928 and in exchange, the Company agreed to forgive NL for its balance owed the Company of $1,024,468.August 31, 2011.

 
716
 
 
Cost of Reverse Merger
Debt financing costs
The cost of the Share Exchange was determined to be $290,000$647,880 for the yeartwelve months ended August 31, 2012 as compared to $0 from September 16, 2010 (inception) to August 31, 2011, and is being amortized onas a straight-line basis over the termresult of the debt..  Company assuming certain obligations totaling $647,880.

Cost of Rescinded Acquisition

Loss on acquisition was $27,297 for the twelve months ended August 31, 2012 as compared to $0 from September 16, 2011 (inception) to August 31, 2012. On May 6, 2011,April 5, 2012, the Company announced that it was unable to complete a two year audit and Crisnic Fund, S.A., a Costa Rican investment company ("Crisnic") entered into a Securities Purchase Agreement (the "Purchase Agreement") whereby Crisnic agreedwas therefore actively seeking to purchase a $650,000 (the "Principal") Secured Promissory Note (the "Note") to provide continued fundingdivest its ownership in CDS. During the twelve months ended August 31, 2012, the Company incurred approximately $27,297 in expenses related to the Companyacquisition. No similar expense existed in the prior year.

Interest Expense

Interest expense was $178,511 for completionthe twelve months ended August 31, 2012 as compared to $0 from September 16, 2010 (inception) to August 31, 2011. The increase in expenses was related to amortization of an infomercial project (the “Somers Project”). In addition, the Company issued Crisnic 3,000,000 shares of the Company’s common stocknote discount amounting to $69,810 and $10,000 paid as part of the original terms of financing, and an additional 11,000,000 sharesa share cancellation agreement as discussed in Note 8 of the Company's common stock as consideration for entering intoattached consolidated financial statements. Additionally, the Purchase Agreement.  PursuantCompany recorded an expense of $69,101, which reflects the difference between the debt conversion price used and the market value on date of conversion. No similar activity existed in the same period of the prior year.

Cost of Offering

Private placement costs of $145,510 were incurred relating to the Note,issuance of certain of our convertible notes during the Company has agreedtwelve months ended August 31, 2012, as compared to pay$0 from September 16, 2010 (inception) to August 31, 2011.

Change in derivative liability

During the Principal plus interest attwelve months ended August 31, 2012, we incurred non-cash costs of $258,510 relating to a ratederivative liability created upon issuance of fifteen percent (15%) per annum on any unpaid principal and accrued interest not repaidcertain of our convertible notes. During 2012, this derivative liability was reduced by June 30, 2012.  The Note$7,540. This change in derivative liability is secured by a Security Agreement granting Crisnic all elements and rights to the Somers Project.
The 14,000,000 shares of common stock issued as part of this transaction were valued at $250,000, which was basednon-cash benefit reported on the value paid by OSL to cancel these sharesstatements of the Company’s common stock subsequent to the year end (see note 14).  The remaining portion attributed to the Note was $400,000 and is being amortized using the effective interest method over the term of the Note, at an interest rate of 43%. Effective interest on the Note is $60,000 and Nil as of August 31, 2011 and 2010.
The Company received net proceeds of $180,000 from Crisnic related to the Note and the difference of $290,000 has been recorded as deferred financing charges and is amortized over the term of the promissory note. Interest of $83,000 and Nil has been amortized as of August 31, 2011 and 2010.operations.

Liquidity and Capital Resources

The Company is in the development stage and has not generated revenues since inception. It has experienced recurring operating losses and negative cash flows from operations from September 16, 2010 (inception) to August 31, 2012. It also has a working capital deficit and stockholders’ deficit of $1,841,938 at August 31, 2012. We have less than $1,000 cash on hand which will not last. We expect a burn rate of at least $125,000 per month and will need to raise at least $500,000 by the end of the second quarter of 2013 to remain in business, of which we can give no assurance of success. Due to the "start-up" nature of our business, we expect to incur losses as and if we expand. To date, our cash flow requirements have been met by equity and debt financings. If we are unable to successfully sell additional securities in one or more offerings, generate sufficient profits or otherwise obtain additional funds for our working capital needs, we may need to cease or curtail operations. Furthermore, there is no assurance the net proceeds from any successful financing arrangement will be sufficient to cover cash requirements during the initial stages of our operations. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

As of August 31, 20112012 we had $39$202 in cash and a working capital deficiency of $1,399,648.$1,841,938. A substantial amount of cash will be required in order to continue operations over the next twelve months. Based upon our current cash and working capital deficiency, we will not be able to meet our current operating expenses and will require additional capital. We expect to obtain additional capital in order to execute our business plan.plan, but can give no assurances of success. We intendare looking to raise up to Five hundred thousand dollars$500,000 through private placements in the next several months from and file for a registration statement to raise additional funds.months. Our business plan involves adding qualified executives and rolling out various business units. Our initial capital needs exceed our current capital, but should be satisfied by a small private funding.  We believe, but can give no assurances, that substantial contractswe will be signedenter into agreements with customers and partners to generate revenue before larger publicadditional financing is required.
17
Due to delays in raising financing, OSL was unable to meet the original repayment terms of the Crisnic Note. OSL has made intermittent payments and the current balance of $170,000 as of December 1, 2012 is currently due and payable. The Company and OSL recently received a written notice of default in accordance with the terms of the Crisnic Note and the Company is obligated to issue the 650,001 shares of Preferred Stock to Crisnic as of December 1, 2012. In addition to the Crisnic Note, the Company has $479,442 of indebtedness with various terms of repayment through August 31, 2013. We can give no assurance that we will generate revenues, if at all, in order to satisfy our or our subsidiaries’ repayment obligations under any of our or their indebtedness.

Cash used in operating activities were $474,637was $(511,029) and ($25,361) for the yeartwelve months ended August 31, 2011.  We expended $243,348 on the development of the Infomercial.  The remaining use of cash2012 and from operating activitiesSeptember 16, 2010 (inception) to August 31, 2011, respectively. Cash was dueprimarily used to changes in the balance of our accounts payable and accrued expenses and the funding offund our net losses from operations.

Cash receivedprovided from financing activities of $380,000 was received from our former majority shareholder, Crisnic Fund S.A.  In exchange$510,084 and $26,508 for the fundstwelve month months ended August 31, 2012 and from September 16, 2010 (inception) to August 31, 2011, respectively. During the twelve months ended August 31, 2012, we received cash of $467,865 from the Company issued 13,000,000 restrictedissuance of promissory notes and we received $105,000 in cash related to common shares to be issued. The Company used $73,000 as repayment of debt. The Company also received $10,219 of operating loans from related parties.

We believe our current working capital position together with our expected future cash flows from operations will be insufficient to fund our operations in August 2010the ordinary course of business, anticipated capital expenditures, debt payment requirements and completed a 1other contractual obligations for 100 reverse stock split.  Subsequentat least the next twelve months.

In addition to the reverse stock split, the Company issued Crisnic 3,000,000 sharesanticipated $125,000 per month necessary to cover our operating expenses, we anticipate additional annual website and technology development costs of the Company’s common stock.  Additionally, on May 6, 2011, the Companybetween $300,000 and Crisnic entered into a Securities Purchase Agreement (the “Purchase Agreement”) whereby Crisnic agreed$500,000. We have been and expect to purchase a $650,000 (the “Principal”) Secured Promissory Note (the “Note”)continue to provide continued fundingfund these activities with debt and equity financing.

We have no present agreements or commitments with respect to the Company for completionany material acquisitions of the Somers Project (as definedother businesses, products, product rights or technologies or any other material capital expenditures. However, we will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or investments in the Purchase Agreement),future. Accordingly, we may need to fund the ongoing expenses related to operating the Company and is secured by the Security Agreement (the “Security Agreement”) entered into with Crisnic.  In addition, the Company has agreed and did issue 11,000,000 sharesobtain additional sources of the Company’s common stock, $0.001 par value per share (the “Common Stock”) as consideration for entering into the Purchase Agreement.  Pursuant to the Note, the Company has agreed to pay the Principal plus interest at a rate of fifteen percent (15%) per annum on any unpaid principal and accrued interest not repaid by June 30, 2012.  Additionally, in consideration for the loan to Crisnic, the Company has agreed to grant a security interestcapital in the Collateral (as defined in the Security Agreement) for the term of the loan.future to finance any such acquisitions and/or investments.

Off Balance Sheet Arrangements

None.

Critical Accounting Policies
The Company’s consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use if estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our consolidated financial statements.
Our significant accounting policies are summarized in Note 3 of our annual consolidated financial statements filed on Form 10-K and dated December 12, 2011. While all these significant accounting policies impact its financial condition and results of operations, the Company views certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on the Company’s consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.
8
Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
 
We are not required to provide the information required by this Item because we are a smaller reporting company.
 
Item 8.  Financial Statements and Supplementary Data
 
Our Financial Statements are annexed to this Report as pages F-2 through F-13 .F-18. An index to such materials appears on page F-1.
 
Item 9.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
     
None.
18
Item 9A.  Controls and Procedures
 
Disclosure controls and procedures.

Under the supervision and with the participation of our management, including our President and Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, the Certifying Officers concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective. We and our auditors identified material weaknesses discussed below in the Report of management on internal control over financial reporting.
 
Report of Management on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.

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

Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement to the Company's annual or interim financial statements will not be prevented or detected.

In the course of management's assessment, we have identified the following material weaknesses in internal control over financial reporting:

-     
Segregation of Duties – As a result of limited resources, we did not maintain proper segregation of incompatible duties. Namely the lack of an audit committee, an understaffed financial and accounting function, and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls. The effect of the lack of segregation of duties potentially affects multiple processes and procedures.

-     
Maintenance of Current Accounting Records – This weakness specifically affects the payments and purchase cycle and therefore we failed to maintain effective internal controls over the completeness and cut off of accounts payable, expenses and other capital transactions.
 
9
We are in the continuous process of improving our internal control over financial reporting in an effort to eliminate these material weaknesses through improved supervision and training of our staff, but additional effort is needed to fully remedy these deficiencies. Management has engaged a Certified Public Accountant as a consultant to assist with the financial reporting process in an effort to mitigate some of the identified weaknesses. The Company intends on hiringto hire the necessary staff to address the weaknesses once additional capital is obtained which will allow full operations to commence.

19
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
 
Changes in internal controls over financial reporting.
 
There were no changes that occurred during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
Item 9B.  Other Information

None.

20
PART III
 
Item 10.  Directors, Executive Officers and Corporate Governance
 
The following sets forth information about our directors and executive officers as of the date of this report:

Name Age Position
Eli Feder (1) 5456 President, Chief Executive Officer and Chairman of the Board
Eric Kotch (1) 5253 Chief Financial Officer, Treasurer, Secretary and Director
Robert Rothenberg42President
 
Eli Feder has been our President, Chief Executive Officer, and Director of the Company since October 2011.2011 and our president from October 2011 through January 2012. He was the founder of Infinity Network and served as its Chairman from September 2006 through May 2008. Eli has launched several successful companies in the food service and marketing industries. His experiences include founding Quality Care, , a nursing staffing firm startup, that now employs 1,500 people in the New York Metropolitan Area and participating successfully in the development of several food products that have been commercialized (eg(e.g., a peanut butter and jelly cookie was conceived and sold to Smuckers). Eli served as Director of Business Development for Splitstream Technologies in 2002 and 2003; the underlying technology that powered Countonme, a registered card program. He has since acquired the technology for use by Infinity Network. Eli was named one of the “Top 40 Businessmen Under 40” by Entrepreneur Magazine in 1989.

Eric Kotch has been our Chief Financial Officer, Secretary, Treasurer and Director of the Company since October 2011. He is currently a manager of Vesuvio Import Company and Beverage Investment Group, LLC which are currently marketing the Sopranos Italian Wines under license from HBO. He has over 20 years of experience in finance and marketing, including 15 years as principal of Express Capital Corporation and Anvil Mortgage Banking Ltd (1986-2001). At Anvil, Kotch had particular success through homebuyer seminar marketing. Kotch founded Black Diamond Enterprises, LLC (“BDE”) (2001-present) a small venture capital company that finances and markets innovative technologies. BDE created and marketed the patented Owl Optical Wallet Light. Approximately three million OWLs have been sold worldwide through direct response marketing. Kotch is a graduate of the Wharton School and the University of Pennsylvania Law School and a member of the New York State Bar.

Robert Rothenberg has been our President since January 2012. Mr. Rothenberg has over 20 years of marketing and operational experience. He transitions out of LSF Interactive, a global digital marketing agency, where he was Managing Director of their U.S. operations. Over the past 18 months he helped LSF navigate three acquisitions, while strengthening their US operations and client roster, gaining momentum and turning it profitable. He helped lead gross revenues this past year to grow significantly & gross profits jumped to two times the rate of gross revenues, while also producing five times that rate of increased direct contribution by expanding profitable engagements with Fortune 1000 companies. Prior to his decade in the internet advertising space, he served as Vice President of Marketing & Business Development at GSI Commerce, helping clients such as JP Morgan Chase, the NFL, L'Oreal, Core Logic, Morgan Stanley (Discover Card), Career Education Corporation, Penske and Warnaco Brands (Speedo, CKU and CK Jeans). As one of the first employees hired after the formation of the company, Mr. Rothenberg helped launch GSI Commerce and grow the foundation of the business that became an e-commerce powerhouse that was recently acquired by eBay for an announced $2.4 billion. Prior to his work for GSI, Mr. Rothenberg worked for the National Basketball Association (NBA) where he launched and managed NBA Properties Direct to Consumer (DTC) business initiatives which included printed catalogues, e-commerce websites, projects for their retail store on 5th Avenue and a database partnership with Sport Illustrated.
 
Family Relationships

There are no family relationships among any of our officers or directors.

21
Conflicts of Interest

Certain potential conflicts of interest are inherent in the relationships between our officers and directors and us.

From time to time, one or more of our affiliates may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses which may compete with our business with respect to operations, including financing and marketing, management time and services and potential customers. These activities may give rise to conflicts between or among the interests of us and other businesses with which our affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither us nor our shareholders will have any right to require participation in such other activities.

Further, because we intend to transact business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons or entities. We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated third parties.
10
 
With respect to transactions involving real or apparent conflicts of interest, we have adopted policies and procedures which require that: (i) the fact of the relationship or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction prior to such authorization or approval, (ii) the transaction be approved by a majority of our disinterested outside directors, and (iii) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.
 
Our policies and procedures regarding transactions involving potential conflicts of interest are not in writing. We understand that it will be difficult to enforce our policies and procedures and will rely and trust our officers and directors to follow our policies and procedures. We will implement our policies and procedures by requiring the officer or director who is not in compliance with our policies and procedures to remove himself and the other officers and directors will decide how to implement the policies and procedures, accordingly.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree, or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Certain Relationships and Related Transactions, and Director Independence – Transactions with Related Persons,” none of our directors, director nominees, or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates, or associates which are required to be disclosed pursuant to the rules and regulations of the Commission.
 
Committees
 
Our Board of Directors has no separate committees and our Board of Directors acts as the audit committee and the compensation committee. We do not have an audit committee financial expert serving on our Board of Directors.
 
Compliance with Section 16(A) of the Exchange Act.
 
Section 16(a) of the Exchange Act requires the Company’s officers and directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and are required to furnish copies to the Company. To the best of the Company’s knowledge, any reports required to be filed were timely filed in the fiscal year ended August 31, 2011.2012, except that Robert Rothenberg was not timely in filing his initial statement of beneficial ownership on Form 3 when appointed as president of the Company.
22
 
Code of Ethics
 
The companyCompany has adopted a Code of Ethics applicable to its Chief Executive Officer and Chief Financial Officer. This Code of Ethics is filed herewith as an exhibit.exhibit to the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2008.
 
Item 11.  Executive Compensation
 
The following sets forth information with respect to the compensation awarded or paid to Anthony Gentile, our former President, Chief Financial Officer and Secretaryexecutive officers listed below, for all services rendered in all capacities to us in fiscal 20112012 and 2010.2011. On October 10, 2011, we were acquired by OSL through a share exchange transaction and, in connection with that transaction, Mr. Feder was appointed as our President and Chief Executive Officer and Mr. Kotch was appointed as our Chief Financial Officer, Secretary and Treasurer. Mr. Rothenberg replaced Mr. Feder as our president in January 2012.

Summary Compensation Table

The following table sets forth information regarding each element of compensation that we paid or awarded to our executive officers for the year ended August 31, 20112012 and 2010.2011.

 Name and
Principal Position
 Year Salary($)  Bonus($)  
All Other
Compensation ($)
  Total($) 
Eli Feder (1) 2012 $145,500  $25,000  $0  $170,500 
Chief Executive  Officer and Chairman 2011 $0  $0  $0  $0 
                   
Eric Kotch (2) 2012 $145,500  $25,000  $0  $170,500 
Chief Financial Officer, Treasurer, Secretary and Director 2011 $0  $0  $0  $0 
                   
Robert Rothenberg (3)
President
 2012 $200,000  $0  $96,250  $296,250 
 __________
Name and
Principal Position
 Year Salary($)  Bonus($)  
All Other
Compensation ($)
  Total($) 
Anthony Gentile (1) 2011 $0  $0  $0  $0 
Former President, Chief Financial Officer and Secretary 2010 $0  $0  $0  $0 
                   
Reno Rolle (2) 2011 $55,000  $0  $0  $55,000 
Former President and Chief Executive Officer 2010 $4,000  $0  $0  $4,000 
                   
Todd Wiseman (2) 2011 $30,000  $0  $0  $30,000 
Former Chief Strategist Officer 2010 $4,000  $0  $0  $4,000 
(1)   For the year ended August 31, 2012, Mr. Feder received $15,500 in cash. Mr. Feder also received 2,833,333 shares of common stock, in lieu of cash compensation owed valued at $85,000. The shares were issued at an average market price of $0.03 per share. The remaining balance owed has been accrued and is included in accrued officer compensation in the attached Consolidated Balance Sheets.
(2)   For the year ended August 31, 2012, Mr. Kotch received $15,500 in cash. Mr. Kotch also received 2,833,333 shares of common stock, in lieu of cash compensation owed valued at $85,000. The shares were issued at an average market price of $0.03 per share.  The remaining balance owed has been accrued and is included in accrued officer compensation in the attached Consolidated Balance Sheets.
(1) Mr. Gentile resigned as an executive officer of the Company on October 10, 2011.  Prior to his resignation, he had been the Company’s chief financial officer, secretary and treasurer since his appointment on August 17, 2011.
(3)   For the year ended August 31, 2012, Mr. Rothenberg received $20,000 in cash. Mr. Rothenberg also received 2,374,996 shares of common stock of which 708,330 shares, valued at $96,250, were issued per his employment agreement dated January 17, 2012. Additionally, 1,666,666 shares, valued at $50,000, were issued in lieu of cash compensation owed. The shares were issued at an average market price of $0.03 per share.  The remaining balance owed has been accrued and is included in accrued officer compensation in the attached Consolidated Balance Sheets.
(2) Mr. Rolle and Mr. Wiseman resigned as executive officers of the Company on August 17, 2011. Prior to their resignations, Mr. Rolle had been the Company’s chief executive officer and Mr. Wiseman had been the Company’s chief strategist officer.
11

Outstanding Equity Awards at Fiscal Year-End Table

We had no outstanding equity awards as of the end of fiscal 2010.2012.

Employment Agreements

Currently, none of our officers or directorsEli Feder

There is subject to ano written employment agreement.contract with Mr. Feder. The Company and Mr. Feder have a verbal agreement in which Mr. Feder is to receive $5,000 per month in base compensation. Mr. Feder is also eligible for discretionary bonuses. The Company expects to renegotiate a new employment contract with Mr. Feder which would likely contain substantial stock awards to offset current unpaid and deferred cash compensation and for prior stock awards that are currently under current market prices.
23
Eric Kotch

There is no written employment contract with Mr. Kotch. The Company and Mr. Kotch have a verbal agreement in which Mr. Kotch is to receive $5,000 per month in base compensation. Mr. Kotch is also eligible for discretionary bonuses. The Company expects to renegotiate a new employment contract with Mr. Kotch which would likely contain substantial stock awards to offset current unpaid and deferred cash compensation and for prior stock awards that are currently under current market prices.

Robert Rothenberg

Pursuant to the Employment Agreement dated January 17, 2012, Mr. Rothenberg is entitled to an annual base salary of $240,000 and 500,000 shares of the Company’s common stock and an additional 41,666 shares of the Company’s common stock per month, with an annual bonus of up towards $100,000 as well as customary benefits including health benefits. Mr. Rothenberg was entitled to  receive a signing bonus of $50,000 for consulting work done for the Company prior to his hire, as well as, 500,000 shares of stock.  The 500,000 shares of stock have been issued while the $50,000 signing bonus has not been paid as of December 1, 2012.

The Employment Agreement provides for a two year term, and is automatically extended for one year periods unless terminated by either party not less than 90 days prior to the end of the term. The Company can terminate the agreement at any point for cause, as defined in the Employment Agreement, and without cause. If termination is without cause, Mr. Rothenberg is entitled to accrued salary plus six months’ severance pay. The Employment Agreement also contains a six month non-compete clause should Mr. Rothenberg’s employment with the Company end. The Company expects to renegotiate a new employment with Mr. Rothenberg which would likely contain substantial stock awards to offset current unpaid and deferred cash compensation and for prior stock awards that are currently under current market prices.

Compensation of Directors

The Company’s directors received no compensation.compensation as such.
 
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 
The following table sets forth certain information as of October 10, 2011December 1, 2012 with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our common stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated.
 
Name of Beneficial Owner and Address Amount and Nature of Beneficial Ownership of Common Stock 
Percent of
Common Stock (1)
 
Amount and Nature of
Beneficial Ownership of
Preferred Stock
 
 
Percent of
Preferred Stock (2)
Crisnic Fund, S.A.
Conhotel Office Center Office 5 Sabana
San Jose, Costa Rica
  -     - 
 
 
650,001 (3)
 
 
100%
Eric Kotch (4)
1710 First Avenue
New York, NY 10028
  22,465,000     44.1%
 
 
-
 
 
-
Eli Feder
1710 First Avenue
New York, NY 10028
  18,597,500      36.5%
 
 
-
 
 
-
All directors and executive officers as a group
(2 people)
  41,062,500   80.6%
 
-
 
-
Name of Beneficial Owner and Address Amount and Nature of Beneficial Ownership of Common Stock 
Percent of
Common Stock (1)
 
 
Amount and Nature of
Beneficial Ownership of
Preferred Stock
  
 
 
Percent of
Preferred Stock (2)
 
Crisnic Fund, S.A.
Conhotel Office Center Office 5 Sabana
San Jose, Costa Rica
  -     -  
 
 
 650,001
(2) 
 
 
100
% 
ARMK LLC (3)  21,575,000   18.42%      
Eric Kotch (3)
60 Dutch Hill Rd, Suite 15
Orangeburg, NY 10963
  3,723,833     3.18% 
 
 
-
  
 
 
-
 
Eli Feder
60 Dutch Hill Rd, Suite 15
Orangeburg, NY 10963
  21,430,833      28.30% 
 
 
-
  
 
 
-
 
Robert Rothenberg  2,524,990   2.16%      
All directors and executive officers as a group (3 people)  49,254,656   42.05% -  - 
 
(1)  Based on 50,924,446117,121,248 shares of common stock issued and outstanding as of October 10, 2011.December 1, 2012. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage of the person holding such options or warrants, but are not deemed outstanding for purposes of computing the percentage of any other person.
(2)Based on
We agreed, as security for a loan, to issue an aggregate of 650,001 shares of Series A Preferred Stock issued and outstanding asour preferred stock, pending repayment in full of October 10, 2011.
(3)such loan by December 1, 2012. The 650,001 sharesCompany recently received a written notice of Series A Preferred Stock were placeddefault in escrow upon issuance, pursuant to the terms in the escrow agreement entered into by the Company, Crisnic, OSL and Sichenzia Ross Friedman Ference Anslow LLP, dated October 10, 2011 (the “Escrow Agreement).  Upon the satisfaction ofaccordance with the terms of the Escrow Agreement,loan and is obligated to issue the 650,001 shares will be returnedof Preferred Stock to Crisnic. Each share of preferred stock effectively would entitle the Company.  Should the termsholder to 100 votes on all matters submitted to shareholders. The preferred stock would also convert into our common stock on a 100:1 basis upon certain circumstances.As of the Escrow Agreement be defaulted upon, thenfiling of this Annual Report, the shares will be released to Crisnic.650,001 Preferred Shares have not been issued.
(4)(3)  Mr. Kotch personally owns 890,0003,723,833 shares and through his wife, Andrea Kotch, is the beneficial owner of the 21,575,000 shares owned by ARMK, LLC.

24
Changes in Control

We are not aware of any person who owns of record, or is known to own beneficially, five percent or more of our outstanding securities of any class, other than as set forth above. We do not have an investment advisor. There are no current arrangements which will result in a change in control, other than those set forth above.
 
12
Item 13.  Certain Relationships and Related Transactions, and Director Independence.
 
Transactions with Related Persons

On June 9, 2007, theThe Company entered into loan agreements with the N. Williams Family Investments, L.P. and Daniel Laikin (collectively, “Williams-Laikin”) for $1,000,000 each for a total of $2,000.000.  The loan agreement with Daniel Laikin was subsequently amendedhas received funding from $1,000,000certain related parties to $900,000.

The proceeds of these loans were tohelp fund the Company’s obligation to advance production costs to National Lampoon (“NL”) for a motion picture production.operating needs of the Company. The balance outstanding as of August 31, 2012 and August 31, 2011 was $14,727 and $4,508, respectively. The loans were secured by the profit participation rights of the films.  The loans beared seven percent (7%) interestare non-interest bearing, unsecured and were to be repaid out of the proceeds of equity raised of the Company or sales efforts of the motion picture. In addition to the interestdue on these advances, Williams-Laikin were entitled to receive five percent (5%) of the twenty five percent (25%) of all net profits from the distribution of the respective pictures specified in their agreement received by Red Rock Pictures Holdings Inc.

On August 13, 2010, the Company entered into an agreement with NL in which NL agreed to assume the Company’s outstanding balance including accrued interest owed to Williams-Laikin of $1,941,928 and in exchange, the Company agreed to forgive National Lampoon, Inc. for its balance owed the Company of $1,024,468.  In 2009, the Company wrote off this balance as a bad debt charge due to the financial condition of National Lampoon, Inc.  After offsetting the balances owed from both parties, the net balance resulted in a gain of $917,460 and is classified as gain on extinguishment of advances from related parties on the consolidated statements operations within during the year ended August 31, 2010.demand.

Director Independence

We do not have any independent directors. Because our common stock is not currently listed on a national securities exchange, we have used the definition of “independence” of The NASDAQ Stock Market to make this determination. NASDAQ Listing Rule 5605(a)(2) provides that an “independent director” is a person other than an officer or employee of the company or any other individual having a relationship which, in the opinion of the company’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The NASDAQ listing rules provide that a director cannot be considered independent if:

·  ●
the director is, or at any time during the past three years was, an employee of the company;
·  ●the director or a family member of the director accepted any compensation from the company in excess of $120,000 during any period of 12 consecutive months within the three years preceding the independence determination (subject to certain exclusions, including, among other things, compensation for board or board committee service);

·  ●
a family member of the director is, or at any time during the past three years was, an executive officer of the company;
·  ●the director or a family member of the director is a partner in, controlling stockholder of, or an executive officer of an entity to which the company made, or from which the company received, payments in the current or any of the past three fiscal years that exceed 5% of the recipient’s consolidated gross revenue for that year or $200,000, whichever is greater (subject to certain exclusions);
25
·  ●
the director or a family member of the director is employed as an executive officer of an entity where, at any time during the past three years, any of the executive officers of the company served on the compensation committee of such other entity; or
·  ●the director or a family member of the director is a current partner of the company’s outside auditor, or at any time during the past three years was a partner or employee of the company’s outside auditor, and who worked on the company’s audit.

Mr. Feder and Mr. Kotch are not considered to be independent because they are both executive officers of the Company.

We do not currently have a separately designated audit, nominating or compensation committee.
  
Item 14.  Principal Accountant Fees and Services
 
Audit Fees
 
For the Company’s fiscal years ended August 31, 20112012 and 2010,2011, we were billed approximately $22,000$28,145 and $25,830,$2,500, respectively, for professional services rendered for the audit and review of our consolidated financial statements.
13
 
Audit Related Fees

There were no fees for audit related services for the years ended August 31, 20112012 and 2010.2011.

Tax Fees
 
For the Company’s fiscal years ended August 31, 20112012 and 2010,2011, we were billed $9,000$0 and $0,$9,000, respectively, for professional services rendered for tax compliance, tax advice, and tax planning.
 
All Other Fees
 
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended August 31, 20112012 and 2010.2011.
  
The Company has not adopted any written pre-approval policies or procedures as described in paragraph (c)(7)(i) of Rule 2.01 of Regulation S-X.
26
PART IV
 
Item15.  Exhibits, Financial Statement Schedules
 
(a)     Exhibits:
 
Exhibit No.  Title of Document  Location
   
3.1  Certificate
Articles of Incorporation
  
Incorporated by reference to Form SB-2 filed on June 17, 2005
   
3.2 Bylaws Incorporated by reference to Form SB-2 filed on June 17, 2005
3.3Certificates of Amendment to Articles of Incorporation and Certificate of DesignationFiled herewith
10.1Convertible Note dated January 20, 2012 with Asher EnterprisesFiled herewith
10.2Convertible Note dated June 15, 2012 with Asher EnterprisesFiled herewith
10.3Convertible Note dated July 17, 2012 with Asher EnterprisesFiled herewith
10.4Convertible Note dated November 8, 2012 with Asher EnterprisesIncorporated by reference to Form 8-K filed on November 14, 2012
10.5Convertible Note dated March 5, 2012 with Panache CapitalIncorporated by reference to Form 8-K filed on March 15, 2012
10.6Convertible Note dated April 10, 2012 with Panache CapitalFiled herewith
10.7Convertible Note dated April 18, 2012 with Panache CapitalIncorporated by reference to Form 8-K filed on April 20, 2012
10.8Convertible Note dated April 26, 2012 with Panache CapitalIncorporated by reference to Form 8-K filed on May 1, 2012
10.9Amendment to Convertible Notes dated September 21, 2012 with Panache CapitalFiled herewith
10.10Convertible Note dated August 13, 2012 with Continental EquitiesIncorporated by reference to Form 8-K filed on September 25, 2012
10.11Note dated October 10, 2011 with Crisnic FundFiled herewith
10.12Stock Purchase Agreement with Asher Enterprises dated November 8, 2012Incorporated by reference to Form 8-K filed on November 14, 2012
10.13Office Lease AgreementFiled herewith
10.14*Employment Agreement dated January 17, 2012 with Robert RothenbergFiled herewith
10.15Senior Secured Convertible Note dated December 28, 2008 with The Exchange LLC (as assignee of Emerald Asset Advisors, LLC)Filed herewith
27
10.16Amendment No. 1 to Senior Secured Convertible Note dated as of October 12, 2011 with The Exchange LLCFiled herewith
10.17Amendment No. 2 to Senior Secured Convertible Note dated as of December 4, 2012 with The Exchange LLCFiled herewith
   
14 Code of Ethics Incorporated by reference to Form 10-K/A filed on December 17, 2008
     
31.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
     
31.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith
   
32.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith
     
32.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith
101Materials from the OSL Holdings, Inc.’s Annual Report on Form 10-K for the fiscal year ended August 31, 2012, formatted in Extensible Business Reporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statement of Stockholders’ Deficit, (iv) Consolidated Statement of Cash Flows and (v) related Notes to the Financial Statements.Filed herewith
 __________
* Management contract or compensatory plan or arrangement.

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
28
 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant had duly caused this report to be signed on its behalf to the undersigned, thereunto duly authorized.
  
Dated: December 12, 201114, 2012
 OSL HOLDINGS INC.
   
  By:/s/ Eli Feder                                            
  
Eli Feder
PresidentChairman and Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)
   
 By:/s/ Eric Kotch
  Eric Kotch
 
Chief Financial Officer, Treasurer and Secretary
(Principal Financial Officer)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of the 12th14th day of December 2012, by the following persons on behalf of the registrant in the capacities indicated:
 
/s/ Eli Feder Director, PresidentChairman of the Board and Chief Executive Officer
Eli Feder  
   
/s/ Eric Kotch Director, Chief Financial Officer, Treasurer and Secretary
Eric Kotch  
   
 
 
1429
 
 
OSL HOLDINGS INC. AND SUBSIDIARIES (FORMERLY RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
AUGUST
Page
Report of Independent Registered Public Accounting FirmF-2
Consolidated Balance Sheets as of August 31, 2012 and 2011F-3
Consolidated Statements of Operations for the Year Ended August 31, 2012 and from inception to August 31, 2012 and 2011F-4
Consolidated Statements of Changes in Stockholders’ Deficit from inception to August 31, 2012F-5
Consolidated Statements of Cash Flows for the Year Ended August 31, 2012 and from inception to August 31, 2012 and 2011F-6
Notes to the Consolidated Financial StatementsF-7

 
 
F-1
 
 
OSL HOLDINGS INC. AND SUBSIDIARIES (FORMERLY RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES)
AUGUST 31, 2011
CONTENTS

Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
F-2
Consolidated Statements of Operations
F-3
Consolidated Statements of Stockholders' Deficit
F-4
Consolidated Statements of Cash Flows
F-5
Notes to the Consolidated Financial Statements
F-6 - F-13

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMReport of Independent Registered Public Accounting Firm
 
To the Board of Directors and Stockholders of
OSL Holdings, Inc. and subsidiaries (formerly Red Rock Pictures Holdings, Inc. and subsidiaries)

Subsidiaries.
 
We have audited the accompanying consolidated balance sheets of OSL Holdings, Inc. and subsidiaries (formerly Red Rock Pictures Holdings, Inc. and subsidiaries) Subsidiaries as of August 31, 20112012 and 20102011, and the related consolidated statements of operations, stockholders’ deficit and cash flows and stockholders’ deficit for the years then ended.year ended August 31, 2012 and for the periods from September 16, 2010 (inception) to August 31, 2012 and 2011, respectively. These consolidated financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of OSL Holdings, Inc. and subsidiaries (formerly Red Rock Pictures Holdings, Inc. and subsidiaries)Subsidiaries as of August 31, 20112012 and 2010,2011, and the results of itstheir operations and itstheir cash flows for the years thenyear ended August 31, 2012 and for the periods from September 16, 2010 (inception) to August 31, 2012 and 2011, respectively,, in conformity with accounting principles generally accepted in the United States.States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses and negative cash flows from operating activities, which have resulted in a negative working capital deficiency and accumulated losses from operations since inception.a stockholders' deficit. These factors raise substantial doubt about the Company’sCompany's ability to continue as a going concern. Management’sManagement's plans in regard to these matters are also discusseddescribed in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 

Weinberg & Company, P.A.
/s/ DNTW Chartered Accountants, LLP
Licensed Public Accountants
Markham, CanadaLos Angeles, California
December 12, 201113, 2012
F-1
OSL HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 31, 2011 AND 2010
  August 31, 2011  August 31, 2010 
       
ASSETS
      
Current Assets
      
Cash
 
$
39
  
$
94,676
 
Capitalized production costs
  
-
   
155,665
 
Deferred financing costs, net of amortization of $83,000 and Nil at August 31, 2011 and 2010, respectively
  
207,000
   
-
 
Total Current Assets
  
207,039
   
250,341
 
         
Long Term Assets
        
Equipment, net
  
-
   
9,838
 
Total Long Term Assets
  
-
   
9,838
 
         
Total Assets
 
$
207,039
  
$
260,179
 
         
LIABILITIES AND STOCKHOLDERS' DEFICIT
        
Current Liabilities
        
Accounts payable and accrued liabilities
 
$
324,051
  
$
277,540
 
Accrued management salary
  
519,000
   
426,000
 
Advances from stockholder
  
63,636
   
63,636
 
Deferred licensing revenue
  
-
   
100,000
 
Senior secured convertible note, including accrued interest of $40,000 and $19,700 at August 31, 2011 and 2010, respectively
  
240,000
   
219,700
 
Secured note payable, including accrued interest of $60,000 and Nil at August 31, 2011 and 2010, respectively
  
460,000
   
-
 
Total Current Liabilities
  
1,606,687
   
1,086,876
 
         
Stockholders' Deficit
        
Preferred stock, $0.001 par value; 5,000,000 shares authorized, none issued or outstanding
  
-
   
-
 
Common stock, $0.001 par value; 120,000,000 shares authorized, 15,198,255 and 1,198,163 shares issued and outstanding at August 31, 2011 and 2010, respectively
  
15,198
   
1,198
 
Additional paid-in-capital
  
11,121,752
   
11,054,752
 
Subscription receivable
  
-
   
(200,000)
 
Accumulated Deficit
  
(12,536,598
)
 
 
(11,682,647
)
Total Stockholders' Deficit
  
(1,399,648
)
  
(826,697
)
         
Total Liabilities and Stockholders' Deficit
 
$
207,039
  
$
260,179
 
         
The accompanying notes are an integral part of these consolidated financial statements.

 
F-2
 
 
OSL HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED AUGUST 31, 2011 AND 2010
OSL HOLDINGS INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
 
  
As of
August 31,
  
As of
August 31,
 
  2012  2011 
       
Assets 
Current assets:      
Cash $202  $1,147 
Prepaid and other assets  2,000   12,500 
Total current assets  2,202   13,647 
         
Website development costs  -   185,800 
Total assets $2,202  $199,447 
         
Liabilities and Stockholders’ Deficit 
Current liabilities:        
Accounts payable and accrued liabilities $659,001  $301,393 
Accrued officers compensation  270,000   - 
Advances from related parties  14,727   4,508 
Senior secured convertible note, including accrued interest of $51,300  135,300   - 
Secured promissory note  170,000   - 
Convertible notes, including accrued interest of $18,800  318,142   - 
Promissory notes, including accrued interest of $2,000  26,000   24,000 
Derivative liability  250,970   - 
Total current liabilities  1,844,140   329,901 
         
Stockholders’ deficit:        
Preferred Stock, $.001 par value; 5,000,000 shares authorized; no shares issued and outstanding  -   - 
Common Stock, $.001 par value; 120,000,000 shares authorized; 86,694,333 and 50,000,000 shares issued and outstanding at August 31, 2012 and August 31, 2011, respectively  86,694   50,000 
Additional paid-in capital  771,990   20,000 
Common shares issuable (1,624,998  shares)  102,083   - 
Deficit accumulated during the development stage  (2,802,705)  (200,454)
Total stockholders’ deficit  (1,841,938)  (130,454)
Total liabilities and stockholders’ deficit $2,202  $199,447 
 
  
For the Year Ended 
August 31, 2011
  
For the Year Ended
August 31, 2010
 
       
REVENUE      
Distribution profit participation $-  $4,435 
         
COSTS AND EXPENSES        
Impairment of capitalized production costs, net of deferred revenue  299,013   - 
General and administrative  391,638   943,958 
Bad debt (recovery)  -   (1,024,468)
TOTAL OPERATING EXPENSES (RECOVERY)  690,651   (80,511)
         
(LOSS) EARNINGS FROM OPERATIONS  (690,651)  84,946 
         
Gain on extinguishment of advances from related parties  -   917,460 
Interest  (80,300)  (115,000)
Amortization of deferred financing costs  (83,000)  - 
         
NET (LOSS) EARNINGS $(853,951) $887,406 
         
(LOSS) EARNINGS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED $(0.16) $0.83 
         
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED $5,436,611  $1,071,013 
TheSee accompanying notes are an integral part of theseto the consolidated financial statements.
 
 
F-3
 
 
OSL HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES) (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICITOPERATIONS
 FOR THE YEARS ENDED AUGUST 31, 2010 AND 2009

  
Year
Ended
August 31, 2012
  
September 16, 2010
(Inception) to
August 31, 2011
  
September 16, 2010
(Inception) to
August 31, 2012
 
          
Revenues $-  $-  $- 
Operating expenses:            
General and administrative expenses  1,424,793   200,454   1,625,247 
Impairment of website development  185,800   -   185,800 
Operating loss  (1,610,593)  (200,454)  (1,811,047)
Other:            
Reverse merger costs  (647,880)  -   (647,880)
Costs of rescinded acquisition  (27,297)  -   (27,297)
Interest expense  (178,511)  -   (178,511)
Cost of offering  (145,510)   -   (145,510) 
Change in value of derivative liability  7,540   -   7,540 
Other expense, net  (991,658)  -   (991,658)
Net loss $(2,602,251) $(200,454) $(2,802,705)
Net loss per common share            
Net loss per common share – basic and diluted $(0.04) $(0.00)    
Weighted average common shares outstanding – basic and diluted  66,796,315   50,000,000     
  Common Stock  Additional Paid In Capital  Subscription receivable  Accumulated Deficit  Total Stockholders’ Deficit 
  Shares  Amount             
Balance, August 31, 2009
  
1,068,255
  
$
1,068
  
$
10,154,882
  
$
-
  
$
(12,570,053
)
 
$
(2,414,103
) 
Stock based compensation
  
-
   
-
   
600,000
   
-
   
-
   
600,000
 
Common shares issued for cash and subscription receivable
  
130,000
   
130
   
299,870
   
(200,000
)
  
-
   
100,000
 
Net income
  
-
   
-
   
-
   
-
   
887,406
   
887,406
 
                         
Balance, August 31, 2010
  
1,198,255
  
$
1,198
  
$
11,054,752
  
$
(200,000
) 
 
$
(11,682,647)
  
$
(826,697
) 
Stock based compensation
  
-
   
-
   
11,000
   
-
   
-
   
11,000
 
Common stock issued in debt restructuring net of issuance costs
  
14,000,000
   
14,000
   
56,000
 
  
200,000
   
-
   
270,000
 
Net loss
  
-
   
-
   
-
   
-
   
(1,191,951
 )
  
(853,951
)
                         
Balance, August 31, 2011
  
15,198,255
  
$
15,198
  
$
11,121,752
  
$
-
  
$
(12,536,598)
  
$
(1,399,648
)

TheSee accompanying notes are an integral part of theseto the consolidated financial statements.
 
 
F-4
 
 
OSL HOLDINGS INC. AND SUBSIDIARIES
(FORMERLY RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES)A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTSSTATEMENT OF CASH FLOWSSTOCKHOLDERS’ DEFICIT
FOR THE YEARS ENDEDPERIOD FROM SEPTEMBER 16, 2010 (INCEPTION) TO AUGUST 31, 2011 AND 2010
  
Year Ended
August 31, 2011
  
Year Ended
August 31, 2010
 
CASH FLOWS FROM OPERATING ACTIVITIES      
Net (loss) earnings $(853,951) $887,406 
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:        
Stock-based compensation  11,000   600,000 
Gain on extinguishment of advances from related parties  -   (917,460)
Decrease in allowance for doubtful accounts  -   (1,024,468)
Accrued interest  80,300   - 
 Amortization of deferred financing costs   83,000    - 
Impairment of capitalized production costs, net of deferred revenue  299,013   - 
Depreciation  9,838   7,078 
Changes in operating assets and liabilities:        
Capitalized production costs  (143,348)  (155,665)
Accounts payable and accrued liabilities  46,511   36,785 
Accrued management salary  93,000   246,000 
Deferred revenue  (100,000)  100,000 
NET CASH USED IN OPERATING ACTIVITIES  (474,637)  (105,324)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Issuance of common stock  200,000   100,000 
Proceeds from secured notes  180,000   100,000 
NET CASH PROVIDED BY FINANCING ACTIVITIES  380,000   200,000 
         
NET (DECREASE) INCREASE IN CASH  (94,637)  94,676 
         
CASH, BEGINNING OF YEAR  94,676   - 
         
CASH, END OF YEAR $39  $94,676
2012
 
  Preferred Stock  Common Stock  
Additional
Paid in
  
Common
Shares
     Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Issuable  Deficit  Deficit 
Balance, September 16, 2010 (Inception)  -  $-   -  $-  $-  $-  $-  $ -
                                 
Common shares issued for cash received          2,000,000   2,000   20,000           22,000 
                                 
Stock based compensation expense          48,000,000   48,000               48,000 
                                 
Net loss                          (200,454)  (200,454) 
Balance, August 31, 2011  -  $-   50,000,000  $50,000  $20,000  $-  $(200,454) $(130,454)
                                 
Shares issued upon Reverse  acquisition  -   -   1,068,255   1,068   (1,068)      -   - 
                                 
Fair value of stock issued upon rescinded acquisition  -   -   400,000   400   19,600       -   20,000 
                                 
Shares issued to employees for services provided          8,041,662   8,042   308,208           316,250 
                                 
Fair value of stock issued for outside services received  -    -  5,800,000   5,800   234,200        -  240,000 
                                 
Common stock issued for cash          29,412   29   4,971           5,000 
                                 
Common stock to be issued                      100,000       100,000 
                                 
Common stock to be issued for employee compensation                      2,083       2,083 
                                 
Shares issued upon conversion of Convertible Notes  -   -   21,355,004   21,355   102,746   -   -   124,101 
                                 
Fair value of beneficial conversion feature of Convertible Notes  -   -   -   -   83,333   -       83,333 
                                 
Net loss  -   -   -   -   -   -   (2,602,251)  (2,602,251)
                                 
Balance, August 31, 2012  -  $-   86,694,333  $86,694  $771,990  $102,083  $(2,802,705) $(1,841,938)
The
See accompanying notes are an integral part of theseto the consolidated financial statements.
 
 
F-5
 
 
OSL HOLDINGS INC. AND SUBSIDIARIES (FORMERLY RED ROCK PICTURES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
  
Twelve Months 
Ended 
August 31, 2012
  
September 16, 2010
(Inception) to
August 31, 2011
  
September 16, 2010
(Inception) to
August 31, 2012
 
Cash flows from operating activities:         
Net loss: $(2,602,251)  $(200,454) $(2,802,705)
Adjustments to reconcile net loss to cash used in operating activities:            
Cost of reverse merger  647,880   -   647,880 
Impairment of website development costs  185,800       185,800 
Fair value of stock issued upon rescinded acquisition  20,000   -   20,000 
Fair value of stock issued for services  240,000   -   240,000 
Stock issued to employees for compensation and services  98,333   48,000   146,333 
Cost of offering  145,510   -   145,510 
Change in fair value of derivative liability  (7,540)   -   (7,540) 
Amortization of note discount  69,810   -   69,810 
Accrued interest  29,600   -   29,600 
Non cash interest expense on note conversions  69,101   -   69,101 
(Increase) decrease in:            
Prepaid and other assets  10,500   -   10,500 
Accrued compensation  490,000   -   490,000 
Accounts payable and accrued liabilities  92,228   127,093   219,320 
Net cash used in operating activities  (511,029)   (25,361)   (536,390)
             
Cash flows from financing activities:            
Advances from related parties  10,219   4,508   14,727 
Payment of senior secured convertible note  (70,000)  -   (70,000)
Payment of promissory note  (3,000)  -   (3,000)
Cash received on issuance of convertible promissory notes  400,500   -   400,500 
Cash received on issuance of  a promissory note  67,365   -   67,365 
Cash received on shares to be issued  100,000   -   100,000 
Cash received on issuance of common stock  5,000   22,000   27,000 
Net cash provided by financing activities  510,084   26,508   536,592 
             
Change in cash:            
Net (decrease) increase  (945)   1,147   202 
Balance at beginning of period  1,147   -   - 
Balance at end of period $202  $1,147  $202 
Supplemental disclosures of cash flow information:            
             
Cash paid for:            
Income taxes $-  $-  $  
Interest $-  $-  $  
             
Non cash financing activities            
Fair value of common shares issued upon conversion of senior secured promissory note $16,000  $-  $16,000 
Fair value of common shares issued upon conversion of convertible notes $ 39,000  $   $39,000 
Accounts payable assumed on reverse acquisition $265,380  $-  $265,380 
Acquisition of website for accounts payable $-  $185,800  $185,800 
Promissory notes assumed on reverse acquisition $142,500  $-  $142,500 
Issuance of note payable on reverse merger $240,000  $  -  $240,000 
Fair value of common shares issued upon conversion of accrued compensation $220,000  $  -  $220,000 
Fair value of beneficial conversion feature of convertible notes $358,333  $   $358,333 
See accompanying notes to the consolidated financial statements.
F-6
OSL HOLDINGS INC. AND SUBSIDIARIES)SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS
YEAR ENDED AUGUST 31, 20112012 AND 2010FROM INCEPTION (SEPTEMBER 16, 2010)
TO AUGUST 31, 2011
 
Note 1- Organization, Nature of Business and Basis of Presentation
 
Organization and Nature of Business

OSL Holdings, Inc. (the “Company”) was originally incorporated in Nevada on November 22, 2004 as Maneki Mining Inc. (“Maneki”), a development stage company inunder the business of mineral exploration.  In August 2006name Red Rock Pictures, Inc. consummated a share exchange agreement, whereby 100% of its shares were acquired by Maneki in exchange for 1,800,000 shares of Maneki.  On October 31, 2006, Maneki filed a certificate of amendment, changing the legal name of the corporation to Red Rock Pictures Holdings Inc.

Red Rock Pictures, Inc. was incorporated on August 18, 2006 under the laws of the State of Nevada and was engaged in the business of developing, financing, producing and licensing feature-length motion pictures and direct response infomercials.

On June 6, 2008, the Company entered into a stock for stock exchange agreement with Studio Store Direct, Inc. (“SSD”) and all of the current SSD Shareholders.. Pursuant to the stock for stock exchange agreement, the Company acquired 100% of the assets of SSD by issuing 11,000,00011,000 restricted common shares in exchange for all the issued and outstanding shares of SSD.  Further, SSD became a wholly owned subsidiary of the Company. With the addition of SSD, the Company also operated as a traditional infomercial production and distribution company.

On February 14, 2011, the Board of Directors authorized by written consent to effect a 1-for-100 reverse split of the Company’s issued and outstanding common shares. Except where the context indicates otherwise, all share figures in the consolidated financial statements give effect to the reverse stock split.

On October 10, 2011, the Company completed a Share Exchange Agreement (the “Share Exchange”) with Office Supply LimitedLine, Inc. (“OSL”), a company incorporated in the stateState of Nevada on September 16, 2010, whereby OSL exchanged all of the issued and outstanding shares of OSL in exchange for 50,000,000 shares of the Company’s common stock. TheAs part of the Share Exchange, transactionthe Company entered into a Share Cancellation Agreement and Release (the "Share Cancellation Agreement") with Crisnic Fund S.A., a Costa Rican corporation (“Crisnic”), and OSL, pursuant to which Crisnic cancelled 14,130,000 shares of the Company in exchange for $10,000 cash and a Secured Promissory Note of OSL in the principal amount of $240,000 (the "Promissory Note"). As security for the repayment of the Promissory Note, the Company agreed to issue into escrow 650,001 shares of Series A Preferred Stock (the "Preferred Shares"), to have been released based on the escrow and default terms of the Promissory Note. The Company recently discovered that the Preferred Shares were never issued. Due to delays in raising financing, OSL was unable to meet the original repayment terms of the Promissory Note. OSL has made intermittent payments and the current balance of $170,000 as of December 1, 2012 is currently due and payable. The Company and OSL recently received a written notice of default in accordance with the terms of the Promissory Note and the Company is obligated to issue the 650,001 Preferred Shares to Crisnic. The Preferred Shares have 100:1 voting rights.

Immediately prior to the Share Exchange, the Company entered into an Asset Assignment Agreement (the "Asset Assignment Agreement") by and among Reno Rolle ("Rolle"), Todd Wiseman ("Wiseman"), former principals of the Company, and Red Rock Direct (an entity managed by Rolle and Wiseman), pursuant to which the Company assigned certain of its assets to Red Rock Direct in consideration of the cancelation of shares of the Company of Rolle (143,809 shares that had not yet been issued) and Wiseman (5 million shares due under an employment agreement), pursuant to Share Cancellation Agreements and Releases entered into among each of Rolle (and Lynn Rolle, the wife of Rolle) and Wiseman, the Company and OSL; and the assumption of certain indebtedness of the Company by Red Rock Direct.
For financial statement reporting purposes, the Share Exchange was treated as a reverse merger recapitalization,acquisition, with OSL asdeemed the accounting acquirer and the Company asdeemed the acquired party.legal acquirer. These financial statements reflect the historical activity of OSL, and the historical stockholders’ equity of OSL has been retroactively restated for the equivalent number of shares received in the Share Exchange after giving effect to the differences in par value offset to additional paid-in capital. In connection with the Share Exchange, OSL is deemed to have issued an additional 1,068 shares of common stock to its stockholders existing prior to the Share Exchange. Reverse merger costs of approximately $649,000 include net liabilities of $408,000 assumed upon the reverse merger and the $250,000 cost of the Share Cancellation Agreement.

As a result of our acquisition of OSL, OSL became a wholly owned subsidiary and the Company has assumed the business and operations of OSL. On October 17, 2011, the Company changed theits name to OSL Holdings Inc, by filing a Certificate of Amendment to Articles of Incorporation with the State of Nevada to more accurately reflect the new business operations. The CompanyInc., and became a holding company which, through OSL, marketsfor its operating subsidiaries.
F-7
On November 16, 2012, the Board of Directors of the Company unanimously adopted a resolution approving an amendment to the Company’s Articles of Incorporation to effect a reverse split of the Company’s outstanding shares of Common Stock. As a result of the reverse stock split, every one thousand shares of the common stock of the Company will be combined into one share of common stock. The Company expects to receive approval from FINRA to effect the reverse split and distributes "Productshas filed an amendment to its Articles of Incorporation to effect the reverse stock split as of January 2, 2013. Adoption of the reverse stock split, without taking into account the issuance of any additional shares of our common stock, will reduce the shares of common stock outstanding to approximately 117,121 shares of Common Stock (without taking into account adjustments for fractional shares).  All share and per share amounts will be retroactively adjusted for the Office."reverse split in the Company’s financial statements when the reverse split become effective.
On December 4, 2012, the Company amended its Articles of Incorporation to increase the number of authorized shares available for issuance from 120,000,000 to 450,000,000.
 
Note 2 – Going Concern

The Company's consolidated financial statements are presented on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has experienced losses from operations since inception, does not have significant sources of revenue and has working capital and stockholders’ deficiencies that raise substantial doubt as to its ability to continue as a going concern. The Company has less than $1,000 cash on hand which will is not sufficient to fund ongoing operations. The Company expects a burn rate of at least $125,000 per month and will need to raise at least $500,000 by the end of the second quarter of 2013 to remain in business, of which we can give no assurance of success. In addition, the Company is currently in default on its Senior Secured Convertible note and Secured Promissory Notes.  The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems.

The Company is in the process of acquiring interests in existing businesses with ongoing revenues and will be launching direct sales of office products in the near future.  We expect to obtain additional capital in order to execute our business plan. We intend to raise up to five hundred thousand dollars through private placements in the next several months from and file a registration statement to raise additional funds. Our business plan involves adding qualified executives and rolling out various business units. Our initial capital needs exceed our current capital, but should be satisfied by a small private offering. We believe that substantial contracts will be signed before larger public financing is required.
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The Company has no present agreements or commitments with respect to any material acquisitions of other businesses, products, product rights or technologies or any other material capital expenditures. However, it will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement its current or planned business and may make such acquisitions and/or investments in the future. The Company will require additional capital, either through debt or private placements, in order to execute its business plan to finance any such acquisitions and/or investments. Such additional financing may not become available on acceptable terms and there can be no assurance that any additional financing that the Company does obtain will be sufficient to meet its needs in the long term. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Note 3 – Summary of Significant Accounting Policies

Development Stage Company

The accounting policiesCompany’s consolidated financial statements are presented as those of a development stage enterprise. Activities during the developmental stage primarily include equity based financing and further implementation of the Company’s business plan. The Company are in accordance with accounting principles generally accepted in the United States of America.  Presented below are those policies considered particularly significant:has not generated any revenues since inception.
F-6

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of OSL Holdings, Inc. and its wholly owned subsidiaries, OSL, OSL Diversity Marketplace, Inc., OSL Rewards Corporation, Red Rock Pictures Inc. and Studio Store Direct Inc..Inc. Inter-company balances and transactions have been eliminated in consolidation.
 
F-8
Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Examples include estimates of the useful life of equipment and intangibles, the impairment of long-lived assets, intangibles and goodwill, the value of stock compensation and the estimates of revenue and costs related to film production. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the period in which they become known.

Revenue RecognitionInternal Website Development Costs

The Company recognizes revenue from television and film productions pursuant to AccountUnder Accounting Standards Codification (“ASC”) 926,350-50 – Entertainment - FilmsIntangibles – Goodwill and Other – Website Development Costs.  The following conditions must be met in order to recognize revenue under ASC 926: (i) persuasive evidence of a sale or licensing arrangement exists; (ii), costs and expenses incurred during the program is completeplanning and has been delivered or is available for immediate and unconditional delivery; (iii) the license periodoperating stages of the arrangement has begunCompany's web site development are expensed as incurred. Costs incurred in the web site application and the customer can begin its exploitation, exhibition or sale; (iv) the arrangement fee is fixed or determinable; and (v) collection of the arrangement fee is reasonably assured. Income from film productions is derived from foreign, home video and television sales of third-party films for which production and/or prints and advertising have been financed by the Company. A significant portion of participation income is paid to the   Company based on the timetable associated with participation statements generated by third party processors, and is not typically knowninfrastructure development stages are capitalized by the Company on a timely basis.  This revenue is consequently not recognized untiland amortized to expense over the amount is either knownweb site's estimated useful life or reasonably estimable or until receiptperiod of the statements from the third parties.  Whenbenefit. In May 2012, the Company is entitleddetermined that the website under development was not going to royalties basedbe utilized and recorded a charge of $185,800 categorized as “Loss on gross receipts, revenue is recognized before deductionImpairment of fees, which are included as a componentWebsite Development Costs” in the Consolidated Statement of cost of revenue. Cash receivedOperations for the year ended August 31, 2012. Prior to this charge, no amortization was recorded and the website was in advance of meeting the revenue recognition criteria described above is recorded as deferred production revenue.development and was not  yet placed into service.
 
The Company recognizes income from consulting services over the life of the contract as the services are provided.
Production Costs for Feature Films
Production costs are accounted for pursuant to ASC 926.  The cost of production for infomercials, including direct costs, production overhead and interest are capitalized and amortized using the individual-film-forecast method under which such costs are amortized for each program in the ratio that revenue earned in the current period for such program bears to management’s estimate of the ultimate revenues to be realized from all media and markets for such program.  Management regularly reviews, and revise s when necessary, its ultimate revenue estimates on a title-by-title basis, which may result in a change in the rate of amortization applicable to such title and/or a write-down of the value of such title to estimated fair value.  These revisions can result in significant quarter-to-quarter and year-to-year fluctuations in film write-downs and rates of amortization.  If a total net loss is projected for a particular title, the associated film and television costs are written down to estimated fair value.  All exploitation costs, including advertising and marketing costs are expensed as incurred.
Production Costs for Infomercials

The cost of production for infomercials for our customers, including direct costs, production overhead and interest are capitalized and expensed upon delivery to our customers.
F-7
Cash and Cash Equivalents
Cash equivalents consist of all highly liquid investments with original maturities of ninety days or less.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with the requirements of ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and 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, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.
 
The carrying value of the Company's cash, accounts payable and accrued liabilities, advances from stockholder, senior secured convertible debt, secured note payable and advances from related parties approximates fair value because of the short-term maturity of these instruments.
 
F-9
The following table presents certain investments and liabilities of the Company’s financial assets measured and recorded at fair value on the Company’s balance sheets on a recurring basis and their level within the fair value hierarchy as of August 31, 2012.

  Level 1  Level 2  Level 3  Total 
Fair value of Derivative Liability $–  $–  $250,970  $250,970 

Vendor Concentration

As of August 31, 2012 and August 31, 2011, one vendor represented 32% and 70% of the accounts payable and accrued liabilities balance, respectively.

Income Taxes

The Company accounts for income taxes pursuant to ASC 740, Income Taxes. Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is recorded for the amount of income tax payable or refundable for the period increased or decreased by the change in deferred tax assets and liabilities during the period.

Earnings or Loss per Share

The Company accounts for earnings per share pursuant to ASC 260, Earnings per Share, which requires disclosure on the financial statements of "basic" and "diluted" earnings (loss) per share. Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding for the year. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to stock options and warrants for each year. There were no dilutive financial instruments as of August 31, 2012 or August 31, 2011.

Weighted average number of shares outstanding has been retroactively restated for the years ended August 31,equivalent number of shares received by the accounting acquirer as a result of the reverse merger as if these shares had been outstanding as of the beginning of the earliest period presented. The 1,068,225 shares issued to the legal acquirer are included in the weighted average share calculation from October 10, 2011, or 2010.the date of the exchange agreement.

Stock-Based Compensation

The Company periodically issues stock options and warrants to officers, directors and consultants for services rendered. Options vest and expire according to terms established at the grant date.  The Company accounts for Stock-Based Compensation in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 establishes standards forshare-based payments to officers and directors by measuring the accounting for transactions in which an entity exchanges its equity instruments for goods or services.  It also addresses transactions in which an entity incurs liabilitiescost of services received in exchange for goods or services that areequity awards based on the grant date fair value of the entity ’ sawards, with the cost recognized as compensation expense in the Company’s financial statements over the vesting period of the awards.  The Company accounts for share-based payments to consultants by determining the value of the stock compensation based upon the measurement date at either (a) the date at which a performance commitment is reached or (b) at the date at which the necessary performance to earn the equity instruments is complete.

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that may be settled byqualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the issuance of those equity instruments.  ASC 718 focuses primarily on accounting for transactionsderivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in which an entity obtains employee services in share-based payment transactions.  ASC 718 requires that the compensation cost relating to share-based payment transactions be recognized in the consolidated financial statements.  That cost is measured based on the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black Scholes Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the equity or liability instruments issued.derivative instrument could be required within 12 months of the balance sheet date.

 
F-8F-10
 
Equipment
Equipment is stated at historical cost less accumulated depreciation.  Depreciation, based on the estimated useful lives of the assets, is provided using the under noted annual rates and methods:

Furniture and fixtures7 years straight line
Equipment5 years straight line
Deferred Financing Costs

Deferred financing costs are deferred and amortized by the straight-line method over the life of the underlying borrowings. In case the amount is repaid before maturity, the related unamortized amount will be written off in the Statement of Operations.
Recent Accounting Pronouncements

In MayDecember 2011, FASBthe Financial Accounting Standard Board (FASB) issued Accounting Standards Update (“ASU”)(ASU) No. 2011-04, “Amendments2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities.” This ASU requires an entity to Achieve Common Fair Value Measurementdisclose information about offsetting and Disclosure Requirements in U.S. GAAP and IFRSs”.related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. ASU No. 2011-04 does not require additional fair value measurements2011-11 will be applied retrospectively and is not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The ASU is effective for annual and interim and annualreporting periods beginning on or after December 15, 2011.January 1, 2013. The Company will adopt the ASU as required.  The ASU will affect the Company’s fair value disclosures, but willdoes not affect the Company’s resultsexpect adoption of operations,this standard to have a material impact on its consolidated financial condition or liquidity.statement disclosures.
 
In June 2011,July 2012, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”.  The ASU eliminates2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment (ASU 2012-02) , allowing entities the option to present the components of other comprehensive income as part of the statement of changes in shareholders’ equity, and instead requires consecutive presentation of the statement of net income and other comprehensive income either in a continuous statement of comprehensive income or in two separate but consecutive statements.  ASU No. 2011-05 is effective for interim and annual periods beginning after December 15, 2011.  The Company will adopt the ASU as required.  It will have no effect on the Company’s results of operations, financial condition or liquidity.
In September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, an update to existing guidance on the assessment of goodwill impairment.  This update simplifies the assessment of goodwill for impairment by allowing companies to considerfirst assess qualitative factors to determine whether it is more likely than notnecessary to perform the quantitative impairment test. If the qualitative assessment indicates it is more-likely-than-not that the fair value of a reporting unitan indefinite-lived intangible asset is less than its carrying amount, before performing the two-stepquantitative impairment review process.  It also amends the examples of events or circumstances that would be considered in a goodwill impairment evaluation.  The amendments aretest is required. Otherwise, no testing is required. ASU 2012-02 is effective for annual and interim goodwill impairment tests performed for fiscal yearsthe Company in the period beginning after December 15, 2011. Early adoption is permitted.January 1, 2013. The Company is currently evaluating the effect thatdoes not expect the adoption of ASU 2011-08 maythis update to have a material effect on its goodwill impairment testing.the consolidated financial statements.
 
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

Note 54 – Capitalized Production CostsRescinded Acquisition

All capitalized production costs relatedOn December 15, 2011, the Company acquired a 48% equity interest in Corporate Diversity Solutions, Inc., a New Jersey Corporation (“CDS”) and issued 200,000 shares of common stock valued at $10,000 in December 2011 to projectsthe shareholders of CDS to purchase this interest. The Company also entered into an employment agreement with an employee of CDS and issued 500,000 shares valued at $25,000 in development. Basedaccordance with this agreement. The shares issued were valued at $.05 per share, the trading price of the common stock on the market resultsdate of our initial testingthe agreement. As part of our projectsthe agreement, family members of the majority shareholders of the Company also acquired a 2% equity interest in development, weCDS. For financial reporting purposes, the Company initially believed its 48% ownership and the ownership of the 2% interest of related individuals gave the Company effective control of CDS.

Pursuant to the terms of the Agreement, all the departing shareholders of CDS (the “Departing Shareholders”) cancelled their shares of CDS. In consideration for the cancelation of shares, CDS indemnified and relieved the Departing Shareholders from any liabilities incurred by CDS. Additionally, OSL requested that United Stationers Inc. (“United Stationers”), a supplier of CDS, release all Departing Shareholders from any liability and OSL and CDS indemnify all Departing Shareholders until such release is obtained. United Stationers also requested that each of Eric Kotch, the Company’s CFO, Eli Feder, the Company’s President and CEO, and OSL, guarantee the debt owed by CDS to United Stationers (the “Guarantee”).

On April 5, 2012, the Company announced that it was unable to complete a two year audit (the “Audit”) of CDS as required by the rules of the SEC and was therefore actively seeking to divest its ownership in CDS. The unrelated CDS shareholders returned $20,000 in cash advanced to CDS and 500 shares of OSLH previously issued to CDS employee Ken Scarpa had been returned. On June 5, 2012, United Stationers cancelled the personal guarantee of OSL, Eric Kotch and Eli Feder. For financial reporting purposes at August 31, 2012, the Company has determined that it was appropriatenever had effective control of the CDS, and consistent with generally accepted accounting procedures,the costs of the acquisition totaling $27,297, comprising the issuance of 400,000 shares of its common shares at $0.05 per share (aggregate value of $20,000) and cash advances of $7,297 made to expenseCDS, have been reflected as a cost of abandoned acquisition on the capitalized balance recorded asaccompanying statement of August 31, 2011.  The table below displaysoperations for the activity during the yearstwelve months ended August 31, 2011 and 2010, respectively:

  
Fiscal
Year 2011
  Fiscal Year 2010 
       
Beginning balance
 $155,665  $  
Production costs incurred and capitalized, net of deferred revenues
  143,348   155,665 
Impairment of capitalized production costs
  (299,013)    
Ending balance
 $-  $155,665 
2012.
 
 
F-9F-11
 
 
Note 6 – Equipment

The table below displays our equipment balance as of August 31, 2011 and 2010, respectively.

  August 31, 2011  August 31, 2010 
Furniture and fixtures
 
$
25,459
  
$
25,459
 
Equipment
  
16,468
   
16,468
 
Equipment
  
41,927
   
41,927
 
Less accumulated depreciation
  
(41,927
)
  
(32,089
)
Total equipment, net
 
$
-
  
$
9,838
 

Depreciation expense was $9,828 and 7,078 for the years ended August 31, 2011 and 2010, respectively.

Note 75 – Advances from Related Parties

The Company has received funding from certain related parties to help fund the operating needs of the Company. The balance outstanding as of August 31, 2012 and August 31, 2011 was $14,727 and $4,508, respectively. The loans are non-interest bearing, unsecured and due on demand.

Note 6 – Senior Secured Convertible Note

The Company assumed a $100,000 senior secured convertible note due to The Exchange LLC (the “Exchange LLC”), an unrelated company, upon the consummation of the reverse merger. On June 9, 2007,October 12, 2011, the Company and the Exchange LLC entered into Amendment No. 1 (the “Amendment”) to the Senior Secured Convertible Note and Additional Debt. Pursuant to the Amendment, the maturity date of the Senior Secured Convertible Note was extended to October 5, 2012 the conversion price of the Senior Secured Convertible Note was set at $1.00. Any conversion of debt owed to the Exchange LLC under the Senior Secured Convertible Note must be approved by the Board of Directors of the Company and in the event that the Board of Directors does not approve such conversion request, the corresponding principal amount shall be due. The Company entered into amendment number 2 to the note on December 12, 2012, pursuant to which the maturity date was extended to October 5, 2013, and further provided that the conversion of the note shall not be affected by any reverse split of the Company’s common stock. There is no material relationship between the Company or its affiliates and the Exchange LLC.
During the twelve months ended August 31, 2012, the Company issued a total of 16,000,000 shares of common stock at the conversion price of $0.001, or $16,000, as partial repayment the Senior Secured Convertible Note.

As of August 31, 2012, the total remaining balance outstanding to Exchange LLC is $135,300, including accrued interest of $51,300.

Note 7 – Secured Promissory Note

As part of the Share Exchange, the Company entered into loan agreementsthe Share Cancellation Agreement with Crisnic and OSL. Pursuant to the Share Cancellation Agreement, Crisnic agreed to cancel 14,130,000 shares in exchange for $10,000 and the Promissory Note in the principal amount of $240,000. Under the terms of the Promissory Note, OSL was required to pay Crisnic $50,000 on November 8, 2011, then $25,000 every subsequent week until December 27, 2011, and one final payment of $15,000 on January 3, 2012. The Promissory note is non-interest bearing. As security for the Promissory Note, the Company was obligated to issue into escrow 650,001 Preferred Shares, to be released either to the Company upon full satisfaction of the Crisnic Note or released to Crisnic upon an uncured event of default. The Preferred Shares have 100:1 voting rights. The Company recently discovered that the Preferred Shares were never issued into escrow.

Due to delays in raising financing, OSL was unable to meet the original repayment terms of the Promissory Note. OSL has made intermittent payments and the current balance of $170,000 as of December 1, 2012 is currently due and payable. The Company and OSL recently received a written notice of default in accordance with the N. Williams Family Investments, L.P. and Daniel Laikin (collectively, “Williams-Laikin”) for $1,000,000 each for a total of $2,000.000.  The loan agreement with Daniel Laikin was subsequently amended from $1,000,000 to $900,000.

The proceeds of these loans were to fund the Company’s obligation to advance production costs to National Lampoon (“NL”) for a motion picture production.  The loans were secured by the profit participation rightsterms of the films.  The loans beared seven percent (7%) interestPromissory Note and were to be repaid out of the proceeds of equity raised of the Company or sales efforts ofis obligated to issue the motion picture. In addition650,001 Preferred Shares to the interest on these advances, Williams-Laikin were entitled to receive five percent (5%) of the twenty five percent (25%) of all net profits from the distribution of the respective pictures specified in their agreement received by Red Rock Pictures Holdings Inc.Crisnic.

On August 13, 2010, the Company entered into an agreement with NL in which NL agreed to assume the Company’s outstanding balance including accrued interest owed to Williams-Laikin of $1,941,928 and in exchange, the Company agreed to forgive National Lampoon, Inc. for its balance owed the Company of $1,024,468.  In 2009, the Company wrote off this balance as a bad debt charge due to the financial condition of National Lampoon, Inc.  After offsetting the balances owed from both parties, the net balance resulted in a gain of $917,460 and is classified as gain on extinguishment of advances from related parties on the consolidated statements operations within during the year ended August 31, 2010.

F-12
Note 8 – Secured Note PayableConvertible Notes

On May 6, 2011, the Company and Crisnic Fund, S.A., a Costa Rican investment company ("Crisnic") entered into a Securities Purchase Agreement (the "Purchase Agreement") whereby Crisnic agreed to purchase a $650,000 (the "Principal") Secured Promissory Note (the "Note") to provide continued funding to the Company for completion of an infomercial project (the “Somers Project”). In addition, the Company issued Crisnic 3,000,000 sharesConvertible notes payable consist of the Company’s common stock as part of the original terms of financing, and an additional 11,000,000 shares of the Company's common stock as consideration for entering into the Purchase Agreement.  Pursuant to the Note, the Company has agreed to pay the Principal plus interest at a rate of fifteen percent (15%) per annum on any unpaid principal and accrued interest not repaid by June 30, 2012.  The Note is secured by a Security Agreement granting Crisnic all elements and rights to the Somers Project.
The 14,000,000 shares of common stock issued as part of this transaction were valued at $250,000, which was based on thefair value of the company’s common stock on the date of issuance.  The remaining portion attributed to the Note was $400,000 and is being amortized using the effective interest method over the term of the Note, at an interest rate of 43%. Effective interest on the Note is $60,000 and Nilfollowing as of August 31, 2011 and 2010.2012:
 
     
Convertible notes payable, interest at 8% per annum (A) $116,600 
Convertible notes payable, interest at 10% per annum (B)  260,600 
Convertible notes payable, interest at 8% per annum, due June 30, 2013 (C)  67,465 
Convertible notes payable  444,665 
Less: note discount  (126,523) 
Convertible notes payable, net of discount $318,142 
The Company received net proceeds of $180,000 from Crisnic related to the Note and the difference of $290,000 has been recorded as deferred financing charges and is amortized over the term of the promissory note. Interest of $83,000 and Nil has been amortized as of August 31, 2011 and 2010.
Note 9 – Senior Secured Convertible Debenture__________

On December 28, 2008,(A) Asher Enterprises
During the period November 15, 2011 to July 17, 2012, the Company entered into a twelve month $100,000 senior secured convertible debenture agreement with Emerald Asset Advisors, LLCissued four unsecured Convertible Notes (the “Convertible Notes”) to Asher Enterprises (“Emerald”Asher”). in the aggregate amount of $150,500. The original terms of the senior secured convertible note was aConvertible Notes are due after one year term loan bearingand bear interest at 10%8% per annum where interest accrues and is payable in cash upon maturity provided that the elected conversion to common shares does not occur. Any amount of principal or interest on these Convertible Notes which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date until the past due amount is paid. At any time or times on or after December 28, 2008, Emerald was180 days from the date of the Notes and until the maturity dates, Asher is entitled to convert any portion of the outstanding and unpaid amount into fully paid and non-assessable shares of common stock. The conversion price will be based on a 49% discount to the average of the three lowest closing bid prices for the Company's common stock during the ten trading days immediately preceding a conversion date.
Each of the Convertible Notes include an anti-dilution provision that allows for the automatic reset of the conversion or exercise price upon any future sale of common stock instruments at aor below the current exercise price. The Company considered the current FASB guidance of “Determining Whether an Instrument Indexed to an Entity’s Own Stock” which indicates that any adjustment to the fixed amount (either conversion price or number of shares) of the instrument regardless of the probability or whether or not within the issuers’ control, means the instrument is not indexed to the issuers own stock. Accordingly, the Company determined that the conversion price of $0.06 per common share.the Convertible Notes is not a fixed amount because they are subject to fluctuation based on the occurrence of future offerings or events. As a result, the Company determined that the conversion features are not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as derivative liabilities upon issuance.

The Company determined the initial fair value of the embedded beneficial conversion feature of the Debentures to be $258,510. This amount was determined by management using a weighted-average Black-Scholes Merton option pricing model. In accordance with current accounting guidelines, the excess of $145,510 of derivative liability created over the face amount of the Debentures was considered to be a cost of offering. As such, the Company recorded an $113,000 valuation discount upon issuance.  The Company determined the fair value of the derivative liabilities to be $250,970 as of August 31, 2012, and the Company recorded a gain for the change in fair value of derivative liabilities of $7,540 in the accompanying statement of operations for the year ended August 31, 2012.   During the year ended August 31, 2010, Emerald advanced2012, the Company an additional $100,000 inamortized $34,338 of the formdiscount and as of a short term loan with no terms attached.  August 31, 2012, the total discount of $78,662 is offset against the balance of the notes for financial statement presentation.
 
 
F-10F-13
 
 
SubsequentDuring the twelve months ended August 31, 2012, the Company issued a total of 5,355,004 shares of common stock at an average conversion price of $0.007 or $39,000 as partial repayment to the year end, on October 12, 2011,Convertible Notes. Upon conversion, the Company recognized a beneficial conversion cost of $69,101 related to the difference between the conversion price and the Exchangemarket price of the stock at the date of conversion. As of August 31, 2012, the total remaining balance outstanding to Asher is $116,600, including accrued interest of $5,100.
(B) Panache Capital, LLC (“Exchange LLC”
During the period March 5, 2012 to April 26, 2012, the Company issued four convertible promissory notes (the "Panache Notes"), to Panache Capital, LLC (the "Payee") for an aggregate amount of $250,000, with 10% annum interest. The Panache Notes are each due after the one year anniversary thereof. All past-due principal of the Panache Notes bear interest at 15%. There is a 25% prepayment fee. The Payee has the right to convert the Panache Notes, in its entirety or in part, into common stock of the Company. The conversion price is based on a 25% discount to the average of the three lowest closing bid prices for the Company's common stock during the ten trading days immediately preceding a conversion date. The Company determined the initial fair value of the beneficial conversion feature was approximately $83,333 and was recorded by the Company as a loan discount, which is being amortized as interest expense over the life of the notes. As of August 31, 2012, the unamortized balance of the Panache Notes discount was $47,861.
As of August 31, 2012, the total remaining balance outstanding to Panache is $260,600, including accrued interest of $10,600.
On September 21, 2012, the Company entered into Amendment No. 1an amendment agreement (the “Amendment”) with Panache, which amends the Panache Notes. Pursuant to the senior securedAmendment, the Company shall have the option, for 90 days after September 21, 2012 (the “Outside Date”), to redeem the Panache Notes for 100% of their outstanding principal and interest. Additionally, Panache shall not, until the Outside Date and absent an event of default, convert any of the Panache Notes into Company common stock. Each of the Panache Notes were further amended to permit Panache to convert the Panache Notes valued at a price not to fall below a 49% discount to the average of the three lowest closing bid prices for the Company common stock during the ten trading days immediately preceding a conversion date.
(C) Continental Equities, LLC
On February 20, 2012, the Company issued a $67,365 unsecured promissory note (the “Profectus Note”) to Profectus, LLC (“Profectus”). The Profectus Note is due on demand bearing interest at 8% per annum where interest accrues. On August 13, 2012, Profectus transferred and assigned the Profectus Note to Continental Equities, LLC (“Continental”). Pursuant to the terms of such transfer and assignment, the Company canceled the Profectus Note and issued a new convertible promissory note to Continental in the principal amount of $100,000 in favor of Emerald.  Pursuant to an agreement dated September 19, 2011, by and between Emerald and the Exchange LLC, Emerald assigned the senior secured convertible note and an additional $100,000 of indebtedness (“Additional Indebtedness”$67,000 (the “New Note”) owed to Emerald by the Company to the Exchange LLC.   Pursuant to the Amendment, in consideration of the forgiveness by the Exchange LLC of the Additional Indebtedness and extending thewith a maturity date of the Senior Secured Convertible Note to October 5, 2012, the Company agreed to amend the conversion price in the Senior Secured Convertible Note to $0.001. There is no material relationship between the Company or its affiliates and the Exchange LLC, other than with respect to the Amendment.

Note 10 – Commitments and Contingency

            We are involved in routine litigation incidental to the conduct of our business. There are currently no pending litigation proceedings to which we are a party or to which any of our property is subject.

Note 11 – Common Stock

On February 14, 2011, the Board of Directors authorized by written consent to effect a 1-for-100 reverse splitJune 30, 2013. The interest rate of the Company’s issued and outstanding common shares. Except whereNew Note is 8% per annum through the context indicates otherwise, all share figures in the consolidated financial statements give effect to the stock split.
On May 6, 2011, the Company and Crisnic enteredmaturity date. The New Note is convertible into a Securities Purchase Agreement whereby Crisnic agreed to purchase a $650,000 Secured Promissory Note (See Note 8).  The Company issued Crisnic 3,000,000 shares of the Company’s common stock as partcommencing on a date that is 30 days after the issue date of the original termsNew Note, at a price equal to the average of financing,the lowest two intraday trading prices for the common stock during the five trading days period ending one trading day prior to the date the conversion notice is sent by Continental to the Company. The New Note is subject to customary anti-dilution and as consideration for entering intodefault provisions. In the Purchase Agreement,event the Company shall default in the payment of the New Note, the interest rate shall be increased to 18% per annum.

As of August 31, 2012, the total remaining balance outstanding to Continental is $67,465, including accrued interest of $465.
F-14
Note 9 – Promissory Notes

On August 8, 2011, the Company issued 11,000,000 sharesa $24,000 unsecured Promissory Note to a private investor.  The note is due on demand bearing interest at 8% per annum where interest accrues and is payable in cash upon demand.  

As of August 31, 2012, the total remaining balance outstanding under the note is $26,000, including accrued interest of $2,000.

Note 10 – Derivative Liability

In June 2008, the FASB issued authoritative guidance on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock. Under the authoritative guidance, effective January 1, 2009, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The conversion feature of certain of the Company’s Convertible Notes (described in Note 8), does not have fixed settlement provisions because their conversion will be lowered if the Company issues securities at lower prices in the future. The Company was required to include the reset provisions in order to protect the holders of the Convertible Notes from the potential dilution associated with future financings.  In accordance with the FASB authoritative guidance, the conversion feature of the Convertible Notes was separated from the host contract and recognized as a derivative instrument. The conversion feature of the Convertible Notes have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

At the date of issuance and as of August 31, 2012, the derivative liabilities were valued using a probability weighted average Black-Scholes pricing model with the following assumptions:
  August 31, 2012  At Date of Issuance 
Conversion feature :        
Risk-free interest rate  0.25%   0.25% 
Expected volatility  215%   215% 
Expected life (in years)  1 year   1 year 
Expected dividend yield  0%   0% 
Fair Value :        
Conversion feature $250,970  $258,510 

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected volatility was based on the Company’s historical volatility for its common stock. The expected life of the conversion feature of the Debentures was based on the term of the Debentures. The expected dividend yield was based on the fact that the Company has performed a valuation ofnot paid dividends to its common stockholders in the equity component of this issuancepast and does not expect to pay dividends to its common stockholders in the future

The Company determined thisthe fair value of the shares issuedderivative liabilities to be $250,000.$250,970 as of August 31, 2012, and the Company recorded a gain for the change in fair value of derivative liabilities of $7,540 in the accompanying statement of operations for the year ended August 31, 2012.
 
F-15
Note 1211 – Capital Stock Options and Equity Incentive Plan
Preferred Stock

On February 14, 2007 the Company filed a Form S-8 Registration Statement for SecuritiesThe Company’s articles of incorporation provide that it is authorized to be offeredissue up to Employees in Employee Benefit Plans’.  Under the terms of this filing the Company registered 9,000,0005,000,000 shares of commonpreferred stock with a par value of $.001 per share. The purposeCompany’s Board of Directors has the authority, without further action by the shareholders, to issue from time to time the preferred stock in one or more series for such consideration and with such relative rights, privileges, preferences and restrictions that the Board may determine. The preferences, powers, rights and restrictions of different series of preferred stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and purchase funds and other matters. The issuance of preferred stock could adversely affect the voting power or other rights of the planholders of common stock.

As security for the Promissory Note due to an uncured event of default, the Company is obligated to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are importantissue 650,001 shares of Series A Preferred Stock. Each share of the Series A Convertible Preferred Stock would, among other things as provided in the Certificate of Designations relating to the successSeries A Preferred Stock: (i) carry voting rights 100 times of the Company’s common stock, (ii) carry no dividends, (iii) carry liquidation preference two times the sum available for distribution to common stock holders, (iv) automatically convert after at such time as the Company has filed a certificate of amendment with the State of Nevada to increase the authorized shares of common stock of the Company by offering them an opportunity to participate ina minimum of 500,000,000 into 100 shares of common stock, and (v) not be subject to reverse stock splits and other changes to the common stock capital of the Company.

Common Stock

Common Stock Issued for Cash

On December 30, 2011, the Company ’ s future performance through awards of options and restricted stock.
Under the Plan, incentive stock options may be grantedentered into a private agreement to employees, directors, and officerssell 29,412 shares of the Company’s common stock at $0.17 per share, or $5,000.   

From September 16, 2010 (inception) to August 31, 2011, the Company issued a total of 220,000 shares of common stock at a valuation based upon the par value of $.001 per common share, for $22,000 received from related parties.

Common Stock Issued for Employee Compensation and non-qualifiedServices

During the twelve months ended August 31, 2012, the Company issued a total of 8,041,662 shares of common stock options may be granted to consultants, employees, directors, and officersat the market price on date of issuance which averaged $0.04 per common share, or $316,250. Of the 8,041,662 shares issued, 708,330 common shares valued at $96,250 were issued as stipulated in an employment agreement dated January 17, 2012 with the Company’s President, Robert Rothenberg.  Per the employment agreement, the Company issued 500,000 shares on at signing of the Company.  Options granted underagreement and is required to issue 42,000 shares per month.  As of August 31, 2012, a total of 124,998 shares of common stock have not been issued and are included in common shares issuable discussed below.

From September 16, 2010 (inception) to August 31, 2011, the option plan are for periods not to exceed ten years, and must beCompany issued a total of 48,220,000 shares of common stock at prices not less than 100% ofa valuation based upon the primarily the fair market value of pre-incorporation services rendered which averaged $0.001 per common share, or $48,000.

Common Stock Issued for Outside Services

During the twelve months ended August 31, 2012, the Company issued a total of 5,800,000 shares of common stock valued at the closing market price on date of issuance for payment of investor relations services.  The total shares issued were value at the market price on the date of grant. Options granted to shareholders who own greater than 10%issuance which averaged $0.04 per common share, or $240,000.

Common Stock Issued for Partial Repayment of Senior Secured Convertible Notes

During the twelve months ended August 31, 2012, the Company issued a total of 16,000,000 shares of common stock at the conversion price of $0.001 or $16,000 representing partial repayment of the Senior Secured Convertible Note, as discussed in Note 6 above.
During the twelve months ended August 31, 2012, the Company issued a total of 5,355,004 shares of common stock at an average conversion price of $.007 or $39,000 in the aggregate, as partial repayment of outstanding stock are for periods not to exceed five yearsindebtendess, as discussed in Note 8 above.   The Company additionally recorded interest expense of $69,101, representing the difference between the market price and must be issued at prices not less than 110% of the fair market value of the stockconversion price on the date of grant.conversion.
 
 
F-11F-16
 

Common Stock Issued Relating to Rescinded Acquisition
Summary of stock option activity is as follows:
  
Number 
of
shares
  
Weighted
average
exercise
price
  
Weighted 
average
remaining
contractual term
(in years)
 
Outstanding at August 31, 2010
  50,000  $3.00   1.20 
Granted
  -   -     
Expired or forfeited
  (20,000)  3.00     
             
Outstanding at August 31, 2011
  30,000  $3.00   1.20 
Vested and expected to vest at August 31, 2011
  30,000  $3.00   1.20 
Exercisable at August 31, 2011
  30,000  $3.00   1.20 

During the yearstwelve months ended August 31, 2011 and 2010,2012, the Company recognizedissued a total compensation expenseof 400,000 shares of common stock to several CDS employees related to stock optionsservices performed prior to the Company’s decision to rescind the acquisition.  Based on the closing market price on date of $11,000 and $600,000 respectively and is disclosed separately inissuance, the accompanying consolidated statementstotal value of operations.  Stock options granted in 2007 had fully vested and were expensed by the end of fiscal year 2010.services received was valued at $20,000.
Common Shares Issuable

Subsequent to the year endOn January 6, 2012, the Company entered into Share Cancellation Agreements and Releases witha private agreement to sell 500,000 shares of the Company’s Chief Executive Officer and Chief Strategy Officer, whom released all claims to salary and employeecommon stock options and their related employment agreements were terminated.at $0.10 per share, or $50,000.   The Company has not issued the shares as of August 31, 2012.  The amount is classified as common shares issuable in the Balance Sheet at August 31, 2012.

Note 13 – Supplemental Cash Flow InformationOn May 31, 2012, the Company entered into a private agreement to sell 1,000,000 shares of the Company’s common stock at $0.05 per share, or $50,000.   The Company has not issued the shares as of August 31, 2012.  The amount is classified as common shares issuable in the Balance Sheet at August 31, 2012.

During the years endedAs of August 31, 2011 and 2010, there was no interest2012, one of our employees is owed 124,998 shares of common stock as stipulated in an employment agreement.  The common stock is valued at the average market price of $0.02 per share, or taxes paid by$2,083.  The amount is classified as common shares issuable in the Company.Balance Sheet at August 31, 2012.

Note 1412 – Income Taxes

As at August 31, 20112012 and 2010,August 31, 2011, there were no differences between financial reporting and tax bases of assets and liabilities.  The Company will have tax losses available to be applied against future years' income as result of the losses incurred.  However, due to the losses incurred in the period and expected future operating results, management determined that it is more likely than not that the deferred tax asset resulting from the tax losses available for carry forward will not be realized through the reduction of future income tax payments.  Accordingly a 100% valuation allowance has been recorded for deferred income tax assets.

Note 1413 – Subsequent Events
 
On September 20, 2012, the Company issued an aggregate of 4,018,240 shares of its common stock at the conversion price of $0.001, or $4,018 as partial repayment of outstanding indebtedness due Asher (See Note 8).
On October 10, 2011,September 21, 2012, the Company issued a convertible promissory note to the Payee for the principal amount of $30,000, with a maturity date of September 21, 2013. The interest rate of the note is 10% per annum through the maturity date. The note is convertible into shares of the Company’s common stock at any time and from time to time, valued at an agreed discount to market not to fall below a 49% discount to the average of the three lowest closing bid prices for the Company’s common stock during the ten days immediately preceding a conversion date. In the event the Company fails to deliver to the Payee the common stock issuable upon conversion, the Company shall be required to pay to the Payee $2,000 per day for each day beyond the due date until the Company so delivers the common stock (the “Conversion Penalty”). In the event the Company shall default in the payment of the note, the interest rate shall be increased to 15% per annum. Furthermore, upon the occurrence and during the continuation of any event of default with respect to failure to pay principal or interest when due at the maturity date, the note shall become immediately due and payable and the Company shall pay to the Payee, in full satisfaction of its obligations under the note, an amount equal to the Default Sum. “Default Sum” is defined as (a) the then outstanding principal amount of the note to the date of payment, plus (b) the accrued and unpaid interest on the unpaid principal amount of the Note to the date of payment plus (c) default interest, if any, on the amounts referred to in clauses (a) and (b) plus (d) any amounts owed to the Payee pursuant to the Conversion Penalty.

On September 21, 2012, the Company entered into a Share Exchange Agreementan amendment agreement (the "Exchange Agreement") by and among the Company, Crisnic, OSL, the shareholders of OSL, and Revolution Oils, LLC, aka, Red Rock Direct, LLC ("Red Rock Direct"), pursuant to which the OSL shareholders transferred to the Company all of the equity interests in OSL in exchange for the issuance of 50,000,000 shares (the "Shares") of our common stock (the "Share Exchange"). The Company became a holding company, which, through OSL, markets and distributes "Products for the Office."
As part of the Share Exchange, the Company entered into a Share Cancellation Agreement and Release (the "Crisnic Share Cancellation Agreement"“Amendment”) with Crisnic and OSL.the Payee, which amends the Panache Notes. Pursuant to the Share Cancellation Agreement and Release, Crisnic agreed to cancel 14,130,000 shares in exchange for $10,000 cash and a Promissory Note in the principal amount of $240,000 (the "Promissory Note"). As a security for this Promissory Note,Amendment, the Company issued Crisnic 650,001 sharesshall have the option, for 90 days after September 21, 2012 (the “Outside Date”), to redeem the Panache Notes for 100% of Series A Preferred Stock (the "Preferred Shares") which were placed into escrow,their outstanding principal and will be released based oninterest. Additionally, the terms in an Escrow Agreement. The Preferred Shares have 100:1 voting rights. Upon payment ofPayee shall not, until the principal amount due under the Promissory Note the Preferred Shares will be cancelled. UponOutside Date and absent an event of default, underconvert any of the Promissory Note,Panache Notes into Company common stock. Each of the Preferred Shares will be releasedPanache Notes were further amended to Crisnic.permit the Payee to convert the Panache Notes valued at a price not to fall below a 49% discount to the average of the three lowest closing bid prices for the Company common stock during the ten trading days immediately preceding a conversion date.
 
 
F-12F-17
 
 
On October 8, 2012, the Company issued a total of 4,476,560 shares of common stock at the conversion price of $0.001 or $4,923 as partial repayment of outstanding indebtedness (See Note 8).
On October 17, 2012, the Company issued a total of 3,529,412 shares of common stock upon the conversion of an existing convertible promissory note amounting to $6,000 issued by the Company dated February 10, 2012.
On October 31, 2012, the Company issued a total of 4,107,143 shares of common stock upon the conversion of an existing convertible promissory note amounting to $2,300 issued by the Company dated January 20, 2012.
In conjunctionCrisnic notified OSL and the Company, by letter dated October 28, 2012 (the "Letter") but deemed delivered in accordance with the Share Exchange,terms of the Promissory Note on November 1, 2012, that OSL remains in default under the Promissory Note (see Note 7), and that Crisnic has declared all sums due and owing under the Promissory Note immediately due and payable. The Company and OSL disagreed that any amount under the Promissory Note was immediately due and payable as neither of them had received appropriate notification from Crisnic to commence the Cure Period until receipt of the Letter. Accordingly, OSL and the Company believe that the date to cure the non-payment under the Promissory Note is December 1, 2012. At such time, the Promissory Note remained unpaid in full and, accordingly, all outstanding amounts are due and payable by OSL and the Company is obligated to issue 650,001 Preferred Shares to Crisnic. As of the filing of this Annual Report, the 650,001 Preferred Shares have not been issued.
On November 8, 2012, the Company entered into an Asset Assignmenta Securities Purchase Agreement (the "Asset Assignment Agreement") by and among Reno Rolle ("Rolle"), Todd Wiseman ("Wiseman"), former principalsdated as of the Company, and Red Rock Direct (an entity managed by Rolle and Wiseman),October 19, 2012, with Asher, pursuant to which Asher purchased, and the Company assigned certain of its assets to Red Rock Direct in considerationissued, a convertible promissory note issued by the Company as of the cancelation of shares of the Company of Rolle (143,809 shares) and Wiseman (5 million shares due under an employment agreement), pursuant to Share Cancellation Agreements and Releases entered into among each of Rolle (and Lynn Rolle, the wife of Rolle) and Wiseman, the Company and OSL; and the assumption of certain indebtedness of the Company by Red Rock Direct (the "Spin-Off"). The Company assets to be assigned to Red Rock Direct include (i) the Company's current direct response television commercial (hosted by Suzanne Somers) (the "Infomercial"), (ii) the book currently entitled The Anti-Aging Miracle by Dr. James William Forsythe, M.D., and any and all proceeds derived therefrom, including any health supplements sold as described in the Infomercial, (iii) the feature length film entitled "Endless Bummer", (iv) the book currently entitled Sleep and Grow Young by Dr. James William Forsythe, M.D, and (v) a management agreement with Mike Flynt (collectively, the "Assigned Assets").
On October 12, 2011, the Company and the Exchange LLC (“Exchange LLC”), entered into Amendment No. 1 (the “Amendment”) to the senior secured convertible notesame date in the principal amount of $100,000 in favor$22,500 (the “November 2012 Note”) with a maturity date of Emerald.  PursuantJuly 23, 2013. The interest rate of the Note is 8% per annum through the maturity date. The November 2012 Note is convertible into shares of the Company’s common stock (up to an agreement dated September 19, 2011, by and between Emerald andamount that would result in Asher holding no more than 4.99% of the Exchange LLC, Emerald assigned the senior secured convertible note and an additional $100,000outstanding shares of indebtedness (“Additional Indebtedness”) owed to Emerald bycommon stock of the Company, subject to waiver by Asher) at any time beginning on the Exchange LLC.   Pursuant todate that is 180 days following the Amendment, in considerationdate of the forgiveness by the Exchange LLC of the Additional IndebtednessNovember 2012 Note and extendingending on the maturity date, valued at an agreed discount to market not to fall below a 59% discount to the average of the Senior Secured Convertible Notethree lowest closing bid prices for the Company’s common stock during the ten days immediately preceding a conversion date, subject to October 5,certain exceptions described in the November 2012 Note. In the event the Company agreedfails to amenddeliver to Asher the common stock issuable upon conversion, pricethe Company shall be required to pay to Asher $1,000 per day for each day beyond the due date until the Company so delivers the common stock (the “Conversion Penalty”). Furthermore, upon the occurrence and during the continuation of a “Conversion Default” (as defined in the Senior Secured ConvertibleNovember 2012 Note), the November 2012 Note to $0.001. There is no material relationship betweenshall become immediately due and payable and the Company orshall pay to the holder, in full satisfaction of its affiliatesobligations under the November 2012 Note, an amount equal to the Default Sum (as defined below), multiplied by 2. In the event the Company shall default in the payment of the November 2012 Note, the interest rate shall be increased to 22% per annum. Furthermore, upon the occurrence and during the Exchange LLC, other thancontinuation of any event of default with respect to failure to pay principal or interest when due at the Amendment.maturity date, the November 2012 Note shall become immediately due and payable and the Company shall pay to Asher, in full satisfaction of its obligations under the November 2012 Note, an amount equal to the Default Sum. “Default Sum” is defined as (a) the then outstanding principal amount of the November 2012 Note to the date of payment, plus (b) the accrued and unpaid interest on the unpaid principal amount of the November 2012 Note to the date of payment plus (c) default interest, if any, on the amounts referred to in clauses (a) and (b) plus (d) any amounts owed to Asher pursuant to the Conversion Penalty.

On November 16, 2012, the Board of Directors of the Company unanimously adopted a resolution approving an amendment to the Company’s Articles of Incorporation to effect a reverse split of the Company’s outstanding shares of Common Stock. As a result of the reverse stock split, every one thousand shares of the common stock of the Company will be combined into one share of common stock. The Company expects to receive approval from FINRA to effect the reverse split and has filed an amendment to its Articles of Incorporation to effect the reverse stock split as of January 2, 2013. Adoption of the reverse stock split, without taking into account the issuance of any additional shares of our common stock, will reduce the shares of common stock outstanding to approximately 117,121 shares of Common Stock (without taking into account adjustments for fractional shares).

 
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