Jody M. Walker
Attorney At Law
7841 South Garfield Way
Centennial, CO 80122
303-850-7637 telephone jmwalker85@earthlink.net 303-482-2731 facsimile
March 28, 2011
Division of Corporation Finance
Securities and Exchange Commission
100 F. Street N.E.
Washington, D.C. 20549
Re: Original Source Entertainment, Inc.
Registration Statement on Form S-1
Filed October 4, 2010
File No. 333-169732
Gentlemen:
We have reviewed the Securities and Exchange Commission's comment
letter dated March 15, 2011, and have provided the following
responses.
Prospectus Summary, page 7
1. We note your revised disclosure on pages 7 and 20 in response to
prior comment 7. Please tell us the names of your current customers
referenced on page 20, which include three major television networks, a
production company and an independent film maker, and the portion of
your revenues generated by each. Please also specify if your current
customers are the television networks themselves or are local
affiliates of such television networks. To the extent you reference
any customers by name in your prospectus, consider whether they are
representative of your customers generally and disclose the portion of
your revenues generated by any such customer. In this regard, please
remove the references to any named television networks who are not
current customers.
We have updated our disclosure on page 20 to accurately account
for our clients and the portion of our revenues attributable to
each client. We have removed any reference to companies who are
of the class of customer we would like to acquire but who are not
currently our customers:
We contract with artists of all musical genres who own the
publishing rights to their songs. We expect to sell the songs to
television companies that produce shows for major television
networks. We have signed contracts with approximately 217
artist/composers. The contracts give the registrant non-
exclusive licensing rights and publishing rights in perpetuity.
The artists retain writer's rights and are given exposure to
television and film through the registrant's catalog.
Artists are referred to the registrant through advertisement, A&R
companies, and referrals from friends, registrant signed artists,
and other music industry acquaintances
Current customers include the CBS, NBC and Warner Bros.
television networks in Los Angeles, California (the home
networks, not the local affiliates). Warner Bros. generates
approximately 90% of our revenues, NBC generates approximately 5%
of our revenues, and CBS generates approximately 5% of our
revenues. A major production company whose name is proprietary
has assisted in placing our music in these major networks and
their efforts account for approximately 80% of the revenue
received from those major networks. An independent film maker
whose name is also proprietary has generated no revenues for us
at this time, but has accounts payable currently due to us in the
amount of $2,000. These stated figures include the royalties
generated through public airing of productions containing our
music which are paid through the performing rights organizations
discussed in this prospectus. Our target customer includes all
other major and minor television networks, production companies
and film makers. We intend to reach such customer bases through
marketing, advertising, and direct sales calls.
Risk Factors
2. We cannot offer any assurance as to our future financial results,
page 9
2. Please update your disclosure to identify the deficit for the
fiscal year ended December 31, 2010.
Disclosure has been updated to show the most up to date financial
information as of the end of the last fiscal year:
We have not received substantial income from operations
to date and future financial results are uncertain. We
cannot assure you that the registrant can operate in a
profitable manner. We have a retained deficit of
$(8,823) as of December 31, 2010. Even if we obtain
future revenues sufficient to expand operations,
increased production or marketing expenses could
adversely affect our ability to operate in a profitable
manner.
12. Our officers and directors have other business activities and will
only ..., page 12.
3. The disclosure in this risk factor regarding the number of hours
per week that Ms. Walker will work for you does not appear to be
consistent with the disclosure on page 30. Please clarify.
This disclosure has been changed to reflect the actual number of
hours being worked by Ms. Walker (20-30):
Until completion of the offering, Ms. Walker will
provide up to twenty hours per week depending on the
needs of the registrant. Thereafter, she will be
providing up to thirty hours per week to the registrant
depending on the needs of the registrant. Such duties
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include planning, marketing, promotion, accounting,
customer service, artist relations, and other company
activities.
Growth Strategy, page 22
4. Please disclose how becoming more established in the source music
niche will help you gain access to the cues and transitional music and
television programming transitions market.
This disclosure has been updated to show that our access to the
cues and transitional music market is dependent on how well known
we are in the business. Once more television producers know of
our work and use our services in their productions, it will be
easier to also get their business for our services in providing
cues and transitional music:
We will be focusing on the addition of cues and
transitional music for commercials and television
programming transitions, something its major
competitors do not seem to do at present. Cues and
transitional music is instrumental music that is played
when commercials segue into and out of a program.
Television programming transitions are the programming
that transitions one show into another show or into or
out of a commercial. By becoming more established in
the source music niche, our company will be well known
by key decision makers in the purchasing and licensing
departments employed by our customers. By fostering
such relationships and because we have established
vendor accounts with our customers, theses decision
makers may readily approve potential licenses in other
areas of music placement such as cues and transitional
music. Once we gain access to this market, our sales
force will begin to target potential customers such as
news programs, weather programs, and advertising
agencies.
Use of Proceeds, page 25
5. We note your response to our prior comment 15 and have the
following comment. You disclose that if you are unable to raise the
funds needed, Ms. Walker has verbally agreed to lend you the necessary
funds to move forward with marketing and promotion activities and that
such loans will be provided "as her personal budget allows, considering
each marketing or promotional activity individually." Please explain
in greater detail what this means. Please disclose if there is a
maximum amount that Ms. Walker is willing and able to loan to you.
Please disclose whether Ms. Walker will make loans to you only on a
project-by-project basis and, if so, disclose the relevant factors that
will be considered in determining whether or not to make such loans.
Finally, please add a risk factor describing the risks associated with
your potential dependence on Ms. Walker for liquidity purposes.
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Is there a maximum amount that she is willing to loan, and what are the
factors needed in making that determination?
The disclosure has been updated to show the amounts that Ms.
Walker is willing to provide, as well as the factors taken into
account when determining which projects to fund:
In the event we are not successful in selling a portion
of the securities to raise at least $75,000, we would
give priority to allocating capital to complete
everything necessary to be ready to meet our SEC
reporting requirements. Any remaining capital would be
used to fund our working capital needs. If we are
unable to raise the funds needed, Ms. Walker, an
officer and director has verbally agreed to lend the
necessary funds to move forward with the marketing and
promotion. These monies shall be provided as her
personal budget allows. These loans shall be without
interest and shall have no specific repayment date.
Any amounts loaned with be repaid when revenues allow,
if ever. Ms. Walker has privately funded the business
thus far. There has not been an established maximum
that Ms. Walker is willing and able to loan. Loans to
the company funded by Ms. Walker will be given on a
project-by-project basis. Relevant factors considered
in loan determination include cost of the project,
potential impact of the project on sales, and ability
to fund the project.
A risk factor has been added concerning the potential dependence
on Ms. Walker for liquidity purposes:
21. Should we have troubles raising the appropriate capital to
continue operations, our ability to complete projects will be
dependent upon a verbal lending agreement with Ms. Walker, and
will be limited by her personal budget.
If we are unable to raise sufficient capital to continue
operations, we have a verbal agreement with Ms. Walker that
states that she will lend the company funds out of her personal
budget to fund projects that she deems necessary, as determined
on a project-by-project basis. As a result, we cannot guarantee
that Ms. Walker will approve of or have the ability to fund any
proposed project.
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Thank you for your time and consideration in this matter. Please do
not hesitate to contact me if you have any questions regarding the
above.
Very truly yours,
/s/Jody M. Walker
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Jody M. Walker
Attorney At Law