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EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER PURSUA - Original Source Music, Inc.f321.htm
EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER PURSUA - Original Source Music, Inc.f312.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL ACCOUNTING OFFICER PURSUA - Original Source Music, Inc.f311.htm



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-K


[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2017


OR


[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to



Commission file number: 000-55516


Original Source Music, Inc.

(Exact name of registrant as specified in its charter)




Nevada

 

20-8594615

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)




8547 E. Arapahoe Road #J453

 

 

Greenwood Village, CO, 80112

 

(303) 953-4245

(Address of Principal Executive Offices)

 

(Registrant's telephone number)



Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  $0.001 par value


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act.  [ ] Yes  [x] No


Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.  [ ] Yes  [x] No


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.406 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 [ ] No [ ]


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  [x] Yes  [ ] No



1




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.  [x]


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.



Large accelerated filer

[ ]

 

Accelerated filer

[ ]

Non-accelerated filer

[ ]

 

Smaller reporting company

[x]

(Do not check if a smaller reporting company)

 

Emerging growth company         [ ]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes [ x] No []


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. The Company’s common stock did not trade during the year ended December 31, 2017.  The market value of the registrant’s voting common stock held by non-affiliates of the registrant was approximately $0.


Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. The number of shares outstanding of the registrant's only class of common stock, as of April 18, 2018 was 5,073,000 shares.


No documents are incorporated into the text by reference.



Throughout this Report on Form 10-K, the terms the “Company,” “we,” “us” and “our” refer to Original Source Music, Inc.  and “our board of directors” refers to the board of directors of Original Source Music, Inc.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


This Annual Report on Form 10-K contains forward-looking statements regarding, among other things, our future operating results and financial position, our business strategy, and other objectives for our future operations.  The words “anticipate,” “believe,” “intend,” “expect,” “may,” “estimate,” “predict,” “project,” “potential” and similar expression are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make.


You should read this Report on Form 10-K and the documents that we have filed as exhibits to this Report on Form 10-K completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Report on Form 10-K are made as of the date of this Report on Form 10-K, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.





2




Table of Contents



 

 

Pages

 

 

 

PART I

 

 

Item 1.

Business

4

Item 1A.

Risk Factors

7

Item 2.

Properties

7

Item 3.

Legal Proceedings

7

Item 4.

Mine Safety Disclosures

7

 

 

 

PART II

 

 

Item 5.

Market for Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

8

Item 6.

Selected Financial Data

8

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

9

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

10

Item 8.

Financial Statements and Supplementary Data

11

Item 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosures

26

Item 9A.

Controls and Procedures

26

Item 9B.

Other Information

26

 

 

 

PART III

 

 

Item 10.

Directors and Executive Officers, Promoters, Control Persons, and Corporate Governance

27

Item 11.

Executive Compensation

28

Item 12.

Security Ownership of Certain Beneficial Owners and Management

29

Item 13.

Certain Relationships and Related Transactions, and Director Independence

29

Item 14.

Principal Accountant Fees and Services

30

 

 

 

PART IV

 

 

Item 15.

Exhibits, Financial Statement Schedules

31

 

 

 

Signatures

 

32




3




PART I


ITEM 1.

BUSINESS


Organizational History


We were incorporated under the laws of the State of Nevada on August 20, 2009.  We were formed to license songs to the television and movie industry. We are a wholly owned subsidiary of Original Source Entertainment, Inc., a publicly traded Nevada corporation.  On February 5, 2014, the board of directors of Original Source Entertainment authorized the spin-off of the registrant to shareholders of record as of February 25, 2014.


The spin-off was accomplished in connection with a change of control of Original Source Entertainment.  Under the terms of the spin-off, the registrant’s common shares, par value $0.001 per share, were distributed on a pro-rata basis to each holder of Original Source Entrainment’s common shares on the record date without any consideration or action on the part of such holders, and the holders of Original Source Entertainment's common shares as of the record date will become owners of 100 percent of our common shares.  The spin-off was consummated only upon the satisfactory resolution of all comments from the Securities and Exchange Commission to the registration statement on Form 10 and upon its effectiveness.  


There was any material change in the registrant's operations as a result of the spin-off.


As of December 31, 2017, we had no employees other than our officers, who were also our directors.


We have never declared bankruptcy, have never been in receivership, and have never been involved in any legal action or proceedings. We have not made any significant purchase or sale of assets, nor has the registrant been involved in any mergers, acquisitions or consolidations.  We are not a blank check company as that term is defined in Rule 419(a)(2) of Regulation C of the Securities Act of 1933, because we have a specific business plan and purpose. As of December 31, 2017, neither the registrant, nor its officers, directors, promoters or affiliates, has had preliminary contact or discussions with, nor do we have any present plans, proposals, arrangements or understandings with any representatives of the owners of any business or company regarding the possibility of an acquisition or merger.


Business


The registrant has a primary focus on licensing music to television and film.


License and Assignment Agreement:  In 2000, Lecia L. Walker assisted in launching Private Wavs, a successful music library which licenses music to television and film, along with her husband at that time. Part of her roll in that endeavor was to do the market research, product and packaging design, sales and marketing. In 2007, she sold her interest in Private Wavs and in 2008, started a new music library under a DBA of Original Source Music, Inc. Since that time she has placed more than 1,100 songs under contract.


On August 21, 2009, Lecia Walker granted a license for a period of ten (10) years for the entire list of songs to Original Source Entertainment, Inc. under a License and Assignment Agreement. Pursuant to the License and Assignment Agreement, Ms. Walker was issued 3,000,000 common shares of Original Source Entertainment. On August 25, 2009, the board of directors of Original Source Entertainment authorized the assignment of its rights under the License and Assignment Agreement to the registrant, its then wholly owned subsidiary. Effective May 31, 2010, Ms. Walker granted the Company an option to extend the term of the original license for an additional 10 year period to expire August 25, 2029.


As of December 31, 2017, Lecia L. Walker is an officer and director of the registrant, bringing her experience to the registrant, and intends to continue to place many new songs under contract and then to license those songs to the television and movie industry.



4




Operations


We review hundreds of music tracks written, produced, and performed by artists who have not already signed away their rights to their original works, then to contract those songs with the highest quality and potential for placement in television and film. The registrant intends to offer a wide variety of instrumental and vocal genres including pop, rock, R&B, jazz, country, singer/songwriter, new age, electronic, dance, funk, children's, adult contemporary, and more.


We contract with artists of all musical genres who own the publishing rights to their songs. We expect to sell the songs to television companies that produce shows for major television networks such as ABC, NBC, Fox, HBO, Warner Bros., etc. We have signed contracts with approximately 217 artist/composers, resulting in over 1,000 songs in our catalog for clients to choose from.  This relatively small catalog has generated over $10,000 in revenues, which continue to increase each time our client’s productions air. 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 television networks such as NBC, Warner Brothers and CBS and production companies such as Hit the Ground Running and Hey Diddle Diddle. 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.


We started our website prior to incorporation, and our website's main purpose is to provide customers with immediate access to the registrant's catalog. To prevent illegal art exploitation, customers must have a login and password to access the registrant's website. Customers are given access to the website only after verification of their role in the professional production industry.


The challenges lie in getting clients to listen to our catalog, and having songs in the catalog that fit the particular scene in the client’s production.  We intend to continue to:


a.

Advertise through the placement of advertisements in film, television and music industry magazines and on film, television and music industry websites


b.

Market and promote the catalog by sending out regular e-mails and snail-mails highlighting particular artists, songs, or genres of music, and send out promotional products to promote branding and


c.

Create a sales team through the hiring of salespeople to research, contact and develop our business.


Typical initial revenues per use in a production varies from $500 to $5,000 or more depending on the potential exposure and audience reach. Royalty revenues have the same value range for the first public airing and are reduced for each re-run, but continue for every public airing forever.


We believe we will be able to attract recording artists to our company due to artists’ desire for public exposure for their original works and payment for that exposure, which we offer the potential of providing at no cost to the artist. We have already attracted many artists and continue receiving requests for song consideration regularly.


We focus on the source music niche of music licensing, but provide music for background, and transitional uses as well. The source music niche is music that is coming from a source in the production and is heard by the characters in the production; such as music being played in a coffee house that the characters are in, or music being played on a radio in the production.  Currently the registrant has more than 1,100 songs available for licensing, and is in the process of signing additional songs to be added to the catalog that will soon be made available for television and film applications. All genres of music are considered for addition to our catalog with a focus on vocal tracks. Signing new songs is a process that involves artist relations such as discussing the contract with the artist, and familiarizing the artist with royalties, performing rights organizations, and rights to their art. It also involves reviewing the songs submitted by the artist, deciding which songs to contract, making a contract offer to the artist, preparing, sending & signing the contracts, obtaining specific descriptions and details of the songs from the artists, converting the songs into a variety of digital formats and cataloguing the songs with the appropriate performing rights organization and the registrant's music catalog.



5




The customer has access to these songs in a variety of ways including logging into our website where they may search for several songs that are appropriate for their needs and download them directly into their production editing program.


Growth Strategy


We 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. Management is of the opinion that as the registrant becomes more established in the source music niche, we will gain access to this market, at which time our sales force will begin to target potential customers such as news programs, weather programs, and advertising agencies.


We intend to enter that market as soon as possible. We intend to examine signing genres of music that are in demand by potential customers but are not available from its competitors at present. We will also examine the creation of a recording label to give the general public access to purchasing the songs in its catalog.


Revenue


The registrant receives revenues in two ways:


a.

Commercial productions pay licensing fees to place a track into their production, and


b.

The registrant owns the publishing rights to all of its songs, and when a production containing a track licensed from the registrant is aired through a public venue, royalties are paid to the registrant by the assigned performing rights organization, such as American Society of Authors and Composers, the Broadcast Music, Inc. or Society of European Stage Authors & Composers. These three performing rights organizations represent songwriters and publishers in the U.S. and their right to be compensated for having their music performed in public.


We do not anticipate that revenues will significantly increase until we are able to heavily market our catalog. If we are unable to raise the funds needed, 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, considering each marketing or promotional activity individually. These loans shall be without interest and shall have no specific repayment date. Any amounts loaned will be repaid when revenues allow, if ever.  Although Ms. Walker has verbally agreed to continue to provide funding to the Company as needed, there is no guarantee that she will and she is not legally bound to do so.


Competition


The music industry is intensely competitive and fragmented. We will compete on the basis of price and selection against other small companies like ours, as well as large companies that have a similar business and large marketing companies.


Some of our major competitors are:


Heavy Hitters Music: Heavy Hitters Music has been in the music licensing business for over 30 years and seems to be the pioneer of the source music niche. Their website boasts a catalog of over 8,500 music tracks. In 2007, former CBS TV executive, Cindy Slaughter, and her husband, Mark purchased Heavy Hitters.


MasterSource: MasterSource became the first real source music competitor for Heavy Hitters when it was formed in 1992 by Marc Ferrari. MasterSource seems to be the first and only competitor with tracks available to the general public.


Killer Tracks: Killer Tracks has been in business for twenty years according to their website. They boast 2000 CDs of music available, yet only a small fraction includes source music. They specialize in background, score, special FX and studio music.


J2R Music: J2R Music has a variety of source music for licensing to television and film.



6




Free Play Music: Free Play Music has a large variety of production music, and a growing number of source music tracks. Although their name indicates the music is free, it is not free for commercial use.


Sync Free Music: Sync Free Music has a large variety of production music, and a growing number of source music tracks. Although their name indicates the music is free, it is not free for commercial use.


License Jazz: License Jazz is a new company targeting commercial jazz music needs.


Pump Audio: Pump Audio started in 2001 and has some source music, but specializes in production and transition music.


Patents and Trademarks


The registrant does not, at this time, have any patents or trademarks.


Governmental Regulations


The business of the registrant does not fall under any government regulations.


Employees


As of December 31, 2017, we have no employees other than our executive officers who are also our directors.  All functions including development, strategy, negotiations and administration are currently being provided by our executive officers. The executive officers do not intend to accept any payment for their services from the receipts of this offering.


As the registrant grows, we may need additional employees for such operations. We do not foresee any significant changes in the number of employees or consultants we will have over the next twelve months.


For information related to property transactions that occurred subsequent to December 31, 2017 refer to Note 7 – “Subsequent Events.”



ITEM 1A.

RISK FACTORS


Not applicable to smaller reporting companies.



ITEM 2.

PROPERTIES


As of December 31, 2017, the registrant maintained office space at 8201 South Santa Fe Drive #229, Littleton, CO 80120 in space leased by the registrant's sole officer and supplied at no charge to the registrant. The registrant believes that its current office space will be adequate for the foreseeable future. We have no plans to lease additional space in the next twelve months.


Should the registrant be required to obtain suitable facilities in the future, it believes it can obtain the required facilities at competitive rates.



ITEM 3.

LEGAL PROCEEDINGS.


The Company is not a party to any pending legal proceedings, and no such proceedings are known to be contemplated.

 

There are no material proceedings to which any director, officer or affiliate of the Company, or any owner of record or beneficially of more than five percent of any class of voting securities of the Company, or any associate of any such director, officer, affiliate of the Company, or security holder is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries.



ITEM 4.

MINE SAFETY DISCLOSURES


Not applicable.




7




PART II



ITEM 5.

MARKET FOR COMPANY'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.


Item 5(a)


a)

Market Information.  Our common stock is not included in the pink sheets nor in the OTC Bulletin Board maintained by the NASD or on the OTCQB.


There is no public trading market for our common stock and there is no guarantee any trading market will develop.


b)

Holders.  At April 12, 2018, there were approximately 34 shareholders of the registrant.


c)

Dividends.  Holders of our common stock are entitled to receive such dividends as may be declared by its board of directors after the spin-off has been completed.  The registrant does not anticipate that it will declare any dividends.  All profit will be used for continuing operations.


d)

Securities authorized for issuance under equity compensation plans.  No securities are authorized for issuance by the registrant under equity compensation plans.


e)

Performance graph.  Not applicable.


f)

Sale of unregistered securities.  None.


Item 5(b)

Use of Proceeds.  Not applicable.


Item 5(c)

Purchases of Equity Securities by the issuer and affiliated purchasers.  None.



ITEM 6.

SELECTED FINANCIAL DATA.


Not applicable to a smaller reporting company.





8




ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Trends and Uncertainties


Demand for the Company's products is dependent on general economic conditions, which are cyclical in nature.  Because a major portion of our activities are the receipt of revenues from our music licensing services, our business operations may be adversely affected by competitors and prolonged recessionary periods.


There are no other known trends, events or uncertainties that have, or are reasonably likely to have, a material impact on our short term or long term liquidity.  Sources of liquidity will come from sales of our products and services.  There are no material commitments for capital expenditure at this time.  There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on the net sales or revenues or income from continuing operations.  There are no significant elements of income or loss that do not arise from the Company’s continuing operations.  There are no other known causes for any material changes from period to period in one or more line items of our financial statements.


Capital and Sources of Liquidity


For the year ended December 31, 2017, we had a net loss of $34,079.  We made an adjustment of $6,446 for the amortization of debt discount and $4,000 for accrued expenses. As a result, we had net cash used in operating activities of $23,633 for the year ended December 31, 2017.


For the year ended December 31, 2016, we had a net loss of $34,507.  We had a positive adjustment of $17,004 for an amortization of debt discount on related party notes, and a negative adjustment of $1,172 for interest expense discharged to paid in capital.  We had a negative change of $5,702 for accounts payable and accrued expenses.  As a result, we had net cash used in operating activities of $22,033 for the year ended December 31, 2016.


For the years ended December 31, 2017 and 2016, we did not pursue any investing activities.


For the year ended December 31, 2017, we received $23,358 from an advance on convertible notes payable from related parties.  As a result, we had net cash provided by financing activities of $23,358 for the period.


For the year ended December 31, 2016, we received $17,117 from an advance on convertible notes payable from related parties and received $6,420 from related party notes payable.  We spent $2,500 on the payment of notes.  As a result, we had net cash provided by financing activities of $21,037 for the year ended December 31, 2016.


Results of Operations


For the year ended December 31, 2017, we recorded revenues of $356.  We paid general and administrative expenses of $2,991 and professional fees of $24,998.  We paid interest expenses to a related party of $6,446.  As a result, we recorded a net loss of $34,079 for the year ended December 31, 2017.


For the year ended December 31, 2016, we recorded revenues of $383.  We paid general and administrative expenses of $1,383 and professional fees of $15,331.  We paid interest expenses to a related party of $18,176.  As a result, we recorded a net loss of $34,507 for the year ended December 31, 2016.


The $428 difference in net gain between the years ended December 31, 2017 and 2016 is due to reduced interest expenses to a related party while increased professional fee and administrative expenses during the year ended December 31, 2017.


Off-Balance Sheet Arrangements


The registrant had no material off-balance sheet arrangements as of December 31, 2017.


Contractual Obligations


The registrant has no material contractual obligations


New Accounting Pronouncements


The registrant has adopted all recently issued accounting pronouncements.



9





ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.


The registrant does not have any significant market risk exposures.



10





ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




ORIGINAL SOURCE MUSIC, INC.

Index to

Financial Statements




 

 

Pages

Report of Independent Registered Public Accounting Firm

 

12

Audited Balance Sheets as of December 31, 2017 and 2016

 

13

Audited Statements of Operations for the years ended December 31, 2017 and 2016

 

14

Audited Statement of Changes in Shareholders' Deficit for the years ended December 31, 2017 and 2016

 

15

Audited Statements of Cash Flows for the years ended December 31, 2017 and 2016

 

16

Notes to Audited Financial Statements for the years ended December 31, 2017 and 2016

 

17




11




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




Board of Directors

Original Source Music, Inc.

Littleton, Colorado



Opinion on the Financial Statements


We have audited the accompanying balance sheet of Original Source Music, Inc. as of December 31, 2017 and 2016 and the related statements of operations, stockholders’ deficit and cash flows for the years then ended December 31, 2017, and the related notes to the financial statements. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.


Going Concern


The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered losses from inception and has a limited operating history which raises substantial doubt about its ability to continue as a going concern.  Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Basis for Opinion


We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.


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


In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Original Source Music, Inc. as of December 31, 2017 and 2016 and the results of its operations and cash flows for the years ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.



/s/ Lo and Kwong C.P.A. Company Limited

Lo and Kwong C.P.A. Company Limited

Suites 313-316

3/F., Shui On Centre

6-8 Harbour Road

Wanchai, Hong Kong

18 April 2018



12




ORIGINAL SOURCE MUSIC, INC.

Balance Sheets

December 31, 2017 and 2016



 

 

December 31, 2017

December 31, 2016

 

 

$

$

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

Prepayment

 

500 

Cash

 

567 

842 

Total Current Assets

 

1,067 

842 

 

 

 

 

TOTAL ASSETS

 

1,067 

842 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Current Liabilities

 

 

 

Accounts payable and accrued expenses

 

4,600 

100 

Convertible notes payable-related party, net of debt

discount of $6,446 as at December 31, 2016

 

8,171 

Notes payable-related party

 

64,410 

26,435 

Total Liabilities

 

69,010 

34,706 

 

 

 

 

Stockholders’ Deficit

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares

   authorized; none issued and outstanding

 

Common stock, $0.001 par value; 45,000,000 shares

 

 

 

Authorized 5,073,000 shares issued and outstanding

 

5,073 

5,073 

Common stock payable 90,000 shares

 

90 

Additional Paid-In Capital

 

37,070 

36,980 

Accumulated Deficit

 

(110,086)

(76,007)

Total Stockholders' Deficit

 

(67,943)

(33,864)

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

1,067 

842 


The accompanying notes are an integral part of these audited financial statements.




13




ORIGINAL SOURCE MUSIC, INC.

Statements of Operations

For the years ended December 31, 2017 and 2016




 

 

Year ended December 31, 2017

Year ended December 31, 2016

 

 

$

$

 

 

 

 

Revenue

 

356 

383 

 

 

 

 

Operating Expenses:

 

 

 

General and administrative

 

2,991 

1,383 

Professional fees

 

24,998 

15,331 

Total Operating Expenses

 

27,989 

16,714 

 

 

 

 

Loss from Operations

 

(27,633)

(16,331)

 

 

 

 

Interest (Expense) to a related party

 

(6,446)

(18,176)

 

 

 

 

Loss before Provision for Income Taxes

 

(34,079)

(34,507)

 

 

 

 

Income Tax Provision

 

 

 

 

 

Net Loss

 

(34,079)

(34,507)

 

 

 

 

Net loss per common share basic and diluted

 

(0.01)

(0.01)

 

 

 

 

 

 

Shares

Shares

 

 

 

 

Weighted average number of common shares Outstanding- Basic and diluted

 

5,073,000 

5,073,000 


The accompanying notes are an integral part of these audited financial statements.




14




ORIGINAL SOURCE MUSIC, INC.

Statement of Changes in Shareholders' Deficit

For the years ended December 31, 2017 and 2016



 

Shares

Amount ($0.001 Par)

Common stock Payable

(shares)

Common stock Payable

(par)

Paid-In Capital

Accumulated

Deficit

Stockholders’

Deficit

 

 

$

 

$

$

$

$

 

 

 

 

 

 

 

 

Balances at December 31, 2015

5,073,000

5,073

18,444 

(41,500)

(17,983)

 

 

 

 

 

 

 

 

Common Stock Payable for extinguishment of debt

-

-

90,000 

90 

(90)

Forgiveness of related party interest on loan

-

-

1,509 

1,509 

Beneficial conversion feature on notes payable-related party

-

-

17,117 

17,117 

 

 

 

 

 

 

 

 

Net income (loss) for the year

-

-

(34,507)

(34,507)

 

 

 

 

 

 

 

 

Balances at December 31, 2016

5,073,000

5,073

90,000 

90 

36,980 

(76,007)

(33,864)

 

 

 

 

 

 

 

 

Cancellation of Common Stock Payable for extinguishment of debt

 

 

(90,000)

(90)

90 

 

 

 

 

 

 

 

 

Net income (loss) for the year

-

-

(34,079)

(34,079)

 

 

 

 

 

 

 

 

Balances at December 31, 2017

5,073,000

5,073

37,070 

(110,086)

(67,943)



The accompanying notes are an integral part of these audited financial statements.



15




ORIGINAL SOURCE MUSIC, INC.

Statements of Cash Flows

For the years ended December 31, 2017 and 2016



 

 

Year ended December 31, 2017

Year ended December 31, 2016

 

 

$

$

 

 

 

 

Operating Activities:

 

 

 

   Net Loss

 

(34,079)

(34,507)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

Amortization of debt discount on related party notes

 

6,446 

17,004 

Interest expense discharged to paid in capital

 

1,172 

Changes in operating assets and liabilities:

 

 

 

Prepayment

 

(500)

Accounts payable and accrued expenses

 

4,500 

(5,702)

 

 

 

 

Net Cash Used in Operating Activities

 

(23,633)

(22,033)

 

 

 

 

Financing Activities:

 

 

 

Advances under convertible notes payable

 

 

 

- related party

 

17,117 

Proceeds from notes payable-related party

 

23,358 

6,420 

Note payment

 

(2,500)

 

 

 

 

Net Cash Provided by Financing Activities

 

23,358 

21,037 

 

 

 

 

Net Change in Cash

 

(275)

(996)

Cash - Beginning of Period

 

842 

1,838 

 

 

 

 

Cash - End of Period

 

567 

842 

 

 

 

 

Supplemental cash flow information:

 

 

 

Cash paid for:

 

 

 

Interest

 

 

 

 

 

Taxes

 

 

 

 

 

Non-Cash Activities

 

 

 

Professional fees paid by related party

 

1,000 

 

 

 

 

Convertible debt related party exchanged for non-convertible debt-related party

 

14,617 

20,015 

 

 

 

 

Related-party interest forgiven to paid in-capital

 

1,509 


The accompanying notes are an integral part of these audited financial statements.




16




ORIGINAL SOURCE MUSIC, INC.

Notes To The Audited Financial Statements

For the years ended December 31, 2017 and 2016


NOTE 1: ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES


Original Source Music, Inc. (“the Company”, “we”, “us” or “our’) was incorporated in the State of Nevada on August 20, 2009 ("Inception"). The Company licenses songs to the television and music industry for use in television shows or movies. The Company has had limited activity and revenue to date.


Basis of Preparation of Financial Statements


The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America. The Company’s year-end is December 31.


Use of Estimates and Assumptions


The preparation of financial statements in conformity with generally accepted accounting principles requires that management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Due to uncertainties inherent in the estimation process, it is possible that these estimates could be materially revised within the next year.


Cash and cash equivalents


The Company considers all highly liquid investments with an original maturity of three months or less as cash equivalents.


Fair Value of Financial Instruments


FASB ASC 820-10 “Fair Value Measurements” defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This ASC also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).


The three levels of the fair value hierarchy are described below:


Level 1


Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity can access at the measurement date.


Level 2


Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable data by correlation or other means.



17




Level 3


Inputs that are unobservable for the assets and liabilities.


The carrying value of cash, accounts payable and accused expenses and notes payable-related party approximates their fair value due to their short-term maturity.


Income tax


The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company had no known material tax assets or liabilities as of December 31, 2017 or December 31, 2016.


Revenue recognition


The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.


Products and services, geographic areas and major customers


The Company derives revenue from the licensing of songs to the television and music industry. All fee revenues each year were domestic and to external customers.


Advertising costs


Advertising costs are expensed as incurred. The Company incurred no advertising costs during the years ended December 31, 2017 or 2016.


Basic and Diluted Earnings (Loss) Per Share


The Company computes earnings (loss) per share in accordance with ASC 260-10-45 “Earnings per Share”, which requires presentation of both basic and diluted earnings per share on the face of the statement of operations. Basic earnings (loss) per share is computed by dividing net earnings (loss) available to common stockholders by the weighted average number of outstanding common shares during the period.  Diluted earnings (loss) per share gives effect to all dilutive potential common shares outstanding during the period.  Dilutive earnings (loss) per share excludes all potential common shares if their effect is anti-dilutive.  During the year ended December 31, 2016 the Company had certain potentially dilutive convertible notes payable related party issued and outstanding.  However, the shares potentially issuable under these notes have been excluded from the calculation of diluted loss per share as the inclusion of such shares would have been anti-dilutive as the Company recognized a loss during the year ended December 31, 2016. During year ended December 31, 2017, no potentially dilutive convertible notes payable issued and outstanding.


The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. By doing so, the Company hopes to generate sufficient capital to execute its business plan of licensing songs to the television and music industry for use in television shows or movies on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern.





18




During the year ended December 31, 2016, certain convertible notes were discharged and replaced with non-convertible debt. The debt holders received 90,000 shares deemed to have nominal value as an incentive to replace the terms of the debt and to forgive the interest accrued to date. Accordingly, the debt modification was deemed to be extinguishment of debt and the gain on extinguishment was netted against the financing cost arising from the amortization of remaining debt discount and classified as a component of interest expense.


During the year ended December 31, 2017, the debt holders holding 90,000 shares declined to accept the 90,000 shares (see details of promissory note M and promissory note N below in note 4).


Recent Accounting Pronouncements


We have reviewed all the recently issued, but not yet effective, accounting pronouncements and we do not believe any of these pronouncements will have a material impact on the Company.


NOTE 2:  GOING CONCERN


The unaudited financial statements for the years ended December 31, 2017 and 2016 have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has suffered a loss from operations and has negative cash flows from operations, and in all likelihood will be required to make significant future expenditures in connection with marketing efforts along with general administrative expenses. These conditions raise substantial doubt about the Company's ability to continue as a going concern.


The principal stockholder has undertaken to finance the Company in cash for a “reasonable” period of time for the Company to continue as a going concern, assuming that in such a period of time the Company would be able to restructure its business and restart on a revenue-generating operation to support its continuation. However, it is uncertain as for how long or to what extent such a period of time would be “reasonable”, and there can be no assurance that the financing from the principal stockholder will not be discontinued.

 

These uncertainties may result in adverse effects on continuation of the Company as a going concern. The accompanying financial statements do not include or reflect any adjustments that might result from the outcome of these uncertainties.


NOTE 3:  CONVERTIBLE NOTES PAYABLE –RELATED PARTY


 

 

Year ended December 31, 2017

Year ended December 31, 2016

 

 

$

$

 

 

 

 

Convertible Note F

 

 

 

Principal

-

5,703 

 

Debt discount

-

(1,267)

 

 

 

 

Convertible Note G

 

 

 

Principal

-

7,114 

 

Debt discount

-

(4,269)

 

 

 

 

Convertible Note I

 

 

 

Principal

-

300 

 

Debt discount

-

(95)

 

 

 

 

Convertible Note J

 

 

 

Principal

-

1,500 

 

Debt discount

-

(815)

 

 

 

 

Total convertible notes payable

 

 

Related party, net of debt discount

-

8,171 



19




Convertible Note A:


On December 31, 2014, a related party loaned the Company $3,255. The note was interest free until June 30, 2015 after which time it bore interest at 6%. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock.  The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note had a balance of $3,255 and matured on February 28, 2016. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded at beneficial conversion feature (capped at proceeds received) of $3,255. Such beneficial conversion feature was accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


On December 31, 2016, the principle balance was cancelled and replaced by Note M, the accrued interest was forgiven. All unamortized debt discount at the time of extinguishment got amortized to Interest expense in the year discharged.


Convertible Note B:


On January 21, 2015, a related party loaned the Company $6,000. The note was interest free until June 30, 2015 after which time it bore interest at 6%. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock.  The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note has a balance of $6,000 and matured on January 30, 2016.  The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $6,000.  Such beneficial conversion feature was accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


On December 31, 2016, the principle balance was cancelled and replaced by Note M, the accrued interest was forgiven. All unamortized debt discount at the time of extinguishment got amortized to interest expense in the year discharged.


Convertible Note C:


On March 30, 2015, a related party loaned the Company $6,000. The note was interest free until August 31, 2015 after which time it bore interest at 6%. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock.  The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note had a balance of $6,000 and matured on March 30, 2016.  The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $6,000.  Such beneficial conversion feature was accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


On December 31, 2016, the principle balance was cancelled and replaced by Note N, the accrued interest was forgiven. All unamortized debt discount at the time of extinguishment got amortized to interest expense in the year discharged.


All accrued interest forgiven was charged as an offset to interest expense.


Convertible Note D:


On September 14, 2015, a related party loaned the Company $3,260. The note was interest free until June 30, 2016 after which time it bore interest at 6%. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock.  The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note had a balance of $3,260 as of December 31, 2016 and matured on December 31, 2016. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $3,260. Such beneficial conversion feature is accounted for as a debt discount which was amortized to interest expense, using the straight line interest rate method, over the life of the note.



20




On December 31, 2016, the principle balance was cancelled and replaced by Note M, and the accrued interest was forgiven. All unamortized debt discount at the time of extinguishment got amortized to interest expense in the year discharged.


Convertible Note E:


On November 6, 2015, a related party loaned the Company $1,500. The note was interest free until December 31, 2016 after which time it bore interest at 6%. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock.  The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note had a balance of $1,500 as of December 31, 2016 and matured on December 31, 2016.  The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $1,500.  Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


On December 31, 2016, the principle balance was cancelled and replaced by Note N, and the accrued interest was forgiven. All unamortized debt discount at the time of extinguishment got amortized to interest expense in the year discharged.


Convertible Note F:


On February 16, 2016, a related party loaned the Company $5,703. The note would have matured on March 31, 2017, and was interest free until December 31, 2016. On December 31, 2016, the note was amended to extend the maturity date and the interest-free period to December 31, 2017. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock at a conversion price of $0.002 per share. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $5,703.  Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


Convertible Note G:


On May 6, 2016, a related party loaned the Company $7,114. The note would have matured on December 31, 2017. The note was interest free until December 31, 2016. On December 31, 2016, the note was amended to extend the interest-free period to December 31, 2017. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock at a conversion price of $0.002 per share. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded at beneficial conversion feature (capped at proceeds received) of $7,114. Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


Convertible Note H:


On May 20, 2016, a related party loaned the Company $2,500. The note was interest free until December 31, 2016 after which time it bears interest at 6%. The note is convertible at the option of the holder into shares of Original Source Music, Inc. common stock.  The number of issuable shares is equal to dividing the balance of the note by double the par value (currently $0.001). The note was repaid in full on August 1, 2016. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $2,500.  Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note. This note was repaid during the year ended December 31, 2016, and accordingly any remaining unamortized debt discount was charged to interest expense in 2016.



21




Convertible Note I:


On June 13, 2016, a related party loaned the Company $300. The note would have matured on March 31, 2017, and was interest free until December 31, 2016. On December 31, 2016, the note was amended to extend the maturity date and the interest-free period to December 31, 2017. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock at a conversion price of $0.002 per share. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $300.  Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


In July 2017, Convertible Note F, G and I in the aggregate amount of $13,117 were exchanged for a non-convertible promissory note in the amount of $13,117 (see details of promissory note below in note 4) and 100,000 shares of common stock.


On December 28, 2017, the holders of Convertible Note F, G and I in the aggregate amount of $13,117 declined to accept 100,000 shares of common stock of the Company.


Convertible Note J:


On July 7, 2016, a related party loaned the Company $1,500. The note would have matured on July 30, 2017, and was interest free until June 30, 2017. On June 30, 2017, the note was amended to extend the maturity date and the interest-free period to December 31, 2017. The note was convertible at the option of the holder into shares of Original Source Music, Inc. common stock at a conversion price of $0.002 per share. The Company assessed the embedded conversion feature and determined that the fair value of the underlying common stock at inception exceeded the conversion price of this note and accordingly recorded a beneficial conversion feature (capped at proceeds received) of $1,500.  Such beneficial conversion feature is accounted for as a debt discount which is amortized to interest expense, using the straight line interest rate method, over the life of the note.


In July 2017, Convertible Note J was exchanged for a non-convertible promissory note in the amount of $1,500 (see details of promissory note below in note 4) and 10,000 shares of common stock.


On December 28, 2017, the holder of Convertible Note J in the amount of $1,500 declined to accept 10,000 shares of common stock of the Company.


NOTE 4:  PROMISSORY NOTES PAYABLE- RELATED PARTY


Note K:


On December 31, 2016, a related party loaned the Company $4,920. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


Note L:


On December 31, 2016, a related party loaned the Company $1,500. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


Note M:


On December 31, 2016 Convertible Promissory Note A in the amount of $3,255 dated December 31, 2014 and, Convertible Promissory Note B in the amount of $6,000 dated January 21, 2015 and Convertible Promissory Note D in the amount of $3,260 dated September 14, 2015, were cancelled and a new single note was issued to replace the three promissory notes in the amount of $12,515. The new note is payable to a related party, VentureVest Capital Corporation and is due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. 50,000 shares of the authorized but unissued common stock of the corporation will be issued to VentureVest Capital Corporation within 30 days of the signing of the promissory note valued at par.




22




During the year ended December 31, 2017, VentureVest Capital Corporation declined to accept 50,000 shares of the authorized but unissued common stock of the Company. Accordingly, the paid-in capital was increased by $50.


Note N:


On December 31, 2016, Convertible Promissory Note C in the amount of $6,000 dated March 30, 2015 and, Convertible Promissory Note E in the amount of $1,500 dated June 11, 2015, were cancelled and a new single note was issued to replace the two promissory notes in the amount of $7,500. The new note is payable to Terayco Enterprises Ltd., a related party and is due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. 40,000 shares of the authorized but unissued common stock of the corporation will be issued to Terayco Enterprises Ltd. within 30 days of the signing of the promissory note valued at par.


During the year ended December 31, 2017, Terayco Enterprises Ltd. declined to accept 40,000 shares of the authorized but unissued common stock of the Company. Accordingly, the paid-in capital was increased by $40.


Note P:


On March 21, 2017, a related party loaned the Company $2,600. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


Note Q:


On June 29, 2017, a related party loaned the Company $6,323. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


Note R:


On December 31, 2017 Convertible Promissory Note F in the amount of $5,703 dated February 16, 2016 and, Convertible Promissory Note G in the amount of $7,114 dated May 6, 2016 and Convertible Promissory Note I in the amount of $300 dated June 13, 2016, were cancelled and a new single note was issued to replace the three promissory notes in the amount of $13,117. The new note is payable to a related party, Terayco Enterprises Ltd. and is due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. 100,000 shares of the authorized but unissued common stock of the corporation will be issued to Terayco Enterprises Ltd. within 30 days of the signing of the promissory note valued at par.


Note S:


On December 31, 2017 Convertible Promissory Note J in the amount of $1,500 dated July 7, 2016 was cancelled and a new single note was issued to replace the promissory note. The new note is payable to a related party, VentureVest Capital Corporation and is due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. 10,000 shares of the authorized but unissued common stock of the corporation will be issued to VentureVest Capital Corporation within 30 days of the signing of the promissory note valued at par.


Note T:


On July 22, 2017, a related party loaned the Company $3,800. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


Note U:


On August 25, 2017, a related party loaned the Company $2,260. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.



23




Note V:


On October 4, 2017, a related party loaned the Company $3,875. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


Note W:


On December 24, 2017, a related party loaned the Company $4,500. The note is interest free until December 31, 2018 after which time it’ll bear interest at 6%. The note matures on December 31, 2018 and requires no periodic payment until maturity.


NOTE 5:  INCOME TAXES


As of December 31, 2016, the Company had net operating loss carry forwards of $76,007 that may be available to reduce future years’ taxable income through 2035. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the deferred tax asset relating to these tax loss carry-forwards.


 

 

Year ended December 31, 2017

Year ended December 31, 2016

 

 

$

$

 

 

 

 

Federal income tax benefit attributable to:

 

 

 

Current Operations

 

(7,156)

(11,732)

Less: change in valuation allowance

 

7,156 

11,732 

 

 

 

 

Net provision for Federal income taxes

 


The Tax Cuts and Jobs Act was signed into law on December 22, 2017 and significantly changes tax law in the United States by, among other items, reducing the federal corporate income tax rate from a maximum of 34% to 21% (effective January 1, 2018). The cumulative tax effect at the expected rate of significant items comprising our net deferred tax amount is as follows:


 

 

December 31, 2017

December 31, 2016

 

 

$

$

 

 

 

 

Deferred tax asset attributable to:

 

 

 

Net operating loss carryover

 

23,118 

25,842 

Less: valuation allowance

 

(23,118)

(25,842)

 

 

 

 

Net deferred tax asset

 


Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $110,086 as of December 31, 2017 for Federal income tax reporting purposes are subject to annual limitations should a change in ownership occur.


NOTE 6:  OTHER RELATED PARTY TRANSACTIONS


For the year ended December 31, 2017, $1,000 of professional fees associated with the preparation of the Company’s 2017 financial statements were paid by a related party on behalf of the Company. These fees were recorded as contributed capital by a related party since no consideration was paid, or will be paid, in exchange for these payments.




24




NOTE 7:  SUBSEQUENT EVENTS


On March 19, 2018, Big Emperor, Ltd. a British Virgin Islands company (“Big Emperor”) purchased 3,500,000 shares of common stock (the “Shares”) of Original Source Music, Inc.  (the “Company”) for $93,800.00.  Of the Shares, 3,000,000 were acquired from Lecia L. Walker, the Company’s Chief Executive Officer and a Director, and 500,000 were acquired from Esther Lynn Atwood, a Company Director. The Shares represent approximately 69% of the Company’s issued and outstanding common stock.


With the proceeds from the acquisition of the Shares, Ms. Walker and Ms. Atwood agreed to pay $64,410.00 to holders of promissory notes issued by the Company in full satisfaction of principal and interest in all outstanding promissory notes issued by the Company.


On March 19, 2018, the Company’s board of directors appointed Tsang Chi Hin, age 59, as its Chief Executive Officer, and as director to hold office until the next annual meeting of shareholders and until his successor is duly elected and qualified or until his resignation or removal.


Following the appointment of Mr. Tsang as an officer and director of the Company, Lecia L. Walker resigned her position as our Chief Executive Officer and Director and Esther Lynn Atwood resigned her position as Director.  Both resignations are effective as of March 19, 2018.


On March 19, 2018, the Convertible Notes listed in Note 3 as Convertible Note A through Convertible Note J, inclusive, were paid in full. On March 19, 2018, the Convertible Notes listed in Note 4 as Convertible Note K through Convertible Note W, inclusive, were paid in full.


On April 11, 2018, our company engaged Lo and Kwong C.P.A. Company Limited (“Lo and Kwong”) as our new independent registered public accounting firm.  On April 5, 2018, Pritchett, Siler & Hardy, P.C. (“Pritchett, Siler”) provided notice that they were ceasing their services as our company’s independent registered public accounting firm.  The reports of Pritchett, Siler on our company’s financial statements as of and for the fiscal years ended December 31, 2016 and December 31, 2015 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principle except to indicate that there was substantial doubt about our company’s ability to continue as a going concern.  Our company’s Board of Directors participated in and approved the decision to change independent registered public accounting firms.  Through the interim periods (subsequent to our period ended September 30, 2017) to April 11, 2018 (the date of change in accountants), there have been no disagreements with Pritchett, Siler on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Pritchett, Siler, would have caused them to make reference to the subject matter of the disagreements in connection with their report on the financial statements for such years.





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ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND

    FINANCIAL DISCLOSURE


None.


ITEM 9A.  CONTROLS AND PROCEDURES


Controls and Procedures.


Evaluation of Disclosure Controls and Procedures:


We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to insure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, or the persons performing similar functions, to allow timely decisions regarding required disclosure.


Under the supervision and with the participation of our CEO and Principal Accounting Officer, or the persons performing similar functions, our management has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report.  Based on that evaluation, our CEO and Principal Accounting Officer, or the persons performing similar functions, concluded that our disclosure controls and procedures were effective as of December 31, 2017.


Management’s Annual Report on Internal Control over Financial Reporting:


Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act, for the Company. Our internal control over financial reporting is the process designed by and under the supervision of our CEO and Principal Accounting Officer, or the persons performing similar functions, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America.  Management has determined that our internal control over financial reporting was not effective as of December 31, 2017.


Management recognizes that there are inherent limitations in the effectiveness of any system of internal control, and accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect material misstatements. In addition, effective internal control at a point in time may become ineffective in future periods because of changes in conditions or due to deterioration in the degree of compliance with our established policies and procedures.


Management has evaluated the effectiveness of our internal control over financial reporting using the criteria established in Internal Control – Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).


This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.  We were not required to have, nor have we, engaged our independent registered public accounting firm to perform an audit of internal control over financial reporting pursuant to the rules of the Commission that permit us to provide only management’s report in this annual report.


Evaluation of Changes in Internal Control over Financial Reporting:


Under the supervision and with the participation of our CEO and Principal Accounting Officer, or those persons performing similar functions, our management has evaluated changes in our internal controls over financial reporting that occurred during the year ended December 31, 2017.  Based on that evaluation, our CEO and Principal Accounting Officer, or those persons performing similar functions, did not identify any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


ITEM 9B.  OTHER INFORMATION


None.



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PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.


Our directors and executive officers and their ages as of December 31, 2017 were as follows:


Name

Age

Position

 

 

 

Lecia L. Walker

48

President, Director

 

 

 

E. Lynn Atwood

70

Secretary, Director


Lecia L. Walker


Lecia L. Walker, President and director, has been involved in the entertainment industry for over 27 years. From 2007 to present, Ms. Walker has owned and operated Original Source Music, Inc., a music library. From 2000 - 2007, Ms. Walker assisted in launching Private Wavs, a music library which licenses music to television and film. In preparation for the launch, she conducted the market research, product and packaging design, sales, and marketing for the entity.


While in school, Ms. Walker was an extra in the movie, Footloose, modeled for ZCMI department stores, and performed in various community, high school, and college productions. From 1997 to 1998, Ms. Walker interned at KZLA radio station in Los Angeles, CA where she gained extensive understanding of all aspects of radio. During 1997 and 1998, Ms. Walker was a DJ for KSBR radio in Orange County, CA and created and produced her own children's radio program, Bedtime Stories with Aunt Clara while there. From 1987 to 1997, Ms. Walker worked as a personal assistant for C.B. Walker, a singer/songwriter, where she learned the ins and outs of publishing and recording contracts, record sales, and top-10 radio hits in the United States and Europe.


Ms. Walker received her bachelor's degree in biology from California State University Long Beach in 1993, and her master's degree in business administration from the University of Phoenix in 2010.


Ms. Walker provides up to thirty hours per week to the registrant depending on the needs of the registrant. Such duties include planning, marketing, promotion, accounting, customer service, artist relations, and other company activities.


Management is of the opinion that the other activities of Lecia Walker will not conflict with the business activities of the registrant due to the terms of the license agreement.


Please see Note 7: “Subsequent Events” above.  Effective as of March 19, 2018, Lecia L. Walker resigned her position as our Chief Executive Officer and Director.


E. Lynn Atwood


E. Lynn Atwood has been an artist in business for over 50 years. From 2007 to present, Ms. Atwood has worked as a graphic artist for Original Source Music, Inc., a music library. From 2005-2007, Ms. Atwood worked as a freelance graphic artist. Ms. Atwood was the lead artist and part owner of Sundance Graphics in San Juan Capistrano, California. She designed all of the outerwear for the Southern California Volleyball Athletic Association sponsored by Reebok for four years. Her fabric design won first prize at the Laguna Art Festival in the '90's and was printed on over 3,000 t-shirts sold. Raisin's Bathing Suits, which sold in Hawaii and Southern California, was her client for several years. Ms. Atwood worked as a graphic artist and brochure designer for Bliss Studios in Jackson Hole, Wyoming from 1992 to 1993. Ms. Atwood also worked as a layout artist at Hallmark Cards from 1994 to 1995. Ms. Atwood designed all artwork for the registrant including the logo, stationery, business cards, marketing postcards, and CD labels.


Ms. Atwood provides up to thirty hours per week to the registrant depending on the needs of the registrant. Such duties include planning, marketing, promotion, accounting, customer service, artist relations, and other company activities.


Management is of the opinion that the other activities of E. Lynn Atwood will not conflict with the business activities of the registrant due to the terms of the license agreement.


The above named directors will serve in their capacity as director until our next annual shareholder meeting to be held within six months of our fiscal year's close. Directors are elected at our annual shareholder meeting.


Please see Note 7: “Subsequent Events” above.  Effective as of March 19, 2018, E. Lynn Atwood resigned her position as Director.



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Tsang Chi Hin


Please see Note 7: “Subsequent Events” above.  


Tsang Chi Hin is being a President and director effective as of March 19 2018. He is currently the Chairman of Honesty Health Industry Limited, a Hong Kong limited company that develops and sells health products throughout Hong Kong and mainland China.  He has held this role since January 1, 2015.  


Mr. Tsang was the Co-founder of Proactive Technology Holdings Limited which was listed on the Growth Enterprises Market (GEM) Board of the Stock Exchange of Hong Kong (stock code. 8089; current name is Chinese Strategic Holdings Limited) in 2000.  He served as the Chairman and Chief Executive Officer of Proactive Technology Limited from 25 Feb 2000 to 16 Oct 2007.  Mr. Tsang then acted as the Chief Executive Officer in China Eco-Farming Limited (GEM Board stock code 8166) from 30 Sept 2008 to 1 Jan 2015.


Mr. Tsang holds a bachelor degree in economics of the Chinese University of Hong Kong in 1984 and a higher certificate in electronic engineering in the Hong Kong Polytechnic University in 1983. He has over 30 years of experience in the telecommunications and electronic industries.  Mr. Tsang started his marketing career in 1984. In 1987, he joined Hongkong Telecom as a consultant in marketing data communication services and his last position was account director.


Section 16(a) Beneficial Ownership Reporting Compliance


Under Section 16(a) of the Securities Exchange Act of 1934, as amended, an officer, director, or greater-than-10% shareholder of the registrant must file a Form 4 reporting the acquisition or disposition of registrant's equity securities with the Securities and Exchange Commission no later than the end of the second business day after the day the transaction occurred unless certain exceptions apply.  Transactions not reported on Form 4 must be reported on Form 5 within 45 days after the end of the registrant's fiscal year.  Such persons must also file initial reports of ownership on Form 3 upon becoming an officer, director, or greater-than-10% shareholder.  To our knowledge, based solely on a review of the copies of these reports furnished to it, the officers, directors, and greater than 10% beneficial owners have complied with all applicable Section 16(a) filing requirements during 2017.


Code of Ethics Policy


The registrant has prepared but has not yet adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.


Corporate Governance


There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors.  In addition to having no nominating committee for this purpose, we currently have no specific audit committee and no audit committee financial expert.  Based on the fact that our current business affairs are simple, any such committees are excessive and beyond the scope of our business and needs.


ITEM 11.  EXECUTIVE COMPENSATION


Compensation of Executive Officers


During the last four fiscal years, there has been no compensation awarded to, earned by or paid to any executive officer nor did the registrant have any compensatory plans in effect for stock options.


Director Compensation


Directors do not receive any compensation for serving as directors. All directors are reimbursed for ordinary and necessary expenses incurred in attending any meeting of the board of directors or any board committee or otherwise incurred in their capacities as directors.


Compensation Committee Interlocks and Insider Participation


During the last three fiscal years, we have not had a compensation committee (or other board committee performing equivalent functions) as part of our board of directors, nor have we had any officer participate in deliberations concerning executive officer compensation.



28





ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND

  RELATED STOCKHOLDERS MATTERS


The following table sets forth, as of April 12, 2018, the number and percentage of outstanding shares of the registrant’s common stock owned by (i) each person known to us to beneficially own more than 5% of its outstanding common stock, (ii) each director, (iii) each named executive officer, and (iv) all officers and directors as a group.


Name and Address of Beneficial Owner

 

Number of Shares Beneficially Owned

Percentage of Outstanding Shares

 

 

 

 

Tsang Chi Hin

8547 E. Arapahoe Road #J453

Greenwood Village, CO 80112

 

3,500,000

68.99%

 

 

 

 

Directors and Executive Officers as a Group

 

3,500,000

68.99%

 

 

 

 


ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE


Promissory Notes Payable - Related Party


On December 31, 2017, three promissory notes in the amount of $22,117 payable to Terayco Enterprises Ltd., a related party and its due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. The three promissory notes in the amount of $22,117 was fully settled after December 31, 2017.


On December 31, 2017, three promissory notes shown below in the amount of $20,035 payable to VentureVest Capital, Corp., a related party and its due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. The three promissory notes in the amount of $20,035 was fully settled after December 31, 2017.


NAME

DATE OF NOTE

AMOUNT

VentureVest Capital, Corp.

December 31, 2016

4,920

VentureVest Capital, Corp.

December 31, 2016

12,515

VentureVest Capital, Corp.  

March 21, 2017

2,600

 

 

20,035


On December 31, 2017, six promissory notes in the amount of $22,258 payable to VentureVest Capital, Corp., a related party and its due on or before December 31, 2018. The note is interest free until December 31, 2018 after which time it shall bear interest at the rate of 6% per annum and requires no periodic payment until maturity. The six promissory notes in the amount of $22,258 was fully settled after December 31, 2017.


NAME

DATE OF NOTE

AMOUNT

VentureVest Capital, Corp.

June 29, 2017

6,323

VentureVest Capital, Corp.  

July 22, 2017

3,800

 

 

 

VentureVest Capital, Corp.  

July 7, 2017

1,500

VentureVest Capital, Corp.

August 25, 2017

2,260

VentureVest Capital, Corp.

October 4, 2017

3,875

VentureVest Capital, Corp.  

December 24, 2017

4,500

 

 

22,258




29





Spin-off from Predecessor


On February 5, 2014, the board of directors of Original Source Entertainment, Inc. approved the spin-off of the registrant to its shareholders. The spin-off was accomplished in connection a change of control.  Under the terms of the spin-off, our common shares were distributed on a pro-rata basis to each holder of Original Source Entertainments' common shares on the record date without any consideration or action on the part of such holders, and the holders of Original Source Entertainments' common shares as of the record date will become owners of 100 percent of our common shares. The spin-off will be consummated only upon the satisfactory resolution of all comments from the SEC to the Form 10 and its effectiveness.   


Lecia L. Walker and E. Lynn Atwood were officers, directors and principal shareholders of Original Source Entertainment through the closing date of the Share Exchange.


There were no other agreements between Original Source Entertainment and the registrant after the spin-off.


Original Source Entertainment will not retain any liability relating to the registrant after the spin-off.  


As a result of this spin-out of the registrant from its parent company and the approved 50,073 for 1 forward split, there is a total 5,073,000 shares issued and outstanding.



ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES


Audit Fees


We have incurred fees and expenses from Pritchett, Siler & Hardy, P.C. of $3,350 for the 2016 fiscal years and incurred fees and expenses from Lo and Kwong C.P.A. Company Limited of $3,000 for the 2017 fiscal year.  Fees included work completed for our annual audit and for the review of our financial statements included in our Form 10.


Tax Fees


We have not incurred fees and expenses for the 2017 and 2016 fiscal years for professional services rendered for tax compliance, tax advice, and tax planning.


All Other Fees


The Board of Directors, acting as the Audit Committee considered whether, and determined that, the auditor's provision of non-audit services was compatible with maintaining the auditor's independence.  All of the services described above for fiscal years 2017 and 2016 were approved by the Board of Directors pursuant to its policies and procedures.  We intend to continue using independent accounting firm for the audit and audit-related services.




30




ITEM 15.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES


(a)(1)  

List of Financial statements included in Part II hereof


Report of Independent Registered Public Accounting Firm

Balance Sheet:

December 31, 2017 and 2016

Statements of Operations:

For the years ended December 31, 2017 and 2016

Statements of Changes in Shareholders’ Equity:

For the years ended December 31, 2017 and 2016

Statements of Cash Flows:

For the years ended December 31, 2017 and 2016

Notes to Financial Statements:

For the years ended December 31, 2017 and 2016


(a)(2)

List of Financial Statement schedules included in Part IV hereof:  None


(a)(3)

Exhibits


 

The following exhibits are included herewith:


Exhibit No.

Description

 

 

3.1

Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Form 10 filed by the Issuer on December 3, 2015)

3.2

Bylaws of Original Source Music, Inc. (incorporated by reference to Exhibit 3.2 to the Form 10 filed by the Issuer on December 3, 2015)

3.3

Specimen of Stock Certificate (incorporated by reference to Exhibit 3.3 to the Form 10 filed by the Issuer on December 3, 2015)

10.1

License Agreement (incorporated by reference to Exhibit 10.1 to the Form 10 filed by the Issuer on December 3, 2015)

10.2

Assignment of License Agreement (incorporated by reference to Exhibit 10.1 to Form 10 filed by the Issuer on December 3, 2015)

10.3

Option Agreement (incorporated by reference to Exhibit 10.3 to the Form 10-12G/A filed by the Issuer on January 11, 2016)

31.1

Certification of Chief Executive Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer and Principal Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*

XBRL Instance Document

101.SCH*

XBRL Taxonomy Extension Schema Document

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document


*

XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.






31




SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned duly authorized person.


Dated: April 23, 2018


Original Source Music, Inc.




/s/Tsang Chi Hin

By:  Tsang Chi Hin, Chief Executive Officer



In accordance with the requirements of the Securities Exchange Act of 1934, as amendment, this report has been signed by the following persons in the capacities and on the dates stated.




Signature

 

Title

Date

/s/Tsang Chi Hin

Tsang Chi Hin

 

Chief Executive Officer

April 23, 2018




32