NEUROONE MEDICAL TECHNOLOGIES Corp - Quarter Report: 2014 June (Form 10-Q)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

-OR-

Commission File Number: 333-169732

Original Source Entertainment, Inc.

(Exact name of Registrant in its charter)

Registrant's Telephone Number, Including Area Code: (303) 495-3728

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerate filer, or a small reporting company as defined by Rule 12b-2 of the Exchange Act):

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

The number of outstanding shares of the registrant's common stock as of August 14, 2014 was 5,073,000 shares of its $.001 par value common stock.

ORIGINAL SOURCE ENTERTAINMENT, INC.

FORM 10-Q

INDEX

PART 1 – FINANCIAL INFORMATION

PART II - OTHER INFORMATION

Item 1. Financial Statements

Original Source Entertainment, Inc.

(A Development Stage Company)

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.

Original Source Entertainment, Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Operations

(unaudited)

* denotes a loss of less than $(0.01) per share.

The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.

ORIGINAL SOURCE ENTERTAINMENT, INC. 

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS CHANGES IN STOCKHOLDERS' DEFICIT

The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.

Original Source Entertainment, Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of the condensed consolidated unaudited financial statements.

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Original Source Entertainment, Inc. (the “Company”), was incorporated in the State of Nevada on August 20, 2009 (“Inception”). The Company’s intent is to license songs to the television and music industry for use for use in television shows or movies. The Company has had limited activity and revenue and is in the developmental stage at this time.

On March 5, 2014, Ms. Walker and E. Lynn Atwood, a former director, sold an aggregate of 3,500,000 shares of our common stock, representing approximately 69% of our issued and outstanding shares of common stock, to Amer Samad. As a result, Mr. Samad was appointed our Chief Executive Officer, and Ms. Walker resigned from all officer positions but remained a director subject to her resignation as such 10 days after the filing of a Schedule 14-F by the Company with the Securities and Exchange Commission.

Basis of Presentation

The accompanying unaudited financial statements of Original Source Entertainment, Inc. have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In our opinion the financial statements include all adjustments (consisting of normal recurring accruals) necessary in order to make the financial statements not misleading. Operating results for the three and six month periods ended June 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. For more complete financial information, these unaudited financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2013 included in our Form 10-K filed with the SEC.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of Original Source Entertainment, Inc. and its sole wholly owned subsidiary, Original Source Music, Inc. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Development Stage Company

The Company is in the development stage as defined under the then current Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 915-205 “Development-Stage Entities,” and among the additional disclosures required as a development stage company are that our financial statements were identified as those of a development stage company, and that the statements of operations, movement in stockholders’ equity (deficit) and cash flows disclosed activity since the date of our inception (August 20, 2009) as a development stage company. Effective June 10, 2014 FASB changed its regulations with respect to Development Stage Entities and these additional disclosures are no longer required for annual reporting periods beginning after December 15, 2014 with the option for entities to early adopt these new provisions. The Company has not elected to early adopt these provisions and consequently these additional disclosures are included in these financial statements.

Cash and cash equivalents

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

Accounts receivable

The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. At June 30, 2014 and December 31, 2013, the Company had no balance of accounts receivable.

Financial Instruments

The Company's financial instruments consist of cash, accounts payable related party and accrued expenses. The carrying value of the Company's financial instruments approximates their fair value because of the short maturity of these instruments

Property and equipment

Property and equipment are recorded at cost and depreciated under accelerated and straight line methods over each item's estimated useful life.

Long-Lived Assets

In accordance with ASC 350, the Company regularly reviews the carrying value of intangible and other long-lived assets for the existence of facts or circumstances, both internally and externally, that may suggest impairment. If impairment testing indicates a lack of recoverability, an impairment loss is recognized by the Company if the carrying amount of a long-lived asset exceeds its fair value.

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company accounts for income taxes under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes”. It prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As a result, the Company has applied a more-likely-than-not recognition threshold for all tax uncertainties. The guidance only allows the recognition of those tax benefits that have a greater than 50% likelihood of being sustained upon examination by the various taxing authorities. The Company is subject to taxation in the United States. All of the Company’s tax years are subject to examination by Federal and state jurisdictions.

The Company classifies penalties and interest related to income taxes as income tax expense in the Statements of Operations.

Revenue recognition

The Company will recognize revenue in accordance with Accounting Standards Codification No. 605, “Revenue Recognition” ("ASC-605"), ASC-605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.

Products and services, geographic areas and major customers

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

Advertising costs

Advertising costs are expensed as incurred. The Company incurred no advertising costs during the three and six months ended June 30, 2014 or 2013.

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):

Stock-based compensation

The Company accounts for employee and non-employee stock awards under ASC 718, whereby equity instruments issued to employees for services are recorded based on the fair value of the instrument issued and those issued to non-employees are recorded based on the fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable.

The Company did not have a stock compensation plan in operation during the three and six month periods ended June 30, 2014 or 2013.

Net income (loss) per share

The net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares of common outstanding. Warrants, stock options, and common stock issuable upon the conversion of the Company's preferred stock (if any), are not included in the computation if the effect would be anti-dilutive and would increase the earnings or decrease loss per share. During the three and six month periods ended June 30, 2014 and 2013, the Company did have potentially dilutive debt instruments outstanding that has been excluded from the earnings per share calculation, as such an inclusion would have been anti-dilutive due to losses incurred by the Company in both periods.

Recent Accounting Pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations other than in respect of the adoption of the new regulations relating to Development Stage Entities as discussed above.

NOTE 2. GOING CONCERN

The Company has suffered a loss from operations and has negative cash flows from operations, and in all likelihood will be required to make significant future expenditures in connection with marketing efforts along with general administrative expenses. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company may raise additional capital through the sale of its equity securities, through an offering of debt securities, or through borrowings from financial institutions or related parties. By doing so, the Company hopes to generate sufficient capital to execute its business plan of licensing songs to the television and music industry for use for use in television shows or movies on an ongoing basis. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. There is no assurance that these events will be satisfactorily completed.

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 3. NOTE PAYABLE - RELATED PARTY

Effective March 5, 2014, both of these notes payable – related party, together with accrued interest of $1,242, were forgiven by the holder. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital.

NOTE 4. CONVERTIBLE NOTES PAYABLE – RELATED PARTY

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 4. CONVERTIBLE NOTES PAYABLE – RELATED PARTY (continued)

The convertible feature of the convertible note payable issued in the twelve months ended December 31, 2013 was valued at $16,000 on an intrinsic value basis. The valuation was based on the fact that 400,000 shares were issuable under the terms of note at $0.01 per share compared to the last cash price for the sale of the shares of $0.05. However, as the debt discount cannot exceed the face value of the loan note, $4,000 was recognized as a debt discount and amortized over the life of the loan note.

Effective March 5, 2014, both of these convertible notes payable – related party, together with accrued interest of $952, were forgiven by the holder. The gain arising on forgiveness of these liabilities has been recognized in additional paid in capital.

NOTE 5. STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.001 per share.

No shares of preferred stock were issued and outstanding during the three and six months ended June 30, 2014 and 2013.

Common Stock

The Company is authorized to issue 45,000,000 shares of common stock with a par value of $0.001 per share.

During the three and six month periods ended June 30, 2014 the Company issued no shares of common stock.

As at June 30, 2014 there were 5,073,000 shares of common stock issued and outstanding.

Additional Paid in Capital

Effective March 5, 2014:

ORIGINAL SOURCE ENTERTAINMENT, INC.

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014 AND 2013

AND THE PERIOD FROM AUGUST 20, 2009 (INCEPTION) TO JUNE 30, 2014

NOTE 5. STOCKHOLDERS’ DEFICIT continued

NOTE 6. SUBSEQUENT EVENTS

In accordance with ASC 855-10. “Subsequent Events” the Company has analyzed its operations subsequent to June 30, 2014 to the date these financial statements were available to be issued on August 14, 2014 and has determined that it does not have any material subsequent events to disclose in these financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

Statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operation, as well as in certain other parts of this quarterly report on Form 10-Q (as well as information included in oral statements or other written statements made or to be made by Original Source) that look forward in time, are forward-looking statements made pursuant to the safe harbor provisions of the Private Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, expectations, predictions, and assumptions and other statements which are other than statements of historical facts. Although Original Source believes such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements are subject to, and are qualified by, known and unknown risks, uncertainties and other factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by those statements. These risks, uncertainties and other factors include, but are not limited to Original Source’s ability to estimate the impact of competition and of industry consolidation and risks, uncertainties and other factors set forth in Original Source’s filings with the Securities and Exchange Commission, including without limitation to this Quarterly Report on Form 10-Q.

Original Source undertakes no obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Form 10-Q.

Critical Accounting Policies

The following discussion as well as disclosures included elsewhere in this Form 10-Q are based upon our unaudited financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. These financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingencies. Original Source continually evaluates the accounting policies and estimates used to prepare the financial statements. Original Source bases its estimates on historical experiences and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management.

Trends and Uncertainties

There are no material commitments for capital expenditure at this time. There are no trends, events or uncertainties that have had or are reasonably expected to have a material impact on our limited operations. There are no known causes for any material changes from period to period in one or more line items of Original Source’s financial statements.

Liquidity and Capital Resources

At June 30, 2014, Original Source had a cash balance of $680, which represents a $155 increase from the $525 balance at December 31, 2013.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the accompanying financial statements, Original Source has incurred losses of $20,247 and $22,430 for the six months ended June 30, 2014 and 2013, respectively, and a working capital deficiency which raises substantial doubt about the Company’s ability to continue as a going concern.

Management believes the Company will continue to incur losses and negative cash flows from operating activities for the foreseeable future and will need additional equity or debt financing to sustain its operations until it can achieve profitability and positive cash flows, if ever.

Management plans to seek additional debt and/or equity financing for the Company, but cannot assure that such financing will be available on acceptable terms.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that management will be successful in implementing its business plan or that the successful implementation of such business plan will actually improve Original Source’s operating results.

Cash Flow from Operating Activities

During the six months ended June 30, 2014 we generated $155 from operating activities compared to $17,780 we used in operating activities during the six months ended June 30, 2013.

During the six months ended June 30, 2014 we incurred a loss of $20,247 which was offset for cash flow purposes by non-cash expenses of $330 and increases in accounts payable and accrued liabilities and accounts payable, related party of $11,702 and $8,370 respectively. By comparison, during the six months ended June 30, 2013 we incurred a loss of $22,430 which was offset for cash flow purposes by non-cash expenses of $4,000 and an increase in accounts payable and accrued liabilities and accounts payable of $650.

Cash Flow from Investing Activities

For the six months ended June 30, 2014 and 2013, we did not pursue any investing activities.

Cash Flow from Financing Activities

For the six months ended June 30, 2014, we did not pursue any financing activities.

By comparison during six months ended June 30, 2014 we received $18,000 from financing activities: we received $8,000 from notes payable–borrowings and $10,000 from the sale of shares of our common stock.

Results of Operations

Three months ended June 30, 2014 compared to the three months ended June 30, 2013

For the three months ended June 30, 2014, we earned revenues of $303. We had general and administrative expenses of $16,322. As a result, we had a net loss of $16,019 for the three months ended June 30, 2014.

For the three months ended June 30, 2013, we earned revenues of $451. We paid general and administrative expenses of $15,246, and interest expenses of $4,327. As a result, we had a net loss of $19,122 for the three months ended June 30, 2013.

The $3,103 decrease in net loss for the three months ended June 30, 2014 compared to the three months ended June 30, 2014 is primarily the result of the decreased interest expenses following the forgiveness of our related party debt in March 2014.

Six months ended June 30, 2014 compared to the six months ended June 30, 2013

For the six months ended June 30, 2014, we earned revenues of $468.  We paid general and administrative expenses of $20,385 and interest expenses of $330. As a result, we had a net loss of $20,247 for the six months ended June 30, 2014.

Comparatively, for the six months ended June 30, 2013, we earned revenues of $857. We paid general and administrative expenses of $18,637 and interest expenses of $4,650.  As a result, we had a net loss of $22,430 for the six months ended June 30, 2013.

The $2,183 decrease in net loss for the six months ended June 30, 2014 compared to the six months ended June 30, 2014 is primarily the result of the decreased interest expenses following the forgiveness of our related party debt in March 2014.

Recently Issued Accounting Standards

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements.

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on our financial condition or the results of its operations other than in respect of the adoption of the new regulations relating to Development Stage Entities as discussed above.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for smaller reporting companies.  

Item 4. Controls and Procedures

During the three months ended June 30, 2014, there were no changes in our internal controls over financial reporting (as defined in Rule 13a- 15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of June 30, 2014. Based on this evaluation, our chief executive officer and principal financial officer have concluded such controls and procedures to be effective as of June 30, 2014 to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

We were not subject to any legal proceedings during the three and six months ended June 30, 2014 and 2013 and currently we are not involved in any pending litigation or legal proceeding.

Item 1A.  Risk Factors

Not applicable for smaller reporting companies  

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

No shares of unregistered common stock were sold during the three and six months ended June 30, 2014.

Item 3.  Defaults Upon Senior Securities.

No shares of senior securities were issued or outstanding during the three and six months ended June 30, 2014.

Item 4.  Mine Safety Disclosures

Not applicable

Item 5.  Other Information

None

Item 6.  Exhibits

 Exhibit 31* - Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 Exhibit 32* - Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 Exhibit 101.INS**  XBRL Instance Document

 Exhibit 101.SCH**  XBRL Taxonomy Extension Schema Document

 Exhibit 101.CAL**  XBRL Taxonomy Extension Calculation Linkbase Document

 Exhibit 101.DEF**  XBRL Taxonomy Extension Definition Linkbase Document

 Exhibit 101.LAB**  XBRL Taxonomy Extension Label Linkbase Document

 Exhibit 101.PRE**  XBRL Taxonomy Extension Presentation Linkbase Document

__________

*  Filed herewith

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

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.  

Dated: August 18, 2014

ORIGINAL SOURCE ENTERTAINMENT, INC.  

By: /s/ Amer Samad

Amer Samad

Chief Executive Officer

(Principal Executive Officer)

(Principal Financial Officer)