~~U.S.~~UNITED ~~SECURITIES AND EXCHANGE COMMISSION~~STATES

~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION

WASHINGTON, D.C.20549

Form 10-K

(Mark One)

x ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OFFor ~~THE~~the ~~SECURITIES~~fiscal ~~EXCHANGE~~year ~~ACT~~ended OFDecember ~~1934~~31, 2012

~~For~~o ~~the~~TRANSITION ~~fiscal~~REPORT ~~year~~UNDER ~~ended~~SECTION ~~March~~13 ~~31,~~OR ~~2012~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o TRANSITION REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File Number 000-54341

~~_______________________________________________~~X-Factor Communications Holdings, Inc.

Organic Spice Imports, Inc.

(Exact name of registrant as specified in its charter)

______________________________________________

Delaware		45-1545032
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Empire Blvd., 5th Floor, South Hackensack, New Jersey 07606

Delaware		45-1545032
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

3 Empire Blvd., 5th Floor, South Hackensack, New Jersey 07606

(Address of principal executive offices)

(201) 518-1925

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act:

None.

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.0001 par value per share

(Title of Class)

~~(Title~~Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of ~~Class)~~the Securities Act. Yes o No x

~~Check~~Indicate by check mark whether the registrant is anot ~~well-known~~required ~~seasoned~~to ~~issuer,~~file asreports ~~defined~~pursuant into ~~Rule~~Section ~~405~~13 or 15(d) of the ~~Securities~~Exchange Act. Yes o No x

~~Check~~Indicate by check mark whether the registrant is(1) ~~not~~has ~~required~~filed toall ~~file~~ reports ~~pursuant~~required to be filed by Section 13 or 15(d) of the Exchange Act 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 ox No xo

~~Check~~Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and posted on its corporate web site, if any, every Interactive Data File required to be ~~filed~~submitted byand ~~Section~~posted 13pursuant orto ~~15(d)~~Rule 405 of ~~the~~Regulation ~~Exchange~~S-T ~~Act~~(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2)~~post ~~has been subject to~~ such ~~filing requirements for the past 90 days~~files). Yes x No o

~~Check~~Indicate ~~whether~~by ~~the~~check ~~registrant~~mark ~~has submitted electronically and posted on its corporate website,~~ if ~~any,~~disclosure ~~every~~of ~~Interactive~~delinquent ~~Data File~~filers ~~required to be submitted and posted~~ pursuant to ~~Rule~~Item 405 of Regulation S-TK (§~~232~~229.405 of this chapter) ~~during~~is ~~the preceding~~not 12contained ~~months~~herein, ~~(or~~and ~~for~~will ~~such~~not ~~shorter~~be ~~period~~contained, ~~that~~to the best of registrant’s ~~was~~knowledge, ~~required~~in todefinitive ~~submit~~proxy ~~and~~or ~~post~~information ~~such~~statements ~~files).~~incorporated ~~Yes x~~by Noreference in Part III of this Form 10-K or any amendment to this Form 10-K o

~~Check~~Indicate ifby ~~there~~check ismark nowhether ~~disclosure~~the ofregistrant ~~delinquent~~is ~~filers~~a inlarge ~~response~~accelerated tofiler, ~~Item~~an ~~405~~accelerated offiler, ~~Regulation~~a Snon-Kaccelerated ~~(§229.405 of this chapter) contained herein~~filer, ~~and~~or noa ~~disclosure~~smaller ~~will~~reporting becompany. See ~~contained,~~definitions ~~to the best~~ of ~~registrant's~~“large ~~knowledge~~accelerated filer,” in“accelerated ~~definitive~~filer” ~~proxy~~and or“smaller ~~information~~reporting ~~statements~~company” ~~incorporated by reference~~ in ~~Part~~Rule ~~III~~12b-2 of ~~this~~the ~~Form~~Exchange ~~10-K or any amendment to this Form 10-K~~Act. o(Check one):

~~Check~~Large ~~whether~~Accelerated ~~the~~Filer ~~registrant~~o isAccelerated aFiler ~~large~~o ~~accelerated filer, an accelerated filer, a non~~Non-accelerated ~~filer,~~Filer oro aSmaller ~~smaller~~Reporting ~~reporting~~Company ~~company. See~~x ~~definitions~~(Do ofnot ~~“large~~check ~~accelerated~~if ~~filer,”~~a ~~“accelerated filer” and “~~smaller reporting company~~” in Rule 12b-2 of the Exchange Act~~. ~~(Check one~~):

~~Large~~Check ~~Accelerated~~whether ~~Filer o Accelerated~~the ~~Filer~~ issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

~~Non~~As of June 30, 2012, the aggregate market value of the registrant’s common stock held by non-~~accelerated~~affiliates ~~Filer o Smaller~~of ~~Reporting~~the registrant was $6,159,968 based on the last price at which the Company x’s common stock was last sold. As of May 15, 2013 there were 17,753,684 shares of common stock outstanding.

(Do not check if a smaller reporting company.)

Check whether the issuer is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

As of September 30, 2011, the aggregate market value of the voting and non-voting common equity held by non-affiliates was $0.

APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of May 14, 2012, there were 11,180,000 shares of common stock, par value $.0001, outstanding.

FORWARD-LOOKING STATEMENTS

Certain statements made in this Annual Report on Form 10-K are “forward-looking statements” (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of ~~Organic~~X-Factor ~~Spice~~Communications ~~Imports~~Holdings, Inc. (the “Company”) to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance the forward-looking statements included in this Report will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved.

PART I

Item 1. Description of Business.

X-Factor Communications Holdings, Inc., a Delaware corporation (formerly, Organic Spice Imports, Inc.) (“weHoldings” or the “Company”, “uswe”, “~~our~~us” or ~~the~~ “~~Company~~our”), ~~was~~through ~~incorporated~~its ~~under~~wholly-owned ~~the~~subsidiary ~~laws~~X-Factor ofCommunications, ~~the State of Delaware on December 30~~LLC, ~~2010.~~a ~~The~~New ~~Company~~York ~~was~~limited ~~established~~liability ascompany ~~part of the Chapter 11 reorganization of Spicy Gourmet Organics, Inc.~~ (“~~SGO~~X-Factor”), alocated ~~California corporation. SGO was incorporated~~ in ~~the~~South ~~State~~Hackensack, ofNew ~~California~~Jersey, inprovides ~~2006~~interactive ~~and~~digital ~~was~~media ~~formed~~network tosoftware ~~import specialty organic spices from South Asia~~ and ~~sell them in the United States~~services. ~~SGO~~ ~~was~~References ~~undercapitalized~~herein ~~and~~to: ~~sales~~the of“Company”, ~~its~~“we”, ~~spice~~“us” ~~products~~or ~~were~~“our”, ~~slow~~refer to ~~develop. As~~Holdings aand ~~result,~~X-Factor. The ~~SGO~~X-Factor ~~lacked~~Digital ~~sufficient~~Media ~~cash~~Network ~~flow~~Platform, toour ~~meet~~cloud-based ~~its~~digital ~~current~~signage, ~~obligations~~web and onmobile ~~October 1~~solution, ~~2010,~~is ~~SGO~~delivered ~~filed~~as a ~~voluntary~~software-as-a-service ~~petition~~and ~~for bankruptcy~~ under ~~Chapter~~a 11software inlicense ~~the~~model, ~~U.S.~~enabling ~~Bankruptcy~~our ~~Court~~customers ~~for~~to ~~the~~build ~~Central~~simple ~~District~~yet ofscalable ~~California. SGO's~~advertising ~~Plan~~and ofcorporate ~~Reorganization~~digital ~~(the~~media ~~"Plan") was confirmed by the U~~networks.S. ~~Bankruptcy~~The ~~Court~~Company’s ~~for~~webcasting ~~the~~solution, ~~Central~~a ~~District~~live ofand ~~California~~ on-demand ~~November~~multimedia ~~19,~~distribution ~~2010. The Plan provided~~product, ~~among~~delivers ~~other~~rich ~~things,~~media ~~for the incorporation of the Company~~content, ~~the~~desktop ~~spin~~signage ~~off~~and ofemergency ~~SGO's~~messaging ~~importing business~~ to ~~the~~mobile ~~Company,~~ and ~~the~~Web ~~distribution~~devices. The ~~of the~~ Company’s ~~shares~~solutions toaddress the ~~bankruptcy~~rapidly ~~creditors. The~~expanding ~~Company~~digital ~~lacked~~media ~~the~~needs ~~resources~~of ~~required~~its tocorporate, ~~effectively~~public ~~develop an import business and~~venue, ~~therefore,~~education ~~engaged in a search for a strategic business partner or a merger or acquisition partner with the resources to establish a business~~ and ~~provide~~government ~~greater~~sector ~~value to its stockholders~~customers. The Company ~~filed~~markets aits ~~registration~~software ~~statement on Form 10 with the U.S. Securities~~ and ~~Exchange~~services ~~Commission~~throughout (the ~~“SEC”)~~United ~~on April 8, 2011, and since its effectiveness, has focused its efforts to identify a possible business combination~~States. ~~The Company selected March 31 as its fiscal year end.~~

~~The~~We ~~Company~~are isan ~~currently~~“emerging ~~considered~~growth ~~to be a "blank check"~~ company.”, ~~The SEC defines those companies~~ as ~~"any~~defined ~~development~~in ~~stage company that is issuing a penny stock, within~~ the ~~meaning~~Jumpstart ofOur ~~Section~~Business 3Startups ~~(a)(51) of the Securities Exchange~~ Act of ~~1934,~~2012 ~~as amended~~ (~~the~~ “~~Exchange~~JOBS Act”), and ~~that~~we ~~has~~may notake ~~specific~~advantage ~~business~~of ~~plan~~certain orexemptions ~~purpose,~~from orvarious ~~has~~reporting ~~indicated~~requirements that ~~its~~are ~~business~~applicable ~~plan is~~ to ~~merge~~other ~~with~~public ~~an unidentified company or~~ companies." ~~Under~~that ~~SEC~~are ~~Rule~~not ~~12b-2~~“emerging ~~under~~growth ~~the~~companies” ~~Exchange Act~~including, ~~the~~but ~~Company~~not ~~also~~limited ~~qualifies~~to, asnot abeing ~~“shell~~required ~~company,”~~to ~~because~~comply itwith ~~has~~the noauditor orattestation ~~nominal~~requirements ~~assets~~of ~~(other~~section ~~than cash~~404(b) ~~and~~of nothe orSarbanes-Oxley ~~nominal operations. Many states have enacted statutes~~Act, ~~rules~~ and ~~regulations~~exemptions ~~limiting~~from the ~~sale~~requirements of ~~securities~~Sections of14A(a) ~~"blank~~and ~~check"~~(b) ~~companies~~of inthe ~~their~~Securities ~~respective~~Exchange ~~jurisdictions.~~Act ~~Management~~of ~~does~~1934 ~~not intend~~ to ~~undertake~~hold ~~any efforts to cause~~ a ~~market~~nonbinding toadvisory ~~develop~~vote ~~in our securities, either debt or equity, until we have successfully concluded a business combination. The Company intends to comply with the periodic reporting requirements~~ of ~~the~~shareholders ~~Exchange~~on ~~Act~~executive ~~for~~compensation soand ~~long~~any asgolden itparachute ispayments ~~subject~~not topreviously ~~those requirements~~approved.

OnWe ~~February~~will ~~10,~~remain ~~2012,~~an a“emerging ~~change~~growth incompany” ~~control~~for ~~occurred~~up asto afive ~~result~~years offollowing ~~the~~our ~~sale~~initial bypublic ~~the~~offering, ~~Company’s~~although ~~majority~~we ~~stockholders~~will oflose 11that status sooner if our revenues exceed $1 billion,~~050,000~~ ~~shares~~if ofwe ~~common~~issue ~~stock. In~~more ~~connection~~than ~~with~~$1 ~~the~~billion ~~change~~in non-convertible debt in ~~control~~a three year period, or if the ~~Company~~market ~~entered~~value ~~into~~of ~~a General~~our ~~Assignment~~common ~~and~~stock ~~Assumption~~that ~~Agreement,~~is ~~dated~~held ~~February~~by ~~10,~~non-affiliates ~~2012~~exceeds ~~("Effective~~$700 ~~Date"),~~million ~~pursuant~~as toof ~~which~~any itJune ~~sold,~~30. To ~~assigned~~the ~~and~~extent ~~transferred~~that we continue to ~~Retail~~qualify ~~Spicy~~as ~~Gourmet,~~a ~~Inc.~~“smaller ~~("RSG")~~reporting company”, aas ~~Delaware~~such ~~corporation,~~term ~~all~~is ~~rights~~defined ~~and~~in ~~interests~~Rule it12b-2 ~~may~~under ~~have~~the toSecurities ~~sell~~Exchange ~~spices~~Act ~~and~~of ~~related~~1934, ~~products~~after ~~(the~~we ~~"Business")~~cease to qualify as ~~set~~an ~~forth~~emerging ingrowth company, certain of the ~~Plan~~exemptions inavailable ~~exchange~~to ~~for~~us ~~RSG's~~as ~~assumption~~an ofemerging ~~any~~growth ~~and~~company ~~all~~may ~~liabilities~~continue ofto ~~the~~be ~~Company~~available ~~preceding~~to ~~the~~us ~~Effective~~as ~~Date~~a smaller reporting company, including: ~~without~~(1) ~~limitation,~~not ~~Organic~~being ~~Spice's~~required ~~obligation~~to ~~under~~comply with the ~~Plan~~auditor toattestation ~~distribute~~requirements ~~25%~~of Section 404(b) of ~~its~~the ~~gross~~Sarbanes ~~profits~~Oxley ~~derived~~Act; ~~from~~(2) ~~all~~scaled ~~sales~~down ofexecutive ~~spices~~compensation disclosures; and ~~related~~(3) ~~products~~the requirement to ~~certain~~provide ~~creditors~~only astwo ~~set~~years ~~forth~~of inaudited ~~the~~financial ~~Plan~~statements.

On March 5, 2012, the Company and its wholly owned subsidiary X-Factor Acquisition Corp., a Delaware corporation formed solely for the purpose of completing the transaction (“MergerCo”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with X-Factor Communications, LLC, a New York limited liability company (“X-Factor”). X-Factor is a provider of interactive digital media network software and services. Upon consummation of the transactions contemplated by the Merger Agreement, MergerCo will be merged with and into X-Factor, at which time, the separate existence of MergerCo shall cease and X-Factor shall continue as the surviving entity and wholly-owned subsidiary of the Company (the “Merger”). There can be no assurances that the transactions contemplated under the Merger Agreement will be consummated.History

Holdings was incorporated in the State of Delaware on December 31, 2010 under the name "Organic Spice Imports, Inc." as part of the Chapter 11 reorganization of Spicy Gourmet Organics, Inc., a California corporation ("SGO"). SGO was incorporated in the State of California in 2006 and was formed to import specialty organic spices from South Asia and sell them in the United States. SGO was undercapitalized and sales of its spice products were slow to develop. As a result, SGO lacked sufficient cash flow to meet its current obligations and on October 1, 2010, SGO filed a voluntary petition for bankruptcy under Chapter 11 in the U.S. Bankruptcy Court for the Central District of California. SGO's Plan of Reorganization (the "Plan") was confirmed by the U.S. Bankruptcy Court for the Central District of California on November 19, 2010.

The Plan provided, among other things, for the incorporation of the Company, the spinoff of SGO's importing business to the Company, and the distribution of the Company's shares to the bankruptcy creditors. The Company lacked the resources required to effectively develop an import business and therefore engaged in a search for a strategic business partner or a merger or acquisition partner with the resources to establish a business and provide greater value to its stockholders.

On February 10, 2012, in connection with a sale of a majority of the issued and outstanding shares of common stock of the Company, resulting in a change in control, pursuant to the terms of the General Assignment and Assumption Agreement dated February 10, 2012 ("Effective Date"), the Company sold, assigned and transferred to Retail Spicy Gourmet, Inc. ("RSG"), a Delaware corporation, all rights and interests it may have to sell spices and related products (the "Business") as set forth in the Plan in exchange for RSG's assumption of any and all liabilities of the Company preceding the Effective Date, including without limitation, the Company's obligation under the Plan to distribute 25% of its gross profits derived from all sales of spices and related products to certain creditors as set forth in the Plan.

On May 15, 2012, pursuant to the terms and conditions of an Agreement and Plan of Merger, dated March 5, 2012 (the "Merger Agreement"), X-Factor Acquisition Corp., a Delaware corporation and wholly owned subsidiary of the Company merged with and into X-Factor (the "Merger"). X-Factor survived the Merger and became a wholly-owned subsidiary of the Company. On May 16, 2012, X-Factor Communications Holdings, Inc., a Delaware corporation and wholly owned subsidiary of the Company, formed solely for the purpose of changing the Company's name, was merged with and into the Company upon the filing of a Certificate of Ownership and Merger with the Secretary of State of Delaware and the Company adopted the name of this subsidiary thereby, changing its name from "Organic Spice Imports, Inc." to "X-Factor Communications Holdings, Inc."

Upon the closing of the Merger, in connection with the terms and conditions of a private placement offering (the “May 2012 Offering”, when combined with sales of securities in December 2012 the “December 2012 Offering” collectively referred to as the "Offerings") the Company issued and sold an aggregate of 3,133,333 shares of common stock at a price of $0.75 per share, for gross proceeds of $2,362,500.

The consummation of the Merger (the "Effective Time") and the May 2012 Offering had the following effects on the membership units and common stock equivalents of X-Factor:

(a) Each X-Factor common and preferred membership unit issued and outstanding immediately prior to the Merger was automatically converted into 5.286767 (the "Initial Exchange Ratio") shares of Holdings common stock. Upon the final closing of the May 2012 Offering in August 2012 the Initial Exchange Ratio was adjusted to reflect 5.550657 (the “Final Exchange Ratio”) and all initial exchanges were adjusted to reflect the Final Exchange Ratio. This resulted in the issuance of an additional 439,098 shares of Holdings common stock. All disclosures in this document reflect the Final Exchange Ratio.

(b) Each holder of an X-Factor preferred membership unit received 1.190229 shares of Holdings common stock as payment to eliminate the liquidation preference of the preferred membership units.

(c) Each X-Factor warrant or option issued and outstanding immediately prior to the Merger was automatically converted into the right to purchase 5.550657 shares of Holdings common stock. The new conversion price applicable to each warrant and option is equal to the conversion price in effect immediately prior to the Merger divided by 5.550657.

(d) All convertible debt of X-Factor outstanding immediately prior to the Merger was automatically converted into the right to purchase 5.550657 shares of Holdings common stock. The new conversion price applicable to convertible debt is equal to the conversion price in effect immediately prior to the Merger divided by 5.550657.

(e) One holder of a warrant to purchase X-Factor Preferred Membership Interests agreed to receive an additional warrant to purchase, for a period of 10 years from the Effective Time, 148,942 shares of Holdings common stock which was equal to the aggregate exercise price of such preferred warrant, which was $125,137, multiplied by 1.190229 and the exercise price of such additional warrant was the quotient of the exercise price of such preferred warrant, which was $4.33 per X-Factor Preferred Membership Interest, divided by 5.550657. These warrants contain a weighted average anti-dilution feature that in certain circumstances could provide the warrant holder with protection against changes in the market value of the Company's common stock

As an inducement for X-Factor to consummate the transactions contemplated by the Merger Agreement, on May 15, 2012, the Company cancelled 10,000,000 shares of common stock and warrants to purchase up to 5,000,000 shares of common stock owned of record by certain stockholders of the Company immediately prior to the Effective Time, pursuant to the terms and conditions of a cancellation agreement, dated of even date.

Overview of X-Factor Business

X-Factor is a provider of interactive digital media network software and services. The X-Factor Digital Media Network Platform (the “X-Factor Platform”), our cloud-based digital signage, Web and mobile solution, is delivered as a software-as-a-service ("SaaS") and under software license model. The X-Factor Platform enables our customers to build simple yet scalable marketing, advertising and corporate digital media networks. The Company operates in one segment and therefore segment information is not presented.

The X-Factor Platform empowers customers with a set of comprehensive digital media tools to integrate digital signs, premium content, social networks and mobile applications with live video broadcasts, advertising sales, and marketing programs addressing the rapidly expanding digital media needs of our brand, corporate, public venue, education and government sector customers.

Our clients use the X-Factor Platform services for end-consumer and audience focused live and on-demand digital media programs, as well as internal corporate communications. We have aligned our products and services to the needs and requirements of our three key major customer segments - brands, corporations and public venues. These customer segments use the X-Factor Platform and associated services to create, manage and deliver comprehensive digital media programs using interactive digital signage, mobile and Web services and applications. These integrated digital media network platform services and applications are optimized for the following specific audience environments:

●

Public Places. These include stadiums, arenas, convention centers, hotels, college campuses, restaurants and outdoor advertising billboard locations. The X-Factor Platform provides an interactive digital signage solution that is used for awareness and advertising campaigns, way finding, emergency messaging, commerce, and as “a call to action” driving targeted engagements via personal devices. The X-Factor Platform’s mobile and Web solutions are used for these targeted personal engagements both in and outside of the public venue.

●

Personal Devices. By leveraging the worldwide adoption of personal mobile devices such as mobile phones, tablets and laptops, driven by social media and Web applications for consumers and corporate users, the X-Factor Platform allows its customers to easily create, manage and deploy targeted digital media programming and applications to enhance audience participation anywhere, driving brand engagement, marketing, advertising and employee communications.

●

Workplace. Our corporate clients use the X-Factor Platform in the corporate setting on equipment such as desktops and mobile devices and in conference rooms, common areas, cafeterias and elevators throughout the enterprise for communications, human resources, training, emergency messaging and security with extensions into the personal environment using Web and mobile applications.

Our Services and Products

The X-Factor Digital Media Network Platform and Component Solutions

Users of the X-Factor Platform are provided with advanced digital media services and an advertising focused e-commerce system that supports public and private advertising sales, campaign creation, order fulfillment and billing that is integrated with content creation, content management and delivery. The X-Factor Platform components that can be sold individually or as a comprehensive turnkey solution are as follows:

●	dscp:// - Digital Signage Control Portal. This is our innovative, patent pending, anchor product. dscp:// is a digital signage software application that allows users to deploy and manage digital signage services quickly and easily.

●

DMAX (Digital Media Advertising Exchange) & Storefront Advertising Portals. These are our integrated and branded e-commerce portals that support public (DMAX) and private (Storefront) advertising sales, campaign creation, order fulfillment and billing. Through our ongoing integration of dscp://, we believe we are the only vendor in the marketplace that provides advertising sales support with content creation, management and delivery.

●	dmcp:// - Digital Media Control Portal & Webcasting. This is our globally available, live and on-demand multimedia distribution product that delivers rich media content, desktop signage and emergency messaging to mobile and Web devices.

●	Media Service Bureau & Creative Services. This is our full suite of professional grade digital media services including digital media application development, content creation and management services.

We have conceptualized, developed and sold our patent-pending signage software to several customers directly and through resellers, including the U.S. Postal Service, the Phoenix Convention Center and the New York Jets.

We believe that our Web 2.0 based software application is unique in the industry specifically because it addresses the “ease of use” needs for content creation, updates, and content workflow by non-technical digital signage system operators as well as the scalability issues that have prevented effective large scale digital signage deployments. Early in the product development cycle, we realized that the target user of the software would not be a corporate information technology organization so we focused on creating a software application which could be mastered by a non-technical user. With a Web browser based and highly graphical user interface, dscp:// is designed to be intuitive and flexible. We trademarked the term “Simple Signage” and this continues to be the goal throughout the evolution of this product line.

Currently dscp:// is available through a traditional licensing agreement or through our scalable, high availability software as a service (SaaS) hosting infrastructure for those organizations that prefer an outsourced service model that minimizes initial capital expenditures.

The dscp:// product addresses three large and growing market segments:

●	Software as a service (SaaS) opportunity with Cisco Systems, Inc.'s global resellers and other strategic digital media hardware companies;

●	“Stand-alone” turnkey enterprise and small to medium sized business (SMB) market; and

●	a digital signage advertising exchange that builds on the dscp:// platform to facilitate the sale and purchase of advertising on digital media networks.

These market opportunities and the dscp:// software are supported further by X-Factor’s cost-effective creative services department for those firms that need assistance with their initial and ongoing digital signage content needs.

Key dscp:// Software Differentiators. Our scalable, open digital signage control platform (dscp://) was designed to be integrated with our advertising sales portals, DMAX and dscp://Storefront.

●	Scalability. Our dscp:// platform is field tested on large networks including the United States Postal Service (USPS) network. This is a large content contributor digital signage network with many publishers contributing content to the network.

●

Open Platform Approach. Unlike most digital signage platforms, dscp:// is not bundled with a proprietary media player. Using a Web 2.0 based approach, dscp:// interoperates with any device capable of supporting a Web browser which includes small form factor PCs and set top box style media players. We are currently exploring the manufacturing of a low cost player that will accelerate large client opportunities.

●	Ease of Use. From X-Factor's inception, we designed dscp:// with the end user in mind. The product is graphics based and requires no programming expertise. If end users can use MS PowerPoint, they can use dscp://.

~~The~~● ~~Company~~Programming ~~currently~~Control. ~~serves~~X-Factor asincorporated auser ~~vehicle~~roles ~~to investigate~~ and, ifpermissions ~~such~~based ~~investigation~~architecture ~~warrants,~~in ~~acquire a target company or business seeking~~ the ~~perceived~~design ~~advantages~~ of ~~being a publicly held corporation~~dscp://. ~~The~~This ~~Company’s~~allows ~~principal~~an ~~business~~administrator ~~objective for~~ the ~~next~~option ~~12 months will be~~ to ~~complete~~keep ~~the~~either ~~transactions~~centralized ~~contemplated~~or bydistributed ~~the~~control ~~Merger~~over ~~Agreement.~~who Incan ~~the~~create ~~event~~and ~~the~~distribute ~~Company~~content ~~does~~over ~~not consummate~~ the transactions contemplated by the Merger Agreement, the Company’s principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with an operating businessnetwork. ~~The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.~~

~~The~~● ~~analysis~~Syndication ofHierarchy. ~~new~~To ~~business~~manage ~~opportunities~~content ~~will~~distribution beover ~~undertaken~~large bynetworks, orwe ~~under~~incorporated the ~~supervision~~concept of ~~Charles~~hierarchical ~~Saracino, the sole officer and director of the Company~~control. ~~The~~ ~~Company~~This ~~has~~allows ~~unrestricted~~users ~~flexibility~~to inprecisely ~~seeking,~~direct ~~analyzing~~content ~~and participating in potential business opportunities. In its efforts~~ to ~~analyze~~specific ~~potential~~locations ~~acquisition~~(national, ~~targets~~regional, ~~the~~local, ~~Company~~single ~~will~~location) ~~consider~~and ~~the~~assign ~~following~~prioritization ~~kinds~~ of ~~factors:~~content.

(● Play Live. We have given dscp:// users the unique ability to easily take a~~) Potential~~ ~~for~~live ~~growth,~~video ~~indicated~~feed byand ~~new~~broadcast ~~technology,~~an ~~anticipated~~event ~~market~~over ~~expansion~~their ordigital ~~new~~signage ~~products;~~network as well as to Web and mobile devices.

~~(b) Competitive~~● ~~position~~Advertising asSales ~~compared~~Portal toSupport. ~~other~~We ~~firms~~have ofdesigned ~~similar~~our ~~size~~dscp:// ~~and~~software ~~experience~~to ~~within~~be ~~the~~complementary ~~industry~~with ~~segment~~DMAX asand ~~well~~dscp://Storefront asadvertising ~~within the industry as a whole;~~platforms.

~~(c) Strength~~● Mobile and ~~diversity~~Web Support. Our dscp:// and dscp://storefront products support a full array of ~~management,~~interactive ~~either~~mobile inand ~~place~~Web oradvertising, ~~scheduled~~marketing ~~for~~and ~~recruitment;~~distribution functions.

~~(d) Capital~~DMAX ~~requirements~~ and ~~anticipated~~Storefront ~~availability~~Advertising ofSales ~~required funds, to be provided by the Company or from operations, through the sale of additional securities, through joint ventures or similar arrangements or from other sources;~~Portals

We have developed two adjunct advertising sales portal applications, dscp://Storefront and the Digital Media Advertising Exchange (eDMAX) ~~The~~. We ~~cost~~believe ofthat ~~participation~~both bysoftware ~~the~~products ~~Company~~are ascapable ~~compared~~of toaccelerating the ~~perceived~~return ~~tangible~~on investment ("ROI") for digital signage and ~~intangible~~other ~~values~~media network owners such as mobile and ~~potentials;~~Web operators. These platforms enable advertisers and media buyers to electronically purchase advertising time from digital signage network owners, such as retail chains, stadiums or convention centers. DMAX supports multiple public network owners while dscp://Storefront is a customer branded sales portal that supports a private single digital signage network owner.

~~(f) The~~During ~~extent~~the 2010 and 2011 professional baseball seasons, we collaborated with Cisco Systems, Inc. to ~~which~~successfully deploy a customized version of its dscp://Storefront advertising sales portal at the ~~business~~Kansas ~~opportunity~~City ~~can~~Royals beKaufman ~~advanced;~~Stadium. Following ~~and~~this deployment, we are now focused on delivering the dscp://Storefront advertising sales portal to a variety of customer networks.

~~(g) The~~Web ~~accessibility~~& ~~of required management expertise, personnel, raw materials, services, professional assistance and other required items.~~Mobile

Indmcp:// ~~applying~~digital ~~the~~media ~~foregoing~~control ~~criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data~~portal. Leveraging ~~Potentially~~our ~~available~~digital ~~business~~signage ~~opportunities~~products ~~may occur in many different industries,~~ and ~~at various stages of development~~services, ~~all~~we ofhave ~~which~~developed ~~will make~~ the ~~task~~first ofrelease ~~comparative investigation and analysis~~ of ~~such business opportunities extremely difficult and complex. Due to~~ the ~~Company's~~dmcp://digital ~~limited~~media ~~capital~~control ~~available for investigation, the Company may not discover or adequately evaluate adverse facts about the opportunity to be acquired~~portal. dmcp:// Inis ~~evaluating~~ a ~~prospective~~digital ~~business~~media ~~combination,~~publishing ~~we will conduct as extensive a due diligence review of potential targets as possible given the lack of information which may be available regarding private companies, our limited personnel~~ and ~~financial~~distribution ~~resources~~application ~~and~~service ~~the~~for ~~inexperience~~content ~~of our management with respect to such activities. We expect that our due diligence will encompass~~publishers, ~~among~~brands ~~other things, meetings with the target business’s incumbent management~~ and ~~inspection~~corporate ofusers ~~its~~supporting ~~facilities,~~desktop ~~as necessary~~signage, asemergency ~~well as a review of financial and other information which is made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage~~messaging, ~~including but not limited to attorneys~~live, accountants, consultants or such other professionals. At this time, the Company has not specifically identified any third parties that it may engage. The costs associated with hiring third parties to complete a business combination target may be significant and are difficult to determine as such costs may vary depending on a variety of factors, including the amount of time it takes to complete a business combination, the location of the target company and the size and the complexity of the target company. Our limited funds and the lack of full-~~time~~demand ~~management will likely make it impracticable to conduct a complete~~ and ~~exhaustive~~programmed ~~investigation~~content ~~and~~channels ~~analysis~~in of a ~~target~~single ~~business~~Web ~~before~~portal weapplication ~~consummate~~for aWeb ~~business combination. Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys~~ and ~~the~~mobile ~~like which, if we had more funds available to us, would be desirable~~devices. ~~We will be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors or other associated with the target business seeking our participation.~~

dmcp:// digital media control portal - Highlights

●	Player: Easily design and deploy custom branded media players and screen savers.

●	Video support: Live, on-demand and programmed channels.

●	Content Management and Creation: Easily manage and create video, graphics and text content. The built-in review feature allows you to manage, approve and monitor all published content.

~~The~~● ~~time~~Viral ~~and~~Distribution: ~~costs~~Enable ~~required~~sharing ~~to select~~ and ~~evaluate~~distribution ~~a target business and to structure and complete a business combination cannot presently be ascertained~~ with ~~any~~the ~~degree~~top ofsocial ~~certainty.~~networks, ~~The amount of time it takes to complete a business combination~~twitter, the location of the target company and the size and complexity of the business of the target company are all factors that determine the costs associated with completing a business combination transactionblogs. The time and costs required to complete a business combination transaction can be ascertained once a business combination target has been identified. Any costs incurred with respect to evaluation of a prospective business combination that is not ultimately completed will result in a loss to us.

~~Competition~~● Advertising: Full advertising management functions including the creation of advertising offers, buying portal, campaign fulfillment and billing/reporting functions.

In● ~~identifying,~~E-Commerce: ~~evaluating~~Support ~~and~~for ~~selecting a target business~~donations, wepay ~~may~~per encounter intense competition from other entities having a business objective similar to ours. There are numerous “public shell” companies either actively or passively seeking operating businesses with which to merge in addition to a large number of “blank check” companies formed and capitalized specifically to acquire operating businesses. Additionallyview, weWeb ~~are~~storefronts/merchandise subject to competition from other companies looking to expand their operations through the acquisition of a target business. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technicalsales, ~~human~~ and ~~other~~subscription ~~resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors~~models. Our ability to compete in acquiring certain sizable target businesses is limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business. Further, our outstanding warrants and the future dilution they potentially represent may not be viewed favorably by certain target businesses.

~~Any~~● ofAccess ~~these~~control: factors may place us at a competitive disadvantage in successfully negotiating a business combination. Our management believes, however, that our status as a public entity and potential access to the United States public equity markets may give us a competitive advantage over privatelyPassword-~~held~~protected ~~entities~~Web ~~with~~Access/User ~~a business objective similar to ours to acquire a target business on favorable terms~~Registration.

If● weContent ~~succeed~~Syndication: inProvides ~~effecting~~multiple alevels ~~business combination, there will be, in all likelihood, intense competition from competitors~~ of ~~the~~content ~~target~~distribution business. Many of our target business’ competitors are likely to be significantly larger and have far greater financial and other resources than we will. Some of these competitors may be divisions or subsidiaries of large, diversified companies that have access to financial resources of their respective parent companies. Our target business may not be able to compete effectively with ~~these~~partner ~~companies or maintain them as customers while competing with them on other projects~~Websites. In addition, it is likely that our target business will face significant competition from smaller companies that have specialized capabilities in similar areas. We cannot accurately predict how our target business’ competitive position may be affected by changing economic conditions, customer requirements or technical developments. We cannot assure you that, subsequent to a business combination, we will have the resources to compete effectively.

~~Form~~● ofScheduling: ~~Acquisition~~Schedule content to display at a certain time and date and also schedule recurring events.

~~The~~● ~~manner~~Web inLinkage: ~~which~~Link ~~the~~to ~~Company~~any ~~participates~~Website inor anmobile opportunity will depend upon the nature of the opportunity, the respective needs and desires of the Company and the promoters of the opportunity, and the relative negotiating strength of the Company and such promoterscontent.

●	Multi-Channel and Device Distribution: Distribute to Web and mobile devices.

●	Live Events: Supports live events through video broadcast, real-time chat and Q&A.

●

Interactive Digital Signage: Using the X-Factor Platform and our mobile synchronization capabilities, marketing and promotion campaigns can be easily deployed to engage audiences through unique in-venue interactivity via mobile IVR, text and QR code integrated marketing solutions. Our customers use our digital signage solution as the call to action mechanism driving in-venue behavior as well as enabling an ongoing engagement with the audience.

Webcasting

A globally available, live and on-demand multimedia distribution service that delivers rich media content cost-effectively, supporting corporate communications, events, marketing, e-commerce and information distribution. Clients use our Webcasting services in many ways, including product announcements, press releases, multimedia-enabled reports, interactive town halls utilizing Q&A and polling features, employee communications, and sales and marketing meetings.

By using the X-Factor Platform, streaming rich media technology, IP (Internet Protocol) over the Internet or corporate Intranets to broadcast live or on-demand audio or video, we can create compelling rich media environments for use by our clients. Coupled with our content development and Digital Asset Management (DAM) services, clients not only have cost-effective access to state of the art technology, but can use this technology more effectively by developing and using compelling content as part of their Webcasting initiatives.

While most Webcasting providers focus on external events (over the public Internet), we also provide Webcasting solutions for enterprise Webcasting (behind a company’s firewall). We believe we can successfully infiltrate the marketplace by operating as a full-service provider and offering consulting services to clients looking to develop their own in-house Webcast solutions.

Many companies use live and on-demand streaming technology. Companies that recognize the value and efficiencies of these forms of communications are demanding richer and timelier interactive content. Media applications must assist with many tasks, including broadcasting video, streaming to mobile devices, synchronizing slides and graphics, and providing audience notification, Q&A and feedback mechanisms, searchable archives, and robust usage reports and viewer statistics. Our targeted markets include:

●	corporate communications, including town hall meetings, human resources updates, sales training, internal executive communications and external corporate meetings;

●	venues such as live events;

It● isgovernment ~~likely~~uses, ~~that the Company will acquire its participation in a business opportunity through the issuance of common stock or other securities of the Company. Although the terms of any~~ such transaction cannot be predicted, it should be noted that in certain circumstances the criteria for determining whether or not an acquisition is a so-called "tax free" reorganization under Section 368(a)(1) of the Internal Revenue Code of 1986, as ~~amended~~public (the "Code") depends upon whether the owners of the acquired business own 80% or more of the voting stock of the surviving entity. If a transaction were structured to take advantage of these provisions rather than other "tax free" provisions provided under the Codehearings, ~~all prior stockholders would in such circumstances retain 20% or less of the total issued and outstanding shares of the surviving entity. Under other circumstances~~local, ~~depending~~state ~~upon the relative negotiating strength of the parties, prior stockholders may retain substantially less than 20% of the total issued~~ and ~~outstanding~~national ~~shares~~branches of ~~the surviving entity. This could result in substantial additional dilution to the equity of those who were stockholders of the Company prior to such reorganization.~~government;

~~The~~● ~~present~~public ~~stockholders~~relations ofapplications, ~~the Company will likely not have control of a majority of the voting securities of the Company following a reorganization transaction. As part of~~ such aas ~~transaction~~product launches, ~~the~~press ~~Company’s~~events ~~sole director may resign~~ and ~~one~~special orevents; ~~more new directors may be appointed without any vote by stockholders.~~and

In● ~~the~~financial ~~case~~sector ~~of an acquisition~~applications, the transaction may be accomplished upon the sole determination of management without any vote or approval by stockholders. In the case of a statutory merger or consolidation directly involving the Company, it will likely be necessary to call a stockholders' meeting and obtain the approval of the holders of a majority of the outstanding securities. The necessity to obtain such as stockholder ~~approval~~meetings ~~may result in delay~~ and ~~additional~~quarterly ~~expense~~earnings ~~in the consummation of any proposed transaction and will also give rise to certain appraisal rights to dissenting stockholders~~updates. ~~Most likely, management will seek to structure any such transaction so as not to require stockholder approval.~~

ItIndustry ~~is anticipated that the investigation of specific business opportunities~~ and ~~the~~Market negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial cost for accountants, attorneys and others. If a decision is made not to participate in a specific business opportunity, the costs theretofore incurred in the related investigation might not be recoverable. Furthermore, even if an agreement is reached for the participation in a specific business opportunity, the failure to consummate that transaction may result in the loss to the Company of the related costs incurred.Overview

WeMarket presently have no employees apart from our management. Our sole officer and director is engaged in outside business activities and anticipates that he will devote very limited time to our business until the consummation of the transactions contemplated by the Merger Agreement or, alternatively, the acquisition of another successful business opportunity has been indentified. We expect no significant changes in the number of our employees other than such changes, if any, incident to a business combination.Opportunity

As a result of our early success in providing high quality global Webcasting, fully interactive live events and related services (including digital asset management, content development, and design/consulting), we have been called upon by our clients and resellers to provide a growing array of multimedia communication services.

Chief among these is digital signage, which has become our product development focus. We believe that digital signage, and the related sector of mobile advertising, provides large, lucrative and growing market opportunities. We are responding to the needs of these growing markets with innovative applications, software and technology through the X-Factor Digital Media Network Platform.

The three areas that we believe we are poised to exploit are Digital Out-of-Home Advertising (“DOOH”), Digital Signage Software and Mobile Advertising.

DOOH

Digital Out-of-Home Advertising refers to media distributed across placed-based networks in public venues such as cafes, bars, restaurants, health clubs, colleges, arenas, gas stations and other public spaces. DOOH networks typically feature screens, kiosks, jukeboxes and/or jumbotrons. DOOH media benefits location owners and advertisers alike in being able to engage customers and/or audiences and extend the reach and effectiveness of marketing messages. As more ad networks look to leverage digital solutions, the total amount spent on DOOH is expected to increase. We believe we are well-positioned as a pioneer in DOOH content management and advertising solutions. It is our goal to capture a substantial portion of this market through large resellers and strategic relationships.

Digital Signage Software

An increasing number of companies are using digital signage networks to communicate with their employees and customers. As a result, a solution that meets the needs of each vertical sector of a company along with those of various segments within an industry is extremely desirable. We believe that our products and services are capable of meeting that need. With paper and print giving way to digital menu displays, we intend to capitalize on tapping the increasing display budgets by providing strategic consulting, software implementation, digital continuing education and training, marketing assistance and advertising revenue from a single digital platform.

Mobile Advertising

We participate in the mobile advertising industry, which is crowded and fractured, by enabling efficient digital media advertising solutions that empower consumers with Digital Out of Home and Mobile synchronization. Progressive brands are increasingly looking to create campaigns using the three screens (signage, Web and mobile). Our experience in the Digital Out of Home sector has established X-Factor as a viable integrator and platform to service these brands.

Sales & Marketing

We sell our integrated digital media network platform to end users and customers through a direct sales force as well as through a growing network of partner resellers. Thus far, we have implemented the portion of our business plan that included developing an initial release of our digital media network platform, acquiring large customers, reseller channel relationships and building brand awareness within our targeted markets. In order to increase our market share of the digital media industry we intend to:

●	increase our sales opportunities through the hiring of addition sales personnel;

●	pursue additional channel reseller relationships and enhance our existing relationships;

●	cultivate and grow our direct brand and advertising offerings in the signage, mobile and social media areas; and

●	increase our technological differentiation through the addition of development resources.

We are actively cultivating and pursuing customers in the following areas to gain market share and drive revenue growth:

Advertising. Our unique combination of simple to use digital signage solutions tied to our dscp://Storefront and DMAX advertising management systems allows digital signage network operators to display and sell their advertising inventory and buyers to order and execute digital signage, mobile and Web advertising buys. This enables our customers to benefit from the ROI produced by easily allowing them to monetize their investment in digital signage and digital media through advertising revenues.

Retail. We provide retailers with a turnkey digital media solution incorporating digital signage, mobile and Web components.

Hotels, Arenas, Stadiums and Convention Centers. Building on our success at the Kansas City Royals’ stadium along with our newly formalized contractual reseller relationship with iBAHN for Webcasting services and their current customer base of hotels, and convention centers. We are focused on growing this market through relationships with established service providers, management companies and owners of these facilities.

Expansion of Strategic Reseller Network. We are seeking to establish additional relationships with other hardware and software providers that benefit from our software offerings, driving sales of their products as well as our software and SaaS services (e.g. Dell, HP, IBM, Sony, Samsung, Panasonic, Sharp, LG and Advantek).

Marketing Strategy

Our sales and marketing strategy involves two focus areas: (1) forming strategic partner programs with companies who we expect to resell our products, services and technology to their end clients and (2) marketing directly to end clients, utilizing our reseller network for implementation when possible.

We plan to focus our marketing and sales efforts on our three primary target customer types in each line of business as follows.

●	Public Venue. This includes retail, healthcare institutions, convention centers, sporting arenas, hotels and education venues.

●	Corporate & Enterprise. Investor relations, public relations, advertising agencies, and healthcare businesses.

●	Brands. Advertising and marketing programs for brands of all sizes.

We expect implementation and execution of our sales and marketing strategy will include the following.

Direct Sales Staff. We plan to staff our sales and marketing organization with professionals who have proven track records in selling digital media solutions to one or more of our three primary customer types (Public Venues, Corporate and Brands).

Product Managers. We plan to make product managers responsible for the growth and development of our products and function as subject matter experts. These experts will also function as a sales overlay to provide expert sales support to the sales team. As we gain market share in each category of business, we expect that our sales and product management team will evolve into areas of specialization where there will be a sales specialist within each product category.

Channel Managers. We plan to make channel managers responsible for the support and performance of their assigned channel resellers. We expect that our marketing staff will work with these channel managers to develop and implement channel partner programs for strategic partner resellers in the digital media sector. We expect that each program will equip our resellers with:

●	access to a channel program manager who oversees the overall relationship;

●	industry-specific promotional materials;

●	on-demand promo Webcasts launched from our resellers’ Websites;

●	educational Webinars to their clients and “training” days; and

●	access to product experts supporting the channel sales process.

We expect to develop a specialized digital media network platform channel program for each of our primary customer types (Public Venues, Corporate and Brands). We expect these programs will equip our contracted channel resellers with:

●	promotional material, pricing information, PowerPoint presentations;

●	training on dscp:// software, features, functions and benefits;

●	training on how best to perform sales presentations and software demonstrations; and

●	an X-Factor on-line reseller portal.

Webcasting Training and Education Program. We understand the importance of using our own Webcasting and Digital Media Network Platform as a powerful tool to market our services by delivering video training, marketing and educational Webcasts to all of our contracted resellers and prospects across all business lines.

We expect that our customers and prospects will participate in on-demand Webcast training sessions to educate them on how our products and services operate and the benefits they provide. We expect that specific Webcasts will be conducted for our strategic contracted resellers to train them on reselling our services.

We plan to make all of our on-demand Webcasts equipped with on-line registration in order to gather key information from the invitee that we can use to build a sales lead and management database.

Database Marketing & Lead Generation. We plan to store the leads generated across our platforms and through the on-line registration feature of our Webcasts in our internal sales database. We plan to use this internal sales database for direct phone campaigns and email and direct mail campaigns. In addition, we plan to equip our Website with an industry specific Special Reports or White Papers tab which customers will need to opt into in order to receive. Once a person’s name, company name and email address are captured, we plan to enter that data into our database and turn it over to a member of our sales team for follow-up.

Advertising and Promotional Vehicles. On our own and in conjunction with our large channel relationships, we plan to aggressively cultivate our search engine advertising through search engine optimization and advertising in industry specific print publications. We believe additional promotional vehicles that will create brand awareness and drive sales will include:

●	advertising in targeted print online publications;

●	exhibiting at trade shows;

●	developing collateral materials, brochures and direct mail pieces;

●	networking through professional associations;

●	sponsoring industry-specific events; and

●	social media such as Facebook, LinkedIn, Twitter and YouTube.

Differentiation. A key tenet of our marketing plan is the promotion of our differentiation in the marketplace. We believe that our Digital Media Network Platform is unique to the marketplace in that it ties together digital signage with Web and mobile solutions that are cloud-based, providing customers with the ability to implement scalable marketing, branding and advertising initiatives all from one provider. In addition, we believe we are the only digital signage solution provider that provides consolidated content delivery and advertising monetization in one easy-to-use platform. The X-Factor platform empowers customers with a set of comprehensive digital media tools to integrate digital signs, premium content, social networks and mobile applications with live video broadcasts, advertising and marketing programs.

Key Differentiating Marketplace Factors

Prominent Customer Base and Channel Partners. Our clients include public and private sector enterprise and government organizations who we believe recognize the value of our product offerings.

Ease of use. Our products and solutions enable creators of digital media to easily create, manage and distribute content. Our trademark “Simple Signage” highlights this concept.

ROI. Our advertising driven DOOH platform enables users to monetize their investment.

Multiple Media Channels. Our products and solutions provide corporate communications and advertising related Digital Out-of-Home, Mobile and Web based solutions.

Large and Growing Market Opportunity. The corporate and advertising marketplace is growing rapidly.

Attractive Business Model. Our solutions are sold as a software sale or a hosted SaaS offering, providing a flexible and affordable business model.

Experienced Management: Our senior management team consists of repeat entrepreneurs with startup and Fortune 100 experience.

Our Digital Media Network Platform

Digital Signage Control Portal (dscp://) Software. This proprietary and unique software that we developed is patent-pending under the trademark “Simple Signage”. We developed dscp:// as the result of studying the market and responding to the needs of customers for the simplest means possible to update and manage content over their digital signage networks.

Because dscp:// is a Web 2.0 application, the programming code is extremely efficient and progressive, providing an advantage over older technology platforms. In comparison to older technology platforms, dscp:// is more easily customizable and the overall architecture is less expensive to deploy, giving us considerable pricing and speed to market advantages. We also provide customers with the choice of obtaining the dscp:// product through a software license or as a software as a service (SaaS) offering.

Strategic Partners and Business Relationships

Our primary business development efforts are focused on exploiting the broad reach of our strategic partners and business relationships. We have established key strategic global business relationships with Cisco Systems, Inc., iBAHN, LGE, NEC and Verizon Business which we believe position X-Factor for rapid sales growth. We continue to make an increasing number of customer presentations and proposals for digital media and signage services as our opportunities for strategic alignments with large industry participants grow. Our business relationships with Cisco Systems, Inc. and our other strategic partners continue to provide sales leads and opportunities that we are seeking to exploit together with our strategic partners.

Cisco Systems, Inc. ("Cisco"). We have earned the designation Cisco Digital Media System (DMS) Ecosystem Partner. We believe this designation coupled with joint Cisco and X-Factor customer deployments may result in the promotion of X-Factor’s business through Cisco's marketing and sales channels. These channels consist of over 30,000 Cisco resellers that are focused on providing Cisco products and DMS solutions to its clients. X-Factor's software products and support services assist Cisco in generating sales for its products and services. In addition, Cisco has offered to refer some of its DOOH advertising opportunities to X-Factor’s Digital Media Advertising Exchange DMAX software platform. We have not generated any revenues in 2012 from this relationship.

LG Electronics, Inc. ("LGE"). LGE and X-Factor are exploring ways to leverage X-Factor’s solutions for its worldwide digital signage solution integration suite for resellers and possible co-marketing.

NEC Corporation ("NEC"). NEC, is one of the largest resellers of Cisco products globally. X-Factor has had a reseller contract in place with NEC since 2009. NEC facilitated the development of our partnership with Cisco through its involvement in the United States Postal Service project. In that instance, NEC provided displays and system integration services alongside Cisco’s media players with our software, providing the customer interface and ongoing content creation, distribution and management.

Verizon. Given Verizon’s broad relationships with its enterprise customers and its attention to their communications needs, Verizon also acts as a systems integrator for digital signage network deployments. We believe that our joint servicing of the United States Postal Service (USPS) with Verizon for over three years demonstrates our successful business relationship with Verizon. Verizon is our prime systems and network integrator and contractor. Cisco, NEC and X-Factor are all subcontractors to Verizon on the USPS digital signage deployment. We expect to continue our relationship with Verizon in 2013.

iBAHN. We signed an agreement to provide Webcasting services to iBAHN and its 70 Platinum hotel customers. These high-end hotels will be offering the Webcasting services to their corporate and conference clients. iBAHN provides digital information, entertainment and Internet solutions to the hospitality and meeting industries.

We plan to continue to leverage these and other developing relationships and we expect these relationships will enable us to broaden our access to potential customers and accelerate our growth.

Competition

We compete in several large and diverse markets. Due to the varied nature of the products that comprise our Digital Media Network Platform, we compete across a number of markets spanning advertising supported digital signage, mobile and Web marketing, and corporate communications. We believe that our software is competitive in a wide array of areas including hardware feature integration, usability, architecture, and pricing.

Digital Signage Architecture

We believe our use of Web 2.0 methodologies, combined with state-of-the-art coding and application frameworks, provides a solid and efficient foundation for the incremental development of client-requested features. We compete with digital signage software providers such as Broadsign, Cisco, Harris, Scala, and Symon, which have substantially greater name recognition and financial and other resources then we have. However, we believe that our easy to use powerful and flexible platform competes favorably with the products provided by these vendors. Our dscp:// product line has an "open architecture" with respect to hardware and can be deployed using off-the-shelf hardware solutions with Microsoft Windows-based or Linux-based operating systems, providing greater deployment possibilities and significant price advantages as compared to competitive company product offerings.

Usability

Usability is the foundation of our current and future product and solution offerings. Larger competitors such as Scala and Harris have been focused on the development of hardware that can be mired in complex functions and may require heavy reliance on IT support. We believe, however, that creators and managers want a simple, powerful content management system. Therefore, we are focused on developing the software for a broad spectrum of users. Furthermore, we provide a wide range of digital signage services from consulting to software implementation to training and content creation, uniquely positioning us to respond to many diverse proposals or leads. From simple corporate communications to complex system wayfinding integration, we believe we provide a solution that will not intimidate new users and will accommodate the power user.

Pricing

We believe that many of our competitors have in place rigid pricing and fee structures, creating a high barrier for potential customers. We believe our product pricing plans that are in place greatly benefit the customer while maintaining scale and profitability. We are extremely flexible in building the pricing structures to accommodate the needs of a wide array of customers. Whether fulfilling a SaaS or license model software deployment, providing professional services or incorporating third party vendors, competitive pricing flexibility drives a large amount of digital signage opportunities. SMB and enterprise customers can select from the features and pricing that meet their needs.

Advertising Sales Platform

We believe that the development of our Digital Media Ad Sales Platform, which was done in tandem with actual users, answers the diverse needs of the advertising community and we believe this positions our product and solution offerings for rapid growth in the marketplace. We believe that our DMAX and Storefront application platforms are competitive in many areas, but most importantly in flexibility, workflow, pricing and scalability.

Flexibility

Our platform achieves a balance of addressing the needs of multiple market verticals, as well as sophisticated and hyper-local advertisers, while our competitors have focused on the larger Digital Out of Home Market. As a result, larger networks may be burdened by increasing overhead and the struggle to reach critical mass. By providing an agnostic platform that supports specific customer and re-seller needs, we believe that our products will provide an attractive alternative to hardware resellers, brands and venues.

Work-Flow

Negotiating the advertising sales world can be daunting for a new digital signage network with no requisite experience in selling media. The DMAX and dscp://Storefront platforms have a sophisticated workflow that is hidden in an easy to use interface. The workflow engine supports the creation of sales opportunities, advertising offers, the synchronization of creative media, and the fulfillment of offers. A process to negotiate, review and approve creative, bill, remit, and make good, are all powerfully packaged in an engaging user interface.

Scalability

The DMAX platform is built around digital media and is built to scale in multiple areas of digital and non-digital media assets. As such, digital signage, placed based banners and signs, mobile and Web advertising sales and integration, through in-house or third party vendors, is a cornerstone of our system architecture and development road map.

Other Recent Developments

The Company has recently added the following new products and solutions to its product base:

The C4 "Corporate Communications Control Center" (the "C4 Solution") is an easy to use software-based solution for multi-media, multi-channel and multi-dimensional internal and external corporate communications. C4 is an advanced and intuitive content creation and management system that supports emergency messaging, conventional publishing as well as interactive applications.

The C4 solution is complementary to other in-place systems, including intranet sites and Microsoft SharePoint, adding greater functionality and ease of use including the automated transformation of PowerPoint documents into desktop signs and alerts, for example. Content distributed over C4 is optimized for all end-points, whether large lobby displays, interactive kiosks including wayfinding capabilities, or mobile tablets and smart phones.

MACC "Marketing and Advertising Control Center" builds upon over five years of experience developing, implementing and managing multimedia "immersive" digital media networks.

MACC makes it easier than ever to participate in the rapidly growing "Digital-Out-Of-Home" marketing trend and enables marketers and their agency partners to:

- Deliver targeted advertising;

- Provide product information and spur cross-selling and up-selling;

- Promote features and benefits;

- Help ensure consistency of messaging in multiple languages and geographies; and

- Control costs via a Software-as-a-Service (SaaS) delivery model

MACC is a high-impact delivery platform integrated into the way people shop, learn and play, presented at the most appropriate moments in the most interesting venues (retail shops, stadiums, public transportation hubs, on trains and buses, at medical centers, in malls, and much more). Displays can deliver messaging that is customized by geography, time of day, specific location and more in real-time, and data collected informs the real-time grooming of campaigns to ensure the highest conversion rates and ROI.

X-Factor's "Enterprise Desktop" makes it possible to distribute content to desktops, intranet sites including SharePoint and mobile devices in real-time, including notifications, promotions, emergency alerts and more. Desktop signage takes content usually available on the intranet or digital signs and delivers it to a large employee community in a way that is hard to miss. While employees typically have access to a wealth of internal corporate information, due to the demands on their time, they often do not take the time to look for information unless it is related to a topic that they are specifically interested in. X-Factor's Enterprise Desktop enables company leaders to get key messages out, whether in screensaver mode or seeing content within the desktop player. Employees simply click for more information on any particular subject or to view a live webcast. X-Factor's Enterprise Desktop complements existing publishing systems including Microsoft SharePoint.

X-Factor's mobile interactive capabilities extend the power of digital signage to audiences' mobile devices. Through X-Factor's enhanced mobile engagement solutions, its mobile applications augment point of display to deliver information, marketing, ads, coupons and offers directly to an individual's smartphone or tablet. X-Factor's product range can be combined to support large scale "real world" and "virtual world" campaigns. For example, users can be sent to one of X-Factor's unique digital players, optimized for their mobile device. After enjoying an entertaining experience at a media wall or other digital sign, consumers can download the player and its contents to enjoy after leaving the venue. At interactive kiosks, consumers can receive wayfinding directions through a simple SMS text, or can receive an e-ticket or coupon instantly.

X-Factor has developed a multimedia player which can be easily branded and customized to aggregate content of all types (photos, animations, videos, audio files, interactive applications, and more) into a single, intuitive user experience. The player that runs automatically, without having the user download a special application, and brings multiple content feeds together in an exciting user experience. X-Factor's digital media and creative services teams can easily and cost-efficiently design and deploy custom branded media players, and because the players are fed by X-Factor's dmcp:// platform, all the advantages of our related products, including the company's advertising sales monetization products dscp:// Storefront and DMAX are easily included.

Working with partners who provide hardware and network infrastructure, X-Factor has released advanced interactive kiosks software, enabling audience engagement and interaction, advertising and marketing content creation, publishing, distribution and management. This software allows remote monitoring of kiosks from a single location, multi-user privileges for hierarchal (local and national) publishing, targeted advertising and transparent kiosk management and collection of user information. The company works with partners to ensure clients' goals for their customized interactive kiosk network are met, ensuring that all the elements in the solution meet stringent guidelines -- from the hardware and the kiosk interface and features to the appropriate network connectivity and uptime.

X-Factor Intellectual Property

Trademarks

We have two trademarks registered with the United States Patent and Trademark Office, namely dscp:// and Simple Signage.

Patents

We have filed one patent application with the United States Patent and Trademark Office for our Dynamic Digital Signage, Customer Content Control Portal and Management System, which provides access to software applications and Websites for others hosted on computer servers accessible through a global computer network; editing, modification and customization of software applications accessible via a global computer network (Application #12/326,034). Costs associated with these filings were not significant.

Employees

We have 6 employees and 3 consultants.

Major Customers

The majority of the Company’s 2012 revenues and accounts receivable are generated by a small number customers and, at times, the concentration of such transactions and balances are in excess of 10% of consolidated totals.

Item 1A. Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 1B. Unresolved Staff Comments.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 2. Description of Property.

~~The~~Through ~~Company~~X-Factor, ~~neither~~we ~~rents~~lease ~~nor~~approximately ~~owns~~1,500 ~~any~~square ~~properties.~~feet ~~The~~of ~~Company~~office ~~utilizes~~and ~~the~~technical ~~office~~operations ofspace ~~its~~at ~~management~~our headquarters at no3 ~~cost~~Empire Boulevard, 5th Floor, South Hackensack, NJ 07606, at a base rent of $1,800 per month. This ~~Management~~lease, ~~estimates~~which ~~such~~commenced ~~amounts~~in December 2005 and has been amended numerous times, is currently on a month to bemonth ~~immaterial~~basis. ~~The~~ We ~~Company~~also ~~currently~~rent ~~has~~approximately no600 ~~policy~~square ~~with~~feet ~~respect~~of space at a storage facility in New Jersey on a month to ~~investments~~month orbasis. We ~~interests~~do not expect to experience any difficulties in ~~real~~renewing ~~estate~~our leases, ~~real~~or ~~estate~~finding ~~mortgages~~additional or ~~securities~~replacement ~~of,~~office orand ~~interests~~collocation inspace, ~~persons~~at ~~primarily~~the ~~engaged~~current inor ~~real~~more ~~estate~~favorable ~~activities~~rates.

Item 3. Legal Proceedings.

There are no material pending legal proceedings to which the Company, any executive officer, any owner of record or beneficially of more than five percent of any class of voting securities is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities.

~~Common~~We ~~Stock~~are authorized by our certificate of incorporation to issue an aggregate of 120,000,000 shares of capital stock, of which 100,000,000 are shares of common stock, par value $.0001 per share and 20,000,000 are shares of preferred stock, par value $.0001 per share. Our common stock is quoted on the Over-the-Counter Bulletin Board ("OTCBB") under the trading symbol "XFCH". The OTCBB is a quotation system and not a national securities exchange, and many companies have experienced limited liquidity when traded through this quotation system. There is no established public trading market for our common stock. As of the date of this report, there are 17,753,684 shares of common stock outstanding and no shares of preferred stock outstanding. All outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the board of directors out of funds legally available, subject to the rights of any preferred stock we issue. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities, subject to the rights of any preferred stock we issue. The stockholders do not have cumulative or pre-emptive rights.

~~Our~~Effect ~~Certificate~~ of ~~Incorporation~~Certain ~~authorizes~~Provisions ~~the issuance~~ of ~~up to 100,000,000 shares of common stock, par value $.0001 per share (~~the ~~“Common~~Company’s ~~Stock”). The~~Certificate ~~Common Stock is not listed on a publicly-traded market. As~~ of ~~May~~Incorporation ~~11,~~and ~~2012, there were 50 holders of record of the Common Stock.~~Bylaws

~~Preferred~~Certain ~~Stock~~provisions of our certificate of incorporation and bylaws may have the effect of delaying, deferring or preventing a change in control of our company. For example, the authorization of undesignated preferred stock in our certificate of incorporation makes it possible for the board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of our company. Furthermore our bylaws provide that only our directors, or an officer instructed to do so by our directors, may call an annual or special meeting of our stockholders. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management. The amendment of any of these provisions would require approval by holders of at least a majority of our outstanding common stock.

Our Certificate of Incorporation authorizes the issuance of up to 20,000,000 shares of preferred stock, par value $.0001 per share (the “Preferred Stock”). The Company has not yet issued any of its preferred stock.14

Dividend Policy

The Company has not declared or paid any cash dividends on its common stock and does not intend to declare or pay any cash dividend in the foreseeable future. The payment of dividends, if any, is within the discretion of the Board of Directors and will depend on the Company’s earnings, if any, its capital requirements and financial condition and such other factors as the Board of Directors may consider.

Securities Authorized for Issuance under Equity Compensation Plans

Prior to the Merger, X-Factor adopted the 2006 Long-Term Incentive Plan and the 2010 Long Term Incentive Plan (collectively, the “Prior Plans”). The ~~Company~~2010 ~~does~~Long ~~not~~Term ~~have~~Incentive ~~any~~Plan ~~equity~~was ~~compensation~~approved ~~plans~~by orthe ~~any~~holders ~~individual~~of ~~compensation~~membership ~~arrangements~~units ~~with~~in ~~respect~~X-Factor prior to ~~its~~the Merger. Upon the closing of the Merger, the Company’s board of directors approved the substitution of X-Factor membership interests underlying the options granted under the Prior Plans with shares of common stock of the Company, subject to any further approvals or ~~preferred~~actions ~~stock~~as may be required to ensure that the implementation of the substitution is in accordance with all state and federal rules and regulations that may be applicable. ~~The~~In ~~issuance~~August 2012 the Company’s Board of ~~any~~Directors approved a 2012 Long-Term Incentive Plan (the "2012 Plan"). This plan reserved 5,000,000 shares of ~~our~~the Company’s common orstock ~~preferred~~to be used for the purpose of making awards under the 2012 Plan. Options granted under the 2012 Plan to employees are non-statutory stock options unless the plan is ~~within~~approved by the ~~discretion~~stockholder’s of ~~our~~the ~~Board~~Company ofby ~~Directors~~August 2013, in which ~~has~~case the ~~power~~grants will be incentive stock options. Options granted under the 2012 Plan to ~~issue~~consultants ~~any~~are ornon-statutory ~~all~~stock ofoptions. Information ~~our~~about ~~authorized~~the ~~but~~Prior ~~unissued~~Plans ~~shares~~and ~~without~~the ~~stockholder~~2012 ~~approval~~Plan appears below.

8Equity Compensation Plan Information

Plan Category	Number of Shares of Common Stock to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted average exercise price of outstanding options warrants and rights (b)		Number of Shares of Common Stock remaining available for future issuance under the equity compensation plan (excluding Shares of Common Stock reflected in column (a)) (c)

Equity Incentive Plans approved by Security Holders		637,434	$	0.865		None

Equity Incentive Plans not approved by Security Holders		4,963,156	$	0.664	1,364,172

Recent Sales of Unregistered Securities

~~None~~The following sales of unregistered securities have occurred during the fiscal year ended December 31, 2012.

On May 15, 2012, in connection with the consummation of the Merger, we issued a total of 10,593,104 shares of our common stock to the members of X-Factor LLC in exchange for all of the issued and outstanding membership interests in X-Factor LLC. In addition, we reserved an additional 4,724,083 shares of common stock for issuance upon the conversion or exercise of all outstanding warrants, options or other securities of X-Factor exercisable or convertible into membership units of X-Factor LLC prior to the Merger. The securities issued in connection with the Merger have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and may not be offered or sold in the United States absent registration or an applicable exemption from registration. The issuance of the securities identified above were made pursuant to the exemption from the registration requirements of the Securities Act pursuant to Section 4(2) and Regulation D promulgated thereunder. The X-Factor LLC members received written disclosures that the securities had not been registered under the Securities Act and that any resale must be made pursuant to a registration or an available exemption from such registration. The securities were issued without any form of general solicitation or advertising and all of the foregoing securities are deemed restricted securities for purposes of the Securities Act. No commissions were paid in connection with the common stock issued in connection with the Merger.

Also in May and August of 2012, in connection with the closings of the May 2012 Offering, the Company issued an aggregate of 2,883,333 shares of common stock for aggregate cash proceeds equal to $2,162,500. In addition, the Company issued an additional 1,010,732 shares of common stock in connection with the conversion of convertible promissory notes with an outstanding principal amount equal to $758,051. We paid a commission in the amount of $321,555 to the placement agent and issued an aggregate of 1,589,059 shares of the Company’s common stock to the placement agent in connection with the May 2012 Offering. The offer and sale of the shares was made pursuant to exemptions provided by Section 4(2) of the Securities Act and Regulation D promulgated thereunder inasmuch as the common stock was sold solely to accredited investors and without any form of general solicitation or general advertising.

On August 21, 2012 the Company granted options to purchase an aggregate of 3,401,000 shares of common stock to certain employees, directors and officers of the Company. The offer and sale of the securities was made pursuant to exemptions provided by Section 4(2) of the Securities Act of 1933, in that the securities were issued without any form of general solicitation or advertising and the offeree had full access to all information concerning the Company that was requested.

In October 2012, as consideration for agreeing to amend certain outstanding promissory notes, the Company issued 10 year warrants to purchase 27,521 shares of common stock to the New Jersey Economic Development Authority at an exercise price of $0.75 per share. The offer and sale of the warrants was made pursuant to the exemption provided by Section 4(2) of the Securities Act of 1933, in that the warrants were issued without any form of general solicitation or advertising and the offeree had full access to all information concerning the Company that was requested.

In December 2012, the Company issued 250,000 shares of common stock and warrants to purchase an aggregate of 125,000 shares of common stock exercisable at an exercise price of $0.90 per share to an accredited investor for aggregate gross proceeds equal to $200,000. The placement agent received cash commissions equal to $20,000 and a five year warrant to purchase 25,000 shares of common stock exercisable at an exercise price of $0.80 per share. The issuance of the securities identified above were made pursuant to the exemption from the registration requirements of the Securities Act pursuant to Section 4(2) and Regulation D promulgated thereunder in that the securities were issued to accredited investors without any form of general solicitation or advertising and all of the foregoing securities are deemed restricted securities for purposes of the Securities Act.

Issuer Purchases of Equity Securities

None.

Item 6. Selected Financial Data.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation

The ~~Company~~following ~~currently~~discussion ~~serves~~should asbe aread ~~vehicle~~in toconjunction ~~investigate~~with ~~and,~~our ifaudited ~~such~~consolidated ~~investigation~~balance ~~warrants,~~sheets ~~acquire~~as aof ~~target~~December ~~company~~31, or2012 ~~business~~and ~~seeking~~2011 and the ~~perceived~~related ~~advantages~~consolidated statements of ~~being~~operations, astockholders’ ~~publicly~~and ~~held corporation. The Company~~members’s ~~principal~~deficit ~~business~~and ~~objective~~cash flows for the ~~next~~years 12ended ~~months~~December ~~will~~31, be2012 toand ~~complete~~2011 ~~the~~and ~~transactions contemplated by~~ the ~~Merger~~notes ~~Agreement~~attached thereto. InSuch ~~the~~2011 ~~event~~financial ~~the~~statements ~~Company~~exclude ~~does not consummate~~ the ~~transactions~~effects ~~contemplated~~of by the Merger ~~Agreement,~~and the ~~Company’s~~related ~~principal business objective for the next 12 months and beyond such time will be to achieve long-term growth potential through a combination with an operating business~~reorganization. ~~The Company will not restrict its potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.~~

All statements contained herein that are not historical facts, including, but not limited to, statements regarding anticipated future capital requirements, our future development plans, our ability to obtain debt, equity or other financing, and our ability to generate cash from operations, are based on current expectations. The ~~Company~~discussion ~~currently~~of ~~does~~results, causes and trends should not ~~engage~~be inconstrued ~~any~~to ~~business~~imply ~~activities~~any conclusion that ~~provide~~such ~~cash~~results ~~flow~~or trends will necessarily continue in the future. ~~During~~The ~~the~~Company ~~next~~operates ~~twelve~~in ~~months~~one wesegment ~~anticipate~~and ~~incurring~~therefore ~~costs~~segment ~~related~~information ~~to:~~is not presented.

~~(i) filing~~The ~~Exchange~~statements ~~Act~~contained ~~reports~~herein, other than historical information, are or may be deemed to be forward-looking statements and involve factors, risks and uncertainties that may cause our actual results in future periods to differ materially from such statements. These factors, risks and uncertainties are discussed below and include market acceptance and availability of digital media communication services, rapid technological change affecting demand for our services, competition from other digital media communication service providers, deteriorating economic conditions, the availability of sufficient financial resources to enable us to pay our existing obligations and expand our operations, adequacy of internal controls, being an early stage software development company, as well as other risks and uncertainties that may be detailed from time to time in our filings with the Securities and Exchange Commission.

~~(ii) investigating, analyzing and consummating an acquisition.~~16

We believe we will be able to meet these costs through deferral of fees by certain service providers and additional amounts, as necessary, to be loaned to, advanced, or invested in us by our stockholders, management or other investors. As of the date of the period covered by this report, the Company has no cash assets. There are no assurances that the Company will be able to secure any additional funding as needed. Currently, however our ability to continue as a going concern is dependent upon our ability to generate future profitable operations and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations when they come due. Our ability to continue as a going concern is also dependant on our ability to find a suitable target company and enter into a possible reverse merger with such company. Management’s plan includes obtaining additional funds by equity financing through a reverse merger transaction and/or related party advances, however there is no assurance of additional funding being available.Overview

~~The~~X-Factor ~~Company~~Communications ~~may~~Holdings, ~~consider~~Inc. ~~acquiring~~(formerly, aOrganic ~~business~~Spice ~~which~~Imports, ~~has~~Inc.) ~~recently~~("Holdings" ~~commenced~~or ~~operations~~the "Company"), isthrough its wholly-owned subsidiary X-Factor Communications, LLC ("X-Factor"), a ~~developing~~New York limited liability company, located in ~~need~~South ofHackensack, ~~additional~~New ~~funds~~Jersey, ~~for~~provides ~~expansion~~interactive ~~into~~digital ~~new~~media ~~products~~network orsoftware ~~markets~~and services. The X-Factor Digital Media Network Platform, our cloud-based digital signage, web and mobile solution, is ~~seeking~~delivered as a software-as-a-service and under a software license model, enabling our customers to ~~develop~~build simple yet scalable advertising and corporate digital media networks. The Company’s webcasting solution, a ~~new~~live and on-demand multimedia distribution product ordelivers ~~service~~rich media content, ordesktop issignage anand ~~established~~emergency ~~business~~messaging ~~which~~to ~~may~~mobile beand ~~experiencing~~Web ~~financial~~devices. The orCompany’s ~~operating~~solutions ~~difficulties~~address ~~and~~the israpidly inexpanding ~~need~~digital media needs of ~~additional~~its ~~capital~~corporate, public venue, education and government sector customers. The InCompany sells its software and services throughout the ~~alternative~~United States. The Company has limited its staffing and marketing efforts, aexpenditures ~~business~~and ~~combination~~expenses ~~may~~to ~~involve~~date. Over the ~~acquisition~~past two ~~of,~~years orthe ~~merger~~Company ~~with~~has benefited from limited direct sales efforts and sales referrals from Cisco Systems, aInc. ~~company~~("Cisco") ~~which~~and ~~does~~some ~~not~~of ~~need~~the ~~substantial~~larger ~~additional~~integrators/reseller ~~capital~~sales ~~but~~channels ~~which~~in ~~desires~~the marketplace. The Company believes it is now positioned to ~~establish~~implement aan ~~public~~aggressive ~~trading~~marketing ~~market~~campaign ~~for~~to ~~its~~increase ~~shares~~the ~~while~~sales ~~avoiding,~~volume ~~among~~through ~~other~~these ~~things~~sales channels. In addition, the ~~time~~Company ~~delays,~~has ~~significant~~introduced ~~expense,~~stand-alone ~~and~~solutions ~~loss~~to ofthe ~~voting~~marketplace ~~control~~that ~~which~~it ~~may~~plans ~~occur~~to inmarket aalong ~~public~~with ~~offering~~its partner oriented product portfolio.

Management has had contact and discussions with representatives of other entities regarding a business combination with us. As of the date of this filing, the Company is party to a Merger Agreement, pursuant to which X-Factor will be merged with and into the Company’s wholly owned subsidiary. There can be no assurances that the transactions contemplated under the Merger Agreement will be consummated.

In the event that the Company does not consummate the transactions contemplated by the Merger Agreement, the Company’s business plan will include seeking another target company to complete a business combination. Any target business that is selected may be a financially unstable company or an entity in its early stages of development or growth, including entities without established records of sales or earnings. In that event, we will be subject to numerous risks inherent in the business and operations of financially unstable and early stage or potential emerging growth companies. In addition, we may effect a business combination with an entity in an industry characterized by a high level of risk, and, although our management will endeavor to evaluate the risks inherent in a particular target business, there can be no assurance that we will properly ascertain or assess all significant risks. Our management anticipates that it will likely be able to effect only one business combination, due primarily to our limited financing and the dilution of interest for present and prospective stockholders, which is likely to occur as a result of our management’s plan to offer a controlling interest to a target business in order to achieve a tax-free reorganization. This lack of diversification should be considered a substantial risk in investing in us, because it will not permit us to offset potential losses from one venture against gains from another.

The Company anticipates that the selection of a business combination will be complex and extremely risky. Because of general economic conditions, rapid technological advances being made in some industries and shortages of available capital, our management believes that there are numerous firms seeking the perceived benefits of becoming a publicly traded corporation. Such perceived benefits of becoming a publicly traded corporation include, among other things, facilitating or improving the terms on which additional equity financing may be obtained, providing liquidity for the principals of and investors in a business, creating a means for providing incentive stock options or similar benefits to key employees, and offering greater flexibility in structuring acquisitions, joint ventures and the like through the issuance of stock. Potentially available business combinations may occur in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex.

Liquidity and Capital Resources

AsAt ofDecember ~~March~~ 31, 2012, the Company ~~has~~had noa ~~assets. This~~stockholders' ~~compares~~deficit ~~with~~of ~~assets~~$1,223,034, a working capital deficiency of $4670,~~862~~657 ~~comprised~~and ~~exclusively~~incurred a net loss of ~~cash~~$3,420,138 asfor the year then ended. In addition, there was a decrease in revenue of ~~March~~$172,681 for the year ended December 31, 2012 when compared to 2011. ~~The~~ There ~~Company~~can ~~had~~be no ~~liabilities~~assurance asthat: (1) existing stockholders will continue to support the operational and financial requirements of ~~March~~the 31Company, ~~2012. This~~(2) ~~compares~~that the Company will be able to raise sufficient equity (see Notes 18 and 20) or (3) that the Company will continue to be able to comply with noexisting ~~liabilities~~covenants aswith creditors in future periods. While the Company has been successful to date in raising funds through sales of ~~March~~securities, 31the Company does not currently have any sources of committed funding available. At present, ~~2011~~these factors raise substantial doubt about the Company's ability to continue as a going concern. The report of our independent registered public accounting firm included an explanatory paragraph indicating that there was substantial doubt concerning the Company’s ~~can~~ability ~~provide~~to operate as a going concern. X-Factor has historically incurred net losses and recurring negative cash flows from operations. Furthermore X-Factor has, in the past, defaulted on debt service payments and been in default of covenants in certain debt agreements and there are no ~~assurance~~assurances that itinvestors ~~can~~will continue to ~~satisfy~~support ~~its~~X-Factor ~~cash~~or ~~requirements~~that ~~for~~X-Factor atwill ~~least~~be able to raise sufficient capital or debt financing to sustain operations. These conditions raise substantial doubt about X-Factor’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the ~~next~~carrying ~~twelve~~value ~~months~~of assets and liabilities that might result from the outcome of these uncertainties.

~~The~~During ~~following~~the isyears aended ~~summary~~December of31, ~~the~~2012 ~~Company's~~and ~~cash~~2011, ~~flows~~the ~~provided~~Company byreceived ~~(used~~an ~~in)~~aggregate ~~operating~~$75,000 ~~investing~~and $850,000, ~~and~~respectively; ~~financing~~in ~~activities~~cash ~~for~~proceeds from the ~~year~~sale ~~ended~~of ~~March~~promissory notes (see Note 12). Through December 31, 2012 ~~and~~the ~~for~~Company ~~the~~received ~~cumulative~~additional ~~period~~net ~~from~~cash ~~December~~proceeds 30of $1,930,549 ~~2010~~raised ~~(Inception)~~in toconnection ~~March~~with ~~31,~~the ~~2012~~Offerings.

	Fiscal Year Ended March 31, 2012			For the Period Ended March 31, 2011			For the Cumulative Period from December 30, 2010 (Inception) to March 31, 2012
Net Cash (Used in) Operating Activities	$	(4,862	)	$	(256	)	$	(5,118	)
Net Cash (Used in) Investing Activities	$	-		$	-			-
Net Cash Provided by Financing Activities	$	-		$	5,118		$	5,118
Net Increase (Decrease) in Cash	$	(4,862	)	$	4,862		$	-

The Company believes that the remainder of the net cash proceeds received from the sale of securities in the Offerings and the conversion of promissory notes in 2012 will provide sufficient equity to fund its operations for the next two to three months from the date of filing this Annual Report on Form 10-K. Additional significant amounts of capital will be needed to be raised to continue the Company’s operations. There are no assurances, however, that the Company will be able to raise additional capital as may be needed, or increase revenue levels and profitability. Further, if the current economic climate negatively impacts the Company, as it may, and the Company is unable to raise additional capital on acceptable terms, it could have a material adverse effect on the Company's financial condition, future operations and cash flows.

The Company has nominal assets and has generated no revenues since inception. The Company is also dependent upon the receipt of capital investment or other financing to fund its ongoing operations and to execute its business plan of seeking a combination with a private operating company. We believe we will be able to meet these costs through borrowing or advances from management or affiliates of management. In addition, the Company is dependent upon certain related parties to provide continued funding and capital resources. If continued funding and capital resources are unavailable at reasonable terms, the Company may not be able to implement its plan of operations.17

10Critical Accounting Policies

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are uncollateralized, non interest bearing, customer obligations due under normal trade terms and are stated at the amount billed to the customer. Payments of accounts receivable are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the earliest unpaid invoices.

The carrying amount of the Company's accounts receivable may, at times, be reduced by a valuation allowance that reflects management's best estimate of the amounts that will not be collected. Management individually reviews all accounts receivable balances periodically and based on an assessment of the current creditworthiness of the customer, estimates the portion, if any, of the balance that will not be collected.

Equipment and Leasehold Improvements

Equipment and leasehold improvements are recorded at cost. Depreciation on equipment is recorded over the estimated useful lives of the assets (five years) using the straight-line method. Leasehold improvements are depreciated using the straight-line method over the shorter of the estimated useful life of the asset (seven years) or the expected term of the occupancy. Included in equipment are fixed assets subject to capital leases which are depreciated over the life of the respective asset. Maintenance and repair costs are charged to expense as incurred. Upon sale or retirement, the cost and related accumulated depreciation are eliminated from the respective accounts and any resulting gain or loss is reported in results of operations.

Long-Lived Assets

The Company periodically evaluates the net realizable value of long-lived assets, principally equipment and leasehold improvements, relying on a number of factors including operating results, business plans, economic projections and anticipated future cash flows. Impairment in the carrying value of an asset is recognized whenever anticipated future undiscounted cash flows from an asset are estimated to be less than its carrying value. The amount of the impairment recognized is the difference between the carrying value of the asset and its fair value. There were no impairment losses recognized in the years ended December 31, 2012 and 2011.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. The Company has certain arrangements where it is obligated to deliver multiple products and/or services (multiple elements). In these arrangements, the Company allocates the total revenue among the elements based on the sales price of each element when sold separately using vendor-specific objective evidence. Revenue from multi-year licensing arrangements is accounted for as subscriptions, with billings recorded as unearned revenue and recognized as revenue ratably over the billing coverage period. Unearned revenue also consists of future maintenance and upgrade services that will be provided by the Company in future periods under terms of a non-refundable service contract.

Derivative Financial Instruments

The Company's objectives in using debt-related derivative financial instruments are to obtain the lowest cash cost source of funds. Derivatives are recognized in the balance sheet at fair value based on the criteria specified in Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification ("ASC") Topic 815, "Derivatives and Hedging " (“ASC Topic 815”). Under ASC Topic 815, the estimated fair value of derivative liabilities is revalued at each balance sheet date with the changes in value, if any, recorded in the interest and other expense section of the accompanying Consolidated Statements of Operations and in derivative financial instruments of the liability section of the Consolidated Balance Sheets.

Financial Instruments with Anti-Dilution Features

The Company has issued warrants that contain a weighted average anti-dilution feature that in certain circumstances could provide the warrant holders with protection against changes in the market value of the Company's common stock; accordingly, they are required under applicable accounting standards to be recorded at fair value as of the balance sheet date. On the balance sheet date the Company evaluates the fair value of the warrants using a valuation model and the net difference, if material, between their previous periods’ fair values and their current fair values is recorded in the interest and other expense section of the accompanying Consolidated Statements of Operations and in derivative financial instruments of the liability section of the Consolidated Balance Sheets.

Equity-Based Compensation

Equity-based awards for common stock have been accounted for as required by FASB ASC Topic 718, “Compensation – Stock Compensation” (“ASC Topic 718”). Under ASC Topic 718, equity-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period. The Company values its equity-based awards using the Black-Scholes option valuation model. The fair value of the common stock used in these valuation models is based on the most recent sale of a share of common stock of the Company.

We periodically granted options for common stock to employees and consultants in accordance with the provisions of our stock option plans (see Note 16), with the exercise price of the options established at the price of a recent sale of a share of common stock of the Company. As a consequence of the Merger, no additional grants may be made from the 2006 and 2010 Plans and the options are exercisable into shares of the Company.

The fair value of warrants for shares of common stock issued to consultants or investors are recognized over the requisite service period with a corresponding credit to Additional Paid-in Capital. Warrants issued to consultants are based on the fair value of a share of common stock related to the warrants. Warrants for common stock issued to equity investors have no effect on Additional Paid-in Capital; that is, the fair value of the warrants granted to investors and charged to Additional Paid-in Capital are entirely offset by a corresponding adjustment to Additional Paid-in Capital.

Income Taxes

Holdings operates as a “C” corporation. Prior to the Merger, the members of X-Factor elected to be treated as a limited liability corporation, under the applicable provisions of the Internal Revenue Code and State of New Jersey tax laws. Holdings uses the asset and liability method to determine our income tax expense or benefit. Deferred tax assets and liabilities are computed based on temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered or settled. Any resulting net deferred tax assets are evaluated for recoverability and an assessment of whether it is more likely than not that such amount will be realized. Based on an assessment of all available evidence, a valuation allowance has been established against net deferred tax assets of $700,000 (principally composed of $430,000 of a net operating loss [“NOL”) and $215,000 of compensation expenses) at December 31, 2012. For the period from the effective date of the Merger through December 31, 2012 the Company did not record a benefit for income taxes. At December 31, 2012 the Company had Federal and New Jersey NOL carry-forwards of approximately $1,085,000 which expire in 2032 and 2019, respectively. The utilization of our NOL for Federal income tax purposes sustained by the Company may be substantially limited annually as a result of an "ownership change" (as defined by Section 382 of the Internal Revenue Code of 1986, as amended). If it is determined that there is a change in ownership, or if the Company undergoes a change of ownership in the future, the utilization of the Company’s NOL carry-forwards may be materially constrained. This would result in a reduction in equal amounts to the deferred tax assets and the related valuation reserves.

FASB ASC Topic 740 “Income Taxes,” clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. The standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition requirements. Prior to the Merger, X-Factor operated as a limited liability corporation and Federal and state taxes are passed through to the members, so too would the assessments from any tax examinations and, since the Merger, has generated an operating loss. The Company conducts business domestically and, as a result, files Federal and state income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. There are no ongoing or pending examinations by Federal or state tax agencies. The Company has evaluated its tax positions for all currently open tax years, 2009 through 2011, and has concluded that there are no significant uncertain tax positions for either Federal or state purposes.

There were no interest or penalties related to income taxes that have been accrued or recognized as of December 31, 2012 and 2011, or for the years then ended.

Emerging Growth Company

We are an “emerging growth company” under the Jumpstart Our Business Startups Act (the “JOBS Act”). We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act. This election allows us to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

Results of Operations

~~The~~Year ~~Company~~ended ~~has not conducted any active operations since inception, except for its efforts to locate suitable acquisition candidates. No revenue has been generated by the Company from~~ December ~~30, 2010 (Inception) to March~~ 31, 2012~~. It~~ ~~is unlikely~~ (the ~~Company~~“2012 ~~will~~Year”) ~~have~~compared ~~any revenues unless it is able~~ to ~~complete~~ the ~~transactions~~year ~~contemplated~~ended byDecember ~~the Merger Agreement or~~31, ~~alternatively,~~2011 ~~effect a acquisition or merger with another operating company, of which there can be no assurance. It is management's assertion that these circumstances may hinder~~ (the ~~Company's~~“2011 ~~ability to continue as a going concern. The Company’s plan of operation for the next twelve months shall be to consummate the transactions contemplated by the Merger Agreement.~~ Year”)

~~For~~Revenues ~~the~~- ~~fiscal~~Revenues ~~year~~decreased ~~ended~~$172,681, ~~March~~or 3120.3%, in the 2012 Year to $676,415 from $849,096 in the ~~Company~~2011 ~~had~~Year. The aprimary ~~net~~reason ~~loss~~for the decrease in revenues in 2012 was that Cisco reduced its purchases of X-Factor’s digital signage and advertising software and services. Purchases by Cisco generated $4196,~~862,~~898 ~~consisting~~ of ~~legal~~revenue in the 2011 Year versus no revenue in the 2012 Year. In addition, ~~accounting~~the US Postal Service, ~~audit~~due to budget constraints, ceased purchasing X-Factor’s digital signage software and ~~other~~maintenance ~~professional~~services ~~service~~for ~~fees~~new ~~incurred~~locations which caused a $59,128 revenue reduction in ~~relation~~the 2012 Year compared to the ~~preparation~~2011 ~~and~~Year. This ~~filing~~reduction ofwas partially offset by successful efforts by the Company’s ~~periodic~~to ~~reports~~increase ~~and~~its ~~general,~~webcasting ~~administrative,~~business. The ~~and~~following ~~interest~~are ~~expenses.~~the changes in the components of X-Factor’s revenue for the years ended:

For the cumulative period from December 30, 2010 (Inception) to March 31, 2011, the Company had a net loss of $256 comprised of expenses incurred in relation to the formation of the Company.

					Favorable
	December 31,				(Unfavorable)
	2012		2011		Change
Digital signage software and services	$	272,380	$	549,988	$	(277,608	)
Webcasting		404,035		299,108		104,927
Total revenues	$	676,415	$	849,096	$	(172,681	)

~~For~~Cost ~~the~~of ~~cumulative~~revenues ~~period~~– ~~from~~Cost ~~December~~of ~~30,~~revenues ~~2010~~increased ~~(Inception) to March 31~~$5, ~~2012~~083, ~~the~~or ~~Company~~2.1% ~~had~~in athe ~~net~~2012 ~~loss~~Year ofto $5243,~~118~~661 ~~comprised~~from ~~of legal~~$238,578 ~~accounting,~~in ~~audit,~~the ~~and~~2011 ~~other~~Year. Cost ~~professional~~of ~~service~~revenues, ~~fees~~as ~~incurred~~a inpercentage ~~relation~~of torevenues, ~~the~~were ~~formation~~36.0% ofin the ~~Company,~~2012 ~~the~~Year ~~filing~~and of28.1% in the ~~Company’s~~2011 ~~Registration~~Year. This ~~Statement~~increase onin ~~Form~~cost, 10as ina ~~April~~percentage of ~~2011~~revenues, ~~the~~is ~~preparation~~caused ~~and~~by ~~filing of~~ the ~~Company’s~~increase ~~periodic~~in ~~reports,~~lower ~~and~~gross ~~general,~~profit ~~administrative,~~percentage ~~and~~webcasting ~~interest expenses~~business.

~~Off-Balance~~Gross ~~Sheet~~Profit ~~Arrangements~~– Gross profit decreased $177,764, or 29.1% in the 2012 Year to $432,754 from $610,518 in the 2011 Year. Gross profit, as a percentage of revenues, was 64.0% in the 2012 Year and 71.9% in the 2011 Year. This change was related to the reduction in revenues for digital signage software and services which have a higher gross profit compared to webcasting revenues and development costs of approximately $70,000.

~~The~~Salaries ~~Company~~and ~~does~~fringe ~~not~~benefits ~~have~~expenses ~~any~~– ~~off-balance~~Compensation ~~sheet~~costs ~~arrangements~~increased ~~that~~$360,997, ~~have~~ or ~~are~~78.9% ~~reasonably~~in ~~likely~~the 2012 Year to ~~have~~$818,817 from $457,820 in the 2011 Year. Compensation costs, as a ~~current~~percentage orof ~~future~~revenues, ~~effect~~were on121.1% in the ~~Company’s~~2012 ~~financial~~Year ~~condition,~~and ~~changes~~53.9% in ~~financial~~the ~~condition,~~2011 ~~revenues~~Year. The orprimary reasons for the increase in these expenses, ~~results~~were the hiring of ~~operations,~~two ~~liquidity,~~employees ~~capital~~and ~~expenditures~~the orgranting ~~capital~~of ~~resources~~options ~~that~~to isemployees ~~material~~in tolieu ~~investors~~of cash compensation. The following are the changes in the components of salaries and fringe benefits for the years ended:

					Favorable
	December 31,				(Unfavorable)
	2012		2011		Change
Salaries	$	448,359	$	357,712	$	(90,647	)
Equity-based compensation		239,312		29,779		(209,533	)
Commissions and bonuses		39,278		7,489		(31,789	)
Employee insurance		28,364		11,140		(17,224	)
Payroll taxes		63,504		51,700		(11,804	)
Total salaries and fringe benefits	$	818,817	$	457,820	$	(360,997	)

General and administrative expenses - General and administrative expenses increased $663,404, or 57.9% in the 2012 Year to $1,810,015 from $1,146,611 in the 2011 Year. General and administrative expenses, as a percentage of revenues, were 267.6% in the 2012 Year and 135.0% in the 2011 Year. The following are the changes in the components of the general and administrative expenses for the respective years ended:

					Favorable
	December 31,				(Unfavorable)
	2012		2011		Change
Professional fees and consultants – Operations (A)	$	686,506	$	266,915	$	(419,591	)
Professional fees and consultants – Legal (B)		181,501		44,462		(137,039	)
Professional fees and consultants – Accounting (B)		215,829		44,159		(171,670	)
Professional fees and consultants – Equity based compensation (C)		290,639		527,387		236,748
Travel (F)		121,933		78,250		(43,683	)
Bad debts		300		25,000		24,700
Communication expenses		45,397		52,820		7,423
Insurance (E)		45,749		5,931		(39,818	)
SEC printing and filing fees (D)		44,272		—		(44,272	)
Settlement of customer dispute		—		26,000		26,000
Computer and office supplies (F)		86,996		35,518		(51,478	)
Advertising and marketing (F)		46,519		3,261		(43,258	)
Miscellaneous expenses		44,374		36,908		(7,466	)
Total general and administrative	$	1,810,015	$	1,146,611	$	(663,404	)

Note A –	Increase is primarily a full year’s salary for the Company’s Interim Chief Financial Officer and Chief Marketing and Sales Officer and the addition of several sales and marketing consultants.
Note B –	Increase is primarily related to reporting requirements of a “Public Company”.
Note C –	In 2011 an individual received equity based compensation of approximately $285,000 for performing legal services.
Note D –	Costs related to being a “Public Company”.
Note E –	Increase is primarily related to a Directors and Officers liability insurance policy the Company obtained upon becoming a “Public Company”.
Note F –	Increase are primarily related to the Company starting up a sales and marketing program upon the completion of the Offering.

Depreciation and amortization – Depreciation and amortization expenses decreased $22,659, or 33.8%, in the 2012 Year to $44,422 from $67,081 in the 2011 Year. The decrease was due to some assets being fully depreciated and a lower level of equipment and leasehold improvement additions in all periods.

Loss from operations – Loss from operations increased by $1,179,506, or 111.2% in the 2012 Year to $2,240,500 from $1,060,994 in the 2011 Year.

Other expense – Other expense increased by $737,994 in the 2012 Year to $1,179,638 from $441,644 in the 2011 Year. Due to amendments to, and the conversion of, various Notes Payable to Related Parties in the 2012 Year, the related unamortized discounts and financing costs were expensed and shown as a Loss on Extinguishment or Modification of Debt. Due to amendments to Notes Payable in the 2012 Year, the related unamortized discount costs were expensed and shown as a Loss on Extinguishment or Modification of Debt. Professional fees related to the Merger were expensed as incurred. Due to increases in the market price of the Company’s common stock there was an increase in the fair value of derivative financial instruments. The following are the changes in the components of the Company’s other expenses:

					Favorable
	December 31,				(Unfavorable)
	2012		2011		Change
Loss on Extinguishment or Modification of Debt	$	523,259	$	—	$	(523,259	)
Professional fees related to Merger		202,867		62,188		(140,679	)
Change in fair value of derivative financial instruments for Related Parties		197,463		—		(197,463	)
Interest		97,172		91,536		(5,636	)
Accretion of discount on notes		139,154		259,112		119,958
Amortization of prepaid financing costs		11,869		23,277		11,408
Other expenses		7,854		5,531		(2,323	)
Total other expenses	$	1,179,638	$	441,644	$	(737,994	)

Income taxes - As a result of X-Factor being a limited liability company all profits and losses of X-Factor prior to the Merger flowed through to the individual members of X-Factor. Accordingly, X-Factor did not record a tax provision, incur any liability for incomes taxes nor record a benefit for income taxes or any deferred tax assets or liabilities for Federal or state tax purposes.

Holdings operates as a “C” corporation. Net deferred tax assets are evaluated for recoverability and an assessment of whether it is more likely than not that such amounts will be realized. Based on an assessment of all available evidence, a valuation allowance has been established against net deferred tax assets (principally net operating losses) at December 31, 2012 and for the period from the date of the Merger through December 31, 2012 the Company did not record a benefit for income taxes.

Net loss – The decrease in gross profit, increase in operating expenses and increase in other expenses are caused primarily by non-recurring expenses related to the Offering, extinguishment and modification of debt and the change in fair value of derivative financial instruments, resulting in the net loss increasing by $1,917,500, in the 2012 Year to $3,420,138 from $1,502,638 in the 2011 Year.

Cash flows

At December 31, 2012, the Company had a working capital deficit of $670,657, compared to a working capital deficit of $441,953 at December 31, 2011, an increase in the deficit of $228,704. The Company had $311,843 in cash at December 31, 2012, compared to $78,639 at December 31, 2011, an increase of $233,204.

Net cash used in operating activities was $1,545,632 for the 2012 Year. The components of the use of funds were a net loss of $3,420,138 (net $1,926,348 excluding non-cash charges and credits), $43,191 from a reduction in unearned revenues and a $16,231 increase in other current assets partially offset by a decrease of $131,146 in accounts receivable and a $308,992 net increase in accounts payable and accrued expenses. Net cash used in operating activities was $525,387 for the 2011 Year. The components of the use of funds were a net loss of $1,502,638 ($541,034 excluding non-cash charges and credits) and $144,195 from a reduction in unearned revenues and a $106,648 net increase in accounts receivables partially offset by a decrease of $266,490 increase in accounts payable and accrued expenses.

Cash provided by investing activities in the 2012 Year totaled $71,165 and consisted of a $75,000 reimbursement by the Controlling Stockholders of the deposit advanced by X-Factor towards the acquisition of control of the Company for the purpose of consummating the Merger partially offset by $3,835 for the purchase of equipment and leasehold improvements. Cash used in investing activities in the 2011 Year totaled $93,257 and consisted of a $75,000 deposit advanced by X-Factor towards the acquisition of control of the Company for the purpose of consummating the Merger, a $10,000 loan made to a strategic business partner and $8,257 for the purchase of equipment and leasehold improvements.

Cash provided by financing activities in the 2012 Year totaled $1,707,671 and was comprised of $2,362,500 of gross proceeds from the sale of common stock in the Offerings, $75,000 from the proceeds of notes payable, partially offset by $431,951 in direct costs relating to the Offerings, $167,774 of principal repayments towards notes payable – related parties, $117,239 of principal repayments towards note payable, $10,457 of principal repayments of lease obligations and $2,418 in direct costs in obtaining the amendment to the note payable. Cash provided by financing activities in the 2011 Year totaled $674,866 and was comprised of $850,000 from the proceeds of notes payable – related parties and $49,153 received from the sale of common stock; partially offset by $146,923 in direct costs related to the Offerings and obtaining the Bridge Notes, $27,439 of principal repayments of lease obligations, $25,000 of principal repayments towards notes payable – related parties and $24,622 of principal repayments towards note payable.

Inflation

Inflation has a minimal impact on the operations of the Company

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

			Payments Due By Period
Obligations	Total		Less Than 1 Year		2 – 3 Years		4 – 5 Years
Notes payable – Note A	$	337,306	$	27,056	$	206,834	$	103,416
Notes payable – related parties		282,680		—		—		282,680
Capital leases		11,663		11,663		—		—
Line of credit – Note B		97,846		97,846		—		—
	$	729,495	$	136,565	$	206,834	$	386,096

Note A –	Payments are based on a percentage of the prior year’s revenues with any unpaid principal due on August 1, 2016. For purposes of this table we were unable to estimate our revenues for the next three years so we have assumed that the unpaid principal balance, after our payment in July 2013, will be paid equally in years 2, 3 and 4.
Note B –	There is no maturity date for the Line of Credit; however the Company has classified this obligation as a current liability.

Off-Balance Sheet Arrangements

The Company had no off-balance sheet arrangements as of December 31, 2012 and 2011.

Recent Accounting Pronouncements

In January 2010, the FASB issued guidance that revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The guidance also clarifies that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. These new disclosure requirements became effective for the Company’s financial statements for the period ended September 30, 2011, except for the requirement concerning gross presentation of Level 3 activity, which became effective for our 2011 year end. Since this guidance is only related to financial statement disclosures, there was no impact to the Company’s financial statements as a result of the adoption of this guidance.

In May 2011, the FASB issued Accounting Standards Update ("ASU") 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards” (“IFRS”) (“ASU 2011-04”), which amends FASB ASC Topic 820, “ Fair Value Measurement . ” These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in a common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value measurement principles and disclosure requirements. The adoption of ASU 2011-04 did not have an impact on the Company’s September 30, 2012 financial statements.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income,” which amends FASB ASC Topic 220, “Comprehensive Income.” This guidance, effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The option to present components of other comprehensive income as part of the statement of stockholders’ and members’ deficit was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of loss per share. The adoption of ASU 2011-05 did not have an impact on the Company’s September 30, 2012 financial statements.

The Company is not aware of any other pronouncements, not yet issued or adopted, that would have a material effect on its future financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

Item 8. Financial Statements and Supplementary Data.

Audited financial statements begin on the following page of this report.

1123

Organic Spice Imports, Inc.

Index to Financial Statements	F-1

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets	F-3

Consolidated Statements of Operations	F-4

Consolidated Statement of Changes in Stockholders’ and Members Deficit	F-5

Consolidated Statements of Cash Flows	F-6 - F7

Notes to Consolidated Financial Statements	F-8

(A DEVELOPMENT STAGE COMPANY)

FINANCIAL STATEMENTS

March 31, 2012 and 2011

FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm	F-1
Balance Sheets	F-2
Statements of Operations	F-3
Statements of Changes in Stockholders' Deficit	F-4
Statements of Cash Flows	F-5
Notes to Financial Statements	F-6

Stan J.H. Lee, CPA

2160 North Central Rd. Suite 209* Fort Lee * NJ 07024

P.O. Box 436402 * San Diego * CA 92143-9402

619-623-7799 *Fax 619-564-3408 * E-mail) stan2u@gmail.com

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Organic Spice Imports, Inc.

(A Development Stage Company)

We have audited the accompanying balance sheet of Organic Spice Imports, Inc. as of March 31, 2012 and 2011, and the related statements of operation, shareholders' equity (deficit) and cash flows for the fiscal year ended March 31, 2012 and period from December 30, 2010 (inception date) to March 31, 2011. 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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. An audit includes 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Organic Spice Imports, Inc. as of March 31, 2012 and 2011, and the results of its operation and its cash flows for the period aforementioned in conformity with U.S. generally accepted accounting principles.

The financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in the note to the financial statements, the Company has not established any source of revenue to cover its operating costs and continuing losses from operations raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Stan J.H. Lee, CPA

----------------------------------

Stan J.H. Lee, CPA

April 30, 2012

Fort Lee, NJ, 07024

Registered with the Public Company Accounting Oversight Board

Member of New Jersey Society of Certified Public Accountants

Registered with Canadian Public Accountability Board

F-1

~~ORGANIC~~Report ~~SPICE~~of ~~IMPORTS,~~Independent ~~INC.~~Registered Public Accounting Firm

(ATo ~~Development~~the ~~Stage~~Stockholders ~~Company)~~and Board of Directors of X-Factor Communications Holdings, Inc.:

~~BALANCE~~We ~~SHEETS~~have audited the accompanying consolidated balance sheet of X-Factor Communications Holdings, Inc. and the balance sheet of its predecessor, X-Factor Communications, Inc. LLC (these entities are collectively referred to as the “Company”) as of December 31, 2012 and 2011 and the related consolidated statements of operations and stockholders’ / members’ deficit and cash flows for each of the years then ended. 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.

	As of			As of
	March 31,			March 31,
	2012			2011
ASSETS
Assets
Cash	$	-			4,862
TOTAL ASSETS	$	-			4,862
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
TOTAL LIABILITIES	$	-			-
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.0001 par value:
20,000,000 shares authorized, no shares issued
and outstanding as of March 31, 2012 and 2011		-			-
Common stock, $0.0001 par value:
100,000,000 shares authorized,
11,180,000 shares issued and
outstanding as of March 31, 2012 and 2011		1,118			1,118
Additional paid in capital		4,000			4,000
Deficit accumulated during the development stage		(5,118	)		(256	)
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)		-			4,862
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	-			4,862

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~See~~In ~~Notes~~our opinion, the consolidated financial statements referred to ~~Financial~~above ~~Statements~~present fairly, in all material respects, the financial position of X-Factor Communications Holdings, Inc. as of December 31, 2012 and X-Factor Communications, LLC as of December 31, 2011, and the results of their operations and their cash flows for each of the years then ended in conformity with United States’ generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has historically incurred net losses and recurring negative cash flows from operations. Furthermore the Company has, in the past, been in technical default of covenants in certain debt agreements and there are no assurances that existing investors will continue to support the Company or that the Company will be able to raise sufficient capital or debt financing to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans regarding these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Withum Smith + Brown, PC

Withum Smith + Brown, PC

Morristown, New Jersey

May 15, 2013

F-2

~~ORGANIC~~X-Factor ~~SPICE~~Communications ~~IMPORTS~~Holdings, ~~INC~~Inc.

(AConsolidated ~~Development~~Balance ~~Stage Company)~~Sheets

December 31, 2012 and 2011

STATEMENT OF OPERATIONS

	December 31,			December 31,
	2012			2011
Assets
Current assets:
Cash	$	311,843		$	78,639
Accounts receivable, net of allowance for doubtful accounts
of $26,200 and $25,900 respectively		79,964			216,110
Other current assets		27,793			209,081
Total current assets		419,600			503,830

Equipment and leasehold improvements		24,705			65,292
Total assets	$	444,305		$	569,122

Liabilities and Stockholders’ and Members’ Deficit
Current liabilities:
Line of credit	$	97,846		$	97,836
Current portion of note payable, net of discount of $2,256 and $9,377, respectively		24,800			161,078
Current portion of capital leases payable		10,705			10,457
Accounts payable		624,045			405,482
Accrued expenses		137,213			172,955
Current portion of unearned revenues		30,008			58,845
Derivative financial instruments		165,640			39,130
Total current liabilities		1,090,257			945,783

Long term liabilities:
Note payable, less current portion, net of discount of $5,848 and $6,166, respectively		304,402			277,924
Notes payable – related parties, net of discount of $0 and $582,209, respectively		282,680			614,543
Capital leases payable, less current portion		—			10,705
Unearned revenues, less current portion		—			14,354
Total long term liabilities		587,082			917,526
Total liabilities		1,677,339			1,863,309

Commitments and contingencies

Stockholders’ and members’ deficit:
Members' deficit (liquidation value of preferred units of $1,140,287)		—			(1,294,187	)
Preferred stock, $.0001 par value; 20,000,000 shares authorized,
no shares issued and outstanding		—			—
Common stock, $.0001 par value; 100,000,000 shares authorized,
17,214,934 shares issued and outstanding at December 31, 2012		1,721			—
Additional paid-in capital		6,519,602			—
Accumulated deficit		(7,754,357	)		—
Total stockholders’ and members’ deficit		(1,233,034	)		(1,294,187	)
Total liabilities and stockholders' and members’ deficit	$	444,305		$	569,122

	Period Ended Mar. 31, 2012			Period Ended Mar. 31, 2011			From Inception Dec. 30, 2010 through Mar. 31, 2012
Revenue	$	-		$	-		$	-
Total Revenue		-			-			-
Expenses
Organizational expenses		-			256			256
General & Admin expenses		4,862			-			4,862
Operating Expenses		4,862			256			5,118
Other Income (Expense)		-			-			-
Net Income (Loss)		(4,862	)		(256	)		(5,118	)
Basic and diluted earning
(Loss) per Share		(0.000	)					(0.000	)
Weighted average number
of common shares
outstanding –
Basic and Diluted		11,180,000			11,180,000

See accompanying notes to consolidated financial statements.

See Notes to Financial Statements

F-3

~~ORGANIC~~X-Factor ~~SPICE~~Communications ~~IMPORTS~~Holdings, ~~INC~~Inc.

(AConsolidated ~~Development~~Statements ~~Stage~~of ~~Company)~~Operations

Years Ended December 31, 2012 and 2011

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

	Year Ended
	December 31,
	2012			2011

Revenue	$	676,415		$	849,096
Cost of revenue		243,661			238,578
Gross profit		432,754			610,518

Operating expenses
Salaries and fringe benefits		818,817			457,820
General and administrative		1,810,015			1,146,611
Depreciation and amortization		44,422			67,081
Total operating expenses		2,673,254			1,671,512

Loss from operations		(2,240,500	)		(1,060,994	)

Other expenses
Interest expense, including $182,503 and $292,932,
respectively for related parties		248,195			373,925
Change in the fair value of derivative financial
instruments for related parties		197,463			—
Professional fees related to Merger		202,867			62,188
Loss on modification or extinguishment
of debt		523,259			—
Other expenses		7,854			5,531
Total other expenses		1,179,638			441,644

Net loss	$	(3,420,138	)	$	(1,502,638	)

~~From~~See ~~inception,~~accompanying ~~December~~notes ~~30, 2010,~~ to ~~March~~consolidated ~~31,~~financial ~~2012~~statements.

	Common Stock				Additional Paid-in		Accumulated During the			Total Stockholders
	Shares		Amount		Capital		Development Stage			Equity
Common Stock Issued
Per Court Order
December 30, 2010		1,180,000	$	118	$	0	$	0		$	118
Common Stock Issued
to Officers
March 29, 2011 at
$0.0005 per share
in cash		10,000,000	$	1,000	$	4,000		-		$	5,000
Net loss for
Period Ended		-		-		-		(256	)		(256	)
March, 31, 2011
Balance,
March, 31, 2011		11,180,000	$	1,118	$	4,000	$	(256	)	$	4,862
Net loss for
Period Ended
March, 31, 2012		-		-		-	$	(4,862	)	$	(4,862	)
Balance,
March, 31, 2012		11,180,000	$	1,118	$	4,000	$	(5,118	)	$	-

See Notes to Financial Statements

F-4

~~ORGANIC~~X-Factor ~~SPICE~~Communications ~~IMPORTS~~Holdings, ~~INC~~Inc.

(AConsolidated ~~Development~~Statement ~~Stage~~of ~~Company)~~Stockholders’ and Members’ Deficit

Years Ended December 31, 2012 and 2011

STATEMENT OF CASH FLOWS

				Common						Membership			Additional									Stockholders’
	Common			Shares			Membership			Units			Paid in			Accumulated			Members’			Deficit
	Shares			Amount			Units			Amount			Capital			Deficit			Deficit			Total
Balance at January 1, 2011		—		$	—			—		$	—		$	—		$	—		$	(1,222,068	)	$	(1,222,068	)
Sale of membership units		—			—			—			—			—			—			49,153			49,153
Membership units issued in connection with issuance of notes payable – related parties		—			—			—			—			—			—			457,600			457,600
Beneficial conversion feature related to notes payable – related parties		—			—			—			—			—			—			342,400			342,400
Equity based compensation – options issued to employees and consultants		—			—			—			—			—			—			72,298			72,298
Equity based compensation – warrants issued to consultants		—			—			—			—			—			—			484,868			484,868
Warrants issued in connection with notes payable – related parties		—			—			—			—			—			—			24,200			24,200
Net loss		—			—			—			—			—			—			(1,502,638	)		(1,502,638	)
Balance at December 31, 2011		—			—			—			—			—			—			(1,294,187	)		(1,294,187	)
Reclassification of Members’ deficit into Stockholders’ accounts		—			—			1,663,893			166			3,039,866			(4,334,219	)		1,294,187			—
Conversion of common membership units into common shares		7,239,216			724			(1,304,210	)		(130	)		(594	)		—			—			—
Conversion of preferred membership units into common shares		1,996,685			200			(359,683	)		(36	)		(164	)		—			—			—
Issuance of common shares and warrants to eliminate liquidation preference on preferred membership units and warrants for preferred membership units		1,357,203			136			—			—			(136	)		—			—			—
Issuance of common shares to exchange Organic holdings		1,180,000			118			—			—			(118	)		—			—			—
Issuance of common shares sold in Offerings		3,133,333			313			—			—			2,362,187			—			—			2,362,500
Costs of Offerings incurred in 2011		—			—			—			—			(64,060	)		—			—			(64,060	)
Cash paid for costs of Offerings incurred in 2012		—			—			—			—			(431,951	)		—			—			(431,951	)
Equity based compensation – common shares and warrants issued to pay costs of Offerings		—			—			—			—			(1,269,016	)		—			—			(1,269,016	)
Equity based compensation – common shares and warrants issued to Placement Agent		1,589,059			159			—			—			1,191,635			—			—			1,191,794
Equity based compensation – warrants issued to Placement Agent		—			—			—			—			57,922			—			—			57,922
Warrants issued in Offerings		—			—			—			—			19,300			—			—			19,300
Equity based compensation – shares issued in settlement of accounts payable		157,932			16			—			—			118,431			—			—			118,447
Cancellation of Controlling Stockholders shares		(656,667	)		(66	)		—			—			66			—			—			—
Conversion of promissory notes		1,218,173			121			—			—			881,357			—			—			881,478
Warrants issued related to refinancing of note payable		—			—			—			—			6,250			—			—			6,250
Equity based compensation – options issued in settlement of accounts payable		—			—			—			—			7,723			—			—			7,723
Equity based compensation – options issued to employees and consultants		—			—			—			—			513,747			—			—			513,747
Reclassification of fair value of warrants issued to Placement Agent and note holder with an anti-dilution feature		—			—			—			—			(92,000	)		—			—			(92,000	)
Equity based compensation – warrants issued to consultants		—			—			—			—			16,204			—			—			16,204
Cancellations of derivative liabilities		—			—			—			—			162,953			—			—			162,953
Net loss		—			—			—			—			—			(3,420,138	)		—			(3,420,138	)
Balance at December 31, 2012		17,214,934		$	1,721			—		$	—		$	6,519,602		$	(7,754,357	)	$	—		$	(1,233,034	)

	Period Ended Mar. 31, 2012			Period Ended Mar. 31, 2011			From Inception Dec. 30, 2010 through Mar. 31, 2012
Cash Flows From
Operating Activities
Net Income (Loss)	$	(4,862	)	$	(256	)	$	(5,118	)
Adjustments to reconcile
net income (loss) to net
cash (used in) operations		-			-			-
Net Cash provided by
(used in) operations		(4,862	)		(256	)		(5,118	)
Cash Flows From
Investing Activities								-
Net cash provided by
investing activities		-			-			-
Cash Flows From
Financing Activities
Common Stock Issuance
For Cash		-			5,000			5,000
Common Stock Issuance
For Expense		-			118			118
Net cash provided by
financing activities		-			5,118			5,118
Net increase (decrease)		(4,862	)		4,862			-
Cash beginning of period		4,862			-			-
Cash end of period	$	-		$	4,862			-
Non-Cash Investing and
Financing Activities
Common stock issued per
Bankruptcy Court Order	$	-		$	118		$	118
Supplemental Disclosures of
Cash Flow Information
Interest paid	$	-		$	-		$	-
Income taxes paid	$	-		$	-		$	-

See accompanying notes to consolidated financial statements.

See Notes to Financial Statements

F-5

~~ORGANIC~~X-Factor ~~SPICE~~Communications ~~IMPORTS~~Holdings, ~~INC~~Inc.

(AConsolidated ~~Development~~Statements ~~Stage~~of ~~Company)~~Cash Flows

Years Ended December 31, 2012 and 2011

Notes to Financial Statements

	Year Ended
	December 31,
	2012			2011
Cash flows from operating activities:
Net loss	$	(3,420,138	)	$	(1,502,638	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization		44,422			67,081
Capitalized interest payments for notes - related parties		48,500			30,403
Capitalized interest income for note receivable		(1,128	)		(435	)
Accretion of discount on notes		139,154			259,112
Amortization of prepaid financing costs		11,869			23,277
Change in fair value of derivative
financial instruments for related parties		197,463			—
Loss on modification or extinguishment of debt		523,259			—
Bad debt expense		300			25,000
Equity-based compensation		529,951			557,166
Changes in operating assets and liabilities:
Accounts receivable		131,146			(106,648	)
Other current assets		(16,231	)		—
Accounts payable		344,735			110,026
Accrued expenses		(35,743	)		156,464
Unearned revenue		(43,191	)		(144,195	)
Net cash used in operating activities		(1,545,632	)		(525,387	)

Cash flows from investing activities:
Refund (payment) of deposit for company to be acquired in Merger		75,000			(75,000	)
Advances made for note receivable		—			(10,000	)
Purchase of equipment and leasehold improvements		(3,835	)		(8,257	)
Net cash provided by (used in)investing activities		71,165			(93,257	)

Cash flows from financing activities:
Sale of common stock		2,362,500			49,153
Costs incurred in connection with Offerings		(431,951	)		(64,060	)
Principal repayments of note payable		(117,239	)		(24,622	)
Principal payments of line of credit		10			(303	)
Proceeds from notes payable - related parties		75,000			850,000
Costs incurred in connection with notes payable – related parties		—			(82,863	)
Principal repayments of obligations under capital leases		(10,457	)		(27,439	)
Principal repayments of notes payable - related parties		(167,774	)		(25,000	)
Costs incurred in connection with NJEDA refinancing		(2,418	)		—
Net cash provided by financing activities		1,707,671			674,866
Net change in cash		233,204			56,222
Cash - beginning of year		78,639			22,417
Cash - end of year	$	311,843		$	78,639

~~March~~ See ~~31,~~accompanying ~~2012~~notes ~~and~~to ~~2011~~consolidated financial statements.

NOTE 1. NATURE AND BACKGROUND OF BUSINESS

Organic Spice Imports, Inc. (“the Company” or “the Issuer”) was organized under the laws of the State of Delaware on December 30, 2010. The Company was established as part of the Chapter 11 reorganization of Spicy Gourmet Organics, Inc. (“SGO”). Under SGO’s Plan of Reorganization, as confirmed by the U.S. Bankruptcy Court for the Central District of California, the Company was incorporated to: (1) receive and own any interest which SGO had in the development of an organic spice importing business; and (2) issue shares of its common stock to SGO’s general unsecured creditors, to its administrative creditors, and to its shareholder. The Company has been in the development stage since its formation and has not yet realized any revenues from its planned operations.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. BASIS OF ACCOUNTING

The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a March 31 year-end.

BASIS OF PRESENTATION – DEVELOPMENT STAGE COMPANY

The Company is a development stage company as defined by ASC 915-10-05, “Development Stage Entity.” The Company is still devoting substantially all of its efforts on establishing the business and its planned principal operations have not commenced. All losses accumulated since inception have been considered as part of the Company’s development stage activities.

b. BASIC EARNINGS PER SHARE

The Company computes net income (loss) per share in accordance with the FASB Accounting Standards Codification (“ASC”). The ASC specifies the computation, presentation and disclosure requirements for earnings (loss) per share for entities with publicly held common stock.

Basic net earnings (loss) per share amounts are computed by dividing the net earnings (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company.

c. ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make 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 reporting period. Actual results could differ from those estimates.

F-6

~~ORGANIC~~X-Factor ~~SPICE~~Communications ~~IMPORTS~~Holdings, ~~INC~~Inc.

(AConsolidated ~~Development~~Statements ~~Stage~~of ~~Company~~Cash Flows (Continued)

Years Ended December 31, 2012 and 2011

Notes to Financial Statements

	Year Ended
	December 31,
	2012		2011
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	$	45,840	$	61,134
Non-cash investing and financing activities:
Conversion of promissory notes to equity	$	881,478	$	—
Equity-based compensation costs of Offerings	$	1,269,016	$	—
Accounts receivable used to offset notes payable - related parties	$	4,700	$	—
Equity issued in settlement of accounts payable	$	118,447	$	—
Options issued in settlement of accounts payable	$	7,723	$	—
Cancellations of derivative liabilities	$	162,953	$	—
Warrants issued in connection with refinancing of note payable	$	6,250	$	—
Warrants issued to Placement Agent and note holder with an anti-dilution feature	$	92,000	$	—
Warrants issued in connection with notes payable – related parties	$	—	$	24,200
Beneficial conversion feature for notes payable – related parties	$	—	$	342,400
Equity issued in connection with notes payable – related parties	$	—	$	457,600

~~March~~See ~~31,~~accompanying ~~2012~~notes ~~and~~to ~~2011~~consolidated financial statements.

d. CASH and CASH EQUIVALENT

For the Balance Sheet and Statements of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents.

e. REVENUE RECOGNITION

The Company recognizes revenues and the related costs when persuasive evidence of an arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as deferred revenue. The Company accrues for warranty costs, sales returns, bad debts, and other allowances based on its historical experience.

f. STOCK-BASED COMPENSATION

The Company records stock-based compensation in accordance with the FASB Accounting Standards Classification using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

g. INCOME TAXES

Income taxes are provided in accordance with the FASB Accounting Standards Classification. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carry forwards. Deferred tax expense (benefit) results from the net change during the year of deferred tax assets and liabilities.

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.

h. IMPACT OF NEW ACCOUNTING STANDARDS

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position, or cash flow.

NOTE 3. GOING CONCERN

The Company's financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have any cash or other material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. The officers and directors have committed to advancing certain operating costs of the Company.

F-7

~~ORGANIC~~X-Factor ~~SPICE~~Communications ~~IMPORTS~~Holdings, ~~INC~~Inc.

(ANotes ~~Development~~to ~~Stage~~Consolidated ~~Company)~~Financial Statements

~~Notes~~Note to1 ~~Financial~~- ~~Statements~~Background and Nature of Operations

~~March~~X-Factor 31Communications Holdings, ~~2012~~Inc., a Delaware corporation (formerly, Organic Spice Imports, Inc.) (“Holdings” or the “Company”, “we”, “us” or “our”), through its wholly-owned subsidiary X-Factor Communications, LLC, a New York limited liability company (“X-Factor”), located in South Hackensack, New Jersey, provides interactive digital media network software and ~~2011~~services. References herein to: the “Company”, “we”, “us” or “our”, refer to X-Factor Communications Holdings, Inc. and X-Factor. The X-Factor Digital Media Network Platform, our cloud-based digital signage, web and mobile solution, is delivered as a software-as-a-service and under a software license model, enabling our customers to build simple yet scalable advertising and corporate digital media networks. The Company’s webcasting solution, a live and on-demand multimedia distribution product, delivers rich media content, desktop signage and emergency messaging to mobile and Web devices. The Company’s solutions address the rapidly expanding digital media needs of its corporate, public venue, education and government sector customers. The Company markets its software and services throughout the United States. The Company operates in one segment and therefore segment information is not presented.

~~NOTE~~May 4.15, ~~STOCKHOLDERS'~~2012 ~~EQUITY COMMON STOCK~~Merger

~~The~~On ~~authorized~~May ~~share~~15, ~~capital~~2012, ofpursuant to the ~~Company~~terms ~~consists~~and conditions of ~~100~~an Agreement and Plan of Merger,~~000~~ dated March 5,~~000~~ ~~shares~~2012 (the "Merger Agreement"), X-Factor Acquisition Corp., a Delaware corporation and wholly owned subsidiary of ~~common~~Holdings ~~stock~~merged with $0and into X-Factor (the "Merger").~~0001~~ X-Factor ~~par~~survived ~~value~~the Merger and became a wholly-owned subsidiary of Holdings. On May 16, 2012, X-Factor Communications Holdings, Inc., a Delaware corporation and 20wholly owned subsidiary of the Company,~~000~~ formed solely for the purpose of changing the Company's name,~~000~~ ~~shares~~was merged with and into the Company upon the filing of ~~preferred~~a ~~stock~~Certificate ~~also~~of Ownership and Merger with $0the Secretary of State of Delaware and the Company adopted the name of this subsidiary thereby, changing its name from "Organic Spice Imports, Inc.~~0001~~" to ~~par~~"X-Factor ~~value~~Communications Holdings, Inc." References Noherein ~~other~~to ~~classes~~“Organic ofSpice” ~~stock~~refer ~~are~~to ~~authorized~~the registrant prior to its name change.

~~COMMON~~Upon ~~STOCK: As~~the closing of ~~March~~the 31Merger, ~~2012,~~in ~~there~~connection ~~were~~with the terms and conditions of a ~~total~~private placement offering issued then (the “May 2012 Offering”) (when combined with sales of 11securities in December 2012 the “December 2012 Offering” collectively referred to as the "Offerings") the Company issued and sold an aggregate of 2,~~180~~883,~~000~~333 shares of common ~~shares~~stock ~~issued~~at ~~and~~a ~~outstanding~~price of $0.75 per share, for gross proceeds of $2,162,500.

The ~~Company’s~~consummation ~~first issuance~~ of ~~common stock, totaling 1,180,000 shares, took place on December 30, 2010 pursuant to~~ the ~~Chapter~~Merger ~~11 Plan of Reorganization confirmed by the U.S. Bankruptcy Court in the matter of Spicy Gourmet Organics, Inc.~~ (~~“SGO”). The Court ordered~~ the ~~distribution~~"Effective ~~of shares in Organic Spice Imports, Inc. to all general unsecured creditors of SGO, with these creditors to receive their pro rata share (according to amount of debt held~~Time") ofand ~~a pool of 80,000 shares in~~ the ~~Company.~~May ~~The~~2012 ~~Court~~Offering ~~also~~had ~~ordered~~ the ~~issuance~~following ofeffects ~~100,000~~on ~~shares in~~ the ~~Company~~membership tounits ~~the~~and ~~sole shareholder of SGO. The Court also ordered the distribution of 1,000,000 shares in the Company to the administrative creditors of SGO; these creditors received one share of~~ common stock inequivalents ~~the Company for each $0.05~~ of ~~SGO’s administrative debt which they held.~~X-Factor:

~~The~~(a) Each ~~Court~~X-Factor ~~also~~common ~~ordered~~and ~~the~~preferred ~~distribution~~membership ofunit ~~warrants~~issued inand ~~the~~outstanding ~~Company~~immediately toprior ~~all administrative creditors of SGO, with these creditors~~ to ~~receive five warrants in~~ the ~~Company~~Merger ~~for~~was ~~each~~automatically ~~$0.05~~converted ofinto ~~SGO’s administrative debt which they held~~5.286767 ~~These~~(the ~~creditors~~"Initial ~~received~~Exchange anRatio") ~~aggregate~~shares of ~~5,000,000~~Holdings ~~warrants consisting of 1,000,000 “A Warrants” each convertible into one share of~~ common stock. Upon atthe anfinal ~~exercise~~closing ~~price~~ of ~~$3.00;~~the ~~1,000,000~~May “B2012 ~~Warrants”~~Offering ~~each~~in ~~convertible~~August ~~into~~2012 ~~one~~the ~~share~~Initial ofExchange ~~common~~Ratio ~~stock~~was atadjusted anto ~~exercise~~reflect ~~price of $4~~5.~~00;~~550657 ~~1,000,000~~(the “CFinal ~~Warrants~~Exchange Ratio”) ~~each~~and ~~convertible~~all ~~into~~initial ~~one~~exchanges ~~share~~were ofadjusted ~~common~~to ~~stock~~reflect atthe anFinal ~~exercise~~Exchange ~~price of $5~~Ratio.~~00;~~ This ~~1,000,000~~resulted “Din ~~Warrants”~~the ~~each~~issuance ~~convertible into one share~~ of ~~common stock at~~ an ~~exercise~~additional ~~price of $6.00; and 1~~439,~~000,000~~098 “Eshares ~~Warrants” each convertible into one share~~ of Holdings common stock ~~at an exercise price of $7~~.~~00.~~ All ~~warrants~~disclosures ~~are~~in ~~exercisable~~this atdocument ~~any~~reflect ~~time~~the ~~prior~~Final toExchange ~~November 19, 2015~~Ratio. ~~This warrant distribution also took place on December 30, 2010.~~

On(b) Each ~~March~~holder ~~29,~~of ~~2011~~an ~~the~~X-Factor ~~two~~preferred ~~individuals~~membership ~~then~~unit ~~serving~~received as1.190229 ~~officers~~shares of ~~the~~Holdings ~~Company acquired a total of 10,000,000~~ common ~~shares~~stock ~~from~~as ~~the~~payment ~~Issuer~~to ineliminate ~~a private placement. The shares were purchased at~~ the ~~price~~liquidation ofpreference ~~$0.0005 per share for a total~~ of ~~$5,000.~~the Nopreferred ~~shares~~membership ~~have been issued since March 29, 2011~~units.

As(c) Each aX-Factor ~~result~~warrant ofor ~~these~~option ~~issuances~~issued ~~there~~and ~~were~~outstanding aimmediately ~~total~~prior ~~11,180,000~~to ~~common~~the ~~shares~~Merger ~~issued~~was ~~and~~automatically ~~outstanding,~~converted ~~and~~into athe ~~total~~right ofto purchase 5~~,000,000~~.550657 ~~warrants~~shares toof ~~acquire~~Holdings common ~~shares~~stock. The ~~issued~~new conversion price applicable to each warrant and ~~outstanding,~~option atis ~~March~~equal ~~31,~~to ~~2012~~the conversion price in effect immediately prior to the Merger divided by 5.550657.

~~PREFERRED~~(d) All ~~STOCK: The~~convertible ~~authorized~~debt ~~share~~of ~~capital~~X-Factor ofoutstanding immediately prior to the ~~Company~~Merger ~~includes~~was ~~20,000,000~~automatically ~~shares~~converted ofinto ~~preferred~~the ~~stock~~right ~~with~~to $0purchase 5.~~0001~~550657 ~~par~~shares ~~value~~of Holdings common stock. The Asnew ofconversion ~~March~~price ~~31,~~applicable ~~2012~~to noconvertible ~~shares~~debt ofis ~~preferred~~equal ~~stock~~to ~~had~~the ~~been~~conversion ~~issued~~price ~~and~~in noeffect ~~shares~~immediately ofprior ~~preferred~~to ~~stock~~the ~~were~~Merger ~~outstanding~~divided by 5.550657.

~~NOTE~~(e) One 5holder of a warrant to purchase X-Factor Preferred Membership Interests agreed to receive an additional warrant to purchase, for a period of 10 years from the Effective Time, 148,942 shares of Holdings common stock which was equal to the aggregate exercise price of such preferred warrant, which was $125,137, multiplied by 1.190229 ~~INCOME~~and ~~TAXES~~the exercise price of such additional warrant was the quotient of the exercise price of such preferred warrant, which was $4.33 per X-Factor Preferred Membership Interest, divided by 5.550657.

The Company has had no business activity and made no U.S. federal income tax provision since its inception on December 30, 2010.

F-8

~~ORGANIC~~As ~~SPICE~~an ~~IMPORTS~~inducement for X-Factor to consummate the transactions contemplated by the Merger Agreement, ~~INC~~on May 15, 2012, the Company cancelled 10,000,000 shares of common stock and warrants to purchase up to 5,000,000 shares of common stock owned of record by certain stockholders of the Company immediately prior to the Effective Time, pursuant to the terms and conditions of a cancellation agreement, dated May 15, 2012.

(ANote ~~Development~~2 ~~Stage~~– ~~Company)~~Liquidity and Going Concern

~~Notes~~At December 31, 2012 the Company had a stockholders' deficit of $1,233,034, a working capital deficiency of $670,657 and incurred a net loss of $3,420,138 for the year then ended. In addition, there was a decrease in revenue of $172,681 for the year ended December 31, 2012 when compared to ~~Financial~~2011. There ~~Statements~~can be no assurance that: (1) existing stockholders will continue to support the operational and financial requirements of the Company, (2) that the Company will be able to raise sufficient equity or (3) that the Company will continue to be able to comply with existing covenants with creditors in future periods. While the Company has been successful to date in raising funds through sales of securities, the Company does not currently have any sources of committed funding available. The report of our independent registered public accounting firm included an explanatory paragraph indicating that there was substantial doubt concerning the Company’s ability to operate as a going concern. X-Factor has historically incurred net losses and recurring negative cash flows from operations. Furthermore X-Factor has, in the past, defaulted on debt service payments and been in default of covenants in certain debt agreements and there are no assurances that investors will continue to support X-Factor or that X-Factor will be able to raise sufficient capital or debt financing to sustain operations. All of these conditions raise substantial doubt about X-Factor’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to the carrying value of assets and liabilities that might result from the outcome of these uncertainties.

~~March~~During the years ended December 31, 2012 and 2011, the Company received an aggregate $75,000 and $850,000, respectively, in cash proceeds from the sale of promissory notes (see Note 12). Through December 31, 2012 the Company received additional net cash proceeds of $1,930,549 raised in connection with the Offerings.

~~NOTE~~The 6Company believes that the remainder of net cash proceeds received from the sale of securities in the Offerings and the conversion of promissory notes in 2012 will only provide sufficient equity to fund its operations for the next two to three months from the date of filing this Annual Report on Form 10-K. Additional ~~RELATED~~significant ~~PARTY~~amounts ~~TRANSACTIONS~~of capital will be needed to be raised to continue the Company’s operations. There are no assurances, however, that the Company will be able to raise additional capital as may be needed, or increase revenue levels and profitability. Further, if the current economic climate negatively impacts the Company, as it may, and the Company is unable to raise additional capital on acceptable terms, it could have a material adverse effect on the Company's financial condition, future operations and cash flows.

~~The~~Note ~~Company~~3 ~~neither~~- ~~owns~~Basis ~~nor leases any real or personal property. An officer~~ of ~~the~~Presentation ~~corporation provides office services without charge. Such costs are immaterial to the financial statements~~ and ~~accordingly,~~Summary have not been reflected therein. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests. The Company has not formulated a policy for the resolution of ~~such~~Significant ~~conflicts.~~Accounting Policies

~~NOTE~~Presentation 7.of ~~WARRANTS~~historical ~~AND~~membership ~~OPTIONS~~unit, option, warrant and convertible note amounts and conversion prices – Reclassifications

OnPrior ~~December~~to ~~30,~~the ~~2010~~Merger ~~(inception),~~on ~~the~~May ~~Company~~15, ~~issued 5~~2012,~~000,000~~ ~~warrants~~X-Factor ~~exercisable~~was ~~into~~a ~~5,000,000~~LLC ~~shares~~and of the ~~Company’s~~equity ~~common~~was ~~stock.~~comprised ~~These warrants were issued per order~~ of ~~the~~membership Uunits.S. As ~~Bankruptcy~~a ~~Court~~result inof the ~~matter~~Merger ofon ~~Spicy~~May ~~Gourmet~~15, ~~Organics~~2012, ~~Inc.~~in ~~(“SGO”)~~which toX-Factor ~~the~~became ~~administrative~~a ~~creditors~~wholly ofowned ~~SGO.~~subsidiary ~~These creditors received an aggregate~~ of ~~5,000,000~~the ~~warrants~~Company ~~consisting~~and ofall ~~1,000,000~~membership “Aunits ~~Warrants”~~were ~~each~~converted ~~convertible~~ into ~~one~~shares ~~share~~ of common stock atof anHoldings, ~~exercise~~all ~~price~~historical ofreferences ~~$3.00;~~to 1membership units,~~000~~ options,~~000~~ “Bwarrants ~~Warrants”~~and ~~each~~ convertible ~~into~~notes ~~one~~have ~~share~~been ofadjusted ~~common~~to ~~stock~~reflect atthe anconversion ~~exercise price of $4.00; 1~~into,~~000,000~~ “Cor ~~Warrants”~~into ~~each~~the ~~convertible~~right ~~into~~to ~~one~~purchase, ~~share~~5.550657 shares of Holdings’ common stock atas anof ~~exercise~~the ~~price~~beginning of ~~$5.00;~~the ~~1,000,000~~reported “Dperiods. The ~~Warrants”~~new ~~each~~conversion ~~convertible~~price ~~into~~applicable ~~one~~to ~~share~~each ofoption, ~~common~~warrant ~~stock~~or atconvertible annote ~~exercise~~is ~~price~~equal ofto ~~$6.00;~~the ~~and~~conversion ~~1,000,000~~price “Ein ~~Warrants”~~effect ~~each~~immediately ~~convertible~~prior ~~into~~to ~~one~~the ~~share~~Merger ofdivided ~~common~~by ~~stock~~5.550657. As ata anresult ~~exercise price~~ of ~~$7.00.~~the ~~All~~Merger ~~warrants~~and ~~are~~conversion, ~~exercisable~~the atnumber ~~any~~of ~~time~~X-Factor ~~prior~~membership tounits, ~~November 19~~options, ~~2015.~~warrants Asand ofexercise ~~the~~prices ~~date~~as of ~~this~~December ~~report~~31, no2011 ~~warrants~~were ~~have~~adjusted ~~been~~as ~~exercised.~~follows:

NOTE 8. CHANGE IN CONTROL

	Common Stock After Conversion		Membership Units Before Conversion

Common		7,239,216		1,304,210
Preferred (A )		1,996,685		359,683
Total shares or units		9,235,901		1,663,893

On February 10, 2012, Ali Balaban, Daniel C. Masters and certain other stockholders (collectively, the "Selling Stockholders") of the Company sold an aggregate of 11,050,000 shares of common stock (the "Shares")which represents 98.8 % of the outstanding shares and warrants to purchase an aggregate of 5,000,000 shares of common stock (the "Warrants") of the Company to Randle Kenilworth, Peter Quigley and Donald Wright (collectively, the "Buyers") pursuant to an Amended and Restated Agreement for the Purchase of Common Stock and Warrants, dated January 13, 2012 and amended on January 20, 2012 (the "Purchase Agreement") by and among Daniel C. Masters, as representative for the Selling Stockholders, X-Factor Communications, LLC, a New York limited liability company ("X-Factor"), and the Buyers.

NOTE 9. AGREEMENTS

On February 10, 2012 (the "Closing Date"), Organic Spice Imports, Inc. (the "Company") entered into a General Assignment and Assumption Agreement ("Assignment Agreement"), pursuant to which the Company agreed to transfer to Retail Spicy Gourmet, Inc. ("RSG") any and all rights which the Company may have to sell spices and related products as set forth in the Bankruptcy Plan of Spicy Gourmet Organics, Inc. as confirmed by written Order of the Court on November 19, 2010 (the "Plan") and RSG agreed to assume any and all liabilities of the Company preceding the date of the Assignment Agreement, including but not limited to, the Company's obligation under the Plan to distribute 25% of its gross profits derived from all sales of spices and related products to certain creditors as set forth in the Plan (collectively, the "Obligations").

F-9

~~ORGANIC~~Note ~~SPICE~~A ~~IMPORTS,~~– ~~INC~~The preferred membership units were converted into shares of common stock.

(A Development Stage Company)

	Common Stock After Conversion		Membership Units Before Conversion

Options – issued		2,161,920		389,490
Warrants – issued		1,012,757		182,457

Options – weighted average exercise price	$	0.579	$	3.210
Warrants – weighted average exercise price	$	0.229	$	1.270

~~Notes~~Since all common and preferred membership units of X-Factor were converted into shares of common stock of the Company, we have replaced all references to ~~Financial~~common ~~Statements~~and preferred membership units with a reference to common stock.

~~March~~Basis ~~31,~~of ~~2012 and 2011~~Presentation

~~NOTE~~The 9.accompanying ~~AGREEMENTS~~consolidated ~~(Continued)~~financial statements have been prepared on an accrual basis of accounting.

OnPrinciples March 5, 2012, Organic Spice Imports, Inc., a Delaware corporation and its wholly owned subsidiary X-Factor Acquisition Corp., a Delaware corporation (“MergerCo”), entered into an Agreement and Plan of Merger with X-Factor Communications, LLC, a New York limited liability company (“X-Factor”). X-Factor is a provider of interactive digital media network software and services. The X-Factor Digital Media Network Platform, its cloud-based digital signage, web and mobile solution, is delivered as a software-as-a-service and under software license model, enables its customers to build simple yet scalable marketing, advertising and corporate digital media networks. The merger agreement has not closed as of the date of issuance of audit report.Consolidation

~~NOTE~~The 10consolidated financial statements include the accounts of Holdings and our wholly owned subsidiary, X-Factor. All ~~COMMITMENT~~inter-company ~~AND~~balances ~~CONTIGENTCY~~and transactions have been eliminated in consolidation.

~~There~~Use isof ~~no commitment or contingency to disclose during the period ended March 31, 2012.~~Estimates

~~NOTE~~The 11preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenue and expenses during the reporting period. ~~SUBSEQUENT~~ ~~EVENTS~~Significant estimates relate to the determination of the allowance for doubtful accounts, the valuation of long lived assets, the technological capabilities (and thus the valuation) of equipment, the determination of amounts owed under contingent arrangements and derivatives issued and the calculations of debt discounts and equity-based compensation. Actual results could differ from those estimates.

~~The~~Concentration ~~Company has performed an evaluation~~ of ~~subsequent~~Credit ~~events~~Risk in(See ~~accordance~~Note ~~with ASC Topic 855 and the Company is not aware of any subsequent events which would require recognition or disclosure in the financial statements.~~15)

At various times, certain balances at a financial institution may exceed the Federal Deposit Insurance Corporation's (“FDIC”) limit. At December 31, 2012, the Company had $61,843 of cash balances that exceeded such FDIC levels. Management regularly monitors the financial condition of the institution it works with, along with their balances in cash and endeavors to keep this potential risk at a minimum, and has not experienced any collection losses with this institution.

Accounts Receivable and Allowance for Doubtful Accounts

Equipment and Leasehold Improvements

F-10

Long-Lived Assets

Loss per Share

Basic loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of shares of common shares outstanding during the year. For 2011, X-Factor was not obligated, as an LLC, to calculate and present loss per share. It is not practicable for the Company to determine the historical net loss (and net loss per share) from the date of the Merger through December 31, 2012. However, the Company has presented unaudited pro forma loss per share for the year ended December 31, 2012, as if the Merger occurred on January 1, 2012 and the related shares were outstanding for the entire year ended December 31, 2012. Such pro forma loss per share is presented below:

For the Year Ended December 31, 2012
Net loss attributable to common stockholders per share:	$	(3,420,138	)
Basic and diluted	$	(0.23	)

Weighted average number of common shares outstanding:
Basic and diluted		14,674,290

Diluted loss per share for the year ended December 31, 2012 is the same as basic loss per share. Potential shares of common stock associated with outstanding options and warrants and shares issuable upon conversion of our convertible notes (totaling 7,864,461 as of December 31, 2012) have been excluded from the calculations of diluted loss per share because the effects, as a result of our net loss, would be anti-dilutive.

Revenue Recognition

F-11

Derivative Financial Instruments

The Company's objectives in using debt-related derivative financial instruments are to obtain the lowest cash cost source of funds. Derivatives are recognized in the balance sheet at fair value based on the criteria specified in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") Topic 815, "Derivatives and Hedging " (“ASC Topic 815”). Under ASC Topic 815, the estimated fair value of derivative liabilities is revalued at each balance sheet date with the changes in value, if any, recorded in the interest and other expense section of the accompanying Consolidated Statements of Operations and in derivative financial instruments of the liability section of the Consolidated Balance Sheets.

Financial Instruments with Anti-Dilution Features

Advertising and Marketing Expense

Advertising costs are expensed as incurred and included in general and administrative expenses. Advertising expenses for the years ended December 31, 2012 and 2011 were $46,519 and $3,261, respectively.

Equity-Based Compensation

We periodically grant options for common stock to employees and consultants in accordance with the provisions of our stock option plans (see Note 16), with the exercise price of the options established at the price of a recent sale of a share of common stock of the Company. As a consequence of the Merger, no additional grants may be made from the 2006 and 2010 Plans and the options are exercisable into shares of the Company.

We periodically grant warrants for common stock to consultants and investors (see Note 17). The fair value of warrants for shares of common stock issued to consultants or employees are recognized over the requisite service period with a corresponding credit to Additional Paid-in Capital. Warrants issued to consultants are based on the fair value of a share of common stock related to the warrants. Warrants for common stock issued to equity investors have no effect on Additional Paid-in Capital; that is, the fair value of the warrants granted to investors and charged to Additional Paid-in Capital are entirely offset by a corresponding adjustment to Additional Paid-in Capital.

Professional Fees (see Note 18)

Professional Fees Related to the Merger have been expensed as incurred through December 31, 2012. Professional fees related to the May 2012 Offering were capitalized at December 31, 2011 based on an assessment of the viability of the May 2012 Offering through that date. When the May 2012 Offering was consummated, the Company offset these costs against proceeds from the sale of the stock.

Income Taxes

Holdings operates as a “C” corporation. Prior to the Merger, the members of X-Factor elected to be treated as a limited liability corporation, under the applicable provisions of the Internal Revenue Code and State of New Jersey tax laws. Holdings uses the asset and liability method to determine our income tax expense or benefit. Deferred tax assets and liabilities are computed based on temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates that are expected to be in effect when the differences are expected to be recovered or settled. Any resulting net deferred tax assets are evaluated for recoverability and an assessment of whether it is more likely than not that such amount will be realized. Based on an assessment of all available evidence, a valuation allowance has been established against net deferred tax assets of $700,000 (principally composed of a $430,000 net operating loss [“NOL”] and $215,000 of compensation expenses) at December 31, 2012. For the period from the effective date of the Merger through December 31, 2012 the Company did not record a benefit for income taxes. At December 31, 2012 the Company had Federal and New Jersey NOL carry-forwards of approximately $1,085,000 which expire in 2032 and 2019, respectively. The utilization of our NOL for Federal income tax purposes sustained by the Company may be substantially limited annually as a result of an "ownership change" (as defined by Section 382 of the Internal Revenue Code of 1986, as amended). If it is determined that there is a change in ownership, or if the Company undergoes a change of ownership in the future, the utilization of the Company’s NOL carry-forwards may be materially constrained. This would result in a reduction in equal amounts to the deferred tax assets and the related valuation reserves.

F-12

FASB ASC Topic 740 “Income Taxes,” clarifies the accounting for uncertainty in income taxes recognized in an entity’s consolidated financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. The standard also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition requirements. Prior to the Merger, X-Factor operated as a limited liability corporation and Federal and state taxes are passed through to the members, so too would the assessments from any tax examinations and, since the Merger, has generated an operating loss. The Company conducts business domestically and, as a result, files Federal and state income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. There are no ongoing or pending examinations by Federal or state tax agencies. The Company has evaluated its tax positions for all currently open tax years, 2009 through 2012, and has concluded that there are no significant uncertain tax positions for either Federal or state purposes.

There were no interest or penalties related to income taxes that have been accrued or recognized as of December 31, 2012 and 2011, or for the years ended December 31, 2012 and 2011.

Fair Value Disclosures

The Company has financial instruments, principally accounts receivable, accounts payable, loan payable, notes payable and accrued expenses. We estimate that the fair value of these financial instruments at December 31, 2012 and 2011 does not differ materially from the aggregate carrying values of these financial instruments recorded in the accompanying consolidated balance sheets. However, because the Company presents certain common stock warrants and embedded conversion features (associated with various convertible notes—See Notes 11 and 12) and accounts for such derivative financial instruments at fair value, such derivatives are impacted by the market value of the Company's stock and therefore subject to a high degree of volatility. The Company's future results may be materially impacted by changes in the Company's closing stock price as of the date it prepares future periodic financial statements.

The Company measures fair value as required by the FASB ASC Topic 820“Fair Value Measurements and Disclosures” (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

	●	Level 1 - unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
	●	Level 2 - inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
	●	Level 3 - unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company has no financial instruments that merit classification as Level 1 or 2 assets and liabilities. The Company's liability for derivative financial instruments is considered a Level 3 liability at December 31, 2012 and 2011. The fair value of this liability is determined using the most recent sale of a common share and the number of shares that are not considered fixed and determinable under the conversion features.

New Accounting Pronouncements

In January 2010, the FASB issued guidance that revises two disclosure requirements concerning fair value measurements and clarifies two others. It requires separate presentation of significant transfers into and out of Levels 1 and 2 of the fair value hierarchy and disclosure of the reasons for such transfers. It will also require the presentation of purchases, sales, issuances and settlements within Level 3 on a gross basis rather than a net basis. The guidance also clarifies that disclosures should be disaggregated by class of asset or liability and that disclosures about inputs and valuation techniques should be provided for both recurring and non-recurring fair value measurements. These new disclosure requirements became effective for the Company's financial statements for the year ended December 31, 2011, except for the requirement concerning gross presentation of Level 3 activity, which became effective in 2012. Since this guidance is only related to financial statement disclosures, there was no impact to the Company's consolidated financial statements as a result of the adoption of this guidance.

F-13

In May 2011, the FASB issued ASU 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards” (“IFRS”) (“ASU 2011-04”), which amends ASC Topic 820. These amendments, effective for the interim and annual periods beginning on or after December 15, 2011 (early adoption is prohibited), result in a common definition of fair value and common requirements for measurement of and disclosure requirements between U.S. GAAP and IFRS. Consequently, the amendments change some fair value measurement principles and disclosure requirements. The adoption of ASU 2011-04 did not have an impact on the Company's consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, “Presentation of Comprehensive Income” (“ASU 2011-05”), which amends FASB ASC Topic 220, “Comprehensive Income”. This guidance, effective retrospectively for the interim and annual periods beginning on or after December 15, 2011 (early adoption is permitted), requires presentation of total comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The option to present components of other comprehensive income as part of the statement of stockholders' and members’ deficit was eliminated. The items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation of loss per share. The adoption of ASU 2011-05 did not have an impact on the Company's consolidated financial statements.

The Company is not aware of any other pronouncements, not yet issued or adopted, that would have a material effect on its consolidated financial statements.

Note 4 - Related Parties

Certain investors, officers and relatives of officers of the Company have loaned the Company funds which are evidenced by promissory notes (see Note 12) (the “Related Parties”). Related Parties and certain service providers are considered Related Parties for purposes of related party disclosures.

The President of the Company provides a guaranty on the Company's line of credit. There is no cost ascribed to the value of this service in the accompanying consolidated financial statements.

In 2011, the President of the Company loaned the Company $10,000 to cover certain operating expenses. The obligation was repaid in May 2012.

Related Parties who are officers of the Company provided accounting and management services to the Company for $152,449 and $58,140 for the years ended December 31, 2012 and 2011, respectively, before they became employees of the Company.

Related Parties who are not officers of the Company provided product development, legal and management services to the Company for $114,631 and $116,709 for the years ended December 31, 2012 and 2011, respectively

Included in accounts payable and accrued expenses are $103,445 and $212,890 as of December 31, 2012 and 2011, respectively, owed to Related Parties.

Included in accounts receivable are $5,725 and $7,700 as of December 31, 2012 and 2011, respectively, due from Related Parties.

The Company leases office and technical operations space and purchases various communication services from a Related Party totaling $40,122 and $33,551 for the years ended December 31, 2012 and 2011, respectively.

Note 5 – Holdings’ Capital Stock (see Notes 16 and 17)

We are authorized by our certificate of incorporation to issue an aggregate of 120,000,000 shares of capital stock, of which 100,000,000 are shares of common stock, par value $.0001 per share and 20,000,000 are shares of preferred stock, par value $.0001 per share. As of December 31, 2012, there are 17,214,934 shares of common stock outstanding and no shares of preferred stock outstanding. All outstanding shares of common stock are of the same class and have equal rights and attributes. The holders of common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. All stockholders are entitled to share equally in dividends, if any, as may be declared from time to time by the board of directors out of funds legally available, subject to the rights of any preferred stock we issue. In the event of liquidation, the holders of common stock are entitled to share ratably in all assets remaining after payment of all liabilities, subject to the rights of any preferred stock we issue. The stockholders do not have cumulative or pre-emptive rights.

F-14

Note 6 - Equipment and Leasehold Improvements

Equipment and leasehold improvements consist of the following as of December 31:

	2012			2011

Equipment and software	$	515,331		$	511,496
Leasehold improvements		3,210			3,210
Equipment and leasehold improvements, at cost		518,541			514,706
Accumulated depreciation and amortization		(493,836	)		(449,414	)
	$	24,705		$	65,292

Depreciation and amortization expense totaled $44,422 and $67,081 for the years ended December 31, 2012 and 2011, respectively.

Included in equipment and software is $219,811 of assets under capital leases, which had accumulated depreciation and amortization of $215,172 and $188,454 as of December 31, 2012 and 2011, respectively.

Note 7 – Other Current Assets

Other current assets consist of the following as of December 31:

	2012		2011

Note receivable	$	11,563	$	10,435
Prepaid insurance		12,294		—
Prepaid leases		3,936		—
Professional and other costs related to the May 2012 Offering		—		64,060
Prepaid financing costs, net of amortization		—		59,586
Deposit for the acquisition of Merger corporation		—		75,000
	$	27,793	$	209,081

In 2011, X-Factor deposited $75,000 in escrow for the acquisition of the Company. In 2012, it was determined that certain individual investors of X-Factor would acquire the Company and the $75,000 deposit in escrow was returned to X-Factor (the "Pre-Merger Acquisition”). We have incurred professional and other costs in connection with the Merger which are expensed as incurred.

In connection with the May 2012 Offering, the Company prepaid various professional fees. When the May 2012 Offering was consummated, the Company offset these costs and future direct costs against proceeds from the sale of the stock (see Note 18).

In connection with the Bridge Notes (discussed and defined in Note 12) we paid our investment bankers a fee of 10% of the gross proceeds of the Bridge Notes financing. The $80,000 fee, with $2,863 of professional fees, was classified as prepaid financing costs and was amortized, using the effective interest method, over the original and amended terms of the Bridge Notes. In connection with the amendment of the Bridge Notes in February 2012, $30,874 was recognized as a Loss on Modification or Extinguishment of Debt. In connection with the conversion of certain Bridge Notes upon the closing of the Merger; an additional $16,843 was expensed.

In August 2011, the Company entered into a $10,000 convertible note receivable with a strategic partner which originally matured in August 2012 and bears interest at prime plus 8.00% per annum (11.25% at December 31, 2012 and 2011). Interest is accrued and paid on the maturity date and the note is convertible into common stock of the borrower at the option of the Company. The Company has extended the maturity date of the note to December 31, 2013. This strategic partner has developed a kiosk software application that is synergistic with the Company’s digital media platform.

F-15

Note 8 – Accrued Expenses

Accrued expenses consist of the following as of December 31:

	2012		2011

Compensation and payroll taxes	$	112,506	$	17,468
Operating expenses payable		2,630		—
Accounting		—		57,420
Legal		—		55,835
Accrued interest payable		306		316
Travel and related expenses		21,771		7,500
Customer refund		—		16,000
Due to President of the Company		—		9,848
Consulting fees		—		5,000
Other current liabilities		—		3,568
	$	137,213	$	172,955

Note 9 - Unearned Revenues

Unearned, non-refundable revenues as of December 31, 2012 are expected to be earned during the twelve months ending December 31, 2013.

Note 10 - Line of Credit

The Company has a revolving line of credit in the amount of $100,000 with JPMorgan Chase Bank of which $97,846 and $97,836 was outstanding as of December 31, 2012 and 2011, respectively. Interest accrues at a defined prime rate plus 0.5% (3.75% at December 31, 2012 and 2011). This line of credit has a secured interest in all business assets, inventory, equipment, accounts receivable, general intangibles, chattel paper, documents, instruments, and letter of credit rights. In addition, the line of credit is personally guaranteed by the President of the Company. There is no maturity date for the line of credit and there are no debt covenants.

Note 11 – Note Payable

In July 2009, X-Factor entered into a $500,000 note payable with the New Jersey Economic Development Authority (the "NJEDA") which initially was scheduled to mature in August 2014 and currently bears interest at 6.00% per annum. This note was modified in January 2011, September 2011 and February 2012, to provide for: (1) interest only payments through March 1, 2012; (2) repayment of up to $250,000 of promissory notes (the Company repaid $167,774); (3) a principal payment of $56,818 and an interest payment on April 1, 2012; and (4) beginning on May 1, 2012, twenty-eight monthly payments of interest and principal through August 2014.

Upon the closing of the Merger, the warrants issued in July 2009 in connection with the NJEDA note were converted into warrants exercisable for 160,414 shares of common stock of the Company at an exercise price of $0.78 per share. The $45,945 estimated fair value of the warrants in 2009 was calculated using the Black-Scholes option valuation model, and, together with $5,040 of closing costs, is classified as a discount of the note and is expensed, using the effective interest method, over the term of the debt.

In connection with the Merger, and as consideration for the amendment to the NJEDA note described above, the Company agreed to issue to NJEDA an additional warrant to acquire 148,942 shares of common stock exercisable as of May 15, 2012, at an exercise price of $0.78 per share with an expiration date of May 15, 2022. The $31,688 estimated fair value of the warrants was calculated using the Black-Scholes option valuation model, and was charged to Additional Paid-in Capital with a related credit to Additional Paid-in Capital for the same amount.

With the closing of the May 2012 Offering, the Company paid NJEDA an additional principal payment of $17,808. The amended note is subordinated to the aforementioned line of credit and requires the maintenance of various non-financial covenants, such as providing consolidated financial statements and budgets on a timely basis, maintaining records and accounts and making punctual payments. The holder of the note has a secondary interest in all assets of the Company behind the holder of the Company's line of credit. The note includes certain restrictions that: (1) prevent the Company from initiating any corporate changes through merger or consolidation, (2) prevent the Company from creating or incurring new debt and (3) prevent the Company from paying dividends or distributions or redeeming outstanding stock, without the written consent of the NJEDA. The note is convertible, at the NJEDA's option, to an equity interest in the Company, the conversion price of which will be based on defined terms of a future equity offering.

F-16

In October 2012, the Company and NJEDA amended the note. The amended note extends the maturity date to August 2016. Interest will continue to accrue at 6% per annum and debt service will be an agreed upon percentage of the prior year’s revenue which will be paid on July 1st of the following year. The unpaid balance of the loan will be due on August 1, 2016. Depending on the amount of revenue, the note could be paid in full prior to August 1, 2016. As compensation for this modification the Company issued NJEDA warrants to acquire 27,521 shares of its common stock at $0.75 per share (the then determined fair value of the Company’s common stock) with an expiration date of 10 years after the grant date. Using the Black-Scholes option valuation model, with current pricing information, these warrants have a $6,250 estimated fair value.

The percentages of revenue to be used in the calculation of the debt service payment are as follows:

Debt Service Payment Based on Revenue for the year ending	% of Revenue	Date Debt Service Paid
December 31, 2012	4%	July 1, 2013
December 31, 2013	5%	July 1, 2014
December 31, 2014	6%	July 1, 2015
December 31, 2015	7%	July 1, 2016
	Balloon	August 1, 2016

The amendment of the NJEDA note in October 2012, which extended the maturity date to August 1, 2016, eliminated monthly principal repayments and requires annual principal payments based on a percentage of the prior year’s revenues, significantly changed the cash flows related to the NJEDA note. To determine the accounting treatment of this modification the Company followed the guidance espoused in FASB ASC Topic 470-50, “Debt – Modifications and Extinguishments” (“ASC 470-50”). ASC 470-50 requires the Company to determine the present value of the cash flows of the original and revised NJEDA note. The difference in the present value of the cash flows exceeded 10% and the modification of the NJEDA note was accounted for as an “extinguishment of debt” with the original NJEDA note effectively defeased and the modified NJEDA note treated as a new note. With the defeasement of the original NJEDA note, the Company expensed any unamortized discount costs related to those notes. The Company determined that the difference in the present value of the cash flows exceeded the 10% threshold and that the modification of the NJEDA note should be accounted for as an “extinguishment of debt”. The Company recorded a charge for this modification as a Loss on Modification or Extinguishment of Debt of $8,124 in October 2012.

Notes payable consisted of the following as of December 31:

	2012			2011

Notes payable	$	337,306		$	454,545
Discount		(8,104	)		(15,543	)
Note payable, net of discount		329,202			439,002
Less: current portion of notes payable, net of discount of $2,256(A)		(24,800	)		(161,078	)
Notes payable, net of current portion	$	304,402		$	277,924

(A) With the amendment of the note in October 2012 the Company currently estimates a payment of $27,056 (4% of 2012 revenue) on July 1, 2013.

Note 12 - Notes Payable – Related Parties

The following notes payable, to individuals that the Company considers to be Related Parties as described in Note 4, are outstanding;

(A)

In March 2012, the Company issued a promissory note to the President of the Company in an aggregate principal amount of $30,460 for an aggregate purchase price of $25,000. This promissory note, along with accrued interest of $183 was repaid in August 2012. This note was unsecured and beginning on August 1, 2012, bore interest at 10% per annum payable on the maturity date. The $5,460 difference between the amount lent to the Company and the face amount of the promissory note is classified as a discount of the note and was expensed; using the effective interest method, over the four month period ending on August 1, 2012, the date that interest began to accrue on the promissory note. The effective interest rate of this note was 16.4% in 2012.

F-17

(B)	In March 2012, the Company issued a promissory note to an acquaintance of the President in an aggregate principal amount of $60,920 for an aggregate purchase price of $50,000. In August 2012, $30,920 of this promissory note along with accrued interest of $367 was repaid and we issued 40,000 shares of our common stock at a price of $0.75 per share, in exchange for the conversion of the remaining $30,000 of this promissory note. This note was unsecured and beginning on August 1, 2012, bore interest at 10% per annum payable on the maturity date. The $10,920 difference between the amount loaned to the Company and the face amount of the promissory note was classified as a discount of the note and was expensed; using the effective interest method, over the four month period ending on August 1, 2012, the date that interest began to accrue on the promissory note. The effective interest rate of this note was 16.4% in 2012.

(C)	The Company has two notes payable outstanding to the President of the Company and another officer of the Company. The maturity date of these notes is the later of August 1, 2014 or such date when all debt owed by the Company to the NJEDA has been paid by the Company. These notes are unsecured and bear interest at 8.50% per annum. Interest is required to be paid monthly, however, when interest payments have not been paid, the Company and these Related Parties have settled such amounts by issuing additional promissory notes equivalent to the related interest expense. Unpaid interest of $14,643 and $15,503 was converted to additional promissory notes in the years ended December 31, 2012 and 2011, respectively. In February 2012 these notes were amended to make them convertible into equity at a conversion rate of $0.595 per share of common stock of the Company. The Company recorded a charge of $52,329 associated with the amendment in February 2012. The unpaid principal and interest of these notes amounted to $178,521 and $163,878 as of December 31, 2012 and 2011, respectively.

(D)	The Company has two notes payable outstanding to current stockholders of the Company. When X-Factor entered into the NJEDA agreements, the Company ceased making principal payments on these notes to be in compliance with the NJEDA note. These notes were amended in February 2012 and the maturity date of these notes is the later of August 1, 2014 or such date when all debt owed by X-Factor to the NJEDA has been paid. These notes are unsecured and bear interest at a rate of 8.5% per annum and were initially convertible into equity at a conversion rate of $0.649 per share of common stock. In February 2012, these notes were amended to make them convertible into equity at a conversion rate of $0.595 per share of common stock of the Company. The Company recorded a charge of $60,668 associated with the amendment in February 2012. In addition, beginning in March 2012, interest was paid quarterly in arrears in the form of additional convertible promissory notes. In August 2012 these stockholders sold $123,427 of these promissory notes to investors and in September 2012 we issued 207,440 shares of our common stock to the investors at a price of $0.595 per share, in exchange for the conversion of those promissory notes along with $856 of accrued interest. Unpaid interest of $11,224 was converted to additional promissory notes in the year ended December 31, 2012. The unpaid principal and interest of these notes amounted to $80,770 and $192,974 as of December 31, 2012 and 2011, respectively. The effective interest rate of these notes was 11.7% in 2012. Detachable warrants to acquire 48,216 shares common stock of the Company at $0.819 with an expiration date of January 2018 were issued in connection with the above mentioned notes. The $16,346 estimated fair value of the warrants was calculated using the Black-Scholes option valuation model. The $16,346 fair value is classified as a discount of the notes and was expensed, using the effective interest method, over the original terms of the debt. When the notes were amended in February 2012 the unamortized discount of $841 was expensed to Loss on Modification or Extinguishment of Debt. The unamortized discount related to these warrants amounted to $0 and $1,188 as of December 31, 2012 and 2011, respectively.

F-18

(E)

In 2011, the Company issued promissory notes, each in the principal amount of $25,000, to two stockholders of the Company. These notes initially matured in three months and bore interest at 10% on any overdue principal. One note was repaid in 2011 while the maturity date of the other note was amended to the later of August 1, 2014 or such date when all debt owed to the NJEDA has been paid by the Company. In February 2012, this note was amended to make it convertible into equity at a conversion rate of $0.595 per share of common stock of the Company, with interest to be paid quarterly in arrears in the form of additional convertible promissory notes. Unpaid interest of $2,150 was converted to additional promissory notes in the year ended December 31, 2012. The Company recorded a charge of $8,299 associated with the amendment in February 2012. In June 2012, $4,700 due from this investor, which was included in accounts receivable, was offset against this note. The unpaid principal and interest of this note amounted to $23,389 and $25,938 as of December 31, 2012 and 2011, respectively.

Detachable warrants to acquire 29,606 shares of common stock of the Company at $0.002 with an expiration date of May 2021 were issued in connection with the above mentioned notes. The $24,200 estimated fair value of the warrants was calculated using the Black-Scholes option valuation model. The $24,200 fair value was classified as a discount of the notes and was expensed, using the effective interest method, over the original three month terms of the debt. The effective interest rate of these notes and the related warrants was 245%.

(F)

In 2011, the Company raised $800,000 by issuing convertible notes to certain stockholders of the Company (the “Bridge Notes”). The Bridge Notes bear interest at 6.00% per annum, payable quarterly in arrears, and are convertible at the option of the Company into additional Bridge Notes. Unpaid interest of $19,932 and $4,906 was converted to additional promissory notes in the years ended December 31, 2012 and 2011, respectively. Unpaid interest of $864 and $4,906 was converted to additional promissory notes in the years ended December 31, 2012 and 2011, respectively. The Bridge Notes originally matured on the first anniversary of their issuance ($600,000 of the principal amount) or on August 1, 2014 ($200,000 of the principal amount), or could be prepaid at the Company’s option, and are subordinated to the Company’s NJEDA debt. These notes were amended in February 2012 and the related maturity date of these notes was amended to be the later of: (a) August 1, 2014 or (b) such date when all debt owed to the NJEDA has been paid by the Company. The Bridge Notes are convertible to an equity interest in the Company using a conversion price which will be based on defined terms of a future equity offering. In connection with the issuance of the Bridge Notes, for each $100,000 of notes issued, holders of Bridge Notes received 163,182 shares of common stock of the Company (the “Issued Shares”). As a result of the issuance of the Issued Shares we considered the Bridge Note investors to be Related Parties; $600,000 of the Bridge Notes are convertible into shares of common stock of the Company at the option of the holders, while $200,000 of the Bridge Notes must be converted to equity of the Company in the event of a future equity offerings. We also paid our investment bankers a fee of 10% of the gross proceeds of the financing. The $80,000 fee was classified as prepaid financing costs and was expensed, using the effective interest method, over the terms of the Bridge Notes and expensed as a component of Loss on Modification or Extinguishment of Debt. Upon the closing of the Merger, $728,049 of Bridge Notes ($700,000 of principal and $28,049 of unpaid interest) was converted into 970,733 shares of common stock of the Company. In August 2012, $105,845 owed for the remaining Bridge Notes ($100,000 of principal and $5,845 of unpaid interest) was repaid. Principal and accrued interest of these notes amounted to $0 and $813,962 as of December 31, 2012 and 2011, respectively.

We accounted for the issuance of the Bridge Notes and the Issued Shares by allocating the $800,000 of proceeds received to each of the instruments based on their relative fair value. The fair value of the Issued Shares was based on recent sales of shares of common stock. Since the redemption amount of the Bridge Notes is convertible into shares of common stock, we recorded the effects of a beneficial conversion feature. The value of the beneficial conversion feature was limited to the proceeds allocated to the Bridge Notes. The $457,600 value of the Issued Shares and the $342,400 value of the beneficial conversion feature are classified as a discount of the Bridge Notes and was expensed, using the effective interest method, over the terms of the Bridge Notes. The unamortized discount related to the Issued Shares and beneficial conversion feature amounted to $0 and $581,021 as of December 31, 2012 and 2011, respectively. The effective interest rate of the Bridge Notes and the beneficial conversion features (adjusted for the amended terms of the maturity date of the Bridge Notes) was approximately 41%.

F-19

To determine the accounting treatment of the conversion of the $728,049 of Bridge Notes, the Company followed the guidance espoused in FASB ASC Topic 470-20, “Debt – Debt with Conversion and Other Options” (“ASC 470-20”). ASC 470-20 requires that the conversion of the Bridge Notes should be accounted for as an “extinguishment of debt”. The Company recorded a charge for this extinguishment of debt as a Loss on Modification or Extinguishment of Debt of $168,430 in May 2012.

The amendment of the Bridge Notes in February 2012, which extended the maturity date for $600,000 of the Bridge Notes from the first anniversary of their issuance to August 1, 2014, significantly changed the cash flows related to the original and modified Bridge Notes. To determine the accounting treatment of this modification the Company followed the guidance espoused in ASC 470-50. ASC 470-50 requires the Company to determine the present value of the cash flows of the original and revised Bridge Notes. The difference in the present value of the cash flows exceeded 10% and the modification of the Bridge Notes was accounted for as an “extinguishment of debt” with the original Bridge Notes effectively defeased and the modified Bridge Notes treated as a new note. With the defeasement of the original Bridge Notes, the Company expensed any discounts or prepaid financing costs related to those notes. The Company determined that the difference in the present value of the cash flows exceeded the 10% threshold and that the modification of the Bridge Notes should be accounted for as an “extinguishment of debt”. The Company recorded a charge for this modification as a Loss on Modification or Extinguishment of Debt of $298,147 in February 2012.

Note payable - Related Parties consisted of the following as of December 31:

	2012		2011
Notes payable – Related Parties	$	282,680	$	1,196,752
Unamortized discount - Related Parties		-		(582,209	)
Notes payable - Related Parties - net of discount		282,680		614,543
Less: current portion		-		-
Notes payable – Related Parties, net of current portion	$	282,680	$	614,543

Note 13 – Derivative Financial Instruments

The holders of Notes Payable – Related Parties, with $282,680 and $192,974 of principal as of December 31, 2012 and 2011, respectively, have the option to convert the notes to equity at a conversion rate of $0.595 and $0.649 per share of common stock of the Company, respectively. When the notes were issued, the fair value of a share of common stock of the Company was $0.819. The related fair value of the embedded beneficial conversion feature is treated as a derivative liability. The derivative liability is periodically measured as the difference between the conversion price and the then current fair value of a share of common stock multiplied by the number of shares of common stock that will be issued at the conversion price. Any change in the fair value of a share of common stock or any increase in the notes will cause a change in the derivative liability, which is then recognized in the Consolidated Statement of Operations and Consolidated Balance Sheets. The amendment of certain Notes Payable – Related Parties in February 2012 to make them convertible into equity at a conversion rate of $0.624 per share of common stock of the Company or to reduce their conversion rate from $0.649 to $0.624, required the recording of the $121,296 fair value of this embedded beneficial conversion feature. The $39,130 derivative liability as of December 31, 2011 was reclassified to Consolidated Statements of Stockholders' Deficit when the related notes were amended in February 2012. The conversion of certain Notes Payable – Related Parties in August 2012 caused the $123,823 derivative liability related to those notes to be reclassified to the Consolidated Statements of Stockholders' Deficit. For the purposes of calculating the derivative liability we used the stock price of $0.75 as quoted on the Over-the-Counter Bulletin Board for December 31, 2012 and $0.78 based on related private sales of the Company’s common stock as of December 31, 2011.

In 2012, the Company issued 605,203 warrants to the Placement Agent (428,740 with a three year term) and NJEDA (176,463 with a ten year term) that contain a weighted average anti-dilution feature that in certain circumstances could provide the holders with protection against changes in the market value of the Company's common stock; accordingly, they are required under applicable accounting standards to be recorded at fair value as of the balance sheet date. At December 31, 2012 the Company evaluated the fair value of the warrants using a valuation model and the net difference was not significant between their previous periods’ carrying values and their current fair values on December 31, 2012.

Pursuant to the requirements of ASC Topic 820, the Company has provided fair value disclosure information for relevant assets and liabilities in the accompanying financial statements. The following summarizes liabilities which have been accounted for at fair value on a recurring basis as of December 31, 2012 and 2011, along with the bases for the determination of fair value:

	Quoted Prices		Observable		Unobservable
	In Active		Measurement		Measurement
	Markets		Criteria		Criteria			Total
December 31, 2012:
Derivative instruments (A )		—		—	$	(165,640	)	$	(165,640	)

December 31, 2011:
Derivative instruments (A )		—		—	$	(39,130	)	$	(39,130	)

F-20

Note (A) – Embedded beneficial conversion feature.

The changes in Level 3 instruments, which are comprised of the embedded conversion feature included in the notes, are measured on a recurring basis for the years ended December 31 and are presented below:

	2012			2011
Derivative financial instruments, beginning of year	$	39,130		$	39,130
Cancellation of derivative – reclassified to stockholders’ deficit		(39,130	)		—
Recognition of beneficial conversion feature of notes
after modification of debt (recognized in the results of operations)		121,296			—
Recognition of beneficial conversion feature of warrants issued with anti-dilution feature		92,000			—
Conversion of notes payable resulting in cancellation of
derivative – reclassified to stockholders’ deficit		(123,823	)		—
Change in fair value of derivative financial instruments (recognized in
the results of operations)		76,167			—
Derivative financial instruments, end of year	$	165,640		$	39,130

Note 14 – Interest Expense

The components of interest expense for the years ended December 31 are presented below:

	2012		2011

Notes payable – Related Parties	$	51,332	$	47,404
Notes payable - Related Parties – discount amortization		131,171		245,528
Note payable – NJEDA		23,255		28,569
Note payable - NJEDA – discount amortization		7,983		13,584
Amortization of prepaid financing costs		11,869		23,277
Obligations under capital leases		2,903		5,491
Line of credit		3,730		3,719
Other interest expense		15,952		6,353
	$	248,195	$	373,925

Note 15 - Concentrations

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of accounts receivable and revenues. The following are the percentages for those customers that exceeded 10% of either net accounts receivable as of December 31, 2012 and 2011 and revenue for the years then ended:

	Accounts Receivable, net						Revenue
	2012			2011			2012			2011
Customer A		—			—			—			23	%
Customer B		16	%		5	%		22	%		2	%
Customer C		32	%		—			4	%		—
Customer D		—			—			7	%		13	%
Customer E		—			14	%		15	%		4	%
Customer F		—			30	%		—			8	%
Customer G		—			25	%		—			6	%
Customer H		25	%		4	%		15	%		10	%
		73	%		78	%		63	%		66	%

F-21

Note 16 - Stock Option Plans

Prior to the Merger, X-Factor approved the 2006 Long-Term Incentive Plan (the "2006 Plan") and the 2010 Long-Term Incentive Plan (the "2010 Plan"). These plans provided for the granting of options to purchase a share of common stock in X-Factor to individuals selected by X-Factor's managing member. Awards under the these plans consist of a specified number of options awarded subject to the satisfaction of various vesting conditions specified by X-Factor at the time of the award. Awards have been granted to employees, consultants and investors. With the Merger, no additional grants may be made from these plans and the options are exercisable into shares of common stock of the Company.

In August 2012 the Company’s Board of Directors approved a 2012 Long-Term Incentive Plan (the "2012 Plan"). This plan reserved 5,000,000 shares of the Company’s common stock to be used for the purpose of making awards under the 2012 Plan. Options granted under the 2012 Plan to employees are non-statutory stock options unless the plan is approved by the stockholders of the Company by August 2013, in which case the grants will be incentive stock options. Options granted under the 2012 Plan to consultants are non-statutory stock options. There are 1,364,172 options available for granting under the 2012 Plan as of December 31, 2012.

The exercise price of a grant was established by the Company at its discretion, but could not be less than the fair value, as determined through historical transactions or an annual valuation, of a share of common stock as of the date of grant. Common stock options, subject to certain restrictions, may be exercisable for a defined period of time from the date of the grant after full vesting occurs. Upon termination of employment any unvested options are immediately cancelled, while vested options are exercisable for a defined period. Upon cessation of services performed by consultants any unvested options are immediately cancelled, while vested options are exercisable until the expiration of the option term. The vesting period for awards was established by the Company at its discretion on the date of grant. The various grants can vest immediately upon issuance or up to three years after the grant.

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option valuation model with the following weighted average activity and assumptions during the year ended December 31, 2012 (there were no options granted in 2011):

Number of options granted		3,710,828
Exercise price	$	0.762
Risk-free interest rate		1.2	%
Expected lives in years		6.7
Expected volatility		26.7	%
Expected dividend yields		None
Fair value of common stock	$	0.75
Fair value per option	$	0.220
Fair value of options granted	$	816,382

Prior to the Merger, the Company’s common stock was not traded and since the Merger the Company’s common stock had a limited number of trades. As a result, the Company calculated expected volatility for an equity-based grant based on the Standard & Poor’s North American Technology Software Index during the period immediately preceding the grant that is equal in length to the expected term of the grant. The risk-free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants, with terms approximating the expected period of the grants. The assumptions used in the Black-Scholes option valuation model are inherently highly subjective, and can materially affect the resulting valuation.

F-22

Other Option Information

A summary of options granted, exercised, forfeited and outstanding as of and for the years ended December 31, 2012 and 2011, which as a result of the Merger are convertible into common shares of common stock of the Company, is presented below:

	Outstanding					Exercisable
				Weighted			Weighted
	Number			Average		Number	Average
	of			Exercise		Of	Exercise
	Options			Price		Options	Price

Outstanding, January 1, 2011		2,528,929		$	0.618	1,695,113	$	0.859
Granted		—			—
Forfeited or expired		(367,009	)		0.703
December 31, 2011		2,161,920		$	0.579	2,161,920	$	0.579
Granted		3,710,828			0.762
Forfeited or expired		(272,158	)		0.793
December 31, 2012		5,600,590		$	0.689	4,414,828	$	0.671

Additional information as of December 31, 2012, with respect to all outstanding options:

		Outstanding						Exercisable
				Weighted
				Average		Weighted				Weighted
		Number		Remaining		Average		Number		Average
		of		Contractual		Exercise		of		Exercise
Range of Price		Options		Life (In Years)		Price		Options		Price

$	0.364		1,134,499		4.0	$	0.364		1,134,499	$	0.364
	0.659 – 0.780		3,253,657		9.4		0.745		2,217,895		0.742
	0.825 – 0.865		1,212,434		8.5		0.846		1,062,434		0.849
	0.364 – 0.865		5,600,590		8.1		0.689		4,414,828		0.671

A summary of nonvested options as of and changes during the years ended December 31, 2012 and 2011, is presented below:

				Weighted
	Number			Average
	of			Exercise
	Options			Price

Outstanding, January 1, 2011		1,144,651		$	0.618
Granted		—			—
Vested		(805,729	)		—
Forfeited or expired		(338,922	)		0.703
December 31, 2011		—			—
Granted		3,710,828			0.762
Vested		(2,450,066	)		0.763
Forfeited or expired		(75,000	)		0.750
December 31, 2012		1,185,762			0.759

No compensation costs were capitalized as part of the cost of any asset.

Of the options granted in 2012, 1,576,000 vested on the date of the grant for bonuses to certain employees for rewarding them for their activities in the Merger and Offerings and for certain strategic consultants who were engaged in the third quarter. The related compensation expense of these grants was $340,569.

F-23

The non-cash compensation expense related to these options was allocated as follows for the years ended December 31, 2012 and 2011:

	Year Ended
	December 31,
	2012		2011

Salaries and fringe benefits	$	239,312	$	37,664
General and administrative		274,435		34,634
	$	513,747	$	72,298

There is $278,154 of additional compensation expense related to these options, assuming that the options vest, to be recognized as of December 31, 2012 over the next two years.

Note 17 - Warrants

A summary of warrants granted, exercised, forfeited and outstanding as of, and for the years ended December 31, 2012 and 2011, which as a result of the Merger are convertible into common shares of common stock of the Company, is presented below (all warrants are exercisable upon date of grant):

			Weighted
			Average
			Exercise
	Warrants		Price

Outstanding, January 1, 2011		358,911	$	0.643
Granted		653,846		0.002
Forfeited or expired		—		—
December 31, 2011		1,012,757		0.229
Granted		776,018		0.765
Forfeited or expired		—		—
December 31, 2012		1,788,775		0.461

Warrants with Anti-Dilution Features

At December 31, 2012, there were 605,203 warrants outstanding that contain a weighted average anti-dilution feature that in certain circumstances could provide the holders with protection against changes in the market value of the Company's common stock; accordingly, they are required under applicable accounting standards to be recorded at fair value as of the balance sheet date. At December 31, 2012 the Company evaluated the fair value of the warrants using a binomial valuation model and the net difference was not significant between their initial carrying values and their fair values on December 31, 2012.

The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes valuation model with the following weighted average activity and assumptions during the years ended December 31, 2012 and 2011:

	Year Ended
	December 31,
	2012			2011

Number of warrants granted		776,018			653,846
Exercise price	$	0.765		$	0.002
Risk-free interest rate		0.7	%		2.4	%
Expected lives in years		4.4			7.0
Expected volatility		25.4	%		24.5	%
Expected dividend yields	None			None
Fair value of common stock	$	0.760		$	0.780
Fair value per warrant	$	0.169		$	0.779
Fair value of warrants granted	$	131,147		$	509,346

F-24

Since prior to the Merger the Company’s common stock was not traded and since the Merger had a limited number of trades, the Company calculated expected volatility for an equity-based grant based on the Standard & Poor’s North American Technology Software Index during the period immediately preceding the grant that is equal in length to the expected term of the grant. The risk-free interest rate is based on U.S. Treasury yields for securities in effect at the time of grants, with terms approximating the expected period of the grants. The assumptions used in the Black-Scholes option valuation model are inherently highly subjective, and can materially affect the resulting valuation.

Additional information as of December 31, 2012, with respect to all outstanding warrants:

			Outstanding
					Weighted
					Average		Weighted
			Number		Remaining		Average
			of		Contractual		Exercise
Range of Price			Warrants		Life (In Years)		Price

	$	0.002		743,939		8.3		$	0.002
		0.764		835,466		3.7			0.764
		0.888		209,370		5.6			0.888
		0.002 – 0.888		1,788,775		5.9			0.461

The non-cash compensation expense related to warrants was allocated as follows for the years ended December 31, 2012 and 2011:

	Year Ended
	December 31,
	2012		2011

Salaries and fringe benefits	$	—	$	—
General and administrative		16,204		484,868
		16,204		484,868
Loss on modification or extinguishment of debt		8,156		—
Interest expense – amortization of warrants		7,441		38,791
	$	31,801	$	523,659

There is no additional compensation expense related to these warrants to be recognized as of December 31, 2012 (excluding the $5,842 of amortization of warrants to debt holders).

Note 18 – Offerings

In May and August, 2012, in connection with the May 2012 Offering, we issued an aggregate of 2,883,333 shares of our common stock at a price of $0.75 per share, for gross proceeds of $2,162,500. We issued an aggregate of 1,010,732 shares of our common stock at a price of $0.75 per share, in exchange for the conversion of certain outstanding convertible promissory notes of X-Factor in an aggregate principal amount of $758,049. In addition, as an inducement to consummate the Merger, those certain stockholders who acquired control of the Company (the "Controlling Stockholders") in connection with the Pre-Merger Acquisition agreed to transfer an aggregate of 656,667 shares of common stock to the Placement Agent on behalf of the Company as partial compensation to the Placement Agent in connection with the May 2012 Offering. The Controlling Stockholders retained 393,333 shares of common stock acquired in connection with the Pre-Merger Acquisition.

In December 2012, we issued an aggregate of 250,000 shares of our common stock at a price of $0.80 per share and warrants to acquire 125,000 shares of common stock at an exercise price of $0.90, with an expiration date of December 2017, for gross proceeds of $200,000. The $14,125 estimated fair value of the warrants was calculated using the Black-Scholes option valuation model was charged to Additional Paid-in Capital with a related credit to Additional Paid-in Capital for the same amount.

F-25

The following is a summary of the shares issued and amounts raised or converted in 2012:

			Transaction
	Shares		Amount
Shares sold pursuant to subscription agreements		3,133,333	$	2,362,500
Conversion of convertible promissory notes		1,218,173		881,478
Controlling Stockholders’ investment		393,333		295,000
		4,744,839	$	3,538,978

The following is a summary of the cash and equity-based compensation costs of the Offerings:

			Cost or
	Shares		Valued at
Cash costs:
Placement Agent 10% fee of proceeds		—	$	341,555
Legal fees		—		134,861
Placement Agent travel costs		—		16,000
Other costs		—		3,595
Total cash costs		—		496,011

Filing Compare · X-Factor Communications Holdings, Inc.