10-K 1 2011-06-30_OBN_10-K_Final.txt OBN HOLDINGS, INC. 10-K FOR FYE 2011 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the annual period ended June 30, 2011 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to _________ Commission File Number 333-108300 OBN Holdings, Inc. (Exact name of registrant as specified in its Charter) Nevada 81-0592921 (State of incorporation) (IRS Employer Identification No.) 8275 South Eastern Ave., Suite 200; Las Vegas, Nevada 89123 (Address of principal executive offices) (702) 938-0467 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ( ) No ( X ) Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ( x ) No ( ) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the past 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 ( ) No ( X ) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporate by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( X ) Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company, See the definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer( ) Accelerated filer ( ) Non-accelerated filer ( ) Smaller reporting company ( X ) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ( ) No ( X ) Aggregate market value of the voting common equity held by non-affiliates of the Company on December 31, 2010 was approximately $1,170,000. As of December 31, 2012 the Company had 22,414,862 shares of its $.001 par value common stock issued and outstanding. TABLE OF CONTENTS PART I ITEM 1. Business 1 ITEM 2. Properties 6 ITEM 3. Legal Proceedings 6 ITEM 4. Submission of Matters to a Vote of Security Holders 6 PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities 6 ITEM 6. Selected Financial Data 7 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 ITEM 7A Quantitative and Qualitative Disclosures About Market Risk 13 ITEM 8. Financial Statements and Supplementary Data 13 ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 32 ITEM 9A. Controls and Procedures 32 PART III ITEM 10. Directors, Executive Officers, and Corporate Governance 33 ITEM 11. Executive Compensation 34 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 35 ITEM 13. Certain Relationships and Related Transactions, and Director Independence 36 ITEM 14. Principal Accounting Fees and Services 37 PART IV ITEM 15. Exhibits, Lists and Reports on Form 8-K 37 PART I ITEM 1. Description of Business Corporate History ----------------- OBN Holdings, Inc. ("OBNI" or the "Company") is a holding company with operations in several industries, including the internet broadcasting, television/film production, plastics recycling, intelligent traffic systems the meat commodity trading industries. The Company is internationally diversified with subsidiaries in China, Japan and the United States. As a holding company our primary objective is to identify and acquire profitable small to medium sized companies as subsidiaries, then manage the subsidiaries' growth and development. In addition, OBN corporate provides consulting services to firms seeking publicly stock trading listing services and import/export services. The Company was incorporated in Nevada on January 21, 2003 as the holding company for three wholly owned entertainment operating subsidiaries: Omni Broadcasting Network ("OMNI"), Eclectic Entertainment ("Eclectic") and Products On Demand Channel ("POD"). In August 2003, the Company acquired KSSY television, which is located in San Luis Obispo County, California. On May 21, 2004 the SEC/NASD granted formal approval for public trading by existing shareholders of OBN shares. On June 25, 2004 OBN's initial public offering was approved by the SEC and the Company began its effort to raise the funds necessary to implement its business plan. However, in October 2004 management decided to cancel the public offering in order to protect the stock price from "shorting" activity by third parties that had driven the stock price down. As a result, management never received the funds it required to fully implement its entertainment-based business plan. The Company continued on with modest growth without the IPO funding. In exchange for extinguishment of debt OBN acquired the name and program library of All Sports Television Network ("ASTN"), which began broadcast operations as a fourth subsidiary in July 2005. In January 2006, the Company agreed to sell 60% ownership to a Sheikh from Saudi Arabia in exchange for the long term funding it sought. Unfortunately, personal circumstances prevented the Sheikh from performing on the agreement. As a result the agreement was cancelled and the funding never materialized. Without funding, the Company was forced to suspend its broadcasting operations and has been unable to implement its business plan. In March 2007 the Company revised its business plan to focus on diversifying into non-entertainment related industries, and to expand globally through acquisition. The Company began to work with an investment banking firm that was responsible for raising funds and identifying targets for acquisition. In June 2007, the KSSY television station was fully impaired and ceased to be an asset. In October 2007, the Company established OBN Holdings (HK) Ltd, a wholly owned subsidiary based in Hong Kong to handle its China operations. In February 2008, the Company signed an agreement to broadcast its film and television properties over the world-wide broadband internet. Thus, internet broadcasting replaced the U.S. television broadcasting operations. In February 2008, the Company entered the intelligent traffic system industry by purchasing the North American rights to proprietary technology that captures traffic violation information on video and still media. In February 2008 the Company entered the plastics recycling industry by purchasing the exclusive North American rights to Chinese proprietary technology that allows "unrecyclable plastics" to be recycled. In June 2008, the Company acquired Kyodo USA, a trading company that sells pork to Japan from Mexico. In October 2008, the Company established OBN Holdings Japan Co, Ltd, a wholly owned subsidiary based in Tokyo, Japan to handle its Japan operations. As a result the Company's success to date in implementing its acquisition and diversification plan, the Company is currently a holding company with diverse interests. The Company is negotiating the acquisition of companies in several other geographical areas. Employees --------- As of June 2010 OBN Holdings, Inc. employs only five full-time employees. There are two employees in the corporate offices and two employees work in our commodity trading company, one works in the Hong Kong office and one works in the Japan office. Once the broadband broadcasting, television/film production, plastics recycling, intelligent traffic system, listing service and commodity trading operations are fully staffed we expect to employ over fifty full-time employees. Competition ----------- Entertainment Industry. The Company transitioned from television satellite broadcasting to broadband internet broadcasting which is a relatively new distribution method. The switch allows our hundreds of film titles to be broadcast worldwide for substantially reduced cost. We no long have satellite uplink, television station affiliate or sales personnel expenses. Programming is available for viewing on computers or televisions. Advertising revenues are shared on a 60/40 basis with our broadband host. Competition among broadband channels is not significant when you consider a worldwide audience. Viewing statistics are available for potential advertisers. Plastics Recycling Industry. There are hundreds of companies around the world that recycle one or more of the 50 different types of plastic. For most recyclers the polymers must be of nearly identical composition. The methods they use include mechanical recycling, hydrogenation, gasification and thermal cracking. Only a few facilities have the capability to recycle mixed types and colors. Alternative processing methods that attempt to address plastics' "macro-molecular" structure and allow recycling of mixed plastics include condensation polymerization, thermal de-polymerization, and heat compression. DuPont has opened a pilot condensation polymerization plant which was essentially the inverse of the original polymerization reaction, but the plant was closed for economic reasons. A pilot thermal de-polymerization plant exists in Carthage, Missouri. Heat compression plants, where the plastics are melted and pumped through heated pipes into casting moulds, exists in Australia and Japan. Our plastics recycling equipment uses a proprietary process that enables it to recycle virtually any combination of plastics and colors. It has little direct competition in China, the largest market in the world. Plans are underway to construct a state of art facility in China to meet increasing international demand for recycled plastics. Intelligent Traffic System Industry. There are only a few companies worldwide that specialize in the type of traffic intelligent systems for which the Company has exclusive rights. The main competitors are the ISS Corporation of the United States and Traficon Corporation of Belgium. Both of these firms have encountered difficulties adapting their systems to China's and third world traffic conditions, pricing structures and post sale service. There problems were the impetus to the development our Lutong Tech's proprietary technology. Lutong Tech Limited has product lines installed and operating throughout China. In fact, Lutong Tech has been designated by the Chinese government to undertake the ITS critical technology and application project in the government's five year Social and Economic Development Plan. Moreover, the Chinese National Video Laboratory has been in operation at Lutong facilities since 2001. The Chinese cities of Beijing, Shanghai, Guangzhou, Nanjing and other municipalities have installed Lutong's intelligent Traffic Systems. The company will roll out this innovative technology to other countries throughout North America, Asia, Africa and South America. Commodity Trading Industry. Kyodo USA has been issued a USDA permit that is required to transport pork through the United States for shipping to Japan. Since September 11, 2001, obtaining permits have been more difficult. As a result, Kyodo USA is positioned for substantial growth with limited competition. The Company has plans to expand operations to include chicken and other meat products. In addition, the Company has identified additional customers in China. Further, there are plans to increase productivity and the profit margin. Intellectual Properties ----------------------- Currently our entertainment group has the rights to several hundred intellectual properties. Some programs were purchased and are wholly owned as a part of our film library. Other programs are licensed. We typically enter a multi-year licensing agreement with unlimited airing. In addition to the licensed and wholly-owned programs, we have several programs in development under the Eclectic Entertainment subsidiary. They include "Music on Demand," "The LA Food Scene," "Adventures of Unit 28," and "The Mini-Movie Hour." In addition, we have sports programming such as "After the Game," "Australian Rules Football" and "Destination Adventure." During the fiscal year ended June 30, 2008 we have added over three hundred fifty (350) additional titles to our film library. The Company has acquired the exclusive North American rights to a Chinese proprietary process for converting "unrecyclable" plastic into reusable plastic pellets. The process requires specially engineered equipment that is not available anywhere else in the world. The company will employ the process in facilities in other geographical location outside the Peoples Republic of China. The company has acquired the exclusive North American rights to several patents in Video Detection Technology, including auto-adapted target characteristic extraction, video pretreatment, video coil, vehicle track technologies and Correlative product Research and Development. These exclusive technologies have been use to produce two intelligent traffic system product lines whereby video and still pictures of automobiles as they move through traffic intersections are captured and sent to government agencies for ticket collections. Other product lines are currently in development. The Company developed two internet portals. The first supports our "Blues in China" project wherein we are introducing the Blues music to China through several venues, including concerts, contests and Blues cafes. We are working with a Chinese promotion firm for this project. The second internet portals support our Music on Demand" project which entails interactive music promotions. Marketing Strategy ------------------ OBN Holdings has multi-faceted marketing strategy based on the industries in which it has operations. The OBN corporate office is responsible for identifying, evaluating and negotiating the acquisition of suitable profitable companies as wholly owned subsidiaries. The corporate marketing strategy is to promote OBN as a business incubator following many of the tenets of Warren Buffet's Berkshire Hathaway. The acquired businesses wish to become part of a fully reporting publicly trading company to support their continued growth and development. In all cases, the management of the acquired subsidiary remains with the company and benefits from the OBN development programs. Assets acquired are not limited to specific industries or geographic regions. Broadband Internet Broadcasting. OBN seeks to provide quality programming suitable for family viewing from sources throughout the world. Our goal is to entertain and enlighten our viewers with the sights, thoughts and visions of independent producers worldwide. Broadcasting is the foundation on which the business is built because it provides the Company with the distribution outlets for its programming, and the medium to promote its products and services. Our broadband channel guarantees that we have an outlet for our programming. The Company will not be dependent on Nielsen ratings as a basis for attracting advertising dollars, but by interesting and differentiated content instead. We believe that advertisers who are continually seeking new markets see the value in placing their advertisements with our programming. Television/Film Production. There are literally thousands of television and feature film production companies, all vying to have their completed projects distributed. A few production companies are owned or aligned with the major broadcast networks. The others are at the mercy of the relatively few distribution outlets available. Through its sister company, Omni Broadcast Networks, Eclectic productions are guaranteed a distribution outlet on its sister companies' network. Alternatively, Eclectic may choose to syndicate a program and have it aired on competing networks. Thus, the a major component of our marketing strategy is to promote our completed productions via our sister broadcast networks and syndicate distribution on other network when advantageous. During 2005-06 our Four Tops Special production was successfully syndicated to eighty million (80,000,000) households via several networks, including ABC, CBS and PBS. We will continue to take advantage of these established relationships. In addition, we plan to expand our production operations by acquiring profitable production companies which will increase our contacts in the industry. OBN's vertically integrated flat organizational structure allows us to minimize costs and make quick decisions. Generated revenues will cover the cost of operations, while outside funds are raised for larger productions. Plastics Recycling. There are two competitive advantages that our plastics recycling operations has over other facilities: 1) low cost and 2) technology. For the most this business is low tech, labor intensive work. Thus, the low wage rates and large labor pool makes the Chinese workforce ideal. Many of the industrialized countries such as the United Kingdom and Australia send the plastics discards to China for recycling. We have plans to construct a new facility that will double capacity and consolidate operations under one roof. All equipment used in our recycling process is custom built in order to protect the proprietary methods and to minimize costs. We recycle only "non-recyclable" plastics for which there is no competition. Thus, marketing for this technology will highlight its environmental and cost saving aspects. Intelligent Traffic Systems. There are several competitive advantages for our traffic systems operations. The systems are uniquely designed to determined acceleration and deceleration through an intersection, thereby determining whether a driver is attempting to avoid detection. Further, the technology captures illegal turns, crossing lines detection, and a host of other traffic violations. To our knowledge, no other system has this unique cadre of capabilities. Further, this technology allows for revenue sharing with municipalities. Therefore, the marketing program for this technology includes one for direct sales (BOT) to municipalities in developing countries and another to contractors who will install/monitor the installation under a Build-to-operate (BOO) contract. Commodity Trading. The competitive advantage for our meat trading operations is the USDA permits. Our marketing strategy is to expand operation to additional types of meats and to additional customers. Existing management has extensive contacts throughout the industry which have not previously been exploited. Under OBN management numerous productivity improvement methods will be instituted so that Kyodo management can focus on implementing the marketing plan. ITEM 2. Description of Properties Our office headquarters is located at 8275 South Eastern Ave., Suite 200; Las Vegas, Nevada 89123. It is a leased executive suite space at a monthly rate of $250. Our Los Angeles based executives now use an executive suite located at 1100 Glendon Avenue. In addition, we have a resident agents and executive suite offices in Hong Kong and Japan for annual fees of $3,000 each. We expect to renew all of our agreements at current market rates. ITEM 3. Legal Proceedings There are no legal proceedings that will impact the Company's ability to continue operating. ITEM 4. Submission of Matters to a Vote of Security Holders None PART II ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is currently an OTC pink sheets company and trades under the symbol "OBNI." Our stock price, like that of holding companies, can be highly volatile. The stock price may be affected by such factors as: - Acquiring additional business entities - Entering new industries - Acquiring or development of important intellectual properties - Announcements of distribution - Regulatory or legal matters - Broader industry and market trends - Financial performance In addition, if our revenues or earnings in any period fails to meet the investment community's expectations, there could be an immediate adverse impact on our stock price. Set forth in the following table is the high and low closing prices for our fiscal year ended June 30, 2011 for our common stock. Quarter Ended High Low September 30, 2010 $0.10 $0.05 December 31, 2010 0.09 0.01 March 31, 2011 0.05 0.05 June 30, 2011 0.05 0.02 As of June 30, 2011 there were approximately 200 shareholders of record of our common stock. We have not paid any cash dividends since our inception and do not contemplate paying dividends in the foreseeable future. It is anticipated that earnings, if any, will be retained for the operation of our business. An executive compensation stock option plan was developed and approved by the Board prior to the Company making its stock available to the public. However, all options under the plan expired in August 26, 2005. No common shares were issued under this option plan. There have been no sales of unregistered securities through June 30, 2011 that have not been previously reported. ITEM 6. Selected Financial Data The selected financial data contained in the chart below should be read in conjunction with the consolidated financial statements and the notes thereto included elsewhere in this document. Years Ending June 30 ---------------------------------------------------------- 2011 2010 2009 2008 2007 OPERATING RESULTS Revenue 7,270,698 11,268,519 18,310,437 2,001,589 - Gross profit (loss) 5,189,904 2,320,553 3,283,179 1,122,350 - Net income (loss) (351,772) (5,141,230) (3,367,532) 23,452 (2,239,282) PER SHARE DATA Wgtd Avg Common Shares 22,318,904 21,084,190 15,350,738 7,361,936 1,419,519 Loss per Common Share (0.02) (0.24) (0.22) 0.00 (1.58) TOTAL ASSETS 1,437,624 2,387,666 7,741,417 8,120,482 585,580 CAPITALIZATION & DEBT Total Liabilities 2,664,521 3,227,777 3,695,933 3,112,927 1,666,886 Capital Lease 49,396 49,396 49,396 49,396 49,396 Common Stock (000) 22,415 22,194 19,931 11,357 3,812 Paid in Capital 16,555,613 16,544,793 16,330,449 13,945,706 7,887,841 Accumulated Deficit (17,758,980 (17,438,626)(12,317,038) (8,949,507) (8,972,959) * Adjusted for 10:1 reversed stock split implemented in April 2007

ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations In an effort to increase shareholder value, management is implementing the Company's plan to grow through a combination of horizontal integration and geographic expansion. Management is actively seeking out and acquiring profitable businesses. In addition, the Company is creating new products and services, such as its internet portals and internet broadcasting. Management views promotion and distribution as being a very important element of the Company's business. The Company's broadband broadcasting channel and internet portal provide very cost effective outlets for promoting any products and services that it will offer in the future. The Company's new horizontal integration strategy also does not mean that management is entering into industries of which it has no knowledge. Prior to creating OBN, the top executives were business consultants to well over 300 companies in numerous industries and countries, ranging from very small private firms to Fortune 500 conglomerates, in the areas of operations management, productivity improvement, accounting, marketing and finance. The acquisition and growth strategy is well underway. In October 2007, the Company established OBN Holdings-Hong Kong, a wholly owned subsidiary. In January 2007 the Company began development of its Film Hook internet broadcasting operations to be launched in November 2009. In February 2008, the Company signed an agreement to broadcast its film and television properties over the broadband internet. In February 2008, the Company entered the intelligent traffic system industry by acquiring the North American exclusive rights to proprietary technology that for capturing traffic violation information on video and still media. In February 2008 the Company entered the plastics recycling industry by acquiring Chinese proprietary technology that allows "unrecyclable plastics" to be recycled. In June 2008, the Company acquired a commodity trading company that currently sells pork to Japan from Mexico. Management's goal is to increase shareholder value. The Company's efforts to fully implement its revised business plan will lead to growth and profitability through acquisition and subsidiary development. Financial risks will be minimized by geographical and industry diversification. GENERAL OVERVIEW The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the audited balance sheet, income statement, cash flow statement and stockholder's equity statement as of and for the year ended June 30, 2011, and the related notes. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. The Company reports a loss of $351,772 for the year ended June 30, 2011 and a cash balance of $93,177 at June 30, 2011. In addition, at June 30, 2011 our accumulated deficit was reduced to $17,758,980 and the net working capital was a negative $1,821,141. Management's plans include obtaining additional capital through equity financing sources. During the three month period subsequent to June 30, 2011 did not raise any funds. Liquidity and Capital Resources As of June 30, 2011 the Company's current liablities of $2,664,521 exceeded current assets of $843,380 by $1,821,141. Approximately 25% of current liabilities represent accrued payroll for executives who have opted to defer taking salaries until additional funding is received. A portion of the payroll shall be paid once a private stock sale is completed. At the board of directors meeting held January 10, 2006, the outside directors approved a resolution allowing executives who have deferred their salaries to convert any or all amounts due that exceed $50,000. The conversion price was $1.00 per share, or market value of the common stock, whichever was greater. As a result, $200,000 of accrued salaries was converted into 200,000 shares in January 2006. In December 2006 another $727,369 of accrued salaries were converted into 1,091,051 shares. In March 2007 another $125,655 of accrued salaries were converted into 158,988 shares. In April 2007, a total of 675,000 shares valued at $1.20 each was issued to executives as special hardship for working without salaries for the past four years. In December 2008 a total of 5,600,000 shares valued at $0.30 per share were issued as executive bonuses. In December, executives converted $200,000 of accrued salary into 666,667 shares valued at $0.30 per share. In May 2009, executives converted $50,000 of accrued salary into 416,667 shares valued at $0.12 per share. These amounts are being held in Company's Non Qualified Deferred Compensation Plan. Management's believes that the acquisition of Kyodo USA in June 2008 addresses any future liquidity issues because of its strong cash flow and cash balances in its bank accounts. In addition, the Company continues to raise additional capital through equity financing sources. However, no assurance can be given that additional capital will be available when required or upon terms acceptable to the Company. The Company intends to raise additional funds through a S-1 filing and anticipates implementing its business plan to expand its acquisition and development plans. The liquidity issues for each segment are addressed below. Entertainment Operations ------------------------ The liquidity issues that have plagued our broadcasting operations have been resolved by terminating our television broadcasts and satellite uplink. Thus, the Company no longer has expenses for television affiliate stations and satellite uplink. Instead, the Company has entered the Internet broadband broadcasting industry by signing an agreement with an established Internet network in February 2008. Under this agreement, the Company provides the programming content and channel scheduling while the Internet Network covers all related broadcasting costs, including costs for advertising sales and technical support. The Company receives 60% of all generated revenues. As a result our broadcast costs have been substantially reduced while our programs now reach a worldwide market. Liquidity for the television and film production operations remains essentially unchanged. There are several television production projects underway at various stages of development. These projects will be completed with funds from OBN operations. The Company will seek project investors for all future projects. Adopting this project funding practice will allow the Company to realize revenues from licensing agreements, syndication agreements and advertising without using much of its own funds. Again, the Company anticipates investing very little of OBN funds into new television and film projects, instead investor funds will be obtained. Plastics Recycling Operations ----------------------------- Liquidity is not a major concern for the plastic recycling operations that began as a result of acquiring the proprietary technology license in February 2008. The Company will not require cash until it begins its own plastic recycling operation using the exclusive technology license. In order to generate cash, the Company will sell raw materials to the Chinese facility from which the exclusive license agreement was acquired. At the same time, the Company is looking to acquire a plastic recycling facility in North America. After the acquisition is completed, the Company will be able to exploit the exclusive recycling technology license. Intelligent Traffic Systems Operations -------------------------------------- Liquidity is not a major concern for the intelligent traffic systems operations that began as a result of acquiring the proprietary technology license in February 2008. The Company plans to bid on traffic system installation projects at municipalities throughout North American. As contracts are awarded, the Company will engage the Chinese company that owns the proprietary technology to supervise the installation. Little cash is required during the bidding process. We anticipate installation of the first system in North America within the next eighteen (18) months. In addition, some traffic systems units will be sold without installation responsibility, thus requiring no cash other than sales expenses. Commodity Trading Operations ---------------------------- There is no liquidity issue related to the commodity trading operations that were acquired in June 2008 as Kyodo USA has adequate cash flow. In fact, the Company anticipates that some of the excess cash from these operations will support other OBN operations via intercompany transfers. Critical Accounting Policies Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements: Allowance for Doubtful Accounts We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on specific identification of customer accounts and our best estimate of the likelihood of potential loss, taking into account such factors as the financial condition and payment history of major customers. We evaluate the collectability of our receivables at least quarterly. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The differences could be material and could significantly impact our operating results. Intangible Assets The Company has adopted Statement of Financial Accounting Standards ASC 350-10, "Goodwill and Other Intangible Assets." ASC 350-10 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but rather be tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their useful lives. In addition, ASC 350-10 expands the disclosure requirements about goodwill and other intangible assets in the years subsequent to their acquisition. ASC 350-10 provides specific guidance for testing goodwill and intangible assets that will not be amortized (i.e., the Company's technology licenses) for impairment. The leased licenses are subject to impairment reviews by applying a fair-value-based test at the reporting unit level, which generally represents operations one level below the segments reported by the Company. An impairment loss will be recorded for any portion of the technology licenses that is determined to be impaired. The Company performs impairment testing on its intangible assets at least annually. However, because no revenue has been generated and insufficient capital to implement related marketing plans. As a result, for the fiscal year ended June 30, 2011 the Company recorded $71,250 of impairment expense. Impairment of Long-Lived Assets The Company's management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long-lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment is measured based on fair value and is charged to operations in the period in which long-lived asset impairment is determined by management. Based on uncertainties in the realizability of its "Four Tops Television Special" production and "One Last Ride" film, the Company wrote down the value of these assets, recording an impairment of $123,092 for the year ended June 30, 2006. In 2007, the Company wrote off the value of the KSSY broadcast license, recording an impairment of $130,000 for the fiscal year ended June 30, 2007. In June 2008, the Company wrote down the value of its Film Libraries, by recording an impairment of $165,000 for the year ending June 30, 2008. The Company wrote down the value of its technology licenses to zero, by recording an impairment of $4,774,781 for the fiscal year ending June 30, 2010. The Company wrote down the value of istream Film Hook portal to zero, by recording an impairment of $71,2500 for the fiscal year ending June 30, 2011. Based on its analysis, the Company believes that no additional impairment of the carrying value of its long-lived assets is required. There can be no assurance, however, that market conditions will not change which could result in additional impairment of its long-lived assets in the future. Revenue Recognition 1) Revenue from licensing TV programs and feature films can come from several sources. As projects are completed, we will have the option of airing the TV programs on our own Internet broadcasting channels and/or licensing the programs to be aired on other networks. Likewise, feature films can be licensed to foreign markets for distribution. Thus, among the revenue sources are other networks in the case of short form programming or foreign markets for feature films. A licensing agreement that specifies the license fee, availability dates and/or agreement duration is required for all projects licensed. Licensing fees are typically paid in advance of providing the project to the customer. Upon receipt of payment, deferred revenue is recorded. Revenue is recognized as the project is aired over the life of the agreement. We do not recognize revenue for projects that are not been completed, even if the licensing agreement for the project is signed. The revenue is recognized only after both the production product is completed and in accordance with the product availability dates in a signed agreement. 2) Revenue can also result from "revenue sharing" with program licensors. Some programs will be obtained by paying a licensing fee. Additionally, some licenses will be obtained via a cash-plus-barter arrangement, where we air the program for a contracted number of times and, in consideration for the programming, the licensor receives a specified number of advertising minutes. ASC 920-10, Financial Reporting by Broadcasters, sets forth accounting and reporting standards for the broadcast industry. Under a cash-plus-barter arrangement, we recognize a licensing asset at the estimated fair value of the programming received. The difference between the cash paid (obligation incurred) for the license and its fair value is recorded as a liability (deferred barter revenue), as the license is received before the broadcast of the licensor-provided commercials. As the licensor-provided commercials are aired, barter revenue is recognized ratably based on the recorded fair value of the barter transaction in relation to the total granted licensor-provided commercials. For cash purchases and revenue sharing, as rights are acquired, the Programs are recorded as assets and are amortized as the programs are aired over the network. For agreements with unlimited airing of a program the asset is amortized over the license period. 3) Revenue can be generated from advertising and paid programming. Advertising and paid programming revenue are recognized as the commercials/programs are aired. For small advertisers that must pay for services in advance, upon receipt of the payment, the signed contract and the tapes, deferred revenue is recorded. Deferred revenue is recognized as sales when the commercial is aired. 4) Revenue is recognized from meat trading operations after the order is received and the Company invoices the customer. At that time the meats have been already purchased from our supplier and are on their way to the customer. Similarly, revenue generated from plastic raw material sales is recognized when the customer is invoiced. 5) Revenue generated from intelligent traffic system operations is recognized when municipalities are invoiced. Deferred Taxes We record a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. We have considered estimated future taxable income and ongoing tax planning strategies in assessing the amount needed for the valuation allowance. If actual results differ favorably from those estimates used, we may be able to realize a larger portion or all of our net deferred tax assets. Such realization could positively impact our operating results and cash flows from operating activities. Results of Operations The figures as of and for the year ended June 30, 2011 are shown in the chart below: Broadcasting Production Commodity Corporate Reconciling Total Operations Operations Trading Items Assets $ - $ 129,369 $1,240,770 $2,806,958 ($2,739,472) $ 1,437,624 Liabilities (430,544) (293,959) (451,500) (1,503,518) 15,000 (2,664,521) Revenues, net of affiliate costs - - 7,253,874 16,824 - 7,270,698 Costs & expenses* 9,789 66,264 7,299,987 349,948 - 7,725,988 Other income (exp) 10,331 129,369 99,387 (135,569) - 103,518 Net income (loss) $ 542 $ 63,105 $ 53,274 ($ 468,693) - ($ 351,772)

For year ended June 30, 2010 Broadcasting Production Commodity Corporate Reconciling Total Operations Operations Trading Items Assets $ 8,689 $ 194,753 $1,964,993 $3,094,460 ($2,875,229) $ 2,387,666 Liabilities (439,543) (422,448) (1,183,052) (1,333,491) 150,757 (3,227,777) Revenues, net of affiliate costs - - 11,267,639 880 - 11,268,519 Costs & expenses* 35,119 25,999 11,145,270 5,347,927 - 16,554,315 Other income (exp) 0 23,833 45,907 74,826 - 144,566 Net income (loss) ($ 35,119) ( $2,166) $ 168,276 ($5,272,221) - ($5,141,230) *Expenses include operating expenses and cost of sales.

There were $7,270,698 of revenues for the fiscal year ended June 30, 2011 as compared to revenues that totalled $11,268,519 for the 2010 fiscal year. Expenses incurred during the year ended June 30, 2011 totaled $7,725,988 as compared to $16,554,315 for the 2010 fiscal year. The 2010 expenses include $5,189,904 for cost of goods sold. Other income for the fiscal year ended June 30, 2011 was $103,518 as compared to other income of $144,566 for fiscal year ended June 30, 2010. This was included a $98,659 gain on debt settlement. Changes in interest expense and tax expense are insignificant. The net loss for the fiscal year ended June 30, 2011 was $351,772 as compared to a net loss of $5,141,230 for the 2010 fiscal year. Reconciling items consist of inter-company balances. There were no reconciling items for revenue and expenses. Balance sheet reconciling amounts represent the elimination of subsidiary accounts. All revenues are from customers in the United States and Japan, and all long-lived assets are located in the United States. Broadcasting Operations ----------------------- Revenues generated from this segment of operations during fiscal 2011 were $0 compared to $0 revenues in fiscal 2010. Expenses were $9,789 for the year ended June 30, 2011, as compared to $35,119 for fiscal 2010. The 2011 expenses were primarily amortization expenses. Other income for 2011 was $10,331 and no income in 2009. Net income in 2011 for this segment of operations was $542, as compared to net loss totaling $35,119 in 2010. TV & Film Production Operations ------------------------------- Revenues generated from this segment of operations during 2011 was $0 as compared to $0 for 2010. The Company incurred $66,264 in 2011 and $25,999 of expense during 2010. Expense were primariliy accrued payroll expenses for both years. There was $129,369 of other income for 2011 and $23,833 for 2010. The net income for 2011 was $63,105 as compared to a net loss $2,166 in 2010. Commodity Trading ---------------- Revenues generated from this segment of operations during fiscal 2011 were $7,253,874 as compared to $11,267,639 revenues in fiscal 2010. Expenses were $7,299,987 for the period ending June 30, 2011 and $11,145,270 for the year ended June 30, 2010. Included were $5,189,904 for cost of goods sold. Other expense for the year ending June 30, 2011 was $99,387 as compared to $45,907 for same period ending June 30, 2010. The net income for commodity trading operations for the year ending June 30, 2011 was $53,274 as compare to a $168,276 income in 2010. OBN Corporate ------------- OBN corporate generated $16,824 in revenue during the year ended June 30, 2011, and $880 revenue for the year ended June 30, 2010. The expenses incurred by OBN corporate were $349,948 for the year ending June 30, 2011 as compared to $5,347,927 for the year ended June 30, 2010. Other expense for 2011 was $135,569 compared to $74,826 of other income for 2010. The 2011 net loss for the corporate office was $468,693, as compared to $5,272,221 for 2010. Forward Looking Statements Certain statements in this report are forward-looking statements within the meaning of the federal securities laws. Although the Company believes that the expectations reflected in its forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. ITEM 7A Quantitative and Qualitative Disclosures About Market Risk Not applicable ITEM 8. Financial Statements and Supplementary Data Reports of Independent Registered Public Accounting Firms 15 Balance Sheet as of June 30, 2011 and 2010 17 Statements of Operations for the years ended June 30, 2011 and 2010 18 Statements of Stockholders' Deficit for the years ended June 30, 2011 and 2010 19 Statements of Cash Flows for the years ended June 30, 2011 and 2010 20 Notes to Financial Statements 21 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM This 10K filing has not been reviewed by a registered public accounting firm, as such it is substantially deficient and not timely filed. Management will have this document reviewed and refiled as soon as possible. OBN Holdings, Inc. CONSOLIDATED BALANCE SHEETS June 30, 2011 2010 ----------- ---------- ASSETS Current assets: Cash and cash equivalents $ 93,177 $ 635,680 Accounts receivables, net of $150,000 and $0 allowance 544,522 858,508 for doubtful accounts, respectively Inventory 205,681 459,202 ---------- ---------- Total current assets 843,380 1,953,390 Fixed assets, net of accumulated depreciation of $60,892 and $60,892, respectively - -- Programming rights, net of accumulated amortization of $100,192 and $100,192, respectively - 65,275 Film library, net of accumulated amortization of $542,840 and $482,675, respectively 34,661 94,826 Other intellectual properties, net of accumulated amortization of $74,415 and $48,623respectively 177,133 202,925 Other tangible assets -- 72,250 Long term notes receivables 382,450 -- ---------- ---------- Total assets $ 1,437,624 $ 2,387,666 ========== ========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable 268,250 686,109 Commissions payable 240,023 26,348 Accrued payroll and related 663,006 1,029,818 Deferred revenue 118,049 645,417 Capital lease obligations 49,396 49,396 Programming rights payable 80,030 80,030 Notes and accrued interest payable 805,857 277,749 Notes and accrued interest payable to related parties 439,910 439,910 ---------- --------- Total current liabilities 2,664,521 3,227,777 ---------- --------- Stockholders' deficit: Undesignated preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding -- -- Common stock; $0.001 par value; 500,000,000 shares authorized; 22,414,862 and 22,194,492 shares issued and outstanding, respectively 22,415 22,194 Additional paid-in capital 16,555,613 16,544,793 Accumulated deficit (17,758,980)(17,438,626) Accumulatd compreshensive income, net (45,945) 31,528 ---------- --------- Total stockholders' deficit (1,226,897) (840,111) ---------- --------- Total liabilities and stockholders' equity $ 1,437,624 $2,387,666 ========== ========== See accompanying notes to consolidated financial statements. OBN Holdings, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED JUNE 30, ------------------------------ 2011 2010 ------------- ------------- Revenue, net of affiliate costs $ 7,270,698 $ 11,268,519 Cost of sales 5,189,904 8,947,966 ------------ ------------ Gross profit 2,080,794 2,320,553 Operating expenses: General and administrative 2,531,390 7,598,405 ------------ ------------ Loss from operations (450,596) (5,277,852) ------------ ------------ Other income (expense): Other (expense) 103,330 45,907 Gain on debt extinguishment 188 98,659 Interest expense (4,694) (7,944) ------------ ------------ Total other income, net 98,824 136,622 ------------ ------------ Loss before income taxes (351,772) (5,141,230) Income taxes - - ------------ ------------ Net income (5,141,230) (5,141,230) ============ ============ Foreign currency transaction adjustment (45,945) 31,528 Compreshensive income, net of 0 taxes (397,717) (5,109,702) Net loss available to common stockholders per common share: Basic and diluted net loss per common share (0.02) (0.24) ============ ============ Basic and diluted weighted average shares outstanding 22,318,904 21,084,190 ============ ============ See accompanying notes to consolidated financial statements. OBN HOLDINGS, INC. Consolidated Statement of Stockholders' Deficit For the years ended June 30, 2011 and 2010 Undesignated Preferred Stock Common Stock Additional Total --------------- --------------- Paid-in Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Deficit ------ ------ ------ ------ ---------- ----------- ------------ Balance, June 30, 2009 -- -- 19,930,903 19,931 16,330,151 (12,317,038) 4,045,184 ------ ------ ---------- ------ ---------- ------------ ----------- Stock issued for cash -- -- 986,640 987 83,168 -- 84,155 Stock issued for services -- -- 975,000 975 90,525 -- 91,500 Stock issued to purchase asssets -- -- 60,240 60 11,988 -- 12,068 Stock issued to retire debt -- -- 212,087 212 23,993 -- 24,205 Subscription receivable -- -- 29,412 29 4,971 -- 7,500 Foreign currency transaction -- -- -- -- -- 19,642 31,528 Net income (loss) -- -- -- -- -- (5,141,230) (5,141,230) ------ ------ --------- ------ ---------- ------------ ----------- Balance, June 30, 2010 -- -- 22,194,462 22,194 16,544,793 (17,438,626) (840,111) ------ ------ ---------- ------ ---------- ------------ ----------- Stock issued for cash -- -- 220,400 220 10,821 -- 11,042 Prior year RE adjustment -- -- -- -- -- (110) (110) Foreign currency transaction -- -- -- -- -- 31,528 (45,945) Net income (loss) -- -- -- -- -- (351,772) (351,772) ------ ------ ---------- ------ ---------- ------------ ----------- Balance, June 30, 2011 -- -- 22,414,862 22,415 16,555,613 (17,758,980) (1,226,897)

OBN Holdings, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, ----------------------- 2011 2010 ---------- ---------- Cash flows from operating activities Net profit (351,772) (5,141,230) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 151,233 121,876 Impairment expense 71,250 4,774,781 Gain on settlement of debt -- (98,659) Shares issued for intangible assets -- 25,000 Shares issued for services -- 91,500 Changes in operating assets and liabilities: Accounts receivable, net 313,986 24,364 Purchased inventory 253,521 488,878 Deferred revenue (527,368) (145,233) Accounts payable and accrued expenses (1,028,965) (211,218) ----------- ------------ Net cash used in operating activities (1,108,115) (119,941) ----------- ------------ Cash flows from investing activities: Purchase of intangible assets -- -- ----------- ------------ Net cash used in investing activities -- -- ----------- ------------ Cash flows from financing activit Proceeds from notes payable, net of issuance costs 36,159 2,024 Proceeds from notes payable to related parties 498,949 (15,372) Proceeds from stock subscriptions receivable -- 5,000 Repayments on notes payable to related parties -- 24,205 Proceeds from issuance of common stock 11,041 91,655 ----------- ------------ Net cash provided by financing activities 546,149 107,512 ----------- ------------ Effect of foreign currency rate changes 19,463 31,528 Net change in cash and cash equivalents (542,503) 19,099 Cash, and cash equivalents, beginning of period 635,680 616,581 ----------- ------------ Cash, and cash equivalents, end of period $ 93,177 635,680 =========== ============ Supplemental disclosure of cash flow information: Cash paid during the period for: Interest -- -- =========== ============ Income taxes $ -- $ -- =========== ============ Supplemental disclosure of noncash investing and financing activities: Purchase of services $ -- $ 91,500 ----------- ---------- Payment of notes payables with common stock $ -- $ 24,205 ----------- ----------- Purchase of intangible assets $ -- $ 12,048 ----------- ------------ See accompanying notes to consolidated financial statements. OBN Holdings, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 2011 and 2010 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Background and Organization Nature of Operations and Principles of Consolidation ---------------------------------------------------- OBN Holdings, Inc. ("OBNI" or the "Company") is a holding company with operations in entertainment, pork commodity trading, plastics recycling and intelligent traffic systems industries. Moreover, the Company is internationally diversified with subsidiaries in China and the United States. As a holding company its primary objective is to identify and acquire profitable small to medium sized companies as subsidiaries, then manage the subsidiaries growth and development. The Company was incorporated in Nevada in 2003 as the holding company for three wholly owned entertainment operating subsidiaries: Omni Broadcasting Network ("OMNI"), Eclectic Entertainment ("Eclectic") and Products On Demand Channel ("POD"). Omni was incorporated in January 2001 as a television broadcast company. Eclectic Entertainment was incorporated July 2002 as a motion picture and television production company. Products On Demand Channel was incorporated in December 2002 as a broadcast television network specializing in providing airtime to independent producers and companies seeking to market their products on television. In August 2003, the Company acquired the KSSY television broadcast license. In February 2004, OBN acquired the name and program library of All Sports Television Network ("ASTN"), which began broadcast operations as a fourth subsidiary in July 2005. In January 2007 the Company began development of its Film Hook internet broadcasting operations to be launched in June 2008. In October 2007 the OBN Holdings Hong Kong subsidiary was incorporated. In February 2008, the Company signed an agreement to broadcast its film and television properties over the broadband internet. In March 2008 the Company entered the plastics recycling industry by acquiring the exclusive North American rights to Chinese proprietary technology that allows "unrecyclable plastics" to be recycled. In March 2008 the Company entered the intelligent traffic systems industry by acquiring the exclusive North American rights to Chinese patents that captures video and still pictures of traffic violations real time. In June 2008 the Company acquired Kyodo USA, a trading company that sells pork from Mexico to Japan. In October 2008, the Company formed OBN Holdings Japan Co., Ltd, a wholly owned subsidiary of OBN Holdings. Principles of Consolidation The consolidated financial statements include the accounts of OBN Holdings, Inc. and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. Segment Information Reporting Management measures the Company's performance in three distinct segments: (1) Broadcasting Operations, which is measured advertising dollars attracted; and, (2) Production Operations, which requires creative talent and has a longer lead time to determine success; and 3) Commodity trading which is measure by volume sold. A summary for the years ended June 30, 2011 and 2010 is presented in the table below: The figures as of and for the year ended June 30, 2011 are shown in the chart below: Broadcasting Production Commodity Corporate Reconciling Total Operations Operations Items Assets $ - $ 129,369 $1,240,770 $2,806,958 ($2,739,472) $ 1,437,624 Liabilities (430,544) (293,959) (451,500) (1,503,518) 15,000 (2,664,521) Revenues, net of affiliate costs - - 7,253,874 16,824 - 7,270,698 Costs & expenses* 9,789 66,264 7,299,987 349,948 - 7,725,988 Other income (exp) 10,331 129,369 99,387 (135,569) - 103,518 Net income (loss) $ 542 $ 63,105 $ 53,274 ($ 468,693) - ($ 351,772)

*Expenses include operating expenses and cost of sales. Reconciling items consist of inter-company balances. Revenues are from U.S and Japanese customers in the United States and all long-lived assets are located in the United States. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 reported period. Actual results could differ from estimated amounts. The Company's significant estimates include the realizability of long-lived assets and deferred tax assets. Concentration of Credit Risk The Company maintains its cash and cash equivalent accounts in financial institutions. Accounts at these institutions are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. At June 30, 2011, the Company had no bank account balances that was in excess of the FDIC insurance limit. The Company performs ongoing evaluations of these institutions to limit its concentration risk exposure. The Company grants credit to customers within the United States of America and does not require collateral. The Company's ability to collect receivables is affected by economic fluctuations in the geographic areas and industries served by the Company. Reserves for uncollectible amounts are provided based on past experience and a specific analysis of the accounts which management believes is sufficient. Although the Company expects to collect amounts due, actual collections may differ from the estimated amounts. Sales for the year ended June 30, 2011 was $7,270,698. Sales for the two largest customers in 2010 totaled approximately 45% of revenue. Fair Value of Financial Instruments The carrying amounts of the Company's cash and cash equivalents, accounts payable, accrued expenses and third-party notes payable approximate their estimated fair values due to the short-term maturities of those financial instruments. The estimated fair values of related-party notes payable are not determinable as the transactions are with related parties. Fixed Assets Depreciation and amortization of fixed assets are provided using the straight-line method over the following useful lives: Furniture and fixtures 5 years Machinery and equipment 3-5 years Leasehold improvements Life of lease Maintenance, repairs and minor renewals are charged directly to expense as incurred. Additions and betterments to fixed assets are capitalized. When assets are disposed of, the related costs and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in operations. At June 30, 2011, the Company's fixed assets consist primarily of computers and office editing equipment which were fully depreciated. Other Long-Lived Assets The programming rights assets are discussed in Note 2. Programming rights are recorded for the purchase of the right to air programming on the Company's broadband internet network. An asset is recorded for the programming rights when the license period begins. These rights are amortized to expense over the expected useful life of the programming, as the Company has the right to unlimited broadcasting of the programming. The film library is discussed in Note 3. These assets are being amortized over their estimated useful life of 10 years. The internet media portal is discussed in Note 4. This asset is an intangible asset with an indefinite life. It began operations in November 2009. Intangible Assets The Company has adopted Statement of Financial Accounting Standards ASC 350-10, "Goodwill and Other Intangible Assets." ASC 350-10 requires that goodwill and intangible assets that have indefinite useful lives not be amortized but rather be tested at least annually for impairment, and intangible assets that have finite useful lives be amortized over their useful lives. In addition, ASC 350-10 expands the disclosure requirements about goodwill and other intangible assets in the years subsequent to their acquisition. ASC 350-10 provides specific guidance for testing goodwill and intangible assets that will not be amortized (i.e., the Company's technology licenses and internet portals) for impairment. The intangible assets are subject to impairment reviews by applying a fair-value-based test at the reporting unit level, which generally represents operations one level below the segments reported by the Company. An impairment loss will be recorded for any portion of the technology licenses and internet portal that is determined to be impaired. The Company performs impairment testing on its intangible assets at least annually. Based on its analysis, the Company's management believes that impairment of the carrying value of its technology licenses was appropriate at March 31, 2010 because no revenue had been generated and there still was insufficient capital to implement related marketing plans. As a result, the two technology licenses were fully impaired at March 31, 2010 Impairment of Long-Lived Assets The Company's management assesses the recoverability of its long-lived assets by determining whether the depreciation and amortization of long lived assets over their remaining lives can be recovered through projected undiscounted future cash flows. The amount of long-lived asset impairment is measured based on fair value and is charged to operations in the period in which long- lived asset impairment is determined by management. During the quarter ended September 30, 2005 the Company recorded an impairment change of $18,092. During the quarter ending June 30, 2007 the Company recorded impairment of $130,000. During the quarter ended June 30, 2008 the Company recorded an impairment expense of $165,000. In March 2008 the Company acquired the North American rights to two proprietary technology licenses. The first was the intelligent traffic system (i.e., red light camera system) license from a Chinese developer for stock and cash valued at $1,880,000. The second was a plastic recycling license for stock valued at $2,894,781. In August 2009 the Company engaged the services of an independent appraisal firm to determine the value of its technology licenses. The appraiser, a member of the National Association of Certified Valuation Analysts, indicated in its report that market value the technology license $4,640,000 and the market value of the recycling license was $ 3,792,000, both significantly higher that their respective carrying values. Therefore, no impairment was recorded at June 30, 2009. However, because no revenue has been generated since the appraisal due to the fact that the Company did not have sufficient capital to implement the related marketing plans, impairment was appropriate for the quarter ended March 31, 2010 even though the revenue and cost projections contained in our impairment analysis provided in our early submissions are still valid. The numbers have not changed (i.e., the licenses acquisition costs are recoverable as the undiscounted cash flow projections from the license exceeds the carrying value), only the expected transactions dates have changed (i.e., pushed back). Thus, management expects to fully recover the acquisition costs from the technology licenses by either implementing the associated marketing plans when funds are available or selling the licenses at some future date. However, because no definite timeframe can be determined as to when revenue will be generated, management has elected to fully impair the licenses as of March 31, 2010 under the conservative principle of GAAP. Revenue Recognition Revenue From Licensing TV Programs and Feature Films The Company has completed several projects that can be licensed, and additional projects are underway. As projects are completed, the Company will have the option of airing the TV programs on its own network and/or licensing the programs to be aired on other networks. Likewise, feature films can be licensed to foreign markets for distribution. Thus, among the revenue sources are other networks in the case of TV projects or foreign markets for feature films. A licensing agreement that specifies the license fee, availability dates and/or agreement duration is required for all projects licensed. Licensing fees are typically paid in advance of providing the project to the customer. Upon receipt of payment, deferred revenue is recorded. Revenue is recognized as the project is aired over the life of the agreement. The Company does not recognize revenue for projects that are not completed, even if the licensing agreement for the project is signed. The revenue is recognized only after both the production of the product is completed and is aired in accordance with the signed agreement. Revenue Sharing With Program Licensors Some programs will be obtained by paying a licensing fee. Additionally, some licenses will be obtained via a cash-plus-barter arrangement, where the Company airs the program for a contracted number of times and grants the licensor a negotiated number of unsold advertising slots. AS 920-10, "Financial Reporting by Broadcasters," sets forth accounting and reporting standards for the broadcast industry. Under a cash-plus-barter arrangement, the Company recognizes a licensing asset at the estimated fair value of the programming received. The difference between the cash paid (obligation incurred) for the license and its fair value is recorded as a liability (deferred barter revenue), as the license is received before the broadcast of the licensor-provided commercials. As the licensor-provided commercials are aired, barter revenue is recognized ratably based on the recorded fair value of the barter transaction in relation to the total granted licensor-provided commercials. For cash purchases and revenue sharing, as rights are acquired, the programs are recorded as assets and are amortized as the programs are aired over the network. For agreements with unlimited airing of a program the asset is amortized over the license period (see above). Revenue from Advertising (and Paid Programming) Advertising and paid programming revenue are recognized as the commercials/programs are aired. For small advertisers that must pay for services in advance, upon receipt of the payment, the signed contract and the tapes, deferred revenue is recorded. Deferred revenue is recognized as revenue when the commercial is aired. Revenue Recognition for Meat Exports Revenue is recognized from meat export operations after the order is received, the customer invoice is issued and the customer receives the product. Invoices issued prior to the customer receiving the product are recorded as deferred revenue. Deferred revenue is then recognized as revenue when the customer takes ownership of the product. Inventories Inventories are valued at the lower of cost or market. Inventory includes direct material costs, whereby product is typically in inventory for periods less than three weeks due to spoilage concerns. Morover, the majority of inventory is in-transit to customers. Shipping costs are considered general and administrative expense and are not included in cost of goods sold. During the fiscal year ending June 30, 2011 a total of $896,602 was expensed for shipping related services. Accounting for Filmed Entertainment and Television Programming Costs In accordance with ASC 926-10, "Accounting by Producers or Distributors of Films", filmed entertainment costs will include capitalizable production costs, overhead and interest costs expected to benefit future periods. These costs, as well as participations and talent residuals, will be recognized as operating expenses on an individual film basis in the ratio that the current year's gross revenues bear to management's estimate of total ultimate gross revenues from all sources. Marketing and development costs under term deals will be expensed as incurred. Filmed entertainment costs are stated at the lower of unamortized cost or estimated fair value on an individual film or television series basis. Revenue forecasts for both motion pictures and television products are continually reviewed by management and revised when warranted by changing conditions. When estimates of total revenues and other events or changes in circumstances indicate that a television production has a fair value that is less than its unamortized cost, a loss will be recognized for the amount by which the unamortized cost exceeds television production's fair value. Advertising Costs Advertising costs are expensed as incurred. For the year ended June 30, 2011 and 2010, there were no advertising costs. Stock-Based Compensation Through June 30, 2011, the Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC 718-10, Accounting for Stock-Based Compensation, and ASC 505-50, Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. 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. The measurement date used to determine the fair value of the equity instrument issued is the earlier of the date on which the third-party performance is complete or the date on which it is probable that performance will occur. ASC 718-10 allows an entity to continue to measure compensation cost related to stock and stock options issued to employees using the intrinsic method accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees. Under APB 25, compensation cost, if any, is recognized over the respective vesting period based on the difference, on the date of grant, between the fair value of the Company's common stock and the grant price. Entities electing to remain with the accounting method of APB 25 must make pro forma disclosures of net income and earnings per share, as if the fair value method of accounting defined in ASC 718-10 had been applied. The Company has a stock-based employee compensation plan. The Company will account for employee options granted under this plan under the recognition and measurement principles of APB 25, and related interpretations. No stock- based employee compensation cost is reflected in the consolidated statements of operations, as all employee warrants previously granted had no intrinsic value, and no new employee options or warrants were granted for the fiscal year ended June 30, 2011. There is also no pro forma impact of warrants as they have no fair value under ASC 718-10. Effective July 1, 2006, on the first day of the Company's fiscal year 2007, the Company adopted the fair value recognition provisions of ASC 718-10, "Share-Based Payment", using the modified-prospective transition method. Under this transition method, compensation cost includes: (a) compensation cost for all share-based payments granted and not yet vested prior to July 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of ASC 718-10, and (b) compensation cost for all share- based payments granted subsequent to June 30, 2006 based on the grant-date fair value estimated in accordance with the provisions of ASC 718-10. ASC 718-10 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. As of June 30, 2011, the Company had no options outstanding and therefore believes the adoption of ASC 718-10 to have an immaterial effect on the accompanying financial statements. The Company calculates stock-based compensation by estimating the fair value of each option using the Black-Scholes option pricing model. The Company's determination of the fair value of share-based payment awards are made as of their respective dates of grant using the option pricing model and that determination is affected by the Company's stock price as well as assumptions regarding the number of subjective variables. These variables include, but are not limited to, the Company's expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behavior. The Black-Scholes option pricing model was developed for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable. Because the Company's employee stock options have certain characteristics that are significantly different from traded options, the existing valuation models may not provide an accurate measure of the fair value of the Company's employee stock options. Although the fair value of employee stock options is determined in accordance with ASC 718-10 using an option-pricing model, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction. The calculated compensation cost, net of estimated forfeitures, is recognized on a straight-line basis over the vesting period of the option. Basic and Diluted Loss Per Share The Company has adopted ASC 260-10, "Earnings Per Share" (see Note 9). Basic loss per common share is computed based on the weighted average number of shares outstanding for the period. Diluted loss per share is computed by dividing net loss by the weighted average shares outstanding assuming all dilutive potential common shares were issued. Basic and diluted loss per share are the same as the effect of stock options and warrants on loss per share are anti-dilutive and thus not included in the diluted loss per share calculation. The impact of dilutive convertible debt and stock options and warrants would not have resulted in an increase in incremental shares for the fiscal year ended June 30, 2011 and 2010. Recent Pronouncements In June 2009, the Financial Accounting Standards Board ("FASB") issued a "The FASB Accounting Standards Codification" and the Hierarchy of Generally Accepted Accounting Principles to establish the FASB Accounting Standards Codification" (also referred to as Codification or ASC) as the single source of authoritative nongovernmental U.S. generally accepted accounting principles ("GAAP"). The ASC is effective for interim and annual periods ending after September 15, 2009. The ASC did not change GAAP but reorganized existing US accounting and reporting standards issued by the FASB and other related private sector standard setters. The Company began to reference the ASC when referring to GAAP in its financial statements starting with the third quarter of 2009. Additionally, because the ASC does not change GAAP, the Company references the applicable ASC section for all periods presented (including periods before the authoritative release of ASC), except for the grandfathered guidance not included in the Codification. The change to ASC did not have an impact on the Company's financial position, results of operations, or cash flows. In December 2007, the FASB issued accounting guidance regarding business combinations. This accounting guidance, found under the Business Combinations Topic of the Codification, ASC 805, retains the requirement that the purchase method of accounting for acquisitions be used for all business combinations. ASC 805 expands the disclosures previously required, better defines the acquirer and the acquisition date in a business combination, and establishes principles for recognizing and measuring the assets acquired (including goodwill), the liabilities assumed and any noncontrolling interests in the acquired business. ASC 805 changes the accounting for acquisition related costs from being included as part of the purchase price of a business acquired to being expensed as incurred and will require the acquiring company to recognize contingent consideration arrangements at their acquisition date fair values, with subsequent changes in fair value generally to be reflected in earnings, as opposed to additional purchase price of the acquired business. As the Company has a history of growing its business through acquisitions, the Company anticipates that the adoption of FASB guidance included in the Business Combinations Topic of the Codification will have an impact on its results of operations in future periods, which impact depends on the size and the number of acquisitions it consummates in the future. According to the Transition and Open Effective Date Information of the ASC Business Combinations Topic, ASC 805-10-65, the acquirer shall record an adjustment to income tax expense for changes in valuation allowances or uncertain tax positions related to the acquired businesses. Certain of the Company's acquisitions consummated in prior years would be subject to changes in accounting for the changes in valuation allowances on deferred tax assets. After December 31, 2008, reductions of valuation allowances would reduce the income tax provision as opposed to goodwill. ASC 805, effective for all business combinations with an acquisition date in the first annual period following December 15, 2008, was adopted by the Company as of January 1, 2009. In December 2007, the FASB issued accounting guidance regarding non-controlling interests in consolidated financial statements. This guidance, found under the Consolidations Topic of the Codification, ASC 810-10-45, and effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008, requires the recognition of a non-controlling interest as equity in the consolidated financial statements and separate from the parent's equity. The amount of net earnings attributable to the non-controlling interest will be included in consolidated net income on the face of the income statement. This guidance also includes expanded disclosure requirements regarding the interests of the parent and its non-controlling interest. The Company adopted ASC 810-10-45 as of January 1, 2009. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. In April 2008, the FASB issued guidance on determining the useful life of intangible assets. The Implementation Guidance and Illustrations for Intangibles Other than Goodwill, ASC 350-30-55, discussed in the Intangibles - Goodwill and Other Topic of the Codification, amends the factors to be considered in determining the useful life of intangible assets. Its intent is to improve the consistency between the useful life of an intangible asset and the period of expected cash flows used to measure its fair value by allowing an entity to consider its own historical experience in renewing or extending the useful life of a recognized intangible asset. The new guidance became effective for fiscal years beginning after December 15, 2008 and was adopted by the Company as of January 1, 2009. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements. In May 2009, the FASB issued accounting guidance regarding subsequent events. This guidance, found under the Subsequent Events Topic of the Codification, ASC 855, and effective for interim or annual periods ending after June 15, 2009, establishes general standards of accounting for disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The Company adopted this guidance as of June 30, 2009. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements In April 2009, the FASB issued new guidance regarding the accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies. This new guidance, found under the Identifiable Assets and Liabilities, and Any Noncontrolling Interest Subtopic within the Business Combinations Topic of the Codification, ASC 805-20, - Requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value of such an asset or liability cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with the Contingencies Topic of the Codification, ASC 450; - Eliminates the requirement to disclose an estimate of the range of outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB decided to require that entities include only the disclosures required by the Contingencies Topic of the Codification, ASC 450, and that those disclosures be included in the business combination footnote; - Requires that contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination be treated as contingent consideration of the acquirer and should be initially and subsequently measured at fair value in accordance with ASC 805-20. ASC 805-20 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company adopted ASC 805-20 effective January 1, 2009 and it did not have any material impact on the Company's financial condition, results of operations, or cash flows. Comprehensive Income The Company reports certain changes in equity during a period in accordance with ASC 220-10 "Reporting Comprehensive Income". Accumulated Comprehensive Income, net includes foreign currency cumulative translation adjustments, net of tax. The components of comprehensive income for the fiscal year periods ended June 30, 2011 and 2010 are as follows: Fiscal Years Ended June 30, --------------------- 2011 2010 Net income ($ 351,722)($5,141,230) Foreign currency cumulative translation adjustments (45,945) 31,528 ----------- ---------- Comprehensive income (loss) ($ 397,717) (5,109,702) ============ =========== NOTE 2 - PROGRAMMING RIGHTS Eclectic expects to continue to produce its own programming. However, during the fiscal year end periods ended June 30, 2011 and 2010, there were no production costs, respectively. At June 30, 2011 cumulative production costs totaled $82,775. OMNI has purchased various programming rights assets totaling $105,130 as of September 30, 2008. Accumulated amortization for these asset totaled $105,130 leaving a carry value of zero at March 31, 2010. For the fiscal years ended June 30, 2011 and 2010, the Company recorded amortization expense of $0 and $337, respectively, related to its programming rights. NOTE 3 - FILM LIBRARY In January 2004, the Company acquired the name and film library of All Sports Television Network ("ASTN") in exchange for ASTN's outstanding payable to the Company of $79,200. The Company began amortizing this library over its estimated useful life of 10 years in April 2004. In February 2005, the Company purchased 200 film titles from Crawford Communications. The Company recorded a $3,900 increase in film library and a corresponding increase in programming rights payable. In September 2005, the Company acquired 550 film titles from Indie Vision Films, Inc. as payment for purchased advertising time. The Company recorded a $275,000 increase in film library and a corresponding increase in deferred revenues, as the advertisements will be broadcast over future months. The Company amortizes the film library titles over its estimated useful life of 10 years. In April 2007, the Company acquired an additional 15% interest in the Four Tops program for 300,000 shares of stock with average per share value of $0.70. The program is being amortized over its estimate useful life of 10 years. In June 2007, the Company acquired 460 film titles for 138,000 shares of stock valued at $0.90 per share. The titles are being amortized over its estimate useful life of 10 years. In January 2008, the Company acquired film titles from Liang Films for 50,000 shares at $0.51 per share. The Company recorded a $25,500 increase in film library and credit to common stock. The films are being amortized over the estimate useful life of 10 years. In February 2008, the Company acquired film titles from Indie Vision Films for 48,125 shares at $0.513 per share. The Company recorded a $24,700 increase in film library and credit to common stock. The films are being amortized over the estimate useful life of 10 years During the fiscal year end periods ended June 30, 2011 and 2010, the Company recorded amortization expense of $60,161 and $92,301, respectively, related to its film library. NOTE 4 - INTERNET PORTALS In October 2006 the Company has entered into an agreement to have an internet portal constructed and operated. Construction of the portal began in June 2007. The agreement specifies that the Company owns the site and will provide the content for the media portal. Revenues generated from the site will be shared on a 50/50 basis between the Company and the contractor. As of June 30, 2008 the Company has not paid the $71,250 construction fee and the contractor has not completed the media portal. The debt was extinguished and operations abandoned. In April 2009 the Company began construction of its "Music on Demand" internet portal. This interactive portal provides an outlet for advertising the Company's products. As of June 30, 2010 the portal has not been completed. In June 2009 the Company began construction on its "Blues in China" internet portal. This interactive portal supports the Company's program to introduce blues music throughout China via concerts, contests and blues cafes. An Chinese promoter has been engaged to assist with this project. As of June 30, 2011, the portal has not been completed. Website development costs for new websites and internet portals is capitalized and amortized over the site's useful life (i.e., 36 months). Maintenance costs for existing websites is expensed in the period that the cost is incurred. NOTE 5 - COMMITMENTS AND CONTINGENCIES Lease Obligations As of June 30, 2011, the Company accrued $84,032 in arrears relating to an office lease. The Company has vacated the Wilshire Boulevard office and is currently utilizes an executive suite located in Westwood California when the need arises. The Company expects to remove this debt from its books during next quarter as the statute of limitation for collection has passed and the creditor has not sought payment. As of June 30, 2011, the Company had capital lease obligations totaling $49,396 in arrears relating to its General Electric master equipment lease. The lease has been canceled. The Company expects to remove this debt from its books during next quarter as the statute of limitation for collection has passed and the creditor has not sought payment. Litigation The Company is not currently engaged in any litigation that will effect its current operations. Indemnities and Guarantees The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Nevada. In connection with a certain facility lease and a transponder agreement, the Company has indemnified its lessor for certain claims arising from the use of the facilities and transponder capacity. The duration of the guarantees and indemnities varies, and in many cases is indefinite. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheet. Litigation In April 2006 OBN filed suit in California against Firestone Communications, its satellite uplink provider claiming the "force majeure" clause in the contract. Firestone filed suit against the Company in Texas for $141,000 claiming non-payment lease amount. The Company agreed to a stipulated judgment to repay the debt by December 31, 2007. Monthly cash payments of $15,000, $10,000 and $10,000 were made in accordance with the agreement in June, July and August of 2007, respectively. The $10,000 payments for September, October and November were not made. In September 2008 the Company agreed to a $62,500 payoff amount when a $50,000 payment was made followed by the $12,500 final payment. Thus, this debt has been fully paid. In the opinion of management, this legal matter involving the Company does not have a material adverse effect on the Company's financial condition or results of operations. Indemnities and Guarantees The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions. The Company indemnifies its directors, officers, employees and agents to the maximum extent permitted under the laws of the State of Nevada. In connection with a certain facility lease and a transponder agreement, the Company has indemnified its lessor for certain claims arising from the use of the facilities and transponder capacity. The duration of the guarantees and indemnities varies, and in many cases is indefinite. These guarantees and indemnities do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying consolidated balance sheet. NOTE 6 - INCOME TAXES The Company accounts for income taxes in accordance with ASC 740-10, "Accounting for Income Taxes." Under the asset and liability method of ASC 740-10, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740-10, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A reconciliation of income taxes computed at the federal statutory rate of 34% to the provision for income taxes is as follows for the fiscal year ended June 30, 2011: June 30, June 30, 2011 2010 ------------ ----------- Tax benefit at statutory rates (34.00%) (34.00%) Difference resulting from: State taxes (5.83%) (5.83%) Changes in valuation allowance 39.83% 39.83% ============ =========== Total 0% 0% The valuation allowance increased by $298,907 during the fiscal year ended June 30, 2011. No current provision for income taxes, other than California minimum taxes, is expected for the year ending June 30, 2011. No operating profits are expected to be generated in California, during the year ended June 30, 2011. Net deferred income taxes are as follows as of the following dates: June 30, June 30, 2011 2010 ----------- ----------- Deferred tax liabilities $ -- $ -- Deferred tax assets: Net operating losses $ 6,055,414 $ 5,935,811 Reserves and accruals ( 40,137) (219,442) ---------- ---------- Total deferred tax assets 6,015,277 5,716,370 Less valuation allowance (6,015,277) (5,716,370) ------------- ------------- $ --- $ --- ============= ============= The Company has approximately $18,000,000 in Federal and California State net operating loss carryforwards as of June 30, 2011, which, if not utilized, expires through 2029. The utilization of the net operating loss carryforwards might be limited due to restrictions imposed under federal and state laws upon a change in ownership. The amount of the limitation, if any, has not been determined at this time. A valuation allowance is provided when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As a result of the Company's continued losses and uncertainties surrounding the realization of the net operating loss carryforwards, management has determined that the realization of the deferred tax assets is questionable. Accordingly, the Company has recorded a valuation allowance equal to the net deferred tax asset balance as of June 30, 2011. NOTE 7 - NOTES PAYABLE At June 30, 2011, the Company had a $439,000 balance of notes payable to a third party. During the quarter ending September 30, 2009 the loan was converted to a no interest loan with no set maturity date, and is payable upon demand. A total of $98,659 of accrued interest was forgiven. An additional $8,500 of interest was paid with 50,000 shares of company stock valued at $0.17 per share. This debt has been fully extinguished. In October 2009 the Company repaid the loan balance that was outstanding under a 10% promissory note from family members of the Company's officers totaling $3,500 by issuing 37,576 shares of its stock. The note had no set maturity date, and was payable upon demand. At the time of retirement the accrued interest on the note had totaled $2,888. At June 30, 2011, the Company had a $175,264 balance of notes payable to a ex-company executive that bears interest at 0.5%. The note has no set maturity date, and is payable upon demand. As of June 30, 2011, the accrued interest on the note totaled $872. At June 30, 2011, the Company had a $498,949 balance of notes payable to a ex-company executive that bears interest at 0.5%. The note has no set maturity date, and is payable upon demand. As of June 30, 2011, the accrued interest on the note totaled $2,482. Related party interest expense under these notes for the fiscal year ended June 30, 2011 and 2010 was $3,354 and $0, respectively. In October 2009 the Company repaid the loan balance that was outstanding under a $5,000 10% promissory note from a third party. The note was paid by issuing 49,511 shares of its stock. The note had no set maturity date and was payable upon demand. At the time of retirement the accrued interest on the note totaled $3,417. At June 30, 2011, the Company had a $272,083 balance of notes payable to a third party that bears interest at 0.5%. The note has no set maturity date, and is payable upon demand. As of June 30, 2011, the accrued interest on the note totaled $5,553. In October 2009 the Company repaid the loan balance that was outstanding under a $30,000 loan to a third party that had a 18% interest rate by issuing 525,000 shares of its stock. At the time of retirement the accrued interest on the note totaled $900. Non-related party interest expense under these notes for the fiscal years ended June 30, 2011 and 2010 was $1,333 and $1,333, respectively. NOTE 8 - STOCKHOLDERS' EQUITY Preferred Stock --------------- The Company has authorized 20,000,000 shares of preferred stock. As of June 30, 2011, the Company has not designated any series of preferred stock or entered into any agreements. Common Stock ------------ There were no stock transactions during the fiscal year ended June 30, 2011. NOTE 9 - STOCK OPTIONS In May 2003, the Company established the OBN Holdings, Inc. 2003 Stock Option Plan (the "Plan"). The Plan provides for the granting of up to 60,000 options to purchase the Company's common stock at prices no less than fair market value (as determined by the Board of Directors) at the date of grant. Options granted under the Plan will be exercisable over a period of ten years from the date of the grant. These options will vest on a pro rata basis over the term of the options. At the end of the term of the options or upon termination of employment, outstanding options will be cancelled. As of June 30, 2008, no options have been granted under the Plan. On March 31, 2003, the Company committed to issue warrants to purchase 100,000 shares of common stock to various investors and employees. Each warrant entitles the holder thereof to purchase one share of common stock at a price per share of $40.00 beginning 180 days following the effectiveness of the Company's registration statement and ending on August 25, 2006. Each unexercised warrant is redeemable by the Company at a redemption price of $0.01 per warrant at any time, upon 30 days written notice to holders thereof, if (a) the Company's common stock is traded on NASDAQ or listed on an exchange and (b) the market price (defined as the average closing bid price for twenty (20) consecutive trading days) equals or exceed 120% of the $40.00 per share exercise price. No expense was recorded for the issuance of these warrants as the warrants (1) were issued to new investors in connection with fundraising activities or (2) had no intrinsic value under APB 25 for those warrants granted to employees (since the warrant exercise price was higher than the estimated fair value of the common stock on the date of grant). As of June 30, 2007 and 2008 no warrants had been exercised and there were no warrants outstanding. NOTE 10 - LOSS PER SHARE Basic and diluted loss per common share is computed as follows for the fiscal years ended June 30, 2011 and 2010: Basic and diluted loss per common share is computed as follows: For the Fiscal Years Ended ------------------------------- June 30, June 30, 2011 2010 ------------- ------------- Numerator for basic and diluted loss per common share: Net loss ($ 351,772) ($ 5,141,230) Denominator for basic and diluted loss per common share Weighted average common shares outstanding 22,318,904 21,084,190 Net loss available to common stockholders per common share ($0.02) ($0.24) NOTE 11 - RELATED PARTY TRANSACTIONS See Note 7 for information related to the Company's related party notes payable. In March 2006, a total of $200,000 of deferred salaries was converted into 200,000 of OBN shares after the Board of Directors approved a December 2005 resolution to allow executives to convert all but $50,000 of each of their deferred salaries into shares of OBN stock during a six month period beginning January 1, 2006. The conversion rate was set at $1.00 per share, which was above the closing price on the date of the resolution. The conversion period ended June 30, 2006. In December 2006, the Company created a Non-Qualified Deferred Compensation Plan ("the Plan"). The accrued salaries and salary-related deductions for Roger Smith, CEO of the Company, totaling $308,685, Larry Taylor, CFO of the Company, totaling $402,815 and Donald Wilson, Senior Vice President of the Company, totaling $379,553, were converted from debt into the Company's common stock at a price of $1.50 per share, which totaled 205,790 shares; 268,543 shares; and 253,036 shares, respectively. The common stock is being held by the Company in the Plan. Access to the shares is prohibited for a period of not less than thirteen (13) months from the time of deferral. At the time of participation, the participants were required to specify when the stock would be distributed, which varies per participant. The value of the shares on the conversion date was $0.80 per share. The resulting gain on extinguishment of the liability of $509,158 was recorded in additional paid in capital due to the related-party nature of the transaction. In March 2007 accrued salaries of $58,988 were converted into 58,988 shares of common stock at a conversion rate of $1.00 per share and $100,000 was converted into 66,667 shares at $1.50 per share. The value of the shares on the conversion date was $1.00 per share. The resulting gain on extinguishment of the liability of $33,334 was recorded in additional paid in capital due to the related-party nature of the transaction. In April 2007, the Board of Directors approved a resolution to grant special hardship compensation to executives for working without salaries for the past four years. In April 2007 a total of 675,000 shares valued at $1.20 per share were issued to three executives. The shares are being held in a deferred compensation plan. In December 2008 the Board authorized management to convert accrued salaries into shares at the market rate. A total of $200,000 of accrued executive salaries was converted into 666,667 shares of common stock at a market rate of $0.30 per share. The shares are being held in the Company's non-qualified deferred compensation plan In December 2008 the Company directors purchased 16,667 of company stock valued at $0.30 per share for a total purchase price of $5,000. In December 2008 a total of 5,600,000 shares were issued to executives as bonus compensation for meeting and exceeding established performance goals during the 2007-08 fiscal year. The market price was $0.30 at the time of authorization. Therefore, a $1,680,000 compensation expense will be recorded for the quarter ending December 31, 2008. The shares are being held in the deferred compensation plan. In May 2009 a total of 416,667 shares were issued to executives as $50,000 of accrued salaries were converted to stock at $0.12 per share. The market price was $0.10 at the time of conversion. The shares are being held in the deferred compensation plan. NOTE 12 - SUBSEQUENT EVENTS In October 2011, OBN Holdings suspended the operations of OBN Holdings (HK) and OBN Holdings Japan. In February 2011, Kyodo USA obtained permits and licenses to import and wholesale alcoholic beverages in the states of California, Texas and New Mexico. In April 2011, the terms of Peter Lindhout and Christine Ohama ended as members of the OBN Holdings board of directors. In October 2011 the Company form a new subsidiary called "Satori Beverages International Ltd". The subsidiary was formed to house all of the beverage related trademarks and licenses, to manage and market the beverage brands owned by OBN, and to manage and market brands owned by third party companies. Satori Beverages International Ltd is a Nevada corporation. In December 2011, the OBN Holdings Board of Directors passed a resolution to spin off Satori Beverages International, Kyodo USA and Kyodo UK from the Company, along with assets directly related to the aforementioned entities. Satori Beverages will be the parent company and Kyodo USA and Kyodo UK will be wholly owned subsidiaries. All holders of record of February 15, 2012 will receive one share of Satori Beverages common stock for each share of OBN Holdings stock owned. In February 2012, Satori Beverages International, Kyodo USA and Kyodo UK spun off from OBN Holdings. All of the shareholders of record on February 15, 2012 received one share of Satori Beverages common stock for each share of OBN Holdings stock owned. In February 2013, OBN Holdings filed a Form 15 with the Securities and Exchange Commision to suspend reporting requirements. In February 2013, Barry Allen retired from the OBN Holdings board of directors. ITEM 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosure None. ITEM 9A. Disclosure Controls and Procedures An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as define in Rule 131-15(e) and 15d-15(c) under the Securities Exchange Act of 1934 is routinely conducted. (a) Evaluation of Disclosure Controls and Procedures. The Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of the effectiveness of the Company's disclosure controls and procedures. Based upon that evaluation, the CEO and CFO concluded that the design and operations of these disclosure controls and procedures were effective. Our disclosure controls and procedures were effective in timely alerting them to the material information relating to the Company's (or the Company's consolidated subsidiaries) required to be included in the Company's periodic filing with the SEC, subject to the various limitations on the effectiveness set forth below. Information relating to the Company, required to be disclosed in SEC reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to the Company's management, including our CEO and CFO, as appropriated to allow timely decisions regarding required disclosure. (b) Changes in Internal Control over Financial Reporting. There has been no change in the Company's internal control over financial reporting that occurred during the year ended June 30, 2011 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Limitations on the Effectiveness of Internal Controls The Company's management, including the CEO and CFO, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will necessarily prevent all fraud and material error. An internal control system, no mater how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of the control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple effort or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, and/or the degree of compliance with the policies or procedures may deteriorate. PART III ITEM 10. Directors, Executive Officers, Promoters and Control Persons, Compliance with Section 16(A) of the Exchange Act The following table sets forth the name and age of each director, the year he (she) was first elected a director and his (her) position(s) with OBN Holdings, Inc. Name Age Year Elected Position ----------------- --- ------------ -------------------- Roger Neal Smith 59 2001 CEO & Board Chairman Larry Taylor, Ph.D. 59 2002 Director Barry Allen 71 2003 Director Peter Lindhout 57 2007 Director Chistine Ohama 56 2004 Director Roger Neal Smith. Mr. Smith has served as our President and CEO since inception and has been responsible for creating and managing all of the operations of OBN and its subsidiaries. From 1996 through 2000 Mr. Smith served as a financial consultant for Salomon Smith Barney and was responsible for managing the investments of his clients, which included individuals and businesses throughout the world. Larry Taylor, PhD. Dr. Taylor was our CFO from April 2003 to June 2010. He was responsible for accounting, tax preparation and planning. From 1989 until joining us, Dr. Taylor was the owner of The Creighton Group where he was responsible for all management activities, including accounting, tax preparation and planning. Dr. Taylor previously served as a Senior Manager in the consulting practice with Ernst and Young (during his tenure, he was with Arthur Young), and with Deloitte and Touche. Barry Allen. Mr. Allen began serving on the Company's board of directors since August 2003. Since 1998 he has operated International FieldWorks, Inc., a management consulting firm, and holds the title of CEO. Additionally, since 2000, Mr. Allen has served as Vice President of RxDispense, Inc. His responsibilities include business development, advisory committee development, partnership development and development of professional service providers. Peter Lindout. Mr. Lindhout began serving on the Board in April 2007. He is the President & co-founder of Qualico Capital Corp., an Investment Banking firm based in Vancouver, British Columbia, with offices in Toronto, Hong Kong, Curasel, and Frankfurt. The Company manages a fund of $30,000,000 Euro. He is also Managing Partner of the Qualico Group of Companies, a subsidiary of Qualico Capital that facilitates market awareness and increasing exposure for public companies. Mr. Lindhout's role in Business Development has aided in the successful increase of shareholder equity for many a client company and has been instrumental in providing advice in successful asset management. Christine Ohama. Ms. Ohama became a member of the Company's board of directors in May 2004. She is Senior Vice President of Marketing for Enviro Board with over 20 years experience in retail and wholesale sales and marketing management. Prior to Enviro Board, Ms. Ohama served as Director of Sales Strategy for Bravo Cable Networks, and Regional Sales Director Western Region for MuchMusic USA, with the primary responsibility for increasing and retaining the network's viewers. She also spent many years in the financial services industry, as a retail stockbroker for a major NYSE member firm; served as Project Manager for a large prototype retail banking sales program and as associate director of a wholesale retail brokerage service program owned by Security Pacific Bank and used by over three hundred banks and saving and loans nationwide. Board of Directors Meetings and Committees During the fiscal year ended June 30, 2011, there was one meeting of the board of directors where numerous actions were taken with the unanimous written consent of the directors. The board of directors established its compensation and audit committees, but has yet to establish a governance committee. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors and those persons who beneficially own more than 10% of our outstanding shares of common stock to file reports of securities ownership and changes in such ownership with the Securities and Exchange Commission. Officers, directors and greater than 10% beneficial owners are also required by rules promulgated by the SEC to furnish us with copies of all Section 16(a) forms they file. Based solely upon a review of the copies of such forms furnished to us, we believe that during the year ended June 30, 2010 all of our officers, directors and greater than 10% beneficial owners complied within the applicable Section 16(a) filing requirements. Code of Ethics for Financial Professionals The Company has adopted a Code of Ethics for Financial Professionals. The Code of Ethics has been posted and may be viewed on our website at: http://www.obnholdings.com ITEM 11. Executive Compensation Deferred Compensation to Executive Officers. In April 2007, the Board of Directors approved a resolution that granted executives 675,000 shares for "hardship compensation" because the executives had been working without paid salaries for past four years. The market price of the shares was $1.20 at the time of issuance. The shares were placed in the Company's Non-Qualified Deferred Compensation Plan. The shares will be available to the executives after May 2011. In December 2008 a total of 5,600,000 shares were issued to executives as bonus compensation for meeting and exceeding established performance goals during the 2007-08 fiscal year. The market price was $0.30 at the time of authorization. Therefore, a $1,680,000 compensation expense was recorded FYE 2009 for the quarter ending December 31, 2008. The shares were being held in the deferred compensation plan. Cash Compensation of Executive Officers. The following table sets forth the total compensation earned by the Chief Executive Officer and all other executive officers that earned in excess of $100,000 per annum during any of our last three fiscal years. A portion of salaries to executives have been converted to stock which are being held in the Company's deferred compensation plan; the remainder of the salaries continues to accrue. Accrued salaries will be paid as monies become available. Annual Compensation Long-Term Compensation Other Common Shares Name and 6/30 Awards Underlying All Other Position Year Compensation Warrants Compensation End *Salary($) Bonus($) ($) Granted(#) ($) Roger Smith 2011 $150,000 -0- -0- -0- -0- President 2010 $150,000 -0- -0- -0- -0- and CEO 2009 $150,000 -0- -0- -0- -0- Larry Taylor 2010 $150,000 -0- -0- -0- -0- CFO 2009 $150,000 -0- -0- -0- -0- Donald Wilson 2009 $ -0- -0- -0- -0- -0- President Eclectic * All salaries are being accrued. No salaries have been paid to Larry Taylor and Donald Wilson. Roger Smith receives a small portion of his salary. No options or warrants were exercised or granted in fiscal 2011. Aggregated Warrant/SAR Exercises and Fiscal Year-End Warrant/SAR Value Table All warrants/SAR expired in August 2006. There are no warrants/SAR pending at this time. Director Compensation Board members that have been compensated include: *Amount Date ---------- ----------- Anital DeFrantz $5,000 March, 2008 Barry Allen $5,000 March, 2008 * Director compensation for 2009, 2010 and 2011 was being accrued. ITEM 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth information regarding beneficial ownership of our common stock at June 30, 2011 by (i) those shareholders known to be the beneficial owners of more than five percent of the voting power of our outstanding capital stock, (ii) each director, and (iii) all executive officers and directors as a group: Number of Name and Address of Shares Beneficial Owner (1) Owned Percent Notes --------------------- ------------ --------- ------- Roger N. Smith (Director and Officer) 4,213,067 18.98% Larry Taylor (Director) 3,078,125 13.87% Jia Lao 2,250,000 10.14% Qualico Capital LLP 1,616,277 7.28% (2) Qing Wu 1,300,000 5.86% Takeo Suzuki (Executive) 810,500 3.65% Barry Allen (Director) 5,000 * Peter Lindhout (Director) 0 * All Directors and Officers as a Group (5 Persons) 8,128,359 36.62% _____________ * Less than 1% (1) Unless otherwise indicated, the address of the beneficial owner is c/o OBN Holdings, Inc., 8275 South Eastern Avenue, Suite 200, Las Vegas, Nevada 89123. (2) Shares paid to Canadian investment banking firm for assistance with implementation of the Company's acquisition strategy. ITEM 13. Certain Relationships and Related Transactions, and Director Independence At June 30, 2011 and 2010, the Company had $439,910 in loans from related parties under 5% promissory notes, of which $0 was advanced to the Company during either years. The principal and interest is due and payable on demand. As of June 30, 2011 and 2010, the accrued interest on these notes was zero as the interest prior and future interest had been forgiven. In October 2009 the Company repaid the loan balance that was outstanding under a 10% promissory note from family members of the Company's officers totaling $3,500 by issuing 37,576 shares of its stock. The note had no set maturity date, and was payable upon demand. At the time of retirement the accrued interest on the note had totaled $2,888. The Company had short-term loans with its executives for a total of $500 and $19,598 at June 30, 2010 and 2009, respectively. The loans have no interest rate and is payable upon demand. As of June 30, 2010 any outstanding loan balances were paid. Related party interest expense under these notes for the year ended June 30, 2010 and 2009 was $0 and $0, respectively. In December 2005 the Board of Directors approved a resolution to allow executives to convert all but $50,000 of each of their deferred salaries into shares of OBN stock during a six month period beginning January 1, 2006. The conversion rate was set at $10.00 per share, which was above the closing price on the date of the resolution. The conversion period ended June 30, 2006. In March, 2006 a total of $200,000 of deferred salaries was converted into 20,000 of OBN shares. In December 2006, accrued salaries and salary-related deductions for Roger Smith, CEO of the Company, totaling $308,685, Larry Taylor, CFO of the Company, totaling $402,815 and Donald Wilson, Senior Vice President of the Company, totaling $379,553, were converted from debt into the Company's common stock at a price of $1.50 per share, which totaled 205,790 shares; 268,543 shares; and 253,036 shares, respectively. The value of the shares on the conversion date was $0.80 per share. The resulting gain on extinguishment of the liability of $509,158 was recorded in additional paid in capital due to the related-party nature of the transaction. In March 2007 accrued salaries of $58,988 were converted into 58,988 shares of common stock at a conversion rate of $1.00 per share and $100,000 was converted into 66,667 shares at $1.50 per share. The value of the shares on the conversion date was $1.00 per share. The resulting gain on extinguishment of the liability of $33,334 was recorded in additional paid in capital due to the related-party nature of the transaction. In April 2007, the Board of Directors approved a resolution to grant special hardship compensation to executives for working without salaries for the past four years. In April 2007 a total of 675,000 shares valued at $1.20 per share were issued to three executives. The shares are being held in the Company's Non-Qualified Deferred Compensation Plan. In December 2008 the Company directors purchased 16,667 of company stock valued at $0.30 per share for a total purchase price of $5,000. In December 2008 Company executives converted $200,000 of accrued salary into 666,667 shares of OBNI shares at the $0.30 per share market rate. The shares are being held in the Company's deferred compensation plan. In December 2008 a total of 5,600,000 shares were issued to executives as bonus compensation for meeting and exceeding established performance goals during the 2007-08 fiscal year. The market price was $0.30 at the time of authorization. Therefore, a $1,680,000 compensation expense was recorded in the quarter ending December 31, 2008. The shares are being held in the Company's deferred compensation plan. ITEM 14. Principal Accountant Fees and Services Tarvaran & Askelson Company, LLP was selected as independent registered public accounting firm to audit our financial statements for the year ended June 30, 2008. The firm did not audit our financial statements for the fiscal years ended June 30, 2011 and 2010 at the request of Management. Audit and Non-Audit Fees Aggregate fees for professional services rendered to the Company by Tarvaran & Askelson Company, LLC for the year ending June 30, 2011 and 2010 were as follows: Services Provided 2011 2010 Audit Fees $ - $ 25,820 Audit Related Fees $ - $ - Tax Fees $ - $ - All Other Fees $ - $ - Total $ - $ 25,820 Audit Fees. The aggregate fees billed for the years ended June 30, 2011 and 2010 were for the audits of our financial statements and reviews of our interim financial statements included in our annual and quarterly reports. Audit Related Fees. There were no fees billed for the years ended June 30, 2011 and 2010 for the audit or review of our financial statements that are not reported under Audit Fees. Tax Fees. There were no fees billed for the years ended June 30, 2011 and 2010 for professional services related to tax compliance, tax advice and tax planning. PART IV ITEM 15 Exhibits, Financial Statement Schedules None SIGNATURES Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OBN HOLDINGS, INC (Registrant) Date: February 12, 2013 /s/ ROGER Neal SMITH ----------------------- Roger Neal Smith Chief Executive Officer

Undesignated Preferred Stock Common Stock Additional Total --------------- --------------- Paid-in Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Deficit ------ ------ ------ ------ --------- ----------- ------------ Balance, June 30, 2008 -- -- 11,357,465 11,357 13,945,405 ($8,949,507) 5,007,255 Stock issued for cash -- -- 1,115,276 1,115 216,108 -- 217,223 Stock issued for serivces -- -- 6,374,828 6,375 1,919,721 -- 1,926,096 Stock issued for conversion of salaries -- -- 1,083,354 1,083 248,917 -- 250,000 Subscription receivable -- -- -- -- -- -- (7,500) Foreign currency transaction -- -- -- -- -- -- 19,642 Net income (loss) -- -- -- -- -- (3,367,531) (3,367,531) ------ ------ --------- ------ --------- ------------ ----------- Balance, June 30, 2009 -- -- 19,930,903 19,931 16,330,151 (12,317,038) 4,045,184 ------ ------ --------- ------ --------- ------------ ----------- Stock issued for cash -- -- 986,640 987 83,168 -- 84,155 Stock issued for services -- -- 975,000 975 90,525 -- 91,500 Stock issued to purchase asssets -- -- 60,240 60 11,988 -- 12,068 Stock issued to retire debt -- -- 212,087 212 23,993 -- 24,205 Subscription receivable -- -- 29,412 29 4,971 -- 7,500 Foreign currency transaction -- -- -- -- -- 19,642 31,528 Net income (loss) -- -- -- -- -- (5,141,230) (5,141,230) ------ ------ --------- ------ --------- ------------ ----------- Balance, June 30, 2010 -- -- 22,194,462 22,194 16,544,793 (17,438,626) (840,111) ------ ------ --------- ------ --------- ------------ -----------

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