SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 
 x
              ANNUAL
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
fiscal year ended August 31, 2009
 
 o
              TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
transition period from ___________ to ___________
 
 Commission
File No. 333-108690
 
 RED
ROCK PICTURES HOLDINGS, INC.
 (Exact
name of registrant as specified in its charter)
 
 NEVADA
              
              98-0441032(State
      or other jurisdiction of
                incorporation
      or organization)
              
              (IRS
      Employer Identification No.)
 
 6019
      Olivas Park Drive, Suite B
                Ventura,
      California
              
              93003(Address
      of principal executive offices)
              
              (Zip
      Code)
 
 (323)
790-1813
 (Registrant’s
telephone number, including area code)
 
 Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class registered:
              Name
      of each exchange on which registered:None
              NoneSecurities
      registered under Section 12(g) of the Exchange Act:Common
      Stock, par value $.001
                (Title
      of class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 the Securities Act.
 Yes o   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 o   No x
 
 Indicate
by check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the last 90 days. Yes x 
 No o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes oNo o
  
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
 
 Large
accelerated
filer                                                    
o
                                           Accelerated
filer                                         
o
 Non-accelerated
filer                                                      
o
                                           Smaller
reporting
company                        x
 (Do not
check if a smaller reporting company)
 
 Revenues
for year ended August 31, 2009: $635,494
 
 Aggregate
market value of the voting common stock held by non-affiliates of the registrant
as of August 31, 2009, was: $402,296
 
 Number of
shares of the registrant’s common stock outstanding as of December 14, 2009 was:
106,816,335
 
 Transitional
Small Business Disclosure Format:   Yes x
       No o
 
 
 
 
 FORM 10-K
 
 FOR
THE YEAR ENDED AUGUST 31, 2009
 
 INDEX
 
 PART IItem 1.
              
              Business
              
              2Item 1A.
              
              Risk
      Factors
              
              5Item 1B.
              
              Unresolved
      Staff Comments
              
              7Item 2.
              
              Properties
              
              7Item 3.
              
              Legal
      Proceedings
              
              8Item 4.
              
              Submission
      of Matters to a Vote of Security Holders
              
              8PART IIItem 5.
              
              Market
      for the Registrant's Common Stock, Related Stockholder Matters, and Issuer
      Purchases of Equity Securities
              
              9Item 6.
              
              Selected
      Consolidated Financial Data
              
              9Item 7.
              
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations
              
              9Item 7A.
              
              Quantitative
      and Qualitative Disclosure about Market Risk
              
              12Item 8.
              
              Financial
      Statements and Supplementary Data
              
              12Item 9.
              
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
              
              12Item 9A.
              
              Controls
      and Procedures
              
              12Item 9B.
              
              Other
      InformationPART IIIItem 10.
              
              Directors
      and Executive Officers and Corporate Governance
              
              14Item 11.
              
              Executive
      Compensation
              
              16Item 12.
              
              Security
      Ownership of Certain Beneficial Owners and Management
              
              20Item 13.
              
              Certain
      Relationships and Related Transactions
              
              17Item 14.
              
              Principal
      Accountant Fees and Services
              
              17PART IVItem 15.
              
              Exhibits,
      Financial Statement Schedules and Reports on Form 8-K
              
              18Signatures
              
              19
 
 
 
 
  CAUTIONARY
STATEMENT RELATED TO FORWARD LOOKING STATEMENTS
 
 This Annual Report on
Form 10-K includes certain forward-looking statements as defined within
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, relating to revenue, revenue
composition, earnings, projected plans, performance, contract procurement,
demand trends, future expense levels, trends in average headcount and gross
margins, and the level of expected capital expenditures. Such forward-looking
statements are based on the beliefs of, estimates made by, and information
currently available to Red Rock Pictures Holdings Inc. management and are
subject to certain risks, uncertainties and assumptions. Any statements
contained herein (including without limitation statements to the effect that the
Company or management "estimates," "expects," "anticipates," "plans,"
"believes," "projects," "continues," "may," "will," "could," or "would" or
statements concerning "potential" or "opportunity" or variations thereof or
comparable terminology or the negative thereof) that are not statements of
historical fact should be construed as forward-looking statements. The actual
results of Red Rock Pictures Holdings Inc. may vary materially from those
expected or anticipated in these forward-looking statements. The realization of
such forward-looking statements may be impacted by certain important
unanticipated factors including those discussed in "Risk Factors" under
Item 1A, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," at pages 12-15. Because of these and other
factors that may affect Red Rock Pictures Holdings Inc.’s.  operating
results, past performance should not be considered as an indicator of future
performance, and investors should not use historical results to anticipate
results or trends in future periods. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements that may be made to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. Readers should
carefully review the risk factors described in this and other documents that Red
Rock Pictures Holdings, Inc. files from time to time with the Securities and
Exchange Commission ("SEC"), including subsequent Current Reports on
Form 8-K, Quarterly Reports on Form 10-Q and Annual Reports on
Form 10-K.
 
 HOW
TO OBTAIN SEC FILINGS
 
 All reports filed by
Red Rock Picture Holdings, Inc. filed with the SEC are available free of charge
via EDGAR through the SEC website at www.sec.gov. In addition, the public may
read and copy materials filed by the Company with the SEC at the SEC's public
reference room located at 450 Fifth St., N.W., Washington, D.C.
20549.  Red Rock Pictures Holdings also provides copies of its
Forms 8-K, 10-K, 10-Q, Proxy and Annual Report at no charge to investors
upon request.
 
 
 
 1
  PART
I
 
 
 ITEM 1. DESCRIPTION OF
BUSINESS
 
 As used in this report, "Red Rock
Pictures Holdings, Inc.", "the Company", "us”, “we," "our" and similar terms
include Red Rock Pictures Holdings, Inc. and its subsidiaries, unless the
context indicates otherwise.
 
 General
 
 Red Rock
Pictures, Inc. was incorporated on August 18, 2006 under the laws of the State
of Nevada and was acquired by Red Rock Pictures Holdings Inc. on August 31,
2006.  The Company engages in the business of developing, financing,
producing and licensing feature-length motion pictures and direct response
infomercials.
 
 On June
6, 2008, the Company entered into a Stock for Stock Exchange Agreement (the
“Exchange Agreement”) with Studio Store Direct, Inc. (“SSD”) and all of the
current SSD Shareholders.  Pursuant to the Exchange Agreement,
the Company acquired 100% of the assets of SSD by issuing 11,000,000 restricted
common shares in exchange for all the issued and outstanding shares of
SSD.  Further, SSD became a wholly owned subsidiary of the
Company.  With the addition of SSD, the Company also operates as a
traditional infomercial production and distribution company.   SSD’s
model provides a turnkey new revenue solution for major Hollywood studios and
independent distributors.
 
 On
January 8, 2009, the Company announced that it has entered into a definitive
agreement to acquire New York based ComedyNet.TV, Inc. (“ComedyNet”), a leader
in multimedia comedic content distribution.  The transaction was
terminated on May 28, 2009 due to the ComedyNet’s failure to complete its
obligations under the asset purchase agreement.
 
 Business
 
 We are
engaged in the finance, production, distribution and marketing of filmed
entertainment products, including theatrical motion pictures, television
programs, home video products, and digitally delivered entertainment and
media.  We were founded in 2006 to leverage the experience and
expertise of its management team and exploit emerging opportunities in
traditional and digital media and entertainment.
 
 Development
 
 Development
activities are a fundamental building block to our future financial success. We
will devote significant resources to identifying and developing material to be
produced.
 
 Financing
 
 We will
be involved in the funding of motion pictures and other entertainment and media
properties, both for its own library and development activities as well as in
partnership with outside producers.
 
 Production
 
 Once a
project is developed and financing is committed, either through internal sources
or through licensing and pre-selling the project to the exhibition, television,
home entertainment and other markets, we will attempt to produce at the lowest
possible cost consistent with the quality that it seeks to achieve. We avoid the
substantial overhead of major studios by maintaining only a small staff and
engaging production staff only as required.
 
 Revenue
Sources
 
 We
currently have revenues from interest income earned on production
advances.  We expect to derive additional revenues from the worldwide
exploitation of our entertainment properties across multiple media and
distribution channels.  We expect to receive revenue from all of the
following sources on a project-by-project basis:
 
 ·
              Producer
      and production fees for our services in the creation and production of
      motion pictures, television and other media;·
              Royalties
      and participation in the future earnings of the properties that we
      develop, produce and/or finance;·
              Interest
      and fees associated with our financing activities;·
              Royalty
      payments from merchandising of consumer products bearing the logos,
      brands, and other forms of intellectual property from our company’s films,
      television programs and archives;  Royalties and license payments
      from exploitation of soundtrack and music publishing rights for music from
      our company’s films, television programs and archives·
              Royalties
      and participation in infomercial productions and related services for
      outside clients and·
              Proprietary
      infomercial and multi channel marketing
  campaigns.
  2
 The
distribution channels associated with these revenue streams are discussed in
greater detail below:
 
 Theatrical
Distribution & Exhibition
 
 Once a
picture has been green lighted, the distribution arm of the studio begins
planning where the picture will be slotted in its schedule for theatrical
release.  Numerous negotiations and strategic issues must be managed,
including the film’s release date, distribution pattern and number of screens
(wide release, limited release or platform release) and exhibitor (theater and
theater chain) financial terms.
 
 Theatrical
revenues are divided between the distributor and the theater owners
(exhibitors). The division of theatrical proceeds is usually determined through
negotiation between the exhibitors and distributors. However, sometimes a bidding process occurs in
which theaters compete against each other for a particular movie with the film
going to the theater that offers the most favorable terms to the distributor.
“Film rentals” are the portion of a film’s theatrical revenues remitted to a
distributor. As a general rule of thumb, a distributor receives 50% of a film’s
gross theatrical revenues. However, the actual division of box-office proceeds
is based upon a formula in which the distributor gets a disproportionate share
of the box-office in the early release of a film. Therefore, theater exhibitors
prefer long-running successful films, as opposed to films that have big opening
weekends and subsequently have substantial drop-offs.
 
 Whether a
film has been financed by a studio or has been acquired from an outside
financing source for distribution, the studio receives a distribution fee. A
distribution fee is a percentage charge on incoming film rentals from theaters,
video revenues, pay television, etc. The fee is simply a service charge designed
solely to support the existence of the distribution organization; it does not apply toward the
recovery of any expenses related to releasing the film (such as prints and
advertising). Deductions for direct costs of marketing a film are made after the
imposition of the fee. The amount of the distribution fee can vary substantially
depending upon many factors. The most important factor in determining the amount
of the fee is whether the film has been financed internally or
externally.
 
 Home
Video – Video Cassette and DVD
 
 As the
market has matured, video revenues have become the most significant source of
income for producers and distributors. Furthermore, home video provides the most
consistent source of revenue of all of the various windows of exhibition
including theatrical.   We currently do not operate our own internal
Home Entertainment distribution business, but, rather, we intend to partner with
the major studios and others to ensure that our productions are sold into the
marketplace.
 
 Pay-Per-View
and Video on Demand
 
 Pay-per-view
refers to films shown on television which subscribers can order through their
local cable operator. Additionally, with the rise of technology and other
digital distribution platforms, Pay-Per-View can also occur via Satellite, and
via Internet delivery. Our projects will be sold into the Pay-Per-View and Video
on Demand markets either directly or as part of a larger distribution agreement
with a studio or other entity.
 
 Pay
Cable
 
 Pay cable
refers to individual cable stations that have a monthly subscription fee, such
as HBO, Showtime, The Movie Channel, Cinemax, Starz and Encore. Pay cable
programming is comprised primarily of three facets:
 
 ·
              Movies
      licensed from the studios and independent distributors·
              Pay
      cable premiere movies that are shown for the first time on the pay cable
      service, these movies are both financed and produced by the cable
      network itself or licensed from independent producers
  and·
              Special
      events, such as sporting events and
concerts.
 
 Our
properties will be sold into the Pay Cable marketplace either directly or as
part of a larger distribution agreement with a studio or other
entity.
 
 Basic
Cable
 
 Basic
cable refers to a group of cable stations that are generally included in a basic
cable package, such as the Sundance Channel, the Independent Film Channel, TNT,
TBS, Lifetime, USA and others.  Basic cable stations, like the pay
cable stations, are now producing a significant number of their own movies. Our
properties will be sold into the basic cable marketplace either directly or as
part of a larger distribution agreement with a studio or other
entity.
  3
  Network
Television
 
 In the
United States, broadcast network rights are granted to ABC, CBS, NBC, FOX, UPN,
WB or other entities formed to distribute programming to a large group of
stations. The commercial television networks license motion pictures for a
limited number of exhibitions during a period that usually commences two to
three years after a film’s initial theatrical release. Our properties will be
sold into the Network Television marketplace either directly or as part of a
larger distribution agreement with a studio or other entity.
 
 Television
Syndication
 
 Distributors
also license the right to broadcast a motion picture on local, commercial
television stations in the United States, usually for a period commencing five
years after initial theatrical release of the motion picture, but earlier if the
producer has not entered into a commercial television network license. These
contracts are usually for between five to eight showings of a film extending
over a period of 3 to 5 years. This activity, known as “syndication,” has become
an important source of revenue as the number of stations has proliferated, and
thus the competition for programming among local television stations has
increased.  Our properties will be sold into the television
syndication marketplace either directly or as part of a larger distribution
agreement with a studio or other entity
 
 Other Ancillary
Markets
 
 A
distributor may earn revenues from other ancillary sources, unless the necessary
exploitation rights in the underlying literary property have been retained by
writers, talent, composers or other third parties (i.e. soundtrack and music
publishing rights).  Our properties will be sold into other ancillary
markets either directly or as part of a larger distribution agreement with a
studio or other entity.
 
 Foreign
Distribution & Exhibition
 
 All of
the major American distributors (i.e. Warner Brothers, Universal, etc.) have
distribution networks in the major overseas countries.  However, each
foreign country has its own local and independent distribution companies that
not only distribute native product, but also compete against the local branch of
the major studios for independently financed American films. Our properties will
be sold into the foreign marketplace either directly or as part of a larger
distribution agreement with a studio or other entity.
 
 Infomercial
production and distribution
 
 According
to the Electronic Retailing Association (ERA) the infomercial industry accounts
for more than 150 Billion dollars in annual revenue here in the
U.S.  We will leverage our track record and years of combined
expertise in direct response television (DRTV) marketing to provide production
services for independent clients.  These services will yield producer
fees and/or royalties based upon sales revenue generated in response to our
productions.  We will also develop proprietary consumer products
resulting in multi-channel (television, internet, radio, retail, etc.)
campaigns.  These products and related television commercials will be
distributed throughout the world leveraging key contacts and relationships in
various international markets.
 
 Competition
 
 The sale
and distribution of filmed entertainment is a highly competitive
business.  The entertainment industry now comprises six major film
distributors/studios: Sony Pictures, Paramount, Twentieth Century Fox, Warner
Brothers, The Walt Disney Company, and Universal.  Today, the major
studios are multi-national, multi-media and mass marketing communication
complexes with wholly owned distribution operations throughout the
world.  In addition to these majors, there are numerous independent
production and distribution companies. Many of our competitors are larger and
better capitalized than us and have existing distribution channels. In addition,
the number of films or television products released in any given period may
create an oversupply of product in the market, and that may reduce our share of
potential sales and make it more difficult for the films in our library to
succeed.
 
 We
believe that the principal competitive factors in our market are:
 
 ·
              Quality
      of filmed entertainment product;·
              Brand
      recognition;·
              Quality
      of assets;·
              Exemplary
      reputation and track record of our Chief Executive Officer;
      and·
              Filmed
      entertainment rights industry
connections.
 
 Employees
 
 We
currently have one full-time employee.
  4
 
 ITEM 1A—RISK
FACTORS
 
 ADDITIONAL
FACTORS THAT MAY AFFECT FUTURE RESULTS
 
 
 In addition to the other
information in this Annual Report on Form 10K, the following factors should
be considered carefully in evaluating our business and
prospects.
 
 Our
auditor has expressed substantial doubt as to our ability to continue as a going
concern.
 
 Based on
our financial history since inception, our auditor has expressed substantial
doubt as to our ability to continue as a going concern. We do not have
significant sources of revenue and have working capital deficiencies that raise
substantial doubt as to its ability to continue as a going concern. The
Company's existence is dependent upon management's ability to develop profitable
operations and resolve its liquidity problems.
 
 We
have a limited operating history in which to evaluate our business.
 
 We were
incorporated in Nevada in August 2006 and we have limited revenues to date and
we have a limited operating history upon which an evaluation of our future
success or failure can be made.  No assurances of any nature can be
made to investors that the company will be profitable.
 
 We
will require additional funds to achieve our current business strategy and our
inability to obtain additional financing could cause us to cease our business
operations.
 
 We will
need to raise additional funds through public or private debt or sale of equity
to achieve our current business strategy. Such financing may not be available
when needed. Even if such financing is available, it may be on terms that are
materially adverse to your interests with respect to dilution of book value,
dividend preferences, liquidation preferences, or other terms. Our capital
requirements to implement our business strategy will be significant. However, at
this time, we can not determine the amount of additional funding necessary to
implement such plan. We intend to assess such amount at the time we will
implement our business plan. Furthermore, we intend to effect future
acquisitions with cash and the issuance of debt and equity securities. The cost
of anticipated acquisitions may require us to seek additional financing. We
anticipate requiring additional funds in order to fully implement our business
plan to significantly expand our operations. We may not be able to obtain
financing if and when it is needed on terms we deem acceptable. Our inability to
obtain financing would have a material negative effect on our ability to
implement our acquisition strategy, and as a result, could require us to
diminish or suspend our acquisition strategy.
 
 If we are
unable to obtain financing on reasonable terms, we could be forced to delay,
scale back or eliminate certain product and service development
programs.  In addition, such inability to obtain financing on
reasonable terms could have a material negative effect on our business,
operating results, or financial condition to such extent that we are forced to
restructure, file for bankruptcy, sell assets or cease operations, any of which
could put your investment dollars at significant risk.
 
 If
we are unable to retain the services of our chief executive officer, Reno Rolle,
or if we are unable to successfully recruit qualified managerial personnel and
employees with experience in business and the entertainment industry, we may not
be able to continue our operations.
 
 Our
success depends solely upon the continued service of Reno Rolle, our chief
executive officer.  Loss of Mr. Rolle’s services will have a material
adverse effect on our growth, revenues, and prospective business.  We
do not maintain key-man insurance on the life of our chief executive officer. In
addition, in order to successfully implement and manage our business plan, we
will be dependent upon, among other things, successfully recruiting qualified
managerial personnel and employees with experience in business and the
entertainment industry. Competition for qualified individuals is intense. There
can be no assurance that we will be able to find, attract and retain existing
employees or that we will be able to find, attract and retain qualified
personnel on acceptable terms.
 
 There
may be potential liabilities associated with the Company that we were not aware
of at the time of the Merger.
 
 We may
have liabilities that we did not discover or may have been unable to discover
during our pre-acquisition investigation. Any indemnities or warranties may not
fully cover such liabilities due to their limited scope, amount or duration, the
financial limitations of the indemnitor or warrantor, or for other reasons.
Therefore, in the event we are held responsible for the foregoing liabilities,
our operations may be materially and adversely affected.
   5
  The
Red Rock shareholders currently own a controlling interest in our voting stock
and investors may not have any voice in our management.
 
 In
connection with the acquisition of Red Rock, the Red Rock Shareholders, will
hold an aggregate of 51% of our outstanding shares of common stock, and in the
aggregate, has the right to cast 51% of the votes in any vote by our
stockholders. Thus, these stockholders, acting together, will have the ability
to control substantially all matters submitted to our stockholders for approval,
including:
 
 ·
              election
      of our board of directors;·
              removal
      of any of our directors;·
              amendment
      of our certificate of incorporation or bylaws; and·
              adoption
      of measures that could delay or prevent a change in control or impede a
      merger, takeover or other business combination involving the
      Company.
 
 As a
result of their ownership and positions, our directors and executive officers
collectively are able to influence all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. In addition, sales of significant amounts of shares held by our
directors and executive officers, or the prospect of these sales, could
adversely affect the market price of our common stock. Management's stock
ownership may discourage a potential acquirer from making a tender offer or
otherwise attempting to obtain control of us, which in turn could reduce our
stock price or prevent our stockholders from realizing a premium over our stock
price.
 
 It
is likely that additional shares of our stock will be issued in the normal
course of our business development, which will result in a dilutive affect on
our existing shareholders.
 
 We will
issue additional stock as required to raise additional working capital in order
to secure intellectual properties, undertake company acquisitions, recruit and
retain an effective management team, compensate our officers and directors,
engage industry consultants and for other business development
activities.
 
 If
we fail to adequately manage our growth, we may not be successful in growing our
business and becoming profitable.
 
 We expect
our business and number of employees to grow over the next year. We expect that
our growth will place significant stress on our operation, management, employee
base and ability to meet capital requirements sufficient to support our growth
over the next 12 months. Any failure to address the needs of our growing
business successfully could have a negative impact on our chance of
success.
 
 If
we acquire or invest in other businesses, we will face certain risks inherent in
such transactions.
 
 We may
acquire, make investments in, or enter into strategic alliances or joint
ventures with, companies engaged in businesses that are similar or complementary
to ours. If we make such acquisitions or investments or enter into strategic
alliances, we will face certain risks inherent in such transactions. For
example, we could face difficulties in managing and integrating newly acquired
operations. Additionally, such transactions would divert management resources
and may result in the loss of artists or songwriters from our rosters. We cannot
assure you that if we make any future acquisitions, investments, strategic
alliances or joint ventures that they will be completed in a timely manner, that
they will be structured or financed in a way that will enhance our
creditworthiness or that they will meet our strategic objectives or otherwise be
successful. Failure to effectively manage any of these transactions could result
in material increases in costs or reductions in expected revenues, or
both.
 
 “Penny
Stock” rules may make buying or selling our common stock difficult.
 
 Trading
in our securities is subject to the “penny stock” rules. The SEC has adopted
regulations that generally define a penny stock to be any equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.
These rules require that any broker-dealer who recommends our securities to
persons other than prior customers and accredited investors, must, prior to the
sale, make a special written suitability determination for the purchaser and
receive the purchaser’s written agreement to execute the transaction. Unless an
exception is available, the regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the risks associated with trading in the penny stock
market. In addition, broker-dealers must disclose commissions payable to both
the broker-dealer and the registered representative and current quotations for
the securities they offer. The additional burdens imposed upon broker- dealers
by such requirements may discourage broker-dealers from effecting transactions
in our securities, which could severely limit the market price and liquidity of
our securities. Broker- dealers who sell penny stocks to certain types of
investors are required to comply with the Commission’s regulations concerning
the transfer of penny stocks. These regulations require broker-dealers
to:
 
 ·
              Make
      a suitability determination prior to selling a penny stock to the
      purchaser;·
              Receive
      the purchaser’s written consent to the transactions;
and·
              Provide
      certain written disclosures to the
purchaser.
  6
  Risks Associated with the
Entertainment, Media and Communications Industries
 
 Competition
from providers of similar products and services could materially adversely
affect our revenues and financial condition.
 
 The
industry in which we compete is a rapidly evolving, highly competitive and
fragmented market, which is based on consumer preferences and requires
substantial human and capital resources. We expect competition to intensify in
the future.   There can be no assurance that we will be able to compete
effectively.   We believe that the main competitive factors in
the entertainment, media and communications industries include
effective marketing and sales, brand recognition, product quality, product
placement and availability, niche marketing and segmentation and value
propositions. They also include benefits of one's company, product and
services, features and functionality, and cost. Many of our competitors are
established, profitable and have strong attributes in many, most or all of
these areas.   They may be able to leverage their existing relationships
to offer alternative products or services at more attractive pricing or
with better customer support. Other companies may also enter our markets
with better products or services, greater financial and human resources and/or
greater brand recognition. Competitors may continue to improve or expand current
products and introduce new products. We may be perceived as relatively too small
or untested to be awarded business relative to the competition. To be
competitive, we will have to invest significant resources in business
development, advertising and marketing.   We may also have to rely on
strategic partnerships for critical branding and relationship leverage, which
partnerships may or may not be available or sufficient. We cannot assure that it
will have sufficient resources to make these investments or that we will be able
to make the advances necessary to be competitive. Increased competition
may result in price reductions, reduced gross margin and loss of market
share. Failure to compete successfully against current or future competitors
could have a material adverse effect on the Company’s business, operating
results and financial condition.
 
 The
speculative nature of the entertainment, media and communications industry may
result in our inability to produce products or services that receive sufficient
market acceptance for us to be successful.
 
 Certain
segments of the entertainment, media and communications industry are highly
speculative and historically have involved a substantial degree of risk. For
example, the success of a particular film, video game, program or recreational
attraction depends upon unpredictable and changing factors, including the
success of promotional efforts, the availability of alternative forms of
entertainment and leisure time activities, general economic conditions, public
acceptance and other tangible and intangible factors, many of which are beyond
our control. If we complete a business combination with a target business in
such a segment, we may be unable to produce products or services that receive
sufficient market acceptance for us to be successful.
 
 Changes
in technology may reduce the demand for the products or services we may offer
following a business combination.
 
 The
entertainment, media and communications industries are substantially affected by
rapid and significant changes in technology. These changes may reduce the demand
for certain existing services and technologies used in these industries or
render them obsolete. We cannot assure you that the technologies used by or
relied upon or produced by a target business with which we effect a business
combination will not be subject to such occurrence. While we may attempt to
adapt and apply the services provided by the target business to newer
technologies, we cannot assure you that we will have sufficient resources to
fund these changes or that these changes will ultimately prove
successful.
  If our products
or services that we market and sell are not accepted by the public, our profits
may decline.
 
 Certain
segments of the entertainment, media and communications industries are dependent
on developing and marketing new products and services that respond to
technological and competitive developments and changing customer needs and
tastes. We cannot assure you that the products and services of a target business
with which we effect a business combination will gain market acceptance. Any
significant delay or failure in developing new or enhanced technology, including
new product and service offerings, could result in a loss of actual or potential
market share and a decrease in revenues.
 
 Management
is fully aware of these risks, and believes that these are manageable risks and
does not post real threats to the Company’s healthy development.
 
 ITEM 1B.UNRESOLVED
STAFF COMMENTS
 
 Not
applicable
 
 ITEM
2. DESCRIPTION OF PROPERTY
 
 The
Company's currently does not lease any offices.  The spouse of the
Company’s Chief Executive Officer leases space for her personal
business.  The Company shares the facility, as required, at no
cost.  Until such time as the Company requires its own separate
facilities, the Company will utilize its current arrangement for conducting its
business.
 
 7
  ITEM 3. LEGAL PROCEEDINGS
 
 We are involved in routine litigation incidental to the
conduct of our business. There are currently no material pending litigation
proceedings to which we are a party or to which any of our property is
subject.
 
 ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 No
matters were submitted to a vote of the Company’s security holders during the
fourth quarter of the fiscal year covered by this report.
    8
 
 PART
II
 
 ITEM
5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
 As of
August 31, 2009 there were approximately 35 holders of record of our common
stock. Our shares of common stock are traded on the OTCBB under the symbol
“RRPH”.
 
 Dividends
 
 We intend
to retain future earnings to support our growth. Any payment of cash dividends
in the future will be dependent upon: the amount of funds legally available
therefore; our earnings; financial condition; capital requirements; and other
factors which our Board of Directors deems relevant.
 
 Recent
Sales of Unregistered Securities
 
 None.
 
 ITEM
6. SELECTED CONSOLIDATED FINANCIAL DATA
 
 The selected financial data set
forth below has been derived from the Company’s Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K. This financial
data should be read in conjunction with “Item 7. “Management’s Discussion and
Analysis of Results of Operations and Financial Condition” and the Consolidated
Financial Statements and Notes thereto.
 
 For
      the year ended August 31,2009
              
              2008
              
              2007Net
      Sales
              
              $
              635,494
              
              $
              934,067
              
              $
              139,154Net
      Income (Loss)
              
              $
              (6,778,069)
              
              $
              (766,695)
              
              $
              (4,943,178)Diluted
      Earnings (Loss) per Common Share
              
              $
              (0.07)
              
              $
              (0.01)
              
              $
              (0.08)2009
              
              2008
              
              2007Current
      Assets
              
              $
              -
              
              $
              1,841,312
              
              $
              12,073Property
      and Equipment, net
              
              $
              16,916
              
              $
              25,707
              
              $
              -Total
      Assets
              
              $
              16,916
              
              $
              5,664,974
              
              $
              3,834,337Current
      Liabilities, including Current Portion of Long-Term Debt
              
              $
              2,251,018
              
              $
              2,547,056
              
              $
              2,153,248Long-Term
      Liabilities, net of Current Portion
              
              $
              -
              
              $
              -
              
              $
              -Stockholders’
      (Deficit) Equity
              
              $
              (2,234,102)
              
              $
              3,117,918
              
              $
              1,681,089
 
 ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 
 Certain
statements contained in this quarterly filing, including, without limitation,
statements containing the words “believes”, “anticipates”, “expects” and words
of similar import, constitute forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performance or achievements of the Company, or
industry results, to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.
 
 Such
factors include, among others, the following: international, national and local
general economic and market conditions: demographic changes; the ability of the
Company to sustain, manage or forecast its growth; the ability of the Company to
successfully make and integrate acquisitions; raw material costs and
availability; new product development and introduction; existing government
regulations and changes in, or the failure to comply with, government
regulations; adverse publicity; competition; the loss of significant customers
or suppliers; fluctuations and difficulty in forecasting operating results;
changes in business strategy or development plans; business disruptions; the
ability to attract and retain qualified personnel; the ability to protect
technology; and other factors referenced in this and previous
filings.
  9
  Given
these uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. The following discussion and analysis should be read
in conjunction with our Financial Statements and notes appearing elsewhere in
this report.
 
 Plan of
Operation
 
 Overview
 
 We are
engaged in the finance, production, distribution and marketing of filmed
entertainment products, including theatrical motion pictures, television
programs, home video products, and digitally delivered entertainment and
media.  We were founded in 2006 to leverage the experience and
expertise of its management team and exploit emerging opportunities in
traditional and digital media and entertainment. Our primary business model
centers around the control of entertainment properties that we may develop,
acquire, produce and/or finance.  We will also be involved in the
funding of motion pictures and other entertainment and media properties, both
for our own library and development activities as well as in partnership with
outside producers.
 
 Proposed
Milestones to Implement Business Operations
 
 During
the next twelve months, we expect to take the following steps in connection with
the development of our business and the implementation of our plan of
operations:
 
 The
Company will continue to enter into agreements with strategic partners in the
film development and production industry.
 
 The
Company will begin building and formalizing relationship with the talent
community.  The Company intends to use our common shares as incentives to
build these relationships.  The Company intends to work with top talent to
fund and produce projects that they bring to the Company.  These are
typically moderately budgeted projects which fall below the typical studio
interest.
 
 Another
area that the Company will pursue as part of our plan is the acquisition of
existing film properties and film and media related businesses.  The
Company will work to build a library of films to leverage across all
distribution platforms.  The Company feels that as distribution platforms
continue to expand, there are opportunities to exploit content and generate
revenue in a number of ways.
 
 Their
compensation is determined as a percentage of the purchase price of the
acquisition.  The company has evaluated a number of strategic
acquisitions and continues to do so.
 
 The
Company will also hire and train a limited amount of additional staff, including
management, marketing, and administrative personnel. The number of employees
hired will be dependent upon a variety of factors including our progress in
implementing our business plan and available capital. The Company believes that
the hiring of employees will be an ongoing process during the Company’s
existence.
 
 Current
Update on Operations
 
 Fiscal
year 2009 has been a disappointing year for the Company.  During
fiscal years 2007 to 2009, we funded two full featured films and various print
and advertising campaigns for our customer, National Lampoon, Inc.  In
2009, we reviewed and determined that the featured films and the print and
advertising campaigns significantly underperformed.  With this
underperformance, and the deteriorating financial condition at National Lampoon,
Inc., we recorded a total charge of approximately $4.4 million.  While
we intend to continue demanding repayment, it is unrealistic to expect at this
time that National Lampoon, Inc. has the ability and wherewithal to repay the
loans.
 
 Results
of Operations
 
 Comparison
of Fiscal Years Ended August 31, 2009 and 2008
 
 Revenue
 
 Revenue
was $635,494 and $934,067 for the years ended August 31, 2009 and 2008,
respectively.  The reduction in revenue was due to decreased print and
advertising premium fees and interest earned on production
advances.  No consulting revenue was performed in fiscal year 2009 as
compared to $198,500 in fiscal year 2008.  These decreases were offset
by an increase of $383,650 in revenues from the production of
infomercials.
  10
  Costs
and Expenses
 
 Cost and expenses was $7,270,863 compared to $956,889 for the years ended August
31, 2009 and 2008, respectively.   The increase of $6,313,974 was
due to the write off our investments on two feature films and various print and
advertising campaigns for our customer National Lampoon, Inc.  The
total write off was $4,464,247.   Based on our evaluation of our
Goodwill and Intangible assets balances, we recorded a reduction in these
balance and a corresponding charge of $829,958.  Total stock based
compensation expense increased 471,424 and stock issued for services rendered
was $225,000 and $28,295 for fiscal year 2009 and 2008,
respectively.  The remaining difference is due to normal fluctuations
in operating expenses based on business operations.
 
 Interest
Expense
 
 Interest expense was $142,700 compared to $743,843 for the years ended August
31, 2009 and 2008, respectively.   In fiscal year 2008, we
incurred interest expense related to a related party loan that was paid in
common shares.  No similar activity existed in fiscal year
2009.  The non cash portion of interest expense was $142,700 and
$743,843 for fiscal year 2009 and 2008, respectively.
 
 Comparison
of Fiscal Years Ended August 31, 2008 and 2007
 
 Revenue
 
 Revenue
was $934,067 and $139,154 for the years ended August 31, 2008 and 2007,
respectively.  Revenues from interest on production advances increased
$ 381,321 or 270% to $520,475 as compared to $ 139,154 for the years ended
August 31, 2008 and 2007, respectively.  The increase is due to the
increase in production advances compared to the prior year.
 
 Costs
and Expenses
 
 Cost and expenses was $965,889 compared to $4,738,347 for the years ended August
31, 2008 and 2007, respectively.   This decrease of $3,772,458
was due to a marginal increase in expenses related to SSD acquisition offset by
a decrease of $3,291,530 in stock based compensation expense, $341,185 in
advertising and promotion expenses, $120,963 in salary and wages and a $32,712
in professional fees.  The remaining nominal difference is due to
normal fluctuations in operating expenses due to business
operations.
 
 Interest
Expense
 
 Interest expense was $743,843 compared to $343,985 for the years ended August
31, 2008 and 2007, respectively.   This increase of $397,858 was
due to shares issued pursuant to the loan agreement discussed in Note 7 of the
attached consolidated financial statements dated August 31, 2008.  The
non cash portion of interest expense was $743,843 and $313,120 for the years
ended August 31, 2008 and 2007, respectively.
 
 Liquidity and Capital
Resources
 
 As of
August 31, 2009 we had no cash and a working capital deficiency of $2.3
million.  A substantial amount of cash will be required in order to
continue operations over the next twelve months.  Based upon our
current cash and working capital deficiency, we will not be able to meet our
current operating expenses and will require additional capital.  We
have been in discussion with, and we continue to seek, private investors in
hopes of raising enough capital to efficiently operate our
business.
 
 Our cash
flows used in operating activities was $88,851 reflecting the decrease in our
deferred revenue account offset by a decrease in our accounts receivable and an
increase in our accounts payable balances.
 
 Our cash
flows used in investing activities was $30,000.   We invested
$30,000 into a feature film that ultimately underperformed.  Due to
its poor performance, we determined that it was highly unlikely that we would be
repaid.  We therefore recorded an expense of $30,000 in fiscal year
2009.
 
 Our cash
flows provided by financing activities were $112,919.  On December 28,
2008, the Company entered into a twelve month $100,000 senior secured
convertible debenture agreement with Emerald Asset Advisors, LLC (“Note
Holder”).  The one year term loan bears interest at 10% per annum and
interest accrues and is payable in cash upon maturity provided that the elected
conversion to common shares does not occur.  At any time or times on
or after December 28, 2008, the Note Holder shall be entitled to convert any
portion of the outstanding and unpaid amount into fully paid and nonassessable
shares of Common Stock at a conversion price of $0.06 per common
share.  From and after the occurrence of an event of default, the
interest rate shall be increased to twenty percent (20.0%) until the date of
such cure.
 
 The
Company is currently in default on the Williams-Laikin loans discussed in Note 9
of the attached consolidated financial statements for the year ended August 31,
2009 and 2008, respectively.   In an event of default occurs and
is continuing, and in every such case, unless the principal of the note shall
have already become due and payable, the holder by a notice in writing to the
Company may declare all of the principal of this note, together with accrued
interest thereon, to be due and payable immediately.  No such notice
has been received as of the date of this filing.
  11
  In the
event the Company or any of its subsidiaries make an assignment for the benefit
of creditors, or put in writing its inability to pay its debts generally as they
become due, or a notice of lien, levy or assessment is filed of record or given
to Company or any of its subsidiaries with respect to all or any of their
respective assets by any federal, state, local department or agency, and such
lien, levy or assessment is not released or paid within a reasonable period of
time but in no event longer than twenty (20) days from the date such lien, levy,
or assessment is filed, or such longer period of time as is appropriate in the
case of any such lien, levy or assessment that is being contested in good faith
and by appropriate proceedings; then all principal and accrued interest shall
become and be immediately due and payable without any declaration or other act
on the part of the note holder.
 
 Based
upon the above we have not been able to raise the capital expected to pursue our
business plan. We are seeking advice from investment professionals on how to
obtain additional capital. We will need to raise additional capital to continue
our operations and there is no assurance that we will be successful in raising
the needed capital. Currently we have no material commitments for capital
expenditures.
 
 Critical
Accounting Policies
 
 Red
Rock’s financial statements and related public financial information are based
on the application of accounting principles generally accepted in the United
States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenues and expense amounts reported. These estimates can
also affect supplemental information contained in our external disclosures
including information regarding contingencies, risk and financial condition. We
believe our use if estimates and underlying accounting assumptions adhere to
GAAP and are consistently and conservatively applied. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances. Actual results may differ materially from
these estimates under different assumptions or conditions. We continue to
monitor significant estimates made during the preparation of our financial
statements.
  Our
significant accounting policies are summarized in Note 3 of our annual financial
statements filed on Form 10-K and dated December 14, 2009.  While all these
significant accounting policies impact its financial condition and results of
operations, Red Rock views certain of these policies as critical. Policies
determined to be critical are those policies that have the most significant
impact on the Company’s consolidated financial statements and require management
to use a greater degree of judgment and estimates. Actual results may differ
from those estimates. Our management believes that given current facts and
circumstances, it is unlikely that applying any other reasonable judgments or
estimate methodologies would cause effect on our consolidated results of
operations, financial position or liquidity for the periods presented in this
report.
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK
 
 Our primary objective in managing our cash balances is preservation of principal
and maintenance of liquidity to meet our operating needs. Our excess cash
balances are invested in money market accounts and short-term municipal bonds in
which there is minimal interest rate risk.
 
 ITEM 8.  
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
 
 Our
Consolidated Financial Statements are annexed to this Report as pages F-2
through F- 23. An index to such materials appears on page F-1.
 
 ITEM
9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
 Our accountant is DNTW Chartered Accountants, LLP. We do not presently
intend to change accountants. At no time have there been any disagreements with
such accountants regarding any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
 
 ITEM
9A .CONTROLS AND PROCEDURES
 
 Evaluation of disclosure
controls and procedures
 
 Under the
supervision and with the participation of our management, including our
President, Chief Executive Officer, Chief Financial Officer, Principal
Accounting Officer and Director (the “Certifying Officer”) we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) under the Securities Exchange Act of
1934 (the “Exchange Act”)). Based upon that evaluation, the Certifying Officer
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were not effective. We and our auditors
identified material weaknesses discussed below in the Report of management on
internal control over financial reporting.
  12
  Report
of Management on Internal Control over Financial Reporting
 
 Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rules 13a-15(f) under the
Exchange Act. Our internal control over financial reporting is designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles.  Our internal
control over financial reporting includes those policies and procedures
that:
 
 (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of our assets;
 
 (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. generally
accepted accounting principles, and that our receipts and expenditures are being
made only in accordance with authorizations of our management and directors;
and
 
 (iii)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of assets that could have a
material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Management
conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the framework in Internal Control – Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the
Treadway Commission. A material weakness is a deficiency, or a combination of
deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement to the Company's annual or
interim financial statements will not be prevented or detected.
 
 In the
course of management's assessment, we have identified the following material
weaknesses in internal control over financial reporting:
 
 -
              Segregation of Duties–
      As a result of limited resources, we did not maintain proper segregation
      of incompatible duties. Namely the lack of an audit committee, an
      understaffed financial and accounting function, and the need for
      additional personnel to prepare and analyze financial information in a
      timely manner and to allow review and on-going monitoring and enhancement
      of our controls. The effect of the lack of segregation of duties
      potentially affects multiple processes and
  procedures.
 
 -
              Maintenance of Current
      Accounting Records– This weakness specifically affects the
      payments and purchase cycle and therefore we failed to maintain effective
      internal controls over the completeness and cut off of accounts payable,
      expenses and other capital
transactions.
 
 Application of GAAP –
      We did not maintain effective internal controls relating to the
      application of generally accepted accounting principles in accounting for
      transactions for common shares issued for interest
  expense.
 
 We are in
the continuous process of improving our internal control over financial
reporting in an effort to eliminate these material weaknesses through improved
supervision and training of our staff, but additional effort is needed to fully
remedy these deficiencies. Management has engaged a Certified Public Accountant
as a consultant to assist with the financial reporting process in an effort to
mitigate some of the identified weaknesses. The Company intends on hiring the
necessary staff to address the weaknesses once additional capital is obtained
which will allow full operations to commence.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation.
  13
 
 PART
III
 
 ITEM
10 . DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
 
 Our directors and
officers, as of December 14, 2009, are set forth below. The directors hold
office for their respective term and until their successors are duly elected and
qualified. Vacancies in the existing Board are filled by a majority vote of the
remaining directors. The officers serve at the will of the Board of
Directors.
 
 Name
              Age
              Current
      Positions and Offices HeldReno
      Rollé
              48
              President,
      Chief Executive Officer and DirectorJohn
      Whitesell
              53
              DirectorRobert
      Rosenblatt
              53
              Director
 
 Set forth below is a brief description of the background and business experience
of our executive officers and directors.
 
 Reno R. Rollé – President, Chief Executive
Officer and Director
 
 On June 6, 2008, Mr. Rollé was appointed as the Company’s President, Chief
Executive Officer, and a member of the Board of Directors.  Mr. Rollé
previously held the position of Chief Executive Officer for Shop America
USA.  Based in Bradford England and operating in the United States,
Shop America specialized in long- and short-form direct response television
(infomercial) marketing.  During this time Mr. Rollé co-created the
hit book and marketing campaign for "Natural Cures ‘They’ Don’t Want You to Know
About." This book held the #1 spot on the NY Times Best Sellers List for 18
weeks in 2005 and 2006, has sold in excess of 9 million copies.
  Prior to his experience
at Shop America, Mr. Rollé was a founding principle of the National Lampoon
Acquisition Group, LLC an investment group that orchestrated the recent
acquisition of J2 Communications, Inc. (NASDAQ:JTWO) a small cap public company
that owned the most recognized brand in comedic entertainment, National Lampoon.
Mr. Rollé founded National Lampoon Home Entertainment in 2002 to produce and
distribute National Lampoon branded DVDs.
 
 Between 1997 and 2001 Mr. Rollé was the co-founder, Chairman and Chief Executive
Officer of Synergy Worldwide, Inc., a product engineering, design and marketing
company. In 1999 Synergy produced “Mastering the Flow,” a blackjack card
counting program that became the longest running, most successful gaming
infomercial ever. In September 2000, Synergy was honored with the distinguished
“R&D 100 Award” for Mr. Rollé’s invention, The “Spin Fryer”. This award,
referred to as the “Oscars of Inventions,” recognizes the most technologically
significant inventions in history. Past winners include: anti-lock brakes, the
fax machine, the ATM, and polarized film. The Spin Fryer was subsequently
licensed to Salton, Inc. (NYSE:SFP) for marketing and distribution under the
George Forman line of kitchen products.
 
 From 1994 to 1997 Mr. Rollé was a co-founder of HSN Direct, a direct response
television joint venture with Home Shopping Network, Inc. (NASDAQ: IACI) Mr.
Rollé’s primary responsibility was to negotiate and manage the majority of
HSND’s contracts, including marketing and distribution, production, talent and
joint venture agreements. In addition, Mr. Rollé oversaw all aspects of new
business development including: media, production, regulatory compliance and
operations.
 
 Highlighting Mr. Rollé’s tenure with HSND was his role in the development and
launch of the Ab Isolator and EZ Crunch abdominal exercise products. These
infomercials both generated in excess of $150 million dollars in worldwide sales
and spawned an entire consumer product segment targeting abdominal exercise.
Estimated sales of this category exceed $1 billion dollars
worldwide.
 
 John Whitesell –
Director
 
 On
June 6, 2008 John Whitesell was appointed as a member of the Company’s Board of
Directors.   John Whitesell is an accomplished director and
producer who released his fifth feature film, Deck the Halls, starring Danny
DeVito and Matthew Broderick, nationwide on 22 November, 2006. The film is a
family comedy about clashing neighbors, home decoration, and the true spirit of
the holidays.   In 2006 Mr. Whitesell directed the feature film
Big Momma’s House 2.  In this sequel to the hit comedy Big Momma’s
House, Martin Lawrence reprises his role as FBI agent Malcolm Turner who once
again goes undercover as Big Momma.  In 2003, Mr. Whitesell directed
the film Malibu’s Most Wanted starring Jamie Kennedy, Taye Diggs, Anthony
Anderson, Ryan O’Neal and Blair Underwood for Warner Brothers. Prior to that,
Mr. Whitesell directed See Spot Run also for Warner Brothers, starring David
Arquette and Michael Clark Duncan.  Mr. Whitesell also directed
Calendar Girl starring Jason Priestley and Joe Pantoliano for Sony Pictures. The
story follows three young men on an end of the summer trip to Hollywood, CA on a
quest to fulfill the fantasy of meeting Marilyn Monroe.
 
  14
 
 During
this time, Mr. Whitesell was also very active in television directing and
producing. He directed and produced over 200 episodes of primetime television
including Roseanne, Action, and Jack and Jill. He also directed many television
pilots including Grounded for Life, The John Larroquette Show, Damon, Cosby and
Law and Order.
  Mr.
Whitesell started his television career in daytime television. He was a director
and executive producer on the soap operas Search for Tomorrow and Another World,
and he won an Emmy for directing Guiding Light.
  Mr.
Whitesell trained in theatre at Circle Square in New York City and at the
Williamstown Theatre Festival and graduated from Simpson College in
1976.
  We will
not enter into a business combination, or acquire any assets of any kind for its
securities, in which our management or any affiliates or associates have any
interest, direct or indirect.
  There are
no binding guidelines or procedures for resolving potential conflicts of
interest. Failure by management to resolve conflicts of interest in favor of us
could result in liability of management to us. However, any attempt by
shareholders to enforce a liability of management to us would most likely be
prohibitively expensive and time consuming.
 
 Robert Rosenblatt–
Director
  Mr.
Rosenblatt was formerly the Group President and Chief Operating Officer of Tommy
Hilfiger.  Prior to joining Tommy Hilfiger, Mr. Rosenblatt was
President of the Home Shopping Network United States (HSN).  While at
HSN, Mr. Rosenblatt helped drive impressive sales and profit increases at the
world’s 16th most widely distributed shopping network.  He was
responsible for all aspects of HSN’s domestic business including Broadcasting,
Finance, Fulfillment, Information Technology, Marketing, Merchandising, Sales
and Service and hsn.com.
  Mr.
Rosenblatt is credited with creating an entrepreneurial culture at HSN that has
led to the tremendous growth of hsn.com and new business opportunities such as
the acquisition of the Improvements catalog.  During his tenure, HSN
has advanced to become the 4th largest cable television network and he has
helped HSN grow its revenue to $2 billion in worldwide sales. Previous to HSN,
Mr. Rosenblatt was senior vice president and chief financial officer of
Bloomingdale’s, a division of Federated Department Stores. Mr. Rosenblatt is
also board member of the Electronic Retail Association (ERA), the Florida
Council on Economic Education, the Pinellas Education Foundation and the Junior
League of Tampa.
 
 Term of
Office
 
 Our directors are appointed for a one-year term to hold office until the next
annual general meeting of our shareholders or until removed from office in
accordance with our bylaws. Our officers are appointed by our board of directors
and hold office until removed by the board.
 
 Audit
Committee
 
 We
do not have a standing audit committee of the Board of Directors. Management has
determined not to establish an audit committee at present because of our limited
resources and limited operating activities do not warrant the formation of an
audit committee or the expense of doing so. We do not have a financial expert
serving on the Board of Directors or employed as an officer based on
management’s belief that the cost of obtaining the services of a person who
meets the criteria for a financial expert under Item 401(e) of Regulation S-B is
beyond its limited financial resources and the financial skills of such an
expert are simply not required or necessary for us to maintain effective
internal controls and procedures for financial reporting in light of the limited
scope and simplicity of accounting issues raised in its financial statements at
this stage of its development.
 
 Certain Legal
Proceedings
 
 No director, nominee for director, or executive officer of the Company has
appeared as a party in any legal proceeding material to an evaluation of his
ability or integrity during the past five years.
 
 Compliance With Section
16(A) Of The Exchange Act.
 
 Section 16(a) of the Exchange Act requires the Company’s officers and directors,
and persons who beneficially own more than 10% of a registered class of the
Company’s equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and are required to
furnish copies to the Company. To the best of the Company’s knowledge, any
reports required to be filed were timely filed in fiscal year ended August 31,
2008.
  15
  Code of
Ethics
 
 The company has adopted a Code of Ethics applicable to its Chief Executive
Officer and Chief Financial Officer. This Code of Ethics is filed herewith as an
exhibit.
 
 ITEM
11. EXECUTIVE COMPENSATION
 
 Compensation of Executive
Officers
 
 The following summary compensation table sets forth all compensation awarded to,
earned by, or paid to the named executive officers paid by us during the fiscal
years ended August 31, 2009 in all capacities for the accounts of our
executives, including the Chief Executive Officer (CEO) and Chief Financial
Officer (CFO):
 
 SUMMARY
COMPENSATION TABLE
 
 Annual
      Compensation
              
              
              
              
              
              
              
              
              Long-Term
      CompensationAwards
              
              
              PayoutsName
      And Principal
                Position
              
              Year
              
              
              Salary
                ($)
              
              
              Bonus
                ($)
              
              
              Other
      Annual Compensation
                ($)
              
              
              Restricted
      Stock Award(s)
                ($)
              
              
              Securities
      Under-lying Options /SARs
                ($)
              
              
              LTIP
                Payouts
                ($)
              
              
              All
      Other Compensation
                ($)Reno
      Rollé, President and Chief Executive Officer (2)
              
              
              2009
                2008
              
              
              
              20,000
                0
              
              
              
              0
                0
              
              
              
              0
                0
              
              
              
              240,000
                0
              
              
              
              0
                0
              
              
              
              0
                1,833
              
              
              
              0
                0Steve
      Handy, Chief Financial Officer (1)
              
              
              2009
                2008
              
              
              
              5,000
                -
              
              
              
              0
      -
              
              
              
              0
      -
              
              
              
              0
                -
              
              
              
              0
                -
              
              
              
              0
                -
              
              
              
              0
                -Jay
      Koh, Vice President of Operations and Production (3)
              
              
              2009
                2008
              
              
              
              5,000
                -
              
              
              
              0
                -
              
              
              
              0
                -
              
              
              
              0
                -
              
              
              
              0
                -
              
              
              
              0
                900-
              
              
              
              0
                -
 
 (1) Mr.
Handy was employed, on a part-time basis, during the months starting in January
2009 until he resigned in June 2009.
 (2) Mr.
Rolle’s employment agreement stipulates certain share issuances as a component
of his overall compensation.   Per the employment agreement, Mr.
Rolle received 8 million common shares at a market value at date of issuance of
$240,000.  Mr. Rolle received cash compensation of
$20,000.
 (3) Mr.
Koh resigned in June 2009.
  Employment
Agreements
 
 On June 1, 2008, the Company entered into an employment agreement with the
President and Chief Executive Officer, Reno Rollé.   The
agreement is in effect for two years and shall automatically renew for
successive one year periods unless the Company’s Board of Directors elects not
to renew the employment agreement.  The employment agreement provides
for compensation of $240,000 per annum of which amount can be paid in cash and
common shares of the Company.  The percentage of cash versus common
shares shall be mutually agreed upon between Mr. Rollé and the Company’s Board
of Directors.  Mr. Rollé is eligible for an annual bonus
program.  The amount of the bonus will be negotiated in good faith and
mutually agreed upon by Mr. Rollé and the Board of Directors of the
Company.  The annual bonus will be paid one-half in stock and one-half
in cash.  Additionally, Mr. Role received options to purchase
2,000,000 shares upon the execution of the employment agreement and will be
entitled to purchase an additional 2,000,000 annually at “no par
value”.   The options vest over a five year period.
 
 Compensation of
Directors
 
 Directors do not receive any compensation for their services as directors. The
Board of Directors has the authority to fix the compensation of directors. No
amounts have been paid to, or accrued to, directors in such
capacity.
 
 ITEM
12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
 
 Security
Ownership of Certain Beneficial Owners and Management
 
 The
following table sets forth each person known by us to be the beneficial owner of
five percent or more of the Company's Common Stock, all directors individually
and all directors and officers of the Company as a group. Except as noted, each
person has sole voting and investment power with respect to the shares
shown.
 
  16
  Name
      and Address
                Number
      of Common Shares Beneficially Owned (2)
                Percent
      of ClassReno
      Rolle(1)
                  8228 Sunset
      Blvd.
                  3rd
      Floor
                  Los
      Angeles, CA 90046
                14,380,773
                13.5%National
      Lampoon(3)
                  8228 Sunset
      Blvd.
                  Los
      Angeles, CA 90046
                11,769,236
                11.0%Dan
      Laikin
                  9920
      Towne Road
                  Carmel,
      IN 46032
                12,769,905
                12.0%N.
      Williams Family Investments(4)
                  114
      East Market Street
                  Warsaw,
      IN 46580
                6,242,197
                5.9%Robert
      Rosenblatt (1)
                1,696,300John
      Whitesell(1)
                700,000
                Less
      than 1%Lake
      City Bank
                6,242,257
                5.9%All
      directors and executive officers as a group (3 in number)
                16,777,073
                15.7%
 
 (1)
The person listed is an officer and/or director of the Company.
 (2)
Based on 106,816,335 shares of common stock issued and outstanding as of August
31, 2009.
 (3)
Timothy Durham has dispositive control of these shares
 (4) The
Lake City Bank Trust Dept, PO Box 1387, Warsaw IN 46580-1387, has dispositive
control of these shares
  ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
 
 See notes 6, 7, 9, and 11 of the Annual
Report on Form 10-K for the fiscal year ended August 31, 2009, filed with the
Securities and Exchange Commission dated December 14, 2009.
 
 ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES
 
 Audit
Fees
 
 For the Company’s fiscal years ended August 31, 2009 and 2008, we were billed
approximately $39,700 and $35,000, respectively, for professional services
rendered for the audit and review of our financial statements.
 
 Audit Related
Fees
 
 There were no fees for audit related services for the years ended August 31,
2009 and 2008.
 Tax Fees
 
 For the Company’s fiscal years ended August 31, 2009 and 2008, we were not
billed for professional services rendered for tax compliance, tax advice, and
tax planning.
 
 All Other
Fees
 
 The Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal years ended August 31, 2009 and
2008.
 
 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
 
 17
  PART IV
 
 
 ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
 
 (a)     Documents
filed as part of this report:
 
 (a)    
Exhibits:
 
 Exhibit No.
              
              Title
      of Document
              
              Location3.1
              
              Certificate
      of Incorporation
              
              Incorporated
      by reference to Form 10-SB filed on 14 March, 20063.2
              
              Bylaws
              
              Incorporated
      by reference to Form 10-SB filed on 14 March, 200614
              
              Code
      of Ethics
              
              Incorporated
      by reference to Form 10-K/A filed on December 17, 200831.1
              
              Certification
      of Chief Executive Officer Pursuant to Rule 13a-14(a) of the
      Securities Exchange Act of 1934
              
              Filed
      herewith32.1
              
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
              
              Filed
      herewith
 
 (b)   
 Reports of Form 8-K filed in fourth quarter of the fiscal year and
subsequent event period:
 
 18
 
 SIGNATURES
 
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
 
 RED
      ROCK PICTURES HOLDINGS, INC.RegistrantDate:
      December 14, 2009
              By:
      /s/ Reno
      RolléReno
      RolléPresident,
      Chief Executive Officer, and Director
 
 
 
 
 
 
 
 19
 
 
 
 
  
  
 RED
ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 AUGUST
31, 2009
 
 
 
 
 
 
 
 
 
 
  
  
 
 RED
ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES
 
 AUGUST
31, 2009
 
 CONTENTS
 
 
 PageREPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
              F-1CONSOLIDATED
      FINANCIAL STATEMENTSConsolidated
      Balance Sheets
              F-2Consolidated
      Statements of Loss and Comprehensive Loss
              F-3Consolidated
      Statements of Stockholders' Equity (Deficit)
              F-4Consolidated
      Statements of Cash Flows
              F-5Notes
      to the Consolidated Financial Statements
              F-6
      - F-14
 
 
 
 
 
 
 
 
 
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To the
Board of Directors and Stockholders of
 Red
Rock Pictures Holdings, Inc. and Subsidiaries
 
 We have
audited the accompanying consolidated balance sheets of Red Rock Pictures Holdings, Inc. and
Subsidiaries as of August 31, 2009 and 2008 and the related consolidated
statements of loss and comprehensive loss, cash flows and stockholders’ equity
(deficit) for the years then ended. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.
 
 We
conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. The Company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial reporting.
An audit includes consideration of internal control over financial reporting as
a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of internal control over financial reporting.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Red Rock Pictures Holdings, Inc. and
Subsidiaries as of August 31, 2009 and 2008, and the results of its
operations and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States.
 
 As
discussed in Note 1 to the consolidated financial statements, the August 31 2008
consolidated financial statements have been restated for the year ended August
31, 2008 to record additional interest expense related to the issuance of common
shares.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has working capital deficiency
and accumulated losses from operations since inception. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also discussed in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 
 
 /s/
DNTW Chartered Accountants, LLP
 Licensed
Public Accountants
 Markham,
Canada
 14
December 2009
 
 
 
 F-1
 
 RED
ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 AS
OF AUGUST 31, 2009 AND 2008
 
 August
      31, 2009
              
              
              August
      31, 2008
                (As
      Restated)ASSETSCurrent
      AssetsCash
              
              $
              -
              
              
              $
              5,932Accounts
      receivable, net of $Nil allowance for doubtful accounts
              
              
              -
              
              
              
              216,644Advances
      to related party
              
              
              -
              
              
              
              76,798Capitalized
      production costs
              
              
              -
              
              
              
              134,723Prepaid
      expenses and deposits
              
              
              -
              
              
              
              10,745Production
      loans and accrued interest to related party - current
    portion
              
              
              -
              
              
              
              1,396,470Total
      Current Assets
              
              
              -
              
              
              
              1,841,312Long
      Term AssetsProduction
      loans and accrued interest to related party
              
              
              -
              
              
              
              1,845,157Print
      and advertising funding to related party
              
              
              -
              
              
              
              1,078,180Property
      and equipment, net
              
              
              16,916
              
              
              
              25,707Intangibles,
      net
              
              
              -
              
              
              
              424,280Goodwill
              
              
              -
              
              
              
              450,338Total
      Long Term Assets
              
              
              16,916
              
              
              
              3,823,662Total
      Assets
              
              $
              16,916
              
              
              $
              5,664,974LIABILITIES
      AND STOCKHOLDERS' (DEFICIT) EQUITYCurrent
      LiabilitiesAccounts
      payable
              
              $
              240,755
              
              
              $
              127,720Accrued
      liabilities
              
              
              -
              
              
              
              32,290Advances
      from stockholders
              
              
              63,636
              
              
              
              63,636Deferred
      production revenue
              
              
              -
              
              
              
              326,000Senior
      secured convertible note, including accrued interest of $6,700 and $Nil at
      August 31, 2009 and 2008, respectively
              
              
              106,700
              
              
              
              --Advances
      from related parties
              
              
              1,799,928
              
              
              
              1,997,410Total
      Current Liabilities
              
              
              2,211,019
              
              
              
              2,547,056Going
      Concern, Commitments and ContingencyStockholders'
      (Deficit) EquityPreferred
      stock, $0.001 par value; 5,000,000 shares authorized, none issued or
      outstanding
              
              
              --
              
              
              
              -Common
      stock, $0.001 par value; 120,000,000 shares authorized,
      106,816,335 and 95,350,735 shares issued and outstanding at
      August 31, 2009 and 2008, respectively
              
              
              106,816
              
              
              
              95,351Additional
      paid-in-capital
              
              
              10,269,134
              
              
              
              8,200,769Deficit
              
              
              (12,570,053
              )
              
              
              (5,178,202
              )Total
      Stockholders' (Deficit) Equity
              
              
              (2,194,103
              )
              
              
              3,117,918Total
      Liabilities and Stockholders' (Deficit) Equity
              
              $
              16,916
              
              
              $
              5,664,974
 
 The
accompanying notes are an integral part of these financial
statements.
 
 F-2
  RED
ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
 FOR
THE YEAR ENDED AUGUST 31, 2009 AND 2008
 
 
 For
      the Year Ended 31 August 2009
              
              
              For
      the Year Ended August 31, 2008
                (As
      Restated)REVENUEProduction
      revenue
              
              $
              383,650
              
              
              $
              -Distribution
      profit participation
              
              
              -
              
              
              
              23,448Print
      and advertising premium fees
              
              
              69,844
              
              
              
              188,696Interest
      on production advances
              
              
              182,000
              
              
              
              520,475Consulting
              
              
              -
              
              
              
              198,500Other
              
              
              -
              
              
              
              2,948635,494
              
              
              
              934,067COSTS
      AND EXPENSESImpairment
      of production loans and accrued interest
              
              
              3,101,022
              
              
              
              -Bad
      debt
              
              
              1,393,325
              
              
              
              -Stock
      based compensation
              
              
              1,219,030
              
              
              
              714,743Impairment
      of goodwill and intangible assets
              
              
              829,958
              
              
              
              -Professional
      fees
              
              
              305,254
              
              
              
              58,925Amortization of capitalized production costs
              
              
              156,555
              
              
              
              -Costs
      of distribution profit participation
              
              
              -
              
              
              
              3,517Salaries
      and wages
              
              
              109,652
              
              
              
              57,141Office
      and general
              
              
              82,217
              
              
              
              65,400Depreciation
      and amortization of intangible assets
              
              
              53,450
              
              
              
              24,737Rent
              
              
              20,400
              
              
              
              32,426TOTAL
      OPERATING EXPENSES
              
              
              7,270,863
              
              
              
              956,889LOSS
      FROM OPERATIONS
              
              
              (6,635,369
              )
              
              
              (22,822
              )Interest
      expense
              
              
              (142,700
              )
              
              
              (743,873
              )NET
      LOSS AND COMPREHENSIVE LOSS
              
              $
              (6,778,069
              )
              
              $
              (766,695
              )LOSS
      PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND
    DILUTED
              
              $
              (0.07)
              
              
              $
              (0.01
              )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED
              
              
              102,875,562
              
              
              
              81,226,205
 
 The
accompanying notes are an integral part of these financial
statements.
  F-3
  RED
ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
 FOR THE YEARS ENDED AUGUST 31, 2009
AND 2008
 
 Common
      Stock
              
              
              Additional
              
              
              Common
              
              
              
              
              
              Total
                Stockholders'Shares
              
              
              Amount
              
              
              Paid
      In
                Capital
              
              
              Shares
      Issuable
              
              
              Accumulated
      Deficit
              
              
              Equity
      (Deficit)Balance,
      31 August 2007
              
              
              64,534,361
              
              
              $
              64,535
              
              
              $
              6,641,843
              
              
              $
              -
              
              
              $
              (5,025,289
              )
              
              $
              1,681,089Common
      shares issued for services
              
              
              2,753,846
              
              
              
              2,753
              
              
              
              25,532
              
              
              
              -
              
              
              
              -
              
              
              
              28,285Common
      shares issued related to equity distribution agreement
              
              
              5,100,000
              
              
              
              5,100
              
              
              
              209,900
              
              
              
              -
              
              
              
              -
              
              
              
              215,000Common
      shares issued as additional interest expense related to related party loan
      agreement
              
              
              11,962,528
              
              
              
              11,963
              
              
              
              601,819
              
              
              
              -
              
              
              
              -
              
              
              
              613,782Stock
      options granted
              
              
              -
              
              
              
              -
              
              
              
              686,457
              
              
              
              -
              
              
              
              -
              
              
              
              686,457Acquisition
      of the net assets of Studio Store Direct Inc.
              
              
              11,000,000
              
              
              
              11,000
              
              
              
              649,000
              
              
              
              -
              
              
              
              -
              
              
              
              660,000Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (766,695
              )
              
              
              (766,695
              )Balance,
      August 31, 2008 (As Restated)
              
              
              95,350,735
              
              
              $
              95,351
              
              
              $
              8,814,551
              
              
              $
              -
              
              
              $
              (5,791,984
              )
              
              $
              3,117,918Common
      shares issued for services
              
              
              1,166,000
              
              
              
              1,166
              
              
              
              223,834
              
              
              
              -
              
              
              
              -
              
              
              
              225,000Common
      shares issued as compensation of employee and director
              
              
              10,133,000
              
              
              
              10,133
              
              
              
              300,000
              
              
              
              -
              
              
              
              -
              
              
              
              310,133Common
      shares issuable to Chief Executive Officer per employment
      agreement
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              180,000
              
              
              
              -
              
              
              
              180,000Stock
      options granted
              
              
              -
              
              
              
              -
              
              
              
              728,897
              
              
              
              -
              
              
              
              -
              
              
              
              728,897Common
      shares issued for accounts payable balance
              
              
              166,000
              
              
              
              166
              
              
              
              21,852
              
              
              
              -
              
              
              
              -
              
              
              
              22,018Net
      loss
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (6,778,069
              )
              
              
              (6,778,069
              )Balance,
      August 31, 2009
              
              
              106,816,735
              
              
              $
              106,816
              
              
              $
              10,089,134
              
              
              $
              180,000
              
              
              $
              (12,570,053
              )
              
              $
              (2,194,103
              )
 
 The
accompanying notes are an integral part of these financial
statements.
 
 F-4
  RED
ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE TWELVE MONTHS ENDED AUGUST 31, 2009 AND 2008
 
 Year
      Ended
                August
      31, 2009
              
              
              Year
      Ended
                August
      31, 2008
                (As
      restated)CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
              
              $
              (6,778,069
              )
              
              $
              (766,695
              )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Stock-based
      compensation expense
              
              
              1,219,030
              
              
              
              686,457Common
      shares issued for services provided
              
              
              225,000
              
              
              
              28,285Common
      shares issued for interest expense on related party loans
              
              
              -
              
              
              
              613,782Increase
      in allowance for doubtful accounts
              
              
              1,393,326
              
              
              
              -Impairment
      of production loans and accrued interest
              
              
              3,071,022
              
              
              
              -Impairment
      of goodwill and intangible assets
              
              
              829,958
              
              
              
              -Interest accrued on production loans to related party
              
              
              (182,000
              )
              
              
              -Interest accrued on advances from related party and convertible
      note
              
              
              142,700
              
              
              
              -Amortization of capitalized production costs
              
              
              156,555Depreciation and amortization of intangible assets
              
              
              53,450
              
              
              
              24,737Changes
      in operating assets and liabilities:Accounts
      receivable
              
              
              14,501
              
              
              
              (212,144
              )Capitalized
      production costs
              
              
              (21,832
              )
              
              
              (48,177
              )Prepaid
      expenses and deposits
              
              
              10,745
              
              
              
              (5,765
              )Accounts
      payable and accrued liabilities
              
              
              102,763
              
              
              
              16,926Deferred
      production revenue
              
              
              (326,000)
              
              
              
              30,000NET
      CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
              
              
              (88,851
              )
              
              
              367,406CASH
      FLOWS FROM INVESTING ACTIVITIESCash
      received in acquisition of Studio Store Direct, Inc.
              
              
              -
              
              
              
              47,788Production
      loans and accrued interest
              
              
              (30,000)
              
              
              
              (497,543
              )NET
      CASH USED IN INVESTING ACTIVITIES
              
              
              (30,000)
              
              
              
              (449,755
              )CASH
      FLOWS FROM FINANCING ACTIVITIESAdvances
      from (to) stockholders
              
              
              -
              
              
              
              (63,457
              )Advances
      from (to) related parties
              
              
              12,919
              
              
              
              (73,198
              )Issuance
      of common stock, net of financing fees
              
              
              -
              
              
              
              215,000Proceeds
      from senior secured convertible note
              
              
              100,000
              
              
              
              -NET
      CASH PROVIDED BY FINANCING ACTIVITIES
              
              
              112,919
              
              
              
              78,345NET
      DECREASE IN CASH
              
              
              (5,932)
              
              
              
              (4,004)CASH,
      BEGINNING OF YEAR
              
              
              5,932
              
              
              
              9,936CASH,
      END OF YEAR
              
              $
              -
              
              
              $
              5,932
 
 The
accompanying notes are an integral part of these financial
statements.
  F-5
 RED
ROCK PICTURES HOLDINGS INC. AND SUBSIDIARIES
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR
THE TWELVE MONTHS ENDED AUGUST 31, 2009 AND 2008
 
 
 1.
              NATURE
      OF BUSINESS AND BASIS OF
PRESENTATION
 
 Nature
of Business
 
 Red Rock
Pictures, Inc. was incorporated on August 18, 2006 under the laws of the State
of Nevada and was acquired by Red Rock Pictures Holdings Inc. on August 31,
2006.  The Company engages in the business of developing, financing,
producing and licensing feature-length motion pictures and direct response
infomercials.
 
 On June
6, 2008, the Company entered into a Stock for Stock Exchange Agreement (the
“Exchange Agreement”) with Studio Store Direct, Inc. (“SSD”) and all of the
current SSD Shareholders.  Pursuant to the Exchange Agreement,
the Company acquired 100% of the assets of SSD by issuing 11,000,000 restricted
common shares in exchange for all the issued and outstanding shares of
SSD.  Further, SSD became a wholly owned subsidiary of the
Company.  With the addition of SSD, the Company also operates as a
traditional infomercial production and distribution
company.
 
 On
January 8, 2009, the Company announced that it has entered into a definitive
agreement to acquire New York based ComedyNet.TV, Inc. (“ComedyNet”), a leader
in multimedia comedic content distribution.  The transaction was
terminated on May 28, 2009 due to the ComedyNet’s failure to complete its
obligations under the asset purchase agreement.
 
 PriorYear
Restatement
 
 The
Company restated its audited consolidated financial statements for the
fiscal year ended August 31, 2008.  The determination to restate this
previously issued financial information was made as a result of management’s
identification of improper accounting treatment applied to the issuance of
certain shares of common stock for interest expense associated with the
Williams-Laikin loan discussed in Note 9.  The result was the
recognition of costs associated with the share issuance and amended footnotes to
the financial statements.
 
 Basis
of Presentation
 
 Effective
September 1, 2008, the Company determined that it has emerged from its
development stage as is therefore no longer presenting development stage
financial information as such.
 
 2.
              GOING
      CONCERN
 
 The
Company's financial statements are presented on a going concern basis, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business.  The Company has experienced losses from
operations since inception, do not have significant sources of revenue and have
working capital deficiencies that raise substantial doubt as to its ability to
continue as a going concern.
 
 The
Company's existence is dependent upon management's ability to develop profitable
operations and resolve its liquidity problems. Management anticipates the
Company will attain profitable status and improve its liquidity through
continued business development and additional equity investment in the
Company.
 
 The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
 
 3.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 The
accounting policies of the Company are in accordance with accounting principles
generally accepted in the United States of America.  Presented below
are those policies considered particularly significant:
  F-6
  Principles
of Consolidation
 
 The
accompanying consolidated financial statements of the Company include the
accounts of Red Rock Pictures Holdings, Inc. and its wholly owned subsidiaries,
Red Rock Pictures Inc. and Studio Store Direct Inc. The Company has the full and
exclusive control of the management and operation of the business of each
subsidiary and participates in 100% of the revenues and losses of its
subsidiaries. Inter-company balances and transactions have been eliminated in
consolidation.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those
estimates.  Examples include estimates of the useful life of equipment
and intangibles, the impairment of long-lived assets, intangibles and goodwill,
the value of stock compensation and the estimates of revenue and costs related
to film production.  These estimates are reviewed periodically, and,
as adjustments become necessary, they are reported in earnings in the period in
which they become known.
 
 Revenue
Recognition
 
 The
Company recognizes revenue from television and film productions pursuant to
American Institute of Certified Public Accountants Statement of Position 00-2,
Accounting by Producers or
Distributors of Films (“ SOP 00- 2”).  The following conditions
must be met in order to recognize revenue under SOP 00-2: (i) persuasive
evidence of a sale or licensing arrangement exists; (ii) the program is complete
and has been delivered or is available for immediate and unconditional delivery;
(iii) the license period of the arrangement has begun and the customer can begin
its exploitation, exhibition or sale; (iv) the arrangement fee is fixed or
determinable; and (v) collection of the arrangement fee is reasonably assured.
Income from film productions is derived from foreign, home video and television
sales of third-party films for which production and/or prints and advertising
have been financed by the Company. A significant portion of participation income
is paid to the   Company based on the timetable associated with
participation statements generated by third party processors, and is not
typically known by the Company on a timely basis.  This revenue is
consequently not recognized until the amount is either known or reasonably
estimable or until receipt of the statements from the third
parties.  When the Company is entitled to royalties based on gross
receipts, revenue is recognized before deduction of fees, which are included as
a component of cost of revenue. Cash received in advance of meeting the revenue
recognition criteria described above is recorded as deferred production
revenue.
 
 The
Company recognizes income from consulting services over the life of the contract
as the services are provided.
 
 Production
Costs for Feature Films
 
 Production
costs are accounted for pursuant to SOP No. 00-2.  The cost of
production for infomercials, including direct costs, production overhead and
interest are capitalized and amortized using the individual-film-forecast method
under which such costs are amortized for each program in the ratio that revenue
earned in the current period for such program bears to management’s estimate of
the ultimate revenues to be realized from all media and markets for such
program.  Management regularly reviews, and revise s when necessary,
its ultimate revenue estimates on a title-by-title basis, which may result in a
change in the rate of amortization applicable to such title and/or a write-down
of the value of such title to estimated fair value.  These revisions
can result in significant quarter-to-quarter and year-to-year fluctuations in
film write-downs and rates of amortization.  If a total net loss is
projected for a particular title, the associated film and television costs are
written down to estimated fair value.  All exploitation costs,
including advertising and marketing costs are expensed as incurred.
 
 Production
Costs for Infomercials
 
 The cost
of production for infomercials for our customers, including direct costs,
production overhead and interest are capitalized and expensed upon delivery to
our customers.
 
 Cash
and Cash Equivalents
 
 Cash
equivalents consist of all highly liquid investments with original maturities of
ninety days or less.
 
 Fair
Value of Financial Instruments
 
 The
Company measures its financial assets and liabilities in accordance with the
requirements of SFAS Statement of Financial Accounting Standards ("SFAS") No.
107, Disclosures about Fair
Value of Financial Instruments.  The estimated fair value of
financial instruments has been determined by the Company using available market
information and valuation methodologies.  Considerable judgment is
required in estimating fair value.  Accordingly, the estimates may not
be indicative of the amounts the Company could realize in a current  
market exchange.  The carrying value of the Company's accounts
receivable, advances from related parties, accounts payable and accrued
liabilities approximates fair value because of the short-term maturity of these
instruments.
 
 F-7
  Income
Taxes
 
 The
Company accounts for income taxes pursuant to SFAS No. 109, Accounting for Income
Taxes.  Deferred tax assets and liabilities are recorded for
differences between the financial statement and tax basis of the assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates.  Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized.  Income tax expense is recorded for the amount of
income tax payable or refundable for the period increased or decreased by the
change in deferred tax assets and liabilities during the period.
 
 Comprehensive
Income
 
 The
Company adopted SFAS No. 130, Reporting Comprehensive
Income that establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial
statements.  Comprehensive income is presented in the statements of
changes in stockholders' equity and consists of net gains (losses) and
unrealized gains (losses) on available for sale marketable
securities; foreign currency translation adjustments and changes in market
value of future contracts that qualify as a hedge; and negative equity
adjustments recognized in accordance with SFAS 87.  SFAS No. 130
requires only additional disclosures in the financial statements and does not
affect the Company's financial position or results of operations.
 
 Earnings
or Loss Per Share
 
 The
Company accounts for earnings per share pursuant to SFAS No. 128, Earnings per Share, which
requires disclosure on the financial statements of "basic" and "diluted"
earnings (loss) per share.  Basic earnings (loss) per share is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding for t he year.  Diluted earnings (loss) per share
is computed by dividing net income (loss) by the weighted average number of
common shares outstanding plus common stock equivalents (if dilutive) related to
stock options and warrants for each year.  There were no dilutive
financial instruments for the year ended August 31, 2009.
 
 Valuation
of Long-Lived Assets
 
 In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long- Lived
Assets, long-lived assets to be held and used are analyzed for impairment
whenever events or changes in circumstances indicate that the related carrying
amounts may not be recoverable.  The Company evaluates at each balance
sheet date whether events and circumstances have occurred that indicate possible
impairment.  If there are indications of impairment, the Company uses
future undiscounted cash flows of the related asset or asset grouping over the
remaining life in measuring whether the assets are recoverable.  In
the event such cash flows are not expected to be sufficient to recover the
recorded asset values, the assets are written down to their estimated fair
value.  Long-lived assets to be disposed of are reported at the lower
of carrying amount o r fair value of asset less cost to sell.
 
 Valuation
of Goodwill and other Intangible Assets
 
 We review
goodwill for impairment annually and whenever events or changes in circumstances
indicate the carrying value of an asset may not be recoverable in accordance
with FASB Statement No. 142, Goodwill and Other Intangible
Assets. The provisions of FASB Statement No. 142 require that a
two-step impairment test be performed on goodwill.  In the first step,
we compare the fair value of our reporting unit to its carrying value. Our
reporting unit is consistent with the operating and reportable segment
identified in the notes to our consolidated financial statements. We determine
the fair value of our reporting unit using a combination of the income approach
and market capitalization approach. If the fair value of the reporting unit
exceeds the carrying value of the net assets, goodwill is not impaired and we
are not required to perform further testing. If the carrying value of the net
assets exceeds the fair value of the reporting unit, then we must perform the
second step in order to determine the implied fair value of the reporting unit’s
goodwill and compare it to the carrying value of the reporting unit’s goodwill.
If the carrying value of the reporting unit’s goodwill exceeds its implied fair
value, then we must record an impairment charge equal to the
difference.
 
 Under the
income approach, we calculate the fair value of a reporting unit based on the
present value of estimated future discounted cash flows. Under the market
capitalization approach, valuation multiples are calculated based on operating
data from publicly traded companies within our industry. Multiples derived from
companies within our industry provide an indication of how much a knowledgeable
investor in the marketplace would be willing to pay for a company. These
multiples are applied to the operating data for the reporting unit to arrive at
an indicated fair value. Significant management judgment is required in the
forecasts of future operating results that are used in the estimated future
discounted cash flow method of valuation. The estimates we have used are
consistent with the plans and estimates that we use to manage our business. We
base our fair value estimates on forecasted revenue and operating costs along
with business plans. Our forecasts consider the effect of a number of factors
including, but not limited to, the effect of the roll out of new products,
securing new customers, the effect of the transition to a new contract
manufacturer, the ability to reduce product costs and the impact of continued
cost savings measures within operating expenses. As a result of these
calculations, management determined that goodwill was impaired and the second
step of the goodwill impairment test was performed to measure the amount of the
impairment, resulting in the recognition of impairment to goodwill and
intangible assets of $829,928. No impairment losses were recognized during 2008,
and we had no goodwill or other intangible assets remaining on our balance sheet
at August 31, 2009.
  F-8
  Stock-Based
Compensation
 
 In
December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
123R, Share-Based Payment ("SFAS No. 123R"). SFAS No. 123R establishes standards
for the accounting for transactions in which an entity exchanges its equity
instruments for goods or services.  It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services that are
based on the fair value of the entity ’ s equity instruments or that may be
settled by the issuance of those equity instruments.  SFAS No. 123R
focuses primarily on accounting for transactions in which an entity obtains
employee services in share-based payment transactions.  SFAS No. 123R
requires that the   compensation cost relating to share-based payment
transactions be recognized in the consolidated financial
statements.  That cost is measured based on the fair value of the
equity or liability instruments issued.
 
 Property
and Equipment
 
 Property
and equipment is stated at historical cost less accumulated
depreciation.  Depreciation, based on the estimated useful lives of
the assets, is provided using the under noted annual rates and
methods:
 
 Furniture
      and fixtures
              7
      years straight lineEquipment
              5
      years straight lineLeasehold
      improvements
              3
      years straight line
 
 Recent
Accounting Pronouncements
 
 In June
2009 the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 168 “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles—a replacement of
FASB Standard No. 162” (“SFAS 168”). SFAS 168 replaces the Generally
Accepted Accounting Principles (“GAAP”) with two levels of GAAP: authoritative
and non-authoritative. On July 1, 2009, the FASB Accounting Standards
Codification (“FASB ASC”) became the single source of authoritative
nongovernmental GAAP, except for rules and interpretive releases of the
Securities and Exchange Commission. All other non-grandfathered accounting
literature became non-authoritative. The adoption of SFAS 168 did not have a
material impact on the Company’s consolidated financial statements. As a result
of the adoption of SFAS 168, all references to GAAP now refer to the codified
FASB ASC topic.
 
 In
September 2006, FASB ASC Topic 820 was issued which defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
FASB ASC Topic 820 does not require any new fair value measurements, but
provides guidance on how to measure fair value by providing a fair value
hierarchy used to classify the source of the information. The adoption of FASB
ASC Topic 820 did not have a significant impact on the Company’s consolidated
financial statements.
 
 In April
2009, FASB ASC Topic 855 was issued which establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or available to be issued. The
adoption did not have a material impact on the Company’s consolidated financial
statements.
 
 4.
              ADVANCES
      TO RELATED PARTY
 
 These
advances are unsecured, non interest bearing and due on demand.  As of
August 31, 2009 and August 31, 2008, advances to related parties were $Nil and
$76,798, respectively.  These advances were made to a company controlled by
the spouse of a director and shareholder of the Company.   The related
party agreed to apply a balance owed to related party of $40,000, which in
effect netted the balance outstanding from related party to
$36,798.  In May 2009, due to the poor performance of the company, the
Company wrote off the balance remaining as bad debt expense in the amount of
$36,798.
 
 5.
              CAPITALIZED
      PRODUCTION COSTS
 
 All
capitalized production costs relate to projects in development.  The table
below displays the activity during the fiscal year ended August 31,
2009:
 
 For
      the Year Ended
                August
      31, 2009Opening
      balance, August 31, 2008
              
              $
              134,723Production
      costs incurred and capitalized
              
              
              21,832Expense
      related to delivered projects and reclassified to cost of
      sales
              
              
              (156,555)Closing
      unamortized balance, August 31, 2009
              
              $
              -
  F-9
  6.
              PRODUCTION
      LOANS AND ACCRUED INTEREST
 
 The
Company provides production financing to National Lampoon, Inc., a corporate
shareholder ("NL") that shares certain directors and officers of Red Rock
Pictures Holdings, Inc.  The production advances bear interest at a
rate of 10% per annum, has a security interest in the film to the extent of the
actual amount of the funding as long as there is an unpaid balance on the loan
and are repayable from 100% of any and all net revenues from each
picture.  The financing agreements allow for the Company to advance up
to $2,000,000 per picture production.
 
 Outstanding
production loans to and accrued interest with NL consists of the following as of
August 31, 2009 and 2008, respectively:
 
 Production
              
              As
      of August 31, 2009
              
              
              As
      of August 31, 2008Bag
      Boy Productions, Inc.
              
              $
              -
              
              
              $
              1,077,635Ratko
      Productions, Inc.
              
              
              -
              
              
              
              2,163,992Endless
      Bummer, LLC
              
              
              -
              
              
              
              -Total
              
              
              -
              
              
              
              3,241,627Less
      current portion
              
              
              -
              
              
              
              (1,396,470
              )Long
      term portion of production loans and interest
              
              $
              -
              
              
              $
              1,845,157
 
 In 2006
through 2008, the Company invested in two films titled Bag Boy and
Ratko.   Per the financing agreement with National Lampoon, Inc.,
the payments were to be made from the proceeds received from the film over an
estimated revenue cycle of three years.  The payments were to be
distributed as follows:
 
 ·
              National
      Lampoon was to receive a 20% distribution fee.·
              National
      Lampoon was to receive recoupment of all prints and advertising expenses
      incurred in connection with the distribution of the
    picture.·
              The
      remaining gross receipts were to be split equally between the Company and
      National Lampoon until such time as the Company has recouped its
      investment entirely.
 
 Towards
the end of fiscal year 2009, it became apparent that due to the poor performance
of the two aforementioned films which we funded and the deteriorating financial
condition of National Lampoon, Inc., the Company determined that the full
balance of our investment in the films by National Lampoon, Inc. was fully
impaired. The Company has little hope at this time that National Lampoon, Inc.
will have the ability and wherewithal to repay the production loans or print and
advertising funding.
 
 Endless
Bummer Productions LLC - Per a deal memorandum effective March 18, 2009 between
Red Rock Pictures Holding, Inc., National Lampoon, Inc., 4Fini, Inc. Chris Kaman
and Endless Bummer Productions, LLC, the Company has an obligation to invest in
an upcoming feature length motion picture title Endless Bummer.  In
April 2009, the Company invested $30,000 in the film.  Based on the
films poor performance, the Company wrote off its investment.
 
 The
Company recorded a charge of $3,101,022 regarding these productions during
fiscal year 2009.  The charge of $3,101,022 is included as impairment
of production loans and accrued interest in the Consolidated Statements of Loss
and Comprehensive Loss for the year ended August 31, 2009.
 
 7.
              PRINT
      AND ADVERTISING FUNDING
 
 During
the third quarter of fiscal year 2008, the Company entered into an agreement
with National Lampoon, Inc. whereby the Company agreed to advance funding to
National Lampoon, Inc. for print and advertising services (P&A) for certain
titles released by National Lampoon, Inc. for total advances of up to
$2,000,000.  The Company will be entitled to recoup its investment
plus a premium of twenty percent (20%) of the amount funded.  In
addition, the Company will be entitled to a five percent (5%) of all net
contingent proceeds from the picture.
 
 Towards
the end of fiscal year 2009, it became apparent that due to the poor performance
of the films for which print and advertising funds were invested and the
deteriorating financial condition of National Lampoon, Inc., the Company
determined the full balance of our print and advertising funding to National
Lampoon, Inc. was fully impaired.  The Company has little hope at this
time that National Lampoon, Inc. will have the ability and wherewithal to repay
the production loans or print and advertising funding.
  The
Company recorded a charge of $1,313,378 during fiscal year 2009.  The
charge is included in the of $3,101,022 is included in the bad debt expense
number in the Consolidated Statements of Loss and Comprehensive Loss for the
year ended August 31, 2009.
 F-10
  8.
              INTANGIBLE
      ASSETS AND GOODWILL
 
 The
Company acquired the direct response marketing business of Studio Store Direct,
Inc. in fiscal 2008.  The intangible asset values related to this
acquisition are being amortized straight-line over a five year
period:
 
 The
changes in the carrying amount of intangible assets were as
follows:
 
 As
      of
                August
      31,
                2009
              
              
              As
      of
                August
      31,
                2008Intangible
      assets at beginning of period
              
              $
              424,280
              
              
              $
              -Additions
              
              
              -
              
              
              
              446,611Amortization
              
              
              (67,041
              )
              
              
              (22,331
              )Impairments
              
              
              (379,620
              )
              
              
              -Total
              
              $
              --
              
              
              $
              424,290
 
 In
accordance with Company policy, the intangible assets assigned to the Studio
Store Direct reporting unit was reviewed for impairment in the third quarter of
Fiscal Year 2009.  The Company was declined a patent on the completed
technology acquired during the acquisition.  As a result of the
decline, an intangible asset charge of $379,620 was recorded during fiscal year
2009.  This reduced the carrying amount of intangible assets related
to the Studio Store Direct reporting unit to $Nil at August 31,
2009.
 
 The
changes in the carrying amount of goodwill were as follows:
 
 As
      of
                August
      31,
                2009
              
              
              As
      of
                August
      31,
                2008Goodwill
      at beginning of period
              
              $
              450,338
              
              
              $
              -Additions
              
              
              -
              
              
              
              450,338Impairments
              
              
              (450,338
              )
              
              
              -Total
              
              $
              --
              
              
              $
              450,338
 
 Goodwill
was assigned to the Studio Store Direct reporting unit.  The Company’s
reporting unit, which are one level below the single reportable segment, are
identified based upon the availability of discrete financial information and
senior management’s regular review of these units.  Goodwill is
assessed annually at the reporting unit level or more frequently if
circumstances indicate that goodwill might be impaired.  The goodwill
impairment test is a two-step process.  In the first step, the Company
compares the fair value of a reporting unit with its carrying amount, including
goodwill.  If the carrying amount of a reporting unit exceeds its fair
value, the second step of the goodwill impairment test shall be performed to
measure the amount of impairment loss.  In the second step, the
Company compares the implied fair value of the reporting unit’s goodwill with
the carrying amount of that goodwill.
 
 9.
              ADVANCES
      FROM RELATED PARTIES
 
 On June
9, 2007, the Company entered into loan agreements with the N. Williams Family
Investments, L.P. and Daniel Laikin (collectively, “Williams-Laikin”) for
$1,000,000 each for a total of $2,000.000.  The loan agreement with
Daniel Laikin was subsequently amended from $1,000,000 to $900,000.
 
 The
proceeds of these loans are to fund the Company’s obligation to advance
production costs to National Lampoon for a motion picture
production.  The loans are secured by the profit participation rights
of the films.  The loans bear seven percent (7%) interest and are to
be repaid out of the proceeds of equity raised of the Company or sales efforts
of the motion picture. In addition to the interest on these advances,
Williams-Laikin are entitled to receive five percent (5%) of the twenty five
percent (25%) of all net profits from the distribution of the respective
pictures specified in their agreement received by Red Rock Pictures Holdings
Inc.  The total balance outstanding, including accrued interest, was
$1.8 million and $2.0 million at August 31, 2009 and 2008,
respectively.
 
 The
Company is currently in default on the Williams-Laikin
loans.   In an event of default occurs and is continuing, and in
every such case, unless the principal of the note shall have already become due
and payable, the holder by a notice in writing to the Company may declare all of
the principal of this note, together with accrued interest thereon, to be due
and payable immediately.  No such notice as been received as of the
date of this filing.
  F-11
  In the
event the Company or any of its subsidiaries make an assignment for the benefit
of creditors, or put in writing its inability to pay its debts generally as they
become due, or a notice of lien, levy or assessment is filed of record or given
to Company or any of its subsidiaries with respect to all or any of their
respective assets by any federal, state, local department or agency, and such
lien, levy or assessment is not released or paid within a reasonable period of
time but in no event longer than twenty (20) days from the date such lien, levy,
or assessment is filed, or such longer period of time as is appropriate in the
case of any such lien, levy or assessment that is being contested in good faith
and by appropriate proceedings; then all principal and accrued interest shall
become and be immediately due and payable without any declaration or other act
on the part of the note holder.
  10.
              SENIOR
      SECURED CONVERTIBLE DEBENTURE
 
 On
December 28, 2008, the Company entered into a twelve month $100,000 senior
secured convertible debenture agreement with Emerald Asset Advisors, LLC (“Note
Holder”).  The one year term loan bears interest at 10% per annum and
interest accrues and is payable in cash upon maturity provided that the elected
conversion to common shares does not occur.  At any time or times on
or after December 28, 2008, the Note Holder shall be entitled to convert any
portion of the outstanding and unpaid amount into fully paid and nonassessable
shares of Common Stock at a conversion price of $0.06 per common
share.  From and after the occurrence of an event of default, the
interest rate shall be increased to twenty percent (20.0%) until the date of
such cure.
 
 11.
              CONSULTING
      TO RELATED PARTY
 
 The
Company's consulting revenue is from a related party, National Lampoon, Inc., a
corporate shareholder (NL) that shares certain directors and officers of Red
Rock Pictures Holdings Inc.
 
 12.
              COMMITMENTS
      AND CONTINGENCY
 
 We
are involved in routine litigation incidental to the conduct of our business.
There are currently no material pending litigation proceedings to which we are a
party or to which any of our property is subject.
 
 13.
              COMMON
      STOCK
 
 In
December 2007 and in March 2008, the Company issued an additional 11,440,662 and
521,866 share, respectively, of its common stock in accordance with loan
agreements entered into as discussed in note 7.
 
 In March
2008 the Company issued 150,000 shares for film distribution services rendered
to the Company, valued at the market value of the common stock on the date of
issue.
  In June
2008 the Company issued 11,000,000 shares of its common stock in exchange for
100% the common shares of Studio Store Direct, Inc., as discussed in note
1.
  Throughout
fiscal year 2008, the Company issued a total of 2,753,846 of its common shares
in exchange for services provided to the Company by various third party service
providers.
  On
November 17, 2008, the Board of Directors authorized the Company to issue 5
million shares to Reno Rollé, the Company’s President and Chief Executive
Officer, at the closing market price on November 17, 2008.  The shares
were issued per Mr. Rollé’s employment agreement with the
Company.   The issuance of shares was recorded as an expense of
$200,000 and is included in stock-based compensation expense in the accompanying
consolidated statements of loss and comprehensive loss.
  On
November 17, 2008, the Board of Directors authorized the Company to issue
1,000,000 shares to a Director for services rendered.  The shares were
issued at the closing market price on November 17, 2008.  The issuance
of shares was recorded as an expense of $40,000 and is included in stock-based
compensation expense in the accompanying consolidated statements of loss and
comprehensive loss.
  On
November 25, 2008, the Company entered into an agreement with one of its vendors
to issue shares in lieu of a cash payment for expenses incurred and
outstanding.   The Company issued 166,000 shares of common stock
to satisfy an outstanding balance owed of approximately $22,000.
   F-12
 On
December 10, 2008, the Board of Directors authorized the Company to issue
1,000,000 shares to an employee for services rendered.  The shares
were issued at the closing market price on December 10, 2008.  The
issuance of shares was recorded as an expense of $30,000 and is included in
stock-based compensation expense in the accompanying consolidated statements of
loss and comprehensive loss.
  On
December 10, 2008, the Board of Directors authorized the Company to issue
1,000,000 shares to Reno Rollé, the Company’s President and Chief Executive
Officer, at the closing market price on December 10, 2008.  The shares
were issued per Mr. Rollé’s employment agreement with the
Company.   The issuance of shares was recorded as an expense of
$30,000 and is included in stock-based compensation expense in the accompanying
consolidated statements of loss and comprehensive loss.
  On April
10, 2009, the Board of Directors authorized the Company to issue 2,000,000
shares to Reno Rollé, the Company’s President and Chief Executive Officer, at
the closing market price on April 10, 2009.  The shares were issued
per Mr. Rollé’s employment agreement with the Company.   The
issuance of shares was recorded as an expense of $9,000 and is included in
stock-based compensation expense in the accompanying consolidated statements of
loss and comprehensive loss.
  On April
10, 2009, the Board of Directors authorized the Company to issue 1,000,000 and
166,000 shares to two separate consultants for professional services
rendered.  The shares were issues for services rendered at a market
value based on an arms length agreement.  The issuance of shares was
recorded as an expense of $225,000 and is included in professional fees in the
accompanying consolidated statements of loss and comprehensive
loss.
 
 14.
              STOCK
      OPTION AND EQUITY INCENTIVE PLAN
 
 On
February 14, 2007 the Company filed a Form S-8 Registration Statement for
Securities to be offered to Employees in Employee Benefit
Plans’.  Under the terms of this filing the Company registered
9,000,000 shares of common stock with a par value of $.001 per
share.  The purpose of the plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company by offering them an opportunity to
participate in the Company ’ s future performance through awards of options and
restricted stock.
  Under the
Plan, incentive stock options may be granted to employees, directors, and
officers of the Company and non-qualified stock options may be granted to
consultants, employees, directors, and officers of the
Company.  Options granted under the option plan are for periods not to
exceed ten years, and must be issued at prices not less than 100% of the fair
market value of the stock on the date of grant.  Options granted to
shareholders who own greater than 10% of the outstanding stock are for periods
not to exceed five years and must be issued at prices not less than 110% of the
fair market value of the stock on the date of grant.
  Summary
of stock option activity is as follows:
 
 Number of
                shares
              
              Weighted
                average
                exercise
                price
              
              Weighted average
                remaining
                contractual term
                (in
      years)Outstanding
      at August 31, 2008
              3,350,000
              
              $
              0.07Granted
              200,000
              
              
              0.01Expired
              (300,000
              )
              
              --Outstanding
      at August 31, 2009
              3,250,000
              
              $
              0.07
              
              3.0Vested
      and expected to vest at August 31, 2009
              3,133,333
              
              $
              0.07
              
              3.0Exercisable
      at August 31, 2009
              3,133,333
              
              $
              0.07
              
              3.0
 
 During
the twelve months ended August 31, 2009 and 2008, the Company recognized total
compensation expense related to stock options of $736,167 and
$686,457 respectively and is disclosed separately in the accompanying
consolidated statements of loss and comprehensive loss.
 
 
 15.
              SUPPLEMENTAL
      CASH FLOW INFORMATION
 
 In June
2008 the Company issued 11,000,000 shares of its common stock in exchange of
100% the common shares of Studio Store Direct, Inc.
 
 During
the years ended August 31, 2009 and 2008, there was no interest or taxes paid by
the Company.
 
 16.
              INCOME
      TAXES
 
 The
Company accounts for income taxes in accordance with SFAS No.
109.  SFAS No. 109 prescribes the use of the liability method whereby
deferred tax asset and liability account balances are determined based on
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates.  The effects
of future changes in tax laws or rates are not anticipated.
  F-13
  Under
SFAS No. 109 income taxes are recognized for the following: a) amount of tax
payable for the current year and b) deferred tax liabilities and assets for
future tax consequences of events that have been recognized differently in the
financial statements than for tax purposes.
 
 As at
August 31, 2009 and 2008, there were no differences between financial reporting
and tax bases of assets and liabilities.  The Company will have tax
losses available to be applied against future years' income as result of the
losses incurred.  However, due to the losses incurred in the period
and expected future operating results, management determined that it is more
likely than not that the deferred tax asset resulting from the tax losses
available for carryforward will not be realized through the reduction of future
income tax payments.  Accordingly a 100% valuation allowance has been
recorded for deferred income tax assets.
 
 17.
              SUBSEQUENT
      EVENT
 
 On
December 5, 2009, the same investor as discussed in Note 10 advanced the Company
with a $50,000 short term loan.  The terms of the short term loan are
in discussion and dependent on our current efforts to successfully obtain
additional financing.   Proceeds from this short term loan will
be used to complete the fiscal year 2009 Annual Report on Form 10-K, which
includes auditor, legal, printing, and other professional services
fees.  Any remaining funds will be used to fund our
operations.