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, 2010





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 ofincorporation or organization)
(IRS Employer Identification No.)





6019 Olivas Park Drive, Suite C

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, 2010: $4,435.00





Aggregate market value of the voting common stock held by non-affiliates of the registrant as of February 28, 2010, was approximately: $107,000





Number of shares of the registrant’s common stock outstanding as of November 30, 2010 was: 119,816,335





Transitional Small Business Disclosure Format:   Yes x        No o











FORM 10-K








FOR THE YEAR ENDED AUGUST 31, 2010








INDEX











PART IItem 1.

Business

3Item 1A.

Risk Factors

6Item 1B.

Unresolved Staff Comments

8Item 2.

Properties

8Item 3.

Legal Proceedings

8Item 4.

(Removed & Reserved)

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

10Item 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

17Item 13.

Certain Relationships and Related Transactions

17Item 14.

Principal Accountant Fees and Services

17PART IVItem 15.

Exhibits, Financial Statement Schedules

18Signatures

19




1





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.





2


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 August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company (“Crisnic”) whereby Crisnic has agreed to provide funding to the Company.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010 and agreed to complete a 1 for 100 reverse stock split as soon as possible.  Subsequent to the reverse stock split, the Company also agreed to issue Crisnic 3,000,000 shares of the Company’s common stock.  Also subsequent to the reverse stock split, the Company will sell up to $1,500,000 in common stock and a registration rights agreement.  The number of shares and the purchase price of the shares in the primary offering shall be determined subsequent to a planned reverse split.   Lastly, and as a condition of funding, it was agreed that Reno Rolle will convert all outstanding past due salary into 5,000,000 newly issued shares of common stock.





The Company received the first tranche of $100,000 from Crisnic in August 2010.  The Company agreed to use the funds received from Crisnic to fund a proposed direct response marketing campaign and will share all adjusted gross receipts from the Campaign with Crisnic.





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.





3




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.





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.




4




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.





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 two full-time employees.





5





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.




6




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.





7




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 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.





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. (REMOVED & RESERVED0





None





8





PART II





ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





As of August 31, 2010 there were approximately 37 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





On August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company (“Crisnic”) whereby Crisnic has agreed to provide funding to the Company.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010 and agreed to complete a 1 for 100 reverse stock split as soon as possible.  Subsequent to the reverse stock split, the Company also agreed to issue Crisnic 3,000,000 shares of the Company’s common stock.  Also subsequent to the reverse stock split, the Company will sell up to $1,500,000 in common stock and a registration rights agreement.  The number of shares and the purchase price of the shares in the primary offering shall be determined subsequent to a planned reverse split.   Lastly, and as a condition of funding, it was agreed that Reno Rolle will convert all outstanding past due salary into 5,000,000 newly issued shares of common stock.





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 31,2010


2009


2008Net Sales

$
4,435


$
635,494


$
934,067Net Income (Loss)

$
887,406


$
(6,778,069
)

$
(766,695
)Diluted Earnings (Loss) per Common Share

$
0.01


$
(0.07
)

$
(0.01
)2010



2009



2008Current Assets

$
250,341


$
-


$
1,841,312Property and Equipment, net

$
9,838


$
16,916


$
25,707Total Assets

$
260,179


$
16,916


$
5,664,974Current Liabilities, including Current Portion of Long-Term Debt

$
660,876


$
2,251,018


$
2,547,2056Long-Term Liabilities, net of Current Portion

$
-


$
-


$
-Stockholders’ (Deficit) Equity

$
(400,697
)

$
(2,234,102
)

$
3,117,918





9





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.





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.





Current Update on Operations





During fiscal years 2007 to 2009, we funded two full featured films and various print and advertising campaigns for our largest customer and related party, 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 of National Lampoon, Inc., we recorded a total charge of approximately $4.4 million during fiscal year 2009.





Starting in fiscal year 2010 we modified our strategic plan to focus on the development and distribution of direct response marketing campaign also commonly known as infomercials.   Our ability to implement our revised strategy is highly dependent on our ability to successfully raise additional capital.





On August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company (“Crisnic”) whereby Crisnic has agreed to provide funding to the Company to fund a proposed direct response marketing campaign and will share all adjusted gross receipts from the campaign.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010 and agreed to complete a 1 for 100 reverse stock split as soon as possible.  Subsequent to the reverse stock split, the Company also agreed to issue Crisnic 3,000,000 shares of the Company’s common stock.  Also subsequent to the reverse stock split, the Company will sell up to $1,500,000 in common stock and a registration rights agreement.  The number of shares and the purchase price of the shares in the primary offering shall be determined subsequent to a planned reverse split.   Lastly, and as a condition of funding, it was agreed that Reno Rolle will convert all outstanding past due salary into 5,000,000 newly issued shares of common stock.  The Company received the first tranche of $100,000 from Crisnic in August 2010.





Results of Operations





Comparison of Fiscal Years Ended August 31, 2010 and 2009





Revenue





Revenue was $4,435 and $635,494 for the years ended August 31, 2010 and 2009, respectively.  The decrease in revenue was due to the loss of our largest customer as explained above.  In 2009, we completed and delivered infomercial projects that generated revenue of $383,650.  No infomercials were delivered during the 2010 fiscal year.




10


Costs and Expenses





Cost and expenses was $(80,511) and $7,270,863 for the years ended August 31, 2010 and 2009, respectively.   The decrease of $7,351,374 was due a reversal of a prior year bad debt charge of $1,024,468 which was subsequently collected in 2010.  In 2009, we recorded a charge of $4,464,247 related to an investment in two feature films and various print and advertising campaigns for our customer National Lampoon, Inc.   In 2009 we also evaluated our Goodwill and Intangible assets balances and based on our evaluation, we recorded an impairment charge of $829,958.  The remaining decline in expense was primarily related to a reduction in stock based compensation of $373,030 and cost cutting efforts related to our decrease in revenues.





Gain on Extinguishment of Advances From Related Parties





In August 2010, the Company recorded a gain of $917,460 related to debt that was assumed by an outside party, National Lampoon, Inc.  No similar activity existed in fiscal year 2009.   On August 13, 2010, the Company entered into an agreement with National Lampoon, Inc. in which National Lampoon, Inc. agreed to assume the outstanding debt the Company owed to Williams-Laikin of $1,941,928 and in exchange, the Company agreed to forgive National Lampoon, Inc. for its balance owed the Company of $1,024,468.  In 2009, the Company wrote off this balance as a bad debt charge due to the financial condition of National Lampoon, Inc.  After offsetting the balances owed from both parties, the net balance resulted in a gain of $917,460.





Interest Expense





Interest expense was $115,000 compared to $142,700 for the years ended August 31, 2010 and 2009, respectively.   The reduction in interest expense of $27,300 was primarily due to the assumption of our debt as discussed above.





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.





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.





Liquidity and Capital Resources





As of August 31, 2010 we had $94,676 in cash and a working capital deficiency of $410,534.  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.





Cash used in operating activities were $105,325 for the year ended August 31, 2010.   We expended $155,665 on the development of an infomercial which is expected to be released to our customer during fiscal year 2011.  The cash used to develop the infomercial was offset by the advance of $100,000 from a book publisher which is related to this same infomercial.  The remaining use of cash from operating activities was due to changes in the balance of our accounts payable and accrued expenses and the funding of our net losses from operations.




11




Cash received from financing activities of $200,000 was received from two sources.   First, $100,000 was from an investor as discussed in Note 6 of the attached consolidated financial statements.  In addition, On August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company (“Crisnic”) whereby Crisnic has agreed to provide funding to the Company.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010 and agreed to complete a 1 for 100 reverse stock split as soon as possible.  Subsequent to the reverse stock split, the Company also agreed to issue Crisnic 3,000,000 shares of the Company’s common stock.  Also subsequent to the reverse stock split, the Company will sell up to $1,500,000 in common stock and a registration rights agreement.  The number of shares and the purchase price of the shares in the primary offering shall be determined subsequent to a planned reverse split.   Lastly, and as a condition of funding, it was agreed that Reno Rolle will convert all outstanding past due salary into 5,000,000 newly issued shares of common stock.  The Company received the first tranche of $100,000 from Crisnic in August 2010.  The Company agreed to use the funds received from Crisnic to fund a proposed direct response marketing campaign and will share all adjusted gross receipts from the Campaign with Crisnic.





The Company is currently in default on its Senior Secured Convertible Debenture discussed in Note 6 of the attached consolidated financial statements at August 31, 2010.  As an event of default, the interest rate is increased to twenty percent (20.0%) until the date of such cure.  The Company is currently in negotiation with the Note Holder.  The Note Holder has advanced an additional $100,000 during the twelve months ended August 31, 2010 to fund the completion of our annual report and to fund operating capital.





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, 2010.  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.





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, 2010, 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
49
President, Chief Executive Officer and DirectorJohn Whitesell
54
DirectorRobert Rosenblatt
55
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 exceeds $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.





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.


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.





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, 2010.





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.




15




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, 2010 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Strategy Officer (CSO):





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 (1)


2010

2009



4,000

20,000



0

0



0

0



0

240,000



0

0



0

0



0

0Todd Wiseman, Chief Strategy Officer (2)


2010

2009



4,000

-



-

-



-

-



10,000

-



-

-



-

-



-

-


(1)
Mr. Rolle’s employment agreement stipulates certain share issuances as a component of his overall compensation.   In 2009, 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 $4,000 and $20,000 in fiscal year 2010 and 2009, respectively.


(2)
Mr. Wiseman’s employment agreement stipulates certain share issuances as a component of his overall compensation.   In 2010, per the employment agreement, Mr. Wiseman is to receive 2 million common shares at a market value at date of issuance of $10,000.  Mr. Wiseman received cash compensation of $4,000 and $Nil in fiscal year 2010 and 2009, respectively.  Mr. Wiseman’s employment started on December 28, 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. Rollé 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.





On December 30, 2009, the Company entered into an employment agreement with the Chief Strategy Officer, Todd Wiseman.  The agreement is in effect for three years and shall automatically renew for a successive three year period unless the Company’s Board of Directors or Mr. Wiseman elects not to renew the employment agreement.  The employment agreement provides for compensation of $80,000 per annum contingent upon the Company’s securing adequate investment financing, as mutually agreed upon by Wiseman and the Company, from a third party investor, which many or may not occur.  Mr. Wiseman is eligible for an annual bonus program.  The amount of the bonus will be negotiated in good faith and mutually agreed upon by Mr. Wiseman and the Board of Directors of the Company.   Additionally, Mr. Wiseman is to receive 2,000,000 common shares and 3,000,000 stock options.  The exercise price of the stock options is to be at least $0.01.  The shares vest annually and ratably over a three year period.   Mr. Wiseman, as long as he remains an employee of the Company, has the option to purchase 5% of the total amount of any new shares issued by the Company beyond the total amount of shares outstanding as of December 30, 2010.  The purchase price of the shares will no on terms no less favorable than any other executive receiving options including Company’s current Chief Executive Officer, Mr. Rollé.





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.





16





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.








Name and Address
Number of Common Shares Beneficially Owned
Percent of Class (2)Reno Rolle(1)

8228 Sunset Blvd.

3rd Floor

Los Angeles, CA 90046
14,380,773
7.3%Crisnic Fund S.A.

ConHotel Office Center, Office 5 Sabana Norte, San Jose

Costa Rica
13,000,000
10.9%National Lampoon(3)

8228 Sunset Blvd.

Los Angeles, CA 90046
10,769,236
9.0%Dan Laikin

9920 Towne Road

Carmel, IN 46032
10,416,051
6.7%All directors and executive officers as a group
16,777,073
7.3%





(1) The person listed is an officer and/or director of the Company.


(2) Based on 119,816,335 shares of common stock issued and outstanding as of August 31, 2010.


(3) Timothy Durham has dispositive control of these shares





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





See notes 5 and 7 of the Annual Report on Form 10-K for the fiscal year ended August 31, 2010, filed with the Securities and Exchange Commission dated December 14, 2010.





ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES





Audit Fees





For the Company’s fiscal years ended August 31, 2010 and 2009, we were billed approximately $25,830 and $39,700, 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, 2010 and 2009.


Tax Fees





For the Company’s fiscal years ended August 31, 2010 and 2009, 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, 2010 and 2009.





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





(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





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, 2010
By: /s/ Reno RolléReno RolléPresident, Chief Executive Officer, and Director




19








RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES





CONSOLIDATED FINANCIAL STATEMENTS





AUGUST 31, 2010

















RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES





AUGUST 31, 2010





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-13








F





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, 2010 and 2009 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, 2010 and 2009, 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.





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


December 14, 2010





F-1





RED ROCK PICTURES HOLDINGS, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


AS OF AUGUST 31, 2010 AND 2009





August 31, 2010


August 31, 2009ASSETSCurrent AssetsCash

$
94,676


$
-Capitalized production costs


155,665



-Total Current Assets


250,341



-Long Term AssetsEquipment, net


9,838



16,916Total Long Term Assets


9,838



16,916Total Assets

$
260,179


$
16,916LIABILITIES AND STOCKHOLDERS' DEFICITCurrent LiabilitiesAccounts payable

$
277,540


$
240,755Advances from stockholder


63,636



63,636Deferred licensing revenue


100,000



-Senior secured convertible note, including accrued interest of $19,700 and $6,700 at August 31, 2010 and 2009, respectively


219,700



106,700Advances from related parties


-



1,799,928Total Current Liabilities


660,876



2,211,019Going Concern, Commitments and ContingencyStockholders' DeficitPreferred 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, 119,816,335 and 106,816,335 shares issued and outstanding at August 31, 2010 and 2009, respectively


119,816



106,816Additional paid-in-capital


10,976,134



10,089,134Common stock issuable


426,000



180,000Subscription receivable


(200,000
)


-Deficit


(11,682,648
)


(12,570,053
)Total Stockholders' Deficit


(400,697
)


(2,194,103
)Total Liabilities and Stockholders' Deficit

$
260,179


$
16,916





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, 2010 AND 2009







For the Year Ended

August 31, 2010


For the Year Ended

August 31, 2009REVENUEProduction revenue

$
-


$
383,650Distribution profit participation


4,435



-Print and advertising premium fees


-



69,844Interest on production advances


-



182,0004,435



635,494COSTS AND EXPENSESImpairment of production loans and accrued interest


-



3,101,022Bad debt (recovery)


(1,024,468
)


1,393,225Stock based compensation


846,000



1,219,030Impairment of goodwill and intangible assets


-



829,958Professional fees


22,716



305,254Costs of distribution profit participation


-



156,555Salaries and wages


61,283



109,652Office and general


6,881



82,217Depreciation and amortization of intangible assets


7,078



53,450Rent


-



20,400TOTAL OPERATING EXPENSES (RECOVERY)


(80,511
)


7,270,863INCOME (LOSS) FROM OPERATIONS


84,946



(6,635,369
)Gain on extinguishment of advances from related parties


917,460



-Interest expense


(115,000
)


(142,700
)NET INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

$
887,406


$
(6,778,069
)LOSS PER WEIGHTED NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED

$
0.01


$
(0.07
)WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC AND DILUTED


107,101,267



102,875,562





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, 2010 AND 2009





Common Stock


Additional Paid In Capital


Common Stock Issuable


Subscription receivable


Accumulated Deficit


Total Stockholders' Equity (Deficit)Shares


AmountBalance, 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


106,815,735


$
106,816


$
10,089,134


$
180,000


$
-


$
(12,570,053
)

$
(2,234,103
)Common shares issuable to Chief Executive Officer and Chief Strategy Officer per employment agreements


-



-



-



246,000



-



-



246,000Stock based compensation


-



-



600,000



-



-



-



600,000Common shares issued for cash and subscription receivable


13,000,000



13,000



287,000



-



(200,000
)


-



100,000Net income


-



-



-



-



-



887,406



887,406Balance, August 31, 2010


119,815,735


$
119,816


$
10,976,134


$
426,000


$
(200,000
)

$
(11,682,648)


$
(400,697
)




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, 2010 AND 2009





Year Ended

August 31, 2010


Year Ended

August 31, 2009CASH FLOWS FROM OPERATING ACTIVITIESNet loss

$
887,406


$
(6,778,069
)Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Stock-based compensation expense


846,000



1,219,030Common shares issued for services provided


-



225,000Gain on extinguishment of advances from related parties


(917,460
)


-(Decrease) Increase in allowance for doubtful accounts


(1,024,468
)


1,393,326Impairment of production loans and accrued interest


-



3,071,022Impairment of goodwill and intangible assets


-



829,958Interest accrued on production loans to related party


-



(182,000
)Interest accrued on advances from related party and convertible note


115,000



142,700Amortization of capitalized production costs


-



156,555Depreciation and amortization of intangible assets


7,078



53,450Changes in operating assets and liabilities:Accounts receivable


-



14,501Capitalized production costs


(155,665
)


(21,832
)Prepaid expenses and deposits


-



10,745Accounts payable and accrued liabilities


36,785



102,763Deferred revenue


100,000



(326,000)NET CASH USED IN OPERATING ACTIVITIES


(105,324
)


(88,851
)CASH FLOWS FROM INVESTING ACTIVITIESProduction loans and accrued interest


-



(30,000)NET CASH USED IN INVESTING ACTIVITIES


-



(30,000)CASH FLOWS FROM FINANCING ACTIVITIESAdvances from related parties


-



12,919Issuance of common stock


100,000



-Proceeds from senior secured convertible note


100,000



100,000NET CASH PROVIDED BY FINANCING ACTIVITIES


200,000



112,919NET INCREASE (DECREASE) IN CASH


94,676



(5,932)CASH, BEGINNING OF YEAR


-



5,932CASH, END OF YEAR

$
94,676


$
-




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, 2010 AND 2009





Note 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 August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company (“Crisnic”) whereby Crisnic has agreed to provide funding to the Company.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010 and agreed to complete a 1 for 100 reverse stock split as soon as possible.  Subsequent to the reverse stock split, the Company also agreed to issue Crisnic 3,000,000 shares of the Company’s common stock.  Also subsequent to the reverse stock split, the Company will sell up to $1,500,000 in common stock and a registration rights agreement.  The number of shares and the purchase price of the shares in the primary offering shall be determined subsequent to a planned reverse split.   Lastly, and as a condition of funding, it was agreed that Reno Rolle will convert all outstanding past due salary into 5,000,000 newly issued shares of common stock.





The Company received the first tranche of $100,000 from Crisnic in August 2010.  The Company agreed to use the funds received from Crisnic to fund a proposed direct response marketing campaign and will share all adjusted gross receipts from the Campaign with Crisnic.





Note 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.





Note 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:





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.





F-6




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 Account Standards Codification (“ASC”) 926, Entertainment - Films.  The following conditions must be met in order to recognize revenue under ASC 926: (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 ASC 926.  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 ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:





Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.





Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.





Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.





F-7





The carrying value of the Company's cash, accounts payable and accrued liabilities, advances from stockholder, senior secured convertible debt and advances from related parties approximates fair value because of the short-term maturity of these instruments.





Income Taxes





The Company accounts for income taxes pursuant to ASC 740, 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.





Earnings or Loss per Share





The Company accounts for earnings per share pursuant to ASC 260, 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 years ended August 31, 2010 or 2009.





Stock-Based Compensation





The Company accounts for Stock-Based Compensation in accordance with ASC 718, Compensation – Stock Compensation. ASC 718 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.  ASC 718 focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions.  ASC 718 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.





Equipment





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 line





Recent Accounting Pronouncements





In October 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance on revenue recognition that will become effective in fiscal years beginning on or after June 15, 2010, with earlier adoption permitted. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition.   We believe the adoption of this new guidance will not have a material impact on our financial statements.





In June 2009, the FASB issued guidance on transfers and servicing of financial assets to eliminate the concept of a qualifying special-purpose entity, change the requirements for off balance sheet accounting for financial assets including limiting the circumstances where off balance sheet treatment for a portion of a financial asset is allowable, and require additional disclosures. The guidance is effective for the Company’s 2011 fiscal year. The Company does not expect that the adoption of this guidance will have a material impact on its financial statements.





Other recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.




F-8




Note 4 – Customer Concentration and Related Party





In fiscal year 2009 the Company recorded revenue from our largest customer and related party, National Lampoon, Inc.  For the twelve months ended August 31, 2010 and 2009, revenue from National Lampoon, Inc. was $Nil and $251,844 or approximately 0% and 40% of total revenue, respectively.





Note 5 – Capitalized Production Costs





All capitalized production costs relate to projects in development.  The Company expects 100% of the balance of capitalized production costs will be amortized or expensed within the next year.  The table below displays the activity during the twelve months ended August 31, 2010:





Fiscal Year 2010Opening balance, August 31, 2009

$
-Production costs incurred and capitalized


155,665Expense related to delivered projects and reclassified to cost of sales


-Closing unamortized balance, August 31, 2010

$
155,665





Note 6 – Equipment





The table below displays our equipment balance as of August 31, 2010 and 2009, respectively.





August 31, 2010


August 31, 2009Furniture and fixtures

$
25,459


$
25,459Equipment


16,468



16,468Equipment


41,927



41,927Less accumulated depreciation


(32,089
)


(25,011
)Total equipment, net

$
9,838


$
16,916





Depreciation expense was $7,078 for both of the twelve months ended August 31, 2010 and 2009, respectively.





Note 7 – 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 $Nil and $1.8 million at August 31, 2010 and August 31, 2009, respectively.





On August 13, 2010, the Company entered into an agreement with National Lampoon, Inc. (“NL”) in which NL agreed to assume the Company’s outstanding balance owed to Williams-Laikin of $1,941,928 and in exchange, the Company agreed to forgive National Lampoon, Inc. for its balance owed the Company of $1,024,468.  In 2009, the Company wrote off this balance as a bad debt charge due to the financial condition of National Lampoon, Inc.  After offsetting the balances owed from both parties, the net balance resulted in a gain of $917,460 and is classified as gain on extinguishment of advances from related parties on the consolidated statements of income (loss) and comprehensive income (loss) within.





Note 8 – 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.




F-9




The Company is currently in default as the Company was unable, due to its financial wherewithal, to repay the balance owed at the maturity date.  As an event of default, the interest rate is increased to twenty percent (20.0%) until the date of such cure.  The Company is currently in negotiation with the Note Holder.





During the year ended August 31, 2010, the Note Holder advanced the Company an additional $100,000 in the form of a short term loan.  The terms of the loan are in discussion and dependent on our current efforts to successfully obtain additional financing.   Proceeds from this loan was used to complete the fiscal year 2009 Annual Report on Form 10-K, which included auditor, legal, printing, and other professional fees and to fund operating capital.  The remaining funds are being used to fund our operations.





Note 9 – Commitments and Contingency





We are involved in routine litigation incidental to the conduct of our business. There are currently no pending litigation proceedings to which we are a party or to which any of our property is subject.





Note 10 – Common Stock





On November 17, 2008, the Board of Directors authorized the Company to issue 5,000,000 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.





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.





Mr. Rolle’s employment agreement stipulates that Mr. Rollé can receive common shares in lieu of cash compensation.  The Company recorded $236,000 and $180,000 during the twelve months ended August 31, 2010 and 2009, respectively.   The balance is included in common shares issuable which are a component of additional paid-in-capital in our Consolidated Balance Sheet and expensed in Stock based compensation on our Consolidated Statement of Loss.





On December 31, 2009 and per Mr. Wiseman’s employment agreement, 2,000,000 shares of common stock are to be issued to Mr. Wiseman.  The shares were valued at the close of market on December 31, 2009.  The value of $10,000 is included in common shares issuable which are a component of additional paid-in-capital in our Consolidated Balance Sheet and expensed in on our Consolidated Statement of Income (Loss).




F-10




On August 20, 2010, the Company and Reno Rolle, the Company’s Chief Executive Officer, entered into a letter of intent with Crisnic Fund, S.A., a Costa Rican investment company (“Crisnic”) whereby Crisnic has agreed to provide funding to the Company.  Pursuant to the letter of intent, Reno Rolle has agreed to pledge a total of 14,380,773 of his shares of the Company’s common stock as security for an initial funding of $300,000 payable in three tranches as set forth in the letter of intent.  In exchange for the $300,000 to be received from Crisnic, the Company issued 13,000,000 restricted common shares in August 2010. The Company received the first tranche of $100,000 from Crisnic in August 2010, and the remaining $200,000 has been recorded as subscription receivable.  The Company agreed to use the funds received from Crisnic to fund a proposed direct response marketing campaign and will share all adjusted gross receipts from the Campaign with Crisnic.





Note 11 – Stock Options 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, 2009


5,950,000


$
0.07



2.0Granted


3,000,000



0.01Expired or forfeited


(3,950,000
)


0.06Outstanding at August 31, 2010


5,000,000


$
0.06



2.0Vested and expected to vest at August 31, 2010


1,533,333


$
0.03



2.0Exercisable at August 31, 2010


1,533,333


$
0.03



2.0





During the twelve months ended August 31, 2010 and 2009, the Company recognized total compensation expense related to stock options of $600,000 and $736,167 respectively and is disclosed separately in the accompanying consolidated statements of income or loss and comprehensive income or loss.





Note 12 – Supplemental Cash Flow Information





During the years ended August 31, 2010 and 2009, there was no interest or taxes paid by the Company.





Note 13 – Income Taxes





As at August 31, 2010 and 2009, 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.





Note 14 – Subsequent Events





Events that have occurred subsequent to August 31, 2010 have been evaluated through the date of this audit report. There have been no subsequent events that occurred during such period that would require disclosure in these financial statements or would be required to be recognized in the financial statements as of or for the year ended 31 August 2010.