UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-K




(Mark
One)





x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT
      OF 1934





For the
fiscal year ended September 30, 2009





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





For the
transition period from _ to _
 Commission
file number 0-3338




ORGANIC
      SALES AND MARKETING, INC.(Name
      of small business issuer in its
charter)





Delaware
                    
                    33-1069593(State
      or other jurisdiction of
                    
                    (I.R.S.
      Employer Identification No.)Incorporation
      or organization)





114
      Broadway           
      Raynham,
      MA
                  
                  02767(Address
      of Principal executive offices)
                  
                  (Zip
      Code)





Issuer's
telephone number {508) 823-1117





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





Title
      of each class
                      
                      Name
      of each exchange on
                        which
      to be registeredCommon
      Stock
                      
                      Over
      the Counter$.0001
      par value
                      
                      Bulletin
      Board





Securities
registered under Section 12(g) of the Exchange Act:
  None


(Title of
class)





Check
whether the issuer is not required to file reports pursuant to Section
13 or 15(d) of the Exchange Act. o




Note -
Checking the box above will not relieve any registrant required to file reports
pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under
those Sections.




Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.


Yes x No
 ̈




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB.  ̈




Indicate by check mark whether the
registrant is a shell company (asdefined in Rule 12b-2 of the Exchange
Act). Yes ̈Nox




State
issuer's gross revenues for its most recent fiscal year. $224,999




State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60. (See definition of affiliate in Rule 12b02 of
the Exchange Act.) $1,231,214 as of December 15, 2009.





Note: If
determining whether a person is an affiliate will involve an unreasonable effort
and expense, the issuer may calculate the aggregate market value of the common
equity held by non-affiliates on the basis of reasonable assumptions, if the
assumptions are stated.





(ISSUERS
INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)




Check
whether the issuer has filed all documents and reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities
under a plan confirmed by a court. Yes  ̈ No
x





(APPLICABLE
ONLY TO CORPORATE REGISTRANTS)




State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date.




10,190,072
shares of common stock as of January 13, 2010




DOCUMENTS
INCORPORATED BY REFERENCE




If the
following documents are incorporated by reference, briefly describe them and
identify the part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1) any annual report to security holders; (2) any
proxy or information statement; and (3) any prospectus filed pursuant to Rule
424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g. annual
report to security holders for fiscal year ended December 24, 1990).
None





Transitional
Small Business Disclosure Format (Check one): Yes o No x














ORGANIC
SALES AND MARKETING, INC. FORM 10-K


September
30, 2009




Table of Contents
                                                                          PagePart
      IItem
      1.
                                                                          Description
      of Business
                                                                          3Item
      2.
                                                                          Description
      of Property
                                                                          15Item
      3.
                                                                          Legal
      Proceedings
                                                                          16Item
      4.
                                                                          Submission
      of Matters to a Vote of Security Holders
                                                                          16Part
      IIItem
      5.
                                                                          Market
      for Common Equity, Related Stockholder Matters and Issuer Purchasers of
      Equity Securities
                                                                          16Item
      6.
                                                                          Selected
      Financial Data
                                                                          18Item
      7.
                                                                          Management's
      Discussion and Analysis of Financial Condition and Results of Operations;
      Plan of Operations
                                                                          23Item
      7A.
                                                                          Quantitative
      and Qualitative Disclosures about Market Risk
                                                                          29Item
      8.
                                                                          Financial
      Statements and Supplementary Data
                                                                          31Item
      9.
                                                                          Changes
      in and Disagreement With Accountants on Accounting and Financial
      Disclosure
                                                                          31Item
      9A
                                                                          Controls
      and Procedures
                                                                          32Item
      9B
                                                                          Other
      Information
                                                                          32Part
      IIIItem
      10
                                                                          Directors,
      Executive Officers, Promoters and Control Persons; Compliance with Section
      16(a) of the Exchange Act
                                                                          32Item
      11
                                                                          Executive
      Compensation
                                                                          36Item
      12
                                                                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                                                          37Item
      13
                                                                          Certain
      Relationships and Related Transactions
                                                                          38Item
      14
                                                                          Principal
      Accounting Fees and Services
                                                                          39Part
      IV40Item
      15
                                                                          Exhibits,
      Financial Statement SchedulesSignaturesSupplemental
      Information




2





PART
I





ITEM 1.
DESCRIPTION OF BUSINESS





(a)
            Business
      Development





1.
            Form
      and Year of Organization.





Organic
Sales and Marketing, Inc. (the "Company" or the "Registrant" or the "Issuer")
was incorporated in the State of Delaware as Garden Connections, Inc. on August
23, 2003. On April 20, 2005, Garden Connections, Inc. changed its’ name to
Organic Sales and Marketing, Inc. The Company purchased the assets of Garden
Connections LLC, a Massachusetts limited liability company in September 2003.
The acquisition of the assets of Garden Connections LLC took the form of an
exchange agreement whereby all of the outstanding common stock of the Company
was exchanged for all of the interests of the respective partners of Garden
Connections, LLC. The major reasons for the exchange were that the management of
Garden Connections, LLC was desirous of adopting a name that would better
describe the mission statement and that the Company could not function as an LLC
if its securities were to be publicly held. The exchange rate whereby the
partners of the LLC received shares of the Company's common stock was arbitrary
and not at arms length. It should be noted that the officers and directors of
the Company as a group beneficially own 41.3% of the Company's outstanding
common stock and as a result, control the operations of the
Company.




2.
              Any
      bankruptcy, Receivership or Similar Proceeding. Not
    Applicable





3.
            Any
      Material Reclassification, Merger, Consolidation, orPurchase/Sale
      of a Significant Amount of Assets not in the Ordinary Course of Business.
      Not Applicable





(b)
            Business
      of Issuer





The
Company is a sales and marketing company that specializes in private labeling of
all natural and organic non-food products developed and manufactured by other
companies who do not have the marketing skills or means to market and sell their
products. We believe that we are able to bring their products to multiple
markets through the Internet, our radio show and our established distribution
network consisting of independent representatives and distributors. Through our
live, three hour weekly radio garden talk show, which is currently heard
on two radio stations throughout the Northeast, we believe that we can
generate market interest and sales in organic and all natural product
alternatives, interest in and knowledge of the importance of organics, and
information regarding where to purchase these related products.




3





The
Company uses the services of well established and experienced sales
organizations and distributors to introduce, promote, and sell its line of
cleaning and gardening products on a commission basis. The Company has begun to
advertise, promote and sell its Nevr-Dull brand of all natural cleaners toNevr-Dull's worldwide clientele pursuant to a royalty
agreement.




The
Company is a franchised vendor with Fisher Scientific Company LLC ("Fisher") for
sales of our industrial, all natural cleaners through Fisher's website and their
well respected national sales organization. Fisher is a major international
medical instrument distributor. On October 31, 2007 the Company and Fisher
signed an agreement that designates Fisher as our sole United States "National
Laboratory Distributor" for our commercially branded product line through
December 31, 2008. This exclusivity will be reviewed annually and awarded based
on meeting mutually agreed upon non-binding targets. Fisher ordersproducts by placing purchase
orders, and the Company fills these orders as set forth in the agreement. In
ordering the products, Fisher has no minimum order requirement; nor does it make
any annual minimum purchasing commitment. Following the initial term, the
agreement has been automatically renewed for successive twelve month periods.
Fisher Scientific carries nine of the Company's industrial cleaners in three
different sizes; fertilizers and hand sanitizers in their international
catalog and now actively sells them through their national sales
organization.




The
Company is currently selling its all natural cleaning and gardening products
through Kehe Foods, a major organic food distributor based in Romeoville, IL and
UNFI (United Natural Foods Inc), the leading organic products distributor in the
country, based in Dayville, CT. Some of the major retail outlets that we sell to
via these distributors or direct are Shaw's, Stop & Shop, Whole Foods,
Tops, Giant, and Key Stores. In addition, we also sell to Bozzuto Bros
Distributors in Cheshire, Connecticut, which sells to many of the smaller,
independent grocery store chains throughout the Northeast. There, of course, can
be no absolute assurance that meaningful orders from any of these outlets will
continue or increase.




The
Company launched its line of organic fertilizers in the spring of 2008 through
retail outlets such as Shaw's, Agway and many smaller independent garden
centers. In the spring of 2009, Whole Foods, Benny’s Hardware, Rocky’s Ace
Hardware, Aubuchon Hardware and Kehe Foods also carried the organic fertilizer
products. We purchase our proprietary organic fertilizer products from Land
O'Lakes Purina Feed Organization ("LOL"), a division of Land O'Lakes, Inc. and
private label them under the brand name, Mother Natures CuisineTM. The packagingcontains
bilingual instructions. Organic fertilizer sales for the spring 2009 were
stronger than the previous year but lower than anticipated due to economic
pressures and the extremely wet and cool season in the Northeast. The intrigue
and attraction of these items is that they are plant based fertilizers, rather
than animal waste.




The
Company's organically certified insecticide/fungicide product, Garden Guys
Garden NEEM, which was first introduced in the spring of 2007, is continually
shipping to many of the above named customers in conjunction with the fertilizer
products.




4




The
Company's structured deal between Northeast Garden Group, Agway, and Land
O'Lakes/ Purina Feeds remains in motion for the 2010 growing season. The Company
is acting as a representative for all sales of Agway's newly launched
All-Natural 4-Stage lawn fertilizer. Sales have already eclipsed $450,000.00 and
continue to climb. This is the first time Agway has ever launched their own
branded natural lawn fertilizer in a 4-Stage offering. The Company is also in
negotiations with a major national lawn & garden distributor to warehouse
and sell its garden and retail cleaning related products. This could have long
term positive implications, as well, given that the distributor is willing to
participate in the Company's media component, the Garden Guys radio
show.




The
Company continues to maintain an e-commerce interest presence hosting five
different Websites; www.garden-guys.com;
www.mothernaturescuisine.com;
www.naturalnevrdull.com;
www.osm-inc.com
and www.dragonflyorganix.com.
The latter is also under the direction of Eye Level Solutions, a division of
Kehe Distributors, Inc., which offers the Dragonfly Organix products for sale in
over 12,000 e-commerce capable grocery stores nationwide. Acting as distributor,
Kehe will process and fulfill orders placed. This enables the Company's products
to gain shelf presence in stores that otherwise may not currently stock these
items.




The
Company continues its active participation in various related trade publications
and trade shows. Most recent completed shows were; the USDA BioPreferred meeting
and trade show, GSA show, Kehe Food Distributor show, UNFI Distributor show,
Agway retail buyers show, Fisher Scientific National Science show, Wind Energy
Expo and GovEnergy. Other shows include the Natural Products Expo, Associated
Buyers, the New Hampshire Hospitality show and the National Association of
Education Procurement Buyers. Each of these markets are currently carrying the
Company's products or have expressed interest in carrying them.




Since its
participation in the USDA BioPreferred show in June of this year, the Company
has attained USDA BioPreferred status for many of its commercial cleaning and
hand sanitizer products. This distinction continues to open doors for those
distributors who sell the government through GSA and other related contracts.
The Company has shipped orders to the CDC (Center for Disease Control) and to
Homeland Security. The Company anticipates additional interest within various
government sectors in the near future. Furthermore, the Company is in
discussions with two other major national and international distributors who
sell to the government.




The
Company plans to concentrate its marketing efforts solely in the rapidly growing
all natural non-food organic arena. The Company believes that consumers are
being drawn to organic products by a growing desire for fewer chemicals and
additives in their everyday lives. However, there can be no assurance that this
trend will translate into sales and profits for the Company.




The
Company believes that the organic industry, consisting of food and non-food
products continues to be one of the fastest growing segments of our economy and
that recent decisions by major corporations to make "going green" part of their
mission statements could accelerate that growth.




A 2009
Organic Industry Survey prepared by the Lieberman Research Group on behalf of
the Organic Trade Association showed that in 2008 $24.6 billion was spent on
organic food and non-food products, an increase of 17.1% over 2007. The organic
non-food segment of the survey showed sales of $1.6 billion or an increase of
39.4% over 2008. The survey projects that spending on organic food products
could increase from $22.9 billion in 2008 to $27.7 billion in 2010, a projected
two year increase of 20.9%.





5





The 2007
Organic Trade Association survey projected that organic non-food products could
grow anywhere from 16% - 40% each year through 2010 and that trend seems to be
holding, given growth rates of 26% in 2006 and 2007 and 39.4% in 2008. The
Company believes that these explosive growth rates of non-food organic products
will continue well into the next decade.




The
Company specializes in the more rapidly growing non-food organic areas, such as
private label premium fertilizers, insecticides and consumer and industrial
cleaners, where profit margins can be substantially greater.




We
understand, however, that external factors such as economic conditions and
climatic issues can impact these trends in an unfavorable way and that there can
be no assurance that our products will follow the same overall upward trend
currently underway in the organic industry.




The
Company has established important marketing relationships with Land O'Lakes; CA
Fortune Co, a major mid-western food broker based in Bloomingdale, IL; North
Eastern Sales Solutions, a major independent grocery store sales representative
organization in the New England area; EC Desmond Sales and Marketing, Inc. a
major grocery store sales representative organization covering the NY, NJ and
Pennsylvania areas and Northeast Garden Group, an independent garden center
sales representative based in Connecticut. The Company also currently has a
verbal working agreement with Land O'Lakes Purina Feed
Organization.




The
Company has also established important manufacturing relationships with Land
O'Lakes for its fertilizer products, secured a licensing agreement with a
British based company and has the rights to several proprietary formulas used in
its extensive line of cleaning products, outsourced its fulfillment operation to
Webco Chemical Co., located in Dudley, Massachusetts, which has the capacity to
handle any and all requirements that the Company may have and, as a backup to
Webco, the Company also has made arrangements with JNJ Industries, located in
Franklin, Massachusetts.




The
Company will continue to use the radio as the primary source for marketing and
creating brand awareness of our non-food, and natural product offerings. Sam
Jeffries, the Company's President, hosts a live, weekly three hour Sunday
morning garden talk radio show on Greater Media owned WTKK, 96.9FM in Boston,
MA, as well as, four other stations heard throughout the Northeast. This also
creates a medium for the Company to offset some of its radio related expenses by
selling air time to potential sponsors and/or advertisers of the radio
show.




The
Company generates brand awareness and consumer loyalty for a growing array of
selective non-food organic products by educating the consumer, and acts as a
distributor and marketer for the retailers that carry our products. The Company
intends to capitalize on the growing interest in all natural non-food organics
in several different markets with the intention of using the radio to increase
awareness that organic products offer healthy alternatives without sacrificing
expected results.




It must
be emphasized that although the Company continues to be very excited about its
product lines and its prospects in a rapidly growing and explosive industry, the
purchase of the Company's securities carries a significant risk. The Company has
not had substantial revenues from operations and has not yet been profitable.
While it has built important, strategic relationships with customers and
vendors, the outlook remains uncertain in the absence of the receipt of
substantial orders or substantial funding. Although the Company believes its
overhead to be low, there can be no assurance that it will continue to find
sources of working capital to keep operations funded until and even after break
even volumes are achieved. It should also be noted that the Company's auditors
have included a "going concern" qualification in their opinion (see "Financial
Statements").








6





1.
            Principal
      Products and Services and Their
Markets





Currently
the major all natural products that the Company is selling are all natural
cleaners, which include stain remover, odor control, glass cleaner, floor
cleaner, degreaser, concrete cleaner, eyeglass cleaner, jewelry cleaner, surface
prep and glue cleaner, solely utilizing outside independent sales professionals,
as well as an all natural insecticide-fungicide, organic soy candles and organic
fertilizers. Since the Company sells non-food, all natural products, the
shelf-life of its products can be in excess of one year or more, depending upon
storage and climatic conditions. The Company uses a proprietary blend of organic
compounds in its all natural products which are non-toxic, biodegradable and
safe for use around children and pets.




The
Company receives revenues from sales of product on our various websites;
products sold directly by us or by our independent reps to distributors who then
re-sell to retail stores; products sold to retail stores directly by us or our
independent
reps, re-selling our organic products to other companies who wish toprivate
label or license our productsand the
sale of advertising inventory(commercial spots) available to the Company
through the various radio stations that carry the Garden Guys radio talk
show.




Organic
Fertilizer Market:




The
Company is focusing marketing efforts on organic fertilizers, a rapidly growing
segment of the fertilizer industry. In our opinion, industry-wide organic
fertilizer sales have risen so rapidly in the last three years that they have
commanded a premium price in the marketplace. Accordingly, we foresee some of
our greatest growth over the next 3-5 years to potentially be in this
arena.




By letter
dated November 14, 2006 we were notified that we have been selected by Land
O'Lakes Purina Feed Organization to act as their private label fertilizer
marketer, starting in the spring of 2008. A strong marketing focus will be on
the major home and garden retail chains such as Home Depot, Lowe's and Agway,
which Land O'Lakes Purina Feed Organization does not presently supply
internally. The Company will be receiving from Land O'Lakes Purina Feed
Organization a complete line of fertilizers, as jointly formulated, designed and
marketed by us under our Mother Natures CuisineTM and Garden GuysTM brands. Under the arrangement,
Land O'Lakes Purina Feed Organization will also assist in product registration
for each state, manufacturing, logistics, and distribution. They will also
provide sales and marketing expertise for the Company, when needed. The Company
believes this will ultimately lead to major sales, as it continues to be
introduced into the 35 billion dollar lawn and garden market as reported by the
National Gardening Association in its Garden Market Research newsletter.
Ultimate product line acceptability will depend on customer demand, so true
assurances cannot be made as to the viability of this product line at this point
in time.




7




Land
O'Lakes Purina Feed Organization is also a prime advertiser on our weekly radio
show. In addition to our Dragonfly Organix brand, Land O'Lakes Purina Feed
Organization will also advertise their own brand of Bradfield Organics
fertilizers, whose market is strictly geared to their existing independent
channel and does not compete in the markets that we are pursuing.




Organic
Based Household Cleaner Market:




Other
areas which the Company believes hold considerable promise are the residential
and commercial cleaner markets. We believe that the momentum in the rise in
organic food sales, due primarily to the growing education of how toxic
chemicals can have a direct or indirect impact on human health, is carrying over
to that of non-food organic products, which may pose similar health hazards and
risks. Our weekly radio show allows us to, 1)educate consumers about the
potential hidden risks of chemical based products, 2)inform listeners about
products that offer healthy alternatives to chemical cleaners, including our own
and 3)let folks know where our products can be purchased.




Jewelry,
Modeling, and Bead Markets:




We
currently supply one of the major industry distributors, Fire Mountain Gems
& Beads, Inc., in Grant Pass, Oregon. Fire Mountain does over 100 million
dollars in annual sales and has an extensive customer base. Their customers are
some of the major retail jewelry and bead shops in the industry, including Zales
and other distributors within the trade. In addition to post card mailers, the
Company has maintained an advertising presence in industry-related magazines to
help to create brand awareness for our Glitz Jewelry Shiner and ODX Surface
Cleaner products in these markets. There is no assurance, however, that these
markets will develop for our products.




Funeral
Industry & Medical Examiners Market:




The
Company is currently supplying its Funeral Organix product line to Funeral Homes
across the country. The Company still expects that this class of trade has
strong upside potential because there is a great need for cleaners and
deodorizers in this industry due to the large amounts of chemicals currently
used by this profession on a daily basis. Preliminary data indicates a strong
willingness by the industry to replace chemical products with those that are all
natural, chemical-free and environmentally friendly. Marketing plans include
advertising in industry related magazines and post card mailers and the
establishment of a network of independent sales representatives and
distributors. There is no assurance that these markets will develop
significantly for our products. This depends entirely upon product quality, the
ability to reach the target market and consumer acceptance.




According
to Funeral Directors Association (FDA) statistics, there are 21,528 funeral
homes nationwide, and 51% of new funeral directors entering the profession today
are women. An adjunct industry to this one would be the ambulance industry,
which has similar issues and problems with the use of chemicals.




8







Municipalities
and Waste Disposal Markets:





Due to
the various odor problems that these markets encounter on a daily basis, the
Company's Odor Eliminator product has been independently tested by customers and
the results have been excellent. Previously, the Massachusetts Bay Transit
Authority ("MBTA") has made small purchases of our product and has had success
in treating the urine odor problem in the transit system. We see our growing
portfolio of all natural products and other related products as having numerous
applications in multiple industries such as nursing homes, industrial kitchens,
waste management, fishing industry, daycare centers, Montessori schools,
kennels, hospice-home care, pet shops, and veterinarian locations. There is no
assurance that these markets will develop for our products. This will depend
upon product quality, the ability to reach the target market and consumer
acceptance.





The
Company has attained USDA BioPreferred status for many of its commercial
cleaning and hand sanitizer products. This distinction continues to open doors
for those distributors who sell the government through GSA and other related
contracts. The Company has shipped orders to Homeland Security and to the CDC
(Center for Disease Control). The Company anticipates additional interest from
other government sectors in the near future. Furthermore, the Company is having
discussions with two other major national and international distributors who
sell to the government.





The
Company is capitalizing on the growing interest and desire among consumers for
safe, environment-friendly products. To do this, we have developed strategic
marketing relationships with manufacturers that offer "green" alternatives to
some of the traditional, chemical-based products that are currently being used
in various industries. The Company hopes to be the dominant leader in the all
natural, non-food organic industry so we are aggressively working with several
manufacturing companies to further develop and perfect our growing line of all
natural, non-food product offerings. In conjunction with a strategic partner, we
have also developed a rubber tire mulch product that can be used in playgrounds,
flower beds and gardens and has a definite ecological benefit by keeping old,
used tires out of landfills.





The last
five plus years have been spent establishing what the Company believes to be a
strong, solid foundation needed to support the next phase in our business plan.
All natural, non-food organic products are growing in demand. The Company's
products are targeted to sophisticated, environmentally aware companies and
consumers in various markets. The Company believes that strategic affiliations
which have been developed with well-established manufacturers and sales and
marketing companies, including the marketing expertise and reach of Land O'Lakes
Purina Feed Organization; could eventually pave the way for our all natural,
non-food organic products to become available in many retail outlets throughout
the country.





2.
            Distribution





Our
sales, marketing and promotional efforts are accomplished through the
following:





o
            Radio
      Show





o
            Radio
      Advertising


9


o
            E-Commerce
      Websites





o
            Interactive
      Website with on-line forum room for
gardeners





o
            Industry-related
      Magazines and Newspapers





o
            Face-to-face
      Client and Prospect Meetings





o
            Sales
      Brochures and Product Samples





o
            Point-of-Sale
      and End Cap Displays





o
            Trade
      Shows





o
            Membership
      in Trade Organizations





o
            Garden
      Clubs





o
            E-mail
      and Direct Mailings





o
            Telemarketing





o
            Strategic
      Marketing Alliances





o
            Cooperative
      Advertising





We are
now able to bring our products from manufacturer to consumer with
limited  financial exposure. We have the added advantage of being able
to market our  products not only through our independent marketing
associates, but through our own radio programs, with a recognized growing
interest in organics. The Garden Guys ®  ensure that brand
awareness reaches the consumer through the radio. This creates
a  multi-faceted, multi-revenue channel model for the Company.
Moreover, we hope to add new strategically selected radio personalities and
stations to our Garden Guys ®  radio network over
the next several years with a reach that goes far beyond the New England area.
Because of the knowledge we have obtained of how the communications industry
works, as a result of the Garden Guys® radio talk show, we believe
that  this is a very attainable goal. There is no set schedule for
this expansion at this  time and there can be no assurance that
enrolling additional stations will be made  easier due to our working
knowledge of radio or current radio relationships.





3.           Status
of Any Publicly Announced New Products or Services





Currently
the Company has a portfolio of approximately 100 items, all of which
are company branded products. The Company will be able to market its
products not only through its distributors and independent sales organizations
but through the Garden Guys ® radio show which provides a
viable channel through the creation of brand awareness on the consumer’s part
and a growing interest in organics. Management believes our all natural non-food
products will attract both male and female consumers looking to avoid the health
risks and implications that have been found in non-organic or synthetic
compounds. Management believes this is a promising trend which is supported by
numerous independent articles and surveys which have been conducted some of
which have been referenced in other sections of this 10K.




10




All of
these products are manufactured for the Company to its own specifications
without any research and development costs being incurred since the
manufacturers with whom we have existing relationships have already done the
R&D. We achieve the benefits of their research by finding niche markets for
these products, creating our own labels, and implementing a sales program by
which to bring these products to market. We hope to continue to expand revenues
without the need for an in-house sales force. The foregoing arrangements greatly
limit the Company's financial exposure:





o
            No
      research and development costs





o
            No
      manufacturing facilities and related
costs





o
            Lower
      inventory costs and warehousing
costs





o
            Limited
      employees and staff





4.        Competition





According
to the Organic Trade Association, a leading organic association publication,
organic non-foods had consumer sales of $938 million in 2006, a growth of 26%
for that year. Organic non-food products are still emerging as a category and
sales are anticipated to grow anywhere from 16% - 40% each year through 2010,
according to Organic Trade Association Forecasting Survey 2007. The Company
believes its largest competitors are privately-owned Seventh Generation, located
in New Hampshire, Clorox, Mrs, Meyers and Imus` Greening the
Cleaning.




Because
the organic cleaner market is relatively small in comparison to the total
organic market, it is a fragmented market, ready for development. We believe
that Seventh Generation, Inc., Clorox, Mrs. Meyers and Imus' Greening the
Cleaning, are our major competitors in the organic cleaner market. Management
believes, and early indications support its belief, that the Company's products
will be accepted into the marketplace due to their unique qualities and eye
catching packaging, coupled with extensive radio support.





Competition
in lawn and garden organic product sales in New England and the East Coast,
however, is much more intense. These markets are large and can support many
companies offering these and similar organic products. We are unique in that we
offer a service (the radio program) in addition to a product. We do not know of
another company that does this. However, many of the companies that make up the
competition in this market are better financed, more experienced, have more
recognizable or established brand names, have better control over their
manufacturing and distribution process, have a longer history of servicing the
retail industry and may be better positioned to control sales to large retail
outlets and, as a result, realize a dominant or substantial market
share.





The
market for cleaning and garden products is highly competitive. Although our
products are natural and therefore distinguishable from most other more
established brands, which do contain chemicals, it is possible that many
consumers neither care about that fact, nor understand its significance. There
are a number of other established providers that have greater resources,
including more extensive research and development, marketing and capital than we
do and also have greater name recognition and market presence. These competitors
could reduce their prices and thereby decrease the demand for our products and
technologies. We expect competition to intensify in the future, which could also
result in price reductions, fewer customers and lower gross profit
margins.




11




Access to
retail outlets may be restricted due to pre-existing agreements that prohibit
retailers from selling our products, or retailers may require substantial
payments (slotting fees) for shelf space which is beyond the Company's financial
capabilities. Such payments are common in the retail industry, but historically,
the Company has been successful in mitigating these costs due to the uniqueness
of our products. In the future our existing retailers may require such payments
in order for us to continue to sell through them and new retail outlets may
require payments to sell our product. It must be emphasized that our lack of
revenues and somewhat limited financial resources may also have a serious impact
on our ability to sell our products in these retail outlets and prevent us from
executing our business plan.





5.           The
Sources and Availability of Raw Materials





The
Company is not necessarily dependent on any one vendor for its raw materials.
All products which are sold and marketed by the Company are fulfilled by our
fulfillment company. Although we believe we can secure other suppliers should
the need arise, we would expect that the deterioration or cessation of any
relationship would have a temporarily adverse effect, until new relationships
are satisfactorily in place.





We also
run the risk of manufacturer price increases and component shortages.
Competition for products or materials in short supply can be intense, and we may
not be able to compete effectively against other purchasers who have higher
volume requirements or more established relationships. Even if manufacturers
have adequate supplies of components, they may be unreliable in meeting delivery
schedules, experience their own financial difficulties, provide components of
inadequate quality or provide them at prices which reduce our profit. Any
problems with our third-party suppliers can be expected to temporarily have a
material adverse effect on our financial condition, business, results of
operations and continued growth prospects. Our principal suppliers
are:





Abott-Action,
      Inc.
                  -
                  Shipping
      MaterialsEnzyme
      Solutions, Inc.
                  
                  Organic
      Liquid ConcentratesKey
      Container, Corp.
                  -
                  Shipping
      MaterialsLightning
      Labels Inc.
                  -
                  Bottle
      LabelsTursso
      Label, Inc.
                  -
                  Bottle
      LabelsMicrobial
      Technologies, Ltd.
                  -
                  Organic
      Liquid ConcentratesWebco
      Chemical Corp.
                  —
                  Liquid
      FulfillmentWebco
      Chemical Corp.
                  -
                  Bottles
      and SprayersMcKernan
      Packaging
                  -
                  Bottles
      and Sprayers





6.          Dependence
on a Single or Few Customers




The
Company currently has several customers. It has developed and continues to
develop multiple strategic alliances with several distributors and independent
sales organizations. The Company does not anticipate that it will ultimately be
dependent on a single customer or small group of customers.




12




7.          The
Importance of Patents, Trademarks, Licenses, Franchises and Concessions
Held





To
protect its rights to its intellectual property, the Company relies on a
combination of trademark and copyright law, patents, trade secret protection,
confidentiality agreements, and other contractual arrangements with its
employees, affiliates, clients, strategic partners, and others. The protective
steps it has taken may be inadequate to deter misappropriation of the Company's
proprietary information. The Company may be unable to detect the unauthorized
use of, or take appropriate steps to enforce its intellectual property rights.
The Company has registered certain of its trademarks in the United States and
has pending U.S. applications for other trademarks and patents.





Effective
trademark, copyright, patent, and trade secret protection may not be available
in every country in which it offers or intends to offer its products or
services. In addition, although The Company believes that its proprietary rights
do not infringe on the intellectual property rights of others, other parties may
assert infringement claims against the Company or claims that we have violated a
patent or infringed a copyright, trademark, or other proprietary right belonging
to them. Such claims, even if not meritorious, could result in the expenditure
of significant time and money on our part which could materially adversely
affect the Company's business, results of operations, and financial
condition.




The
Company incorporates certain licensed third-party technology in some if its
services. In these license agreements, the licensors have generally agreed to
defend, indemnify, and hold the Company harmless with respect to any claim by a
third party that the licensed software infringes any patent or other proprietary
right. The Company cannot assure that these provisions will be adequate to
protect it from infringement claims. The loss or inability to obtain or.maintain
any of these technology licenses could result in delays in introduction of new
services.





The
Company has trademark protection for its "Garden Guys Down to Earth Up to
Date"(TM) trademark. In addition, the Company has applied to the US Patent and
Trademark Office for trade mark protection for its "Dragonfly Organix from the
Earth to the World"(TM) brand-name trade mark, "Mother
Natures Cuisine(TM) Feed your Land from Mother Nature" brand name trade mark,
and the picture of the "Plate with Garden Hand Fork and Hand Trowel with Gingham
Placemat" trade dress. Final action on these applications is pending subject to
publication in the Official Gazette.





8.
            Government
      Approval





Government
approval is required for some of the Company's current products. The initial
approval process is generally handled by the manufacturer. The Company does not
believe that the approval process will have a material impact on its business
growth.





9.
            Effect
      of Any Existing or Proposed Government
  Regulations





Other
than normal government regulation that any business encounters, the Company's
business is not significantly affected by any government regulations. As a
publicly held company, we do have extensive responsibilities and expenses to
assure compliance with federal and state securities regulation.




13




10.           Research
and Development Costs





The cost
of Research and Development is borne initially by the manufacturer and built
into our manufacturing expense. Since the Company began operations in August
2003 it has spent over one million dollars on market research and development of
its markets. The revenues of the Company will be primarily from strategic
alliances as described above. Revenues generated, while paying indirectly for
research and technology costs accrued to date, will fund the operations of the
Company, which includes funding any ongoing research and
development.





11.
            Cost
      and Effects of Compliance With Environmental Laws and
      Regulations





The
Company is not involved in a business which involves the use of materials in a
manufacturing stage where such materials are likely to result in the violation
of any potential environmental rules and/or regulations. Further, the Company
does not own any real property which would lead to potential liability as a land
owner. Therefore, the Company does not anticipate that there will be any costs
associated with compliance with environmental laws and regulations. The Company
does, however, pay registration fees to each state in which it sells its
fertilizers and insecticide/fungicide products.





12.
            Employees





As of the
date hereof, the Company employs 5 full-time employees and 2 part-time
employees. The Company hires independent contractors on an "as needed" basis
only. It has no collective bargaining agreements with its employees. The Company
believes that its employee relationships are satisfactory. In the long term, we
will hire additional employees, as needed, based on the growth of the
Company.





We will
be dependent on our current management team for the foreseeable future. The loss
of the services of any member of this management group could have a material
adverse effect on our operations and prospects. Our success will be dependent to
a substantial degree on Sam Jeffries and other key management personnel. CEO Sam
Jeffries' continued involvement is particularly critical. In the event he
becomes unavailable, it would have a material adverse effect on operations. At
this time, we have no employment. agreements in place and we have a "key man"
insurance policy on Sam Jeffries, but no one else. The expansion of our business
may be hampered by our inability to attract and retain additional qualified
personnel, as needed, for the management team. There is no assurance that we can
find suitable management personnel or that we will have the financial resources
to hire or retain them once found.





13.
            Cautionary
      Statement on Forward Looking
Statements





Certain
statements in this Report constitute "forward — looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934. Management believes such statements to be
relevant to an assessment and understanding of our results of operations and
financial condition, which are based upon our financial statements prepared in
accordance with generally accepted accounting principles in the USA. The
discussion should be read in conjunction with our financial statements and notes
thereto, appearing in this report.





The
preparation of these financial statements requires us to make estimates and
judgments that may affect the reported amount of assets and liabilities,
revenues and expenses, and the related disclosure of such contingent assets and
liabilities at the date of our financial statements. Actual results may
substantially differ from these estimates under different assumptions and
conditions.




14




This
report also contains forward-looking statements that involve risks and
uncertainties, which may include statements about our:





o
              Business
      strategy
  o
              Expansion
      of our manufacturing
capabilities





o
            Plans
      for entering into collaborative
agreements





o
            Anticipated
      sources of funds to finance our operations following the date of this
      report





o
            Plans,
      objectives, expectations and intentions contained in this report that are
      not historical fact





The
following words and financial projections contain figures related to plans,
expectations, future hoped-for results, performance, events or other matters
that are "forward-looking statements". When used in the section describing our
Plan of Operations, words such as "estimate", "project", "intend", "expect",
"anticipate", and other similar expressions are intended to be forward-looking
statements. Such statements involve numerous risks and uncertainties, including,
but not limited to, the science of organics, the development of the Company's
products, markets for those products, timing and level of customer orders,
competitive products and pricing, changes in economic conditions and other risks
and uncertainties. Actual results, performance and events could likely differ
materially and adversely. Investors are cautioned not to place undue reliance on
these forward looking statements which are often no more than Management's
expression of its expectations. The Company undertakes no obligation to release
or deliver to investors, revisions to these forward-looking statements to
reflect events or circumstances after the date of this report, the occurrence of
unanticipated events or other matters that may occur in the future.





ITEM 2.
DESCRIPTION OF PROPERTY





The
Company is in a "tenant at will" agreement with Leo S. Arcand (Lessor) of 114
Broadway, Raynham, MA. The premises encompass the North side of a one story,
commercial, wood building with approximately 500 square feet of office space.
The monthly lease payment is $600.00 per month. It is located in an area that
has easy access to major highways. Products are received and shipped by contract
carriers.





The
Company also maintains storage space at two locations. The cleaning and
gardening products raw material and finished goods inventories are stored at
our• fulfillment house, Webco Chemical in Dudley, Massachusetts. The storage and
picking is performed as a function of fulfillment and the Company is not
separately charged for storage. We utilize about 10,000 sq. ft. of space. We do
not have a warehouse agreement with Webco.





In
addition, the Company rents a small storage unit on a month-to-month basis with
Extra Space Storage located at 266 Broadway, Raynham, MA, The storage unit is
approximately 20' X 20' and is used for storing office records, sales support
materials and small amounts of corrugated materials used for shipping. The
monthly payment for this space is $129.00.




15




ITEM 3.
LEGAL PROCEEDINGS





We are
not presently a party to any material litigation.




ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




No
matters were submitted to a vote of our shareholders during the fourth quarter
of fiscal 2009.





PART
II





ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS





(a)
            Market
      Information. The Company's common stock has been listed on NASDAQ's Over
      The Counter Bulletin Board since May 5, 2008 and is traded under the
      symbol OGSM.





(b)
            Holders.
      As of December 15, 2009, there are 174 record holders of 9,990,072 shares
      of the Company's common stock.





(c)
            Dividends.
      The Company has not paid any cash dividends to date and does not
      anticipate or contemplate paying dividends in the foreseeable future. It
      is the present intention of management to utilize all available funds for
      the development of the Company's
business.





(d)
            Recent
      sales of unregistered securities.





Effective
January 3, 2006, the Company commenced a stock offering, whereby it issued an
aggregate of 999,500 shares of its common stock for cash of $999,500 as of
December 31, 2007. Included in this, is an aggregate of 576,993 shares of common
stock for cash of $576,993 issued during the fiscal year ended September 30,
2007.





On
February 18, 2008, the Company conducted a private stock offering whereby it
authorized the issuance of 100,000 shares of common stock in exchange for cash
of $50,000. The offering was closed as of March 31, 2008 and 50,000 shares of
common stock wereultimately issued in this stock offering in exchange for cash of
$25,000.





On
February 20, 2008, the Company conducted a private stock offering whereby it
authorized the issuance of 50,000 shares of common stock in exchange for cash of
$50,000. The offering was closed as of March 31, 2008 and 33,123 shares of
common stock were ultimately issued in this stock offering in exchange for cash
of $33,123.





On
February 28, 2008, the Company's Board of Directors' approved the issuance of
139,562 shares of common stock at $1.00 per share in settlement of equal amounts
of Notes and Accounts Payable.





On April
11, 2008 the Company conducted a private stock offering whereby it authorized
the issuance of 820,000 shares of common stock in exchange for cash of $410,000.
The offering was closed as of April 30, and 820,000 shares of common stock were
ultimately issued in this stock offering in exchange for cash of
$410,000.




16




On May
30, 2008, the Company extended a Conversion offer to nine bridge loan note
holders who had loaned the Company funds during the 3rd Quarter of 2007. In
exchange for their notes, the note holders were offered two shares of stock for
each dollar of debt and accrued interest they were owed through June 30, 2008.
Debt settlement expense associated with these transactions was $685,421 for the
twelve months ending September 30, 2008. Note holders were also offered one
common stock warrant for each dollar of debt and accrued interest at an exercise
price of $2.00 per share and a two year exercise period. Warrant expense
associated with these transactions was $239,549 for the twelve months ending
September 30, 2008.




On
October 3, 2008, the Company commenced a private stock offering, whereby it
authorized the issuance of 1,440,000 Units consisting of one share of its common
stock and one common stock purchase warrant for a total raise of $360,000. The
common stock purchase warrants are exercisable at $1.00 per share and carrying a
five year exercise period. The offering was closed as of November 30, 2008. All
1,440,000 units were issued and $360,000 in cash was received.
 
 On
January 28, 2009, the Company commenced a private stock offering, whereby it
authorized the issuance of 1,750,000 Units, each consisting of one share of its
common stock and one common stock purchase warrant for a total raise of
$262,500. The common stock purchase warrants are exercisable at $1.00 per share
and carry a five year exercise period. The offering was
closed on March 31, 2009 at which time 1,296,800 unit shares were issued and
$194,520 in cash was received.




During
the year ended September 30, 2009 the Company issued 450,000 shares of stock to
Nu Vision Holdings, LLC. valued at $180,000 for consulting services rendered to
the Company. The contract expired on April 7, 2009.
 
 During
the year ended September 30, 2009 the Company issued 102,500 shares of stock to
an individual at an aggregate value of $14,350 for services rendered to the
Company in connection with the Garden Guys radio talk show. An issuance of
50,000 shares was issued on July 1, 2009; 50,000 shares were issued on August 1,
2009 and 2,500 shares were issued on September 1, 2009.


For a
more complete list of previous sales of unregistered securities by the Company,
please refer to Part 5 of Form 10K for the year ended September 30, 2007, which
is incorporated by reference herein.





(e)
            Description
      of Securities.





(i)
            Common
      Stock





The
Company is authorized by its Certificate of Incorporation to issue an aggregate
of 100,000,000 shares of capital stock, of which 100,000,000 are shares of
Common Stock, par value $.0001 per share (the "Common Stock").





The
following is a summary description of our capital stock and certain provisions
of our certificate of incorporation and by-laws, copies of which have been
included as exhibits to this report. The following discussion is qualified in
its entirety by reference to such exhibits.





All
common shares are equal to each other with respect to voting; dividend rights
and liquidation rights. Special meetings may be called by the Board of Directors
or by any officer instructed by the directors to call the meeting. Shareholders
have no right to call special meetings. Holders of common shares are entitled to
one vote at any meeting of the shareholders for each common share they own as of
the record date fixed by the Board of Directors. At any meeting of shareholders,
a majority of the outstanding common shares represented at the meeting will
govern, even if this is substantially less than a majority of common shares
outstanding. Directors are elected by a plurality of votes. Holders of shares
are entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefore; and on liquidation are
entitled to participate pro rata in a distribution of assets available for such
a distribution to shareholders. Assets for conversion, pre-emptive or other
subscriptions are not available for such a distribution to shareholders. Shares
do not have cumulative voting rights which mean that the holders of more than
fifty percent of the common shares voting for election of directors may elect
all the directors, if they choose to do so. In such event, the holders of the
remaining shares aggregating less than fifty will not be able to elect
directors.




This
description of certain matters relating to the securities of the Company is a
summary and is qualified in its entirety by the provisions of the Company's
Certificate of Incorporation and By-Laws, copies of which have been filed as
exhibits to the Form 10-KSB for the year ended September 30, 2007, which is
incorporated by reference herein.


(ii)
            Debt
      Securities. None




(iii)
            Securities
      To Be Registered. None




17




(iv)     Market ValueTable





CLOSING BID
                      
                      
                      CLOSING ASK2009
                      
                      HIGH
                      
                      
                      LOW
                      
                      
                      HIGH
                      
                      
                      LOWJan 1
      thru Mar 31
                      
                      $
                      .35
                      
                      
                      $
                      .20
                      
                      
                      $
                      1.01
                      
                      
                      $
                      .25April 1
      thru June 30
                      
                      $
                      .30
                      
                      
                      $
                      .05
                      
                      
                      $
                      .65
                      
                      
                      $
                      .25July 1
      thru Sept 30
                      
                      $
                      .25
                      
                      
                      $
                      .05
                      
                      
                      $
                      .40
                      
                      
                      $
                      .10Oct
      1 thru Dec 31
                      
                      
                      .30
                      
                      
                      
                      .10
                      
                      
                      
                      .35
                      
                      
                      
                      .16




The
market value information above was compiled by Pink OTC Markets, Inc. from
sources they believed to be reliable, however, they do not guarantee the
accuracy, nor warranty its use for any purpose.





The above
quotations represent prices between dealers and do not include retail markup,
markdown or commission. They may not represent actual transactions and have not
been adjusted for stock dividends or splits of which there were
none.




ITEM 6.
SELECTED FINANCIAL DATA


Selected
Financial Data




Organic
Sales and Marketing, Inc.




For the
Years Ended September 30,2009 and 2008




Statements
of Operations





Twelve Months Ended
                            
                            
                            Twelve Months EndedSeptember 30, 2009
                            
                            
                            September 30, 2008Revenues
      (Net)
                            
                            $
                            224,999
                            
                            
                            $
                            347,111Margin
                            
                            
                            41,488
                            
                            
                            
                            103,725Selling,
      General and Administrative Expenses
                            
                            
                            1,446,873
                            
                            
                            
                            1,370,934(Loss)
      from Operations
                            
                            $
                            (1,405,385
                            )
                            
                            $
                            (1,267,209
                            )Other
      Income/(Expense)
                            
                            
                            (47,105
                            )
                            
                            
                            (56,089
                            )Debt
      Settlement Expense
                            
                            
                            0
                            
                            
                            
                            (685,421
                            )Warrants
      granted in settlement of debt
                            
                            
                            0
                            
                            
                            
                            (239,549
                            )Warrants
      granted for financing costs
                            
                            
                            (954,837
                            )
                            
                            
                            0Profit/(Loss)
      Before Taxes
                            
                            $
                            (2,407,327
                            )
                            
                            $
                            (2,248,268
                            )Loss
      per share-Basic and Diluted
                            
                            $
                            (0.26
                            )
                            
                            $
                            (0.37
                            )Weighted
      Average Number of Shares
                            
                            
                            9,124,777
                            
                            
                            
                            6,002,421




18





Balance
Sheets





Twelve Months Ended
                                
                                
                                Twelve Months EndedSeptember 30, 2009
                                
                                
                                September 30, 2008Cash
                                
                                $
                                24,547
                                
                                
                                $
                                27,838Accounts
      Receivable
                                
                                
                                8,090
                                
                                
                                
                                26,710Inventories
                                
                                
                                109,581
                                
                                
                                
                                149,386Fixed
      Assets
                                
                                
                                9,383
                                
                                
                                
                                14,284Other
      Assets
                                
                                
                                200
                                
                                
                                
                                200Prepaid
      Expense
                                
                                
                                7,479
                                
                                
                                
                                53,932TOTAL
      ASSETS
                                
                                $
                                159,280
                                
                                
                                $
                                272,350LIABILITIESAccounts
      Payable-trade
                                
                                $
                                581,215
                                
                                
                                $
                                480,483Accounts
      Payable-related party
                                
                                
                                3,986
                                
                                
                                
                                —Accrued
      Expenses
                                
                                
                                95,427
                                
                                
                                
                                68,108Notes
      Payable-Current
                                
                                
                                567,790
                                
                                
                                
                                336,909TOTAL
      LIABILITIES
                                
                                $
                                1,248,418
                                
                                
                                $
                                885,500STOCKHOLDERS
      (DEFICIT)Common
      Stock (Note 1)
                                
                                $
                                1,009
                                
                                
                                $
                                680Additional
      Paid in Capital
                                
                                
                                5,669,969
                                
                                
                                
                                3,738,959Accumulated
      (Deficit)
                                
                                
                                (6,760,116
                                )
                                
                                
                                (4,352,789
                                )TOTAL
      STOCKHOLDERS (DEFICIT)
                                
                                $
                                (1,089,138
                                )
                                
                                $
                                (613,150
                                )TOTAL
      LIABILITIES AND STOCKHOLDERS (DEFICIT)
                                
                                $
                                159,280
                                
                                
                                $
                                272,350





Note 1:


Common
Stock, $.0001 par value, 100,000,000 shares authorized 10,088,794; 6,799,494
shares issued and outstanding respectively.


Detailed
information regarding the Company’s operations is contained in the Selected
Financial Data and Financial Statements section of this Report. The following
sets forth, for the periods indicated certain key information about the
Company.
 
 The
Company is continuing to focus its efforts on improving and expanding its all
natural cleaning and garden product lines and establishing a large viable
national distribution network for these products. While there are no assurances,
the Company anticipates that by continuing to improve and expand its quality
product offerings, in conjunction with establishing a broad national
distribution network, it will be in a position to receive substantial revenues
in the not-too-distant future.
 
 The
Company has incurred costs associated with the establishment of its business and
the development and launching of its products line. The Company has established
brand names, consumer recognition and interest in organics through private
labels, the internet, the radio show and an established regional distribution
network. The Company’s products started generating revenues during the second
half of calendar 2007.
 
 Significant
resources have been allocated to growing and expanding the Company from October
1, 2007 through September 30, 2009. These costs include, but are not
limited to $164,274 for Legal and Accounting Fees, $562,027 for Payroll and
payroll taxes, $230,537 for Advertising, $492,237 for brokered time purchased
for our radio shows and $107,523 for Interest Expense. To help absorb these
costs, the Company financed its operations during this period primarily through
convertible promissory notes of $184,120, common stock issued in lieu of debt
and payables for $139,562 and private placement stock offerings totaling
$1,022,643.
 
 The
Company has issued shares directly to accredited investors and through the
conversion of the 6% convertible debentures and convertible promissory notes
previously issued. All such shares have been issued in reliance upon exemptions
from registration with the Securities and Exchange Commission. An approximate
total of 69% of the Company’s outstanding common shares were restricted as of
June 30, 2009.
 
 For a
more complete list of sales of unregistered securities by the Company, please
refer to Part 5 of Form 10K for the year ended September 30, 2009, which is
incorporated by reference herein.
 
 Results
of Operations
  Year
Ended September 30, 2009, Compared to Year Ended September 30, 2008
 
 Revenues
for FY 2009 totaled $224,999 compared to $347,111 for FY 2008. This 35%
drop in revenue is almost entirely attributable to declining economic conditions
and the drop in retail sales. Gardening product sales were relatively flat for
FY 2009 and advertising revenues increased by 60% compared to FY
2008.
  Gross
profit was 18.4% in FY 2009 compared to 29.9% in FY 2008. The 11.5% drop in
gross margin can be attributed to decreased prices to stay competitive, the
increased cost of raw materials and increased shipping and receiving costs. All
of the changes were directly related to declining economic
conditions.
 
 Operating
expenses increased by 5.5% during FY 2009, primarily due to a licensing
agreement with Microbial Technologies for the use of their formulations in our
manufacturing process. Due to the drop in sales the full savings margin effect
on gross margins was not able to be realized. To offset these licensing costs, a
number of our radio station agreements were not renewed; there was a cutback in
personnel in the office and non-recurring legal fees associated with taking the
Company public in May, 2008 did not repeat in FY 2009.
 
 Other
Income/(Expense) was essentially  unchanged from year to year. In FY
2009, 2,736,800 warrants were granted to entice investors to participate in our
private placement, incurring a warrant expense of $954,837. In FY 2008 bridge
loan note holders converted their bridge loans.  Each note holder was
offered two shares of stock for each dollar of debt and accrued interest they
were owed for a significant discount in stock price.  As such, the
Company incurred debt settlement expense of $685,421. Note holders were also
granted one warrant for each dollar of debt and accrued interest owed which
resulted in warrant expense of $239,549 for the grant of 184,120 warrants.
Interest expense decreased 18% in FY 2009 when compared to FY 2008 primarily due
to the bridge loans that were converted.
 
 Liquidity
and Capital Resources
 
 Cash was
$24,547 at September 30, 2009 compared to $27,838 in FY 2008 or a decrease of
$3,291. Net Cash Used in Operating Activities decreased by 18% or $176,061 from
the prior fiscal year.  The net loss of the Company of $2,407,327 is
offset, in part, by stock issuances, and options and warrants granted during the
year in the amount of $1,376,820.  Net Cash Provided by Financing
Activities was $785,400 in FY 2009 compared to $805,032 in FY 2008 or a decrease
of $19,632 which was due to decreased borrowings on the Line of Credit
and  lower cash received on Bridge Loans offset by a net increase in
private placement raises of $86,397 and an increase in related party notes
payable of $233,633.
 
 Significant
Accounting Policies


Significant accounting
policies are defined as those that are reflective of significant judgments and
uncertainties, and potentially result in materially different results under
different assumptions and conditions and are incorporated in these financial
statements. We believe that our significant accounting policies are limited
to those described below.





Principles
of Accounting





The
Company employs the accrual method of accounting for both financial statements
and tax purposes. Using the accrual method, revenues and related assets are
recognized when earned, and expenses and the related obligations are recognized
when incurred. The Company has elected a September 30 year end.





Use of
Estimates





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


19





Revenue
Recognition





We earn
our revenues from the distribution of garden and cleaning products to retailers
and directly to consumers via our internet site and from advertising contracts.
Four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services
rendered; (3) the fee is fixed and determinable; and (4) collectibility is
reasonably assured.





Revenue
from garden and cleaning products is recognized upon shipment of the product.
The distribution of products is governed by purchase orders or direct sale
agreements which fix the price and delivery date. The Company records a
provision for product returns and price markdowns as a reduction of gross sales
at the time the product passes to these retailers or consumers. The provision
for anticipated product returns and price markdowns is primarily based upon the
Company's analysis of historical product return and price markdown results.
Should product sell-through results at retail store locations fall significantly
below anticipated levels this allowance may be insufficient. The Company will
review the adequacy of its allowance for product returns and price markdowns and
if necessary will make adjustments to this allowance on a quarterly
basis. In accordance with GAAP, "Accounting for Shipping and Handling
Fees and Costs," distribution costs charged to customers are recognized as
revenue when the related product is shipped. Advance payments are recorded on
the balance sheet as deferred revenue until revenue recognition criteria is
met.





Revenue
from radio advertising is derived from three sources, the sale of
commercial spots on the Garden Guys radio talk show, the sponsorship of
informative show segments and hosting live remote broadcasts. Revenue from radio
advertising is recognized after the commercial has been aired and/or a remote
broadcast has taken place. Customers will prepay for radio spots or remote
broadcasts at the time they contract with the Company to air their commercials
or host a remote broadcast. The Company will carry this prepayment as a
liability, until such time as economic performance takes place. Money received
is refundable prior to the airing of commercials or the airing of the remote
broadcast, adjusted by any production or other direct costs incurred up to that
point in time. Radio advertising for the years ended September 30, 2009 and 2008
were $40,210 and $25,260, respectively.





Cash and
Cash Equivalents





The
Company considers all highly liquid investments with a maturity of three months
or less at the time of purchase to be cash equivalents. During the past twelve
months the Company maintained cash in bank accounts which, at times, exceeded
Federal Deposit Insurance Corporation insured limits. The Company has not
experienced, nor does it anticipate, any losses on these accounts and believes
their risk to be minimal.
  Accounts
Receivable





The
Company carries its accounts receivable at cost less an allowance for doubtful
accounts. On a periodic basis, the Company evaluates its accounts receivable and
establishes an allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions. The Company feels that
all of its accounts receivable as of September 30, 2009 and September 30, 2008
are collectable and therefore no allowance has been taken. The full
value of accounts receivable is held as collateral for the Company’s Line of
Credit.


20


Inventory





The
inventory is stated at the lower of cost (first-in-first-out method) or market.
Inventory items consist of raw material and finished goods. Raw materials
consist of labels, bottles, sprayers and shipping materials. Finished goods
consist of fertilizer bags and bottles of organic cleaning products ready for
shipment. The inventory consists of newly purchased items; therefore, there is
currently no allowance for excess or obsolete inventory. The full
value of inventory is held as collateral for the Company’s Line of
Credit.





Prepaid
Expense





Business
expenses, including consulting expenses, that are paid for in advance of
services being rendered are treated as prepaid. The Company occasionally pays
for these expenses with its common stock. When this occurs the offset is shown
as a negative component of stockholders' equity.





Fixed
Assets





Fixed
assets are stated at cost less accumulated depreciation. The
Company has elected to capitalize and depreciate any fixed asset item costing in
excess of $1,000. Expenditures for minor replacements, maintenance and
repairs which do not increase the usefullives of the property and equipment are
charged to operations as incurred. Major additions and improvements are
capitalized. Depreciation and amortization are computed using the straight-line
method over estimated useful lives of five to seven years. The full
value of fixed assets is held as collateral for the Company’s Line of
Credit.





Advertising





The
Company follows the policy of charging advertising costs to expense as incurred.
Advertising expenses primarily consist of the Company's three hour weekly
Garden Talk radio call in program with Citadel (WBSM) and Greater Media. Annual
advertising expense for the radio contracts was $209,615 and $282,622 for the
years ended September 30, 2009 and 2008, respectively. Total advertising,
including radio contracts, for the years ended September 30, 2009 and 2008 was
$265,687 and $457,087, respectively. Advertising expense also includes display
rack costs, slotting fees, samples, trade show participation and print media
advertising.





Income
Taxes





The
Company utilizes the liability method of accounting for income taxes.
 Under the liability method, deferred income tax assets and liabilities are
provided based on the difference between the financial statement and tax bases
of assets and liabilities measured by the currently enacted tax rates in effect
for the years in which these differences are expected to reverse.  Deferred
tax expense or benefit is the result of changes in deferred tax assets and
liabilities.
  Fair
Value of Financial Instruments
 On
January 1, 2008, the Company adopted FASB ASC 820-10-50, “Fair Value Measurements.This
guidance defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosure requirements for
fair value measures. The three levels are defined as follows:
 
 ·
                Level
      1 inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.
 
 ·
                Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.
  ·
                Level
      3 inputs to valuation methodology are unobservable and significant to the
      fair measurement.
  The
carrying amounts reported in the balance sheets for the cash and cash
equivalents, receivables and current liabilities each qualify as financial
instruments and are a reasonable estimate of fair value because of the short
period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The carrying value of
related party notes payable approximates fair value because negotiated terms and
conditions are consistent with current market rates as of September 30, 2009 and
2008.
 
 Stock-Based
Compensation
 In
December 2004, FASB issued FASB ASC 718 (Prior authoritative
literature:  SFAS No. 123R,“Share-Based
Payment”).  FASB 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.  FASB ASC 718 focuses primarily
on accounting for transactions in which an entity obtains employee services in
share-based payment transactions.  FASB ASC 718 requires that the
compensation cost relating to share-based payment transactions be recognized in
the financial statements.  That cost will be measured based on the
fair value of the equity or liability instruments issued.
 
 The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of FASB ASC
505-50 (Prior authoritative literature:  EITF 96-18, “Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”and EITF 00-18, “Accounting Recognition for
Certain Transactions Involving Equity Instruments Granted to Other Than
Employees”).  The measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at
which a commitment for performance by the consultant or vendor is reached or
(ii) the date at which the consultant or vendor’s performance is complete.
In the case of equity instruments issued to consultants, the fair value of the
equity instrument is recognized over the term of the consulting
agreement.  Stock-based compensation related to non-employees is
accounted for based on the fair value of the related stock or options or the
fair value of the services, whichever is more readily determinable in accordance
with FASB ASC 718.


21





Net
Income (Loss) per Share
 
 Basic net
Income (loss) per share is computed by dividing net income {loss) by the
weighted average number of common shares outstanding. Diluted net income (loss)
per share is computed by dividing net income (loss) by the weighted average
number of common shares outstanding and dilutive potential common shares, which
includes the dilutive effect of stock options and warrants granted. Dilutive
potential common shares for all periods presented are computed utilizing the
treasury stock method. Common stock options of 1,140,145 were considered, but
not included in the computation of loss per share because their effect is
anti-dilutive. Common stock warrants of 2,920,920 were considered, but not
included in the computation of loss per share, because their effect is
anti-dilutive, as well.
 
 Recently
Issued Accounting Standards
  In June
2006, FASB issued FASB ASC 740-10 (Prior authoritative
literature:   FASB Interpretation No. 48 “Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109”).  This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB No.
109, “Accounting for Income
Taxes”.  FASB ASC 740-10
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FASB ASC 740-10 is effective for fiscal years
beginning after December 15, 2006. The adoption of FASB ASC 740-10 did not have
a material impact on the Company’s financial position, results of operations, or
cash flows.
 In
September 2006, the FASB issued FASB ASC 820-10 (Prior authoritative
literature:  FASB Statement 157, “Fair Value Measurements”).
FASB ASC 820-10 defines fair value, establishes a framework for measuring fair
value under GAAP and expands disclosures about fair value measurements. FASB ASC
820-10 applies under other accounting pronouncements that require or permit fair
value measurements. Accordingly, FASB ASC 820-10 does not require any new fair
value measurements. However, for some entities, the application of FASB ASC
820-10 will change current practice. The changes to current practice resulting
from the application of FASB ASC 820-10 relate to the definition of fair value,
the methods used to measure fair value and the expanded disclosures about fair
value measurements. The provisions of FASB ASC 820-10 are effective as of
January 1, 2008, with the cumulative effect of the change in accounting
principle recorded as an adjustment to opening retained earnings. However,
delayed application of this statement is permitted for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually),
until fiscal years beginning after November 15, 2008, and interim periods within
those fiscal years. The adoption of FASB ASC 820-10 did not have a material
impact on the Company’s financial position, results of operations, or cash
flows.
 
 In
February 2007, FASB ASC 825-10 (Prior authoritative
literature:  Statement of Financial Accounting Standards No. 159,
“The Fair Value Option for
Financial Assets and Financial Liabilities-Including an Amendment of FASB
Statement No. 115  ,”) was issued. This standard allows a
company to irrevocably elect fair value as the initial and subsequent
measurement attribute for certain financial assets and financial liabilities on
a contract-by-contract basis, with changes in fair value recognized in earnings.
The provisions of this standard were effective as of the beginning of fiscal
year 2008, with early adoption permitted. The adoption of FASB ASC 825-10 did
not have a material impact on the Company’s financial position, results of
operations, or cash flows.
 
 In March
2007, FASB ASC 715-60 (Prior authoritative literature:  EITF Issue No.
06-10, "Accounting for
Collateral Assignment Split-Dollar Life Insurance Agreements”). FASB ASC
715-60 provides guidance for determining a liability for the postretirement
benefit obligation as well as recognition and measurement of the associated
asset on the basis of the terms of the collateral assignment agreement. FASB ASC
715-60 is effective for fiscal years beginning after December 15, 2007. The
adoption of FASB ASC 715-60 did not have a material impact on the Company’s
financial position, results of operations, or cash flows.
 
 In
December, 2007, the FASB issued FASB ASC 805 (Prior authoritative literature:
SFAS No. 141(R), “Business
Combinations”), which established the principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired. FASB ASC 805 also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. FASB ASC 805 is effective the first annual reporting
period beginning on or after December 15, 2008 and is not expected to have any
impact on the Company’s financial statements.
 
 In
December, 2007, the FASB issued FASB ASC 810-10-65 (Prior authoritative
literature: SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, an amendment of ARB No. 51). FASB ASC
810-10-65 will change the accounting and reporting for minority interests which
will be characterized as noncontrolling interests and classified as a component
of equity. This new consolidation method will significantly change the
accounting for transactions with minority interest shareholders. This standard
is effective for fiscal years and interim periods within those fiscal years
beginning on or after December 15, 2008.and is not expected to have an impact on
the Company’s financial statements.
  22
  In March
2008, the FASB issued FASB ASC 815-10 (Prior authoritative literature: SFAS No.
161, “Disclosures about
Derivative Instruments and Hedging Activities”), which is effective
January 1, 2009. FASB ASC 815-10 requires enhanced disclosures about derivative
instruments and hedging activities to allow for a better understanding of their
effects on an entity’s financial position, financial performance, and cash
flows. Among other things, this standard requires disclosures of the fair values
of derivative instruments and associated gains and losses in a tabular formant.
This standard is not currently applicable to the Company since we do not have
derivative instruments or engage in hedging activity.
 
 In May
2008, the FASB issued FASB ASC 944 (Prior authoritative literature: SFAS No.
163, "Accounting for Financial
Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60").
FASB ASC 944 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement. This standard is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal years.  As
such, the Company is required to adopt these provisions at the beginning of the
fiscal year ended March 31, 2009. The Company does not believe this
standard will have any impact on the financial statements.
 
 In April,
2009, the FASB issued FASB ASC 810-10-65 (Prior authoritative literature: SFAS
No. 164, “Not-for-Profit
Entities: Mergers and Acquisitions”)which governs the
information that a not-for-profit entity should provide in its financial reports
about a combination with one or more other not-for-profit entities, businesses
or nonprofit activities and sets out the principles and requirements for how a
not-for-profit entity should determine whether a combination is in fact a merger
or an acquisition. This standard is effective for mergers occurring on or after
Dec. 15, 2009 and
for acquisitions where the acquisition date is on or after the beginning of the
first annual reporting period, beginning on or after Dec. 15, 2009. This
standard does not apply to the Company since the Company is considered a
for-profit entity
 
 In May
2009, FASB issued FASB ASC 855-10 (Prior authoritative
literature:  SFAS No. 165, "Subsequent Events"). FASB
ASC 855-10 establishes principles and requirements for the reporting of events
or transactions that occur after the balance sheet date, but before financial
statements are issued or are available to be issued. FASB ASC 855-10 is
effective for financial statements issued for fiscal years and interim periods
ending after June 15, 2009. As such, the Company adopted these provisions at the
beginning of the interim period ended June 30, 2009. Adoption of FASB ASC 855-10
did not have a material effect on our financial statements.
 
 In
June 2009, the FASB ASC 860-10 (Prior authoritative literature: issued SFAS
No. 166, “Accounting for
Transfers of Financial Assets, an Amendment of FASB Statement
No. 140”), which eliminates the concept of a qualifying
special-purpose entity (“QSPE”), clarifies and amends the de-recognition
criteria for a transfer to be accounted for as a sale, amends and clarifies the
unit of account eligible for sale accounting and requires that a transferor
initially measure at fair value and recognize all assets obtained and
liabilities incurred as a result of a transfer of an entire financial asset or
group of financial assets accounted for as a sale. This standard is effective
for fiscal years beginning after November 15, 2009. The Company is
currently evaluating the potential impact of this standard on its financial
statements, but does not expect it to have a material effect.
 
 In
June 2009, the FASB issued FASB ASC 810-10-65 (Prior authoritative
literature:  SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”) which amends the consolidation guidance applicable to a
variable interest entity (“VIE”). This standard also amends the guidance
governing the determination of whether an enterprise is the primary beneficiary
of a VIE, and is therefore required to consolidate an entity, by requiring a
qualitative analysis rather than a quantitative analysis. Previously, the
standard required reconsideration of whether an enterprise was the primary
beneficiary of a VIE only when specific events had occurred. This standard is
effective for fiscal years beginning after November 15, 2009, and for
interim periods within those fiscal years. Early adoption is prohibited. The
Company is currently evaluating the potential impact of the adoption of this
standard on its financial statements, but does not expect it to have a material
effect.
  In June
2009, FASB issued ASC 105-10 (Prior authoritative literature:  SFAS
No. 168, "The FASB Accounting
Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles - a replacement of FASB Statement No. 162").FASB ASC 105-10
establishes the FASB Accounting Standards Codification TM (Codification) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. FASB ASC 105-10 is effective for financial statements
issued for fiscal years and interim periods ending after September 15, 2009. As
such, the Company is required to adopt these provisions at the beginning of the
fiscal year ending September 30, 2009.  Adoption of FASB ASC 105-10
did not have a material effect on the Company’s financial
statements.
  Income
Taxes
 The
Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10 (Prior
authoritative literature: Financial Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN
48)).  FASB ASC 740-10 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with
prior literature FASB Statement No. 109, Accounting for Income Taxes. This
standard requires a company to determine whether it is more likely than not that
a tax position will be sustained will be sustained upon examination based upon
the technical merits of the position.  If the more-likely-than- not
threshold is met, a company must measure the tax position to determine the
amount to recognize in the financial statements.  As a result of the
implementation of this standard, the Company performed a review of its material
tax positions in accordance with recognition and measurement standards
established by FASB ASC 740-10.
  Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences.  Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax basis.
 Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.  Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
  The
Company has adopted FASB ASC 740-10 to account for income taxes. The Company
currently has no issues creating timing differences that would mandate deferred
tax expense. Net operating losses would create possible tax assets in future
years. Due to the uncertainty of the utilization of net operating loss carry
forwards, an evaluation allowance has been made to the extent of any tax benefit
that net operating losses may generate.  A provision for income taxes
has not been made due to net operating loss carry-forwards of $4,189,293 and
$2,964,435 as of September 30, 2009 and September 30, 2008, respectively, which
may be offset against future taxable income through 2029. No tax benefit has
been reported in the financial statements.
  The
Company did not have any tax positions for which it is reasonably possible that
the total amount of unrecognized tax benefits will significantly increase or
decrease within the next 12 months.
 
 The
Company includes interest and penalties arising from the underpayment of income
taxes in the consolidated statements of operations in the provision for income
taxes.  As of September 30, 2009 and 2008, the Company had no accrued
interest or penalties related to uncertain tax positions.
 The tax
years that remain subject to examination by major taxing jurisdictions are for
the years ended December 31, 2008, 2007 and 2006.
 ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
 Forward
Looking Statements
 The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition, which are based upon our financial statements. The
discussion should be read in conjunction with our financial statements and notes
thereto, appearing in this Report.
 
 The
preparation of these financial statements requires us to make estimates and
judgments that may affect the reported amount of assets and liabilities,
revenues and
expenses, and the related disclosure of such contingent assets and liabilities
at the date of our financial statements. Actual results may differ from these
estimates under different assumptions and conditions.
 
 This
Report also contains forward-looking statements that involve risks and
uncertainties, which may include statements about our:
 
 ·
                Business
      strategy
 ·
                Expansion
      of our manufacturing capabilities
 ·
                Plans
      for entering into collaborative
agreements
 ·
                Anticipated
      sources of funds to finance our operations following the date of this
      report
 ·
                Plans,
      objectives, expectations and intentions contained in this prospectus that
      are not historical fact
 
 The
following words and financial projections contain figures related to plans,
expectations, future results, performance, events or other matters that are
“forward-looking statements”. When used in the Plan of Operations, words such as
“estimate”, “project”, “intend”, “expect”, “anticipate”, and other similar
expressions are intended to identify forward-looking statements. Such statements
involve numerous risks and uncertainties, including, but not limited to, the
science of organics, the development of the Company’s products, markets for
those products, timing and level of customer orders, competitive products and
pricing, changes in economic conditions and other risks and uncertainties.
Actual results, performance and events are likely to differ and may differ
materially and adversely. Investors are cautioned not to place undue reliance on
these forward looking statements which speak only as of the date of the Plan of
Operations. The Company undertakes no obligation to release or deliver to
investors revisions to these forward-looking statements to reflect events or
circumstances after the date of the Plan of Operations, the occurrence of
unanticipated events or other matters that may occur.


23


Since
inception the Company has principally financed its operations through private
placements offerings as noted in PART II, Item 5(d) of this Form 10K. Since its
inception in August 2003, the Company has been involved in the development and
acquisition of a wide variety of non-food organic and naturally based products
to be initially sold to retail supermarkets, convenience stores, colleges,
universities, laboratories, local, regional and national government agencies,
lawn and garden centers and the funeral industry. In addition, new markets
continue to be pursued that include costume jewelry, sporting goods, sports
teams, hobby and craft, health, beauty and wellness, footwear, automotive, cigar
catalog houses, wine industry and the international cocoa
industry.  The Company also recently began fulfilling orders under its
own private label offering program for a multi-level marketing company based in
the Midwest and is in discussions with another national catalog company which
also has brick and mortar retail locations.  Essentially, OSM, Inc.
has become a sales and marketing company of branded organic and natural products
which markets to many different industries throughout the world. The Company
began generating revenues in January, 2007.





The
Company has a licensing agreement with a British based company and has the
rights to several proprietary formulas used in its extensive line of cleaning
products. Through its own brands, these excellent non-food organic and/or
natural products are then marketed at retail, wholesale or through the
internet.





The
Company continues to develop its operating history on which to evaluate its
prospects. The risks, expenses and difficulties encountered by an expanding
company must be considered when evaluating the Company’s prospects. Management
believes that existing funds, in conjunction with minimum funds sought to be
raised during 2009-2010 and projected revenues from operations will be
sufficient to reach self-sufficiency by the end of 2010 or early 2011. Expansion
of the business into 2010 and beyond will likely require additional investment
through private placement offers or the ability of the Company to secure funding
elsewhere. There can be no guarantee, however, that the Company will be able to
raise either the minimum capital it needs to sustain its 2010 operations or the
larger amount of capital it will need to expand and grow the business well into
2010 and beyond. Failure to do so would likely have an adverse effect on the
Company’s ability to continue its operations.  Most recently, the
Company has been loaned money by its President & CEO, Sam
Jeffries.





The
Company believes it is equipped with the necessary products to go to market and
has developed strategic alliances with several distributors in various
industries, however given the economic climate, and lack of sales to date,
operating expenses cannot be predicted with any real degree of certainty. They
will depend on several factors, including, but not limited to, marketing
expenses, continued acceptance of the Company’s products, competition for such
products and the current economic environment.





Management
has no firm basis for projecting the increase in revenue required to sustain
operations, as anticipated above. Such assumptions are based almost entirely on
the strategic relationships the Company has forged which it believes will
ultimately translate into operating revenues. It is important to stress,
however, that these assumptions are not at all based on firm commitments from
customers or on other tangible evidence.





The
Company currently has in excess of 100 SKU’s in its product line offering and it
continues to develop and introduce new and better non-food organic and/or
natural products as they present themselves. For instance, its’ Dragonfly
OrganixTM cleaner
product line is  currently sold in such large chains as Stop &
Shop and many other smaller independent supermarkets.


24


The
Company continues to maintain strong, strategic relationships with United
Natural Foods (UNFI), a leading natural food distributor based in Chesterfield,
NH servicing over 17,000 customers nationwide and Kehe Foods, another leading
natural food distributor based in Romeoville, IL which services over 9,000
customers nationwide.





The
Company launched its organic fertilizer products in the spring of 2008 under its
Mother Natures CuisineTM with
Shaw’s Supermarkets and many Agway Stores.  The current economic
pressures in addition to an extremely wet and cool weather season in the
northeast in 2009 had adverse effects on the overall
sales.  Commitments to carry the fertilizer products still remain from
Shaw’s, Whole Foods, Benny’s Hardware, Rocky’s Ace Hardware, Aubuchon Hardware,
Agway, Kehe Foods and many independent garden centers.  In addition,
the Company contracted with Arett Sales, a $150 million lawn, garden and home
improvement distributor of 54 years based in Cherry Hill, NJ, servicing 20
states and Washington, D.C. to sell its products.  The Company’s
organically certified insecticide/fungicide product, Garden Guys Garden NEEM,
which was first introduced in the spring of 2007, is continually shipping to
many of the above named customers in conjunction with the fertilizer products.
Sales of Garden Guys Garden NEEM in 2010 should continue to grow with the
additional distribution outlets, increased exposure due to advertising and brand
recognition and on-going discussions with government entities through the
Company’s affiliation with the USDA BioPreferred program.





To date,
Kehe Distributors, Inc., has only sold the Company’s Dragonfly Organix line of
cleaning products, yet has added the Company’s entire line of branded Mother
Nature’s Cuisine line of products which includes, All-Purpose, Flower, and
Veggie & Herb five pound bagged granular fertilizers, Oh No Deer repellant,
Fish & Seaweed liquid concentrate fertilizer, four varieties of suet cakes,
& Garden Guys Garden NEEM.  Kehe Distributors, Inc., recently
reached an agreement to purchase Tree of Life, Inc (see exhibit
10.23). Distributors which may have an impact on the Company’s future sales
in markets not currently being sold for or some of the above mentioned
products.





In the
Company structured deal between Northeast Garden Group, Agway, and Land
O’Lakes/Purina Feeds with the Company is acting as a representative for all
sales of Agway’s newly launched All-Natural 4-Stage lawn fertilizer, the Company
received a total compensation of $5,000 thousand dollars.  This is the
first time Agway has ever launched their own branded natural lawn fertilizer in
a 4-Stage offering.      This could also have long
term positive implications given that Agway continues to participate in the
Company’s media component, the Garden Guys radio show.





The
Company has started to generate initial sales of its Nev’r Dull commercial brand
of cleaning products and anticipates more significant sales to follow in the
boating, automotive and janitorial industries through 2010 and beyond. The
Company continues to receive orders from J. Racenstein Company, a well known
national distributor of window cleaning supplies and is currently in discussions
with other distributors.





The
Company continues to develop relationships where there is an increasing demand
for consistent performance and safe environmental acceptability of
eco-products.  Should the present “green movement” continue, the
Company may be well positioned capitalize in these sales.  Together,
and in conjunction with its recent USDA BioPreferred status, the Company
believes that it could provide simple, safe solutions for the replacement of
harmful chemicals increasingly being found in the various work places
encountered daily by such entities as Grainger, Fisher Scientific and
others.


25




The
Company continues to maintain an e-commerce internet presence hosting five
different sites, www.garden-guys.com ,
www.mothernaturescuisine.com
, www.osm-inc.com ,
www.naturalnevrdull.com
, and www.dragonflyorganix.com
..  The latter is also under the direction of Eye Level Solutions, a
division of Kehe Distributors, Inc., which offers the Dragonfly Organix products
for sale in over 12,000 e-commerce capable grocery stores
nationwide.  Acting as distributor, Kehe continues to process and
fulfill orders placed.  This enables the Company’s products to gain
shelf presence, without slotting fees, within stores which otherwise may not
currently stock these items.





The
Company will continue its active participation in various related trade
publications and trade shows. Most recent completed shows were; the
Massachusetts Conference for Women, Natural Products Expo, Kehe Holiday Trade
Show, Insalon 2009 Salon & Spa Trade Show, Arett Seasonal Showcase, Fisher
Scientific regional show at University of Iowa, Agway retail buyers show, New
Hampshire Hospitality, and the Fisher Science Education show Other shows
recently committed to include the New England Grows Lawn & Garden Show,
Fisher Scientific National Sales Meeting and Natural Products
Expo.    Each of these markets are either currently carrying
the Company’s products or have expressed interest in them.





Since its
participation in the USDA BioPreferred show in June of 2009, the Company has
attained USDA BioPreferred status for many of its commercial cleaning and hand
sanitizer products. (see
Exhibit 10.24 USDA letter dated Oct. 22, 09)  This distinction
continues to open doors for those distributors who sell the national government
through GSA (General Services Administration), or state and local contracts and
other contracts where there may be an increased interest for USDA BioPreferred
approved products.  The Company has shipped orders to the CDC (Center
for Disease Control) and Homeland Security.  The Company is in futher
discussions with other entities within the United States government through some
of its distributors currently holding GSA contracts.





The
Company continues to receive orders from Fisher Scientific, its National
Laboratory Distributor that sells into the colleges and universities, Hospital
and Healthcare Laboratory industries, Educational K-12 and Government services,
the Company’s OSM branded line of all natural products to their customer
base.  The Company is still working with Fisher Scientific to add its
products to the Fisher Scientific Safety division, which focuses heavily on
municipal and government sales.  The Company and Fisher are also
finalizing the additions of its fertilizer and other garden related
items.





Net cash
used in operating activities dropped 18.2% in the current fiscal year vs. the
prior fiscal year. This is due in part to driving down such costs as slotting
fees, radio expenditures, and salary cutbacks. The Company continually looks for
opportunities to cut costs that don’t impact customer service or product
quality.





In 2010,
the Company projects a loss, however, if sales come in stronger than
anticipated, a small profit and positive cash flow from operations are a
distinct possibility.  If, however, the Company is unsuccessful in
raising additional capital by the late spring of 2010, the probability of
hitting its short term financial goals will be seriously
impacted.


26


The
Company will continue to use the radio as the primary source for marketing and
creating brand awareness of our non-food, and natural product offerings. Sam
Jeffries, the Company’s President, hosts a live, weekly three hour Sunday
morning garden talk radio show which is currently heard on two radio stations in
the Northeast and also available on the internet via streaming or
Podcasts.  Using this allows us to keep listeners informed about the
importance of considering natural, organic, chemical-free alternatives, how they
should use these products and where they can buy them. This also forges
relationships with key people in various scopes of business, politics and the
general public.  Since the Company pays for the air time, it also
receives an inventory of commercials which are used as a follow up during the
work week to educate consumers about its organic and natural products, hand
sanitizers, etc. and where they can purchase these products. This also creates a
medium for the Company to offset some of its radio and related expenses by
selling the air time to potential sponsors and or advertisers of the radio
show.  Essentially, the Company has created its own media network, The
Garden Guys, within the New England region.  Owned by Greater Media,
WTKK 96.9 FM is the base station.  Based in Boston, MA, it is
part of one of the largest markets in the country.





As
previously noted, the Company has strategic relationships established with key
sales representative and distributor organizations in the markets that it
services and has developed very strong relationships with several vendors for
the fulfillment of its organic liquid and fertilizer product lines. The Company
plans to vigorously pursue all strategic relationships that enhance its ability
to deliver quality non-food, all natural products at reasonable
prices.





The
Company’s projected Plan of Operations for 2010 consist of the following: (000’s
omitted)




CALENDAR


Year 2010Revenues
                
                $
                3,000Margin
                
                
                600Selling,
      General and Administrative Expense
                
                
                700Net
      Profit/ (Loss) from Operations
                
                
                (100
                )





In 2010,
the Company will likely continue to rely on invested capital and short-term debt
to fund operations. The Company continues to seek additional minimum financing
of $500,000 to maintain and grow operations in 2010. If operating revenues
increase as expected and we attain close to break even in 2010,
operations could be able self-sustaining in 2011; however, additional
investor funds would still be needed to continue to expand in 2010 and beyond.
On the other hand, if we are unable to raise the minimum financing needed in
2010, the Company would likely exhaust its resources in mid 2010.





1.
            Revenue
      Projections





Despite
its heavy financial commitment to continually advertise and promote its products
to enhance brand awareness, foster customer loyalty and encourage reorders,
there can be no guarantee that the products will sell as the Company believes
they will, or that the consumer will reorder the products once they have used
them.


27


Given the
most recent unprecedented economic market, the Company did not reach and fell
well short of its 2009 projections.  Although the Company has been
able to strategically align itself with a multitude of distributors in various
retail, wholesale and commercial sectors, it did not anticipate the length of
time to go to market.  The 2010 projections have been made on an
industry-by-industry basis with 25% of projected revenues coming from a
combination of Grocery, Convenience and College Book Stores; 65% from commercial
sales including our exclusive National Laboratory Distributor, Fisher Scientific
and the remaining 10% from a combination of website, radio ad sales and private
label sales. In preparing these projections customers were identified as those
currently being shipped, those to whom are about to start shipping and those who
have indicated a desire to carry the products at some point during
2010.




2.
            Expense
      Projections





Costs of
sales were projected based upon the amount of product being sold using the
extensive by product costs we had developed for each of our products. As volume
increases it is expected that costs will go down as a function of better
quantity purchases. Our projections do not, however, take these cost reductions
into consideration.





General
and Administrative costs were projected at 5% of revenues, in line with our
corporate objective of keeping G&A expenses level as sales
increase.





Selling
expenses were projected at 15% of revenues. If revenues are higher than
projected, more of the additional revenues will be reinvested in further
marketing and selling activities. If revenues come in lower than projected,
analysis will be done to determine why and, if appropriate, marketing and
selling expenses will be reduced or redirected. These expenses include, but are
not limited to, radio show costs, display cases, trade shows, commissions,
samples, payroll and print media advertising.





The
Company believes that it has developed a careful, well-thought out business plan
based upon educated assumptions using the most current data available. There is,
of course, no guarantee as to how much or how often existing or new customers
will buy   The Company also believes that its business plan contains
enough flexibility to weather unforeseen delays in the generation of revenues by
being able to modify expenses and other spending, as required, assuming minimum
financing is obtained by mid 2010.





There can
be no assurance that the Company’s actual operations will reflect the above
projections. Market conditions, competition, supplier delays, the ability to
raise capital and all other risks associated with the operation of a business
could adversely impact the Company’s ability to reach the above
projections.





The
Company anticipates that in order to fulfill its plan of operations, it will
need to attract additional key markets to sell its natural cleaning and
gardening products, and continue to leverage its other business relationships.
The Company continues to receive orders and re-orders from the various outlets
in which it is positioned.  In addition, the recent H1N1 concern
across the country has created additional sales opportunities for the Company’s
products.


28





To
fulfill orders in a timely fashion, the Company must have the capability of
producing and delivering its cleaning and gardening products in sufficient
volume and quantity to achieve its projections.  To satisfy this
requirement, for the past two plus years the Company has outsourced its
fulfillment operation to Webco Chemical Co., located in Dudley, Massachusetts.
It believes that Webco has the capacity and ability to handle any and all
requirements that the Company may have and more, over the next five
years.  As a backup, the Company also has made arrangements with JNJ
Industries, located in Franklin, MA.  The Company is also in
discussions with LOL/Purina to potentially satisfy its distribution and
manufacturing needs for potential orders that may require larger sizes and
quantity of product.





In
addition to the minimum financing needed by mid 2010, the Company will need to
continue to seek financing from outside sources to expand the business into 2010
and beyond.  In order to provide this necessary additional financing,
the Company intends to offer private placement opportunities to investors in an
as yet undetermined amount.  The Company is currently undergoing a
private offering to raise $500,000 dollars. The Company has no basis, however,
for predicting the success of such an offering.





ITEM
      7A.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





·
            Risks
      Related To Our Business and
Operations





·
              Economic
      or industry-wide factors relevant to the
  Company:





Should
consumer interest in "organic" or "natural" products diminish or discontinue;
should there be a natural disaster that adversely impacts garden center product
sales such as extreme weather conditions throughout the United States; should
there be a shortage of suppliers in the enzyme technology that is used in some
of our products or should there be a slower than anticipated roll-out of
products to customers due to such external factors, the Company's ability to
realize a profit and yield a positive cash flow from operations as quickly as we
anticipate could be adversely impacted.




·
              Material
      opportunities, challenges:




Should
our suppliers not be able to deliver in the quantities the Company needs at any
given time in order to fulfill orders; should our contract manufacturer not be
able to deliver finished goods in a timely manner or suffer any type of physical
plant disaster, labor strike or shortage, it would adversely impact the
Company's' business. Difficult challenges may be incurred as more competitors,
who are more heavily financed than we are, enter into the market and create
pricing issues which could adversely impact the Company's
operations.


29





·
            Risks
      in short and long term and the actions we are taking to address
      them:




Undercapitalization
could impose growth restraints on the Company preventing us from entering other
markets and regions, as planned. The Company will continue to actively pursue
private placement investor funding as allowed by SEC regulations and to satisfy
debt and payables with stock, stock options and/or warrants as a means of
capitalizing the Company until operations are sufficient enough to be
self-sustaining, which could happen by the end of 2009. There can be no
assurance, however, that these activities will be successful.




If Sam
Jeffries were unable to host and produce the weekly talk show, this could have
an adverse impact on the show's educational and promotional programming which is
considered an essential part of our advertising and marketing plan. The present
co-hosts, Jim Zoppo and Layanee DeMerchant, could produce and conduct the show
in Sam Jeffries absence. In addition, Jim Zoppo, is a well respected, well known
horticulturist and radio talk show host in his own right.




Although
unlikely, interest in organics could diminish which would have an adverse effect
on the popularity of the radio show. To mitigate this possibility, "home
remedy", "how to" and "natural and organic health-care alternative segments are
being added to the shows programming to expand listener interest and extend the
seasonality of the show. The Company also has plans to ultimately reach a
national audience by franchising the Garden Guys concept throughout the country
by having local talk shows discuss organics and lawn and gardening techniques
and problems indigenous to each of those regions.




·
              Reliance on Investment Funds




We just
recently started to receive meaningful cash flow from customer sales. We expect
that for the short term future, we will still rely on external funding sources,
primarily equity capital, to finance our operations. While we believe that
increasing cash flow from customer sales will ultimately provide adequate funds
to permit us to become self-sufficient, possibly, by the end of 2009; until
then, we will continue to require additional capital from investors. If we were
unable to obtain such funding from outside sources, we would likely be forced to
reduce the level of our operations and business failure could become a real
possibility.





·
              Reliance on Management Team





As stated
above, the Company relies heavily upon a small team of full-time officers and
consultants. It has "key man" life insurance on the CEO, Samuel Jeffries that
would compensate us in the event of his demise. Sam Jeffries continued
involvement is deemed especially critical to our marketing efforts. The loss of
Sam Jeffries or one of several key officers or consultants could have an adverse
impact on the Company's chances for success. At present, "key man" insurance
coverage is not being pursued on the other full-time officers due to
cost.


30





·
            Risks
      Related to Ownership of Our Stock





·
              Trading
      Market





Our stock
officially began trading on Monday, May 5, 2008 on the Over The Counter
Electronic Bulletin Board under the trading symbol; OGSM. Even with our shares
being traded publicly, there is a substantial "overhang" of outstanding shares
that would be eligible for sale under Rule 144. Such sales, if they were to
occur, could tend to suppress the market value of our shares for some
time.





·
              No
      Dividends in Foreseeable
Future





Our board
of directors determines whether to pay cash dividends on our issued and
outstanding shares. Such determination will depend upon our future earnings, our
capital requirements, our financial condition and other relevant factors. At
present, our board is not intending to declare any dividends in the foreseeable
future. Earnings, once achieved, are expected to be retained to help finance the
growth of our business and for general corporate purposes.





·
              Provisions
      of our Certificate of Incorporation, By-laws and Delaware
    Law





Provisions
of our Certificate of Incorporation, By-laws and Delaware law may make it more
difficult for someone to acquire control of us or for our stockholders to remove
existing management, and might discourage a third party from offering to acquire
us, even if a change in control or in management would be beneficial to our
stockholders. For example, our Certificate of Incorporation allows us to issue
different series of shares of common stock without any vote or further action by
our stockholders and our Board of Directors has the authority to fix and
determine the relative rights and preferences of such series of common stock. As
a result, our Board of Directors could authorize the issuance of a series of
common stock that would grant to holders the preferred right to our assets upon
liquidation, the right to receive dividend payments before dividends are
distributed to the holders of other common stock and the right to the redemption
of the shares, together with a premium, prior to the redemption of other series
of our common stock.





ITEM
      8.
            FINANCIAL
      STATEMENTS AND SUPPLEMENTARY DATA





For the
Financial Statements required by Item 8 see the Financial Statements included at
the end of this Form 10-K.





ITEM
      9.
              CHANGES
      IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURES.





There
have been no changes in or disagreements with accountants with respect to
accounting and/or financial disclosure.


31





ITEM
      9A.
            CONTROLS
      AND PROCEDURES.





Item
9A.       Controls and Procedures
 We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports made pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). is recorded,
processed, summarized and reported within the timelines specified in the
Securities and Exchange Commission’s rules and forms, and that such information
is accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can only provide reasonable assurance
of achieving the desired control objectives, and in reaching a reasonable level
of assurance, management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and
procedures.
 
 As
required by Rule 13a-15(b) under the Exchange Act, we carried out an
evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the year covered by this report. Based on the
foregoing, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were not effective as of the end of
the period covered by this report in timely alerting them to material
information relating to Organic Sales and Marketing, Inc. required to be
disclosed in our periodic reports with the Securities and Exchange Commission.
As a result of this conclusion, we have initiated the remedial actions disclosed
below.
 
 Management’s Report on Internal
Control over Financial Reporting
 
 Our
Chief Executive Officer and Chief Financial Officer are responsible for
establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rule 13a-15(f) of the Exchange Act.
 
 Internal
control over financial reporting is promulgated under the Exchange Act as a
process designed by, or under the supervision of, our Chief Executive Officer
and Chief Financial Officer and effected by our board of directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and
includes those policies and procedures that:
 
 •
  Pertain to the maintenance of records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our
assets;
 
 • 
 Provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with accounting
principles generally accepted in the United States and that our receipts and
expenditures are being made only in accordance with authorizations of our
management and directors; and
 
 •    Provide
reasonable assurance regarding prevention or timely detection of unauthorized
acquisition or disposition of our assets that could have a material effect on
the financial statements.
 
 Readers
are cautioned that internal control over financial reporting, no matter how well
designed, has inherent limitations and may not prevent or detect
misstatements.
 
 Therefore,
even effective internal control over financial reporting can only provide
reasonable assurance with respect to the financial statement preparation and
presentation.
 
 Our
management, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of our internal controls over financial reporting as of the end of the period
covered by this report. .
 
 As
a result of this evaluation we identified a material weakness in our internal
controls over financial reporting relating to the recording of a non-cash
transaction in the financial statements.
 
 A
material weakness is a control deficiency, or a combination of control
deficiencies, that results in a more than remote likelihood that a material
misstatement of the Company’s annual or interim financial statements will not be
prevented or detected. Management has concluded that a material weakness existed
in the following area as of September 30, 2009:
 
 ·
              A
      consulting agreement with NU Vision Holdings LLC that was paid for with
      stock inlieu of cash had been
      erroneously misfiled, and an entry to book the transaction was not
      recorded until the annual audit.
 
 The
following remedial actions have been undertaken to prevent this from
reoccurring:
 
 ·
              All
      contracts or agreements, whether paid in cash or with stock, will now be
      placed in a specific location in the Chief Financial Officer’s office with
      a check list cover letter that requires both the Chief Executive Officer
      and Chief Financial Officer to sign off that different requirements,
      including in this case, the booking of the entry, have taken place before
      the document can be filed.
 
 In
addition, because the Company maintains a small office staff it was not able to
timely handle the absence of the Chief Financial Officer when he had major open
heart surgery at the end of the fiscal year.    This
resulted in some minor control deficiencies in the handling of office
documentation which will now be mitigated in the future, should there be another
extended absence, by hiring a qualified temporary replacement.
 
 Organic
Sales and Marketing, Inc. continues the process to complete a thorough review of
its internal controls as part of its preparation for compliance with the
requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404
requires our management to report on, and our external auditors to attest to,
the effectiveness of our internal control structure and procedures for financial
reporting. As a non-accelerated filer under Rule 12b-2 of the Exchange Act, our
first report under Section 404 as a smaller reporting company will be contained
in our Form 10-K for the period ended September 30, 2010.
 
 This
annual report does not include an attestation report of the company’s
independent registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by the
company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the company to provide only
management’s report.
 Despite
these material weaknesses, management believes that the consolidated financial
statements are fairly stated in all material respects as of and for the year
ended September 30, 2009.
 
 There
were no changes in our internal controls over financial reporting (as such term
is defined in Rule 13a-15(f) under the Exchange Act) that occurred during
our year ended September 30, 2009, that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.





ITEM
      9B.
            OTHER
      INFORMATION.





None.




PART
III





ITEM
      10.
            DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
  PERSONS




A.
            Directors
      and Executive Officers




The
following table sets forth our current directors, officers and significant
employees, their ages, and all offices and positions with our
company.





NAME
                                                          
                                                          AGE
                                                          
                                                          POSITIONSamuel
      F.H. Jeffries
                                                          
                                                          48
                                                          
                                                          President,
      Chief Executive Officer and Chairman of the Board of
    DirectorsStephen
      B. Jeffries '
                                                          
                                                          49
                                                          
                                                          Director
      and Audit Committee MemberLeonard
      B. Colt, Jr.
                                                          
                                                          73
                                                          
                                                          Director,
      SecretaryJerry
      Adelstein
                                                          
                                                          77
                                                          
                                                          DirectorJoanne
      L.H. Anderson
                                                          
                                                          52
                                                          
                                                          Director,
      vice PresidentLaurie
      Basch-Levy
                                                          
                                                          56
                                                          
                                                          Director
      and Audit Committee MemberMark
      J. McEvoy
                                                          
                                                          57
                                                          
                                                          Treasurer
      and Chief Financial
Officer


32


The
following is a biographical summary of our directors and officers:





Samuel
F.H. Jeffries has been president, Chief Executive Officer, and Chairman of the
Board of Directors since inception. He is also a member of the Executive
Committee. Prior to such time, he was president and co-managing member of Garden
Connections, LLC, from its inception in 2002. From 1999 to 2001, Mr. Jeffries
was Eastern Regional Sales Manager and area manager for Etera Corporation, a
wholesale garden products distributor based in Mount Vernon, Washington. His
responsibilities included sales, management, forecasts, hiring, computer
training, new accounts, budgeting, advertising and promotions. From 1992 to
2000, Mr. Jeffries owned and operated Jeffries Horticultural Sales and Jeffries
Landscape and Design, based in Franklin, Massachusetts. In 1984, Mr. Jeffries
received his Bachelor of Science degree in environmental design from the
University of Massachusetts at Amherst. He minored in arboriculture. He was also
a certified Occupational Education instructor at the Norfolk County Agricultural
High School, Walpole, MA. He is the first cousin of Stephen B. Jeffries, a
director.




Joanne
L.H. Anderson, Director, Vice President and member of the Executive Committee.
She has been a director of the Company since May, 2005 and is utilizing her
artistic designing talents in creating our logos, labels, packaging and our
websites. She also oversees the Company's advertising and marketing. Since 1980,
Joanne has been employed as an artist, designer, and head of the art department
of North American Carrousel Company located in Minneapolis, Minnesota. She is
experienced in website design and graphic and commercial art. She is trained as
an artistic painter, sculptor and art conservationist. She apprenticed for four
years with leading portrait artist Jerome Ryan. She majored in art at Hamline
University in Saint Paul, Minnesota and has restored paintings and ceilings in
the Minnesota State Capital and St. Paul Courthouse.





Len Colt,
has been our director since the inception. Since 1993, he has been owner of
Pegasus Marketing & Sales based in Little Compton, Rhode Island. Pegasus is
in the packaging consultancy firm and sales representative for various packaging
manufacturers. In 1958, Mr. Colt received his bachelor of arts degree in history
from Middlebury College located in Middlebury, Vermont.





Jerry
Adelstein, has been a director since the inception and is a member of the Audit
Committee and the Executive Committee. Since 1968, he has been the president of
H&J Associates, a textile sales company, based in Long Island, New York. In
1953, he received a bachelor of science in economics from Alfred University, in
New York State. In 1957, he received a Masters degree in business administration
with a major in economics from New York University.





Stephen
B. Jeffries, has been a director since the inception. He is also on the Audit
Committee. He has been the owner of S.B. Jeffries Consultants since 1990. S.B.
Jeffries Consultants is based in Boston, Massachusetts, and is in the business
of equity analysis and financial portfolio and estate management. In 1983, he
received a Bachelor of Arts in Economics from the University of Chicago. He has
completed the C.F.A. Level 1 Examination and C.F.P. Level 1
Examination.


33


Laurie
Basch-Levy, Director and a member of the Audit Committee. She has been a textile
designer, creating designs widely used by major fashion designers in New York
City until 1982 when she became treasurer of The George Basch Co. In January
2001 she became President and CEO of The George Basch Co., a privately owned
manufacturer and global distributor of the product Nevr-Dull Metal Polish, which
was formed in and has operated since 1929. This may give rise to a potential
conflict inasmuch as the Company has a business relationship with Nevr-Dull and
has a licensing agreement with them (see "Business of the Company", above). Ms.
Basch-Levy and the Company will endeavor to avoid any such conflict by excluding
her from any decision making or Board votes referable to Nevr-Dull. She received
her degree from the Fashion Institute of Technology in New York
City.





Michael
Ernst, Director, since the inception. He has been Senior Energy Consultant,
Tetra Tech Ec Inc., an engineering and consulting firm since 2006; Vice
President of Permitting and Siting for TransEnergie U.S. Ltd. 2001-2006
specializing in environmental engineering; Associate Attorney, Rubin &
Rudman, Boston, specializing in environmental law; General Counsel and
Legislative Director of the Massachusetts Department of Telecommunications and
Energy, 1992-2001; Hearing Officer for the Massachusetts Energy Facilities
Siting Board, 1990-1992; Counsel to the Joint Committee on Energy of the
Massachusetts Legislature, 1984-1990; Safe Energy Advocate, MASSPIRG, 1981-1983.
He received his degrees from Northeastern University School of Law, J.D., and
Davidson College, B.S.





Mark J.
McEvoy was elected Treasurer and Chief Financial Officer on November 15, 2006.
He has practiced in the accounting profession for 32 years, during which period
he owned and operated an Accounting and Tax practice from 1986 to 1996. He
graduated from Bentley College in 1977 with a Bachelor's degree in Accounting.
Immediately prior to joining the Company he served 5 years as the CFO of
WareRite Distributors, Inc. a fabricator of and distributor of laminate
countertop products.





B.
            Significant
      Employees.





We intend
to enter into employment agreements with our officers and significant employees,
but we have not yet done so.





C.
            Family
      Relationships. Samuel F.H. Jeffries and Stephen B. Jeffries are first
      cousins.





D.           Involvement
in Certain Legal Proceedings. None




E.
            The
      Executive Committee and the Audit Committee of the Board are separate
      committees.




The
Executive Committee consists of our independent directors. Its principal
functions are to advise and make recommendations to our Board of Directors
regarding matters relating to the compensation of officers and senior
management.


34


The Audit
Committee consists of Stephen B. Jeffries, Jerry Adelstein and Laurie
Basch-Levy. The Board of Directors has determined that all three members are
independent directors as (1) defined in Rule 10A-3(b)(i)(ii) under the
Securities Exchange Act of 1934 (the "Exchange Act") and (ii) under Section 121
B(2)(a) of the AMEX Company Guide (although our securities are not listed on the
American Stock Exchange or any other national exchange). Stephen B. Jeffries
serves as the financial expert as defined in Securities and Exchange Commission
rules relating to the Audit Committee.




We
believe Messrs. Adelstein and Jeffries and Ms. Basch-Levy to be independent of
management and free of any relationship that would interfere with their exercise
of independent judgment as members of this committee. The principal functions of
the Audit Committee are to (i) assist the Board in fulfilling its oversight
responsibility relating to the annual independent audit of our consolidated
financial statements, the engagement of the independent registered public
accounting firm and the evaluation of the independent registered public
accounting firm's qualifications, independence and performance (ii) review the
reports or statements as may be required by the securities laws, (iii) assist
the Board in fulfilling its oversight responsibility relating to the integrity
of our financial statements and financial reporting process and our system of
internal accounting and financial controls, (iv) discuss the financial
statements and reports with management, including any significant adjustments,
management judgments and estimates, new accounting policies and disagreements
with management, and (v) review disclosures by independent accountants
concerning relationships with us and the performance of our independent
accountants.




F.
            Meetings
      of the Board and Committees.





Our Board
of Directors is responsible for the management and direction of our company and
for establishing broad corporate policies. A primary responsibility of the Board
is to provide effective governance over our affairs for the benefit of our
stockholders. In all actions taken by the Board, the Directors are expected to
exercise their business judgment in what they reasonably believe to be the best
interests of our company. In discharging that obligation, Directors may rely on
the honest and integrity of our senior executives and our outside advisors and
auditors.





The Board
of Directors and the Audit Committee of the board meet periodically throughout
the year to receive and discuss operating and financial reports presented by our
executive officers as reports by experts and other advisors.




The Board
held meetings during the fiscal year ended September 30, 2009 in person and
telephonically and acted by unanimous written consent on one occasions. In
fiscal 2009, the Audit Committee met telephonically on February 25,
2009.





G.
            Compliance
      with Section 16(a) of The Securities Exchange Act of
  1934.





To our
knowledge, during the fiscal year ended September 30, 2009, based solely on a
review of such materials as are required by the Securities and Exchange
Commission, no officer, director or beneficial holder of more than ten percent
of our issued and outstanding shares of Common Stock failed to timely file with
the Securities and Exchange Commission any form or report required to be so
filed pursuant to Section 16(a) of the Securities Exchange Act of
1934.


35


ITEM
      11.
            EXECUTIVE
      COMPENSATION.





The
following table sets forth the aggregated compensation awarded to, earned by or
paid to our Chief Executive Officer and our other executive officers as a group,
or to directors for all services rendered in all capacities.





SUMMARY
COMPENSATION TABLE





Change
      inPension
      Valueand
      NonqualifiedNon-Equity
                    
                    
                    DeferredName
      and
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    Stock
                    
                    
                    Option
                    
                    
                    Incentive
      plan
                    
                    
                    Compensation
                    
                    
                    All
      OtherPrincipal
                    
                    
                    
                    Salary
                    
                    
                    Bonus
                    
                    
                    Awards
                    
                    
                    Awards
                    
                    
                    Compensation
                    
                    
                    Earnings
                    
                    
                    Compensation
                    
                    
                    TotalPosition
                    
                    Year
                    
                    ($)
                    
                    
                    ($)
                    
                    
                    ($)
                    
                    
                    ($)
                    
                    
                    ($)
                    
                    
                    ($)
                    
                    
                    ($)
                    
                    
                    ($)(a)
                    
                    (b)
                    
                    (c)
                    
                    
                    (d)
                    
                    
                    (e)
                    
                    
                    (f)
                    
                    
                    (g)
                    
                    
                    (h)
                    
                    
                    (i)
                    
                    
                    (j)Sam
      Jeffries
                    
                    2009
                    
                    
                    51,108
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    6,000
                    
                    
                    
                    57,108Sam
      Jeffries
                    
                    2008
                    
                    
                    73,049
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    -0-
                    
                    
                    
                    6,000
                    
                    
                    
                    79,049





All
officers and directors as a group were paid in the aggregate $160,901 for the
fiscal year ended September 30, 2009.


36


ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The
following table sets forth, as of December 17, 2008 certain information with
respect to the beneficial ownership of the common stock by (1) each person known
by us to beneficially own more than 5% of our outstanding shares, (2) each of
our directors, (3) each named executive officer and (4) all of our executive
officers and directors as a group. Except as otherwise indicated, each person
listed below has sole voting and investment power with respect to the shares of
common stock set forth opposite such person's name.





Samuel
      F.H. Jeffries
                  
                  
                  1,390,500
                  
                  
                  
                  13.9
                  %Stephen
      B. Jeffries
                  
                  
                  732,203
                  
                  
                  
                  7.3
                  %Leonard
      B. Colt, Jr.
                  
                  
                  171,938
                  
                  
                  
                  1.7
                  %Jerry
      Adelstein
                  
                  
                  1,158,565
                  
                  
                  
                  11.6
                  %Joanne
      L.H. Anderson
                  
                  
                  256,940
                  
                  
                  
                  2.6
                  %Laurie
      Basch-Levy
                  
                  
                  355,000
                  
                  
                  
                  3.6
                  %Michael
      Ernst.
                  
                  
                  62,000
                  
                  
                  
                  .6
                  %All
      Executive Officers and Directorsas
      a Group (7 persons)
                  
                  
                  4,127,146
                  
                  
                  
                  41.3
                  %





(1)     Beneficial
ownership so determined in accordance with the rules of the Securities and
Exchange Commission. Unless otherwise indicated, this column reflects amounts as
to which the beneficial owner has sole voting power and sole investment
power.





Applicable
percentage of ownership is based on 9,990,072 shares of our common stock
outstanding on December 15, 2009.





The
address of each of the executive officers and directors is care of Organic Sales
and Marketing, Inc. 114 Broadway, Raynham, MA 02767.





The
Company has not granted any of the following during or after its fiscal year
ended September 30, 2009:





Grants of
Plan-Based Awards




Equity
Awards




Nonqualified
Deferred Compensation





The
Company anticipates that its Executive Committee will develop and establish
clear compensation policies and procedures for disclosing these
policies.


37


ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





We pay
$1,000 per year to Jeffries Landscape & Design (a company owned by, Samuel
F.H. Jeffries) for the storage of certain products we sell.





Jerry
Adelstein, a director of the company, holds a demand note dated March 1, 2007
with a principal balance due as of September 30, 2009 of $103,747. This note is
payable monthly by the Company in the amount of $1,000 with interest at the rate
of 6% per annum. As of September 30, 2009, accrued interest and principal owed
on the Note was $114,078.





Leonard
Colt, a director of the company, holds a demand note dated March 15, 2008 with a
principal balance due as of September 30, 2009 of $10,855. This note is payable
monthly by the Company in the amount of $1,020 with interest at the rate of 6%
per annum. As of September 30, 2009, interest and principal owed on the Note was
$11,815.





Laurie
Basch-Levy, a director of the company, holds a 12 month promissory note dated
December 1, 2007 with a principal balance due as of September 30, 2009 of
$175,000. Interest accrues at 12% per annum. Accrued interest and principal was
due at maturity, December 1, 2008, however, the note holder has agreed to extend
the maturity date for an additional twelve months given the same terns and
conditions as the original note. Early indications are that the maturity date
will be extended for an additional twelve months subject to Board approval
in January 2010. As of September 30, 2009 interest and principal owed on the
note was $222,533.





Samuel
Jeffries, CEO and Chairman of the Board of Directors of the company, holds a
demand note dated January 1, 2009 with a principal balance due as of September
30, 2009 of $206,134. Monthly payments are not required and interest
accrues at 6% per annum. The note matures on January 30, 2010. As of September
30, 2009, interest and principal owed on the Note was
$208,608.


38





ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES.




All audit
and professional services provided by Certified Public Accountants will be
approved in advance by the Audit Committee to assure such services do not impair
the auditor's independence from us. The aggregate fees billed by Chisholm,
Bierwolf, Nilson & Morrill were $31,632 and $9,278 for the
fiscal years ended September 30, 2009 and 2008, respectively.





Description of Fees
                
                2009
                
                
                2008Audit
      Fees
                
                $
                31,632
                
                
                $
                9,278Audit-Related
      Fees
                
                
                -0-
                
                
                
                -0-Tax
      Fees
                
                
                -0-
                
                
                
                -0-All
      Other Fees
                
                
                -0-
                
                
                
                -0-Total
                
                $
                31,632
                
                
                $
                9,278





Audit
Fees


Represent
fees for professional services provided for the audit of our annual financial
statements, services that are performed to comply with generally accepted
auditing standards, and review of our financial statements included in our
quarterly reports and services in connection with statutory and regulatory
filings.





Audit-Related
Fees


Represent
the fees for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements. The Board of
Directors considers to be well qualified to serve as our independent public
accountants.




The Audit
Committee will pre-approve all auditing services and the terms thereof {which
may include providing comfort letters in connection with securities
underwriting) and non-audit services (other than non-audit services prohibited
under Section 10A{g) of the Exchange Act or the applicable rules of the SEC or
the Public Company Accounting Oversight Board) to be provided to us by the
independent auditor; provided, however, the pre-approval requirement is waived
with respect to the provisions of non-audit services for us if the "de minimus"
provisions of Section 10A(i) (1)(B) of the Exchange Act are satisfied. This
authority to pre-approve non-audit services may be delegated to one or more
members of the Audit Committee, who shall present all decisions to pre-approve
an activity to the full Audit Committee at its first meeting following such
decision. The Audit Committee may review and approve the scope and staffing of
the independent auditors' annual audit plan.





Tax Fees


This
represents professional services rendered for tax compliance, tax advice and tax
planning.





All Other
Fees


Chisholm,Bierwolf,
Nilson & Morrill was paid no other fees for professional services during the
fiscal years September 30, 2009 and 2008.


39


ITEM 15.
EXHIBITS





1.1
                                      Certificate
      of Incorporation of Garden Connections, Inc.2.2
                                      Amendment
      of Certificate of Incorporation Changing name from Garden Connections,
      Inc. to Organic Sales and Marketing, Inc.2.3
                                      Amended
      and Restated By-Laws3.2
                                      2008
      Stock Option Plan3.3
                                      Microbial
      Technologies Licensing Agreement10.16
                                      Nu
      Vision Holdings Consulting Agreement10.17
                                      EC
      Desmond Sales Representation Agreement10.18
                                      CA
      Fortune Specialty Foods Brokerage Agreement10.19
                                      WHYN
      Radio Contract (Springfield, MA)10.20
                                      WBAE
      Radio Contract (Portland, ME)10.21
                                      WGIR
      Radio Contract (Manchester, NH)10.22
                                      Kehe
      Foods Vendor Buying AgreementExhibit
      1.1- 10.22 referred to above may be found attached to the September 30,
      2008 Form 10KSB which is incorporated by reference herein.10.23
                                      Tree
      of Life, Inc acquisition by KEHE Food Distributors, Inc10.24
                                      USDA
      letter notifying OSM that we are Bio-Preferred program
      participants10.25
                                      Fresh  Direct
      Press Release10.26
                                      USDA
      Bio-Preferred Press Release10.26
                                      WTKK
      Radio Agreement31.1
                                      Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the
      Company's Chief Executive Officer.31.2
                                      Certification
      pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 from the
      Company's Chief Financial Officer.32.1
                                      Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the
      Company's Chief Executive Officer.32.2
                                      Certification
      pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 from the
      Company's Chief Financial
Officer.


40





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, thereunto duly
authorized.





ORGANIC SALES AND MARKETING,
      INC.By
                  /s/ Samuel F.H. JeffriesSamuel F.H. Jeffries, Chairman,President and Chief Executive OfficerDate
      January 13, 2010





In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities on the dates
indicated.





By
                  /s/ Mark J. McEvoyMark J. McEvoy, Treasurer and ChiefFinancial OfficerDate
      January 13, 2010




41


Organic
Sales and Marketing, Inc.
 
 Financial
Statements for the Years Ended
 September
30, 2009 and 2008
 And
Report of Independent Registered
 Public
Accounting Firm
  1
  CONTENTS
  Report
      of Independent Registered Public Accounting Firm
                  
                  
                  3Balance
      Sheets
                  
                  
                  4Statements
      of Operations
                  
                  
                  6Statements
      of Stockholders’ (Deficit)
                  
                  
                  7Statements
      of Cash Flows
                  
                  
                  8Notes
      to the Financial Statements
                  
                  
                  9
  2
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 To The
Audit Committee
 Organic
Sales and Marketing, Inc.
 Raynham,
Massachusetts 02767
 
 We have
audited the accompanying balance sheets of Organic Sales and Marketing,
Inc.  as of
September  30,  2009  and  2008,  and  the  related  statements  of
operations,  stockholders'  deficit,  and cash
flows for the years  then  ended.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits
to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free
of  material  misstatement.  The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting.  Our audits included consideration
of internal control over financial  reporting as a basis for designing
audit procedures that are appropriate in
the  circumstances,  but not for the purpose of expressing
an opinion on the  effectiveness  of the
Company's  internal control over financial reporting. Accordingly, we
express no such opinion. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis
for our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Organic Sales and Marketing, Inc.
as of September 30, 2009 and 2008, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
 
 The  accompanying  financial  statements  have
been  prepared  assuming that the
Company  will  continue  as
a  going  concern.  As  discussed  in
Note 14 to the financial statements, the Company has incurred recurring
substantial losses from
operations,  recurring  negative  working  capital,  negative  cash  flows  from
operations and has limited sales of its products which
raise  substantial  doubt about its ability to continue as a
going concern.  Management's plans in regard to these matters are also
described in Note 14. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
 
 /s/
Chisholm, Bierwolf, Nilson & Morrill, LLC
  Chisholm,
Bierwolf, Nilson & Morrill, LLC
 Bountiful,
Utah
 January
13, 2010
  3
 
 ORGANIC
SALES AND MARKETING, INC.
 Balance
Sheets
 
 ASSETS
 
 September
      30,
                  
                  
                  September
      30,2009
                  
                  
                  2008CURRENT
      ASSETSCash
      and cash equivalents
                  
                  $
                  24,547
                  
                  
                  $
                  27,838Accounts
      receivable, net
                  
                  
                  8,090
                  
                  
                  
                  26,710Inventories
                  
                  
                  109,581
                  
                  
                  
                  149,386Prepaid
      expense
                  
                  
                  7,479
                  
                  
                  
                  53,932Total
      current assets
                  
                  
                  149,697
                  
                  
                  
                  257,866PROPERTY
      AND EQUIPMENT, NET
                  
                  
                  9,383
                  
                  
                  
                  14,284OTHER
      ASSETSDeposits
                  
                  
                  200
                  
                  
                  
                  200Total
      other assets
                  
                  
                  200
                  
                  
                  
                  200TOTAL
      ASSETS
                  
                  $
                  159,280
                  
                  
                  $
                  272,350
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  4
 
 ORGANIC
SALES AND MARKETING, INC.
 Balance
Sheets (Continued)
 
 LIABILITIES AND
STOCKHOLDERS' (DEFICIT)
 
 September
      30,
                        
                        
                        September
      30,2009
                        
                        
                        2008CURRENT
      LIABILITIESAccounts
      payable - trade
                        
                        $
                        581,215
                        
                        
                        $
                        480,483Accounts
      payable - related party
                        
                        
                        3,986
                        
                        
                        
                        -Accrued
      expenses
                        
                        
                        33,807
                        
                        
                        
                        41,185Accrued
      interest payable
                        
                        
                        61,620
                        
                        
                        
                        26,923Line
      of credit
                        
                        
                        72,054
                        
                        
                        
                        74,807Notes
      payable - related parties
                        
                        
                        495,736
                        
                        
                        
                        262,102Total
      current liabilities
                        
                        
                        1,248,418
                        
                        
                        
                        885,500Total
      liabilities
                        
                        
                        1,248,418
                        
                        
                        
                        885,500COMMITMENTS
                        
                        
                        -
                        
                        
                        
                        -STOCKHOLDERS'
      (DEFICIT)Common
      stock, $0.0001 par value; 100,000,000 shares authorized; 10,088,794 and
      6,799,494 shares issued and outstanding, respectively
                        
                        
                        1,009
                        
                        
                        
                        680Additional
      paid-in capital
                        
                        
                        5,669,969
                        
                        
                        
                        3,738,959Accumulated
      (deficit)
                        
                        
                        (6,760,116
                        )
                        
                        
                        (4,352,789
                        )Total
      stockholders' (deficit)
                        
                        
                        (1,089,138
                        )
                        
                        
                        (613,150
                        )TOTAL
      LIABILITIES ANDSTOCKHOLDERS' (DEFICIT)
                        
                        $
                        159,280
                        
                        
                        $
                        272,350
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  5
 
 ORGANIC
SALES AND MARKETING, INC.
 Statements
of Operations
 
 For
      the Years EndedSeptember
      30,2009
                      
                      
                      2008REVENUESProduct
      sales, net
                      
                      $
                      184,789
                      
                      
                      $
                      321,851Radio
      advertising
                      
                      
                      40,210
                      
                      
                      
                      25,260Total
      revenues
                      
                      
                      224,999
                      
                      
                      
                      347,111COST
      OF SALES
                      
                      
                      183,511
                      
                      
                      
                      243,386GROSS
      PROFIT
                      
                      
                      41,488
                      
                      
                      
                      103,725OPERATING
      EXPENSESAdvertising
      expense
                      
                      
                      265,687
                      
                      
                      
                      457,087Payroll
      and compensation expense
                      
                      
                      332,121
                      
                      
                      
                      378,522Selling
      expense
                      
                      
                      172,838
                      
                      
                      
                      195,678General
      and administrative
                      
                      
                      488,740
                      
                      
                      
                      159,929Legal
      and accounting
                      
                      
                      187,487
                      
                      
                      
                      179,718Total
      operating expenses
                      
                      
                      1,446,873
                      
                      
                      
                      1,370,934LOSS
      FROM OPERATIONS
                      
                      
                      (1,405,385
                      )
                      
                      
                      (1,267,209
                      )OTHER
      INCOME (EXPENSE)Interest  income
                      
                      
                      1,311
                      
                      
                      
                      3,019Interest
      expense
                      
                      
                      (48,416
                      )
                      
                      
                      (59,108
                      )Debt
      settlement expense related to issuance of stock at a
    discount
                      
                      
                      -
                      
                      
                      
                      (685,421
                      )Valvation
      of warrants granted for financing costs
                      
                      
                      (954,837
                      )
                      
                      
                      0Valuation
      of warrants granted in settlement of debt
                      
                      
                      -
                      
                      
                      
                      (239,549
                      )Total
      other income (expense)
                      
                      
                      (1,001,942
                      )
                      
                      
                      (981,059
                      )NET
      LOSS BEFORE INCOME TAXES
                      
                      
                      (2,407,327
                      )
                      
                      
                      (2,248,268
                      )INCOME
      TAX EXPENSE
                      
                      
                      -
                      
                      
                      
                      -NET
      LOSS
                      
                      $
                      (2,407,327
                      )
                      
                      $
                      (2,248,268
                      )LOSS
      PER SHARE-Basic
      and Diluted
                      
                      $
                      (0.26
                      )
                      
                      $
                      (0.37
                      )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING-Basic
      and Diluted
                      
                      
                      9,124,777
                      
                      
                      
                      6,002,421
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  6
 
 ORGANIC
SALES AND MARKETING, INC.
 Statements
of Stockholders' Equity/(Deficit)
 For
the period October 1, 2007 through September 30, 2009
 
 TotalAdditional
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    Stockholders'Common
      Stock
                                                    
                                                    
                                                    Paid-In
                                                    
                                                    
                                                    Accumulated
                                                    
                                                    
                                                    EquityShares
                                                    
                                                    
                                                    Amount
                                                    
                                                    
                                                    Capital
                                                    
                                                    
                                                    (Deficit)
                                                    
                                                    
                                                    (Deficit)Balance,
      October 1, 2007
                                                    
                                                    
                                                    5,388,569
                                                    
                                                    
                                                    $
                                                    539
                                                    
                                                    
                                                    $
                                                    1,898,410
                                                    
                                                    
                                                    $
                                                    (2,104,521
                                                    )
                                                    
                                                    $
                                                    (205,572
                                                    )Shares
      issued for cash at $.50/share
                                                    
                                                    
                                                    870,000
                                                    
                                                    
                                                    
                                                    87
                                                    
                                                    
                                                    
                                                    434,913
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    435,000Shares
      issued for cash at $1.00/share
                                                    
                                                    
                                                    33,123
                                                    
                                                    
                                                    
                                                    3
                                                    
                                                    
                                                    
                                                    33,120
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    33,123Shares
      issued for debt and payables at $1.00/share
                                                    
                                                    
                                                    139,562
                                                    
                                                    
                                                    
                                                    14
                                                    
                                                    
                                                    
                                                    139,548
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    139,562Shares
      issued for conversion of debt at $.50/share
                                                    
                                                    
                                                    368,240
                                                    
                                                    
                                                    
                                                    37
                                                    
                                                    
                                                    
                                                    184,083
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    184,120Debt
      settlement expense related to issuance of stock at a
    discount
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    685,420
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    685,420Valuation
      of options and warrants granted
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    363,465
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    363,465Net
      loss for the year ended September 30, 2008
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (2,248,268
                                                    )
                                                    
                                                    
                                                    (2,248,268
                                                    )Balance,
      September 30, 2008
                                                    
                                                    
                                                    6,799,494
                                                    
                                                    
                                                    $
                                                    680
                                                    
                                                    
                                                    $
                                                    3,738,958
                                                    
                                                    
                                                    $
                                                    (4,352,789
                                                    )
                                                    
                                                    $
                                                    (613,150
                                                    )Shares
      issued for cash at $.25/share
                                                    
                                                    
                                                    1,440,000
                                                    
                                                    
                                                    
                                                    144
                                                    
                                                    
                                                    
                                                    359,856
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    360,000Shares
      issued for cash at $.15/share
                                                    
                                                    
                                                    1,296,800
                                                    
                                                    
                                                    
                                                    130
                                                    
                                                    
                                                    
                                                    194,390
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    194,520Shares
      issued for services rendered at $.40/share
                                                    
                                                    
                                                    450,000
                                                    
                                                    
                                                    
                                                    45
                                                    
                                                    
                                                    
                                                    179,955
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    180,000Shares
      issued for services rendered at $.10/share
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    5
                                                    
                                                    
                                                    
                                                    4,995
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    5,000Shares
      issued for services rendered at $.18/share
                                                    
                                                    
                                                    50,000
                                                    
                                                    
                                                    
                                                    5
                                                    
                                                    
                                                    
                                                    8,995
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    9,000Shares
      issued for services rendered at $.14/share
                                                    
                                                    
                                                    2,500
                                                    
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    350
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    350Valuation
      of options granted and warrants granted
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,182,470
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    1,182,470Net
      loss for the year ended September 30, 2009
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    
                                                    (2,407,327
                                                    )
                                                    
                                                    
                                                    (2,407,327
                                                    )Balance,
      September 30, 2009
                                                    
                                                    
                                                    10,088,794
                                                    
                                                    
                                                    
                                                    1,009
                                                    
                                                    
                                                    
                                                    5,669,969
                                                    
                                                    
                                                    
                                                    (6,760,116
                                                    )
                                                    
                                                    
                                                    (1,089,138
                                                    )
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  7
 
 ORGANIC SALES AND MARKETING, INC.
 Statements
of Cash Flows
 
 For
      the Years EndedSeptember
      30,2009
                    
                    
                    2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                    
                    $
                    (2,407,327
                    )
                    
                    $
                    (2,248,268
                    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
      expense
                    
                    
                    4,901
                    
                    
                    
                    4,250Shares
      issued for services rendered
                    
                    
                    194,350
                    
                    
                    
                    -Valuation
      of options and warrants granted
                    
                    
                    1,182,470
                    
                    
                    
                    363,465Debt
      settlement expense related to issuance of stock at a
    discount
                    
                    
                    -
                    
                    
                    
                    685,421Change in operating assets and
      liabilities:Accounts
      receivable-trade
                    
                    
                    18,620
                    
                    
                    
                    3,892Inventories
                    
                    
                    39,805
                    
                    
                    
                    (38,082
                    )Prepaid
      expense
                    
                    
                    46,453
                    
                    
                    
                    (35,039
                    )Accounts
      payable - trade
                    
                    
                    100,732
                    
                    
                    
                    257,672Accounts
      payable - related party
                    
                    
                    3,986
                    
                    
                    
                    -Accrued
      expenses
                    
                    
                    (7,378
                    )
                    
                    
                    (8,201
                    )Accrued
      interest payable
                    
                    
                    34,697
                    
                    
                    
                    50,138Net
      Cash Used in Operating Activities
                    
                    
                    (788,691
                    )
                    
                    
                    (964,752
                    )CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property and equipment
                    
                    
                    -
                    
                    
                    
                    (5,783
                    )Net
      Cash Used in Investing Activities
                    
                    
                    -
                    
                    
                    
                    (5,783
                    )CASH
      FLOWS FROM FINANCING ACTIVITIESProceeds
      from issuance of common stock
                    
                    
                    554,520
                    
                    
                    
                    468,123Proceeds
      from line of credit
                    
                    
                    15,827
                    
                    
                    
                    82,500Payments
      on line of credit
                    
                    
                    (18,580
                    )
                    
                    
                    (7,693
                    )Proceeds
      from bridge loans
                    
                    
                    -
                    
                    
                    
                    175,000Proceeds
      from notes payable - related party
                    
                    
                    233,633
                    
                    
                    
                    87,102Net
      Cash Provided by Financing Activities
                    
                    
                    785,400
                    
                    
                    
                    805,032NET
      INCREASE (DECREASE) IN CASH
                    
                    
                    (3,291
                    )
                    
                    
                    (165,503
                    )CASH,
      BEGINNING OF PERIOD
                    
                    
                    27,838
                    
                    
                    
                    193,341CASH,
      END OF PERIOD
                    
                    $
                    24,547
                    
                    
                    $
                    27,838SUPPLEMENTAL
      DISCLOSURES:Cash
      paid for interest
                    
                    $
                    13,524
                    
                    
                    $
                    9,026Cash
      paid for income taxes
                    
                    $
                    -
                    
                    
                    $
                    -NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Shares
      issued for conversion of notes payable and accrued
interest
                    
                    $
                    -
                    
                    
                    $
                    256,682Shares
      issued for services rendered
                    
                    $
                    194,350
                    
                    
                    $
                    -Shares
      issued for accounts payable and accrued expenses
                    
                    $
                    -
                    
                    
                    $
                    67,000Valuation
      of options and warrants granted
                    
                    $
                    1,182,470
                    
                    
                    $
                    363,465
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  8
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 1 – Organization and
Principle Activities of the Company
 
 Business
Description
 Organic
Sales and Marketing, Inc. was incorporated in the state of Delaware on August
23, 2003.  On September 8, 2003, a security exchange agreement was
entered into with Garden Connections, LLC.  Garden Connections, LLC
partners received all of the issued and outstanding common stock of Organic
Sales and Marketing, Inc. in exchange for their interests in Garden Connections,
LLC.
 
 The
Company is located in Raynham, Massachusetts and is engaged in the sale and
marketing of a wide variety of all natural, non-food products for distribution
and sale to major distributors and retail outlets throughout the United States.
The Company continues to expand their market penetration by acquiring or
developing consumer products that have organic origins that can be private
labeled. The Company currently has private label all natural, non-food products
that have been modified to meet applications in other industries including
costume jewelry, sporting goods, grocery, optical, health and beauty, footwear,
museum stores, historical preservation groups, funeral homes, quilting and
boating.
 
 Note 2 – Summary
of Significant Accounting Policies
 
 Financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States.
 
 Significant accounting
policies are defined as those that are reflective of significant judgments and
uncertainties, and potentially result in materially different results under
different assumptions and conditions and are incorporated in these financial
statements. We believe that our significant accounting policies are limited
to those described below.
 
 Principles
of Accounting
 The
Company employs the accrual method of accounting for both financial statements
and tax purposes. Using the accrual method, revenues and related assets are
recognized when earned, and expenses and the related obligations are recognized
when incurred. The Company has elected a September 30th year
end.
  9
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 2 – Summary
of Significant Accounting Policies (Continued)
 
 Use
of Estimates
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
 
 Revenue
Recognition
 We earn
our revenues from the distribution of garden and cleaning products to retailers
and directly to consumers via our internet site and from advertising contracts.
Four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists; (2) delivery has occurred or services
rendered; (3) the fee is fixed and determinable; and (4) collectibility is
reasonably assured.
 
 Revenue
from garden and cleaning products is recognized upon shipment of the product.
The distribution of products is governed by purchase orders or direct sale
agreements which fix the price and delivery date. The Company records a
provision for product returns and price markdowns as a reduction of gross sales
at the time the product passes to these retailers or consumers. The provision
for anticipated product returns and price markdowns is primarily based upon the
Company’s analysis of historical product return and price markdown results.
Should product sell-through results at retail store locations fall significantly
below anticipated levels this allowance may be insufficient. The Company will
review the adequacy of its allowance for product returns and price markdowns and
if necessary will make adjustments to this allowance on a quarterly basis. In
accordance with GAAP “Accounting for Shipping and Handling Fees and Costs,”
distribution costs charged to customers are recognized as revenue when the
related product is shipped. Advance payments are recorded on the balance sheet
as deferred revenue until the revenue recognition criteria is met.
 
 Revenue
from radio advertising is derived from three sources, the sale of commercial
spots on the Garden Guys radio talk shows, the sponsorship of informative show
segments and hosting live remote broadcasts. Revenue from radio advertising is
recognized after the commercial has been aired and/or a remote broadcast has
taken place. Customers will prepay for radio spots or remote broadcasts at the
time they contract with the Company to air their commercials or host a remote
broadcast. The Company will carry this prepayment as a liability, until such
time as economic performance takes place. Money received is refundable prior to
the airing of commercials or the airing of the remote broadcast, adjusted by any
production or other direct costs incurred up to that point in time.
 
 Cash
and Cash Equivalents
 The
Company considers all highly liquid investments with a maturity of three months
or less at the time of purchase to be cash equivalents. During the past twelve
months the Company maintained cash in bank accounts which, at times, exceeded
Federal Deposit Insurance Corporation insured limits. The Company has not
experienced, nor does it anticipate, any losses on these accounts and believes
their risk to be minimal.
  10
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 2 – Summary
of Significant Accounting Policies (Continued)
 
 Accounts
Receivable
 The
Company carries its accounts receivable at cost less an allowance for doubtful
accounts. Periodically, the Company evaluates its accounts receivable and
establishes an allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions. The Company feels that
the entire balance of Accounts Receivable as of September 30, 2009 and September
30, 2008 are collectable and, therefore, no allowance has been taken. The full
value of accounts receivable is held as collateral for
the Company’s
Line of Credit.
 
 Inventory
 The
inventory is stated at the lower of cost (first-in-first-out method) or market.
Inventory items consist of raw material and finished goods. Raw materials
consist of labels, bottles, sprayers, fertilizers and shipping materials.
Finished goods consist of fertilizer bags and bottles of organic cleaning
products ready for shipment. The inventory consists of newly purchased items;
therefore, there is currently no allowance for excess or obsolete inventory. The
full value of inventory is held as collateral for the Company’s Line of
Credit.
 
 Prepaid
Expenses
 Business
expenses, including consulting expenses, that are paid for in advance of
services being rendered are treated as prepaid expenses. On occasion, the
Company pays for prepaid expenses with common stock. When these transactions
occur, they are identified as negative components of stockholders’
equity.
 
 Fixed
Assets
 Fixed
assets are stated at cost less accumulated depreciation. The
Company has elected to capitalize and depreciate any fixed asset item costing in
excess of $1,000. Expenditures for minor replacements, maintenance
and repairs which do not increase the useful lives of the property and equipment
are charged to operations as incurred. Major additions and improvements are
capitalized. Depreciation and amortization are computed using the straight-line
method over estimated useful lives of three to seven years. The full value of
fixed assets is held as collateral for the Company's Line of
Credit.
 
 Advertising
 The
Company follows the policy of charging the costs of advertising to expense as
incurred. Advertising expense primarily consists of the Company’s three hour
weekly Garden Guys radio call in program with Greater Media and Citadel
Communications, slotting fee expense, display case costs, samples and trade show
participation. The total advertising expense for the radio show contracts was
$209,615 and $282,682 for the twelve months ended September 30, 2009 and
September 30, 2008, respectively. In addition, the Company advertises its
products on its own website and in numerous trade and industry publications.
Total advertising, including radio contracts for the years ended September 30,
2009 and 2008 was $265,687 and $457,087, respectively.
 
 Income
Taxes
 The Company utilizes the liability
method of accounting for income taxes.  Under the liability method,
deferred income tax assets and liabilities are provided based on the difference
between the financial statement and tax bases of assets and liabilities measured
by the currently enacted tax rates in effect for the years in which these
differences are expected to reverse.  Deferred tax expense or benefit is
the result of changes in deferred tax assets and
liabilities.
  Fair
Value of Financial Instruments
 On
January 1, 2008, the Company adopted FASB ASC 820-10-50, “Fair Value Measurements.This
guidance defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosure requirements for
fair value measures. The three levels are defined as follows:
 
 ·
                  Level
      1 inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets.
 
 ·
                  Level
      2 inputs to the valuation methodology include quoted prices for similar
      assets and liabilities in active markets, and inputs that are observable
      for the asset or liability, either directly or indirectly, for
      substantially the full term of the financial
  instrument.
 
 ·
                  Level
      3 inputs to valuation methodology are unobservable and significant to the
      fair measurement.
 
 The
carrying amounts reported in the balance sheets for the cash and cash
equivalents, receivables and current liabilities each qualify as financial
instruments and are a reasonable estimate of fair value because of the short
period of time between the origination of such instruments and their expected
realization and their current market rate of interest. The carrying value of
related party notes payable approximates fair value because negotiated terms and
conditions are consistent with current market rates as of September 30, 2009 and
2008.
 
 Stock-Based
Compensation
 In
December 2004, FASB issued FASB ASC 718 (Prior authoritative
literature:  SFAS No. 123R,“Share-Based
Payment”).  FASB 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.  FASB ASC 718 focuses primarily
on accounting for transactions in which an entity obtains employee services in
share-based payment transactions.  FASB ASC 718 requires that the
compensation cost relating to share-based payment transactions be recognized in
the financial statements.  That cost will be measured based on the
fair value of the equity or liability instruments issued.
 
 The
Company’s accounting policy for equity instruments issued to consultants and
vendors in exchange for goods and services follows the provisions of FASB ASC
505-50 (Prior authoritative literature:  EITF 96-18, “Accounting for Equity Instruments
That are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services”and EITF 00-18, “Accounting Recognition for
Certain Transactions Involving Equity Instruments Granted to Other Than
Employees”).  The measurement date for the fair value of the
equity instruments issued is determined at the earlier of (i) the date at
which a commitment for performance by the consultant or vendor is reached or
(ii) the date at which the consultant or vendor’s performance is complete.
In the case of equity instruments issued to consultants, the fair value of the
equity instrument is recognized over the term of the consulting
agreement.  Stock-based compensation related to non-employees is
accounted for based on the fair value of the related stock or options or the
fair value of the services, whichever is more readily determinable in accordance
with FASB ASC 718.
 11
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 2 – Summary
of Significant Accounting Policies (Continued)
 
 Recently
Issued Accounting Standards
 In June
2006, FASB issued FASB ASC 740-10 (Prior authoritative
literature:   FASB Interpretation No. 48 “Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109”).  This
Interpretation clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with FASB No.
109, “Accounting for Income
Taxes”.  FASB ASC 740-10
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. FIN 48 also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FASB ASC 740-10 is effective for fiscal years
beginning after December 15, 2006. The adoption of FASB ASC 740-10 did not have
a material impact on the Company’s financial position, results of operations, or
cash flows.
 
 In
September 2006, the FASB issued FASB ASC 820-10 (Prior authoritative
literature:  FASB Statement 157, “Fair Value Measurements”).
FASB ASC 820-10 defines fair value, establishes a framework for measuring fair
value under GAAP and expands disclosures about fair value measurements. FASB ASC
820-10 applies under other accounting pronouncements that require or permit fair
value measurements. Accordingly, FASB ASC 820-10 does not require any new fair
value measurements. However, for some entities, the application of FASB ASC
820-10 will change current practice. The changes to current practice resulting
from the application of FASB ASC 820-10 relate to the definition of fair value,
the methods used to measure fair value and the expanded disclosures about fair
value measurements. The provisions of FASB ASC 820-10 are effective as of
January 1, 2008, with the cumulative effect of the change in accounting
principle
  12
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 2 – Summary
of Significant Accounting Policies (Continued)
 
 Recently
Issued Accounting Standards (Continued)
 recorded
as an adjustment to opening retained earnings. However, delayed application of
this statement is permitted for nonfinancial assets and nonfinancial
liabilities, except for items that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually), until fiscal
years beginning after November 15, 2008, and interim periods within those fiscal
years. The adoption of FASB ASC 820-10 did not have a material impact on the
Company’s financial position, results of operations, or cash flows.
 
 In
February 2007, FASB ASC 825-10 (Prior authoritative
literature:  Statement of Financial Accounting Standards No. 159,
“The Fair Value Option for
Financial Assets and Financial Liabilities-Including an Amendment of FASB
Statement No. 115  ,”) was issued. This standard allows a
company to irrevocably elect fair value as the initial and subsequent
measurement attribute for certain financial assets and financial liabilities on
a contract-by-contract basis, with changes in fair value recognized in earnings.
The provisions of this standard were effective as of the beginning of fiscal
year 2008, with early adoption permitted. The adoption of FASB ASC 825-10 did
not have a material impact on the Company’s financial position, results of
operations, or cash flows.
 
 In March
2007, FASB ASC 715-60 (Prior authoritative literature:  EITF Issue No.
06-10, "Accounting for
Collateral Assignment Split-Dollar Life Insurance Agreements”). FASB ASC
715-60 provides guidance for determining a liability for the postretirement
benefit obligation as well as recognition and measurement of the associated
asset on the basis of the terms of the collateral assignment agreement. FASB ASC
715-60 is effective for fiscal years beginning after December 15, 2007. The
adoption of FASB ASC 715-60 did not have a material impact on the Company’s
financial position, results of operations, or cash flows.
 
 In
December, 2007, the FASB issued FASB ASC 805 (Prior authoritative literature:
SFAS No. 141(R), “Business
Combinations”), which established the principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any non-controlling interest in the
acquiree and the goodwill acquired. FASB ASC 805 also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. FASB ASC 805 is effective the first annual reporting
period beginning on or after December 15, 2008 and is not expected to have any
impact on the Company’s financial statements.
 
 In
December, 2007, the FASB issued FASB ASC 810-10-65 (Prior authoritative
literature: SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, an amendment of ARB No. 51). FASB ASC
810-10-65 will change the accounting and reporting for minority interests which
will be characterized as noncontrolling interests and classified as a component
of equity. This new consolidation method will significantly change the
accounting for transactions with minority interest shareholders. This standard
is effective for fiscal years and interim periods within those fiscal years
beginning on or after December 15, 2008.and is not expected to have an impact on
the Company’s financial statements.
  13
   ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 2 – Summary
of Significant Accounting Policies (Continued)
 
 Recently
Issued Accounting Standards (Continued)
 
 In March
2008, the FASB issued FASB ASC 815-10 (Prior authoritative literature: SFAS No.
161, “Disclosures about
Derivative Instruments and Hedging Activities”), which is effective
January 1, 2009. FASB ASC 815-10 requires enhanced disclosures about derivative
instruments and hedging activities to allow for a better understanding of their
effects on an entity’s financial position, financial performance, and cash
flows. Among other things, this standard requires disclosures of the fair values
of derivative instruments and associated gains and losses in a tabular formant.
This standard is not currently applicable to the Company since we do not have
derivative instruments or engage in hedging activity.
 
 In May
2008, the FASB issued FASB ASC 944 (Prior authoritative literature: SFAS No.
163, "Accounting for Financial
Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60").
FASB ASC 944 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement.  This standard is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and all interim periods within those fiscal
years.   As such, the Company is required to adopt these provisions at
the beginning of the fiscal year ended March 31, 2009.  The Company does
not believe this standard will have any impact on the financial
statements.
 
 In April,
2009, the FASB issued FASB ASC 810-10-65 (Prior authoritative literature: SFAS
No. 164, “Not-for-Profit
Entities: Mergers and Acquisitions”)which governs the
information that a not-for-profit entity should provide in its financial reports
about a combination with one or more other not-for-profit entities, businesses
or nonprofit activities and sets out the principles and requirements for how a
not-for-profit entity should determine whether a combination is in fact a merger
or an acquisition. This standard is effective for mergers occurring on or after
Dec. 15, 2009 and
for acquisitions where the acquisition date is on or after the beginning of the
first annual reporting period, beginning on or after Dec. 15, 2009. This
standard does not apply to the Company since the Company is considered a
for-profit entity
  14
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 2 – Summary
of Significant Accounting Policies (Continued)
 
 Recently
Issued Accounting Standards (Continued)
 In May
2009, FASB issued FASB ASC 855-10 (Prior authoritative
literature:  SFAS No. 165, "Subsequent Events"). FASB
ASC 855-10 establishes principles and requirements for the reporting of events
or transactions that occur after the balance sheet date, but before financial
statements are issued or are available to be issued. FASB ASC 855-10 is
effective for financial statements issued for fiscal years and interim periods
ending after June 15, 2009. As such, the Company adopted these provisions at the
beginning of the interim period ended June 30, 2009. Adoption of FASB ASC 855-10
did not have a material effect on our financial statements.
 
 In
June 2009, the FASB ASC 860-10 (Prior authoritative literature: issued SFAS
No. 166, “Accounting for
Transfers of Financial Assets, an Amendment of FASB Statement
No. 140”), which eliminates the concept of a qualifying
special-purpose entity (“QSPE”), clarifies and amends the de-recognition
criteria for a transfer to be accounted for as a sale, amends and clarifies the
unit of account eligible for sale accounting and requires that a transferor
initially measure at fair value and recognize all assets obtained and
liabilities incurred as a result of a transfer of an entire financial asset or
group of financial assets accounted for as a sale. This standard is effective
for fiscal years beginning after November 15, 2009. The Company is
currently evaluating the potential impact of this standard on its financial
statements, but does not expect it to have a material effect.
 
 In
June 2009, the FASB issued FASB ASC 810-10-65 (Prior authoritative
literature:  SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)”) which amends the consolidation guidance applicable to a
variable interest entity (“VIE”). This standard also amends the guidance
governing the determination of whether an enterprise is the primary beneficiary
of a VIE, and is therefore required to consolidate an entity, by requiring a
qualitative analysis rather than a quantitative analysis. Previously, the
standard required reconsideration of whether an enterprise was the primary
beneficiary of a VIE only when specific events had occurred. This standard is
effective for fiscal years beginning after November 15, 2009, and for
interim periods within those fiscal years. Early adoption is prohibited. The
Company is currently evaluating the potential impact of the adoption of this
standard on its financial statements, but does not expect it to have a material
effect.
 
 In June
2009, FASB issued ASC 105-10 (Prior authoritative literature:  SFAS
No. 168, "The FASB Accounting
Standards Codification TM and the Hierarchy of Generally Accepted Accounting
Principles - a replacement of FASB Statement No. 162").FASB ASC 105-10
establishes the FASB Accounting Standards Codification TM (Codification) as the
source of authoritative accounting principles recognized by the FASB to be
applied by nongovernmental entities in the preparation of financial statements
in conformity with GAAP. FASB ASC 105-10 is effective for financial statements
issued for fiscal years and interim periods ending after September 15, 2009. As
such, the Company is required to adopt these provisions at the beginning of the
fiscal year ending September 30, 2009.  Adoption of FASB ASC 105-10
did not have a material effect on the Company’s financial
statements.
  15
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 3 – Net
Income/(Loss) per Share
 Basic net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding.  Diluted net
income (loss) per share is computed by dividing net income (loss) by the
weighted average number of common shares outstanding and dilutive potential
common shares, which includes the dilutive effect of stock options and warrants
granted. Dilutive potential common shares for all periods presented are computed
utilizing the treasury stock method. Common stock options of 1,140,145 were
considered but were not included in the computation of loss per share because
their effect is anti-dilutive. Common stock warrants of 2,920,920 were
considered, but not included in the computation of loss per share because their
effect is anti-dilutive.
 
 For the Years EndedSeptember 30,2009
                    
                    
                    2008Basic and DilutedNet
      Loss - Numerator
                    
                    $
                    (2,407,327
                    )
                    
                    $
                    (2,248,268
                    )Weighted
      Average Shares - Denominator
                    
                    
                    9,124,777
                    
                    
                    
                    6,002,421Per
      Share Amount
                    
                    $
                    (0.26
                    )
                    
                    $
                    (0.37
                    )
  Note 4 – Income
Taxes
 
 The
Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10 (Prior
authoritative literature: Financial Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109 (FIN
48)).  FASB ASC 740-10 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with
prior literature FASB Statement No. 109, Accounting for Income Taxes.  This
standard requires a company to determine whether it is more likely than not that
a tax position will be sustained will be sustained upon examination based upon
the technical merits of the position.  If the more-likely-than- not
threshold is met, a company must measure the tax position to determine the
amount to recognize in the financial statements.  As a result of the
implementation of this standard, the Company performed a review of its material
tax positions in accordance with recognition and measurement standards
established by FASB ASC 740-10.
 
 Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for taxable
temporary differences.  Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax basis.
 Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.  Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
  16
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 4 – Income Taxes
(Continued)
 
 Deferred
tax assets and the valuation account are as follows:
 
 For the Years EndedSeptember 30,2009
                    
                    
                    2008Deferred
      tax asset:Net
      operating loss carryforward
                    
                    $
                    1,633,824
                    
                    
                    $
                    1,156,130Valuation
      allowance
                    
                    
                    (1,633,824
                    )
                    
                    
                    (1,156,130
                    )$
                    -
                    
                    
                    $
                    -
 
 The
components of income tax expense are as follows:
 
 For the Years EndedSeptember 30,2009
                      
                      
                      2008Current
      Federal tax
                      
                      $
                      -
                      
                      
                      $
                      -Current
      State tax
                      
                      
                      -
                      
                      
                      
                      -Change
      in NOL benefit
                      
                      
                      477,695
                      
                      
                      
                      467,759Change
      in valuation allowance
                      
                      
                      (477,695
                      )
                      
                      
                      (467,759
                      )$
                      -
                      
                      
                      $
                      -
 
 The
Company has adopted FASB ASC 740-10 to account for income taxes. The Company
currently has no issues creating timing differences that would mandate deferred
tax expense. Net operating losses would create possible tax assets in future
years. Due to the uncertainty of the utilization of net operating loss carry
forwards, an evaluation allowance has been made to the extent of any tax benefit
that net operating losses may generate.  A provision for income taxes
has not been made due to net operating loss carry-forwards of $4,189,293 and
$2,964,435 as of September 30, 2009 and September 30, 2008, respectively, which
may be offset against future taxable income through 2029. No tax benefit has
been reported in the financial statements.
  17
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 4 – Income Taxes
(Continued)
 
 A
reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:
 
 For the Years EndedSeptember 30,2009
                      
                      
                      2008Beginning
      Balance
                      
                      $
                      -
                      
                      
                      $
                      -Additions
      based on tax positions related to current year
                      
                      
                      -
                      
                      
                      
                      -Additions
      for tax positions of prior years
                      
                      
                      -
                      
                      
                      
                      -Reductions
      for tax positions of prior years
                      
                      
                      -
                      
                      
                      
                      -Reductions
      in benefit due to income tax expense
                      
                      
                      -
                      
                      
                      
                      -Ending
      Balance
                      
                      $
                      -
                      
                      
                      $
                      -
 
 The
Company did not have any tax positions for which it is reasonably possible that
the total amount of unrecognized tax benefits will significantly increase or
decrease within the next 12 months.
 
 The
Company includes interest and penalties arising from the underpayment of income
taxes in the consolidated statements of operations in the provision for income
taxes.  As of September 30, 2009 and 2008, the Company had no accrued
interest or penalties related to uncertain tax positions.
  The tax
years that remain subject to examination by major taxing jurisdictions are for
the years ended December 31, 2008, 2007 and 2006.
  Note5–
Inventories
 
 Inventories
consisted of the following as of:
 
 September 30,
                  
                  
                  September 30,2009
                  
                  
                  2008Raw
      materials
                  
                  $
                  70,179
                  
                  
                  $
                  105,107Finished
      goods
                  
                  
                  39,402
                  
                  
                  
                  44,279Totals
                  
                  $
                  109,581
                  
                  
                  $
                  149,386
 
 At
September 30, 2009 and September 30, 2008, no provision for obsolete inventory
was recorded by the Company.
  18
 ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note6–Property and
Equipment
 
 Property
and Equipment consisted of the following as of:
  September 30,
                    
                    
                    September 30,2009
                    
                    
                    2008Property
      and equipment
                    
                    $
                    21,900
                    
                    
                    $
                    21,900Less:
      accumulated depreciation
                    
                    
                    (12,517
                    )
                    
                    
                    (7,616
                    )Property
      and equipment, net
                    
                    $
                    9,383
                    
                    
                    $
                    14,284
 
 Depreciation
expense on property and equipment was $4,901 and $4,250 for the years ended
September 30, 2009 and September 30, 2008, respectively.
 
 Note 7 – Stock
Options
 
 On
February 28, 2008, our Board of Directors approved the 2008 Stock Option and
Purchase Plan. Under the terms of this plan, options may be granted to officers,
directors, employees, consultants and independent contractors to purchase up to
an aggregate of 1,350,000 shares of common stock at an exercise price of $1.00
per share. Options are exercisable and vest over a four year period at a rate of
25% per year.
 
 As of
September 30, 2009, there were 1,140,145 options outstanding under this plan at
the exercise price of $1.00 per share. The issuance of these options was
approved by holders of the majority of the Company’s outstanding common stock.
The total amount of option expense recorded for the twelve months ended
September 30, 2009 was $227,631, of which, $93,863 was recorded as payroll and
compensation expense and $133,768 was recorded as legal and accounting expense.
The amount of option expense to be charged over the remainder of the exercise
period is $549,701.
 The
Company has determined the estimated value of the stock options granted by using
the Black-Scholes pricing model using the following assumptions: expected life
of 10 years, a risk free interest rate of 1.66-3.71%, a dividend yield of 0% and
volatility that ranged from 75% in 2008 to 192% in 2009.
  19
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
  
 Note 7 – Stock Options
(Continued)
 
 Outstanding
common stock options as of September 30, 2009 and September 30, 2008 are
summarized below:
 
 Number of Shares
                  
                  
                  Weighted Average
                    Exercise PriceStock
      Options Outstanding, October 1, 2007
                  
                  
                  -
                  
                  
                  $
                  -Options
      Granted
                  
                  
                  1,126,250
                  
                  
                  $
                  1.00Options
      Exercised
                  
                  
                  -
                  
                  
                  $
                  -Options
      Canceled
                  
                  
                  -
                  
                  
                  $
                  -Stock
      Options Outstanding, September 30, 2008
                  
                  
                  1,126,250
                  
                  
                  $
                  1.00Stock
      Options Exercisable, September 30, 2008
                  
                  
                  148,619
                  
                  
                  $
                  1.00Options
      Granted
                  
                  
                  29,000
                  
                  
                  $
                  1.00Options
      Exercised
                  
                  
                  -
                  
                  
                  $
                  -Options
      Canceled
                  
                  
                  (15,105
                  )
                  
                  $
                  1.00Stock
      Options Outstanding, September 30, 2009
                  
                  
                  1,140,145
                  
                  
                  $
                  1.00Stock
      Options Exercisable, September 30, 2009
                  
                  
                  438,057
                  
                  
                  $
                  1.00
 
 The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock options issued to both
employees and non-employees of the Company.
 
 Options Outstanding
                    
                    
                    Options ExercisableWeightedNumber
                    
                    
                    Average
                    
                    
                    
                    
                    
                    WeightedExercise
                    
                    
                    Shares
                    
                    
                    Contractual
                    
                    
                    Number
                    
                    
                    AverageYear
                    
                    Price
                    
                    
                    Outstanding
                    
                    
                    Life (Years)
                    
                    
                    Exercisable
                    
                    
                    Exercise PriceFebruary
      2008
                    
                    $
                    1.00
                    
                    
                    
                    861,145
                    
                    
                    
                    8.42
                    
                    
                    
                    346,848
                    
                    
                    $
                    1.00May
      2008
                    
                    $
                    1.00
                    
                    
                    
                    250,000
                    
                    
                    
                    8.67
                    
                    
                    
                    88,542
                    
                    
                    $
                    1.00January
      2009
                    
                    $
                    1.00
                    
                    
                    
                    5,000
                    
                    
                    
                    10.25
                    
                    
                    
                    938
                    
                    
                    $
                    1.00April
      2009
                    
                    $
                    1.00
                    
                    
                    
                    10,000
                    
                    
                    
                    8.42
                    
                    
                    
                    1,146
                    
                    
                    $
                    1.00August
      2009
                    
                    $
                    1.00
                    
                    
                    
                    14,000
                    
                    
                    
                    9.83
                    
                    
                    
                    583
                    
                    
                    $
                    1.001,140,145
                    
                    
                    
                    
                    
                    
                    
                    438,057
 
 The
aggregate intrinsic value of stock options outstanding and exercisable at
September 30, 2009 and 2008 totaled $-0- and $-0- and $-0- and $-0-,
respectively. The weighted average grant date fair value of options granted
during the period ended September 30, 2009 and 2008 is $0.27 and $ 0.81,
respectively. The fair value of options vested during the period ended September
30, 2009 and 2008 totaled $122,656 and $59,448, respectively.
  20
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
  Note 8 – Common Stock
Purchase Warrants
 
 On May
30, 2008, the Company extended a Conversion offer to nine bridge loan note
holders who had loaned the Company funds during the 3rd Quarter of 2007. In
exchange for their notes, the note holders were offered two shares of stock for
each dollar of debt and accrued interest they were owed through June 30, 2008.
In addition, they were offered one common stock purchase warrant for each dollar
of debt and accrued interest at an exercise price of $2.00 per share and a two
year exercise period. The total number of warrants granted was 184,120 which
vested entirely upon grant. Warrant expense in the amount of $239,548 was
recognized in the statements of operations for the fiscal year ended September
30, 2008.
 
 On
October 3, 2008, the Company commenced a private stock offering, whereby it
authorized the issuance of 1,440,000 units consisting of one share of its common
stock and one common stock purchase warrant for a total raise of $360,000. The
common stock purchase warrants are exercisable at $1.00 per share and carrying a
five year exercise period. The offering was closed as of November 30, 2008. All
1,440,000 units were issued and $360,000 in cash was received.
 The
amount of warrant expense related to this offering for the twelve months ending
September 30, 2009 was $593,484.
 
 On
January 28, 2009, the Company commenced a private stock offering, whereby it
authorized the issuance of 1,750,000 units, each consisting of one share of its
common stock and one common stock purchase warrant for a total raise of
$262,500. The common stock purchase warrants are exercisable at $1.00 per share
and carry a five year exercise period. The offering was closed on March 31, 2009
at which time 1,296,800 unit shares were issued and $194,520 in cash was
received. The amount of warrant expense related to this offering for the twelve
months ending September 30, 2009 was $361,353.
 
 Total
warrant expense charged as financing costs for the twelve months ended September
30, 2009 and 2008 was $954,837 and $-0-, respectively.
  Total
warrant expense charged as settlement of debt costs for the twelve months ended
September 30, 2009 and 2008 was $-0- and $239,549,
respectively.
  The
Company has determined the estimated value of warrants granted during the twelve
months ended September 30, 2009 using the Black-Scholes pricing model with the
following assumptions:  expected life of 5 years; a risk free interest
rate of 1.66%-2.71%; a dividend yield of 0% and volatility of
149.62%-172.61%.
  21
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
  Note 8 – Common Stock
Purchase Warrants (Continued)
 
 Outstanding
common stock purchase warrants as of September 30, 2009 and September 30, 2008
are summarized below:
 
 Number of Warrants
                  
                  
                  Weighted Average
                    Exercise PriceWarrants
      Outstanding, October 1, 2007
                  
                  
                  -
                  
                  
                  $
                  -Warrants
      Granted
                  
                  
                  184,120
                  
                  
                  $
                  2.00Warrants
      Exercised
                  
                  
                  -
                  
                  
                  $
                  -Warrants
      Canceled
                  
                  
                  -
                  
                  
                  $
                  -Warrants
      Outstanding and Exercisable, September 30, 2008
                  
                  
                  184,120
                  
                  
                  $
                  2.00Warrants
      Granted
                  
                  
                  2,736,800
                  
                  
                  $
                  1.00Warrants
      Exercised
                  
                  
                  -
                  
                  
                  $
                  -Warrants
      Canceled
                  
                  
                  -
                  
                  
                  $
                  -Warrants
      Outstanding and Exercisable, September 30, 2009
                  
                  
                  2,920,920
                  
                  
                  $
                  1.06
  The
following table summarizes the changes in warrants outstanding and the related
prices for the shares of the Company’s common stock issued to the note holders
referenced above.
 
 Warrants Outstanding
                    
                    
                    Warrants ExercisableWeightedNumber
                    
                    
                    Average
                    
                    
                    
                    
                    
                    WeightedExercise
                    
                    
                    Shares
                    
                    
                    Contractual
                    
                    
                    Number
                    
                    
                    AverageYear
                    
                    Price
                    
                    
                    Outstanding
                    
                    
                    Life (Years)
                    
                    
                    Exercisable
                    
                    
                    Exercise Price2008
                    
                    $
                    2.00
                    
                    
                    
                    184,120
                    
                    
                    
                    0.75
                    
                    
                    
                    184,120
                    
                    
                    $
                    2.002009
                    
                    $
                    1.00
                    
                    
                    
                    2,736,800
                    
                    
                    
                    4.59
                    
                    
                    
                    2,736,800
                    
                    
                    $
                    1.002,920,920
                    
                    
                    
                    
                    
                    
                    
                    2,920,920
 
 The
aggregate intrinsic value of stock warrants outstanding and exercisable at
September 30, 2009 and 2008 totaled $-0- and $-0- and $-0- and $-0-,
respectively. The weighted average grant date fair value of stock warrants
granted during the period ended September 30, 2009 and 2008 is $0.35 and $1.30,
respectively. The fair value of stock warrants vested during the period
ended September 30, 2009 and 2008 totaled $766,304 and $73,648,
respectively.
  22
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 9 – Line of
Credit
 
 In August
2006, the Company entered into a Line of Credit / Overdraft Protection Agreement
(“LOC Agreement”) with a financial institution to borrow up to $75,000. Interest
accrues at the Wall Street Journal Prime Rate (“WSJ Prime Rate”) less 1% for the
first six months and at the WSJ Prime Rate, thereafter. All amounts due on the
line of credit are due on demand. The balance outstanding at September 30, 2009
and September 30, 2008 was $72,054 and $74,807 respectively. Accrued interest
payable at September 30, 2009 and September 30, 2008 was $322 and $512,
respectively. The LOC Agreement is guaranteed by an officer of the Company and
is secured by all assets of the Company.
 
 Note 10 – Equity
Transactions
 
 On
February 18, 2008, the Company commenced a private stock offering, whereby it
authorized the issuance of 100,000 shares of its common stock for cash of
$50,000. The offering was closed as of March 31, 2008 and 50,000 shares of
common stock were actually issued during the period presented in exchange for
cash of $25,000.
 
 On
February 20, 2008, the Company commenced a private stock offering, whereby it
authorized the issuance of 50,000 shares of its common stock for cash of
$50,000. The offering was closed as of March 31, 2008 and 33,123 shares of
common stock were actually issued during the period presented in exchange for
cash of $33,123.
 
 On
February 28, 2008, our Board of Directors approved the issuance of 139,562
shares at a price of $1.00 per share in settlement of Notes and Accounts
Payable.
 
 On April
11, 2008, the Company commenced a private stock offering, whereby it authorized
the issuance of 820,000 shares of its common stock for cash of $410,000. The
offering was closed as of April 30, 2008. All 820,000 shares were
issued.
 
 On May
30, 2008, the Company extended a Conversion offer to nine bridge loan note
holders who had loaned the Company funds during the 3rd Quarter of 2007. In
exchange for their notes, the note holders were offered two shares of stock for
each dollar of debt and accrued interest they were owed through June 30, 2008.
Debt settlement expense associated with these transactions was $685,421 and was
recorded in the Company’s statement of operations for the twelve months ending
September 30, 2008. Note holders were also offered one common stock warrant for
each dollar of debt and accrued interest at an exercise price of $2.00 per share
and a two year exercise period. The warrant expense associated with this
transaction was $239,549 for the twelve months ending September 30,
2008.
 
 On
October 3, 2008, the Company commenced a private stock offering, whereby it
authorized the issuance of 1,440,000 Units consisting of one share of its common
stock and one common stock purchase warrant for a total raise of $360,000. The
common stock purchase warrants are exercisable at $1.00 per share and carrying a
five year exercise period. The offering was closed as of November 30, 2008. All
1,440,000 units were issued and $360,000 in cash was received.
 
 On
January 28, 2009, the Company commenced a private stock offering, whereby it
authorized the issuance of 1,750,000 Units, each consisting of one share of its
common stock and one common stock purchase warrant for a total raise of
$262,500. The common stock purchase warrants are exercisable at $1.00 per share
and carry a five year exercise period. The offering was closed on March 31, 2009
at which time 1,296,800 unit shares were issued and $194,520 in cash was
received.
  23
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 10 – Equity
Transactions (Continued)
 
 During
the year ended September 30, 2009 the Company issued 450,000 shares of stock to
Nu Vision Holdings, LLC. valued at $180,000 for consulting services rendered to
the Company. The contract expired on April 7, 2009.
 
 During
the year ended September 30, 2009 the Company issued 102,500 shares of stock to
an individual at an aggregate value of $14,350 for services rendered to the
Company in connection with the Garden Guys radio talk show. An issuance of
50,000 shares was issued on July 1, 2009; 50,000 shares were issued on August 1,
2009 and 2,500 shares were issued on September 1, 2009.
 Note 11 – Notes Payable-
Related Parties
 Through
September 30, 2007, a director of the company, loaned the Company a total of
$32,026 at a interest rate of 6%.  During the fiscal year ended
September 30, 2008 the Company issued 30,779 shares of common stock in relief of
$30,779 in debt.  This director advanced $75,000 during fiscal year
2008.  During the fiscal year ended September 30, 2009 the director
advance the Company an additional $27,499 bringing the total principal balance
due as of September 30, 2009 to $103,747. This note is payable monthly by the
Company in the amount of $1,000 with interest  During the fiscal years
ending September 30, 2009 and 2008, no scheduled payments were made. As of
September 30, 2009, accrued interest owed on the Note was $10,331.
 
 Through
September 30, 2008, a director of the company, advanced a total of $12,772 in
the form of  a demand note dated March 15, 2008.  During the
2008 fiscal year end 1,917 shares of common stock were issued in satisfaction of
$1,917 in debt, resulting in a principal balance due as of September 30, 2009
and 2008, of $10,855. This note is payable monthly by the Company in the amount
of $1,020 with interest at the rate of 6% per annum. During the fiscal year
ending September 30, 2009 and 2008, no scheduled payments were
made.  As of September 30, 2009, accrued interest owed on the Note was
$960.
 
 Through
September 30, 2008, a director of the company, advanced $175,000 to the Company.
Interest accrues at 12% per annum. Accrued interest and principal was due at
maturity, December 1, 2008, however, the note holder  agreed to extend
the maturity date for an additional twelve months given the same terms and
conditions as the original note. Early indications are that the maturity date
will be extended for an additional twelve months subject to Board approval in
January 2010. As of September 30, 2009 accrued interest owed on the note was
$47,533.
 
 Through
September 30, 2007, the CEO and Chairman of the Board of Directors of the
Company advanced the Company $20,000.  During the fiscal year ended
September 30, 2008 the Company issued a total of 20,000 shares of common stock
in satisfaction of $20,000 in debt.  At September 30, 2009 this
individual has advanced an aggregate of $206,133. Monthly payments are not
required and interest accrues at 6% per annum. The note matures on January 30,
2010. As of September 30, 2009, accrued interest owed on the Note was
$2,474.
  Notes
payable-related parties consisted of the following at:
 
 September 30,
                        
                        
                        September 30,2009
                        
                        
                        2008Note
      payable with a director of the Company, interest at 6% per annum, payments
      of $1,000 due monthly beginning April 1, 2007, matures March 2010,
      unsecured.
                        
                        $
                        103,747
                        
                        
                        $
                        76,247Note
      payable with a director of the Company, interest at 6% per annum, payments
      of $1,020 due monthly beginning April 15, 2008, matures April, 2009,
      unsecured.
                        
                        $
                        10,855
                        
                        
                        
                        10,855Note
      payable with a director of the Company, interest at 12% per annum. No
      monthly payments are required. All accrued interest and principal is paid
      at maturity, December 1, 2008, unsecured
                        
                        $
                        175,000
                        
                        
                        
                        175,000Note
      payable with a director of the Company, interest at 6% per annum, no
      monthly payments are required. All accrued interest and principal is due
      at maturity, January 30, 2010, unsecured
                        
                        
                        206,134
                        
                        
                        
                        -Total
      Notes Payable - Related Parties
                        
                        $
                        495,735
                        
                        
                        $
                        262,102Less:
      Current Portion
                        
                        
                        (495,735
                        )
                        
                        
                        (262,102
                        )Long-Term
      Notes Payable - Related Parties
                        
                        $
                        -
                        
                        
                        $
                        -
 
 Total
accrued interest at September 30, 2009 and September 30, 2008 was $61,298 and
$26,411.
  24
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 11 – Notes Payable-
Related Parties (Continued)
 
 Annual
maturities of notes payable-related parties are as follows:
 
 Years Ending September 30,2010
                    
                    
                    495,7362011
                    
                    
                    -2012
                    
                    
                    -2013
                    
                    
                    -2014
                    
                    
                    -Thereafter
                    
                    
                    -
 
 Note 12 – Commitments and
Contingencies
 
 Leases
 
 The
Company leases facilities for its corporate offices at $600 per month. The lease
expired in fiscal 2007 and was then converted to a month-to-month basis. In
addition, the company leased warehouse space at $500 per month through January,
2008. Rental expense for fiscal 2009 and 2008 was $9,087 and $6,800,
respectively. The Company also has a 60 month equipment lease on its office
copier machine that costs $240 per month and expires on August 30,
2011 and rents a small storage unit on a month to month basis for $129 per
month.
 
 The
future minimum annual lease commitments as of September 30, 2009 are as
follows:
 
 Years Ending September 30,
                        
                        Amount2010
                        
                        
                        2,8802011
                        
                        
                        2,6402012
                        
                        
                        -2013
                        
                        
                        -2014
                        
                        
                        -Thereafter
                        
                        
                        -$
                        5,520
 
 Agreements
 
 As of
September 30, 2009, the Company had two active radio station syndication
agreements. One station was paid currently and the second was owed $6.950. The
agreements range in length from one month to two years and the Company intends
to renew them at the end of each respective term. As of September 30, 2009, the
monthly cost of our radio shows is $7,500 in a four week month and $8,000 in a
five week month. During
the fiscal year, the Company had six other radio syndication agreements which
were not renewed and as of September 30, 2009 the Company owed $ 127,717 which
was included in accounts payable.
 
 On May 3,
2008, the Company entered into a ten year licensing agreement with Microbial
Technologies Ltd. (“MTL”) for the purposes of obtaining the right to use the
proprietary formulations owned by MTL. The cost of the licensing agreement will
be $100,000 per year, which will be billed quarterly to the Company, and a 5%
royalty on net sales of any MTL product formulations sold. If the Company does
not use MTL formulations, the licensing fee and royalties are not required to be
paid. As of the year ended September 30, 2008 no royalties were paid and none
were due. The total amount owed for the agreement at September 30, 2009, is
$109,905 from the use of the MTL technology, and has been included in accounts
payable.  Royalties for the year ended September 30, 2009 were $6,200
and have been paid.
  25
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 12 – Commitments and
Contingencies (Continued)
 
 The
future minimum annual contractual obligations as of September 30, 2009 are as
follows:
 
 Years Ending September 30,
                        
                        Amount2010
                        
                        
                        79,1112011
                        
                        
                        16,5002012
                        
                        
                        -2013
                        
                        
                        -2014
                        
                        
                        -Thereafter
                        
                        
                        -$
                        95,611
 
 Note 13 – Concentration of
Credit Risk
 
 Major
Customers
 
 The
Company had two customers who represented 10% or more of total sales for the
year ended September 30, 2009.
 September 30, 2009
                  
                  
                  September 30, 2008Customer
      A
                  
                  
                  10.6
                  %
                  
                  
                  —Customer
      B
                  
                  
                  10.0
                  %
                  
                  
                  —
 
 As of
September 30, 2009 none of the Company’s accounts receivable was due from these
two customers. The loss of these customers, although not anticipated, could have
a material impact on the Company’s present and future operations.
 
 Major
Suppliers
 
 The
Company had two vendors who represented 10% or more of the total material
purchases for the year ended September 30, 2009.
 
 September 30, 2009
                  
                  
                  September 30, 2008Vendor
      A
                  
                  
                  54.2
                  %
                  
                  
                  39.6
                  %Vendor
      B
                  
                  
                  30.4
                  %
                  
                  
                  —
 
 Due to
capabilities, pricing and geographic location, these vendors are considered sole
source vendors by the Company. The loss of these sole source vendors could have
a temporary impact on operations; however, alternate suppliers are readily
available that the Company feels could quickly fill the void, should it ever
need to.
  26
  ORGANIC
SALES AND MARKETING, INC.
 Notes
to the Financial Statements
 September
30, 2009 and 2008
 
 Note 14 – Going
Concern
 
 The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company is poorly capitalized and has had
recurring operating losses, negative cash flows from operations and recurring
negative working capital for the past several years and is dependent upon
financing to continue operations.  The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.  It is management's plan to continue to implement their
strategy of acquiring new customers and accepting reorders from existing
customers. As the Company's revenues become more established, management expects
to report net income. With the expansion of sales, management believes that
the Company will eventually generate positive cash flow from operations. In the
interim, management believes that shortfalls in cash flow will be satisfied with
funds raised from bridge loans, convertible debt and additional private stock
offerings that are in compliance with Securities and Exchange Commission rules
and regulations governing the same.
 
 Note 15 – Subsequent
Events
 
 On
December 16, 2009, the Company commenced a private stock offering, whereby it
authorized the issuance of 3,333,334 shares of its common stock for a total
raise of $500,000.  The offering is expected to be completed by March
31, 2010 and the company expects that all shares will be sold. There can be no
assurance, however, that this will happen. As of January 10, 2010 $36,000 of the
$500,000 has been raised and 240,000 shares have been issued.
  Subsequent
to September 30, 2009, and through January 13, 2010, the Company’s CEO and
Chairman of the Board has advanced the Company an aggregate amount of $145,000
as operating capital.
 Organic
Sales and Marketing, Inc. has evaluated subsequent events for the period
September 30, 2009 through January 13, 2010, the date its financial statements
were issued, and concluded there were no other events or transactions occurring
during this period that required recognition of disclosure in its financial
statements.
 27