Bill The Butcher, Inc. - FORM 10-K

Attached files

Attached files

Bill The Butcher, Inc. Reports

Also read

file	filename
EXCEL - IDEA: XBRL DOCUMENT - Bill The Butcher, Inc.	Financial_Report.xls
EX-31.1 - EX-31.1 - Bill The Butcher, Inc.	ex31-1.htm
EX-32.1 - EX-32.1 - Bill The Butcher, Inc.	ex32-1.htm
EX-21.1 - EX-21.1 - Bill The Butcher, Inc.	ex21-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

x	Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended August 31, 2013

o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ______________ to _____________

Commission File Number: 000-52439

BILL THE BUTCHER, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-5449905
(State of or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
24 Roy Street # 16 Seattle, Washington 98109
(Address of principal executive offices)
(206) 453-4418
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.001

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer ¨	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x

At February 28, 2013, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $1,192,000, based on the last sale price of the registrant’s common stock. For the purposes of the foregoing calculation only, all of the registrant’s directors, executive officers and holders of ten percent or greater of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not a determination for other purposes.

As of January 2, 2014, there were 55,330,404 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Table of Contents

		Page

Cautionary Statement Regarding Forward-Looking Statements		1

PART I
Item 1.	Business	2
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	10
Item 2.	Properties	10
Item 3.	Legal Proceedings	10
Item 4.	Mine Safety Disclosure	10

PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	11
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 8.	Financial Statements and Supplementary Data	16
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30
Item 9B.	Other	31

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	32
Item 11.	Executive Compensation	33
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	33
Item 13.	Certain Relationships and Transactions and Director Independence	34
Item 14.	Principal Accounting Fees and Services	35

PART IV
Item 15.	Exhibits, Financial Statement Schedules	36

SIGNATURES

EXHIBIT INDEX

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

In this report, the terms “Bill the Butcher,” the “Company,” “we,” “us” and “our” refer to Bill the Butcher, Inc. and its subsidiary. This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements reflect our current views with respect to future events or our financial performance, and involve certain known and unknown risks, uncertainties and other factors, including those identified below, which may cause our actual or future results, levels of activity, performance or achievements to differ materially from those expressed or implied by any forward-looking statements or from historical results. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements include information concerning our possible or assumed future results of operations. Words such as “may,” “will,” “could,” “would,” “should,” “believe,” “expect,” “plan,” “anticipate,” “intend,” “estimate,” “predict,” “potential” or and variations of these words or similar expressions are intended to identify forward-looking statements.

Forward-looking statements are inherently subject to risks and uncertainties, many of which we cannot predict with accuracy and some of which we might not even anticipate. Although we believe that the expectations reflected in such forward-looking statements are based upon reasonable assumptions made at the time, we can give no assurance that such expectations will be achieved. Future events and actual results, financial and otherwise, may differ materially from the results discussed in these forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements. We have no duty to update or revise any forward-looking statements after the date of this Annual Report on Form 10-K or to conform them to actual results, new information, future events or otherwise.

The following factors, among others, could cause our future results to differ materially from historical results or those anticipated:

These and other risk factors discussed in Part I, Item 1A (“Risk Factors”) of this Form 10-K are among the important factors of which we are currently aware that could cause actual results, performance or achievements to differ materially from those expressed in our forward-looking statements. We operate in a continually changing business environment, and new risk factors emerge from time to time. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We cannot assure you that projected results or events will be achieved or will occur, respectively.

Table of Contents

PART I

ITEM 1. BUSINESS

Recent Events -

Business Overview - Seattle-based Bill the Butcher, Inc. is a retailer of sustainably raised U.S. sourced and USDA inspected organic and natural grass-fed beef, pork, chicken and lamb. Bill the Butcher is an innovator in the $200 billion U.S. meat marketplace, operating the nation’s first publicly-owned chain of sustainable neighborhood butcher shops, and currently operates six stores located in Woodinville, Redmond, Edmonds, and the Laurelhurst, Magnolia and Wallingford neighborhoods in greater Seattle, Washington. The Company has been named in the top 25 best butcher shops in America and has been nominated as the runner-up for the best butcher in Washington State and won a Chamber of Commerce award for the best new business in 2013.

The Company also recently formed a wholly owned subsidiary, called the American Sustainability Project (www.American SustainabilityProject.com) to support a new cause based wholesale business and to acquire the Great Northern Cattle Company (www.GreatNorthernCattleCompany.com) in order to vertically integrate the Company. Both the formation of the American Sustainability Project and the acquisition of the Great Northern Cattle Company are expected to significantly increase revenues in 2014.

The Company also launched a comprehensive new web site, preparing for online sales. (www.BilltheButcher.com)

The Company incorporated under the laws of the State of Nevada on August 23, 2006. In October 2009, J’Amy Owens acquired a majority of the outstanding shares of common stock and became the Company’s majority shareholder, sole director and chief executive officer. Ms. Owens acquired the public company in order to conduct a reverse merger through the acquisition of W K Inc., a business she co-founded in 2009, which was the original prototype of the “Bill the Butcher” retail concept. On March 26, 2010, the Company executed a related party purchase agreement to acquire all of the equity ownership interest of W K Inc., a Washington Company selling sustainable meat under the name “Bill the Butcher.” The stock trades under the symbol “BILB” and the web site is: www.BilltheButcher.com.

Bill the Butcher is an innovator in the $200 billion U.S. meat marketplace, operating the nation’s first publicly-owned chain of neighborhood butcher shops, and currently operate six stores located in Woodinville, Redmond, Edmonds, and the Laurelhurst, Magnolia and Wallingford neighborhoods in greater Seattle, Washington.

The Company sources products from local and regional ranchers and farmers who follow sustainable and organic practices to deliver what is the highest quality meat that is healthy for consumers and has a positive impact on the environment. The Company’s stores provide a unique customer experience by offering “new-school” butcher services in a culturally cool store comprised of recycled materials. Stores stock over 800 items of sustainably -raised meat and other specialty gourmet grocery items like salts, spices, sauces and condiments.

Bill the Butcher has generated local brand awareness and buzz, with 200,000 unique customers and over 560,000 hits to our web site. Social media plays a big role with over 8,000 followers between both Facebook and Twitter and a weekly social media reach of over 20,000.Through the use of local marketing initiatives, total marketing spending has remained low relative to traditional retail start-ups. The Company has a state-of-the-art inventory tracking and sales system, which meets public company compliance standards.

Bill the Butcher is led by an experienced retail executive who has successfully developed retail business models from inception to maturity. J’Amy Owens, our sole officer and director and principal shareholder, was vital in the inspiration, development, design and launch of the Bill the Butcher brand and business. Prior to launching Bill the Butcher, Ms. Owens served as a corporate consultant through her firm, The J’Amy Owens Group, and her predecessor consulting firm were responsible for the evolution of over 400 noteworthy consumer businesses and retail models.

Ethical Responsibility - Bill the Butcher’s mission is to:

Save the world, one steak at a time, through the support of sustainable ranching and farming

to provide the world’s healthiest and most delicious meat.

Table of Contents

Industry Background – Over the last 50 years cattle production has shifted from small-scale local operations to corporate “agri-business” complexes with large-scale, input intensive, mechanized, petroleum-based cattle feedlots that have led to widespread environmental degradation, dangerous increases in pesticide use and the loss of ecosystems. More than 80% of beef is raised in a feed lot or confinement facility in highly stressful and abusive environments. This “factory farming” is also associated with extremely high uses of hormones, antibiotics and pesticides. Animals in this environment eat a diet intended to quickly fatten them with low cost production as the paramount factor. To this end, their feed may contain things such as animal byproducts such as tallow, genetically modified corn, and restaurant waste. Correction of these deficiencies produces dramatic improvements in animal health, and as a result, human health, along with direct positive benefits to the environment and its long-term preservation.

There is a growing awareness and resistance among consumers to such practices. Films such as Food Inc. and Fast Food Nation and books such as The Omnivore’s Dilemma have greatly helped raise this awareness. More and more consumers are recognizing the damage being done by the big meat industry to the environment and to their own health. In response, consumers have started to demand a return to the era of sustainable farming that promotes healthy nutrition and the humane treatment of animals. Bill the Butcher’s humane and healthy approach has already struck a chord with consumers that wish to reduce their dietary consumption of mass-produced and compromised foods.

According to the Organic Trade Association (OTA), the $450 million U.S. organic and natural meat industry is growing at more than 10% per annum, and should reach $1 billion by 2015. This trend is due to heightened awareness of the threat of antibiotics to human health and the industry’s nutritional benefits and humane breeding practices. All meat sold at Bill the Butcher is hormone and antibiotic free. The grass finished meat is lower in fat and calories and higher in taste, antioxidants, vitamins, and essential fatty acids and blind taste testing shows consumers prefer the flavor and understand why.

The health benefits of organic and natural meat are significant. A study conducted by Clemson University, for example, found that grass-fed and finished beef is lower in total fat, higher in beta-carotene and vitamin E (alpha-tocopherol), higher in the B-vitamins thiamin and riboflavin, higher in calcium, magnesium, and potassium, higher in total omega-3s and lower in the saturated fats linked with heart disease.

$46 million LOHAS consumers are aware of the SLOW FOOD movement and the “locavore” movement, which is the support of food that is raised or grown locally, that encourages eating food from nearby farms. These consumers are willing to pay a premium for meat raised in a socially responsible manner. Consumers are increasingly looking at the point of origin when buying meats, preferring to consume livestock that has been locally-raised and thus has a low carbon footprint. With farms and ranches located within regional proximity to its retail shops, Bill the Butcher is creating one of the shortest food chains. By working directly with local suppliers and generating a highly visible presence at local events, Bill the Butcher is a template for sustainable food retailing.

Our Stores, Products and Customer Experience - Bill the Butcher sells locally and regionally sourced, sustainably -raised natural meat, free range poultry, pork and lamb through a collection of regionally clustered butcher shops that provide carved-to-order meats. The Company also sells specialty items such as marinades, rubs, sauces, charcuterie, dairy products, and a wide variety of salts, spices and condiments.

Store hours are noon to 7:00 PM daily. The individual butcher shops carve sub primals, dry age, make sausage and grinds and prepare many value added products such as charcuterie, lunch meats, smoked meats, sausage, meat loaf and marinades. Each Bill the Butcher location features the Company’s signature products including gourmet-to-go dishes, spices, rubs and marinades in this experiential and utterly sustainable butcher shop. The butcher is glorified and featured on an elevated stage, directly behind the meat case, so that large primal cuts of meat are in full view, at the customer’s eye level, enabling customers to direct the butcher to a custom cut that suits their exact preferences. Our stores have hosted 200,000 unique transactions since inception.

To help customers better understand where their food comes from, the Company’s state-of-the-art technology system allows it to track and identify all meat sourced from the farms and ranches to the Company’s butcher shops. This system is more specific and more transparent than those used by the largest premium grocery chains. Customers can also learn about our farm and ranch partners from printed information available in every shop.

Bill the Butcher shops have a warm and inviting feel, as stores are designed with barn wood fixtures, found objects and recycled materials. By offering the finest meat in an authentic grass-roots environment made up almost entirely of recycled, reused and reclaimed materials, Bill the Butcher has modernized, reinvented and re-introduced the butcher shop. It is the butcher - helpful, opinionated, knowledgeable and passionate about food and its flavor in every store who serves as a brand evangelist, building and telling the Bill the Butcher story and creating a hands-on experience that has been lost in the mass-market. The business is a neighborhood concept, just like the coffee bar, which the Company believes will work in a multitude of regions across the country based on zones where median household incomes are at or above $65,000.

Product Supply - Bill the Butcher works with USDA certified processors, which is an inspection qualification for the resale of meat.

Table of Contents

The Company has made great strides in its support of small farmers and ranchers and has purchased millions of dollars of product from small producers. We believe that Bill the Butcher has formed a new marketplace, not just organized suppliers. This new market exists in between the farmers markets and the grocery stores.

Bill the Butcher is committed to selling only the finest USDA organic and USDA/WSDA natural grass-fed beef, pork, chicken and lamb. Our product has not been raised with steroids, antibiotics or hormones and has not been fed genetically-modified corn. To ensure compliance with our rigorous “gate to plate” standards, we use a three-tier classification structure:

·	Bill the Butcher Natural: No herbicides, pesticides, antibiotics or growth hormones. No tallow or animal by-products. Humanely raised and harvested. Pastured raised and finished without gmo’s.

·	Organic: No herbicides, pesticides, antibiotics or growth hormones. No tallow or animal by-products. Humanely raised and harvested. Pastured and finished with on grass or grain without gmo’s.

·	Natural: No herbicides, pesticides, antibiotics, animal by-products, or growth hormones . Humanely raised and harvested.

We depend on our relationships with farmers. We sell natural and organic meats from sustainably raised animals from Washington, Wyoming, Montana and Oregon. All of our meat comes from farmers and ranchers that follow strict practices that meet our exact specifications. Based on our relationships established with our suppliers, we know that the risk of non-delivery on existing and future purchase orders is remote. The supply and price of sustainable meats are subject to volatility depending on supply and demand at the time of purchase.

Business Strategy – Studies have shown that upper income Americans purchase roughly two-thirds of all of their meat to be consumed at home. A highly-prized cut of meat can cost upwards of $40 at a traditional steakhouse, but less than half of that price when purchased at a retail outlet and prepared at home.

The Company believes that there is a general dissatisfaction with supermarket meat offered today and that most consumers do not understand the dangers of antibiotic resistance from the general meat supply. Bill the Butcher aims to capitalize on this consumer dissatisfaction and the growing awareness of the wide spread health threat by extolling the myriad flavor and health benefits of sustainable raised , grass-fed, organic, artisanal meats.

Just as consumers have developed a much more comprehensive language around the consumption of coffee and wine, they are also starting to refer to meat consumption in new ways. Beyond the buzzwords of organic and natural, consumers are increasingly aware of the types of animal breeds, diet, preferred cuts and marbling and texture preferences.

Our business and growth strategy is described in two stages. We are currently well into stage one, which includes opening 14 stores in Seattle and 10 stores in Portland. The plan is to bring stores to optimal sales and profit levels and therefore improve the scalable model. We believe the successful execution of this stage will generate positive cash flows from operations. We now have six stores open and have one additional location in Kirkland under construction. A significant portion of proceeds from our future financing activities are expected to be used to:

·	Provide additional working capital to increase inventories.

Close the Great Northern Cattle Acquisition.

·	Open 8 more Bill the Butcher shops in neighborhoods around Seattle: one per quarter.

Begin area development in Portland with 1 store in 2014.

·	Advertise and market the Bill the Butcher brand.

·	Improve gross margins through vertical integration, purchasing in greater quantities and increasing inventory turns.

·	Launch fully functional internet commerce site.

·	The second stage of our growth plan will require substantial additional financing for a regional rollout. We anticipate a regional store expansion with 120 to 150 company-owned Bill the Butcher stores, with an initial focus during this stage in California and Texas.

Growth Strategy – The first Bill the Butcher shop was opened in Woodinville, Washington in August 2009. The Company opened five more Seattle area stores in Laurelhurst, Madison Valley, Redmond, Magnolia and Bellevue, Washington in 2010. Then the Company opened Edmonds and Wallingford in 2013. Our butcher shops typically average 1,300 square feet, and have each been opened at an average cost of $120,000. During the 2012, we closed our Bellevue location due to lack of an occupancy permit because the landlord refused to upgrade the power supply even though the Company offered to pay the expense. We also closed the Madison Valley store because the lease was expiring and the lack of parking proved bad for sales.

Our model focuses on the development of a regional store base, as is now happening in the Seattle, Washington area. We believe this model is reproducible in other markets with a similar demographic profile including: Portland, San Francisco, Los Angeles, Dallas, Austin, Denver, Chicago and Minneapolis.

Table of Contents

Bill the Butcher’s store-based revenues are expected to be augmented by a rising e-commerce presence in the future. The Company has already built a considerable online presence, with over 8,000 Facebook fans and friends and Twitter followers and over 560,000 views of our website, www.billthebutcher.com.

Competition - Our primary competitors for meat product sales and related specialty items are supermarkets and other specialty retailers. We believe our customers choose among sustainable meat and specialty product retailers primarily on the basis of product quality. The consumer market for meats is often impacted by changes in the taste and eating habits of the public, as well as economic and political conditions affecting spending habits. Our business faces significant competition from established suppliers, most of whom have greater financial and marketing resources than us. However, we believe our growth strategy, detailed above, will result in our business becoming increasingly competitive with these established retailers.

Patents, Trademarks, Copyrights and Domain Names - We have registered and maintained internet domains including “BilltheButcher.com” and own the trademark on the name, “Bill the Butcher” and tagline: The Only Meat to Eat.

Seasonality and Quarterly Results - Our business is subject to seasonal fluctuations, including fluctuations resulting from holiday seasons. For these reasons, results for any quarter or interim period to date periods are not necessarily indicative of the results that may be achieved for full fiscal years.

Employees - We employed 30 employees as of August 31, 2013, with 22 in Company-operated retail stores. We believe our relationship with our employees is good. None of our employees are covered by collective bargaining agreements.

Governmental and Environmental Regulation - Our operations are subject to extensive federal, state and local laws and regulations by authorities that oversee food safety standards and processing, packaging, storage, distribution, advertising, labeling and export of our products. Our facilities for processing meats are subject to a variety of federal, state and local laws relating to the protection of the environment, including provisions relating to the discharge of materials into the environment, and to the health and safety of our employees. In addition, our products are subject to inspection prior to distribution, primarily by the USDA, WSDA and the U.S. Food and Drug Administration. The Federal Meat Inspection Act requires that meat sold through retail channels be slaughtered or harvested at plants inspected by the USDA Food Safety and Inspection Service. Claims or enforcement proceedings could be brought against us in the future. In addition, as a distributor of natural and organic meats, we are subject to increasing governmental scrutiny of and public awareness regarding food safety and the sale, packaging and marketing of natural and organic products. Compliance with these laws may impose a significant burden on our operations. We are also routinely subject to new or modified laws, regulations and accounting standards. We believe that we are currently in compliance with all material laws and regulations governing our business.

Available Information - We are a fully reporting company and file annual, quarterly and current reports and other information with the Securities and Exchange Commission. You may read and copy these reports and other information at the Bill the Butcher web site www.BilltheButcher.com or at the SEC’s Public Reference Room at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or e-mail the SEC at publicinfo@sec.gov for more information on the operation of the public reference room. Our SEC filings are also available at the SEC’s website at http://www.sec.gov.

ITEM 1A. RISK FACTORS

Risks Related to our Business and Operations

We have a limited operating history and face significant challenges in executing our business plan. We have a limited operating history and face all of the challenges inherent in operating a new business, including limited capital and management resources.

We need to raise additional capital to fund our business and continue as a going concern. Our ability to continue as a going concern is contingent upon our ability to raise additional capital to fund our working capital requirements and execute our operating plan. Financing alternatives available to us could be highly dilutive to our existing shareholders and may involve significant interest and other costs. There can be no assurance that any equity or debt financing arrangement will be available to us when needed on acceptable terms, if at all. In addition, there can be no assurance that any financing alternative would provide us with sufficient funds to meet our capital requirements. If we are unable to secure additional financing to fund our needs, we could be required to significantly alter our operating plan and curtail our operations.

We have a history of losses and expect to incur losses in the immediate future. We incurred net losses of approximately $3.5 million and $4.0 million during the years ended August 31, 2013 and 2012, respectively, and likely will incur losses in future periods. We expect to use significant amounts of our cash resources to fund our net losses, working capital and store expansion needs.

Table of Contents

We are in arrears in payment of employment and other taxes in amounts that are significant. A portion of proceeds from future fund raising will be used to make negotiated scheduled payments, which will reduce funds otherwise available for working capital and expansion.

If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately. Any inability to report and file our financial results accurately and timely could harm our business and adversely affect the trading price of our common stock. We are required to establish and maintain internal controls over financial reporting and disclosure controls and procedures and to comply with other requirements of the Sarbanes-Oxley Act and the rules promulgated by the SEC. Our management cannot guarantee that our internal controls and disclosure controls and procedures will prevent all possible errors. Because of the inherent limitation in all control system, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the possibility that judgments in decision-making can be faulty and subject to simple error or mistake. Furthermore, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Management has determined that, as of August 31, 2013 and 2012, there were deficiencies in both the design and the effectiveness of our internal controls over financial reporting, including:

·	Inadequate entity-level controls,

·	Deficiencies pertaining to inadequate segregation of duties consistent with control objectives,

·	Insufficiently skilled Company personnel and a lack of resources within finance and accounting reporting functions,

·	Insufficient oversight of financial significant processes and systems,

·	Deficiencies relating to insufficient analysis, documentation and review of the selection and application of generally accepted accounting principles to significant non-routine transactions, and

·	Inability to demonstrate through testing that internal control over financial reporting was effective.

When financial resources become available, we intend to take certain actions intended to remediate the material weaknesses in our internal control over financial reporting, and we anticipate that these actions will improve our internal control over financial reporting in future periods. However, because this remediation process is still in its initial stages, we can give no assurance as to when it will be completed.

We may not be successful in implementing our growth plan, which would have a material adverse impact on our business and financial results. Our business plan contemplates that we will open new Bill the Butcher stores, sustain and improve comparable store sales and margins, and expand into new geographic locations. Our ability to successfully implement any or all of these initiatives is uncertain. Our growth plans will present operational and competitive challenges, and may strain our management, operational and financial resources. Our inability to successfully achieve or manage our growth, or to successfully implement our business strategy, could have a material adverse effect on our business, results of operations, and financial condition. Even if we successfully implement our growth strategy, we may discover that our growth strategy does not deliver the results that we currently anticipate.

We are dependent on the financial performance of stores located in one geographic area. Our financial performance is dependent on stores located in the Seattle, Washington area. In recent years Washington has been adversely impacted, as has most of the United States, due to the declining economic climate. If the Seattle area continues to experience significant economic pressures, our sales and operating results could be negatively impacted.

Our management team has limited support. J’Amy Owens, our sole officer and director and principal shareholder, performs multiple management functions for us and many key responsibilities of our business have been assigned to a relatively few employees. In addition, our management team has limited experience operating a multi-store retail business. The management team needs additional support in operations, finance, and administration, among other areas, in order for us to be successful. If we are unable to recruit, retain, and motivate skilled managers and other employees to work together effectively to implement our strategies, manage our operations, and accomplish our business objectives, our ability to grow our business and successfully meet operational challenges could be significantly impaired.

We are dependent on our sole officer and director and we may not be able to meet our strategic objectives if she is unavailable to us. J'Amy Owens, our sole officer and director and principal shareholder, is involved in a number of community and business endeavors unrelated to our business. If Ms. Owens focuses her time and attention on these other endeavors without also dedicating the necessary time and efforts to our business, or if Ms. Owens is unavailable to us due to death, disability or any other reason, it could have a significant impact on our efforts to achieve our business goals.

Table of Contents

If we are not able to differentiate ourselves and compete effectively against meat purveyors with greater resources and established customer bases, our prospects for future success will be jeopardized. Our competitors include but are not limited to local, regional, and national supermarkets, natural food stores, warehouse membership clubs, small specialty stores, and to some degree, traditional butchers. These businesses compete with us for products, customers, and in some instances store locations. Some of our largest competitors are expanding aggressively in marketing a range of natural and organic foods, including meat. We expect competition to intensify in the future as the market for ethically and organically raised meat products develops and matures.

Most of these potential competitors have longer operating histories, larger customer bases, better brand recognition, and significantly greater financial, marketing, technical, and other resources than us. Some of our competitors may be able to devote significant resources to marketing and promotional campaigns, adopt more aggressive pricing policies, and devote substantially more resources to business development than us. As we open new stores or enter new geographic locations, competition may intensify, which may result in reduced operating margins, an inability to establish a local market, and diminished value in our brand.

Expansion into new geographic markets presents increased risks. Our business plan contemplates expansion into new geographic areas in the United States. Our future results depend on various factors, including successful selection and expansion into these new geographic markets and market acceptance of our products and retail experience. Those markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing market. As a result, stores in new geographic locations may be less successful than stores in our existing market. Consumers in a new market likely will not be familiar with the Bill the Butcher brand, and we will need to build brand awareness in that market through greater investments in advertising and promotional activity than we originally planned. Stores opened in new markets may also have lower average store revenue than stores opened in existing markets, and may have higher construction, occupancy or operating costs than stores in existing markets. Furthermore, we may have difficulty in finding reliable suppliers or distributors or ones that can provide us, either initially or over time, with adequate supplies of meat and other products that satisfy our quality standards.

Revenue at stores opened in new markets may take longer to ramp up and reach expected revenue levels, and may never do so. As with the experience of other retail concepts that have tried to expand nationally, we may find that the Bill the Butcher concept has limited or no appeal to customers in new markets or we may experience a decline in the popularity of the Bill the Butcher experience. Newly opened stores may not succeed, future markets and stores may not be successful and, even if we are successful, our average store revenue may not increase and may even decline.

Moreover, if our competitors were to significantly increase their locally-sourced and sustainably-raised product offerings or if new laws were to require alternative certification of certain products, the supply of these products to us could be constrained. Any significant disruption in the supply of locally-sourced and sustainably -raised meat, poultry and could have a material impact on our overall sales and cost of goods sold.

Perishable foods product losses could materially affect our results. Because nearly all of the products we sell are perishable, we may incur significant product inventory losses in the event of extended power outages, natural disasters or other catastrophic occurrences.

Increases in the price of raw materials used to produce our products could materially increase our costs and adversely affect our operating results. Prices for sustainable food are dependent on the market price for the raw materials used to produce them. These raw materials are subject to price volatility caused by weather, supply conditions, power outages, government regulations, economic climate, and other unpredictable factors. Any raw material price increase would increase our cost of sales and decrease our profitability unless we were able to pass along higher prices to our customers. In addition, if one or more of our competitors is able to reduce its production costs by taking advantage of any reductions in raw material prices or favorable sourcing agreements, we may face pricing pressures and may be forced to reduce our prices or incur a decline in net sales, either of which could have a material and adverse effect on our business, results of operations and financial condition.

Our inability or failure to protect our intellectual property would have a negative impact on our brand and operating results. Our trademarks, service marks, copyrights, trade dress rights, trade secrets, domain names and other intellectual property are valuable assets that are critical to our success. The unauthorized reproduction or other misappropriation of our intellectual property could diminish the value of our brand and cause a decline in our sales. Protection of our intellectual property and maintenance of distinct branding are particularly important as they distinguish our products from those of our competitors who may sell similar products. We may not be able to adequately protect our intellectual property. In addition, the costs of defending our intellectual property may adversely affect our operating results.

Table of Contents

Litigation and publicity concerning food quality, health and other issues can result in liabilities, increased expenses, and distraction of management and can also cause customers to avoid our products, which could adversely affect our results of operations, business and financial condition. Food service businesses can be adversely affected by litigation and complaints from customers or government authorities resulting from food quality, allergens, illness, injury or other health concerns or operating issues stemming from one retail location or a limited number of retail locations. Adverse publicity about these allegations may negatively affect us, regardless of whether the allegations are true, by discouraging customers from buying our products.

We could be subject to complaints or lawsuits alleging that we are responsible for some illness or injury a customer suffered at or after a visit to our stores, or that we have problems with food quality or operations. Regardless of whether any claims against us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from our operations and hurt our performance. A judgment significantly in excess of our insurance coverage, or for which we are not covered by insurance, could materially and adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations may also materially and adversely affect our reputation or prospects, which in turn could adversely affect our results.

Governmental regulations could impose material costs. Our operations are subject to extensive federal, state and local laws and regulations by authorities that oversee food safety standards and processing, packaging, storage, distribution, advertising, labeling and export of our products. Our facilities for processing meats are subject to a variety of federal, state and local laws relating to the protection of the environment, including provisions relating to the discharge of materials into the environment, and to the health and safety of our employees. In addition, our products are subject to inspection prior to distribution, primarily by the USDA, WSDA and the U.S. Food and Drug Administration. The Federal Meat Inspection Act requires that meat sold through retail channels be slaughtered or harvested at plants inspected by the USDA Food Safety and Inspection Service. Claims or enforcement proceedings could be brought against us in the future. Loss of or failure to obtain necessary USDA/WSDA permits and registrations could delay or prevent us from meeting our current product demand or introducing new products, and could adversely affect our operating results. In addition, as a distributor of natural and organic meats, we are subject to increasing governmental scrutiny of and public awareness regarding food safety and the sale, packaging and marketing of natural and organic products, such as the WSDA Organic Foods Program. Compliance with these laws may impose a significant burden on our operations. We are also routinely subject to new or modified laws, regulations and accounting standards. If we are found to be out of compliance with applicable laws and regulations in these other areas, we could be subject to civil remedies, including fines, injunctions, recalls or asset seizures, as well as potential criminal sanctions, any of which could have an adverse effect on our financial results.

If our products become contaminated, we may be subject to product liability claims and product recalls. Our products may be subject to contamination by disease-producing organisms or pathogens, such as Salmonella and generic E. coli. These organisms and pathogens are found generally in the environment; therefore, there is a risk that one or more, as a result of food processing, could be present in our products. These pathogens can also be introduced as a result of improper handling by our customers or third parties after we have sold the products. We seek to control these risks through careful processing of our products, but we cannot entirely eliminate them. We have no control over handling of our products once they are sold. Nevertheless, contamination that results from improper handling by customers or third parties may be blamed on us. Any publicity regarding contamination or resulting illness or death could adversely affect us even if we did not cause the contamination and could have a material adverse effect on our business, reputation and future prospects. We could be required to recall our products if they are contaminated or damaged and product liability claims could be asserted against us.

Outbreaks of livestock disease can adversely impact our ability to conduct our operations and demand for our products. Demand for our products can be adversely impacted by outbreaks of livestock disease, which can have a significant impact on our financial results. Efforts are taken to control disease risks by adherence to good production practices and extensive precautionary measures designated to ensure the health of the livestock we purchase from our suppliers. However, outbreaks of disease and other events, which may be beyond our control, could significantly affect demand for our products, consumer perceptions of certain products, the availability of livestock for purchase by us and our ability to conduct our operations. Furthermore, any outbreak of disease could result in governmental restrictions on the purchase and sale of our products to or from our suppliers, facilities or customers. This could also result in negative publicity that may have an adverse effect on our ability to market our products successfully and on our financial results.

Risks Related to our Capital Stock

There is a very limited trading market for our stock. Although our Common Stock is quoted on the Over-The-Counter Bulletin Board (the “OTCBB”), there is a very limited public market for our Common Stock. There has been limited trading activity in our stock, and when it has traded, the price has fluctuated widely. We consider our Common Stock to be “thinly traded” and any last reported sale prices may not be a true market-based valuation of the Common Stock. Shareholders may experience difficulty selling their shares if they choose to do so because of the illiquid market and limited public float for our Common Stock. We cannot offer any assurance that an active trading market for our Common Stock will develop or how liquid that market may become.

Table of Contents

Our stock price is volatile. The closing price per share of our Common Stock on the OTCBB fluctuated from a high of $0.11 per share to a low of $0.02 per share during the fiscal year ended August 31, 2013. Subsequent to August 31 through January 8, 2014, the closing price per shares fluctuated from a low of $0.02 to a high of $0.13. The market price of our Common Stock could be subject to significant fluctuation in response to various market factors and events. These market factors and events include variations in our sales and earnings results and failure to meet market expectations; publicity regarding us, our competitors, or the organic products industry generally; new statutes or regulations or changes in the interpretation of existing statutes or regulations affecting the organic products industry specifically; and sales of substantial amounts of Common Stock in the public market or the perception that such sales could occur and other factors.

Because we do not intend to pay any cash dividends on our Common Stock, our shareholders will not be able to receive a return on their shares unless they sell them. We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell them. There is no assurance that shareholders will be able to sell shares when desired.

Future issuances of common and preferred stock will be dilutive and could depress our stock value. The future issuance of capital stock may result in substantial dilution in the percentage of our Common Stock held by our then existing shareholders. We may value any Common Stock issued in the future on an arbitrary basis. The issuance of Common Stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our Common Stock.

Penny stock regulations may adversely affect our share price and ability to resell our securities in the market. Penny Stock Regulations and broker-dealer practices in connection with transactions in “Penny Stocks” are regulated by certain penny stock rules adopted by the SEC. Penny stocks generally are equity securities with a price of less than $5.00 per share. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to the penny stock rules. Our stock is a penny stock and has had a trading price of less than $5.00 per share and is not listed on any stock exchange (although it is traded on the OTCBB). Therefore, investors may find it more difficult to purchase and/or sell their securities based on these limitations and regulations.

We may issue shares of preferred stock in the future that may adversely impact your rights as holders of our Common Stock. Our articles of incorporation authorize us to issue up to 5,000,000 shares of preferred stock, including two million shares of preferred stock that would be entitled to ten votes per share, and two million shares of preferred stock that would be entitled to two votes per share. Our board of directors will have the authority to fix and determine the relative economic rights and preferences of preferred shares, as well as the authority to issue such shares, without further shareholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our Common Stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the Common Stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of Common Stock could be impaired thereby, including, without limitation, dilution of your ownership interest in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest as holders of Common Stock.

Our principal shareholder has significant influence over matters subject to shareholder vote and may support corporate actions that conflict with other shareholders’ interests. As of August 31, 2013, Ms. J’Amy Owens, our sole full-time officer and sole director and principal shareholder, owns approximately 17% of our outstanding Common Stock, with the proxy to vote an additional 11%, and owns 2 million shares of preferred stock entitled to ten votes per share. Ms. Owens’s shareholdings give her the ability to control the election of our directors and other matters brought before the shareholders for a vote. The voting power held by Ms. Owens could prevent or significantly delay another company from acquiring or merging with us, even if the acquisition or merger was in the best interests of our shareholders.

There is a risk of market fraud on the OTCBB. OTCBB securities are frequent targets of fraud or market manipulation. Not only because of their generally low price, but also because the OTCBB reporting requirements for these securities are less stringent than for listed or NASDAQ traded securities, and no exchange requirements are imposed. Dealers may dominate the market and set prices that are not based on competitive forces. Individuals or groups may create fraudulent markets and control the sudden, sharp increase of price and trading volume and the equally sudden collapse of the market price for shares of our Common Stock.

Table of Contents

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We believe that our facilities are sufficient to support our current operating needs. As of August 31, 2013, we operated six butcher shops, all in the greater Seattle, Washington area. The size of our shops varies from just under 800 square feet to just under 1,800 square feet, with an average size of approximately 1,300 square feet. All of our shops are leased from third parties. All of our leases provide for rent at fixed base amounts, some of which escalate during the lease term. Lease terms vary from one to five years. We have options to renew most of our leases with renewal periods ranging from 3 to 7 years. We are in negotiations with landlords currently to renew leases or purchase locations. Currently, we do not own any real property. We believe that our facilities are sufficient to support our current operating needs.

ITEM 3. LEGAL PROCEEDINGS

We may occasionally become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters that may arise from time to time could have an adverse effect on our business, financial condition or operating results. We are currently not involved in any litigation nor are we aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURE

Not applicable.

Table of Contents

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded under the symbol “BILB” on the OTC Bulletin Board. The following table represents the range of the high and the low bid prices, as quoted on the OTC Bulletin Board, by fiscal quarter. The following represent prices between dealers, and may not include retail mark-ups, markdowns or commissions, and may not necessarily represent actual transactions.

three months ended	low		high
August 31, 2013	$	0.02	$	0.04
May 31, 2013		0.02		0.07
February 28, 2013		0.04		0.09
November 30, 2012		0.02		0.11
August 31, 2012		0.06		0.19
May 31, 2012		0.06		0.25
February 29, 2012		0.13		0.50
November 30, 2011		0.20		0.43

As of August 31, 2013, we had 92 stockholders of record.

Dividends - We have never declared or paid cash dividends to our stockholders. We currently intend to retain all available funds and any future earnings for use in the operation of our business and we do not anticipate declaring or paying cash dividends for the foreseeable future.

Securities Authorized for Issuance under Equity Compensation Plans – None.

Repurchases of Equity Securities – None.

Recent Sales of Unregistered Securities – None.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

Table of Contents

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT FOR FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those listed under the heading “Risk Factors” and those listed in our other Securities and Exchange Commission filings. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report. Unless the context otherwise requires, references in this report to “we,” “us,” “Bill the Butcher,” or the “Company” refer to Bill the Butcher, Inc. and its subsidiaries.

The following is intended to provide information necessary to understand our consolidated financial statements and highlight certain other information which, in the opinion of management, will enhance a reader’s understanding of our financial condition, changes in financial condition and results of operations. In particular, the discussion is intended to provide information with respect to significant trends and material changes in our financial position and operating results of our business during the years ended August 31, 2013 and 2012. The following should be read in conjunction with our consolidated financial statements and accompanying notes thereto appearing in this Annual Report on Form 10-K.

Overview - Founded in 2009, Bill the Butcher is a Seattle based sustainable food company with a mission to support small farmers and ranchers that produce sustainable meat, (including pasture-raised beef, pork, chicken and lamb) with complementary and thematic products via corporate owned neighborhood butcher shops. The Company’s brand promise is to sell proteins which do not contain hormones, antibiotics, steroids or genetically modified inputs, which differentiates us from traditional butcher shops and grocery stores. At August 31, 2013, we operated six stores in the greater Seattle area.

In September of 2013, the Company launched the American Sustainability Project, a wholly owned subsidiary, that’s purpose is to create a coalition of like-minded meat suppliers through a cause based wholesale business to engage and educate chefs, restaurants and retailers. The Company also executed binding agreements to acquire the Great Northern Cattle Company, a successful 12 year old grass based beef supplier, the first member of the American Sustainability Project.

All three companies can be reviewed at the websites:

www.AmericanSustainability.com

www.GreatNorthernCattleCompany.com

www.BilltheButcher.com

Recent Events - Key milestones in recent months include:

The Company has raised over $4 million dollars of equity and debt capital since 2010.

The Company has $2,166,000.00 of secured convertible debt that is convertible to common stock at prices between $0.05 and $0.15 cents.

The Company has raised over $2 million in equity and debt from March 8, 2013 to Jan 8, 2014.The Company began to finalize the plans to build and open the Bill the Butcher Kirkland store.

The Company formed the American Sustainability Project, a wholly owned subsidiary.

The American Sustainability Project executed a binding agreement to acquire the Great Northern Cattle Company a twelve year old producer and wholesaler of grass based beef, which is expected to add approximately $5 million dollars to the Company revenue in the next full fiscal year.

The Company restructured the majority of the secured convertible debt into a new senior credit facility and signed loan extensions from all but one secured creditor.

The Company has one matured loan, from one secured creditor, which it will either pay back from proceeds of the next raise, convert or request a combination of both.

All Company debt is subject to conversion to common stock at a near term benchmark.

Table of Contents

The Company was named in the top 25 best butchers in America and was the runner-up for best butcher in Washington State and won the best new business of 2013 by the Chamber of Commerce.

The Company has negotiated an area development agreement to open 10 stores in Portland, Oregon and has a non binding letter of intent between the parties, with a contract between the parties currently being drafted. The area developer is an investor in Bill the Butcher and a creditor, with a long standing relationship with the Company.

The Company launched a new Bill the Butcher web site (www.BilltheButcher.com) with the express purpose of launching online sales.

The Company also designed and launched launched new Facebook, Linked in, Google Plus and Twitter pages for our new acquisition and for our new subsidiary. The Great Northern Cattle Company, the American Sustainability Project, and Bill the Butcher, which makes the total social media sites we manage and operate 13.

The Company achieved the fastest store profitability with the opening of the new Bill the Butcher Wallingford store prototype. This store is also the award winning Chamber of Commerce best new business of the year for 2013.

The American Sustainability Project is receiving offers for significant ranching affiliations and acquisitions which the Company is currently vetting.

Fund raising and restructuring of debt – During the year ended August 31, 2013, we received proceeds of over $1.4 million from issuances of our 12% Convertible Notes and $285,000 from sales of our common stock. Our Chief Executive Officer together with our financial advisors at Finance 500 have negotiated restructured payment terms for more than $1 million of prior indebtedness and settlement of prior litigation and continue to raise capital.

Operations - We opened a new shop in Edmonds in January 2013 and another new shop in the Seattle neighborhood of Wallingford in June. As funding becomes available, we plan on opening one new store per quarter, the next being Kirkland within approximately a mile from Google headquarters

We plan on allocating significantly more resources for marketing and advertising moving forward. Meanwhile, we are playing a central role in state and national discussions about the negative impacts animal antibiotics have on human health and are working to educate lawmakers and consumers.

Historical sales figures are significant and margins are extremely favorable to fuel profitable growth. Management believes that a blended gross margin in the high fifties is achievable and is working to lower the costs through vertical integration to achieve new benchmarks.

We currently enjoy nearly 8,000 followers between Facebook and Twitter and continue to leverage social media and have had over 560,000 hits to our web site and 200,000 unique transactions through our registers. The Company has also recently launched an Instagram program and a Google Plus- Bill the Butcher site. Our internet reach through social media is over 20,000 impressions a day

Going Concern and Capital Resources - As of August 31, 2013, we had an accumulated deficit of $11.8 million. Our net loss was approximately $3.5 million and $4.0 million for the years ended August 31, 2013 and 2012, respectively, and we expect to incur losses in the near future. Our operating activities used cash of $1.3 million and $1.0 million during the years ended August 31, 2013 and 2012, respectively, and our working capital deficit (excess of current liabilities over current assets) was $5.5 million as of August 31, 2013. The report of our independent registered public accounting firm on our August 31, 2013 consolidated financial statements included in this Form 10-K includes a comment noting that these and other factors raise substantial doubt regarding our ability to continue as a going concern.

We have prepared our consolidated financial statements on the basis that we will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business. We have funded our losses primarily through sales of common stock in private placements and short-term borrowings. We require additional capital to further develop our business, execute our business strategy and to satisfy our near-term working capital requirements. Our operating expenses will also consume a material amount of our cash resources. We intend to raise capital from equity and debt financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be obtained in sufficient amounts on a timely basis or on terms favorable to us necessary to meet our needs. In the event that we cannot obtain additional funds on a timely basis or our operations do not generate sufficient cash flow, we may be forced to curtail or cease our activities, which would likely result in the loss to investors of all or a substantial portion of their investment. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.

Table of Contents

Results of Operations – Following is a summary of operating results (dollars in thousands):

	Year ended August 31,
	2013			2012
Sales	$	1,141		$	1,043
Cost of goods sold		680			831
Gross profit		461			212
Operating expenses
Direct store		997			933
General and administrative		1,429			1,628
Impairment		-			65
Settlement		495			766
Total operating expenses		2,921			3,392
Loss from operations		(2,460	)		(3,180	)
Other income (expense), net		(1,085	)		(773	)
Net loss	$	(3,545	)	$	(3,953	)

	as a percentage of sales
Gross profit		40	%	20	%
Direct store expenses		87	%	89	%

Year ended August 31, 2013 - Sales for the year ended August 31, 2013 were $1.1 million as compared to $1.0 million during the prior year. We opened our Edmonds shop in January 2013 and our Wallingford shop in June 2013 and had an average of approximately 4.8 shops open during the year ended August 31, 2013 as compared to approximately 5.3 shops open during the prior year. Sales increased during 2013 due primarily to increases during the last half of the fiscal year. Our prior lawsuits were settled near the beginning of this fiscal year, and we look forward to rebuilding sales volume to former levels. It is important to note that we had sales of $1.4 million and $2.2 million during the fiscal years ended August 31, 2010 and 2011, respectively. Management believes that growth will result due to a solid base of customers, with over 200,000 unique transactions, and an active daily social media following of over 8,000 fans and followers and an average 4.5 star rating on social media sites such as Yelp. Management believes that the product the Company offers is in high demand.

Cost of goods sold includes the cost of meat and nonperishable products sold. Cost of goods sold was $680,000 during the year ended August 31, 2013, resulting in a gross profit of $461,000, or approximately 40% of sales, as compared to gross profit of $212,000, or 20% during the prior year.

Direct store expenses consist of store salaries and employee related costs, rent and other occupancy costs, supplies, depreciation, and other store-specific costs. Direct store expenses were $997,000 during the year ended August 31, 2013, or 87% of sales, compared to $933,000, or 89% of sales, during the prior year. Our direct store expenses have increased in amount due to our being able to increase shop staffing to support, which also resulted in increased sales, and decreased as a percentage of sales. We expect direct store expenses to continue to increase in amount as our operations expand and we are planning increased sales levels to support the expense, which should result in store costs decreasing as a percentage of sales.

General and administrative expenses, which include compensation and related costs, investor and public relations, legal, advertising and marketing, accounting, facilities and other office related costs, were approximately $1.4 million during the year ended August 31, 2013, a decrease from $1.6 million during the prior year, due primarily to decreases in stock-based compensation. We expect stock-based expenses and general and administrative costs, including costs associated with being a public reporting company, to continue to be significant in the future and may increase or decrease from quarter to quarter.

Settlement expense includes the fair value of securities issuable in connection with settlements of litigation and past due amounts.

Other income (expense) during the year ended August 31, 2013 approximated $1.1 million as compared to $773,000 during the prior year, and was comprised of interest expense of $1.5 million reduced by gain on modification of debt of $445,000. Certain of our agreements with note holders involved a change in fair value of securities issuable in such proportion that required recording a gain on modification and debt discount on modified debt. The discount is amortized over the related debt term, all of which was amortized during the year ended August 31, 2013, and is included as a part of interest expense. Interest expense includes interest on note payable borrowings and advances and amortization of debt issue costs and debt discount.

Our net loss and basic and diluted loss per common share for the year ended August 31, 2013 was approximately $3.5 million and $(0.07) per share, respectively. Our net loss and basic and diluted loss per common share for the prior year was $4.0 million and $(0.11) per share, respectively. The weighted average number of shares used in computing per share amounts increased in 2013, which also has the effect of decreasing loss per share.

Table of Contents

Year ended August 31, 2012

Sales for the year ended August 31, 2012 were $1.0 million as compared to $2.2 million the prior fiscal year. We had six butcher shops open all of 2011 and 5.3 shops open during the fiscal year ended August 31, 2012. In addition to decreases in sales as a result of having fewer butcher shops open, sales have also significantly decreased due to our stores being under stocked as a result of not having sufficient operating capital and the burden of litigation. Now that the lawsuits are settled, we look forward to rebuilding sales volume to former levels.

Cost of goods sold includes the cost of meat and nonperishable products sold and commissary costs. Cost of goods sold was $831,000 during the year ended August 31, 2012, resulting in a gross profit of $211,000, or approximately 20% of sales. Cost of goods sold was $1.4 million during the year ended August 31, 2011, resulting in a gross profit of $796,000, or 36% of sales. Gross profit decreased due to decreased sales. Cost of goods sold as a percent of sales has increased due to commissary costs included in cost of goods sold representing a larger percentage, while costs and margins on sales of perishable goods remain relatively stable. In August 2012, we relocated our commissary function and expect to significantly lower the cost of operations.

Direct store expenses consist of store salaries and related employee costs, rent and other occupancy costs, supplies, depreciation, and other store-specific costs. Direct store expenses were $933,000 during the year ended August 31, 2012, or 90% of sales, compared to $1.4 million, or 62% of sales, during the prior fiscal year. Our direct store expenses decreased due to store closures and reductions in workforce required by limited working capital, and increased as a percent of sales due to decreased sales.

General and administrative expenses, which include compensation and related costs not included in direct store expenses, legal, advertising and marketing, accounting, facilities and other office related costs, were $1.6 million during the year ended August 31, 2012, as compared to $2.0 million during the prior fiscal year. During the year ended August 31, 2012, we recorded expenses paid through issuances of our common stock to employees and consultants of approximately $60,000. During the year ended August 31, 2011, we recorded expenses paid through issuances of our common stock to consultants of approximately $468,000. We expect stock-based expenses and general and administrative costs, including costs associated with being a public reporting company, to continue to be significant in the future and may increase or decrease from quarter to quarter.

Interest expense during the year ended August 31, 2012 was $773,000 comprised of interest on note payable borrowings and advances, including amortization of debt issue costs and debt discount of $54,000, and $343,000 of non-cash stock-based expenses for common stock issued to note holders in connection with debt forbearance. Interest expense during the year ended August 31, 2011 was $390,000 and represents interest on note payable borrowings, including $337,000 of amortization of debt issue costs and debt discount.

Our net loss and basic and diluted loss per common share for the year ended August 31, 2011 was $3.9 million and $(0.11) per share, respectively. Our net loss and basic and diluted loss per common share for the year ended August 31, 2011 was $2.9 million and $(0.12) per share, respectively.

Cash Flows - Following is a summary of cash flow information (dollars in thousands):

	Year ended August 31,
	2013			2012
Net cash used by operating activities	$	(1,331	)	$	(1,018	)
Net cash used by investing activities		(41	)		-
Net cash provided by financing activities		1,385			928
Net increase (decrease) in cash		13			(90	)
Cash at beginning of year		-			90
Cash at end of year	$	13		$	-

Operating activities used cash of approximately $1.3 million during the year ended August 31, 2013 as compared to $1.0 million during the comparative prior year. Cash used in operating activities relates primarily to funding our net losses. We expect operating activities to continue to use cash in the near future.

During the year ended August 31, 2013, investing activities used cash of approximately $41,000 in connection with property additions for our new shops. When cash from financing activities becomes available, uses of cash for investing activities are expected to increase as we open new stores.

Table of Contents

Our financing activities provided cash of approximately $1.4 million during the year ended August 31, 2013, as compared to $928,000 during the prior year. During the year ended August 31, 2013, we received approximately $1.4 million from issuance of our 12% Convertible Notes and $285,000 from sales of our common stock before offering costs. During the year ended August 31, 2012, proceeds from sales of our common stock provided $200,000, proceeds from notes payable provided $500,000, and advances on note payable borrowings provided $205,000. Financing activities are expected to increase in order to fund future operations and to provide additional working capital.

Critical Accounting Policies and Estimates- The preparation of financial statements included in this Annual Report on Form 10-K requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, management evaluates its estimates and judgments. Management bases its estimates and judgments on historical experiences and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The more significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates as to the valuation and recovery of inventory, recovery of long-lived assets, valuation and classification of equity related instruments and valuation allowance for deferred income tax assets. At this early stage of our business and operations we have not yet been involved in many transactions having significant accounting reporting alternatives. Our accounting policies are described in notes to consolidated financial statements included in this Annual Report on Form 10-K.

Off-Balance Sheet Arrangements - As of August 31, 2013, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

ITEM 8. FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at August 31, 2013 and 2012

Consolidated Statements of Operations for the years ended August 31, 2013 and 2012

Consolidated Statement of Stockholders’ Deficit for the years ended August 31, 2013 and 2012

Consolidated Statements of Cash Flows for the years ended August 31, 2013 and 2012

Notes to Consolidated Financial Statements

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Bill the Butcher, Inc.

Seattle, Washington

We have audited the accompanying consolidated balance sheets of Bill the Butcher, Inc. and Subsidiary ("the Company") as of August 31, 2013 and 2012, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company has determined that it 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bill the Butcher, Inc. and Subsidiary as of August 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has experienced recurring losses from operations since inception, and has a working capital deficit. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/ PETERSON SULLIVAN LLP

January 10, 2014

Table of Contents

Bill the Butcher, Inc. and Subsidiary

Consolidated Balance Sheets

(in thousands, except share information)

	August 31,
	2013			2012
Current assets
Cash and cash equivalents	$	13		$	-
Merchandise inventories		77			27
Prepaid expenses and other current assets		37			1
Total current assets		127			28
Property and equipment, net		105			140
Deferred debt issue costs, net		-			56
Deposits and other assets		95			56

Total assets	$	327		$	280

Current liabilities
Checks issued in excess of bank balance	$	-		$	45
Accounts payable		564			1,048
Accrued compensation and related		896			276
Other current liabilities		146			120
Accrued interest on notes payable and advances		397			150
Notes payable and advances, net of discount		3,595			1,880
Total current liabilities		5,598			3,519
Other liabilities		13			17
Total liabilities		5,611			3,536

Commitments and contingencies

Stockholders' deficit
Preferred stock, $0.001 par value, 5,000,000 shares authorized
Series A - 2,000,000 shares authorized, issued and outstanding at August 31, 2013, none at August 31, 2012		2
Series B - 2,000,000 shares authorized, none issued and outstanding
Series C - 1,000,000 shares authorized, none issued and outstanding
Common stock, $0.001 par value; 195,000,000 and 70,000,000 shares authorized; 45,580,404 and 41,570,404 shares issued and outstanding		46			41
Shares issuable: 14,687,070 shares and no shares		617			-
Common stock, 200,000 shares, receivable from founder		(100	)		(100	)
Additional paid-in capital		5,927			5,034
Accumulated deficit		(11,776	)		(8,231	)
Total stockholders' deficit		(5,284	)		(3,256	)

Total liabilities and stockholders' deficit	$	327		$	280

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bill the Butcher, Inc. and Subsidiary

Consolidated Statements of Operations

(in thousands, except share and per share information)

	Year ended August 31,
	2013			2012

Sales	$	1,141		$	1,043
Cost of goods sold		680			831
Gross profit		461			212
Operating expenses
Direct store expenses		997			933
General and administrative expenses		1,429			1,628
Provision for impairment		-			65
Settlement expense		495			766
Total operating expenses		2,921			3,392

Loss from operations		(2,460	)		(3,180	)
Other income (expense):
Interest expense		(1,530	)		(773	)
Gain on modification of debt		445			-

Net loss	$	(3,545	)	$	(3,953	)

Net loss per share, basic and diluted	$	(0.07	)	$	(0.11	)

Weighted average shares used in computing net loss per common share, basic and diluted		52,239,788			34,715,883

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bill the Butcher, Inc. and Subsidiary

Consolidated Statement of Stockholders' Deficit

For each of the years ended August 31, 2013 and 2012

(in thousands, except shares)

	Preferred stock				Common stock
	Series A				issued						issuable						receivable						Additional			Accumulated
	Shares		Amount		Shares			Amount			Shares			Amount			Shares			Amount			paid-in capital			deficit			Total
Balance at August 31, 2011		-	$	-		25,206,654		$	25			352,000		$	137			(200,000	)	$	(100	)	$	2,931		$	(4,278	)	$	(1,285	)
Shares issued previously issuable						342,000			-			(342,000	)		(133	)								133						-
Shares issuable for services												(10,000	)		(4	)														(4	)
Warrants issued for services																								96						96
Shares issued in connection with notes payable						1,575,000			2															341						343
Shares issued for services						4,766,000			5															603						608
Shares issed in exchange for accounts payable						418,042			-															80						80
Shares issued upon cash-less exercise of warrants						1,742,708			2															(2	)					-
Shares issued upon sale of common stock						1,250,000			1															199						200
Warrants issued with convertible notes																								95						95
Shares issued in connection with settlement						6,270,000			6															558						564
Net loss																											(3,953	)		(3,953	)
Balance at August 31, 2012		-		-		41,570,404			41			-			-			(200,000	)		(100	)		5,034			(8,231	)		(3,256	)
Shares received from founder in connection with settlement						(6,270,000	)		(6	)														6						-
Shares and warrants issued in connection with extensions of notes payable						100,000			1															119						120
Shares issued and issuable for cash						4,200,000			4			1,500,000			75									206						285
Stock issue costs																								(136	)					(136	)
Shares issued and issuable for services		2,000,000		2		2,000,000			2															276						280
Shares issued in connection with settlement						3,000,000			3															197						200
Shares issuable in connection with notes payable												5,260,000			138															138
Shares issued and issuable in connection with conversions and exchanges of accounts and notes payable						980,000			1			703,000			43									59						103
Shares and warrants issued and issuable to financial advisor for services												7,224,070			361									165						526
Net loss																											(3,545	)		(3,545	)
Balance at August 31, 2013		2,000,000	$	2		45,580,404		$	46			14,687,070		$	617			(200,000	)	$	(100	)	$	5,927		$	(11,776	)	$	(5,284	)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bill the Butcher, Inc. and Subsidiary

Consolidated Statements of Cash Flows

(in thousands)

	Year ended August 31,
	2013			2012
Cash flows from operating activities:
Net loss	$	(3,545	)	$	(3,953	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		67			138
Stock-based compensation and financing expense		280			1,047
Amortization of debt discount and issue costs		1,229			54
Gain on modification of debt		(445	)		-
Loss on disposal of property and equipment		9
Impairment of long-lived assets		-			65
Settlement expense for shares and notes issued		200			711
Changes in assets and liabilities
Merchandise inventories		(50	)		43
Accounts payable, net of exchanged		(131	)		489
Accrued compensation and other current liabilities		980			361
Other		75			27
Net cash used by operating activities		(1,331	)		(1,018	)
Cash flows from investing activities:
Purchases of property, plant & equipment		(41	)		-
Net cash used by investing activities		(41	)		-
Cash flows from financing activities:
Proceeds from sale of common stock issued and issuable		285			200
Proceeds from issuance of notes payable		1,405			525
Proceeds from advances		-			215
Payment of stock and debt issue costs		(195	)		(73	)
Payment on settlement note payable		(65	)
Increase in checks issued in excess of bank balance		(45	)		45
Other financing activities		-			16
Net cash provided by financing activities		1,385			928

Net increase (decrease) in cash and cash equivalents		13			(90	)
Cash and cash equivalents, beginning of year		-			90

Cash and cash equivalents, end of year	$	13		$	-

Supplemental disclosures of cash flow information:
Cash paid for interest	$	-		$	8

Non-cash financing activities:
Common stock received from founder	$	251		$	-
Common stock issuable in connection with issuances of notes payable		202
Shares issued and issuable in connection with conversions and exchanges of accounts and notes payable		103			-

Accrued interest converted to notes payable		72
Accounts payable converted to notes payable		275

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

Bill the Butcher, Inc. and Subsidiary

Notes to Consolidated Financial Statements

August 31, 2013 and 2012 and for each of the years then ended

Note 1. Description of Business and Summary of Significant Accounting Policies

Organization and business – Bill the Butcher, Inc. and its wholly-owned subsidiary (“Bill the Butcher” or the “Company”), is a Seattle, Washington based retailer selling U.S. sourced and ethically and sustainably raised meats through corporate-owned neighborhood butcher shops. At August 31, 2013, we operated six stores in the greater Seattle area.

Fund raising activities and restructuring of debt – Our Chief Executive Officer together with our financial advisors at Finance 500, continue to raise capital and have also negotiated restructured payment terms for more than $1 million of prior indebtedness and settlement of prior litigation. During the year ended August 31, 2013, we received approximately $1.4 million from financing activities primarily from issuances of our 12% Convertible Notes and sales of our common stock.

Going concern - The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. Our net loss was approximately $3.5 million and $4.0 million during the years ended August 31, 2013 and 2012, respectively, and our operating activities used cash of approximately $1.3 million and $1.0 million during the years ended August 31, 2013 and 2012, respectively. We expect losses to continue in the near future as we grow and further develop operations. At August 31, 2013, we had a working capital deficit of approximately $5.5 million and a stockholders’ deficit of $5.3 million. We have funded our operations, business development and growth through sales of common stock and short-term borrowings. We require additional funds to further develop our business, execute our business strategy and satisfy our working capital needs. Our operating expenses will consume a material amount of our cash resources. We intend to raise capital through debt and/or equity financing to fund future operations and to provide additional working capital. However, there is no assurance that such financing will be available on a timely basis, on terms favorable to us or obtained in sufficient amounts necessary to meet our needs. In the event that we cannot obtain additional funds on a timely basis or our operations do not generate sufficient cash flow, we may be forced to curtail or cease our activities, which would likely result in the loss to investors of all or a substantial portion of their investment. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of this uncertainty.

Use of estimates in the preparation of financial statements - Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The more significant accounting estimates inherent in the preparation of our financial statements include estimates as to the valuation and recoverability of inventories, recoverability of long-lived assets and classification and valuation of equity related instruments.

Consolidation - The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated.

Concentrations - All of our operations are located in the greater Seattle, Washington area. As a result, we could be particularly susceptible to adverse trends and economic conditions in the area, including labor markets and other occurrences such as local strikes, earthquakes or other natural disasters. In addition, as we are a retailer of meat and related merchandise, adverse publicity and/or trends with respect to the meat industry in general could have a material effect on our operations and financial condition.

Cash and cash equivalents - We consider all highly liquid investments purchased with maturities of three months or less to be cash equivalents. Our cash is maintained with high credit quality financial institutions. At times, such balances may be in excess of the FDIC insurance limit. At August 31, 2013, no amounts exceeded the limit.

Prepaid expenses and other current assets – Prepaid expenses include inventory in transit.

Checks issued in excess of bank balance – The amount of checks issued in excess of amounts on deposit at the bank upon which the checks are drawn.

Table of Contents

Fair value measurements – In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices for similar asset or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

Fair value of financial instruments – The fair value of our financial instruments, including accounts payable, certain accrued liabilities and notes payable, approximates carrying amounts due to short maturities.

Merchandise inventories – Merchandise inventories, which consist of meat and nonperishable products, are stated at the lower of cost or market. Cost is determined by the first-in, first-out method.

Property and equipment - Property and equipment is stated at cost. Additions and improvements that significantly add to the productive capacity or extend the life of an asset are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is computed using the straight-line method over five to seven years for equipment and furniture, and over three to five years for computer software and hardware. Leasehold improvements are amortized over the lesser of the estimated remaining useful life of the asset or the remaining lease term.

Impairment of long-lived assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, and is disclosed. In connection store closures during the year ended August 31, 2012, certain assets were impaired and we recorded a provision for impairment of approximately $65,000.

Deferred financing costs – We record legal and other fees paid relating to offerings of equity or debt securities as deferred financing costs included in other assets. Costs relating to debt are deferred and amortized to interest expense over the term of the related debt. Costs relating to equity are recorded as stock issue costs as a decrease to additional paid-in capital upon sales of equity securities in the financing to which the costs relate.

Debt discount – We record fees paid to lenders and the fair value of common stock or warrants issued with debt securities as a debt discount, which is presented net of related borrowings on the consolidated balance sheets and amortized as an adjustment to interest expense over the borrowing term.

Revenue recognition - Revenues are recognized at point of sale at retail locations or upon delivery of product. Retail store revenues are reported net of sales, use or other transaction taxes collected from customers and remitted to taxing authorities.

Cost of goods sold - Cost of goods sold includes the cost of meat and nonperishable products sold and commissary costs.

Direct store expenses - Direct store expenses consist of store-level expenses such as personnel salaries and benefits costs, supplies, depreciation, and other store-specific costs.

Investor and public relations expenses – Investor and public relations expenses consist of fees paid or payable and equity securities issued or issuable to consultants in connection with services provided or to be provided during a contractually specified period.

Marketing and advertising expenses – Marketing and advertising costs ,which are expensed as incurred and included with general and administrative expenses, approximated $32,000 and $33,000 during the years ended August 31, 2013 and 2012, respectively.

Stock-based compensation - We use the Black-Scholes-Merton option pricing model as our method of valuation for stock-based awards. Stock-based compensation expense is based on the value of the portion of the award that will vest during the period. The Black-Scholes-Merton option pricing model requires the input of assumptions, and other reasonable assumptions could provide differing results. Our determination of the fair value of stock-based awards on the date of grant using an option pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the award term. Stock-based compensation expense is recognized on a straight-line basis over vesting periods, if any, based on the grant date fair value.

Table of Contents

Income taxes - We account for income taxes using an asset and liability method which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts expected to be realized. We continue to provide a full valuation allowance to reduce our net deferred tax asset to zero, inasmuch as our management has not determined that realization of deferred tax assets is more likely than not. The provision for income taxes represents the tax payable for the period and change during the period in net deferred tax assets and liabilities.

Net loss per share - Basic and diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Common stock equivalents are excluded as the effect would be anti-dilutive. Shares excluded from loss per share computations for the years ended August 31 were as follows:

	2013		2012
Convertible notes payable		46,535,013		6,617,513
Warrants		18,149,407		6,841,674
Options		375,000		375,000
		65,059,420		13,834,187

Contingencies - Conditions may exist as of the date financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events do or do not occur. Company management assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. If the assessment of a contingency indicates that it is probable that a liability has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in our financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable, would be disclosed.

Note 2. Related Parties and Settlement of Litigation

J’Amy Owens, our sole officer and director and principal shareholder, acquired a majority of the Company’s ownership in 2009, and during 2010, the Company acquired ownership of a business she co-founded to develop the “Bill the Butcher” retail concept. Ms. Owens is involved in other business activities, and as a result may face a conflict in selecting between the Company and other business interests.

Preferred Stock issued to Founder – In May 2013, we issued 2,000,000 shares of our Series A Preferred Stock to Ms. Owens. Each Series A Preferred Share has voting rights with a voting weight equal to ten common shares, and may be converted into ten common shares upon approval by the Board of Directors.

Common Stock received from Founder - During the year ended August 31, 2013 we received 6,270,000 shares of our common stock from Ms. Owens from personally owned shares. These shares were cancelled. The transfer of shares was to return shares the Company previously issued pursuant to terms of a settlement agreement by a former owner as described in Settlement of Litigation below. The fair value of shares was $251,000 based on closing market price at the transfer date and has been recorded as an increase in additional paid-in capital, similar to that of a capital contribution.

Common Stock Receivable from Founder - During the year ended August 31, 2011, we issued 293,750 shares of our common stock to investors in exchange for $75,000, and Ms. Owens agreed to transfer 200,000 of these shares from personally owned shares. The agreement to transfer shares is accounted for as a contribution of capital of $100,000 based on the closing price of our common stock on the transaction date. The transfer of shares has not occurred and the related receivable is presented as a separate component of stockholders’ deficit.

Lease arrangement with Founder – Since September 2012, we lease our corporate facilities, which includes two residential housing units, pursuant to a five-year lease agreement with J’Amy Owens, providing for monthly rent of $10,000 through October 2017. During the year ended August 31, 2013, we paid rent of $10,000 per month and made additional payments of $100,000 to secure tenancy of the premises, of which $80,000 has been recorded as deferred prepaid rent to be amortized to rent expense over the remaining lease term. At August 31, 2013, approximately $67,000 of additional payments has been deferred and included in deposits and other assets.

Common Stock Issued to Employees – During the year ended August 31, 2013 we issued 1,000,000 shares to each of two employees, who are currently holders of our common stock. Subsequent to August 31, 2013, we issued an additional 2,300,000 shares to each of these two employees. These shares are subject to a proxy to vote by Ms. Owens, as are other shares owned by these employees.

Table of Contents

Settlement of Litigation - In 2011, an action was commenced by the former owner and co-founder of the company we acquired in 2010, in the Superior Court of the State of Washington, County of King, against the Company, J’Amy Owens and certain other parties. The plaintiff was seeking damages or the rescission of a Related Party Agreement and a Stock Purchase Agreement. In June 2012, the Court awarded the plaintiff 6,270,000 shares of our common stock, which we issued in June 2012. In August 2012, the Company, Ms. Owens and the plaintiff entered into a settlement agreement and general release pursuant to which, among other things, all claims, demands, expenses, attorney fees, causes of action or suits between and among the Company, Ms. Owens and the plaintiff were released, the plaintiff retained all shares issued and we issued to the plaintiff a $130,000 non-interest bearing note payable due July 1, 2013, repayment terms since renegotiated. In connection with issuance of shares and notes payable and together with related legal fees and expenses, we recognized settlement expense of $766,000 during the year ended August 31, 2012. As described under Common Stock received from Founder, during the year ended August 31, 2013, we received 6,270,000 shares of common stock from Ms. Owens, which shares were cancelled.

In 2010, a former employee commenced a lawsuit in the Superior Court of the State of Washington against the Company, J’Amy Owens, its sole officer and director. In July 2012, the Company, Ms. Owens and the former employee entered into a settlement agreement and general release.

Note 3. Merchandise Inventories

Merchandise inventories consisted of the following at August 31 (in thousands):

	August 31,
	2013		2012
Perishable food	$	56	$	20
Non-perishables		21		7
Total	$	77	$	27

Note 4. Property and Equipment

Property and equipment consisted of the following at August 31 (in thousands):

	August 31,
	2013			2012
Leasehold improvements	$	183		$	142
Furniture and equipment		206			205
Vehicle		-			32
Total property and equipment		389			379
Accumulated depreciation and amortization		(284	)		(239	)
Total property and equipment, net	$	105		$	140

Note 5. Notes Payable and Advances

Notes payable and advances consist of the following at August 31, 2013 and 2012 (in thousands):

	August 31,
	2013			2012
Convertible notes, interest at 12%	$	3,080		$	1,008
Convertible notes, interest at 15%		-			50
2011 note payable, refinanced		-			300
Settlement note payable		65			130
Advances		475			465
Total notes payable and advances		3,620			1,953
Discount, net of amortization		(25	)		(73	)
Total	$	3,595		$	1,880

During the year ended August 31, 2013, we received proceeds from the issuance of $1,445,000 convertible notes payable, bearing interest at 12% and convertible into shares of our common stock at $0.05 per share. The notes, as amended, have various maturity dates, most of which are on or before August 31, 2013. As disclosed in Note 9, subsequent to year end, we entered into a forbearance agreement with the holder of a convertible note for $365,000 and extended the maturity date. We have entered into agreements with holders of a significant amount of outstanding notes and are in process of negotiations with other holders regarding extensions of, among other things, maturity dates and terms of conversion into shares of our common stock.

Table of Contents

Pursuant to terms of certain of the 12% Convertible Notes and non-interest bearing note, the outstanding balance, including accrued interest, shall automatically convert into shares of common stock at a per share conversion price of $0.05 or $0.15 upon completion by the Company of a sale of $1 million or more of equity or new debt financing.

In connection with note payable financings, we incur fees and expenses and have agreed to issue shares of our common stock and warrants to purchase our common stock to our financial advisor for placement services. During the year ended August 31, 2013, we recorded $385,000 of debt issue costs, which included financing and legal fees paid and fair value of securities issued and issuable , and which is amortized to interest expense over borrowing terms. During the year ended August 31, 2013, we also issued and agreed to issue 2,760,000 shares of our common stock in connection with issuance of our convertible notes, and have recorded the related fair value of approximately $82,000 as debt discount based on the closing stock date when issuable, and which is amortized to interest expense over borrowing terms. Additionally, during the year ended August 31, 2013, in connection with amendments and modifications of certain notes payable, we issued warrants and recorded the fair value of approximately $110,000 as debt discount based on estimated fair values determined using the Black-Scholes-Merton option pricing model, which is amortized to interest expense over the borrowing terms.

Certain of our agreements with note holders involved a change in fair value of securities issuable in such proportion that required recording a $445,000 gain on modification and debt discount on modified debt. The discount is amortized over the related debt term, all of which was amortized during the year ended August 31, 2013, and is included as a part of interest expense.

During the year ended August 31, 2013 and 2012, we recognized amortization of debt issue costs and debt discount of approximately $1.2 million and $143,000, respectively.

During the year ended August 31, 2013, a holder converted $25,000 of convertible notes payable for 303,000 shares of our common stock, valued at approximately $15,000 at the conversion date.

Settlement Note Payable – In August 2012, we issued a promissory note payable due July 1, 2013 in the amount of $130,000. A discount for imputed interest of approximately $10,000 was recorded using an estimated interest rate of 12% and amortized to interest expense over the term until maturity. The note payable is collateralized by a pledge of interests in all of the Company’s assets on a pari passu basis with holders of other collateralized notes payable. On July 1, 2013, we repaid $65,000 and entered into an agreement, since amended, with the note holder to make the remaining payment in 2014 and issue the holder 600,000 shares of our common stock.

Advances –During the years ended August 31, 2012 and 2011, we received cash from an investor pursuant to an arrangement that would include our issuing notes or other securities, the terms of which were not finalized. We have accrued financing expense using interest rates in effect during the period funds were advanced.

The weighted average interest rate on total notes payable outstanding at August 31, 2013 was 12%. The average interest rate for interest and amortization of debt discount and debt issue costs on average amounts outstanding of approximately $2.6 million was 26% for the year ended August 31, 2013. The weighted average interest rate on total notes payable at August 31, 2012 was 13.9%. The average interest rate for interest and amortization of debt discount on average amounts outstanding of approximately $1.3 million was 59% for the year ended August 31, 2012.

Note 6. Stockholders’ Equity

Preferred Stock - We are authorized to issue up to 5,000,000 shares of $0.001 par value preferred stock, including two million shares of Series A preferred stock that would be entitled to ten votes per share, two million shares of Series B preferred stock that would be entitled to two votes per share, and one million shares of Series C preferred stock with no voting rights. Our Board of Directors has the authority to fix and determine the relative economic rights and preferences of preferred shares, as well as the authority to issue such shares without further stockholder approval. As a result, our Board of Directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. In addition, shares of preferred stock could be issued with terms designed to delay or prevent a change in control or make removal of management more difficult.

In May 2013, we issued 2,000,000 shares of Series A preferred stock to our Founder for services. There were no additional or incremental terms or provisions authorized with respect to shares of Series A preferred stock, other than those shares have voting rights and carry a voting weight equal to ten common shares. Each Series A preferred share may be converted into ten common shares upon approval by our Board of Directors. We recorded expense of $60,000 based, in part, on closing market prices of our common stock on the dates shares were awarded.

Common Stock – In May 2013, our sole director approved by unanimous written consent an amendment to our Articles of Incorporation to increase the number of authorized shares of our $0.001 par value Class A common stock from 70,000,000 shares to 195,000,000 shares. In June 2013, the certificate of amendment was filed and effective.

Table of Contents

Common Stock Issued for Borrowing Extensions – During the year ended August 31, 2013, we issued 300,000 shares of our common stock to lenders. The value of shares issued based on the closing market price on the date shares are issuable approximated $21,000 and is reported as interest expense.

Common Stock Issued for Cash – During the year ended August 31, 2013, we issued 4,200,000 shares of our common stock and received cash of $210,000. During the year ended August 31, 2012, we issued 1,250,000 shares of our common stock and received cash of $200,000.

Common Stock Issuable for Cash – During the year ended August 31, 2013, we received cash of $75,000 and agreed to issue 1,500,000 shares of our common stock.

Common Stock Issued in Connection with Settlement Agreement – During the year ended August 31, 2013, we issued 3,000,000 shares of our common stock in settlement of litigation. The value of shares issued based on the closing market price on the dates shares are issuable of $200,000 was reported as settlement expense.

Common Stock Issuable in Conversion of Notes Payable – During the year ended August 31, 2013, we agreed to issue 303,000 shares of our common stock in connection with a the conversion of $15,000 of Convertible Notes Payable.

Common Stock Issuable with Notes Payable – During the year ended August 31, 2013, we agreed to issue 2,760,000 shares of our common stock in connection with issuances of $895,000 of Convertible Notes Payable.

Common Stock Issued and Issuable in Exchange for Accounts Payable – During the year ended August 31, 2013, we agreed to issue 460,000 shares of our common stock in connection with exchanges of accounts payable, of which 260,000 shares were issued. The value of shares based on the closing market price on the dates shares are issuable approximated $37,000.

Common Stock Issued and Issuable for Services – During the year ended August 31, 2013, we issued 2,000,000 shares of our common stock to employees for services and recorded expense of $220,000 based on closing market prices of our common stock on the dates shares were issuable, and also recorded 250,000 shares issuable and recorded expense of $18,000 relating to investor relations services. During the year ended August 31, 2012, we issued 2,774,000 shares of our common stock to employees and consultants for services and recorded expense of $317,000 based on closing market prices of our common stock on the dates shares were issuable.

Common Stock Issued in Exchange for Accounts Payable – During the year ended August 31, 2012, we issued 418,042 shares of our common stock in exchange for approximately $50,000 of accounts payable. The value of shares issued based on the closing market price on the dates shares are issuable approximated $80,000, and the $30,000 excess of fair value of common stock issued over the amount of accounts payable exchanged was recorded as expense.

Common Stock Issued for Services – In February 2012, we entered into a one-year agreement, since terminated, with an investor and public relations firm pursuant to which, among other things, we issued the firm 1,250,000 shares of our common stock and agreed to issue the firm 250,000 shares of our common stock each three-month period. Shares were recorded at the closing market price on the dates shares are issuable. During the year ended August 31, 2012, we recorded expense of $286,000 and issued 1,992,000 shares.

Common Stock and Warrants to Purchase Common Stock Issued and Issuable to Placement Agent – In 2012, we entered into an agreement with a firm to provide placement agent services in connection with our fund-raising activities. Pursuant to terms of the agreement, among other things, we agreed to pay the firm a fee upon financing transaction closings equal to a percentage ranging from 10% to 13% of transaction values (as defined) and shares of our common stock and ten-year warrants to purchase shares of our common stock. During the year ended August 31, 2013, issued the firm warrants to purchase 4,102,417 shares of our common stock at $0.15 per share, 103,666 shares at $0.10 per share and 754,150 shares at $0.05 per share, and agreed to issue the firm 7,224,070 shares of our common stock, and warrants to purchase 1,712,500 shares of our common stock at $0.05 per share .

Table of Contents

Warrants and Options to Purchase Common Stock – In connection with offerings of our common stock and notes payable, we have issued warrants to purchase shares of our common stock. We have also issued warrants and options to purchase shares of our common stock to service providers. The following summarizes activity during the years ended August 31, 2013 and 2012:

	shares of			weighted average
	common stock			exercise price
Outstanding at August 31, 2011		2,675,000		$	0.28
Warrants issued for services		750,000			0.18
Warrants issued with notes payable		6,333,342			0.15
Warrants exercised		(1,750,000	)		0.001
Warrants exchanged and cancelled		(1,166,668	)		0.43
Outstanding at August 31, 2012		6,841,674			0.20
Warrants issued and issuable for services		6,672,733			0.11
Warrants issued with notes payable		11,376,668			0.05
Warrants exchanged and cancelled		(6,366,668	)		0.05
Outstanding at August 31, 2013		18,524,407		$	0.11

The following summarizes additional information on our stock warrants and options outstanding at August 31, 2013:

		shares of		remaining life
Exercise price		common stock		in years
$	0.05		10,833,318		9.5
	0.10		103,666		9.5
	0.15		6,812,423		9.5
	0.20		400,000		8.2
	0.80		375,000		1.9
			18,524,407

Note 7. Income Taxes

The Company has recorded no provision or benefit for income taxes. The difference between tax at the statutory rate and no tax is due to the full valuation allowance. Deferred income taxes represent the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes, and net operating loss carry forwards. Substantially all of our deferred tax assets relate to net operating loss carryforwards. Deferred tax assets were approximately $4.0 million and $2.8 million at August 31, 2013 and 2012, respectively, and the change in the valuation allowance was approximately $1.2 million and $1.3 million during the years then ended. A valuation allowance has been recorded in the full amount of total deferred tax assets as it has not been determined that it is more likely than not that these deferred tax assets will be realized. As of August 31, 2013, the Company has net operating loss carryforwards of approximately $11.4 million, which begin to expire in 2027. Realization is dependent on generating sufficient taxable income prior to expiration. Further, as a result of ownership changes, the Company is subject to annual limitations on the amount of net operating loss utilizable in any tax year, and such limitations are significant.

We have identified our federal tax return as our major tax jurisdiction, as defined. Tax years since inception are subject to audit. We believe our income tax filing positions and deductions will be sustained on audit and we do not anticipate any adjustments that would result in a material change to our financial position. No reserves for uncertain income tax positions have been recorded. Our policy for recording interest and penalties associated with uncertain income tax positions is to record such items as a component of interest expense.

Note 8. Commitments and Contingencies

Legal Matters - We have settled all prior legal matters. We may occasionally become involved in various lawsuits and legal proceedings arising in the ordinary course of business. Litigation is subject to inherent uncertainties and an adverse result in these or other matters that may arise from time to time could have an adverse effect on our business, financial condition or operating results. We are currently not involved in any litigation nor are we aware of any such legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.

Agreement with Placement Agent – In 2012, we entered into an agreement with a firm to provide placement agent services in connection with our fund-raising activities. Pursuant to terms of the agreement, among other things, we agreed to pay the firm a fee upon financing transaction closings equal to a percentage ranging from 10% to 13% of transaction values (as defined) and shares of our common stock and ten-year warrants to purchase shares of our common stock. During the year ended August 31, 2013, we paid the firm approximately $152,000, issued the firm warrants to purchase 4,102,417 shares of our common stock at $0.15 per share, 103,666 shares at $0.10 per share and 754,150 shares at $0.05 per share, and agreed to issue the firm 7,224,070 shares of our common stock, and warrants to purchase 1,712,500 shares of our common stock at $0.05 per share . During the year ended August 31, 2013, we recognized expense for debt issue costs of approximately $385,000, stock issue costs of $23,000 and settlement expense of $157,000, and at August 31, 2013, accrued fees approximate $18,000.

Table of Contents

Leases - The Company leases its stores under non-cancelable operating leases, some with renewal options. Rents are fixed base amounts. Lease provisions also require additional payments for maintenance and other expenses. Rent is expensed on a straight-line basis over the term of the lease. The difference between amounts paid and expensed is recorded as deferred rent. In addition, as disclosed in Note 2, we lease our office facilities pursuant to terms of a five year lease agreement at $10,000 per month. Rent expense during the years ended August 31, 2013 and 2012 was $408,000 and $404,000, respectively. At August 31, 2013, minimum future annual lease obligations are as follows (in thousands):

year ending
August 31, 2014	$	272
August 31, 2015		246
August 31, 2016		240
August 31, 2017		175
August 31, 2018		23
Total minimum payments	$	956

Arrearages in payment of employment and other taxes – The Company is in arrears in payment of employment and other taxes. We have created a payment plan with the State, and are taking measures to obtain additional funds to remedy the arrearages.

Note 9. Subsequent Events

In October 2013, we entered into a Forbearance Agreement with the holder of past due $365,000 of convertible notes (the Forbearance Note) and related accrued interest of approximately $55,000, pursuant to which, among other things, the holder will forbear from pursuing its default remedies as provided in a prior settlement agreement, we will issue the holder 3,000,000 shares of our common stock, and have agreed to pay accrued interest in payments by January 7, 2014, and quarterly principal and interest payments of $75,000 commencing in April 2014, until repaid in full in April 2015. In December 2013, we entered into a strategic advisory services agreement with an affiliate of the holder of the Forbearance Note pursuant to which, among other things, we agreed to issue 2,000,000 shares of our common stock, and $5,000 per month. The initial term extends through February 2014 and shall be extended through May 2014, unless we notify our intent not to extend.

In November 2013, the Company, and its recently formed wholly-owned subsidiary, The American Sustainability Project, Inc., entered into a purchase agreement with Montana Cattle Holdings, LLC d/b/a Great Northern Cattle Company (Seller), for the purchase of certain of Seller’s assets associated with its cattle and meat wholesale, retail, and brokerage businesses, and an employment agreement with the members of Seller in a transaction to close on or before January 7, 2014, or within 60 days thereafter. Terms of the proposed agreement provide for, among other things, issuance of 10,000,000 shares of our common stock, which shall be subject to a proxy in favor of J’Amy Owens, and payment of $300,000 to Seller at Closing, and $700,000 to be paid to Seller based on defined future operating results, which if not earlier paid, would be due a payable in full on the fifth anniversary of the Closing date.

Subsequent to August 31, 2013 through December 2013, we received $165,000 and issued 12% convertible notes having relatively terms of three months to nine months, and agreed to issue approximately 495,000 shares of our common stock.

In December 2013, we entered into a revolving credit agreement with one of our investors pursuant to which we may borrow up to $1 million and received approximately $300,000, which together with prior result in borrowings of $600,000 on the facility. Interest on borrowings is 12% and borrowings are due December 31, 2014. We agreed to issue 1 million shares of our common stock in connection with the line of credit facility.

Subsequent to August 31, 2013, we have entered into extension and modification agreements with the majority of holders of our convertible notes payable and with the settlement note holder. Pursuant to terms of a number of the convertible notes, such notes are convertible into shares of our common stock at our election, which is expected to occur.

Table of Contents

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures. As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of senior management, including Ms. Owens, our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our CEO/CFO concluded that our disclosure controls and procedures were not effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that we file or submit under the Exchange Act. A discussion of the material weaknesses in our controls and procedures is described below.

(b) Internal Control over Financial Reporting. There have been no changes in our internal controls over financial reporting or in other factors during the fourth fiscal quarter ended August 31, 2013, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting subsequent to the date we carried out our most recent evaluation.

(c) Management Report on Internal Control. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is a process designed by, or under the supervision of, our CEO/CFO, or persons performing similar functions, 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. Our management, with the participation of our CEO/CFO, has established and maintained policies and procedures designed to maintain the adequacy of our internal control over financial reporting, and include 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 generally accepted accounting principles, 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, use or disposition of our assets that could have a material effect on the financial statements.

Management has used the framework set forth in the report entitled Internal Control – Integrated Framework published by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission to evaluate the effectiveness of our internal control over financial reporting. As a result of the material weaknesses described below, management has concluded that our internal control over financial reporting was not effective as of August 31, 2013.

Management’s Assessment - Management has determined that, as of the August 31, 2013, evaluation date, there were deficiencies in both the design and the effectiveness of our internal control over financial reporting. Management has assessed these deficiencies and determined that there were various material weaknesses in our internal control over financial reporting. As a result of our assessment that material weaknesses in our internal control over financial reporting existed as of August 31, 2013, management has concluded that our internal control over financial reporting was not effective as of August 31, 2013. This determination was the same as of August 31, 2012. The existence of a material weakness or weaknesses is an indication that there is a more than remote likelihood that a material misstatement of our financial statements will not be prevented or detected in a future period.

Management has assigned a high priority to the improvement of our internal control over financial reporting. We have listed below the nature of the material weaknesses we have identified, the steps we are taking to remediate these material weaknesses and when we expect to have the material weaknesses remediated.

Inadequate entity-level controls. As of August 31, 2013, we did not have effective entity level controls with respect to our overall control environment and monitoring efforts as defined in the COSO framework. The pervasive nature of the material weaknesses in our internal control over financial reporting in itself constitutes a material weakness. We failed to implement processes to ensure periodic monitoring of our entity level internal control activities. As a result, management concluded that there are deficiencies in the design and execution of our entity-level controls that constitute a material weakness in our internal control over financial reporting and errors in our financial statements that have not been prevented by our entity level controls could occur.

Table of Contents

Deficiencies pertaining to inadequate segregation of duties consistent with control objectives. The lack of segregation of duties among management resulted in deficiencies in our financial reporting.

Deficiencies pertaining to insufficiently skilled Company personnel and a lack of human resources within our finance and accounting reporting functions. The lack of appropriately skilled Company personnel could result in material misstatements to financial statements not being detected in a timely manner.

Insufficient oversight of financially significant processes and systems, including deficiencies relating to monitoring and oversight of the work performed by our finance and accounting personnel. Due primarily to the lack of human resources in our accounting and finance department during 2013, we noted deficiencies related to insufficient review and approval and documentation of the review and approval of the work being performed by employees within our accounting and finance department relating to journal entries, reconciliation of subsidiary ledgers, balance sheet and income statement accounts, accrual of expenses, documentation supporting financial reporting closing processes, and periodic financial reporting. As a result, we do not have sufficient internal control over financial reporting to ensure underlying transactions are being appropriately and timely accounted for, which could lead to material misstatements in the financial statements not being detected in a timely manner.

Deficiencies relating to insufficient analysis, documentation and review of the selection and application of generally accepted accounting principles, or GAAP, to significant non-routine transactions, including the preparation of financial statement disclosures relating thereto. We did not have appropriate personnel in place at August 31, 2013, to review and document the application of GAAP to significant non-routine transactions, including the preparation of related financial statement disclosures. As a result, we do not have sufficient internal control over financial reporting to ensure that underlying non-routine transactions are appropriately and timely accounted for in the general ledger.

Inability to demonstrate through testing that our internal control over financial reporting was effective as of August 31, 2013. We were unable to demonstrate through testing the effectiveness of our remediation efforts with respect to the material weaknesses described above. Our processes with respect to quarterly and annual controls, such as our control processes relating to general ledger close procedures and periodic financial reporting, were not implemented as of the year ended August 31, 2013.

Overview of Remediation

Fiscal year ended August 31, 2013 – Our ability to maintain and improve our control procedures was significantly adversely impacted by our not having sufficient operating capital to, among other things, pay our outsourced service providers that were instrumental in improvements in our processes during prior fiscal years. While we were able to fund engagement of the service provider to assist in August 31, 2013 financial reporting, this was not in time to successfully implement processes and procedures at August 31, 2013.

Fiscal year ending August 31, 2014 - We believe that with sufficient funding from recent and anticipated financings, we will again be able to remediate a number of our material weaknesses of our internal control over financial reporting during the fiscal year ending August 31, 2014. We plan to continue funding improvements throughout the year with the goal of remediation of the material weaknesses we have identified. Our management estimates additional costs we will incur in connection with remediation efforts will approximate $65,000 for the year ending August 31, 2014.

Management’s report is not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission, and accordingly, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None

Table of Contents

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The following table lists our sole director and executive officer, who will serve in the capacities noted until successors are duly appointed and qualified, as of August 31, 2013:

Name	Age	Position
J’Amy Owens	52	Chief Executive Officer, Chief Financial Officer and Secretary

Current Directors and Officers – J’Amy Owens has been our sole director and has served as President and Chief Executive Officer since acquiring a controlling interest in the Company in October 2009. A 1979 graduate of Punahou Preparatory Academy, she attended Loyola Marymount during 1979 and 1980. Since 2000, she has been the Chief Executive Officer of J’Amy Owens Group, a comprehensive full service branding and management consultancy, which provides turnkey business incubation for consumer brands and retailers, with a specialization in startups and turnarounds. During 1986 to 2000, she founded the Retail Group and grew it to a 65 person strategic retail planning company which was responsible for the development of over 400 Fortune 100 and 500 consumer business and retail models while directing $500 million in annual spending. During 1998 to 2000, she co-founded Laptop Lane, a virtual on-site office centers within the terminals of major U.S. airports. During 1997 to 1999, J’Amy was co-founder of Ravenna Gardens, an upscale gardening center catering to the gardens of urban dwellers

Code of Ethics - We have not adopted a Code of Ethics for the Board and any employees as we currently only have a single director and executive officer. As our business continues to expand and we appoint additional executive officers and directors we will implement a Code of Ethics. The Company does have an Insider Trading Policy as well as an employee handbook, both with stated policies and procedures.

Corporate Governance - We currently have no standing audit, compensation or nominating committees or committees performing similar functions, nor do we have written audit, compensation or nominating committee charters. Our director believes it unnecessary to have such committees at this time because we have only one director and the Board of Directors can perform the functions of such committees adequately.

We do not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The Board of Directors believes that, given the stage of our development, a specific nominating policy would be premature until our business operations develop to a more advanced level. We currently do not have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment. A shareholder who wishes to communicate with our Board of Directors may do so by directing a written request addressed to our director at the address on the cover of this report.

Limitation of Liability of Directors - Pursuant to the Nevada General Corporation Law, our Articles of Incorporation exclude personal liability for our Directors for monetary damages based upon any violation of their fiduciary duties as Directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a Director receives an improper personal benefit. This exclusion of liability does not limit any right which a Director may have to be indemnified and does not affect any Director's liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a Director if they acted in good faith and in a manner they believed to be in our best interests.

Involvement in certain legal proceedings - During the past ten years, none of the Company’s directors and executive officers has been:

	•	the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
	•	convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
	•	subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;
	•	found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, that has not been reversed, suspended, or vacated;
	•	subject of, or a party to, any order, judgment, decree or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of a federal or state securities or commodities law or regulation, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
	•	subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Table of Contents

No director, officer or affiliate of the Company, or any beneficial owner of 5% or more of the Company’s common stock, or any associate of such persons, is an adverse party in any material proceeding to, or has a material interest adverse to, the Company or any of its subsidiaries.

Section 16(a) Beneficial Ownership Reporting Compliance - Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our executive officers and directors, and persons who beneficially own more than ten percent of our common stock, to file initial reports with the SEC on their initial beneficial ownership of our common stock and any subsequent changes. They must also provide us with copies of the reports.

ITEM 11. EXECUTIVE COMPENSATION.

As a “smaller reporting company,” we have elected to follow the scaled disclosure requirements for smaller reporting companies with respect to the disclosures required by Item 402 of Regulation S-K. Under the scaled disclosure obligations, we are not required to provide a Compensation Discussion and Analysis, Compensation Committee Report and certain other tabular and narrative disclosures relating to executive compensation.

Summary Compensation Table

Name	Principal Position	Year Ended Augut 31,	Salary (a)		Bonus, awards & all other compensation		Total

J'Amy Owens	Chief Executive Officer	2013	$	96,000	$	60,000	$	156,000
		2012	$	96,000	$	-	$	96,000

(a)	– Includes unpaid and accrued wages of $79,404 and $26,868 at August 31, 2013 and 2012, respectively.

(b)	– Represents amount recorded for 2,000,000 shares of Series A Preferred Stock awarded May 15, 2013.

Narrative Disclosure to Summary Compensation Table - We have not entered into any employment agreements with our officer. We do not have any existing arrangements providing for payments or benefits in connection with the resignation, retirement or other termination of our officer, or a change in control of the Company or a change in the officers’ responsibilities following a change in control. We have no equity incentive plan.

Outstanding Equity Awards at Fiscal Year-End - As of August 31, 2013, we have no formal equity compensation plan in effect nor have we granted any equity-based awards.

Compensation of Directors - As of August 31, 2013, our sole director has not received any compensation from us for serving as our director, nor do we have any plans to compensate our sole director.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information as of January 2, 2014, regarding the number of shares of common stock beneficially owned by (i) each person that we know beneficially owns more than 5% of our outstanding common stock, (ii) each of our named executive officers, (iii) each of our directors and (iv) all of our named executive officers and directors as a group. The amounts and percentages of common stock beneficially owned are reported on the basis of SEC rules governing the determination of beneficial ownership of securities. Under the SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days through the exercise of any stock option, warrant or other right. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. Unless otherwise indicated, each of the shareholders named in the table below, or his or her family members, has sole voting and investment power with respect to such shares of common stock. As of January 2, 2014, there were 55,330,404 shares of our common stock issued and outstanding.

Table of Contents

			percentage
name	shares		of class

J'Amy Owens Chairman and Chief Executive Officer		7,883,203		14	%
William Von Schneidau		4,780,000		9	%
Alan Brown		4,643,017		8	%
Kathleen Donahue		4,643,017		8	%
All Directors and Named Executive Officers as a Group (1 Person)		17,169,237		31	%

J’Amy Owens also owns 2,000,000 shares of our Series A Preferred Stock, which shares are entitled to ten votes per share.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Certain Relationships and Related Transactions – J’Amy Owens, our sole officer and director and principal shareholder, acquired a majority of the Company’s ownership in 2009, and during the fiscal year ended August 31, 2010, the Company acquired ownership of a business she co-founded to develop the “Bill the Butcher” retail concept. Ms. Owens is involved in other business activities, and as a result may face a conflict in selecting between the Company and other business interests. We have not established a policy for resolution of such conflicts.

Settlement of Litigation - In October 2010, a former employee commenced a lawsuit in the Superior Court of the State of Washington against the Company, J’Amy Owens, its sole officer and director (together the with the Company the “BtB Parties), and certain advisors to the Company (“Other Parties”). The complaint alleged that the Company breached its employment agreement with the plaintiff and that the former employee was wrongfully discharged in violation of public policy. The former employee sought damages in an undefined amount, injunctive relief, and attorneys’ fees. Additionally, the plaintiff also asserted a claim against our sole officer and director, personally, for breach of a stock purchase agreement. On July 17, 2012, the Company, Ms. Owens and the former employee entered into a settlement agreement and general release. As part of the settlement, the BtB Parties provided a declaration with respect to certain matters pertaining to the former employee’s lawsuit with the Other Parties, and all claims, demands, expenses, attorney fees, causes of action or suits between and among the Company, Ms. Owens and the former employee were released and fully settled. There was no compensation in cash or securities to the former employee who commenced the lawsuit.

In June 2011, an action was commenced by the former owner and co-founder of the company we acquired in 2010, in the Superior Court of the State of Washington, County of King, against the BtB Parties and the Other Parties. The plaintiff was seeking damages or the rescission of a Related Party Agreement and a Stock Purchase Agreement. In June 2012, the Court awarded the plaintiff 6,270,000 shares of our common stock, which were issued in June 2012. On August 3, 2012, the Company, Ms. Owens and the plaintiff entered into a settlement agreement and general release pursuant to which, among other things, all claims, demands, expenses, attorney fees, causes of action or suits between and among the Company, Ms. Owens and the plaintiff were released, the plaintiff retained all shares previously issued without restrictions on the sale and transfer of said stock except as provided for by applicable Securities Laws, and except under certain circumstances, and we issued to the plaintiff a $130,000 non-interest bearing note payable due July 1, 2013. A discount for imputed interest of approximately $10,000 was recorded using an estimated interest rate of 12%, which is amortized to interest expense over the term until maturity. The note payable is collateralized by a pledge of interests in all of the Company’s assets on a pari passu basis with holders of other collateralized notes payable, and payments on the note are required in the amount of 6.5% of proceeds received by the Company from securities offerings subsequent to the date of the settlement agreement, which proceeds are to be paid at finance closings. In connection with the issuance of shares and notes payable and with related legal fees and expenses, we have recognized settlement expense of approximately $766,000 during the year ended August 31, 2012. During the year ended August 31, 2013 we received 6,270,000 shares of our common stock from Ms. Owens from personally owned shares. These shares were cancelled. The transfer of shares was to return shares the Company previously issued pursuant to terms of a settlement agreement by a former owner as described above. The fair value of shares was $251,000 based on closing market price at the transfer date and has been recorded as an increase in additional paid-in capital, similar to that of a capital contribution.

Director Independence – Our current director is not deemed independent for the purposes of the listed company standards of The NASDAQ Stock Market LLC currently in effect and approved by the SEC and all applicable rules and regulations of the SEC.

Table of Contents

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Peterson Sullivan LLP has served as our independent registered public accounting firm to audit our books and accounts for the fiscal years ending August 31, 2013 and 2012. The aggregate fees billed for the last two fiscal years for professional services rendered by Peterson Sullivan were as follows:

	2013		2012
Audit fees	$	50,298	$	38,526
Audit-related fees		-			-
Tax fees		-			-
All other fees		-			-

In the above table, “audit fees” are fees billed for services provided related to the audit of our annual financial statements, quarterly reviews of our interim financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for those fiscal periods. “Audit-related fees” are fees not included in audit fees that are billed by the independent accountant for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements. “Tax fees” are fees billed by the independent accountant for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the independent accountant for products and services not included in the foregoing categories.

Our Board of Directors pre-approves all services provided by our independent accountants. Our Board of Directors reviewed and approved all of the above services and fees.

Table of Contents

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

The following documents are filed as part of or are included in this Annual Report on Form 10-K:

	1.	Financial statements listed in the Index to Financial Statements, filed as part of this Annual Report on Form 10-K; and
	2.	Exhibits listed in the Exhibit Index filed as part of this Annual Report on Form 10-K.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	BILL THE BUTCHER, INC. (Registrant)

Date: January 10, 2014	By:	/s/ J’Amy Owens
		J’Amy Owens
		President, Chief Executive Officer, Chief Financial Officer,
		Treasurer, Secretary and sole Director
		(Principal Executive Officer, Principal Financial Officer and
		Principal Accounting Officer)

Table of Contents

EXHIBIT INDEX

Exhibit No.		Description
2.1		Related Party Purchase Agreement between W K, Inc. and Reshoot & Edit dated March 26, 2010 (Incorporated herein by reference to Exhibit 2.1 to Current Report on 8-K filed March 29, 2010)
3.1.1		Articles of Incorporation (Incorporated herein by reference to Exhibit 3.1 to Registration Statement on Form SB-2 filed October 3, 2006)
3.1.2		Articles of Amendment to the Articles of Incorporation, effective May 24, 2010 (Incorporated herein by reference to Exhibit 3.1.2. to Annual Report on Form 10-K filed December 13, 2010 )
3.2		Bylaws (Incorporated herein by reference to Exhibit 3.2 to Registration Statement on Form SB-2 filed by Reshoot & Edit on October 3, 2006)
4.1		Common Stock Purchase Warrant issued to Montage Venture Group LLC, effective April 2, 2010 (Incorporated herein by reference to Exhibit 4.1 to Annual Report on Form 10-K filed December 13, 2010)
4.2		Stock Option Agreement, dated August 1, 2010, with Wall Street Consultants, Inc. (Incorporated herein by reference to Exhibit 4.2 to Annual Report on Form 10-K filed December 13, 2010)
4.3		Form of Registration Rights Agreement, effective April 2, 2010, between Registrant and Montage Venture Group LLC (Incorporated herein by reference to Exhibit 4.3 to Annual Report on Form 10-K filed December 13, 2010)
†21.1		List of Subsidiaries
†31.1		Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
†32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as signed by the Chief Executive Officer and Chief Financial Officer

# Management contract or compensatory plan, contract or arrangement

† Filed herewith

our inability to obtain additional funding and continue as a going concern;

our limited operating history and the significant challenges we face in executing our business plan;

the material deficiencies in our internal controls over financial reporting;

our ability to increase store revenues and further develop our brand and business model;

our dependence on the financial performance of stores located in one geographic area; and

our ability to attract and retain key officers and employees.