f10k2013_boldfacegroup.htm

CONSOLIDATED BALANCE SHEETS

	June 30, 2013			June 30, 2012
ASSETS

Current assets:
Cash	$	388,892		$	71,532
Accounts receivable		100,087			-
Due from factor, net		164,090			-
Inventory (net of reserve of $365,772 and $0, as of June 30, 2013 and June 30, 2012, respectively)		1,948,908			-
Prepaid inventory		258,531			349,679
Prepaid expenses and other current assets		89,786			2,220
Current portion of prepaid royalty		378,960			640,351
Current portion of deferred financing costs, net		29,899			150,150
Total current assets		3,359,153			1,213,932

Prepaid royalty		-			268,421
Property and equipment, net		669,033			-
Deferred financing costs, net		328,893			-
License acquisition costs		24,504			11,782

Total assets	$	4,381,583		$	1,494,135

LIABILITIES AND SHAREHOLDERS' DEFICIT

Current liabilities:
Short-term loans	$	-		$	1,925,030
Accounts payable		2,481,852			145,839
Accrued expenses and other current liabilities		806,553			108,863
Current portion of convertible debt, net of debt discount		23,476			-
Due to Gold Grenade, LLC		-			108,475
Total current liabilities		3,311,881			2,288,207

Long-Term Liabilities
Convertible debt, net of debt discount		258,240			-
Derivative liability		1,660,440			-
Total Long-Term Liabilities		1,918,680			-

Total Liabilities		5,230,561			2,288,207

Commitments and Contingencies

Shareholders' deficit:
Preferred stock, $.001 par value, 10,000,000 shares authorized, zero issued and outstanding		-			-
Common stock, $.001 par value, 300,000,000 shares authorized, 155,301,468 and 85,200,116 shares issued as of June 30, 2013 and June 30, 2012 respectively		155,301			85,200
Treasury stock, at cost - 999,680 and 0 shares as of June 30, 2013 and June 30, 2012 respectively		(228,284	)		-
Additional paid in capital		6,841,822			-
Accumulated deficit		(7,617,817	)		(879,272	)
Total shareholders' deficit		(848,978	)		(794,072	)

Total liabilities and shareholders' deficit	$	4,381,583		$	1,494,135

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

F-2

BOLDFACE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Twelve Months Ended June 30, 2013			Date of Inception (April 26, 2012) to June 30, 2012
Revenues
Gross revenues	$	6,666,201		$	-
Discounts		1,335,136			-
Revenues, net of discounts		5,331,065			-

Cost of Goods Sold, Net		3,307,304			-

Gross Profit		2,023,761			-

Operating expenses:
Research and development		61,440			65,190
Royalty expense		639,813			91,228
Professional fees		2,114,818			165,916
General and administrative expenses		3,535,367			195,579
Depreciation and amortization expense		1,711,135			-
Product development fee - related party		872,700			212,104
Total operating expense		8,935,273			730,017

Loss from operations		(6,911,512	)		(730,017	)

Other (income) / expenses:
Interest expense, net		1,711,193			64,155
Loss from debt extinguishment		2,098,819			-
Derivative liability gain		(5,411,959	)		-

Net loss	$	(5,309,565	)	$	(794,172	)

Net loss per share attributable to common shareholders—basic and diluted	$	(0.06	)	$	(0.01	)

Weighted average number of common shares used in computation—basic and diluted		89,073,174			85,200,116

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

F-3

BOLDFACE GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

	Twelve Months Ended June 30, 2013			Date of Inception (April 26, 2012) to June 30, 2012

Cash flows from operating activities:
Net loss	$	(5,309,565	)	$	(794,172	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock compensation expense		407,491			-
Stock issued for services		506,302			-
Inventory write-offs		365,772			-
Amortization of license acquisition costs		2,662			380
Amortization of deferred financing costs		1,513,200			41,463
Amortization of debt discount		1,201,959			-
Depreciation		197,935			-
Loss from conversion of debt		2,098,819			-
Derivative liability gain		(5,411,959	)		-
Change in operating assets and liabilities:
Accounts receivable		(100,087	)		-
Due from factor, net		(164,090	)		-
Prepaid royalty		529,812			(908,772	)
License acquisition costs		(15,384	)		(12,162	)
Inventory		(2,314,680	)		-
Deposit		(3,900	)		(2,220	)
Prepaid expenses and other current assets		16,332			-
Prepaid inventory		91,149			(349,679	)
Accounts payable		2,336,013			145,839
Accrued expenses and other current liabilities		774,406			108,863
Due to Gold Grenade, LLC		(108,475	)		108,475
Net cash used in operating activities		(3,386,288	)		(1,661,985	)

Cash flows from investing activities:
Acquisition of property and equipment		(866,968	)		-
Net cash used in investing activities		(866,968	)		-

Cash flows from financing activities:
Issuance of common stock, net of financing fees		783,480			100
Purchase of treasury stock and warrants		(250,000	)		-
Proceeds from short term loans		1,335,000			1,733,417
Paydown of short term loans		(1,335,000	)		-
Proceeds from convertible debt, net of deferred financing fees		4,037,136			-
Net cash provided by financing activities		4,570,616			1,733,517

Net change in cash		317,360			71,532

Cash at beginning of period		71,532			-

Cash at end of period		388,892			71,532

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest		225,078			-
Income Taxes		-			-

Non-cash financing activities:
Conversion of bridge notes		5,305,030			-
Contribution from shareholders for deferred financing cost		1,537,940			-
Other non-cash deferred financing fees from issuance of convertible debt		264,520			-
Fair value of warrants issued in connection with equity and debt financing		7,252,282			-

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

F-4

Boldface Group, Inc.

Statement of Shareholders’ Deficit

	Common Stock
	Shares		Amount (Par value)		Treasury Stock			Additional paid in capital			Accumulated Deficit			Total Equity

Balance, April 26, 2012		85,200,116	$	85,200	$	-		$	-		$	(85,200	)	$	-

Net loss									-			(794,172	)		(794,172	)
Balance, June 30, 2012		85,200,116		85,200		-			-			(879,372	)		(794,172	)

Conversion of bridge note at reverse, net		-		-		-			1,847,432			-			1,847,432
Net loss		-		-		-			-			(5,309,565	)		(5,309,565	)
Stock based compensation		-		-		-			407,491			-			407,491
Issuance of warrants / derivative liability		-		-		-			(2,442,990	)		(1,428,880	)		(3,871,870	)
Issuance of stock		3,443,920		3,444		-			730,177			-			733,621
Issuance of stock for services		1,818,499		1,818		-			287,886			-			289,704
Issuance of stock from conversion of debt and exercise of warrants		64,838,933		64,839		-			4,473,886			-			4,538,725
Capital contribution by shareholders		-		-		-			1,537,940			-			1,537,940
Repurchase of stock		-		-		(228,284	)		-			-			(228,284	)
Balance, June 30, 2013		155,301,468	$	155,301	$	(228,284	)	$	6,841,822		$	(7,617,817	)	$	(848,978	)

*REVERSE WAS BOOKED RETROACTIVELY AT THE START OF THE FIRST FISCAL YEAR PRESENTED.

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

F-5

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 1. FORMATION AND NATURE OF BUSINESS

Organization

BOLDFACE, Group Inc. (“BLBK”) together with its wholly owned subsidiary BOLDFACE Licensing + Branding (“BLB” and collectively, “we”, “us”, “our” or the “Company”) was incorporated under the laws of the State of Nevada on July 9, 2007. On July 12, 2012, BOLDFACE Acquisition Corp., the Company’s wholly owned subsidiary, merged with and into BLB, with BLB remaining as the surviving entity (the “Merger”). As a result of the Merger, the Company acquired the business of BLB and will continue the existing business operations of BLB as the Company’s wholly owned subsidiary. In connection with the Merger, on August 14, 2012, the Company’s Board of Directors approved a change of the Company’s fiscal year end from September 30 to June 30.

For financial reporting purposes, the Merger represented a capital transaction of BLB or a “reverse merger” rather than a business combination, because the sellers of BLB effectively controlled the combined company immediately following the completion of the Merger. As such, BLB was deemed to be the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of BLB.

BLB was incorporated under the laws of the State of Nevada on April 26, 2012. BLB was founded by Ms. Nicole Ostoya, the Company’s Chief Executive Officer, President and a director, and Ms. Robin Coe-Hutshing, a principal shareholder of the Company. Ms. Ostoya and Ms. Coe-Hutshing are beauty industry veterans with over 40 years combined experience in the industry. BLB’s focus is on licensing top tier entertainment and designer brands for opportunities in the beauty, fragrance and personal care market. BLB contracts to design, manufacture and sell branded color cosmetics, hair preparations, fragrances, home fragrances, skin care, beauty tools, and other beauty and personal care products in multiple channels of distribution.

To date, the Company has devoted its efforts to developing, marketing and selling its cosmetics/beauty brand by Kourtney, Kim and Khloe Kardashian into retail channels, developing its Mario Lopez fragrance and UGLYDOLL® personal care brands, evaluating additional license agreements with additional celebrities and brands, and the raising of capital.

Going Concern Liquidity

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. However, the Company’s ability to continue as a going concern will be dependent upon the Company’s ability to generate sufficient cash flow from its planned operations to meet its obligations on a timely basis, to obtain additional financing, and ultimately attain profitability. The Company’s ability to continue as a going concern will also be determined by its ability to obtain additional equity and/or debt financing or ability to generate sufficient revenue to cover its operating expenses. Additional financing may not be available upon acceptable terms, or at all.

To date, we have financed operations to date through the proceeds of the private placement of equity, convertible debt instruments and factoring agreements. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) acquisition of additional celebrity licenses; (ii) payments under existing celebrity licenses, (iii) developmental expenses associated with a start-up business; (iv) research and development costs associated with new product offerings, and (v) management and consulting costs, as well as general administrative expenses, including the costs of being a public company. We intend to finance these expenses with further issuances of debt and equity securities. Thereafter, we expect we will need to raise additional capital and generate revenues to meet short-term and long-term operating requirements. Additional financing may not be available on acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations. We currently do not have a specific plan of how we will obtain such funding; however, we anticipate that additional funding will be in the form of equity and/or debt financing and/or additional short-term borrowing. As such, these factors raise substantial doubt as to the Company’s ability to continue as a going concern.

The Company’s consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

F-6

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and transactions are eliminated in consolidation.

Method of Accounting

The Company maintains its accounting records on an accrual method in conformity with accounting principles generally accepted in the United States of America (“US GAAP”).

Use of Estimates

In preparing the financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

Revenue Recognition

As required by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collection is probable.

The Company offers its customers a variety of sales and incentive programs, including discounts, allowances, coupons, slotting fees, and co-op advertising; such amounts are recorded as a reduction in revenue over the period in which revenue is recognized. The Company reduced revenue in the amount of $0 and $1,335,136 for the period ended June 30, 2012 and year ended June 30, 2013, respectively, and such amounts are included in discounts in the accompanying statement of operations.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable represent payments due to the Company for previously recognized net sales, reduced by an allowance for doubtful accounts for balances, which are estimated to be uncollectible at June 30, 2012 and June 30, 2013, respectively. The Company grants credit terms in the normal course of business to its customers. The Company does not require collateral or other security to support credit sales. The allowance for doubtful accounts is determined based on historical experience and ongoing evaluations of the Company’s receivables and evaluations of the risks of payment. The allowance for doubtful accounts is recorded against accounts receivable balances when they are deemed uncollectible. When accounts are deemed significantly past due and uncollectible, the accounts receivable balances are written down for the amount deemed to be uncollectible. Recoveries of accounts receivable previously reserved are recorded in the consolidated statements of operation when received. At June 30, 2013, the Company’s one customer accounted for approximately 94% of outstanding accounts receivable. The Company did not have any accounts receivable for the period ended June 30, 2012.

F-7

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Inventories

Inventories, which consist primarily of finished goods, include items which are considered salable or usable in future periods, and are stated at the lower of cost or market value, with cost being based on standard cost which approximates actual cost on a first-in, first-out basis. Costs include direct materials, direct labor and overhead (e.g., indirect labor, rent and utilities, depreciation, purchasing, receiving, inspection and quality control), in-bound freight costs. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold. In the period ended June 30, 2012 and the year ended June 30, 2013, the Company recorded $0 and $0.366 million, respectively, in write-offs.

Property and Equipment

Property and equipment as of June 30, 2013 consist of costs incurred by the Company in connection with installing display fixtures at certain key customer display rooms and retail stores. The display fixtures are being depreciated on a straight-line basis over two years, which approximates the estimated useful lives of such assets. Display fixtures maintained at customer display rooms and retail stores amounted to $866,968 at June 30, 2013. Depreciation expense amounted to $0 and $197,935 for the period ended June 30, 2012 and year ended June 30, 2013, respectively, and is included in depreciation & amortization expense in the accompanying statements of operations.

Advertising

Advertising costs are expensed as incurred. Total advertising expenses amounted to $0 and $561,765 for the period ended June 30, 2012 and year ended June 30, 2013, respectively, and are included in general and administrative expenses in the accompanying statement of operations.

Selling Expenses and Commissions

Selling expenses are expensed as incurred. Total selling expenses amounted to $0 and $84,338 for the period ended June 30, 2012 and the year ended June 30, 2013, respectively, and are included in general and administrative expenses in the accompanying statement of operations.

Selling commissions are expensed as incurred. Total selling commissions amounted to $0 and $236,600 for the period ended June 30, 2012 and the year ended June 30, 2013, respectively, and are included in professional fees in the accompanying statement of operations.

F-8

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Deferred Financing Costs

Deferred financing costs represent fees paid in connection with obtaining short-term loans and convertible notes (see Notes 4, 5 and 6). These fees are amortized using a method that approximates the effective interest method over the term of the related financing.

As of June 30, 2012 and June 30, 2013, deferred financing costs of $191,613 and $365,179, respectively, prior to accumulated amortization of $41,463 and $6,387, are presented on the accompanying balance sheet. Amortization of deferred financing costs of $41,463 and $6,387, as of June 30, 2012 and June 30, 2013, respectively, are included in depreciation and amortization expenses in the accompanying statement of operations. The remaining deferred financing costs will be fully amortized by December 20, 2014.

Debt Discount

The Company records debt discounts in connection with raising funds through the issuance of convertible debt (see Note 5 and 6). These costs are amortized to non-cash interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

As of June 30, 2012 and June 30, 2013, convertible debt, net of unamortized debt discounts, was $0 and $281,716, respectively. Amortization of debt discounts of $0 and $1,201,959 is included in interest expense in the accompanying statement of operations for the period ended June 30, 2012 and the year ended June 30, 2013, respectively. The remaining debt discounts will be fully amortized by December 20, 2014.

Derivative Financial Instruments

GAAP requires derivative instruments embedded in convertible debt or equity instruments, to be bifurcated and measured at their fair value for accounting purposes. In determining the appropriate fair value, the Company uses the Black-Scholes option-pricing model. In assessing the debt instruments with characteristics of liability and equity, management determines if the convertible debt host instrument is conventional convertible debt and if there is a beneficial conversion feature. If the instrument is not considered conventional convertible debt, the Company will estimate the fair value of the embedded derivative instruments. The warrant liability is measured at fair value on a recurring basis using level 2 inputs (see Notes 5, 6 and 7).

Financial Instruments and Concentrations of Business and Credit Risk

FASB ASC Subtopic 825-10, Financial Instruments, requires disclosure of fair value information about financial instruments. The Company’s financial instruments include cash and cash equivalents, convertible debt, a factoring line of credit, short-term loans, accounts payable and other current assets and liabilities. The fair value of these instruments approximates their carrying value due to their relatively short maturities. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Customer concentration also subjects the Company to concentrations of credit risk. The Company maintains cash balances that at times exceed amounts insured by the Federal Deposit Insurance Corporation. Two customers accounted for approximately 44% and 24% of the Company’s net revenues for the twelve months ended June 30, 2013. Accounts receivable for one customer represented 94% of the Company’s accounts receivable as of June 30, 2013. The Company did not have any revenue during the period ended June 30, 2012. Three suppliers represented 23%, 21% and 12% of the Company’s inventory purchases as of June 30, 2013. The Company did not have any inventory as of June 30, 2012. The Company has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk in this area.

F-9

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

License Acquisition Costs

License acquisition costs represent legal fees paid in connection with obtaining the Company’s licensing agreements (see Note 3). These fees are amortized using straight-line method over the term of each licensing agreement.

As of June 30, 2012 and June 30, 2013, license acquisition costs, net of amortization, were $11,782 and $24,504, respectively on the accompanying balance sheet. Amortization of license acquisition costs of $380 and $2,662 are included in depreciation and amortization expense in the accompanying statement of operations for the period ended June 30, 2012 and the year ended June 30, 2013, respectively. Estimated future license acquisition cost amortization expense is as follows:

Twelve months periods ending June 30,
2014	$	6,381
2015		7,793
2016		7,793
2017		2,537
	$	24,504

Impairment of Long-Lived Assets

The Company is subject to the provisions of FASB ASC Topic 360, Property, Plant and Equipment – Impairment or Disposal of Long Lived Assets, which requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the 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 undiscounted future cash flows expected to be generated by the asset. In such cases, the carrying value of these assets are adjusted to their estimated fair value and assets held for sale are adjusted to their estimated fair value less selling expenses. No impairment losses of long-lived assets or intangible assets were recognized for the period ended June 30, 2012 and the year ended June 30, 2013.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company provides a valuation allowance against its deferred tax assets when circumstances indicate that it is no longer more likely than not that such assets will be realized.

F-10

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Net Loss per Share

Basic net income / (loss) per share is computed by dividing net income / (loss) by the weighted average number of common shares outstanding for the period. The Company’s potential dilutive shares, which include common stock options, common stock warrants and convertible debt have not been included in the computation of diluted net loss per share for all periods where there was a net loss as the result would be antidilutive. Such potentially dilutive shares are excluded when the effect would be to reduce net loss per share. Such potential common shares consist of the following:

	As of June 30, 2013
Warrants		60,751,751
Stock options		6,550,000
Convertible Debt		24,705,882
Total Shares		92,007,633

NOTE 3. PREPAID ROYALTY

During the year ended June 30, 2013, the Company entered into a licensing agreement with an individual acquiring the exclusive right to use the licensor’s image in connection with the development, production, distribution, advertisement, promotion and sale of products and obtain certain ancillary services of the licensor. The licensing agreement remains in effect through February 29, 2016.

During the term of the licensing agreement and as consideration for the grant of rights and license the licensor’s image, the Company has agreed to pay the licensor depending on the product sold, a royalty rate on all net sales of all products within the contract term. In addition the Company has agreed to pay a guaranteed minimum royalty payment of $600,000 depending on launch date of various products in accordance with the following schedule, but subject to adjustments:

●

Contract period one: $100,000

●

Contract period two: $225,000

●

Contract period three: $275,000

As part of the licensing agreement, $100,000 was prepaid and is recorded under Prepaid Royalty as of June 30, 2013.

During the year ended June 30, 2013, the Company entered into a licensing agreement with an entity acquiring the exclusive right to use the licensor’s image in connection with the development, production, distribution, advertisement, promotion and sale of products and obtain certain ancillary services of the licensor (the “Third License”). The licensing agreement remains in effect through April 16, 2016.

During the term of the licensing agreement and as consideration for the grant of rights and license the licensor’s image, the Company has agreed to pay the licensor depending on the product sold, a royalty rate on all net sales of all products within the contract term. In addition the Company has agreed to pay a guaranteed minimum royalty payment of $100,000 depending on launch date of various products in accordance with the following schedule, but subject to adjustments:

●

Contract period one: $33,333

●

Contract period two: $33,333

●

Contract period three: $33,334

F-11

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

As part of the licensing agreement, $10,000 was prepaid and is recorded under Prepaid Royalty as of June 30, 2013.

During the period ended June 30, 2012, the Company entered into a licensing agreement with three individuals (collectively the “Licensors”) acquiring the exclusive right to use the Licensors’ image in connection with the development, production, distribution, advertisement, promotion and sale of products and obtain certain ancillary services of the Licensors. The licensing agreement remains in effect through November 30, 2016. The Company has the option to extend the term of this agreement for an additional period of eighteen months.

During the term of the licensing agreement and as consideration for the grant of rights and license the Licensors’ image, the Company has agreed to pay the Licensors depending on the product sold, a single digit royalty on all wholesale sales of all products within the contract term. In addition the Company has agreed to pay a guaranteed minimum royalty payment of $4,686,125 or $5,206,900 depending on launch date of various products in accordance with the following schedule, but subject to adjustments:

●

Contract period one: $1,000,000

●

Contract period two: $925,000 or $962,000

●

Contract period three: $1,188,625 or $1,394,900

●

Contract period four: $1,572,500 or $1,850,000

In addition to the royalty payment and guaranteed minimum royalty payment, the Company granted the Licensors warrants, on a cashless exercise basis, to purchase 10,000,000 common shares of the Company.

As of June 30, 2012, the Company has paid the Licensors $1,000,000 as a non-refundable advance payment for contract period one through November 30, 2013.

NOTE 4. SHORT TERM LOANS AND FACTORING AGREEMENT

On September 7, 2012 and September 25, 2012, the Company issued secured bridge loan promissory notes totaling in the aggregate $300,000 bearing interest at a rate of 10% per annum.

The promissory notes were issued in two installments:

●

September 7, 2012 - $150,000, due by December 7, 2012

●

September 25, 2012 - $150,000, due by December 25, 2012

As of March 28, 2013, the Company had re-paid the principal and accrued interest on all of the bridge loan promissory notes.

On November 9, 2012, the Company issued a short-term note in the principal amount of $60,000 to a stockholder of the Company. The note accrued interest at an annual rate of 10%. On December 21, 2012, the Company re-paid the principal plus accrued interest on this promissory note.

On October 4, 2012, the Company entered into a Purchase Order Sale Agreement (the “PO Agreement”) with Solops LLC, under which it financed certain of its contracts of orders (or purchase orders) (the “Orders”), which represent amounts due from bona fide contracts for the sale and delivery of the Company’s goods to certain merchants, in the principal amount of $1,125,000. Pursuant to the PO Agreement, the Company sold the Orders to Solops for a purchase price of $875,000. Under the terms of the PO Agreement, Solops will receive $1,065,000 through a combination of the merchants’ payments under the Orders directly to Solops, the Company’s collection of accounts receivable under the Orders and resulting payments to Solops and/or any other payments made by the Company to Solops under the PO Agreement. Upon the full payment to Solops of $1,065,000, the PO Agreement will immediately terminate and Solops will convey, assign and deliver back to the Company the Orders and all of its rights thereunder. After such full payment is made, the Company will regain sole ownership of the Orders and it will not have any further obligations to Solops, and Solops will not have any further rights, with respect to the Orders or under the PO Agreement. On November 21, 2012, the Company re-paid its obligation under the PO Agreement.

F-12

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

On December 7, 2012, the Company issued a short-term promissory note totaling $100,000 bearing interest at a rate of 10% per annum. On December 21, 2012, the Company re-paid the principal plus interest on this promissory note.

Effective as of November 21, 2012, the Company entered into a one-year Factoring Agreement and Supply Agreement with Star Funding, Inc. Under the terms of the Factoring Agreement, the Company sells most of its trade receivables to the factor without recourse as to credit risk but with recourse for any claims by the customer for adjustments in the normal course of business. The Company is able to borrow up to 80% of its factored receivables. Under the terms of the Supply Agreement, the Company is able to finance the purchases of its inventory. For the period ended June 30, 2012 and the year ended June 30, 2013, interest and commissions totaled approximately $0 and $154,887, respectively, under these agreements. Balances due from factor include outstanding accounts receivables from customers net of allowances for discounts and chargebacks, advances and interest due to factor. The Factoring Agreement and Supply Agreement limit the Company’s ability to: incur additional debt, pay dividends or make distributions to our stockholders, incur liens that would rank senior in priority to, or pari passu with, the obligations under the Notes, sell certain assets, and sell or otherwise dispose of any assets or rights of our Company or any subsidiary, subject to certain exceptions. Substantially all of the Company’s assets are collateralized against the Factoring Agreement and Supply Agreement.

On May 16, 2012 and May 17, 2012, the Company issued secured bridge loan promissory notes totaling in the aggregate $1,500,025 bearing interest at a rate of 10% per annum (the “Bridge Notes”). On June 1, 2012, the Company issued additional Bridge Notes totaling $425,005. As of June 30, 2012, $1,925,030 of Bridge Notes were outstanding and are presented under short-term loans in the accompanying balance sheet.

The promissory notes were issued in three installments:

●

May 16, 2012 - $1,440,000, due by November 15, 2012

●

May 17, 2012 - $60,025, due by November 16, 2012

●

June 1, 2012 - $425,005 due by November 30, 2012

The loan is due and payable on the earliest of:

●

On the dates mentioned above, or

●

Closing of additional financing by the Company of an amount equal to or greater than the amount borrowed, or

●

The date of closing of the merger between BLB and the Company

As of July 12, 2012, the Bridge Notes were converted into equity as the Company and BLB completed the merger.

In connection with the Bridge Notes, the Company recognized deferred financing costs of $191,613, prior to accumulated amortization of $41,463, as of June 30, 2012. The amortization of deferred financing costs of $41,463 is included in interest expense in the accompanying statement of operations for the year ended June 30, 2012. Upon the reverse merger in July of 2012 the deferred financing costs were fully amortized.

F-13

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 5. DECEMBER, MARCH AND APRIL CONVERTIBLE DEBT OFFERING

Convertible Note Offering

On December 21, 2012 the Company issued senior secured convertible notes (the “Convertible Notes”). The term of the Convertible Notes include an eight month maturity period and an annual interest rate of 12% which is accrued until payment or until the Convertible Notes are converted into equity. The Convertible Notes were issued at a price of $200,000 per unit, for total gross proceeds of $2,000,000 with an original issue discount of 0.2%. On March 28, 2013, the Company issued additional Convertible Notes for total gross proceeds of $1,130,000 with an original issue discount of 0.2%.

On April 8, 2013, the Company issued senior secured convertible notes (the “April Convertible Notes”). The term of the April Convertible Notes include an eight month maturity period and an annual interest rate of 12% which is accrued until payment or until the Convertible Notes are converted into equity. The Convertible Notes were issued at a price of $200,000 per unit, for total gross proceeds of $250,000. The investor is an affiliate of Mr. Victor Azrak, who was appointed as the Company’s director effective as of April 8, 2013.

The Convertible Notes and April Convertible Notes are convertible at a per share conversion price of $0.25, which is subject to a one-time reset right (the “Conversion Price Reset”) as well as “weighted average” and other customary anti-dilution protections (the “Debt Conversion Feature”). The Conversion Price Reset will be available on the earlier of: (i) the date of maturity of the 12% Notes or (ii) the completion of a subsequent financing by the Company of at least $5,000,000, (the “Reset Date”), if the closing price of the Company’s stock is less than $0.30 on the Reset Date. The conversion price after the reset will be equal to 70% of the 5-day VWAP immediately preceding the Reset Date.

In connection with the issuance of Convertible Notes, 12,520,000 five-year cashless exercise warrants (“Convertible Note Warrants”) were issued with “weighted average” and other customary anti-dilution protections. 6,260,000 Convertible Note Warrants are exercisable at $0.50 and 6,260,000 Convertible Note Warrants are exercisable at $0.25 (see Note 7 for further detail).

In connection with the issuance of April Convertible Notes, 1,000,000 five-year cashless exercise warrants (“April Convertible Note Warrants”) were issued with “weighted average” and other customary anti-dilution protections. 500,000 Convertible Note Warrants are exercisable at $0.50 and 500,000 Convertible Note Warrants are exercisable at $0.25 (see Note 7 for further detail).

As of June 20, 2013, the Convertible Notes, the April Convertible Notes, the Convertible Note Warrants and the April Convertible Note Warrants were converted into equity. The Convertible Notes and April Convertible Notes were converted at a per share price of $0.07, as the Company’s stock price was less than $0.30 on the Reset Date, for 50,575,333 shares. The Convertible Note Warrants and April Convertible Note Warrants were converted into 11,830,000 shares of the Company’s common stock.

F-14

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Debt Discounts

Convertible Note Warrants and Debt Conversion Feature

The fair value of the Convertible Note Warrants and the Debt Conversion Feature, issued as of December 21, 2012, totaling $1,353,720 was recorded as a debt discount in the accompanying balance sheet and was amortized as interest expense in the accompanying statement of operations over the term of the Convertible Note using the effective interest method (see Note 7 for further detail). As of June 30, 2013, the full value of this debt discount had been amortized as a result of the conversion of the Convertible Notes and Convertible Note Warrants into equity.

The fair value of the Convertible Note Warrants and the Debt Conversion Feature, issued on March 28, 2013, totaling $274,957 was recorded as a debt discounts in the accompanying balance sheet and was amortized as interest expense in the accompanying statement of operations over the term of the Convertible Note using the effective interest method (see Note 7 for further detail). As of June 30, 2013, the full value of this debt discount had been amortized as a result of the conversion of the Convertible Notes and Convertible Note Warrants into equity.

The fair value of the April Convertible Note Warrants and the Debt Conversion Feature, issued on April 8, 2013, totaling $39,851 was recorded as a debt discounts in the accompanying balance sheet and was amortized as interest expense in the accompanying statement of operations over the term of the April Convertible Note using the effective interest method (see Note 7 for further detail). As of June 30, 2013, the full value of this debt discount had been amortized as a result of the conversion of the April Convertible Notes and April Convertible Note Warrants into equity.

Original Issue Discount

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The Convertible Notes issued on December 21, 2012 and March 28, 2013 were issued with an original issue discount of 0.2%. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the term of the Convertible Note.

Convertible Note Face Value	$	3,380,000
Debt Discount
Convertible Note Warrant Derivative		908,649
Conversion Feature Derivative		713,768
Original Issue Discount		6,260
Total Debt Discount	$	1,628,677
Amortization of Debt Discount, as of June 30, 2013		(1,628,677	)
Debt Discount, Net	$	0

Convertible Note Carrying Value at June 30, 2013, gross	$	3,380,000
Conversion of Convertible Note into Equity	$	3,380,000
Convertible Note Carrying Value at June 30, 2013	$	0

April Convertible Note Face Value	$	250,000
Debt Discount
Convertible Note Warrant Derivative		35,434
Conversion Feature Derivative		4,417
Total Debt Discount	$	39,851
Amortization of Debt Discount, as of June 30, 2013		(39,851	)
Debt Discount, Net	$	0

Convertible Note Carrying Value at June 30, 2013, gross	$	250,000
Conversion of Convertible Note into Equity	$	250,000
Convertible Note Carrying Value at June 30, 2013	$	0

F-15

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Deferred Financing Costs

Transaction Fees

The Company paid Aegis Capital Corp. (“Aegis”) who acted as the sole placement agent for the closings of the Convertible Notes Offering a commission of 10% of the funds raised in the Convertible Notes offering and a 3% non-accountable reimbursement of its expenses, for a total payment of $406,900, which is recorded as a deferred financing cost in the accompanying balance sheet.

The Company incurred additional fees of $96,556 for legal and escrow agent fees in connection with the Convertible Notes Offering, which are recorded as a deferred financing cost in the accompanying balance sheet.

The Company paid Gottbetter Capital Markets (“GCM”) who acted as the sole placement agent for the April Convertible Notes a commission of 10% of the funds raised in the April Convertible Notes offering and a 1.5% non-accountable reimbursement of expenses, for a total payment of $28,750.

Convertible Note Broker Warrants

In addition, Aegis received five-year warrants (the “Convertible Note Broker Warrants”) to purchase 2,504,000 shares of the Company’s common stock. The Convertible Note Broker Warrants were issued with “weighted average” and other customary anti-dilution protections. The Convertible Note Broker Warrants are identical to the Convertible Note Warrants in all material respects, except that they are exercisable at $0.25. As of June 20, 2013, the Convertible Note Broker Warrants were considered converted into 2,253,600 shares of common stock based on the same conversion terms as the Convertible Note Warrants. The Convertible Note Broker Warrants were valued at approximately $194,000 based on a Black-Scholes model (see Note 7 for further detail).

April Convertible Note Broker Warrants

In addition, GCM received five-year warrants (the “April Convertible Note Broker Warrants”) to purchase 200,000 shares of the Company’s common stock. The April Convertible Note Broker Warrants were issued with “weighted average” and other customary anti-dilution protections. The April Convertible Note Broker Warrants are identical to the April Convertible Note Warrants in all material respects, except that they are exercisable at $0.25. As of June 20, 2013, the Convertible Note Broker Warrants were converted into 180,000 shares of common stock based on the same conversion terms as the Convertible Note Warrants. The April Convertible Note Broker Warrants were valued at approximately $57,000 based on a Black-Scholes model (see Note 7 for further detail).

Third Party Share Sale

The Convertible Note holders were sold 6,260,000 free trading shares by non-affiliated, third party shareholders of the Company at par value. Although the Company was not a party to the sale of these shares by third party shareholders, per FASB ASC Topic 718, the fair value of this non-affiliated third party transaction is recognized by the Company as a deferred financing cost of the Convertible Note transaction. Additionally, the Company will provide no reimbursement or compensation to the selling shareholders of the 6,260,000 free trading shares. As such, the Company does not anticipate recognizing any further expenses in relation to this third-party transaction. The fair value of this third party transaction of $1,537,940 is recorded under deferred financing costs in the accompanying balance sheet.

The unamortized deferred financing costs were expensed under Loss from Debt Extinguishment in the accompany statement of operations due to the June 20, 2013 conversion (see Note 8 for further detail).


Placement agent and other fees associated with Convertible Note offering	$	503,457
Convertible Note Broker Warrants		194,381
Third Party Share Grant		1,537,940
Total Deferred Financing Costs	$	2,235,777
Amortization of Deferred Financing Costs, as of June 30, 2013		(2,235,777	)
Deferred Financing Costs, Net, as of June 30, 2013	$	0

F-16

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Placement agent and other fees associated with April Convertible Note offering	$	28,855
April Convertible Note Broker Warrants		9,253
Total Deferred Financing Costs	$	38,108
Amortization of Deferred Financing Costs, as of June 30, 2013		38,108
Deferred Financing Costs, Net, as of June 30, 2013	$	0

NOTE 6. JUNE CONVERTIBLE DEBT OFFERING

June Convertible Note Offering

On June 20, 2013 the Company issued $1,500,000 senior secured convertible notes (the “June Convertible Notes”) with an original issue discount of 12%, and a conversion price of $0.068 per share (the “June Conversion Price”), for face value of $1,680,000. The term of the June Convertible Notes includes an eighteen-month maturity period, with partial redemptions beginning on June 1, 2014. The June Convertible Notes bear an annual interest rate of 8%, which is paid quarterly in the form of cash or equity beginning November 2013. Interest is payable in cash or at the Company’s option in shares of common stock, provided certain conditions are met, based on a share value equal to the lesser of (a) 90% of the average of the volume weighted average price (the “VWAP”) for the 20 consecutive trading days prior to the applicable interest payment date and (b) 100% of the average of the VWAP for the 20 consecutive trading days prior to the applicable interest payment date less $0.01. Upon any Event of Default (as defined in the June Convertible Note), the outstanding principal amount of the June Convertible Note, plus liquidated damages, interest, a premium of 30% and other amounts owing in respect thereof through the date of acceleration, shall become, at the June Convertible Note holders’ election, immediately due and payable in cash. Commencing five days after the occurrence of any Event of Default, the interest rate on the June Convertible Note shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. The June Conversion Price is subject to “full ratchet” and other customary anti-dilution protections. As of October 15, 2013, with the timely filing of our Form 10-K, the Company will remain in compliance with the covenants of the Debentures. The June Convertible Notes limit the Company from incurring additional indebtedness, pay dividends or make distributions to shareholders, incur liens that would rank senior in priority or pari passu to the June Convertible Notes, sell or otherwise dispose of any assets or rights of the Company or its subsidiaries.

In connection with the issuance of the June Convertible Notes, 24,705,882 five-year cashless exercise warrants (“June Convertible Note Warrants”) were issued with “weighted average” and other customary anti-dilution protections. The June Convertible Note Warrants are exercisable at $0.082 per share and are subject to “weighted average” and other customary anti-dilution protections (see Note 7 for further detail).

June Convertible Note Redemption

On each of June 1, 2014, July 1, 2014, August 1, 2014, September 1, 2014, October 1, 2014 and November 1, 2014, the Company is obligated to redeem an amount equal to $140,000 and on December 1, 2014, the Company is obligated to redeem an amount equal to $840,000, (plus accrued but unpaid interest, liquidated damages and any other amounts then owing in respect of the June Convertible Note) (collectively, the “Periodic Redemption Amount”). In lieu of a cash redemption and subject to the Company meeting certain equity conditions described in the June Convertible Note, the Company may elect to pay the Periodic Redemption Amount in shares based on a conversion price equal to the lesser of (a) $0.068 per share, subject to adjustments upon certain events, and (b) 90% of the average of the VWAP for the 20 consecutive trading days prior to the applicable redemption date.

F-17

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Debt Discounts

The fair value of the June Convertible Note Warrants and the corresponding Debt Conversion Feature, issued on June 20, 2013, totaling $1,243,177 is recorded as a debt discounts in the accompanying balance sheet and is amortized as interest expense in the accompanying statement of operations over the term of the June Convertible Note using the effective interest method (see Note 7 for further detail).

Original Issue Discount

For certain convertible debt issued, the Company may provide the debt holder with an original issue discount. The June Convertible Notes were issued with an original issue discount of 12%. The original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized to interest expense over the term of the June Convertible Note.

June Convertible Note Face Value	$	1,680,000
Debt Discount
June Convertible Note Warrant Derivative		752,126
Conversion Feature Derivative		491,051
Original Issue Discount		180,000
Total Debt Discount	$	1,423,177
Amortization of Debt Discount, as of June 30, 2013		(24,893	)
Debt Discount, Net	$	1,398,284
June Convertible Note Carrying Value at June 30, 2013	$	281,716

Deferred Financing Costs

Transaction Fees

The Company paid Gottbetter Capital Markets (“GCM”) who acted as the sole placement agent for the June Convertible Notes a commission of 7.2% of the first $1,400,000 funds raised in the June Convertible Notes offering for a total payment of $100,000. In addition, the placement agent received five-year broker warrants to purchase approximately 2.0 million shares of our common stock at an exercise price of $0.082 per share. The broker warrants are identical to the warrants in all material respects. We also paid $117,446 in legal fees to Gottbetter & Partners and $85,207 in professional fees to the lead investor in the Debenture.

June Convertible Note Broker Warrants

In addition, GCM received five-year warrants (the “June Convertible Note Broker Warrants”) to purchase 2,000,000 shares of the Company’s common stock. The June Convertible Note Broker Warrants were issued with “weighted average” and other customary anti-dilution protections. The June Convertible Note Broker Warrants are identical to the June Convertible Note Warrants in all material respects.

Placement agent and other fees associated with June Convertible Note offering	$	304,293
June Convertible Note Broker Warrants		60,886
Total Deferred Financing Costs	$	365,179
Amortization of Deferred Financing Costs, as of June 30, 2013		6,387
Deferred Financing Costs, Net, as of June 30, 2013	$	358,792

F-18

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 7. DERIVATIVE LIABILITY

As of June 30, 2013, the Company had reserved 60,751,751 shares of common stock for issuance upon exercise of the Company’s outstanding warrants. The Company had reserved 24,705,882 shares of common stock for issuance upon exercise of the Company’s outstanding convertible debt as of June 30, 2013.

On March 28, 2013, the Company repurchased 499,840 shares of common stock and cancelled 499,840 warrants for $125,000. The repurchased shares are reflected under treasury stock in the accompanying balance sheet. On June 30, 2013, the Company had agreed to repurchase an additional 499,840 shares of common stock for $125,000. The commitment to repurchase these shares are represented under treasury stock and accrued expenses in the accompanying balance sheet.

July 2012 Merger

Upon the completion of the July 12, 2012 Merger, $1,925,030 of the Bridge Notes converted into PPO Units. The holders of the Bridge Notes received 7,700,120 five-year bridge warrants (the “Bridge Warrants”), each exercisable to purchase one share of the Company’s Common Stock. 3,850,060 of the Bridge Warrants are exercisable at $0.25 per share (the “Series A Warrants”) and 3,850,060 of the Bridge Warrants (the “Series B Warrants”) are exercisable at $0.50 per share. As of August 29, 2013, the Series A Warrants are exercisable at $0.01 per share and the Series B Warrants are exercisable at $0.015 per share, (See Note 14 for further detail). Except as to exercise price, the Bridge Warrants are identical, in all material respects to the Investor Warrants (as defined below).

Licensor Warrants

The Company also issued to the Licensors warrants exercisable for the purchase of an aggregate of 10,000,000 shares of the Company’s common stock for a term of ten years at an exercise price of $0.24 per share (the “Licensor Warrants”). The exercise price and number of shares of common stock issuable upon exercise of the Licensor Warrants may be adjusted in certain circumstances including stock splits and stock dividends (but excluding future issuances of our equity securities, regardless if for no consideration or for consideration per share less than $0.24). They are exercisable on a cashless basis at any time prior to their expiration. Except as otherwise described herein, the Licensor Warrants are identical in all material respects to the Investor Warrants. On May 8, 2013, the Company reduced the Licensor Warrant exercise price to $0.12 in consideration of value received.

Private Placement Offering

Concurrently with the closing of the Merger, the Company completed an initial closing of a private offering (the “Offering”) wherein 500,000 units (the “PPO Units”) were sold, at a price of $0.25 per PPO Unit, for a total cash consideration of $125,000. Each PPO Unit consists of one share of the Company’s common stock and a redeemable Investor Warrant to purchase one share of the Company’s common stock. The Investor Warrants are exercisable for a period of five years at a purchase price of $1.00 per share of the Company’s common stock. If at any time during the two year period following the closing date the Company issues additional shares of Common Stock for a consideration per share less than $0.25 (the “Reduced Price”), then the Company will issue to the purchasers in the Offering, concurrently with such issue and without any additional consideration from the purchasers, the number of additional shares of the Company’s common stock and Investor Warrants equal to the difference between (A) the purchase price of the PPO Units being subscribed for divided by the Reduced Price and (B) the number of shares of the Company’s common stock included in the units being subscribed for in the Offering. In addition, we effected the conversion of the $1,925,030 in Bridge Notes. The Bridge Notes were converted into 7,700,120 PPO Units and 7,700,120 five-year Investor Warrants each exercisable to purchase one share of the Company’s Common Stock. As of August 29, 2013, the Investor Warrants are exercisable at $0.03 per share (See Note 14 for further detail).

F-19

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

On July 20, 2012, the Company completed the second closing under the Offering through the sale of 124,000 PPO Units (for aggregate gross proceeds of $31,000) consisting of 124,000 shares of common stock and 124,000 five-year Investor Warrants with an exercise price of $1.00.

On July 31, 2012, the Company completed the third closing under the Offering through the sale of 1,639,920 PPO Units (for aggregate gross proceeds of $409,980) consisting of 1,639,920 shares of common stock and 1,639,920 five-year Investor Warrants with an exercise price of $1.00.

On August 24, 2012, the Company completed the fourth closing under the Offering through the sale of 500,000 PPO Units (for aggregate gross proceeds of $125,000) consisting of 500,000 shares of common stock and 500,000 five-year Investor Warrants with an exercise price of $1.00.

On September 10, 2012, the Company completed the fifth closing under the Offering through the sale of 80,000 PPO Units (for aggregate gross proceeds of $20,000) consisting of 80,000 shares of common stock and 80,000 five-year Investor Warrants with an exercise price of $1.00.

On December 6, 2012, the Company completed the sixth closing under the Offering through the sale of 600,000 PPO Units (for aggregate gross proceeds of $150,000) consisting of 600,000 shares of common stock and 600,000 five-year Investor Warrants with an exercise price of $1.00.

On December 10, 2012, the Company completed the seventh closing under the Offering through the sale of 200,000 PPO Units (for aggregate gross proceeds of $50,000) consisting of 200,000 shares of common stock and 200,000 five-year Investor Warrants with an exercise price of $1.00.

On December 12, 2012, the Company completed the eighth closing under the Offering through the sale of 100,000 PPO Units (for aggregate gross proceeds of $25,000) consisting of 100,000 shares of common stock and 100,000 five-year Investor Warrants with an exercise price of $1.00.

On February 8, 2013, the Company completed the ninth closing under the Offering through the sale of 200,000 PPO Units (for aggregate gross proceeds of $50,000) consisting of 200,000 shares of common stock and 200,000 five-year Investor Warrants with an exercise price of $1.00.

As of August 29, 2013, the Investor Warrants are exercisable at $0.03 per share (See Note 14 for further detail).

In connection with the July 12, 2012 PPO closing, the Company issued an aggregate of 656,010 five year broker warrants with an exercise price of $0.25 per share. Effective as of June 30, 2013, 79,975 broker warrants have been cancelled with the repurchase of 999,680 shares. In connection with the July 20, 2012, July 31, 2012, August 24, 2012, and September 10, 2012 closings, the Company issued an aggregate of 187,514 five-year broker warrants with an exercise price of $0.25 per share. In connection with the December 6, 2012, December 10, 2012, and December 12, 2012 closings, the Company issued an aggregate of 72,000 five-year broker warrants with an exercise price of $0.25 per share. In connection with the February 8, 2013 closing, the Company issued 16,000 five-year broker warrants with an exercise price of $0.25 per share. As of August 29, 2013, the broker warrants are exercisable at $0.01 per share (See Note 14 for further detail).

F-20

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Short Term Loan

In connection with two short-term notes that were issued on September 7, 2012 and an additional short-term note that the Company issued on September 24, 2012, for an aggregate principal amount of $300,000, the Company issued 1,200,000 warrants to holders of these notes (the “Series D Warrants”). These warrants are exercisable for a period of five years at a purchase price of $0.25 per share of the Company’s common stock. These warrants contain certain anti-dilution and other customary terms.

On March 28, 2013, in connection with a repayment of a short-term shareholder note, the Company issued an additional 150,000 five-year warrants to the holder to compensate the holder as the shareholder note was past due. The fair value of the warrants was $9,482. These warrants are exercisable for a period of five years at a purchase price of $0.25 per share of the Company’s common stock. These warrants contain certain anti-dilution and other customary terms.

As of August 29, 2013, the Series D warrants are exercisable at $0.01 per share (See Note 14 for further detail).

Convertible Note Warrants, April Convertible Note Warrants, June Convertible Note Warrants

In connection with the Convertible Note offering on December 21, 2012, the Company issued 8,000,000 Convertible Note Warrants. 4,000,000 Convertible Note Warrants are exercisable at $0.50 and 4,000,000 Convertible Note Warrants are exercisable at $1.00. In connection with the second closing of the offering which occurred on March 28, 2013, the Company and Aegis agreed to modify the exercise price of these Convertible Note Warrants and the placement agent warrants issued by the Company as part of the first closing. As a result of such modification, 4,000,000 of such Convertible Note Warrants are exercisable at $0.25 per share and 4,000,000 of such Convertible Note Warrants are exercisable at $0.50 per share, and all of the placement agent warrants are exercisable at $0.25 per share.

The relative fair value of the warrants at issuance was estimated at $686,192 using a Black-Scholes model with the following assumptions: expected volatility of 60%, risk free interest rate of 0.95%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and debt discount on the balance sheet.

In connection with the Convertible Note offering on March 28, 2013, the Company issued 4,520,000 Convertible Note Warrants. 2,260,000 Convertible Note Warrants are exercisable at $0.50 and 2,260,000 Convertible Note Warrants are exercisable at $0.25.

The relative fair value of the warrants at issuance was estimated at $222,457 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.005%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and debt discount on the balance sheet.

F-21

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

In connection with the April Convertible Note offering on April 8, 2013, the Company issued 1,000,000 April Convertible Note Warrants. 500,000 April Convertible Note Warrants are exercisable at $0.25 and 500,000 April Convertible Note Warrants are exercisable at $0.50.

The relative fair value of the warrants at issuance was estimated at $35,434 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and debt discount on the balance sheet.

In connection with the June Convertible Note offering on June 20, 2013, the Company issued 24,705,882 June Convertible Note Warrants, which are exercisable at $0.082 and contain weighted average anti-dilution protections.

The relative fair value of the warrants at issuance was estimated at $752,126 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and debt discount on the balance sheet.

Convertible Note Broker Warrants, April Convertible Note Broker Warrants, June Convertible Note Broker Warrants

In connection with the Convertible Note offering on December 21, 2012, the Company issued 1,600,000 Convertible Note Broker Warrants. The Convertible Note Broker Warrants are exercisable at $0.25.

The relative fair value of the warrants at issuance was estimated at $137,238 using a Black-Scholes model with the following assumptions: expected volatility of 60%, risk free interest rate of 0.95%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and deferred financing cost on the balance sheet.

In connection with the Convertible Note offering on March 28, 2013, the Company issued 904,000 Convertible Note Broker Warrants. The Convertible Note Broker Warrants are exercisable at $0.25.

The relative fair value of the warrants at issuance was estimated at $57,143 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.005%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and debt discount on the balance sheet.

F-22

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

In connection with the April Convertible Note offering on April 8, 2013, the Company issued 200,000 April Convertible Note Broker Warrants. The April Convertible Note Broker Warrants are exercisable at $0.25.

The relative fair value of the warrants at issuance was estimated at $9,253 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and debt discount on the balance sheet.

In connection with the June Convertible Note offering on June 20, 2013, the Company issued 2,000,000 Convertible Note Broker Warrants. The Convertible Note Broker Warrants are exercisable at $0.082.

The relative fair value of the warrants at issuance was estimated at $60,886 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and deferred financing cost on the balance sheet.

Founder Warrants

In connection with the acquisition of the Third License on April 17, 2013, the Company issued 2,500,000 warrants. The warrants are exercisable at $0.13.

The relative fair value of the warrants at issuance was estimated at $210,349 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of five years and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and deferred financing cost on the balance sheet.

Debt Conversion Feature

The Convertible Note, April Convertible Note, and June Convertible Note offerings included a Debt Conversion Feature (see Note 5 and 6).

The relative fair value of the Debt Conversion Feature of the December 21, 2012 closing was estimated, using Level 2 inputs, at $663,528 using a Black-Scholes model with the following assumptions: expected volatility of 60%, risk free interest rate of 0.95%, expected life of right months and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry.

The relative fair value of the Debt Conversion Feature of the March 28, 2013 closing was estimated, using Level 2 inputs, at $50,240 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.005%, expected life of eight months and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry.

The relative fair value of the Debt Conversion Feature of the April 8, 2013 closing was estimated, using Level 2 inputs, at $4,361 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of eight months and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry.

F-23

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

The relative fair value of the Debt Conversion Feature of the June 20, 2013 closing was estimated, using Level 2 inputs, at $491,051 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of eighteen months and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry.

Fair Value Measurement of Warrants

The relative fair value at issuance of those warrants granted during the quarter ended September 30, 2012 was estimated at $3,788,687 using a Black-Scholes model with the following assumptions: expected volatility of 70%, risk free interest rate of 0.83%, expected life of 5.0 – 10.0 years, based upon the term of the warrant, and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and equity sections of the balance sheet.

The relative fair value at issuance of those warrants granted during the quarter ended December 31, 2012 was $888,596 using a Black-Scholes model with the following assumptions: expected volatility of 60%, risk free interest rate of 0.95%, expected life of 0.8 - 5.0 years, based upon the term of the warrant, and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and equity sections of the balance sheet.

The relative fair value at issuance of those warrants granted during the quarter ended March 31, 2013 was estimated at $297,716 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.005%, expected life of 5.0 years, based upon the term of the warrant, and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and equity sections of the balance sheet.

The relative fair value at issuance of those warrants granted during the quarter ended June 30, 2013 was estimated at $1,067,196 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.685%, expected life of eighteen months to 10 years, based upon the term of the warrant, and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty and personal care industry. The relative fair value of the warrants was recorded in the long-term liability and equity sections of the balance sheet.

The Company’s warrant liability was valued at June 30, 2013 using a Black-Scholes model with the following assumptions: expected volatility of 55%, risk free interest rate of 1.005%, expected life of eighteen months – 10 years, based upon the term of the warrant or convertible note, and no dividends. Expected volatility was based on the volatility of similar public entities in the beauty industry. The following table is a rollforward of the fair value of the warrant liability:

	June 30, 2013			June 30, 2012
Beginning Balance	$	0		$	0
Issuance of Warrants and Conversion Feature		7,252,283			0
Repurchase / Exercise / Cancellation of Warrants and Conversion Feature		(179,884	)		0
Change in fair value		(5,411,959	)		0
Ending Balance	$	1,660,440		$	0

F-24

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

During the quarter ended June 30, 2013, the Company changed the exercise price of the 13,520,000 Convertible Note Warrants and April Convertible Note Warrants issued as of December 21, 2012, March 28, 2013 and April 8, 2013 from $0.50 to $0.015 and from $0.25 to $0.01 and changed the exercise price of 2,704,000 Convertible Note Broker Warrants and April Convertible Note Broker Warrants from $0.25 to $0.01. At the same time, the 13,520,000 Convertible Note Warrants and April Convertible Note Warrants and 2,704,000 Convertible Note Broker Warrants and April Convertible Note Broker Warrants were exercised into 11,830,000 and 2,433,600 shares, respectively, (see Note 8).

The relative fair value of the Company’s outstanding warrants and derivative instruments was estimated at $0 and $1,660,440 as of June 30, 2012 and June 30, 2013. The gain / (loss) in the fair value of the warrants of $0 and $5,411,959 for the period ended June 30, 2012 and the year ended June 30, 2013, respectively, was recognized as a gain in the derivative liability section on the accompanying statement of operations.

A summary of the Company’s warrant activity is as follows:

	Number of shares underlying warrants		Weighted Average Exercise Price		Weighted Average Contractual Term
Outstanding June 30, 2012
Granted		77,555,566	$	0.33	5.8 years
Exercised		(16,224,000)	$	0.01	5.0 years
Forfeited / Repurchased		(579,815)	$	0.37	5.0 years
Outstanding June 30, 2013		60,751,751	$	0.06	6.9 years

NOTE 8. LOSS FROM EXTINGUISHMENT OF DEBT

On June 20, 2013, the Company effected the conversion of the principal and accrued interest of the Convertible Notes and April Convertible Notes of $3,540,273 in accordance with the provisions of the respective notes. As a result of such conversion, the Company issued 50,575,333 shares. At the same time, the Company effected the conversion of the underlying warrants and broker warrants related to the notes for exercise prices of $0.01 (for such warrants with an exercise price of $0.25) and $0.015 (for such warrants with an exercise price of $0.50). In accordance with FASB 470.20.40.20, the Company has recognized a loss equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of consideration issuable in accordance with the original conversion terms. The Company has recognized a non-cash expense of $2,098,819, which is recorded under Loss from Extinguishment of Debt in the accompanying statement of operations for the year ended June 30, 2013. The Company did not have any expenses related to the Loss from Conversion of Debt for the period ended June 30, 2012.

NOTE 9. COMMITMENTS AND CONTINGENCIES

License agreements

In May 2012, the Company entered into a licensing agreement with the Licensors (see Note 3 for further detail).

During the term of the licensing agreement the Company has agreed to pay a guaranteed minimum royalty payment of $4,686,125 or $5,206,900 depending on launch date of various products in accordance with the following schedule, but subject to adjustments:

● Contract period one: $1,000,000

● Contract period two: $925,000 or $1,000,000

● Contract period three: $1,188,625 or $1,285,000

● Contract period four: $1,572,500 or $1,700,000

In July 2012, the Company entered into the Second License (see Note 3). The Company agreed to pay a guaranteed minimum royalty payment of $600,000 depending on launch date of various products in accordance with the following schedule, but subject to adjustments:

● Contract period one: $100,000

● Contract period two: $225,000

● Contract period three: $275,000

F-25

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

In May 2013, the Company entered into a licensing agreement with the Third Licensor (see Note 3). The Company agreed to pay a guaranteed minimum royalty payment of $100,000 depending on launch date of various products in accordance with the following schedule, but subject to adjustments:

● Contract period one: $33,333

● Contract period two: $33,333

● Contract period three: $33,334

Operating Lease

On May 8, 2012, the Company executed a one-year operating lease for its corporate office commencing on May 15, 2012 at a monthly rent payment of $1,785 per month. Total rent expense related to this operating lease was $0 and $21,420 for the period ended June 30, 2012 and the year ended June 30, 2013, respectively, and is included in general and administrative expenses in accompanying statement of operations. As of June 30, 2013, the lease has expired and the Company is renting the office space on a month-to-month basis.

On January 7, 2013, the Company executed a five-month operating lease for storage commencing on January 1, 2013 at a monthly rent payment of $1,500 per month. Total rent expense related to this operating lease was $0 and $9,000 for the period ended June 30, 2012 and the year ended June 30, 2013, respectively, and is included in general and administrative expenses in accompanying statement of operations. As of June 30, 2013, the storage space lease has expired and the Company is renting the space on a month-to-month basis.

Contractual Obligations and Commitments:

The table below provides information concerning obligations of our contractual commitment as of June 30, 2013:

	Total		Less than 1 year		1 – 3 years		3 - 5 years		More than 5 years
License agreement obligations	$	7,427,125	$	33,333	$	2,851,667	$	4,542,125	$	0
Operating lease obligation	$	0	$	0	$	0	$	0	$	0
Total	$	7,427,125	$	33,333	$	2,851,667	$	4,542,125	$	0

Litigation

In the normal course of business, the Company may become involved in various legal proceedings. Except as described below, management knows of no pending or threatened legal proceeding to which they are or will be a party and which, if successful, might result in a material adverse change in our business, properties or financial condition.

On November 19, 2012, an action entitled Chroma Makeup Studio, LLC. v. BOLDFACE Group, Inc. and BOLDFACE Licensing + Branding was filed in the United States District Court for the Central District of California, Western Division (the “Court”). Chroma Makeup Studio, LLC (“Chroma”) alleged that the Company’s use of the term Khroma, including the marks Khroma Beauty and Khroma Beauty By Kourtney, Kim and Khloe (the "Khroma Beauty Marks"), for cosmetics is infringing upon Chroma's rights in its Chroma mark. The Complaint included claims for trademark infringement under the Lanham Act and unfair competition under applicable California law. The Court set a tentative trial date of April 22, 2014. The parties also agreed to pursue private mediation in an attempt to resolve the disputed issues in this case. On August 2, 2013, the parties participated in mediation in an attempt to settle the case but were unable to do so.

F-26

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

On November 30, 2012, BLB filed a complaint for a declaratory judgment in the United States District Court for the Central District of California, Western Division entitled BOLDFACE Licensing + Branding v. By Lee Tillett, Inc. (“Tillett”). BLB’s complaint requests a declaration from the Court that (1) BLB’s use of the Khroma term, including the Khroma Beauty marks does not infringe on Tillett’s rights in its Kroma trademark, and (2) BLB’s two pending trademark applications for Khroma Beauty marks should be allowed to register with the USPTO. On January 9, 2013 Tillet filed an answer and counterclaims for (1) trademark infringement, (2) false designation of origin, (3) trademark infringement, and (4) unfair competition pursuant. In addition to BLB, Tillett's Counterclaims are made against the following additional parties: Kimsaprincess Inc., 2Die4Kourt Inc., Khlomoney Inc., and individuals Kim Kardashian, Kourtney Kardashian, and Khloe Kardashian (collectively, the “Kardashian Parties”). In March 2013, Tillet obtained a preliminary injunction enjoining BLB’s use of the Khroma Beauty mark. BLB appealed the injunction and moved for a stay in the Ninth Circuit. As a result, the injunction was stayed until May 31, 2013. By the time the stay expired, BLB had already changed the name of its mark from Khroma Beauty by Kourtney, Kim and Khloe to Kardashian Beauty. On August 9, 2013, BLB and the Kardashian Parties filed a joint motion to dismiss the appeal. On August 2, 2013, the parties participated in mediation in an attempt to settle the case but were unable to do so. The Court set a tentative trial date of April 22, 2014.

Based on the existing status of the two cases, Management believes it has adequately reserved for these matters such that there would not be a material effect on future financial statements.

Registration Agreement

As of June 30, 2013, the Company had 300,000,000 shares of common stock authorized. As of June 30, 2013, the Company had 155,301,468 shares issued and 154,301,788 shares outstanding.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company's stockholders. Common stockholders are not entitled to receive dividends unless declared by the Company's Board of Directors.

PPO Offering Registration Rights

In connection with the Merger and Offering (as defined in Notes 1, 4 and 7), the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with each of the investors participating in the Offering. Under the Registration Rights Agreement, as amended, the Company committed to file a registration statement on Form S-1, or other applicable form (the “Registration Statement”), covering the resale of (i) the Company’s common stock underlying the Bridge Warrants (as defined in Note 7), (ii) common stock underlying the PPO Units (as defined in Note 7) sold or to be sold in the Offering, and (iii) common stock underlying the Investor Warrants (as defined in Note 7) (including securities issued in the Offering as a result of the conversion of the Bridge Notes (as defined in Note 7), but not common stock that is issuable upon exercise of the broker warrants issued to the placement agent for the Offering) (collectively, the “Registrable Securities”) no later than October 29, 2012 (the “Filing Date”), and to use commercially reasonable efforts to cause the Registration Statement to become effective no later than 150 days after it is filed (the “Effectiveness Date”). As of the date of this Annual Report the Company has not filed the Registration Statement with the SEC and anticipates filing the Registration Statement during the quarter ended December 31, 2013. The Company agreed to use its commercially reasonable efforts to maintain the effectiveness of the Registration Statement for at least one year from the date the Registration Statement is declared effective by the SEC or for such shorter period ending on the earlier to occur of (i) until Rule 144 of the Securities Act is available to investors with respect to all of their Registrable Securities or (ii) the date when all of the Registrable Securities registered thereunder shall have been sold.

F-27

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

The Company will be liable for liquidated damages at the rate of 1% of the purchase price per PPO Unit paid by each investor for the Registrable Securities then held by such investor for each full period of 30 days for which the Company fails to file the registration statement by the Filing Date or if the Company fails to have the Registration Statement declared effective by the Effectiveness Date (each, a “Registration Event”), until such failure is cured. The payment amount shall be prorated for partial 30-day periods. The aggregate penalty accrued with respect to each investor may not exceed 10% of the original purchase price paid by such investor. However, if a Registration Event occurs (or is continuing) on a date more than one year after July 12, 2012 or the final closing of the Offering, liquidated damages shall be paid only with respect to that portion of the Registrable Securities that cannot then be immediately resold in reliance on Rule 144. If the Company fails to pay any partial liquidated damages or refund pursuant in full within seven days after the date payable, the Company will pay interest thereon at a rate of 8% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the holder of the PPO Unit.

In December 2006, the FASB issued guidance on accounting for registration payment arrangements. This guidance specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB guidance on accounting for contingencies. This guidance further clarifies that a financial instrument subject to a registration payment arrangement should be accounted for in accordance with US GAAP without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. The Company applied the recognition and measurement provisions of the FASB guidance to the registration rights associated with the Registration Rights Agreement. As of June 30, 2013, the Company has recorded $206,381 in general and administrative expenses on the accompanying statement of operations associated with these registration rights.

Convertible Note Offering Registration Rights

In connection with the Convertible Note offering (as defined in Note 5), the Company also entered into a registration rights agreement with the Investors (the “Convertible Note Registration Rights Agreement”). Under the terms of the Convertible Note Registration Rights Agreement, the Company committed to file a registration statement on Form S-1, or other applicable form, covering the resale of (i) the Common Stock underlying the Warrants and (ii) the Common Stock underlying the Notes (collectively, the “Convertible Note Registrable Securities”) within 45 days from the final closing of the Offering (the “Filing Date”), and to use its commercially reasonable efforts to cause the registration statement to become effective no later than 90 days after it is filed (the “Effectiveness Date”). As the Company delayed the registration due to the June Convertible Offering, and such delay was communicated to the Convertible Note Offering investors, the Company has not recorded any registration right penalties. The Company anticipates filing the registration statement on or prior to November 1, 2013.

The Company agreed to use its commercially reasonable efforts to maintain the effectiveness of the registration statement for at least one year from the date the registration statement is declared effective by the SEC or for such shorter period ending on the earlier to occur of (i) until Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), is available to Investors with respect to all of their Convertible Note Registrable Securities or (ii) the date when all of the Convertible Note Registrable Securities registered thereunder shall have been sold. The Company will be liable for monetary penalties equal to 0.5% of the purchase price per Unit paid by such Investor for the Convertible Note Registrable Securities then held by each investor for each full period of period of 30 days if the Company fails to file the registration statement by the Filing Date or if the Company fails to use its reasonable efforts to have the registration statement declared effective by the Effectiveness Date until such failure is cured. The payment amount shall be prorated for partial 30-day periods. The maximum aggregate amount of payments to be made by the Company as the result of such failures, whether by reason of a filing deadline failure, effectiveness deadline failure or any combination thereof, shall be an amount equal to 6% of the purchase price per Unit paid by such Investor for the Convertible Note Registrable Securities held by such Investor at the time of the first occurrence of such failure to file with, or to have the registration statement be declared effective by, the United States Securities and Exchange Commission (the “SEC”).

F-28

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Moreover, no such payments shall be due and payable with respect to any Convertible Note Registrable Securities that the Company is unable to register due to limits imposed by the SEC’s interpretation of Rule 415 under the Securities Act. The holders of any Convertible Note Registrable Securities removed from the registration statement as the result of a Rule 415 comment or other comment from the SEC shall have “piggyback” registration rights for the shares of Common Stock underlying the Convertible Note Registrable Securities, until such shares can be sold without limitation under Rule 144, with respect to any registration statement filed by the Company following the effectiveness of the registration statement which would permit the inclusion of these shares.

NOTE 10. EQUITY TRANSACTIONS

On January 8, 2013, the Company issued 169,355 shares of common stock to a third party for consulting services provided, valued at $52,500.

On February 1, 2013, the Company issued 57,252 shares of common stock to a third party for consulting services provided, valued at $16,030.

On March 1, 2013, the Company issued 76,531 shares of common stock to a third party for consulting services provided, valued at $14,923.

On March 28, 2013, the Company issued 1,000,000 shares of common stock to a third party for a reduction in fees for services provided, valued at $170,000.

On April 8, 2013, the Company issued 500,000 five-year warrants with an exercise price of $0.25 to its new consultant, engaged effective as of the same date for consulting services to the Company. The warrants shall vest ratably in arrears over six 30-day periods beginning on April 8, 2013, with one-sixth of the warrants vesting on each successive thirtieth day following April 8, 2013, subject to the termination of the consulting agreement prior thereto.

On April 15, 2013, the Company issued 90,361 shares of common stock to a third party for consulting services provided, valued at $15,000.

On June 28, 2013, the Company issued 200,000 shares of common stock to a third party for consulting services provided, valued at $10,000.

On June 28, 2013, the Company issued 100,000 shares of common stock to a third party for consulting services provided, valued at $5,000.

On June 28, 2013, the Company issued 125,000 shares of common stock to a board member per the compensation package of said board member, valued at $6,250.

F-29

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 11. STOCK COMPENSATION EXPENSE AND FAIR VALUE MEASUREMENT

In July 2012, the Company's Board of Directors adopted the 2012 Stock Option and Incentive Plan (the "2012 Equity Incentive Plan"). The 2012 Equity Incentive Plan provides for the grants of incentive and non-qualified stock options, restricted stock and other equity awards to employees, officers, directors, consultants and advisors of the Company. Provisions such as vesting, repurchase and exercise conditions, and limitations are determined by the Board of Directors on the grant date. There are 20,000,000 shares of the Company’s Common Stock reserved for issuance under its 2012 Equity Incentive Plan.

As of June 30, 2013, the Company has reserved 13,450,000 for future issuance upon exercise of outstanding and future grants of common stock options and future issuances of restricted stock awards pursuant to the Company's 2012 Equity Incentive Plan.

Effective as of July 12, 2012 the Company issued 4,600,000 stock options under its 2012 Equity Incentive Plan to the Company’s CEO, a consultant and the Chairman of the Board of Directors; 3,600,000 of which have a five-year term and 1,000,000 of which have a ten-year term. All of the options are exercisable for the purchase of one share of the Company’s common stock at an exercise price of $0.24 per share. Such options, which will vest annually at a rate of 33% beginning on the first anniversary date of the Merger, in each case, if the grantee remains employed by the Company or any of its subsidiaries on each annual vesting date.

Effective as of August 15, 2012 the Company issued 400,000 stock options under its 2012 Equity Incentive Plan to certain of the Company’s employees and consultants. All of the options have a ten-year term and are exercisable for the purchase of one share of the Company’s common stock at an exercise price of $0.24 per share. Vesting on these awards is a three-year period. Such options, which will vest annually at a rate of 33% beginning on the first anniversary date of the grant, in each case, if the grantee remains employed by the Company or any of its subsidiaries on each annual vesting date.

Effective as of November 21, 2012 the Company issued 500,000 stock options under its 2012 Equity Incentive Plan to the Company’s newly appointed director. All of the options have a ten-year term and are exercisable for the purchase of one share of the Company’s common stock at an exercise price of $0.24 per share. Vesting on these awards is a three-year period. Such options, which will vest annually at a rate of 33% beginning on the first anniversary date of the grant, in each case, if the grantee remains employed by the Company or any of its subsidiaries on each annual vesting date.

Effective as of March 28, 2013 the Company issued 500,000 stock options under its 2012 Equity Incentive Plan to the Company’s newly appointed director. All of the options have a ten-year term and are exercisable for the purchase of one share of the Company’s common stock at an exercise price of $0.17 per share. Vesting on these awards is a three-year period. Such options, which will vest annually at a rate of 33% beginning on the first anniversary date of the grant, in each case, if the grantee remains employed by the Company or any of its subsidiaries on each annual vesting date.

Effective as of April 8, 2013 the Company issued 500,000 stock options under its 2012 Equity Incentive Plan to the Company’s newly appointed director. All of the options have a ten-year term and are exercisable for the purchase of one share of the Company’s common stock at an exercise price of $0.14 per share. Vesting on these awards is a three-year period. Such options, which will vest annually at a rate of 33% beginning on the first anniversary date of the grant, in each case, if the grantee remains employed by the Company or any of its subsidiaries on each annual vesting date.

F-30

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

Effective as of June 28, 2013 the Company issued 50,000 stock options under its 2012 Equity Incentive Plan to two of the Company’s directors pursuant to the Company’s board compensation package, effective as of March 15, 2013. All of the options have a ten-year term and are exercisable for the purchase of one share of the Company’s common stock at an exercise price of $0.05 per share. Vesting on these awards is a three-year period. Such options, which will vest annually at a rate of 33% beginning on the first anniversary date of the grant, in each case, if the grantee remains employed by the Company or any of its subsidiaries on each annual vesting date.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The expected life assumption is based on the estimated forfeiture rate. Expected volatility is based on a blend of the volatility of the Company and similar public entities in the beauty industry. The risk-free interest rate is the yield currently available on U.S. Treasury five-year and seven-year zero-coupon issues approximating the expected term used as the input to the Black-Scholes model. FASB accounting guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods as options vest, if actual forfeitures differ from those estimates. During the year ended June 30, 2013, because substantially all of the Company's stock option grants vest annually, stock-based employee compensation expense includes the actual impact of forfeitures. No stock options are exercisable as of June 30, 2013. The relevant inputs used to determine the value of the stock option grants is as follows:

	July 12, 2012			August 15, 2012			November 21, 2012			March 28, 2013			April 8, 2013			June 28, 2013
Number of options outstanding		3,600,000			1,400,000			500,000			500,000			500,000			50,000
Weighted average risk-free rate		0.83	%		0.83	%		0.95	%		1.005	%		1.685	%		1.685	%
Expected life in years		3.5			6.0			6.0			6.0			6.0			6.0
Expected volatility		70	%		70	%		60	%		55	%		55	%		55	%
Expected dividends		0	%		0	%		0	%		0	%		0	%		0	%

The relative fair value of the Company’s outstanding options issued to non-employees was $659,895 as of June 30, 2013. These options were valued at June 30, 2013 using a Black-Scholes model with Level 2 inputs. Expected volatility was based on the volatility of similar public entities in the beauty industry.

The total fair value of the stock options was $0 and $1,371,910 as of June 30, 2012 and June 30, 2013, respectively. As a result, share-based compensation expense totaled $0 and $407,491 for the period ended June 30, 2012 and the year ended June 30, 2013, respectively, and is recorded in general and administrative expenses. The loss in the fair value of the options was recorded under stock compensation expense and is reflected in general and administrative expenses in the accompanying statement of operations.

The following table summarizes stock option activity for the Company during the year ended June 30, 2013:

	Options		Weighted Average Exercise Price		Weighted Average Contractual Term		Aggregate Intrinsic Value
Outstanding June 30, 2012		-	-		-		-
Granted		6,550,000	$	0.23	7.3		$	0
Exercised		-		-	-		-
Forfeited		-		-	-		-
Outstanding June 30, 2013		6,550,000	$	0.23		7.3	$	1,150,000
Exercisable at year-end		-	$	0		0	$	0

As of June 30, 2013, the total unrecognized compensation cost related to unvested stock options amounted to $908,803, which will be fully amortized by June 30, 2015.

F-31

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 12. INCOME TAXES

The Company did not incur any income tax expense for the period ended June 30, 2012 and the year ended June 30, 2013. At June 30, 2013, $2,778,488 of federal and state net operating losses were available to the Company to offset future taxable income, which will expire in 2033. Given the short history of the Company and the uncertainty as to the likelihood of future taxable income, the Company has recorded a 100% valuation reserve against the anticipated recovery from the use of the net operating losses created at the inception or generated thereafter. The Company will evaluate the appropriateness of the valuation allowance on an annual basis and adjust the allowance as considered necessary.

The Company’s effective tax rate differs from the federal statutory rate of 34% primarily due to the impact of state income taxes and the valuation allowance recorded against its deferred tax assets.

	2013			2012
Statutory rate		34.0	%		34.0	%
State income taxes		5.8	%		8.8	%
Valuation allowance		(39.8	)%		(42.8	)%
Total		0.0	%		0.0	%

The principal components of deferred tax assets and (liabilities) are as follows as of June 30, 2013 and June 30, 2012 on a tax effected basis:

	2013			2012
Net operating losses carryforward	$	2,002,842		$	126,987
Start-up costs		60,005			25,541
Property and equipment		56,270			-
Stock based compensation		192,786			-
Gross deferred taxes	$	2,311,903		$	152,528
Valuation allowance		(2,311,903	)		(152,528	)
Net deferred taxes	$	-		$	-

The Company follows the provisions of FASB ASC Subtopic 740-10-65-1, Income Taxes. As of June 30, 2012 and June 30, 2013, the Company did not recognize any liability for unrecognized tax benefits.

Section 382 of the Internal Revenue Code can limit the amount of net operating losses, which may be utilized if certain changes to a company’s ownership occur. While the Company underwent a shift in ownership in 2013 as defined by Section 382 of the Internal Revenue Code, the Company has not incurred any limitations on its ability to utilize its net operating losses under Section 382 of the Internal Revenue Code, it may incur limitations in the future if there is a change in ownership.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at June 30, 2012 or June 30, 2013. The period ended June 30, 2012 and the year ended June 30, 2013 are subject to examination by the federal and state taxing authorities. There are no income tax examinations currently in process and as of the date of this report.

NOTE 13. RELATED PARTY TRANSACTIONS

The Company entered into a consulting agreement with Gold Grenade, LLC (“Gold Grenade”), a related entity co-owned by two of the shareholders to receive product development services. As of June 30, 2012 and June 30, 2013, $108,475 and $0, respectively, was due to Gold Grenade. For the period ended June 30, 2012 and the year ended June 30, 2013, the Company incurred approximately $212,014 and $872,700 respectively, in product development fees payable to Gold Grenade. The agreement is to remain in effect unless either party desires to cancel the agreement.

F-32

BOLDFACE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2013

NOTE 14. SUBSEQUENT EVENTS

On August 29, 2013, the Company issued senior secured convertible notes (the “August Convertible Notes”) with an original issue discount of 12% and a conversion price of $0.068 per share (the “August Conversion Price”) for gross proceeds of $616,000. The term of the August Convertible Notes include an eighteen-month maturity period, with partial redemption beginning on September 1, 2014. The August Convertible Notes bear an annual interest rate of 8%, which is paid quarterly in the form of cash or equity. Interest is payable in cash or at the Company’s option in shares of common stock, provided certain conditions are met, based on a share value equal to the lesser of (a) 90% of the average of the volume weighted average price (the “VWAP”) for the 20 consecutive trading days prior to the applicable interest payment date and (b) 100% of the average of the VWAP for the 20 consecutive trading days prior to the applicable interest payment date less $0.01.

In connection with the financing described above, the Company entered into Amendment and Waiver Agreements (collectively, the “Amendment Agreements”) with the holders (collectively, the “Holders”) of substantially all of the securities issued in connection with the Company’s Bridge Notes, PPO, short-term loans and PPO and Bridge Broker Warrants (collectively, the Transactions”) pursuant to which the Company reduced the exercise prices of all of its outstanding Series A, Series B, Series C, Series D and Series E common stock purchase warrants (collectively, the “Warrants”) as follows: the exercise price per share of the Series A Warrants that had an initial exercise price of $0.25 was reduced to $.01; the exercise price per share of the Series B Warrants that had an initial exercise price of $0.50 was reduced to $.015; the exercise price per share of the Series C Warrants that had an initial exercise price of $1.00 was reduced to $0.03; and the exercise price per share of the Series D and Series E Warrants that had an initial exercise price of $0.25 was reduced to $0.01.

In consideration of the exercise price reductions, the Holders of substantially all of the securities agreed to permanently waive all past and future exercise price and share number anti-dilution adjustment provisions that would otherwise be triggered by share issuances by the Company at prices less than the purchase, exercise or conversion price of any securities acquired by the holders in the Transactions or underlying any of such securities. The Amendment Agreements also provided for a waiver of all penalties incurred by the Company under the terms of the PPO registration rights agreement as a result of the Company’s failure to timely file and effect the registration for resale of the private placement securities.

Exhibit No.		Description
2.1		Agreement and Plan of Merger and Reorganization, dated as of July 12, 2012, by and among the Company, BOLDFACE Acquisition Corp., and BOLDFACE Licensing + Branding (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
2.2		Articles of Merger, dated as of July 12, 2012, for the merger of BOLDFACE Acquisition Corp. into BOLDFACE Licensing + Branding (incorporated by reference to Exhibit 2.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
3.1		Amended and Restated Articles of Incorporation as filed with the Nevada Secretary of State on May 21, 2012 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 22, 2012)
3.2		By-Laws of Registrant (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form SB-2 filed with the SEC on January 17, 2008)
4.1		Form of Investor Warrant (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.2		Form of Broker Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.3		Form of Bridge Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.4		Form of Licensor Warrant (incorporated by reference to Exhibit 4.4 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.5		Form of 10% Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.5 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.6		Form of Registration Rights Agreement by and between the Company and the investors in the Private Placement Offering (incorporated by reference to Exhibit 10.6 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.7		Form of 10% Secured Convertible Promissory Note issued by BOLDFACE Licensing + Branding to the Company (incorporated by reference to Exhibit 10.19 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
4.8		Form of 12% Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)

-33-

Exhibit No.		Description
4.9		Form of $0.50 Investor Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)
4.10		Form of $1.00 Investor Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)
4.11		Form of Registration Rights Agreement, dated as of December 21, 2012, by and among the Company and the investors in the Offering (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)
4.12		Form of 12% Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2013)
4.13		Form of $0.25 Investor Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2013)
4.14		Form of $0.50 Investor Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on April 3, 2013)
4.15		Form of Registration Rights Agreement, dated as of April 8, 2013, by and among the Company and the investor in the offering (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
4.16		Form of 12% Secured Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
4.17		Form of $0.25 Investor Warrant (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
4.18		Form of $0.50 Investor Warrant (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
4.19		Form of 12% Secured Convertible Promissory Note issued on June 20, 2013 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
4.20		Form of Warrants issued on June 20, 2013 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
4.21		Form of Convertible Debenture issued on August 29, 2013 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
4.22		Form of Warrant issued on August 29, 2013 (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
10.1		Split-Off Agreement, dated as of July 12, 2012, by and among the Company, BOLDFACE Split Corp., and Noah Levinson (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.2		General Release Agreement, dated as of July 12, 2012, by and among the Company, BOLDFACE Split Corp. and Noah Levinson (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.3		Form of Securities Purchase Agreement between the Company and the investors in the Private Placement Offering (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.4		Subscription Escrow Agreement, dated as of June 1, 2012, by and among the Company, Gottbetter Capital Markets, LLC, and CSC Trust Company of Delaware, as amended on June 28, 2012 (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.5		Placement Agency Agreement, dated as of May 2, 2012, by and between the Placement Agent and the Company (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)

-34-

Exhibit No.		Description
10.6		Escrow (Indemnification) Agreement, dated as of July 12, 2012, among the Company, Nicole Ostoya, Robin Coe-Hutshing, Maria Torres, and Gottbetter & Partners, LLP, as escrow agent (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.7		Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.8†		Employment Agreement, dated as of July 12, 2012, between the Company and Nicole Ostoya (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.9†		Employment Agreement, dated as of May 30, 2012, between BOLDFACE Licensing + Branding and Ashumi Kothary (incorporated by reference to Exhibit 10.10 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.10†		Consulting Agreement, dated as of July 3, 2012, between the Company and Gold Grenade, LLC (incorporated by reference to Exhibit 10.11 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.11		Indemnification Agreement, dated as of July 12, 2012, between the Company and John Derby (incorporated by reference to Exhibit 10.12 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.12†		2012 Equity Incentive Plan of the Company (incorporated by reference to Exhibit 10.13 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.13		Form of Securities Purchase Agreement between the Company and the investors in the Bridge Financing (incorporated by reference to Exhibit 10.14 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.14		Bridge Loan Agreement, dated as of May 16, 2012, between the Company and BOLDFACE Licensing + Branding (incorporated by reference to Exhibit 10.15 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.15		Pledge Agreement, dated as of May 16, 2012, among the Company and each person and entity listed as a pledger on the signature pages thereto (incorporated by reference to Exhibit 10.16 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.16		Company Security Agreement, dated as of May 16, 2012, among the Company, BOLDFACE Licensing + Branding and Gottbetter & Partners, LLP, as collateral agent (incorporated by reference to Exhibit 10.17 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.17		NewCo Bridge Loan Agreement, dated as of May 16, 2012, between BOLDFACE Licensing + Branding and Gottbetter & Partners, LLP, as collateral agent (incorporated by reference to Exhibit 10.18 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)

-35-

Exhibit No.		Description
10.18		Subscription Escrow Agreement, dated as of May 3, 2012, by and among the Company, Gottbetter Capital Markets, LLC, and CSC Trust Company of Delaware (incorporated by reference to Exhibit 10.20 to the Company’s Current Report on Form 8-K filed with the SEC on July 18, 2012)
10.19		Form of Factoring Agreement, dated as of October 17, 2012, entered into by and between Star Funding, Inc. and each of BOLDFACE Licensing + Branding and BOLDFACE Group, Inc. (contains a Schedule of Omitted Documents in the form of Exhibit 10.1, including material detail in which such documents differ from Exhibit 10.1) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 28, 2012)
10.20		Form of Supply Agreement, dated as of October 17, 2012, entered into by and between Star Funding, Inc. and each of BOLDFACE Licensing + Branding and BOLDFACE Group, Inc. (contains a Schedule of Omitted Documents in the form of Exhibit 10.2, including material detail in which such documents differ from Exhibit 10.2) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 28, 2012)
10.21		Form of Guarantee, dated as of October 17, 2012, issued by each of BOLDFACE Licensing + Branding and BOLDFACE Group, Inc. in favor of Star Funding, Inc. (contains a Schedule of Omitted Documents in the form of Exhibit 10.3, including material detail in which such documents differ from Exhibit 10.3) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 28, 2012)
10.22		Form of Validity Guarantee, dated as of October 17, 2012, entered into by and between Star Funding, Inc. and each of Nicole Ostoya, Ashumi Kothary and Robin Coe-Hutshing (contains a Schedule of Omitted Documents in the form of Exhibit 10.4, including material detail in which such documents differ from Exhibit 10.4) (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 28, 2012)
10.23		Form of Securities Purchase Agreement, dated as of December 21, 2012, by and among the Company and the investors in the Offering (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)
10.24		Subscription Escrow Agreement, effective as of December 19, 2012, by and among the Company, Aegis Capital Corp. and CSC Trust Company of Delaware (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)
10.25		Security Agreement, dated as of December 21, 2012, by and among the Company, BOLDFACE licensing + branding and Gottbetter & Partners, LLP, as collateral agent (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)
10.26		Guaranty, dated as of December 21, 2012, issued by BOLDFACE licensing + branding in favor of the investors in the offering (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K filed with the SEC on December 28, 2012)

-36-

Exhibit No.		Description
10.27		Form of Securities Purchase Agreement, dated as of April 8, 2013, by and between the Company and the investor in the Offering (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
10.28		Security Agreement, dated as of April 8, 2013, by and among the Company, BOLDFACE Licensing + Branding and Gottbetter & Partners, LLP, as collateral agent ((incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
10.29		Guaranty, dated as of April 8, 2013, issued by BOLDFACE Licensing + Branding in favor of the investor in the Offering (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on April 12, 2013)
10.30		Form of Securities Purchase Agreement, dated as of June 20, 2013, by and among the Company and the investors in the Offering (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
10.31		Form of Security Agreement, dated as of June 20, 2013, by and among the Company, BOLDFACE Licensing + Branding and the investors in the offering (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
10.32		Guarantee, dated as of June 20, 2013, issued by BOLDFACE Licensing + Branding in favor of the investors in the offering (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
10.33*^		Licensing Agreement, effective as of May 9, 2012, by and among BLB Licensing + Branding, 2Die4Kourt, Inc., Kimsaprincess, Inc. and Khlomoney, Inc.
10.34*^		License Agreement, effective as of July 11, 2012, by and between BLB Licensing + Branding and Pez-Mar, Via Mar Productions Inc.
10.35*^		Merchandising License Agreement, dated as of April 25, 2013, by and between BLB Licensing + Branding and Pretty Ugly, LLC.
10.36		Form of Securities Purchase Agreement, dated as of August 29, 2013, by and between the Company and the investor in the Offering (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
10.37		Form of Security Agreement, dated as of August 29, 2013, by and between the Company and the investor in the Offering (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
10.38		Guaranty of BOLDFACE Licensing + Branding, dated as August 29, 2013, by and between the Company and the investor in the Offering (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on June 26, 2013)
14.1		Code of Ethics (incorporated by reference from Exhibit 14 to the Company’s Annual Report on Form 10-K for the year ended September 30, 2008 filed with the SEC on December 31, 2008)
16.1		Letter from Webb & Company, P.A. to the Securities and Exchange Commission, dated as of May 17, 2012, regarding changes in Registrant’s certifying accountant (incorporated by reference from Exhibit 16.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 8, 2012)
21.1*		List of Subsidiaries
31.1*		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*		The following materials from the Company’s Annual Report on Form 10-K for the year ended June 30, 2013 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2013 and June 30, 2012, (ii) Consolidated Statements of Operations for the years ended June 30, 2013 and 2012, (iii) Statement of Shareholders Equity (Deficit) from June 30, 2012 to June 30, 2013, (iv) Consolidated Statements of Cash Flows for the year ended June 30, 2013 and 2012, (iv) and Notes to Consolidated Financial Statements.

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2013

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from ________________ to ________________

Nevada		02-0811868
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1309 Pico Blvd., Suite A Santa Monica, CA		90405
(Address of principal executive offices)		(Zip Code)

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

		Page

PART I

Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	14
Item 2.	Properties	14
Item 3	Legal Proceedings	14
Item 4.	Mine Safety Disclosures	14

PART II

Item 5.	Market for Registrant’s Common Equity, Related Matters and Issuer Purchases of Equity Securities	15
Item 6.	Selected Financial Data	20
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	31
Item 9A.	Controls and Procedures	31
Item 9B.	Other Information	31

PART III

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

PART IV

Item 15.	Exhibits and Financial Statements Schedules	33

Signatures		38

	BOLDFACE GROUP, INC.
	(Exact name of registrant as specified in its charter)

Period	High		Low

Quarter ended December 31, 2011 (from October 3, 2011)	$	0.0005	$	0.04
Quarter ended March 31, 2012	$	0.04	$	0.04
Quarter ended June 30, 2012	$	0.04	$	0.25
Quarter ended September 30, 2012	$	0.70	$	0.25
Quarter ended December 31, 2012	$	0.36	$	0.18
Quarter ended March 31, 2013	$	0.36	$	0.12
Quarter ended June 30, 2013	$	0.18	$	0.05

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted-average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders		6,550,000	$	0.23		13,450,000

Equity compensation plans not approved by security holders		N/A		N/A		N/A

Total		6,550,000	$	0.23		13,450,000

	(a)			(b)		(c)		(d)
Period	Total Number of Shares (or Units) Purchased			Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
September 1, 2012 – September 30, 2012		--			--		--		--
December 1, 2012 – December 31, 2012		--			--		--		--
March 1, 2013 – March 31, 2013		499,840	(1)	$	0.25		--		--

Financial Statements:

Report of Independent Registered Public Accounting Firm – Friedman LLP	F-1
Balance Sheets as of June 30, 2013 and 2012	F-2
Statements of Operations for the year ended June 30, 2013 and the period from April 26, 2012 (Inception) to June 30, 2012	F-3
Statements of Cash Flow for the year ended June 30, 2013 and the period from April 26, 2012 (Inception) to June 30, 2012	F-4
Statement of Shareholders Deficit from April 26, 2012 (date of inception) to June 30, 2013	F-5
Notes to Consolidated Financial Statements	F-6

	BOLDFACE Group, Inc.

October 15, 2013	By:	/s/ Nicole Ostoya
		Nicole Ostoya
		Chief Executive Officer and President

Signature	Title	Date

/s/ Nicole Ostoya	Director	October 15, 2013
Nicole Ostoya	Chief Executive Officer and President

/s/ Ashumi K. Shippee	Chief Financial Officer	October 15, 2013
Ashumi K. Shippee

/s/ Emil Rensing	Director	October 15, 2013
Emil Rensing

/s/ Patrick Collins	Director	October 15, 2013
Patrick Collins

/s/ Victor Azrak	Director	October 15, 2013
Victor Azrak