The Company computes net loss per share in accordance with ASC 260,Earnings Per Share, which requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing dilutedDiluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
9
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Fair Value Measurements
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated Financial Statements
| 2. | Summary of Significant Accounting Policies (Continued) |
e) Financial Instruments
ASC 820, and ASC 825, Financial Instruments (ASC 825)'" Fair Value Measurements”,requiresanentitytomaximizetheuse of observable inputsand minimize the use of unobservable inputs when measuring fair value.value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’sinstrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
CMG HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 1: DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued)
Fair Value Measurements (continued)
Level 1
Level 1 – Quotedapplies to assets or liabilities for which there are quoted prices are available in active markets for identical assets
or liabilities.
Level 2
Level 2 applies to assets or liabilities as of the reporting date. Active marketsfor which there are those in which transactionsinputs other than quoted prices that are observable for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.
Level 2 – Pricingquoted prices for similar assets or liabilities in active markets; quoted prices for identic al assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are other than quoted prices in active markets included in level 1, which are either directlyobservable or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived principally from, observable data or are supportedcorroborated by, observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.
market data.Level 3
Level 3 – Pricingapplies to assets or liabilities for which there are unobservable inputs include significant inputsto the valuation methodology that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimatesignificant to the measurement of the fair value.
value of the assets or liabilities.The Company’sCompany's financial instruments consist principally of cash, accounts receivable, accounts payable, and accrued liabilities. amounts due to related parties. Pursuant to ASC 820, and 825, the fair value of our cash is determined based on “Level 1”"Level I" inputs, which consist of quoted prices in active markets for identical assets. TheWe believe that the recorded values of all our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations.
durations. t) Property and Equipment
Property and equipment are comprised of a vehicle and is amortized on a straight-line basis over an expected
useful life of three years. Maintenance and repairs are charged to expense as incurred.
g) Impairment of long lived assets
The following table sets forth by level withCompany evaluates the fair value hierarchyrecoverability of long-lived assets and the related estimated remaining lives at each balance sheet date. The Company records an impairment or change in useful life whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed.
h) Reclassifications
Certain prior period amounts have been reclassified to conform to current presentation.
i)Substantial doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial assetsstatements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s negative cash flow from operations raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
10
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
3 Loan Receivable
On November 15, 2019 the company entered into an agreement to a line of credit (LOC) with Pristec America Inc. (Pristec). The LOC was for $75,000. As of December 31, 2019, the Company had loaned to Pristec $67,500 at an interest rate of 12%, the loan matures in twelve (12) months. As of December 31, 2020 the Company loaned an additional $32,500 and liabilities measuredextended the loan for another 12 months until December 31, 2023. Pristec is a late stage technology company that has 108 worldwide patents for the cold cracking of crude oil and other oil products. The Company has been granted the right to convert this loan into 100 shares of stock at fair value on Septemberprice of $1,000. At the discretion of the Company, the Company has the option of entering into a revenue sharing at the same terms. Total amount owed including interest is $125,430 and $123,430 as of June 30, 20152023 and December 31, 2014:
| December 31, 2015 | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Derivative Liabilities | | $ | - | | | $ | - | | | $ | 0 | | | $ | 0 | |
| December 31, 2014 | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Derivative Liabilities | | $ | - | | | $ | - | | | $ | 400,892 | | | $ | 400,892 | |
Investments in Debt and Equity Securities
2022, respectively.On June 24, 2020 The Company applies the provisions of Accounting Standards Codification 320, Investments – Debt and Equity Securities, regarding marketable securities. The Company invests in securities that are intended to be bought and held principally for the purpose of selling them in the near term, and as a result, classifies such investments as trading securities. Trading securities are recorded at fair value on the balance sheet with changes in fair value being reflected as unrealized gains or losses in the current period. In addition, the Company classifies the cash flows from purchases, sales, and maturities of trading securities as cash flows from operating activities.
Details of the Company's marketable trading securities as of September 30, 2015 and December 31, 2014 are as follows:
| | | September 30, 2015 | | | December 31, 2014 | |
| Aggregate fair value | | $ | - | | | $ | - | |
| Gross unrealized holding gains (losses) | | | - | | | | - | |
| | | | | | | | | |
| Proceeds from sales | | $ | - | | | $ | 850,470 | |
| Gross realized gains | | | - | | | | 86,382 | |
| Gross realized losses | | | - | | | | - | |
| Other than temporary impairment | | | - | | | | - | |
CMG HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 2 - EQUITY
Preferred Stock
Series B Preferred Stock and Inventory Purchase
During August 2013, the Company entered into a Termination Agreement and Release (the “Agreement”)an agreement with Continental Investments Group (Continental), the holder of a $85,000 convertible note payable of the Company and the holder of 2,500,000 shares of restricted common stock. The Agreement calls for the termination and cancellation of a Sale and Purchase agreement,New Vacuum Technologies LLC(NVT) whereby the Company agreed to issue loaned NVT $50,000 shares of Series B Convertible Preferred Stock in exchange for 20,000 cartoon animated Cels. The Agreement also calls for the cancellation of the $85,000 convertible note and related interest and for Continental to return the 2,500,000 shares of restricted common stock.
Common Stock
On January 29, 2014, the Company sold 1,500,000 shares of its common stock for $0.01 per share and net proceeds of $15,000.
On March 28, 2014, the Company issued 5,000,000 shares of its common stock pursuant to the acquisition of its subsidiary. The shares were valued at a total of $87,500 or $0.0175 per share, the closing price of the company’s common stock on the OTCQB.
On April 7, 2014, the Company issued 522,000 shares of its common stock pursuant to a consulting agreement. The shares were valued at a total of $8,613 or $0.0165 per share, the closing price of the company’s common stock on the OTCQB.
On May 9, 2014, the Company issued to a total of 6,000,000 shares of Common Stock to its three former directors of the Company, with each former director receiving 2,000,000 shares, pursuant to the agreements between the Company and each of the former directors dated February 5, 2014.
On June 30, 2014, the Company canceled 7,350,000 shares of common stock pursuant to a settlement agreement with CMGO Investors LLC and Craig Boden.
. During July 2015 the Company issued 126,000,000 of its common shares in conversion of convertible notes to KBM Worldwide and KBM Investments, Inc.
During July 2015 the Company issued 9,000,000 of its common shares in conversion of a convertible note to Iconic Holdings, LLC. The Company holds an option to purchase the remaining debt from Iconic Holdings, LLC for $43,000.
During July 2015 the Company issued 25,000,000 of its common shares in conversion of a convertible note to Typenex Co-Investment, LLC. The Company holds an option to purchase the remaining debt from Typenex Co-Investment, LLC. for $65,000.
Common Stock Warrants
On April 7, 2014, we issued to our newly appointed CEO and Chairman of the Board of Directors, as compensation, a warrant to purchase a total of 40,000,000 shares of Common Stock at the exercise price of $0.0155 with a term of 5 years.
CMG HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 2 - EQUITY (continued)
Common Stock Warrants (continued)
A summary of warrant activity for the nine months ended September 30, 2015 and the year ended December 31, 20142021 the Company loaned an additional $999,201 to NVT. NVT repaid $60,000 to the Company. The loan was originally due on December 24, 2020 at an interest rate of 10% per annum. The loan was extended on December 24, 2022 until December 24, 2023. The loan was verbally extended until December 24, 2023. The total amount owed including interest is $1,459,209 and $1,391,334as follows:
| | | Outstanding and Exercisable | | | Weighted average Exercise Price | |
| | | | | | | | | |
| December 31, 2013 | | | 1,798,000 | | | $ | 0.28 | |
| Granted | | | 40,000,000 | | | $ | 0.016 | |
| Exercised | | | — | | | | — | |
| Expired | | | (1,798,000 | ) | | | | |
| December 31, 2014 | | | 40,000,000 | | | $ | 0.02 | |
| Granted | | | | | | | | |
| Exercised | | | | | | | | |
| Expired | | | | | | | | |
| September 30, 2015 | | | 40,000,000 | | | | .0021 | |
As of
June 30, 2023 and December 31, 2022 respectively.On September 3, 2022, The Company loan its CEO Glenn Laken $100,000 for personal legal fees.
4 Equity
During the periods ended June 30, 2015,2023 and December 31, 2022, the Company did not sell any shares of its $0.001 par value per share common stock.
During the periods ended June 30, 2023 and December 31, 2022, the Company did not issue any warrants have a weighted averagefor its common shares. On December 15, 2017, the Company's Board of Directors lowered the strike price on the outstanding 40,000,000 Warrants previously issued to Glenn Laken to $0.0035 and extended the expiration date for an additional five (5) years. These warrants were extended to December 15, 2022. They were extended again to December 15, 2027. The remaining life of 4.43at June 30, 2023 is 4 years with $0 aggregate intrinsic value.
NOTE 3 – PROPERTY AND EQUIPMENT
| | | 2015 | | | 2014 | |
| Equipment | | $ | 33,000 | | | $ | 33,000 | |
| Leasehold Improvements | | | 4,142 | | | | 4,142 | |
| | | | 37,142 | | | | 37,142 | |
| Less accumulated depreciation | | | 8,664 | | | | 4,950 | |
| | | $ | 28,478 | | | $ | 32,192 | |
Depreciation expense was $3,714 and $4,950 for the nine months ended September 30, 2015 and the year ended December 31, 2014.
NOTE 4 – GOODWILL
The Company recorded goodwill of $54,500 on the purchase of Good Gaming Inc. The Company issued 5,000,000 shares of Company common stock at a value of $0.0175 per share for a value of $87,500. The Company also recorded $33,000 of equipment.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE Notes to the Consolidated financial Statements
5 – NOTES PAYABLE
Notes Payable
Convertible Promissory Notes
On November 23, 2021, the Company borrowed $500,000 from GS Capital Partners LLC. The Company issued Iconic Holdings, LLC. a convertible promissory note of principal amount of $50,000is due and payable on September 26, 2014.November 23, 2022. The note has an interest rate of 10% and6% per annum. The Holder of this Note is due September 29, 2015. The note is convertible into the Company’s common stockentitled, at a conversion price equal to 70% of the lowest trading price of the Company’s common stock during the 20 consecutive trading days prior to the date on which note holder electsits option, at any time after cash payment, to convert all or part of the note. The unamortized discount is $24,520. The net value of the note is $18,638. The outstanding balance at June 30, 2015 is $50,000.
On October 1, 2014 the Company sold a Convertible Debenture in the principleany amount of $114,000 to Typenex Co-Investment, LLC. The principal amount includes an Original Issue Discount in the amount of $10,000. The Debenture bears interest at an annum rate of 10% and is payable in 5 equal installments that can be paid in cash or share of the Company’s common stock. The number of shares to be issued for installment payments made in the form of shares of the Company’s common stock, shall be calculated at70% of the average of the three closing prices in the 20 trading days prior to the date of conversion, of the Company’s common stock. The Note’s maturity date is August 1, 2015. The unamortized discount is $46,125. The net value of the note is $63,960. The outstanding balance at June 30, 2015 is $114,000.
On October 10, 2014 the Company sold a Convertible Debenture in the principal amount of $115,000 to KBM Investments LLC. The Principle amount includes an Original Issue Discount in the amount of $11,000 and investor fees in the amount of $4,000. Total net proceeds to the Company were $100,000. The Debenture bears interest at an annum rate of 8% and can be repaid at any time prior to the date of maturity. The prepayment penalty for such prepayment ranges from 8%-25% of the principal face amount paid. On the 181st day from the date of the Note. Thethis Note is convertiblethen outstanding into shares of the Company’sCompany's common stock. The Ratestock (the "Common Stock") at a price for each share of such conversion is 75%Common Stock at a price ("Conversion Price") of $0.0165 per share (the “Fixed Price”). Beginning on the 6th monthly anniversary of the lowest 3 trading pricesIssuance Date of the Note, the Fixed Price shall be equal to $0.0092 per share. Provided, however that in the event, the Company’s common stock during the tenCommon Stock trades below $0.007 per share for more than seven (7) consecutive trading days, priorthe Holder of this Note is entitled, at its option, to the conversion date. The Note’s maturity date is October 8, 2015. The unamortized discount is $60,510. The net valueconvert all or any amount of the note is $75,924. The outstanding balance at June 30, 2015 is $115,000.
On December 18, 2014 the Company entered into the Securities Purchase Agreement pursuant to which it sold an 8% convertible note of the Corporation, in the aggregate principleprincipal face amount of $40,000 convertiblethis Note then outstanding into shares of the Company's Common Stock at a Conversion Price equal to the lower of the Fixed Price or 75% of the average of the two lowest VWAP’s of the Common Stock as reported on the National Quotations Bureau OTC Marketplace exchange which the Company’s common stockshares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the tenpriortrading days including the day upon which a Notice of Conversion is received by the Company or its transfer agent (provided such Notice of Conversion is delivered by fax or other electronic method of communication to KBM Worldwide Inc.the Company or its transfer agent after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Note is convertible intoCompany agrees to honor all conversions submitted pending this increase. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Company’s common stock. The Rate of such conversion is 75%Common Stock of the lowest 3 trading prices ofCompany (which may be increased up to 9.9% upon 60 days’ prior written notice by the Company’s common stock during the ten trading days prior to theInvestor). The conversion date. The note hasdiscount, look back period and other terms will be adjusted on a maturity date of December 18, 2015. The unamortized discount is $28,175. The net value of the note is $34,074. The outstanding balance at June 30, 2015 is $40,000. .
In June 2015,ratchet basis if the Company borrowed $100,000offers a more favorable conversion discount, prepayment rate, interest rate, (whether through a straight discount or in combination with an original issue discount), look back period or other more favorable term to provide paymentanother party for any financings while this Note is in effect, including but not limited to Eatondefaults, penalties and Van Winkle (the attorneysthe remedy for the Hudson Grey lawsuit) as the seed money for the Suit. As stated previously the balance of the fees for the suit have been arranged. This loan with expenses is due to be repaid November 1, 2015.
|
The Company borrowed $150,000 from two Irish pension funds to purchase the remaining debt of KBM Worldwide, Inc. and KBM Investments, LLC. The terms for the loan are in the final stages of negotiation and will require a payment upon and if the Company is victorious in the pending litigation against Hudson Grey et al.
We expect these two notes to be extinguished previous to the end of the forth quarter of 2015.
|
CMG HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 6 - DERIVATIVE LIABILITIES
The Company has a convertible instruments outstanding more fully described in Note 3. In accordance with ASC 815-15 “Derivatives and Hedging”, the convertible share-settleable instruments are classified as liabilities.
Embedded Derivative Liabilities in Convertible Notes
such defaults or penalties. During
the nine months ended September 30, 2015 and the year ended December 31,
2014,2022 the Company
recognized new derivative liabilitiesborrowed an additional $222,000 under the same terms. At June 30, 2023 the balanced owed was $712,000.NOTES PAYABLE
In 2017 the company borrowed 150,000 from 2 individuals in Ireland. 90k and 60k respectively. In 2021 the individual who was owed 90k(90,000) was paid back with interest. The CEO of $0 and $400,892, respectively, asCMG had a result of new convertible debt issuances. The fair value of these derivative liabilities exceeded the principal balance of the related notes payable by $0 and $81,892 for the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively. As a result of conversions of notes payable, the Company reclassified $0 and $0 from equity and $0 and $0 of derivative liabilities to equity during the nine months ended September 30, 2015 and the year ended December 31 2014, respectively. The Company recognized a gain(loss) of $0 and $7,926 on derivatives due to change in fair value of the liability during the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively. The fair value of the Company’s embedded derivative liabilities was $0 and $400,892 at September 30, 2015 and December 31, 2014, respectively.
Warrants
Under ASC 815-15, the liabilities were subsequently measured at fair value at the end of each reporting perioddisagreement with the changesecond lender and they have not spoken in fair value recorded to earnings. The fair value of all outstanding warrants as of September 30, 2015almost 4 years, we are carrying the loan and December 31, 2014 was $0 and $51,622, respectively. The Company recognized an expense of $40,501 and a gain $40,501 related to the warrants for the nine months ended September 30, 2015 and the year ended December 31, 2014, respectively.
The following table summarizes the derivative liabilities included in the consolidated balance sheet:
| Derivative Liabilities | | | |
| Balance December 31, 2013 | | $ | 11,121 | |
| ASC 815-15 additions | | | 402.710 | |
| Change in fair value | | | (1,818 | ) |
| ASC 815-15 deleations | | | (11,121 | ) |
| Balance December 31, 2014 | | | 400,892 | |
| ASC 815-15 additions | | | - | |
| Change in fair value | | | 15,607 | |
| ASC 815-15 deleations | | | (416,499 | ) |
| Balance December 31, 2015 | | $ | - | |
The embedded conversion options in the Notes, which is accounted for separately as a derivative instrument is valued using a binomial lattice model because that model embodies all of the significant relevant assumptions that address the features underlying these instruments. Significant assumptions used in the model as of the date the Note was issued and as of June 30, 2015 included an expected life equal to the remaining term of the Note, an expected dividend yield of zero, estimated volatility ranging of 116%, and a risk-free rate of return of 0.13%. For the risk-free rates of return, we use the published yields on zero-coupon Treasury Securities with maturities consistent with the remaining term of the Note. Volatility is based upon our expected common stock price volatility over the remaining term of the Note. The volatility used for the Note is based on the Company’s 100-day volatility, which is considered a reasonable surrogate for the volatility to be expected over the life of the Note. That volatility has generally ranged from 116% to 146%. During the quarter ended September 30, 2015 thethe notes were convertied or paid off by refinancing
CMG HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 7 – RELATED PARTY
The Company issued to three former directors 2,000,000 shares of the Company’s common stock. The Company issued the Company CEO a warrant to purchase 40,000,000 shares of the Company’s common stock at $0.0155. The warrant has a term of 5 years. The board of directors approved a monthly salary for the Company CEO of $15,000 per month. Due to negative economic factors the company has not made all of these payments and has recorded “Accrued Compensation” of $130,000 at June 30, 2015. Due to these same economic effects the Company is currently using office space provided by the Company CEO’s daughter on a rent free basis and she is also employed as an outside consultant on a part time basis.
NOTE 8 - LEGAL PROCEEDINGS
some point it will more than likely settle.6 Legal Proceedings
We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
On September 23, 2014, XA filed a lawsuit in the Supreme Court of the State of New York, County of New York against HG and its principals alleging wrongdoing by the defendants in connection with soliciting XA’s clients and seeking against further contact with XA clients. The Company conducted an internal investigation of actions taken by XA’s former employees during the quarter ended September 30, 2014. The Company and XA plan to complete the investigation, including recovering e-mails deleted by the former employees, and to vigorously pursue any and all amounts wrongfully taken from XA.
The investigation has been completed, an amended complaint will be filed on June 15, 2015. New counsel has been retained to pursue the prosecution of the case and the new counsels name is Laurence Speckman of the firm Eagon and Van Winkle. There will be new defendant s added and the damages sought will be substantially increased
In October, 2014, Ronald Burkhardt, XA,s former Executive Chairman and a current member of the Company’s Board of Directors filed a lawsuit in the Supreme Court of the State of New York, County of New York, alleging breach of his employment contract and seeking approximately $695,000 in damages. The Company believes that Mr. Burkhardt’s claim is without merit and plans to vigorously defend the lawsuit.
NOTE 9 - ACQUISITION OF GOOD GAMING, INC.
On March 28, 2014, CMG Holdings, Inc. (the “Company” or “CMG”), completed its acquisition of 100% of the shares of Good Gaming, Inc. (“GGI”) by entering into a Share Exchange Agreement (the “SEA”) with BMB Financial, Inc. and Jackie Beckford, the then shareholders of GGI. The sole owner of BMB Financial, Inc. is also the sole owner of Infinite Alpha, Inc. which provides consulting services to CMG. The transaction was completed under the purchase method of accounting. Pursuant to the SEA, the Company received 100% of the shares of GGI in exchange for 5,000,000 shares of the Company’s common stock, $33,000 in equipment and consultant compensation and a commitment to pay $200,000 in development costs, of which $50,000 of the development costs had been advanced by the Company. In addition, pursuant to the SEA, CMG shall adopt an incentive plan for GGI which shall entitle the GGI officers, directors and employees to receive up to 30% of the net profits of GGI and up to 30% of the proceeds, in the event of a sale of GGI or its assets. The Companyy recorded goodwill of $54,500 as a result of this acquisition and intends to test this asset for impairment every twelve months.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SeptemberNotes to the Consolidated financial Statements
7Income Taxes
The Company has a net operating loss carried forward of $14,481,322 available to offset taxable income in future years which commence expiring in 2030. The Company is subject to United States federal and state income taxes at an approximate rate of 21% (2022 and 2021). As at June 30, 2015
| | | 2023 | | 2022 |
| Income tax recovery at Statutory rate | | $ | 30,626 | | | $ | 4,515 | |
| Permanent differences and other | | | — | | | | — | |
| Valuation allowance change | | | (30,626 | ) | | | (4,515 | ) |
| Provision for income taxes | | $ | — | | | $ | — | |
The significant components of deferred income tax assets and liabilities at June 30, 2023 and December 31, 2022
are as follows:
| | | 2023 | | 2022 |
| Net operating loss carried forward | | $ | 14,481,322 | | | $ | 14,331,600 | |
| Valuation allowance | | $ | (14,481,322 | ) | | $ | (14,331,600 | ) |
| Net deferred income tax asset | | $ | — | | | $ | — | |
13
(Unaudited)
NOTE 10 - SEGMENTS
CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
8Segments
The Company splits its business activities during the Septembersix months emded ended June 30, 20152023 into three Reportable Segments. Each segment represents an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity, for the period ended June 30, 2023.
Reportable Segments
| | | | | CMG Holding | | |
| | | XA | | Group | | Total |
| Revenues | | | 479,425 | | | | — | | | | 479,425 | |
| | | | | | | | | | | | | |
| Cost of Revenues | | | 273,943 | | | | — | | | | 273,943 | |
| | | | | | | | | | | | | |
| Gross Profit | | | 205,482 | | | | — | | | | 205,482 | |
| | | | | | | | | | | | | |
| Operating expenses | | | 194,687 | | | | 199,437 | | | | 394,124 | |
| | | | | | | | | | | | | |
| Operating income (loss) | | | 10,795 | | | | (199,437 | ) | | | (188,642 | ) |
| | | | | | | | | | | | | |
| Other income (expenses) | | | — | | | | 42,803 | | | | 42,803 | |
| | | | | | | | | | | | | |
| Net income(loss) | | | 10,795 | | | | (156,634 | ) | | | (142,839 | ) |
The Company splits its business activities during the year ended December 31, 2021 into three reportable segments. Each segment represents an entity of which are included in the consolidation. The table below represents the operations results for each segment or entity, for the nine monthsperiod ended SeptemberJune 30, 2015.
| | | | | CMG Holding | | |
| | | XA | | Group | | Total |
| Revenues | | | 975,555 | | | | — | | | | 975,555 | |
| | | | | | | | | | | | | |
| Cost of revenues | | | 797,886 | | | | — | | | | 797,886 | |
| | | | | | | | | | | | | |
| Gross profit | | | 177,669 | | | | — | | | | 177,669 | |
| | | | | | | | | | | | | |
| Operating expenses | | | 99,786 | | | | 205,482 | | | | 305,268 | |
| | | | | | | | | | | | | |
| Operating income (loss) | | | 77,883 | | | | (205,482 | ) | | | (127,599 | ) |
| | | | | | | | | | | | | |
| Other income (expenses) | | | 62,500 | | | | 49,131 | | | | 111,631 | |
| | | | | | | | | | | | | |
| Net income(loss) | | | 140,383 | | | | (156,351 | ) | | | (15,968 | ) |
| | | XA | | | Good Gaming | | | CMG Holdings Group | | | Totals | |
| | | | | | | | | | | | | |
| Revenue | | $ | 564,040 | | | $ | 62,390 | | | $ | -- | | | $ | 626,430 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses | | | 662,123 | | | | 46,846 | | | | -- | | | | 708,969 | |
| | | | | | | | | | | | | | | | | |
| Operating Income (Loss) | | | (98,083 | ) | | | 15,544 | | | | -- | | | | (82,539 | ) |
| | | | | | | | | | | | | | | | | |
| Other Income (Expense) | | | -- | | | | -- | | | | (201,919 | ) | | | (201,919 | ) |
| | | | | | | | | | | | | | | | | |
| Net Income (Loss) | | $ | (98,083 | ) | | $ | 15,544 | | | $ | (201,919 | ) | | $ | (284,458 | ) |
NOTE 11 – RESIGNATION OF OFFICERS AND MEMBERS OF THE BOARD.
On May CMG HOLDINGS GROUP, INC.
Notes to the Consolidated financial Statements
9 2014, theRelated Party Transactions
The Company issued toborrowed $125,000 from a total of 6,000,000 shares of Common Stock to its three former directorsrelative of the Company with each former director receiving 2,000,000CEO. This amount is due on demand and has an interest rate of 0%. At June 30, 2023 the remaining balance of the loan was $15,000.
The Company issued the Company CEO a warrant to purchase 40,000,000 shares pursuantof the Company’s common stock at $0.0155. The warrant has an original term of 5 years. On December 15, 2017 the purchase price was changed to $.0035 and the term was extended 5 years. The warrants were extended 5 years on December 15, 2022. The warrants were vested 100% on April 7, 2014 when issued.
The board of directors approved a monthly salary for the Company CEO of $15,000 per month. Due to negative economic factors the company did not make any of these payments until January 15, 2019, when payments to the agreements betweenCEO began. The Company has recorded “Deferred Compensation” of $443,014 at June 30, 2023. The Company made payments of $(57,500) and $32,500 in excess of the current $45,000 and $90,000 salary for periods ended June 30, 2023 and 2022, respectively.
The Company paid $75,000 and $75,000 for the periods ended June 30, 2023 and 2022, respectively, as compensation to the President of XA, who is the daughter of the Company and each of the former directors dated February 5, 2014.
10 Subsequent Events
Per management review, no other material subsequent events have occurred.
14
On September 17, 2014, Jeffrey Devlin resigned as Chief Financial Officer and Director of the Company.
NOTE 12 – GOING CONCERN
As reported in the consolidated financial statements, the Company has an accumulated deficit as of September 30, 2015 and its current liabilities exceeded its current assets. There were recurring losses from operations and cash flows. There is a potential for this negative trend to continue.
These factors create uncertainty about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable and to create operations that contribute capital from normal operations. If the Company cannot obtain adequate capital or revenue streams it could be forced to cease operations.
NOTE 13 - SUBSEQUENT EVENTS
The Company has evaluated events subsequent through the date these financial statements have been issued to assess the need for potential recognition or disclosure in this report. Such events were evaluated through the date these financial statements were available to be issued. Based upon this evaluation, it was determined that, with the exception of disclosure below, no other subsequent events occurred that require recognition or disclosure in the financial statements.
During July 2015 the Company issued 126,000,000 of its common shares in conversion of convertible notes to KBM Worldwide and KBM Investments, Inc.
The Company borrowed $150,000 from two Irish pension funds to purchase all of the remaining debt of KBM Worldwide, Inc. and KBM Investments, LLC. The terms for the loan are in the final stages of negotiation and will require a payment upon and if the Company is victorious in the pending litigation against Hudson Grey et al.
CMG HOLDINGS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2015
(Unaudited)
NOTE 13 - SUBSEQUENT EVENTS (Continued)
During July 2015 the Company issued 9,000,000 of its common shares in conversion of a convertible note to Iconic Holdings, LLC. The Company holds an option to purchase the remaining debt from Iconic Holdings, LLC for $43,000.
During July 2015 the Company issued 25,000,000 of its common shares in conversion of a convertible note to Typenex Co-Investment, LLC. The Company holds an option to purchase the remaining debt from Typenex Co-Investment, LLC. for $65,000.
We expect these two notes to be extinguished previous to the end of the forth quarter of 2015.
The Company borrowed $150,000 from two Irish pension funds to purchase the remaining debt of KBM Worldwide, Inc. and KBM Investments, LLC. The terms for the loan are in the final stages of negotiation and will require a payment upon and if the Company is victorious in the pending litigation against Hudson Grey et al.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
In addition to historical information, this Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, which includes, but are not limited to, statements concerning expectations as to our revenues, expenses, and net income, our growth strategies and plans, the timely development and market acceptance of our products and technologies, the competitive nature of and anticipated growth in our markets, our ability to achieve cost reductions, the status of evolving technologies and their growth potential, the adoption of future industry standards, expectations as to our financing and liquidity requirements and arrangements, the need for additional capital, and other matters that are not historical facts. These forward-looking statements are based on our current expectations, estimates, and projections about our industry, management’s beliefs, and certain assumptions made by it. Words such as “anticipates”, “appears”, “believe,”, “expects”, “intends”, “plans”, “believes, “seeks”, “assume,” “estimates”, “may”, “will” and variations of these words or similar expressions are intended to identify forward-looking statements. All statements in this Quarterly Report regarding our future strategy, future operations, projected financial position, estimated future revenue, projected costs, future prospects, and results that might be obtained by pursuing management’s current plans and objectives are forward-looking statements. Therefore, actual results could differ materially and adversely from those results expressed in any forward-looking statements, as a result of various factors. Readers are cautioned not to place undue reliance on forward-looking statements, which are based only upon information available as of the date of this report. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known and unknown risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed with the Securities and Exchange Commission (“SEC”). We expressly disclaim any obligation to revise or update publicly any forward-looking statements even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such difference might be significant and materially adverse to our stockholders. Unless the context indicates otherwise, the terms “Company”, “Corporate”, “CMGO”, “our”, and “we” refer to CMG Holdings Group, Inc. and its subsidiaries.
RESULTS OF OPERATIONS FOR THE NINESIX MONTH PERIOD ENDED SEPTEMBERJUNE 30, 2015
2023Gross revenues decreased from $7,020,102$975,555 for the ninesix months ended SeptemberJune 30, 20142022 to $626,430$479,425 for the ninesix months ended September 30, 2015.June, 2023. The decrease in revenues was mainly attributable to decrease in available business in the legal issues surrounding XA and its ongoing suit and lack of finances due to the same issue.
current year.Cost of revenue decreased from $6,312,846$769,502 for the ninesix months ended SeptemberJune 30, 20142022 to $202,531$273,943 for the ninesix months ended SeptemberJun3 30, 2015.2023. The decrease in cost of goods soldrevenues was duemainly attributable to the decrease in revenues of XA, The Experiential Agency, Inc. (XA).
available business in the current year.Operating expenses decreasedincreased from $2,767,332$305,681 for the ninesix months ended SeptemberJune 30, 20142022 to $575,438$394,124 for ninethe six months ended SeptemberJune 30, 20152023. The decreaseincrease in operating expenses is due to the decreaseincrease in revenuessupport expenses to run business.
Net income decreased from a loss of $15,968 for the ninesix months ended SeptemberJune 30, 2015.
Net2022 to net loss decreased from $1,618,697of $145,840 for the ninesix months ended SeptemberJune 30, 2014 to $121,423 for the nine months ended September 30, 2015.2023. The decreaseincrease in net loss is duewas mainly attributable to the decrease in revenuesavailable business in the current year and cost of revenueincrease in interest income and the realized and unrealized gains of marketable securities incurred during the nine months ended September 30, 2015 from the nine months ended September 30, 2014.
interest expense.LIQUIDITY AND CAPITAL RESOURCES:
As of SeptemberJune 30, 2015,2023, the Company’s cash on hand was $63,592.
$188684.Cash used in operating activities for the ninesix months ended SeptemberJune 30, 20152023 was $27,973,$101,973, as compared to cash used in operating activities of $1,227,805$7,770 for the ninesix months ended SeptemberJune 30, 2014. This change is due2022. The increase in net loss was mainly attributable to realized and unrealized gains on marketable securities of $0, respectively fordecrease in available business in the nine months ended September 30, 2015 as compared to $193,487 for the nine months ended September 30, 2014.
current year.Cash fromused in investing activities for the ninesix months ended SeptemberJune 30, 20152023 was $63,666$47,500 as compared cash used in investing activities of $1,227,805$139,340 for the ninesix months ended SeptemberJune 30, 2014. During2022. This was due to the nine months ended September 30, 2014, sold 925,925 shares ofCompany not loaning additional funds to NVT during the Company’s holdings in AudioEye, Inc., for net proceeds of $250,000.
period and not getting additionl financing.Cash provided by financing activities for the ninesix months ended SeptemberJune 30, 20152023 was $0 as compared to $65,000$0 provided forby financing activities the ninesix months ended September 30, 20143.
June, 2022.15
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2015.March 31, 2022. Based upon such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2015,March 31, 2022, the Company’s disclosure controls and procedures were not effective due to the identification of a material weakness in our internal control over financial reporting which is identified below, which we view as an integral part of our disclosure controls and procedures. This conclusion by the Company’s Chief Executive Officer and Chief Financial Officer does not relate to reporting periods after December 31, 2014.
June 30, 2023.Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting as of SeptemberJune 30, 20152023 based on the framework stated by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 1992). Furthermore, due to our financial situation, the Company will be implementing further internal controls as the Company becomes operative so as to fully comply with the standards set by the Committee of Sponsoring Organizations of the Treadway Commission.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on its evaluation as of December 31, 2014,June 30, 2023, our management concluded that our internal controls over financial reporting were not effective as of December 31, 2014June 30, 2023 due to the identification of a material weakness. A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. At any time, if it appears that any control can be implemented to continue to mitigate such weaknesses, it is immediately implemented. As soon as our finances allow, we will hire sufficient accounting staff and implement appropriate procedures for monitoring and review of work performed by our Chief Financial Officer.
In performing this assessment, management has identified the following material weaknesses as of December 31, 2014:
June 30, 2023:· | ● | There is a lack of segregation of duties necessary for a good system of internal control due to insufficient accounting staff due to the size of the Company |
· | ● | Lack of a formal review process that includes multiple levels of reviews |
· | ● | Employees and management lack the qualifications and training to fulfill their assigned accounting and reporting functions |
· | ● | Inadequate design of controls over significant accounts and processes |
· | ● | Inadequate documentation of the components of internal control in general |
· | ● | Failure in the operating effectiveness over controls related to valuing and recording equity based payments to employees and non-employees |
· | ● | Failure in the operating effectiveness over controls related to valuing and recording debt instruments including those with conversion options and the related embedded derivative liabilities |
· | ● | Failure in the operating effectiveness over controls related to recording revenue and expense transactions in the proper period |
· | ● | Failure in the operating effectiveness over controls related to evaluating and recording related party transactions |
16
The Company is not required by current SEC rules to include, and does not include, an auditor's attestation report. The Company's registered public accounting firm has not attested to Management's reports on the Company's internal control over financial
reporting. As of June 30, 20152022 no changes have occurred.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
On April 7, 2014, the Board of Directors of the Company appointed Mr. Glenn Laken as the Company’s Chief Executive Officer. Mr. Jeffrey Devlin remained as the Company’s acting Chief Financial Officer.
Except for the above, noNo change in the Company’s internal control over financial reporting occurred during the period ended June 30, 2015,2023, that materially affected, or is reasonably likely to materially affect, the Company s internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1 – LEGAL PROCEEDINGS
We are subject to certain claims and litigation in the ordinary course of business. It is the opinion of management that the outcome of such matters will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
On July 6, 2011, the Company was served with a lawsuit filed in the Circuit Court for the County of Multnomah, Oregon. The complaint alleges breach of contract and entitlement to consulting fees from the Company. The case was settled in 2012 for $30,000 and the settlement amount has not been paid.
The Company is a smaller reporting company and is therefore not required to provide this information.
ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
All unregistered sales of the Company’s securities have been disclosed on the Company’s current reports on Form 10-K10Q, 10K and form 8-K.
17
ITEM 3 – DEFAULT UPON SENIOR SECURITIES
ITEM 4 – MINE SAFETY DISCLOSURES
ITEM 5 – OTHER INFORMATION
On February 24, 2015, CMG Holdings Group, Inc.’s (the “Company”) subsidiary, XA, The Experiential Agency, Inc. (“XA”) having determined that it could no longer operate its business, as it was then constituted, decided to execute an assignment for the benefit of creditors to Tailwind Services LLC (“Tailwind”). An Assignment for the Benefit of Creditors is a method of liquidating a business. To that end a Trust Agreement and Assignment of Assets for the Benefit of Creditors was executed on February 24, 2015, transferring all of the assets of XA to Tailwind. Subsequently Tailwind advertised a sale of XA's assets to the Company for the approximate sum of $60,000 (the "Sale"). An Asset Purchase Agreement was executed between XA and the Company on March 4, 2015. The Sale of XA's assets to CMG was consummated on March 25, 2015. Only assets were purchased by CMG liabilities were not assumed. The assets consisted of, among other things, all personal property of XA including accounts receivable, the XA name and other general intangibles of XA, as well as a cause of action involving stolen services.
None.
Description of Exhibit Filing Reference
* The XBRL-related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| | CMG HOLDINGS GROUP, INC. |
Dated: August 14, 2023 | | By: /s/ Glenn Laken |
| | | | |
Dated: August 5, 2016 | By: | /s/ Glenn Laken,
| |
| | Glenn Laken
Chief Executive Officer and Chief Financial Officer | |
