In addition to historical information, this Form 10-Q10-Q/A (this “Quarterly“ Amended 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 THREE MONTH PERIOD ENDED JUNESEPTEMBER 30, 2013
Gross revenues decreasedincreased from 6,159,910374,104 for the three months ended JuneSeptember 30, 2012 to $4,369,640$1,048,407 for the three months ended JuneSeptember 30, 2013. The decreaseincrease in revenues was mainly due to market and economic conditions in our event marketing, event management and public relations and consulting business of XA, The Experiential Agency, Inc. (XA) as well as the sale of Audio Eye on August 17, 2012.
Cost of revenue decreasedincreased from $4,465,668$422,233 for the three months ended JuneSeptember 30, 2012 to $3,261,774$722,819 for the three months ended JuneSeptember 30, 2013. The decreaseincrease in cost of goods sold was due to market and economic conditions in our event marketing, event management and public relations and consulting business of XA, The Experiential Agency, Inc. (XA) as well as the sale of Audio Eye on August 17, 2012.
Operating expenses decreasedincreased from $5,371,321$1,216,921 for the three months ended JuneSeptember 30, 2012 to $3,978,609$ 1,448,677 for the three months ended JuneSeptember 30, 2013. The decreaseincrease in operating expenses is mainly due to fewer expenses incurredthe increase in cost of revenues from $422,233 for the three months ended September 30, 2012 to $722,819 for the three months ended September 30, 2013.
The net incomes decreased from $3,074,634 for the three months ended September 30, 2012 to a net loss of $115,799 for the three months ended September 30, 2013. The decrease in net income is mainly due to a decrease in income on sale of discontinued operations from $4,115,771 for the three months ended September 30, 2012 to $0 for the three months ended September 30, 2013 associated to the spinoff transaction related to AudioEye, Inc. and lower operating expenses related to the talent agency business that was sold to Creative Management Global.
The net loss of $433,506 for the three months ended June 30, 2012 decreased to a net income of $2,475,029 for the three months ended June 30, 2013. The decrease in operating expenses is mainly due to fewer expenses incurred associated to spinoff transaction related to AudioEye, Inc. and lower operating expenses related to the talent agency business that was sold to Creative Management Global. In addition, the Company realized a gain on settlement of debt of $610,400 for the three months ended June 30, 2013.
RESULTS OF OPERATIONS FOR THE SIXNINE MONTH PERIOD ENDED JUNESEPTEMBER 30, 2013
Gross revenues decreased from $7,143,059$7,517,163 for the sixnine months ended JuneSeptember 30, 2012 to $5,392,809$6,441,216 for the sixnine months ended JuneSeptember 30, 2013. The decrease in revenues was mainly due to market and economic conditions in our event marketing, event management and public relations and consulting business of XA, The Experiential Agency, Inc. (XA) as well as the sale of Audio Eye on August 17, 2012.
Cost of revenue decreased from $4,933,747$5,355,980 for the sixnine months ended JuneSeptember 30, 2012 to $3,803,808$4,526,627 for thesixthe nine months ended JuneSeptember 30, 2013. The decrease in cost of goods sold was due to market and economic conditions in our event marketing, event management and public relations and consulting business of XA, The Experiential Agency, Inc. (XA) as well as the sale of Audio Eye on August 17, 2012.
Operating expenses decreased from $6,966,463$8,183,384 for the sixnine months ended JuneSeptember 30, 2012 to $5,150,981$6,599,658 for the sixnine months ended JuneSeptember 30, 2013. The decrease in operating expenses is mainly due to fewer expenses incurred associated to spinoff transaction related to AudioEye, Inc. and lower operating expenses related to the talent agency business that was sold to Creative Management Global.
The net income of 1,613,314 for the nine months ended September 30, 2012 increased to a net income of $ 2,070,484 for the nine months ended September 30, 2013. The increase in net income is mainly due to an increase in unrealized gain on marketable securities from $0 for the nine months ended September 30, 2012 to $1,479,899 for the nine months ended September 30, 2013, a decrease in interest expense from $790,992 for the nine months ended September 30, 2012 to $205,178 for the nine months ended September 30, 2013, and a decrease in income on sale of discontinued operations from $4,115,771 for the nine months ended September 30, 2012 to $0 for the nine months ended September 30, 2013 associated to the spinoff transaction related to AudioEye, Inc.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 2013, the Company’s cash on hand was $278,185.
Cash used by operations for the nine months ended September 30, 2013 was $11,939, as compared to cash used by operations of $315,299 for the nine months ended September 30, 2012. This change is primarily due to unrealized gain on marketable securities of $ 1,479,899 for the nine months ended September 30, 2013 as compares to $0 for the nine months ended September 30, 2012, gain on sale of subsidiary of $0 for the nine months ended September 30, 2013 as compares to $4,115,771 for the nine months ended September 30, 2012, and gain on extinguishment of debt of $793,732 for the nine months ended September 30, 2013 as compares to $75,618 for the nine months ended September 30, 2012.
Cash used in investing activities for the nine months ended September 30, 2013 was $0 as compared cash used in investing activities of $4,841 for the nine months ended September 30, 2012.
Cash provided by financing activities for the nine months ended September 30, 2013 was $52,000, as compared to $448,305 provided for the nine months ended September 30, 2012. The decrease during the nine months ended September 30, 2013, was primarily due to the decrease by $415,640 in cash provided by discontinued operations.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The net loss of 1,461,320 for the six months ended June 30, 2012 decrease to a net income of $2,186,283 for the six months ended June 30, 2013. The decrease in operating expenses is mainly due to fewer expenses incurred associated to spinoff transaction related to AudioEye, Inc. and lower operating expenses related to the talent agency business that was sold to Creative Management Global. In addition, the Company realized a gain on settlement of debt of $610,400 for the six months ended June 30, 2013.