UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
Form 10-Q
[ü] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2014
or
| [ ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________________ to __________________
Commission file number: 333-113296
Beta Music Group, Inc.
(Name of registrant as specified in its charter)
| Florida | 26-0582871 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| 7100 Biscayne Blvd. Miami, FL | 33138 |
| (Address of principal executive offices) | (Zip Code) |
(212) 249-4900
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [ ] No [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated Filer | [ ] | Accelerated Filer | [ ] |
| Non-accelerated Filer | [ ] | Small Reporting Company | [X] |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.
Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock as of the latest practicable date: 72,407,505 shares of Common Stock, $.01 par value as of November 19, 2014.
TABLE OF CONTENTS
| PART I. - FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. | 11 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. | 14 |
| Item 4. | Controls and Procedures. | 14 |
| PART II. - OTHER INFORMATION | ||
| Item 1. | Legal Proceedings. | 15 |
| Item 1A. | Risk Factors. | 15 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. | 15 |
| Item 3. | Defaults Upon Senior Securities. | 15 |
| Item 4. | Mine Safety Disclosure. | 15 |
| Item 5. | Other Information. | 15 |
| Item 6. | Exhibits. | 16 |
FORWARD-LOOKING STATEMENTS
This Form 10-Q quarterly report contains “forward-looking statements” within the meaning of applicable securities laws relating to Beta Music Group, Inc. (“Beta”, “Beta Music” “we”, “our”, or the “Company”) which represent our current expectations or beliefs including, but not limited to, statements concerning our operations, performance, and financial condition. These statements by their nature involve substantial risks and uncertainties, credit losses, dependence on management and key personnel, variability of quarterly results, and our ability to continue growth. Statements in this annual report about the Company’s future expectations, beliefs, goals, plans or prospects constitute forward-looking statements. You should also see our risk factors as set forth in this Form 10-Q and Form 10-K and all amendments thereto.. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact are forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, anticipate”, “intend”, “could”, “estimate”, or “continue” or the negative or other comparable terminology are intended to identify forward- looking statements. Other matters such as our growth strategy and competition are beyond our control. Should one or more of these risks or uncertainties materialize or should the underlying assumptions prove incorrect, actual outcomes and results could differ materially from those indicated in the forward-looking statements.
Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time and it is not possible for us to predict all of such factors, nor can we assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
We are under no duty to update such forward-looking statements.
PART I. – FINANCIAL INFORMATION
| Item 1. | Consolidated Financial Statements. |
BETA MUSIC GROUP, INC.
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED AND THREE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013
CONTENTS
| Consolidated Balance Sheets as of September 30, 2014 (Unaudited) and December 31, 2013 |
| Consolidated Statements of Operations for the nine months ended and three months ended September 30, 2014 and 2013 (Unaudited) |
| Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013 (Unaudited) |
| Notes to Consolidated Financial Statements (Unaudited) |
1
BETA MUSIC GROUP, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 3,232 | $ | 1,174 | ||||
| Accounts Receivable | - | 18,000 | ||||||
| Inventory | 60,715 | 36,041 | ||||||
| Total Current Assets | 63,947 | 55,215 | ||||||
| Other Assets: | ||||||||
| Inventory - noncurrent | 8,279 | 32,953 | ||||||
| Fixed Assets, net | 4,567 | 3,000 | ||||||
| Intangible Assets, net | 346,593 | -- | ||||||
| Total Assets | $ | 423,386 | $ | 91,168 | ||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 221,165 | $ | 48,044 | ||||
| Accounts payable – related parties | 10,550 | -- | ||||||
| Salary payable | 134,200 | 69,200 | ||||||
| Accrued liabilities | 93,967 | -- | ||||||
| Deferred revenue | 5,000 | -- | ||||||
| Notes payable – related party | 27,360 | -- | ||||||
| Notes payable, net of discount of $0 and $9,771, respectively | 26,000 | 16,229 | ||||||
| Convertible notes payable, net of discount of $12,949 and $129,489, respectively | 142,297 | 25,757 | ||||||
| Derivative liability | 310,492 | 1,270,492 | ||||||
| Total Liabilities | 971,031 | 1,429,722 | ||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Series A Super Voting Preferred Stock, $.01 par value, 5,100,000 authorized and 5,100,000 issued and outstanding as of September 30, 2014 and December 31, 2013 | 51,000 | 51,000 | ||||||
| Blank Check Preferred Stock, $.01 par value, 4,900,000 authorized and 0 issued and outstanding as of September 30, 2014 and December 31, 2013 | - | - | ||||||
| Common stock, $.01 par value, 290,000,000 authorized and 72,107,505 and 65,057,505 issued and outstanding as of September 30, 2014 and December 31, 2013, respectively | 721,075 | 650,575 | ||||||
| Additional paid in capital | 2,043,486 | (121,014 | ) | |||||
| Accumulated deficit | (3,363,206 | ) | (1,919,115 | ) | ||||
| Total Stockholders’ Deficit | (547,645 | ) | (1,338,554 | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | 423,386 | $ | 91,168 | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
2
BETA MUSIC GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2014 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||
| Revenue | $ | 19,000 | $ | - | $ | 39,000 | $ | - | ||||||||
| General administrative expenses | 327,545 | 12,800 | 1,035,329 | 171,400 | ||||||||||||
| Operating loss | (308,545 | ) | (12,800 | ) | (996,329 | ) | (171,400 | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Bargain purchase gain | - | - | 173,642 | - | ||||||||||||
| Gain (loss) on derivative liability | - | - | (480,000 | ) | - | |||||||||||
| Interest expense | (53,939 | ) | - | (141,404 | ) | - | ||||||||||
| Total other income (expense) | (53,939 | ) | - | (447,762 | ) | - | ||||||||||
| Net income (loss) | $ | (362,484 | ) | $ | (12,800 | ) | $ | (1,444,091 | ) | $ | (171,400 | ) | ||||
| Net income (loss) per common share - basic | $ | (0.01) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.02 | ) | |||||
| Net income (loss) per common share - diluted | $ | (0.01) | $ | (0.00 | ) | $ | (0.02 | ) | $ | (0.02 | ) | |||||
| Weighted average common shares outstanding - basic | 71,746,092 | 27,861,772 | 67,837,908 | 9,413,183 | ||||||||||||
| Weighted average common shares outstanding - diluted | 71,746,092 | 27,861,772 | 67,837,908 | 9,413,183 | ||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
3
BETA MUSIC GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine months ended | ||||||||
September 30, 2014 | September 30, 2013 | |||||||
| Operating Activities: | ||||||||
| Net loss | $ | (1,444,091) | $ | (171,400 | ) | |||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Bargain purchase price gain | (173,642) | |||||||
| Amortization of intangible assets | 31,509 | |||||||
| Amortization of debt discount | 126,311 | — | ||||||
| Stock base compensation | 795,000 | — | ||||||
| Loss on derivative liabilities | 480,000 | — | ||||||
| Change in operating assets and liabilities | ||||||||
| Accounts receivable | 18,000 | — | ||||||
| Accounts payable | 55,673 | 40,400 | ||||||
| Accounts payable – related party | — | (4,000) | ||||||
| Accrued expenses | 80,093 | 135,000 | ||||||
| Deferred revenue | 5,000 | — | ||||||
| Net Cash provided by (used) in operating activities | (26,147) | — | ||||||
| Cash flows from investing activities | ||||||||
| Cash from business acquisition | 845 | -- | ||||||
| Net Cash provided by (used) in investing activities | 845 | — | ||||||
| Cash flows from financing activities | ||||||||
| Borrowings form related party | 27,360 | — | ||||||
| Net Cash provided by financing activities | 27,360 | — | ||||||
| Net Increase (Decrease) in Cash | 2,058 | — | ||||||
| Cash at Beginning of Period | 1,174 | — | ||||||
| Cash at End of Period | $ | 3,232 | $ | — | ||||
| Supplemental Disclosures: | ||||||||
| Cash paid for income taxes | $ | — | — | |||||
| Cash paid for interest | $ | — | — | |||||
| Non cash investing and financing activities | ||||||||
| Reclassification from derivative liability to additional paid in capital | $ | 1,440,000 | $ | — | ||||
| Stock issuance for cashless exercise of warrants | 24,000 | — | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
4
BETA MUSIC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014
(Unaudited)
NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial statements and do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. The financial statements as of December 31, 2013 have been audited by an independent registered public accounting firm. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s 10K for the calendar year ended December 31, 2013.
Non-Employee Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with the provision of ASC 505, “Equity Based Payments to Non-Employees” (“ASC 505”). ASC 505 which requires that such equity instruments are recorded at their fair value on the measurement date. The measurement of stock-based compensation is subject to periodic adjustment as the underlying equity instruments vest.
Long Lived Assets
In accordance with ASC 360 "Property Plant and Equipment," the Company reviews the carrying value of intangibles subject to amortization and long-lived assets for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by comparison of its carrying amount to the undiscounted cash flows that the asset or asset group is expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the property, if any, exceeds its fair market value.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with the requirements of FASB ASC 820, “Fair Value Measurements and Disclosures”. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions 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 – Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date and 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 from observable data or are supported 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.
Level 3 – Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of September 30, 2014, and December 31, 2013:
| Recurring Fair Value Measures | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| September 30, 2014 | ||||||||||||||||
| Derivative liability | - | - | $ | 310,492 | $ | 310,492 | ||||||||||
| December 31, 2013 | ||||||||||||||||
| Derivative liability | - | - | $ | 1,270,492 | $ | 1,270,492 | ||||||||||
5
NOTE 2: GOING CONCERN CONSIDERATION
These consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has negative working capital and incurred cumulative net losses since its inception and requires capital for its contemplated operation and marketing activities to take place. The Company's ability to raise additional capital through the future issuances of common stock is unknown. The obtainment of additional financing, the successful development of the Company's contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. Future issuances of the Company's equity or debt securities will be required in order for the Company to continue to finance its operations and continue as a going concern. The Company's present revenues are insufficient to meet operating expenses. The consolidated financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
NOTE 3: SALARY PAYABLE DUE
On January 5, 2013, The Company entered into an executive agreement its Chief Executive Officer, Jim Ennis. The agreement is for an initial term of 5 years, and provides for monthly compensation in the amount of $15,000. The executive shall receive bonus each year and shall be paid based on the performance of the Company each year ending December 31. The Bonus will be a minimum of 25% but not exceed 75% of Annual Salary. As of September 30, 2014 and December 31, 2013, the Chief Executive Officer is due a total of $134,200, and $69,200, respectively, which is comprised of accrued salary expense that is unpaid and deferred based on the working capital conditions of the Company.
NOTE 4: RELATED PARTY TRANSACTIONS
Related Party Debt
During the nine months ended September 30, 2014, the Company received working capital infusion from its Chief Executive Officer. The total related party notes with its Chief Executive Officer are $27,360, bore interest at 0% and are due on demand.
Accounts payable – related parties
On June 27, 2014, the Company assumed $10,550 of accounts payable from related parties through business acquisition. The balance remains outstanding as of September 30, 2014. See note 8.
NOTE 5: NOTES PAYABLE
At December 31, 2013 the Company had notes payable from third parties with a balance of $16,229 net of discount of $9,771. During the nine months ended September 30, 2014, $9,771 was recorded as amortization expense. The notes payable had a balance of $26,000 net of discount of $0 at September 30, 2014.
6
NOTE 6: CONVERTIBLE NOTES
| Principal | Less: Unamortized Discount | Net Carrying Value | |
| On October 31, 2013, principal amount of $109,500 and accrued interest of $11,272, a total of $120,772, was assigned by the original debt holder to another unrelated party. The convertible note accrues at 10% interest, is payable within 12 months, and contains a conversion feature which allows the principal balance to be converted into common stock of the Company. The conversion price is equal to 50% of the average of the lowest three trading prices among the 10 day trading period immediately prior to conversion date. As of December 31, 2013, the debt balance is $3,629, net of discount of $18,850. There is no conversion as of September 30, 2014. During the nine months ended September 30, 2014, the amortization of debt discount is $16,965. As of September 30, 2014, the unamortized discount is $1,885. | $22,479 | $(1,885) | $20,594 |
| On October 31, 2013, principal amount of $30,000 and accrued interest of $2,767, a total of $32,767, was assigned by the original debt holder to another unrelated party. Upon assignment, the Company issued to the new debt holder a convertible note. The convertible note accrues at 10% interest, is payable within 12 months, and contains a conversion feature which allows the principal balance to be converted into common stock of the Company. The conversion price is equal to 50% of the average of the lowest three trading prices among the 10 day trading period immediately prior to conversion date. As of December 31, 2013, the debt balance is $5,461, net of discount of $27,306. There is no conversion as of September 30, 2014. During the nine months ended September 30, 2014, the amortization of debt discount is $24,575. As of September 30, 2014, the unamortized discount is $2,731. | 32,767 | (2,731) | 30,036 |
| On October 23, 2013, EVG Media issued a convertible note of $75,000 to a third party. The $75,000 convertible note accrues at 12% interest, is payable within 12 months, and contains a conversion feature which allows the principal balance to be converted into common stock of the Company. The conversion price is equal to 50% of the average of the lowest three trading prices among the 10 day trading period immediately prior to conversion date. As of December 31, 2013, the debt balance is $12,500, net of discount of $62,500. There is no conversion as of September 30, 2014. During the nine months ended September 30, 2014, the amortization of debt discount is $56,250. As of September 30, 2014, the unamortized discount is $6,250. | 75,000 | (6,250) | 68,750 |
| On November 5, 2013, the Company issued a convertible note for principal amount of $25,000. The note accrues at 12% interest, is payable within 12 months, and contains a conversion feature which allows the principal balance to be converted into common stock of the Company. The conversion price is equal to 50% of the average of the lowest three trading prices among the 10 day trading period immediately prior to conversion date. As of December 31, 2013, the debt balance is $4,167, net of discount of $20,833. There is no conversion as of September 30, 2014. During the nine months ended September 30, 2014, the amortization of debt discount is $18,750. As of September 30, 2014, the unamortized discount is $2,083. | 25,000 | (2,083) | 22,917 |
| Balance at September 30, 2014 | $155,246 | $(12,949) | $142,297 |
A total of 4,800,000 warrants were issue along with the convertible debt as mentioned above. The warrant has an exercise price equal to 50% of the average of the lowest three trading prices among the 10-day trading period immediately prior to conversion date and will expire on October 31, 2018. On June 26, 2014, the warrants were exercised on a cashless basis and the Company issued 2,400,000 restricted shares of common stock in total for full settlement of the warrants. There are no outstanding warrants at September 30, 2014.
The following table summarizes information about outstanding warrants at September 30, 2014:
| Number Outstanding | Weighted Average Exercise Price | Remaining Contractual Life in Years | Intrinsic Value | |||||||||||||
| Warrants outstanding as of December 31, 2013 | 4,800,000 | $ | 0.10 | 4.84 | $ | 480,000 | ||||||||||
| Warrants exercised | (4,800,000) | $ | 0.10 | - | - | |||||||||||
| Warrants outstanding as of September 30, 2014 | - | $ | 0.10 | - | $ | - | ||||||||||
The Company analyzed the conversion option of all the convertible debts. See discussion at Note 7.
7
NOTE 7: DERIVATIVE LIABILITIES
Convertible Notes
On October 31, 2013, convertible notes of $120,772 and $32,767 were issued. On October 23, 2013, a convertible note of $75,000 was issued. On November 5, 2013, a convertible note of $25,000 was issued. The Company analyzed the conversion option of all the notes and Company considered derivative accounting under ASC 815-15 “Derivatives and Hedging” and determined that the embedded conversion feature should be classified as a liability due to there being no explicit limit to the number of shares to be delivered upon settlement of the above conversion options. The embedded conversion feature was measured at fair value at the date of inception and at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. The fair value of the instruments was determined by using Black-Scholes option-pricing model, assuming maximum value.
The fair value of the conversion feature related to the “$120,722 convertible note” on issuance date was $241,544, including a debt discount of $120,772 and a loss on derivative liabilities of $120,772. On November 12, 2013, upon conversion of 98,293 of the $120,772 outstanding note, the derivative liability was revalued to be $543,474, out of which $442,319 was re-classified to additional paid in capital and $301,930 was recognized as loss on derivative liabilities. On December 31, 2013, the derivative liability was revalued to be $44,958, and a gain of $56,197 was recognized in earnings. On September 30, 2014, the fair value didn’t change, resulting in no gain or loss.
The fair value of the conversion feature related to the “$32,767 convertible note” on issuance date was $65,534, including a debt discount of $32,767, and a loss on derivative liabilities of $32,767. On December 31, 2013 and September 30, 2014, the fair value didn’t change, resulting in no gain or loss.
The fair value of the conversion feature related to the “75,000 convertible note” on issuance date was $187,500, including a debt discount of $75,000 and a loss on derivative liabilities of $112,500. On December 31, 2013, the derivative liability was revalued to be $150,000, and a gain of $37,500 was recognized in earnings. On September 30, 2014, the fair value didn’t change, resulting in no gain or loss.
The fair value of the conversion feature related to the “25,000 convertible note” on issuance date was $112,500, including a debt discount of $15,750 and a loss on derivative liabilities of $96,750. On December 31, 2013, the derivative liability was revalued to be $50,000, and a gain of $62,500 was recognized in earnings. On September 30, 2014, the fair value didn’t change, resulting in no gain or loss.
Warrants
On October 31, 2013, warrants to purchase 4,800,000 shares of the Company common stock were issued along with the convertible notes. As a result of the issuance of convertible debt, the conversion option of all other convertible instruments became tainted. Under ASC 815-15“Derivatives and Hedging”, all other tainted share settleable instruments must be reclassified from equity to liability. The conversion feature was measured at fair value at the date it became tainted and at the end of each reporting period or termination of the instrument with the change in fair value recorded to earnings. The fair value of the instruments was determined by using Black-Scholes option-pricing model, assuming maximum value.
The fair value of the warrants on issuance date was $384,000, resulting in a loss on derivative liability of $384,000. On December 31, 2013, the derivative liability was revalued to be $960,000, resulting in a loss of $576,000 to be recognized in earnings.
On June 26, 2014, the warrants were exercised on a cashless basis and the Company issued 2,400,000 restricted shares of common stock. There are no outstanding warrants at September 30, 2014.
On June 26, 2014, the derivative liability was revalued to be $1,440,000, resulting in a loss of $480,000 to be recognized in earnings. Upon exercise, the derivative liability of $1,440,000 was reclassified from liability to equity.
The following table summarizes the derivative liabilities included in the balance sheet:
| Balance at December 31, 2013 | $ | 1,270,492 | ||
| Change in fair value of derivative liability | 480,000 | |||
| Reclassification from liability to additional paid in capital | (1,440,000 | ) | ||
| Balance at September 30, 2014 | $ | 310,492 |
NOTE 8: VIEWPON ACQUISITION
On June 27, 2014, The Company entered into a Share Exchange Agreement providing for the acquisition by the Company of all of the outstanding capital stock of Viewpon Holdings, Inc. a company formed under the laws of Delaware, from the shareholders of Viewpon in exchange for the issuance of up to 1,900,000 shares common stock of the Company payable upon closing. Viewpon Holdings, Inc. owns and operates two subsidiaries, Viewpon and Sideshow Entertainment. The closing was subject to obtaining the consent from shareholders owning no less than 90% of Viewpon’s issued and outstanding shares of common stock. Shareholders representing the holders of 100% of the outstanding common stock have consented to the agreement.
8
Viewpon, www.viewpon.tv, is a lifestyle entertainment show and online listing services website that features small businesses and stories across San Francisco and the Pacific Northwest. From the coolest places to stay, play and dine, Viewpon takes viewers on a tour of all that is best in the area where they live. Viewpon's television show and digital video content website highlights small businesses and fun things to do your area and then offers those experiences at a discount. Viewpon's television show drives customers to our website where customers can view digital videos of all of our small business clients.
Sideshow Entertainment, www.sideshowentertainment.tv, is a full service television and video production company producing original, non-scripted programming. Founded in San Francisco in 2007, by President and Executive Producer Michael Orkin; Sideshow Entertainment has produced reality-based programming featuring home makeovers, real estate, home brewing, infomercials and even a game show. Sideshow Entertainment has partnered with high profile companies such as IKEA, Kelly Moore Paints, Big O Tires and Miller/Coors. Sideshow Entertainment prides itself in being able to help such high profile companies turn "branding" into compelling television.
In accordance with ASC 805-10 Business Combination and purchase acquisition accounting, the Company initially allocated the consideration to the net tangible and identifiable intangible assets, based on their estimated fair values as of the date of acquisition. The gain represents the excess of the fair value of the underlying net tangible and intangible assets over the purchase price.
The following preliminary table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
| Category | Totals | |||
| Cash | $ | 845 | ||
| Fixed assets | 1,567 | |||
| Intangible Asset – Customer Lists | 378,102 | |||
| Accounts payable | $ | 117,448 | ||
| Accounts payable related parties | 10,550 | |||
| Accrued liabilities | 78,874 | |||
| Bargain purchase price gain | $ | 173,642 | ||
| Total purchase price | $ | -0- | ||
The above listed totals in this table are preliminary totals and the Company is in process of hiring an evaluation specialist to evaluate all of the intangible assets of Viewpon and Sideshow Entertainment that the Company acquired. These intangible assets may include television shows, digital media networks, and audiovisual materials.
The Company issued 1,900,000 shares of common stock valued at the market price on the respective dates of issuance, and the fair value of the shares was determined to be $0 to shareholders of Viewpon Holdings, Inc. as consideration for Viewpon.
The $378,102 of acquired intangible assets (customers list) has a useful life of approximately 3 years, and the Company recognized amortization expense of $31,509 for the nine months ended September 30, 2014. The liabilities acquired include accounts payables and other payables with a fair value of $206,872. The Company recognized a gain of $173,642 as a result of the acquisition. The gain is included in other income in the Company’s statement of operations for the nine months ended September 30, 2014.
NOTE 9: PRO FORMA FINANCIAL INFORMATION
The following unaudited consolidated pro forma information gives effect to the Viewpon acquisition (see Note 8) as if this transaction had occurred at the beginning of each period presented. The following unaudited pro forma information is presented for illustration purposes only and is not necessarily indicative of the results that would have been attained had the acquisition of this business bee completed at the beginning of each period presented, nor are they indicative of results that may occur in any future periods.
For the Nine Months Ended September 30, 2014 | ||||||||||||
| Beta | Viewpon | Pro Forma | ||||||||||
| Revenue | $ | 39,000 | $ | 15,822 | $ | 54,822 | ||||||
| Operating expenses | 1,176,458 | 33,256 | 1,209,714 | |||||||||
| Other expenses | 306,358 | - | 306,358 | |||||||||
| Net income (loss) | $ | (1,443,816 | ) | $ | (17,434 | ) | $ | (1,461,250 | ) | |||
| Basic and diluted income (loss) per share | $ | (0.02 | ) | |||||||||
| Weighted average shares outstanding – basic and diluted | 67,837,908 | |||||||||||
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For the Nine Months Ended September 30, 2013 | ||||||||||||
| Beta | Viewpon | Pro Forma | ||||||||||
| Revenue | $ | -- | $ | 179,521 | $ | 179,521 | ||||||
| Operating expenses | 171,400 | 215,955 | 387,355 | |||||||||
| Other expenses | -- | -- | -- | |||||||||
| Net income (loss) | $ | (171,400 | ) | $ | (36,434 | ) | $ | (207,834 | ) | |||
| Basic and diluted income (loss) per share | $ | (0.02 | ) | |||||||||
| Weighted average shares outstanding – basic and diluted | 9,413,183 | |||||||||||
NOTE 10: STOCKHOLDERS EQUITY
On March 15, 2014, the Company issued 300,000 shares of common stock for consulting services for full value of $60,000. The shares were valued at the market price on the respective date of issuance.
On April 22, 2014, the Company issued 950,000 shares of common stock valued at $285,000 for consulting services regarding the Company’s expansion of the digital media platform. The shares were valued at the market price on the respective date of issuance. This is a one-time expense for startup cost related to the digital media expansion.
On May 20, 2014, the Company issued 750,000 shares of common stock valued at $225,000 for consulting services regarding the Company’s expansion of the digital media platform. The shares were valued at the market price on the respective date of issuance. This is a one-time expense for startup cost related to the digital media expansion.
On June 26, 2014, the Company issued 2,400,000 shares of common stock for cashless exercise of warrants issued on October 31, 2013. See Note 7.
On June 27, 2014, the Company issued 1,900,000 shares of common stock to shareholders of Viewpon Holdings, Inc. under a share exchange agreement. See detailed discussion at Note 8.
On July 21, 2014, The Company agreed to issue 900,000 restricted shares of common stock for financial communication, public relations and advisory services to CSIR Group, LLC in addition to monthly retainer fee of $5,000. On September 29, 2014, the Company and CSIR Group, LLC terminated the agreement where the 900,000 restricted shares of common stock were returned to the Company. Instead, the Company issued 250,000 shares for services provided through September 29, 2014. The 250,000 shares were valued at $75,000.
On July 21, 2014, The Company issued 500,000 restricted shares of common stock for legal services and advisory services to Jeffrey Klein, P.A. in addition to a retainer fee of $9,750. The 500,000 shares were valued at $150,000.
NOTE 11: SUBSEQUENT EVENTS
On October 1, 2014, the Company signed an Intellectual Property Development Agreement with AudioEye, Inc. to engage AudioEye to perform intellectual property development in connection to a product development strategy for the Company’s anticipated products and services. Under the Agreement, the Company shall pay to AudioEye a total of 1,800,000 shares of the Company's common stock as compensation. The Company will issue 300,000 shares for six consecutive months on or before the last day of the month starting from October 2014.
On October 29, 2014, The Company issued 300,000 restricted shares of common stock regarding the above Intellectual Property Development Agreement.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operation. |
Business Description
The Company is a Florida Corporation and is headquartered in Miami, Florida.
The Company is an emerging growth digital media company. In December 2013, The Company acquired from Viewpon Holdings the exclusive worldwide licensing rights to operate and sell services and products available on Viewpon’s digital media platform. The digital media platform will enable the Company to develop and design digital and interactive videos, applications, social media products, new media and internet television and social networks for sports, health, fitness and entertainment enthusiasts. In addition, The Company will sell digital coupons and digital media videos which was acquired from Viewpon. The Company will implement a multimarket revenue strategy that incorporates digital media videos, mobile applications, social media and internet television to engage consumers to purchase products and services for small businesses. The strategy of the Company is to offer digital media videos as a cost effective method for small businesses to connect to their clients in an efficient way to by placing the interests of their consumers first. The Company will also provide consulting, social networking and strategic planning for clients.
The Company’s digital media platform will include mobile apps, interactive videos, online websites, mobile marketing and social media. The Company’s strategy to drive revenues is by producing digital videos for small and large businesses across various sectors including retail, health, wellness, consulting and other specific communities. The digital media videos will serve small business sectors including boutiques and salons, restaurants, doctors, dentists, accountants, hotels, travel services as well as auto mechanics, plumbers and many more small businesses. Small businesses and large businesses will use the digital media platform to create interactive advertising videos so engage with current and potential consumers at the critical moment when they are deciding where to spend their money. The business revolves around three key constituencies: producing digital media advertising, contributors who submit digital streaming reviews of the small businesses products and services and consumers who watch digital reviews of the local businesses that they describe. The Company will invest in these small business communities to build customer loyalty and increase brand awareness by delivering digital videos of interest and enhanced interactive content of small business products and services that enrich and improve their client’s lifestyle.
The Company is a marketing and media company that will provide digital media marketing, social and mobile marketing, strategic media planning and other specialty communications services. The Company will provide customers with digital, mobile, social and video content productions to promote small businesses to their clients by providing digital coupons as interactive experiences between clients and the small business community. The Company has entered into a licensing agreement with Viewpon Holdings to market and sell products and services developed by Viewpon’s digital marketing platform. The licensing agreement grants to the Company the exclusive rights to utilize this platform to implement its business strategy. References throughout this business disclosure to “our digital media platform” refer to the digital media platform developed by Viewpon which the Company is licensed to use.
The Company currently has an inventory of video discount coupon purchased from Viewpon. Viewpon currently has approximately 20,000 registered users. The Company has been selectively contacting these users and offering them the opportunity to purchase these coupons. In addition to the sale of the video coupons, the Company provides creative solutions to the advertising and marketing challenges encountered by small businesses. The mission is to assist small businesses grow their operations by increasing their customers. The Company is a strategic marketing partner, creating online promotions that deliver results to reach a range of targeted audiences and provide strategic planning to clients across the sectors of social media and marketing services.
The licensing agreement with Viewpon provides the Company with access to Viewpon’s digital media technology platform that includes interactive coupon & multi-format publishing technologies and multiple new scalable revenue streams & innovative technologies designed specifically for internet couponing applications. The Company creates value for its clients that are comprised of consumers and businesses via digital value offers, retailers who create offers enabled with our technology and finally consumers who redeem offers, consume advertisements and products that generate revenue for our operation. The digital media platform provides digital video commercials and interactive broadcasting as the method of video presentations, distribution, and monetization.
The Company’s website is located at www.betamusicgroupinc.com
To date, our revenues have been generated through consulting services offered to small business owners. Our digital media platform will enable us to develop digital media marketing programs by producing digital videos for small and large businesses across various sectors including retail, health, wellness, consulting and other specific communities. Our digital media videos will serve small business sectors including boutiques and salons, restaurants, doctors, dentists, accountants, hotels, travel services as well as auto mechanics, plumbers and other sectors within the small business community. Contracts with our clients to produce the digital media videos are negotiated individually and terms of the engagement with clients and the basis in which fees and commissions will vary significantly. Contracts with small business client are multifaceted arrangements that may include an upfront fee, an incentive compensation provision and may also include vendor credits. Clients may arrange for our services to be provided via local, regional across various business sectors.
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Viewpon Acquisition:
Management has determined that the most expedient way to achieve these goals is for the Company to purchase Viewpon Holdings. In furtherance thereof, the Company signed a Letter of Intent with Viewpon which provides in part for Beta to acquire 100% of the issued and outstanding shares of common stock of Viewpon in consideration for the issuance of 1,900,000 shares of Beta common stock. Closing will be subject to execution of a definitive share exchange agreement and satisfaction of certain conditions precedent including but not limited to the absence of pending or threatened litigation, satisfactory review of the Company’s financial condition and results of operations, the execution of a non-compete agreement with the principal shareholders.
On June 27, 2014, The Company entered into a Share Exchange Agreement providing for the acquisition by the Company of all of the outstanding capital stock of Viewpon Holdings, Inc. a company formed under the laws of Delaware, from the shareholders of Viewpon in exchange for the issuance of up to 1,900,000 shares common stock of the Company payable upon closing. Closing was subject to obtaining the consent from shareholders owning no less than 90% of Viewpon’s issued and outstanding shares of common stock. Shareholders representing the holders of 100% of the outstanding common stock have consented to the agreement.
The Viewpon website is located at www.viewpon.tv. The Sideshow Entertainment website is located at www.sideshowentertainment.tv.
Viewpon is a lifestyle entertainment show and online listing services website that features small businesses and stories across San Francisco and the Pacific Northwest. From the coolest places to stay, play and dine, Viewpon takes viewers on a tour of all that is best in the area where they live. Viewpon's television show and digital video content website highlights small businesses and fun things to do your area and then offers those experiences at a discount. Viewpon's television show drives customers to our website where customers can view digital videos of all of our small business clients.
Sideshow Entertainment is a full service television and video production company producing original, non-scripted programming. Founded in San Francisco in 2007, by President and Executive Producer Michael Orkin, Sideshow Entertainment has produced reality-based programming featuring home makeovers, real estate, home brewing, infomercials and even a game show. Sideshow Entertainment has partnered with high profile companies such as IKEA, Kelly Moore Paints, Big O Tires and Miller/Coors. Sideshow Entertainment prides itself in being able to help such high profile companies turn "branding" into compelling television.
The Company’s strategy to drive revenues is by producing digital videos for small and large businesses across various sectors including retail, health, wellness, consulting and other specific communities. The Company’s digital media videos will serve small business sectors including boutiques and salons, restaurants, doctors, dentists, accountants, hotels, travel services as well as auto mechanics, plumbers and many more small businesses. Small businesses and large businesses will use the digital media platform to create interactive advertising videos so engage with current and potential consumers at the critical moment when they are deciding where to spend their money. The Company’s business revolves around three key constituencies: producing digital media advertising, contributors who submit digital streaming reviews of the small businesses products and services and consumers who watch digital reviews of the local businesses that they describe. The Company will invest in these small business communities to build customer loyalty and increase brand awareness by delivering digital videos of interest and enhanced interactive content of small business products and services that enrich and improve their client’s lifestyle. The Company is a marketing and media company that will provide digital media marketing, social and mobile marketing, strategic media planning and other specialty communications services. The Company will provide customers with digital, mobile, social and video content productions to promote small businesses to their clients by providing digital coupons as interactive experiences between clients and the small business community. Viewpon has approximately 20,000 registered users and has produced an approximately total of 378 television shows and over 5,000 digital media network broadcasts regarding their digital media platform. As a result of the acquisition of Viewpon, the Company is expected to be the premier provider of digital media marketing, social and mobile marketing, strategic media planning and other specialty communications services and produce digital videos for small and large businesses across various sectors including retail, health, wellness, consulting and other specific communities. The digital media videos will serve small business sectors including boutiques and salons, restaurants, doctors, dentists, accountants, hotels, travel services as well as auto mechanics, plumbers and many more small businesses.
Comparison of Operating Results for the Three Months ended September 30, 2014 and 2013.
Revenues
The Company recognized revenue of $19,000 during the three months ended September 30, 2014 and compared to $0 revenues for period ended September 30, 2013. The increase in revenue is primarily due to the consulting services for our subsidiary EVG Media, Inc. operations.
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Operating Update
General and administrative expenses for the three months ended September 30, 2014 and September 30, 2013 totaled $327,545 and $12,800 respectively. The increase in general and administrative expenses is primarily due to the $225,000 in stock based expenses for business development regarding the expansion of the digital media and television production platform. This is a one-time non-cash expense for startup cost related to the digital media and television production expansion and is not forecasted to be a recurring expense. There was an additional $19,807 in legal expenses and auditing expenses regarding the additional filings of the public company and $45,000 in executive salary during this period.
The Company’s Net Loss for the three months ended September 30, 2014 totaled $362,484 compared to $12,800 in net losses for the three months ending of September 30, 2013.
The Net Loss is primarily due to the $31,509 related to amortization of intangible assets regarding the acquisition of Viewpon. This increase in net loss is also due to general and administrative expenses primarily due to the $225,000 in stock based expenses for business development regarding the expansion of the digital media and television production platform. This is a one-time non-cash expense for startup cost related to the digital media and television production expansion and is not forecasted to be a recurring expense. There was an additional $19,807 in legal expenses and auditing expenses regarding the additional filings of the public company and $45,000 in executive salary during this period.
Comparison of Operating Results for the Nine Months ended September 30, 2014 and 2013.
Revenues
The Company recognized revenue of $39,000 during the nine months ended September 30, 2014 and compared to $0 revenues for period ended September 30, 2013. The increase in revenue is primarily due to the consulting services for our subsidiary EVG Media, Inc. operations.
Operating Update
General and administrative expenses for the nine months ended September 30, 2014 and September 30, 2013 totaled $1,035,329 and $171,400 respectively. The increase in general and administrative expenses is due to the $795,000 in stock based expenses for business development regarding the expansion of the digital media and television production platform. This is a one-time non-cash expense for startup cost related to the digital media and television production expansion and is not forecasted to be a recurring expense. There was an additional $28,378 in legal expenses and $24,526 in auditing expenses regarding the additional filings of the public company and $135,000 in executive salary.
The Company’s Net Loss for the nine months ended September 30, 2014 totaled $1,444,091 compared to $171,400 in net losses for the nine months ending of September 30, 2013.
The increase in net losses is primarily due to the net non-operating loss of $480,000 related to derivative liabilities. The increase in net loss is also due to general and administrative expenses of $795,000 in stock based expenses for business development regarding the expansion of the digital media and television production platforms. This is a one-time non-cash expense for startup cost related to the digital media expansion and is not forecasted to be a recurring expense. There was an additional $28,378 in legal expenses and $24,526 in auditing expenses regarding the additional filings of the public company and $135,000 in executive salary during this period. This was offset by the net non-operating income of $173,642 related to bargain purchase gain regarding the acquisition of Viewpon.
Liquidity and Capital Resources
Assets and Liabilities
At September 30, 2014, The Company had cash totaling $3,232, inventory assets of $68,994, fixed assets of $4,567 and intangible assets of $346,593 which represented the Company’s assets. At December 31, 2013, the Company had cash totaling $1,174, accounts receivable of $18,000, inventory assets of $68,994, fixed assets of $3,000, intangible assets of $0, which represented the Company’s assets.
The Company’s total assets were $423,386 at September 30, 2014. The Company’s total assets were $91,168 at December 31, 2013.
The Company’s liabilities at September 30, 2014 totaled $971,031 of which $168,297 is attributable to notes payable, $221,165 is accounts payable, $134,200 is salary payable, $93,967 is accrued liabilities, $5,000 is deferred income, $27,360 is notes payable related party and $310,492 is derivative liability. The Company’ liabilities at December 31, 2013 totaled $1,429,722 of which $41,986 is attributable to notes payable, $48,044 is accounts payable, $69,200 is salary payable and $1,270,492 is derivative liability.
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The Company had a working capital deficit at September 30, 2014 of $907,084 compared to working capital deficit at December 31, 2013 of $1,374,507.
The change in the working capital deficit is primarily due to the decrease in derivative liability, the increase in notes payables due to amortization of debt discount, and increase in deferred revenues regarding initial expansion of digital media business of our operations. The Company does not have sufficient revenues and operating profits to satisfy our ongoing liabilities. Unless the Company secures equity or debt financing, of which there can be no assurance, or identify an acquisition candidate, we will not be able to continue any operations.
| Item 3. | Quantitative and Qualitative Disclosure About Market Risk. |
Not applicable.
| Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer to allow for timely decisions regarding required disclosure. Our management carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) and determined that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q. The evaluation considered the procedures designed to ensure that the information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and communicated to our management as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the period covered by this Quarterly Report on Form 10-Q, there were no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(d) and 13d-15(d) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations of Disclosure Controls and Internal Controls over Financial Reporting
Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation or effectiveness to future periods are subject to risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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PART II. – OTHER INFORMATION
| Item 1. | Legal Proceedings. |
None.
There have been no material changes from the risk factors disclosed in Item 1.A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2013.
On March 15, 2014, The Company issued 300,000 shares of common stock for consulting services. The shares were issued to AudioEye, Inc., an unaffiliated third party. AudioEye provided us with assistance in building out our technology platform.
On April 22, 2014, the Company issued 950,000 shares of common stock valued at $285,000 for consulting services regarding the Company’s expansion of the digital media and television platform.
On June 26, 2014, the Company issued 2,400,000 shares of common stock for cashless exercise of warrants issued on October 31, 2013. See Note 7.
On June 27, 2014, the Company issued 1,900,000 shares of common stock to shareholders of Viewpon Holdings, Inc. under a share exchange agreement. See detailed discussion at Note 8.
On July 21, 2014, The Company agreed to issue 900,000 restricted shares of common stock for financial communication, public relations and advisory services to CSIR Group, LLC in addition to monthly retainer fee of $5,000. On September 29, 2014, the Company and CSIR Group, LLC terminated the agreement where the 900,000 restricted shares of common stock were returned to the Company. Instead, the Company issued 250,000 shares for services provided through September 29, 2014.
On July 21, 2014, The Company issued 500,000 restricted shares of common stock for legal services and advisory services to Jeffrey Klein, P.A.
With respect to the issuance of the securities identified above, the Company relied on the exemptive provisions of Section 4(2) of the Securities Act of 1933, as amended.
At all times relevant the securities were offered subject to the following terms and conditions:
| · | The sale was made to a sophisticated or accredited investor, as defined in Rule 502 or were issued pursuant to a specific exemption; |
| · | The Company gave the purchaser the opportunity to ask questions and receive answers concerning the terms and conditions of the offering and to obtain any additional information which we possessed or could acquire without unreasonable effort or expense that is necessary to verify the accuracy of information furnished; and |
| · | At a reasonable time prior to the sale of securities, the Company advised the purchaser of the limitations on resale in the manner contained in Rule 502(d)2. |
| Item 3. | Defaults upon senior securities. |
None.
Not Applicable.
None.
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| Exhibit No. | Description |
| 31.1* | Section 302 Certification of Chief Executive Officer |
| 31.2* | Section 302 Certification of Chief Financial Officer |
| 32.1* | Section 906 Certification of Chief Executive Officer |
| 32.2* | Section 906 Certification of Chief Financial Officer |
| 101** | XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q. |
* Filed herewith.
** To be submitted by amendment
16
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| BETA MUSIC GROUP, INC. | |||
| By: | /s/ Jim Ennis | Date: November 19, 2014 | |
| Jim Ennis | |||
| CEO/CFO and Director | |||