First Level Entertainment 10-Q 2013 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedFebruary 28, 2013
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number:333-170016

First Level Entertainment Group, Inc.

(Exact name of registrant as specified in its charter)

Florida	90-0599877
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
305 South Andrews Avenue. Suite 204 Fort Lauderdale, Florida	33301
(Address of principal executive offices)	(Zip Code)

(954) 599-3672
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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. Yesþ Noo

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). Yesþ Noo

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 definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at June 11, 2013
Common Stock, $0.001	27,500,000 shares

FIRST LEVEL ENTERTAINMENT GROUP, INC.

TABLE OF CONTENTS

	PAGE
Part I Financial Information	4
Item 1. Financial Statements	4
Condensed Balance Sheets at February 28, 2013 (unaudited) and August 31, 2012 (audited)	4
Condensed Statements of Operations for the three months ended February 28, 2013 and 2011 and the cumulative period from June 2, 2008 (inception) through February 28, 2013 (unaudited)	5
Statement of Stockholders’ Equity/(Deficit) from June 2, 2008 (inception) through February 28, 2013 (unaudited)
Condensed Statements of Cash Flows at February 28, 2013 (unaudited)	6
Notes to Condensed Financial Statements	7-9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	10-13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	13
Item 4. Controls and Procedures.	13
Part II Other Information	14
Item 1. Legal Proceeding.	14
Item 1A. Risk Factors.	14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	14
Item 3. Defaults Upon Senior Securities.	14
Item 4. Mine Safety Disclosures	14
Item 5. Other Information.	14
Item 6. Exhibits.	14
Signatures	15

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report may constitute “forward-looking” statements as defined in Section 27A of the Securities Act of 1933 (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”) or in releases made by the Securities and Exchange Commission (“SEC”), all as may be amended from time to time. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. Forward-looking statements can be identified by, among other things, the use of forward-looking language, such as the words “plan,” “believe,” “expect,” “anticipate,” “intend,” “estimate,” “project,” “may,” “will,” “would,” “could,” “should,” “seeks,” or “scheduled to,” or other similar words, or the negative of these terms or other variations of these terms or comparable language, or by discussion of strategy or intentions. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed in this report, in our Annual Report on Form 10-K for the year ended August 31, 2012, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in that report, and in other documents which we file with the SEC. These forward-looking statements involve risks and uncertainties, and relate to future events or our future financial or operating performance and include, but are not limited to, statements concerning:

● the anticipated benefits and risks of our business relationships;

● our ability to attract retail and business customers;

● the anticipated benefits and risks associated with our business strategy;

● our future operating results;

● the anticipated size or trends of the market segments in which we compete and the anticipated competition in those markets;

● potential government regulation;

● our future capital requirements and our ability to satisfy our capital needs;

● the potential for additional issuances of our securities;

● our plans to devote substantial resources to our sales and marketing teams;

● the possibility of future acquisitions of businesses, products or technologies;

● our belief that we can attract customers in a cost-efficient manner;

● our belief that current or future litigation will likely not have a material adverse effect on our business;

● the ability of our online marketing campaigns to be a cost-effective method of attracting customers;

● our belief that we can internally develop cost-effective branding campaigns;

● the results of upgrades to our infrastructure and the likelihood that additional future upgrades can be implemented without disruption of our business;

● our belief that we can maintain or improve upon customer service levels that we and our customers consider acceptable;

● our belief that our information technology infrastructure can and will support our operations and will not suffer significant downtime;

● statements about our community site business and its anticipated functionality;

● our belief that we can maintain inventory levels at appropriate levels despite the seasonal nature of our business; and,

● our belief that we can successfully offer and sell a constantly changing mix of products and services

Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this report.

OTHER PERTINENT INFORMATION

We maintain our web site at www.firstlevelent.com. Information on this web site is not a part of this report.

Unless specifically set forth to the contrary, when used in this report the terms “First Level”, the “Company,” “we”, “us”, “our” and similar terms refer to First Level Entertainment Group, Inc., a Florida corporation.

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements.

FIRST LEVEL ENTERTAINMENT GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED BALANCE SHEET

ASSETS
	Unaudited February 28, 2013			Audited August 31, 2012
CURRENT ASSETS:
Cash and equivalents		2,529			4,409
Total Current Assets		2,529			4,409
OTHER ASSETS:
Intellectual assets, net		35,000			70,000
Total Assets		37,529			74,409
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable		—			7,500
Accrued Expenses		188,933			136,924
Loans from related parties		28,850			—
Total Current Liabilities		217,783			144,424
LONG TERM LIABILITIES
Note Payable - Related Party		150,000			87,500
Total Long Term Liabilities		150,000			87,500
TOTAL LIABILITIES		367,783			231,924
STOCKHOLDERS’ EQUITY (DEFICIT):
Preferred Stock, par value $.001; 10,000,000 shares authorized; 0 issued and outstanding at February 28, 2013 and August 31, 2012		—			—
Common stock , par value $.001; 500,000,000 shares authorized; 25,166,667 shares issued and outstanding as of February 28, 2013 and 17,500,000 shares issued at August 31, 2012		25,167			17,500
Additional paid in capital		1,867,333			1,185,000
Deficit accumulated during the development stage		(2,222,754	)		(1,360,015	)
Total Stockholders’ Equity (deficit)		(330,254	)		(157,515	)
Total Liabilities and Stockholders’ Equity		37,529			74,409

The accompanying notes are an integral part of these statements.

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FIRST LEVEL ENTERTAINMENT GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF OPERATIONS

FOR THE PERIOD JUNE 2, 2008 (INCEPTION) THROUGH FEBRUARY 28, 2013

(UNAUDITED)

	For the three months ended February 28, 2013			For the three months ended February 29, 2012			For the six months ended February 28, 2013			For the six months ended February 29, 2012			Cumulative from June 2, 2008 (inception) through February 28, 2013
Net Sales	$	—		$	—		$	—		$	—		$	—
Cost of Sales		—			—			—			—			—
Gross Profit		—			—			—			—			—
Operating Expenses:
Legal and Accounting		15,300			2,500			24,470			9,000			75,957
General and Administrative		2,636			13,050			8,590			19,850			39,774
Compensation, Consulting and Software		743,320			81,000			786,220			81,000			1,859,140
Total Operating Expenses		761,256			96,550			819,280			109,850			1,974,871
Operating Loss		(761,256	)		(96,550	)		(819,280	)		(109,850	)		(1,974,871	)
Other Income (Expenses)
Impairment		35,000			100,000			35,000			100,000			227,500
Interest Expense		6,783			—			8,459			—			20,383
Total other expenses		(41,783	)		(100,000	)		(43,459	)		(100,000	)		(247,883	)
Net (loss) before Income Taxes		(803,039	)		(196,550	)		(862,739	)		(209,850	)		(2,222,754	)
Provision for Income Taxes					—						—
Net (loss)		(803,039	)		(196,550	)		(862,739	)		(209,850	)		(2,222,754	)
Basic and diluted net loss per common share	$	0.05		$	0.02		$	0.05		$	0.02
Weighted average number of common shares outstanding		17,585,185			10,516,190			17,542,357			10,508,095

The accompanying notes are an integral part of these statements.

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FIRST LEVEL ENTERTAINMENT GROUP, INC.

(A DEVELOPMENT STAGE COMPANY)

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE PERIOD JUNE 2, 2008 (INCEPTION) THROUGH FEBRUARY 28, 2013

	For the Six months ended February 28, 2013			For the Six months ended February 29, 2012			Cumulative from June 2, 2008 (Inception) through February 28, 2013
OPERATING ACTIVITIES:
Net loss	$	(862,739	)	$	(209,850	)	$	(2,222,754	)
Adjustments to reconcile net loss to net cash used in operating activities:
Issuance of common stock for services		690,000			75,000			1,609,500
Issuance of common stock - shareholder note payable		—			32,500			12,500
Impairment		35,000			100,000			227,500
Changes in operating assets and liabilities:
Increase/(Decrease) in accounts payable and accrued expenses		44,509			1,071			188,933
Net cash provided by (used) in operating activities		(93,230	)		(1,279	)		(184,321	)
FINANCING ACTIVITIES:
Increase in due to related parties		28,850			1,279			28,850
Increase (decrease) in notes payable		62,500						150,000
Proceeds from issuance of common stock		—			3,000			8,000
Net cash provided by (used in) financing activities		91,350			4,279			186,850
NET INCREASE (DECREASE) IN CASH		(1,880	)		3,000			2,529
CASH BEGINNING BALANCE		4,409			100			—
CASH ENDING BALANCE		2,529			3,100			2,529
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid	$	—		$	—		$	—
Interest paid	$	—		$	—		$	—
NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock - shareholder note payable	$	—		$	32,500		$	397,500
Issuance of common stock for services	$	690,000		$	75,000		$	1,384,924
Issuance of common stock for acquisition of intellectual property	$	—		$	—		$	22,500
Issuance of notes payable for acquisition of intellectual property	$	—		$	—		$	240,000

The accompanying notes are an integral part of these statements.

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FIRST LEVEL ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

First Level Entertainment Group, Inc. (“Company”) is a development stage company commencing development operations in April, 2010 and has incurred losses since inception totaling ($2,222,754) through February 28, 2013.  The Company was incorporated on June 2, 2008 in the State of Florida and established a fiscal year end of August 31st.  The Company is a development stage company focusing on social networking applications including mobile and children’s original music.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed financial statements included in this report have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s 10K. The financial data for the three and six month periods presented may not necessarily reflect the results to be anticipated for the complete year ended August 31, 2013.

Development Stage Company

The Company has not earned any revenue from operations.  Accordingly, the Company’s activities have been accounted for as those of a “Development Stage Enterprise” as set forth in ASC Topic 915.  Among the disclosures required by ASC 915 are that the Company’s financial statements be identified as those of a development stage company, and that the statements of operations, stockholders’ equity/(deficit) and cash flows disclose activity since the date of the Company’s inception.

Use of Estimates and Assumptions

Preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differ from those estimates.

Related Parties

Loans from Related Parties

Related parties, which can be a corporation, individual, investor or another entity are considered to be related if the party has the ability, directly or indirectly, to control the other party or exercise significant influence over the Company in making financial and operating decisions.  Companies are also considered to be related if they are subject to common control or common significant influence.  The Company has these relationships from time to time.

Convertible Note from Related Parties

On April 17, 2012, the Company entered into a Convertible Note with a related entity controlled by our Chief Executive Officer (Steve Adelstein). Under the terms of this Note, the maximum amount to be advanced (from time to time) is $150,000 on or before December 31, 2013. The Note matures on August 31, 2015 including interest of 9% compounded quarterly. Additionally, the Note can be converted into common shares of the Company at $0.09 per common share at the sole discretion of the Note holder and/or assigns. As advances under this Note are at the sole discretion of the holder, there are no assurances that any future advances will be provided. At February 28, 2013, the Note amount was $150,000 plus accrued interest of approximately $6,600.

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FIRST LEVEL ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

Services rendered from Related Parties

From time to time, the Company utilizes services including, but not limited to, consulting, marketing and strategic planning from related parties. During the three (6) months ended February 28, 2013, the Company issued stock and cash valued at $643,500 for these professional services performed.

Recent Accounting Pronouncements

The Company has evaluated all the recent accounting pronouncements through June, 2013 and believes that none of them, including those not yet effective, will have a material effect on the financial position or results of operations of the Company.

NOTE 3 – GOING CONCERN

The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern.  This contemplates the realization of assets and the liquidation of liabilities in the normal course of business.  Currently, the Company does not have material assets that can be liquidated in a timely manner, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern.  The Company has a deficit accumulated since inception (June 2, 2008) through February 28, 2013; of ($2,222,754).The Company will be dependent upon the raising of additional capital through placement of our common stock in order to implement its business plan.  There can be no assurance that the Company will be successful in either situation in order to continue as a going concern.  The Company has funded its initial operations, from inception to February 28, 2013 by way of issuing common shares, advances from related parties and a long term Note arrangement. 

These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

NOTE 4 – CAPITAL STOCK

In February 2013 the Company issued 7,666,667 shares of the common stock in the Company at $0.09 per share for compensation to consultants and officers. The total value of shares issued was $690,000.

On May 31, 2013 the Company authorized a 3:1 Reverse Stock Split. The financial statements have been retroactively adjusted to reflect the reverse stock split.

From inception (June 2, 2008) through February 28, 2013, the Company has not granted any stock options and warrants.

NOTE 5 – RELATED PARTY TRANSACTIONS

During the period from June 2, 2008 (inception) through August 31, 2011 the former sole officer and director paid incorporation costs of $684 on behalf of the Company.  Additionally, other affiliates and related parties have made advances from time to time and at February 28, 2013 and August 31, 2012, the amounts were $28,850 and $0 respectively. These were classified as loans from related parties.

On April 17, 2012, the Company entered into a Convertible Note with a related entity controlled by our Chief Executive Officer (Steve Adelstein). Under the terms of this Note, the maximum amount to be advanced (from time to time) is $150,000 on or before December 31, 2013. The Note matures on August 31, 2015 including interest of 9% compounded quarterly. Additionally, the Note can be converted into common shares of the Company at $0.09 per common share at the sole discretion of the Note holder and/or assigns. As advances under this Note are at the sole discretion of the holder, there are no assurances that any future advances will be provided. At February 28, 2013, the Note amount was $150,000.

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FIRST LEVEL ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS

Limited office space and services are provided without charge by a related party which is considered immaterial for financial presentation. The officers and directors of the Company are involved in other business activities and may, in the future, become involved in other business opportunities.  If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interests.  The Company has not formulated a policy for the resolution of such conflicts.

NOTE 6 – SUBSEQUENT EVENTS

On May 31, 2013 the Company converted the note payable for $150,000, as well as other payables for services, into 2,333,333 shares of common stock valued at $0.09 per share.

On May 31, 2013 the Company authorized a 3:1 Reverse Stock Split the financial statements have been retroactively adjusted to reflect the reverse stock split.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing elsewhere in this report.

Overview

We are a development stage company incorporated in the state of Florida in June, 2008. The current focus of our development stage company has the primary focus of developing mobile applications as follows:

1)	VIP Wink™
	The VIPWINK™ mobile application is currently in software development stage for iTunes and Android phones whereby allowing the celebrity to offer premium content via a paid subscription based model. The premium content will be locked out to all non-subscribers and available on a time delay established by the celebrity.
	This application should enable celebrities, athletes, branded products and others to monetize their (Twitter™) followers and have better control content and timing of often negative, runaway trends that currently plague them and the industry. This application is conceptually being developed for beta testing in the fourth quarter of 2013.
	VIPWINK™ has executed agreements with a selective roster of VIP celebrities, athletes, branded products and others for our beta testing of our functioning prototype. The preliminary roster of VIPWINK™ has approximately 2,000,000 followers on Twitter™. We continuously are in negotiations to execute further agreements to coincide with our development of this application.
2)	MobileSonars™
	We have filed a patent application (13/662,417) with the United State Patent and Trademark Office (USPTO) on October 27, 2012 titled “Localized Interest Based Matching of Mobile Device Users.”
	MobileSonars™ is a designed mobile application which is location-specific by the user answering a specific questionnaire that is “pushed” to the user at the location, social, business event and/or venue. When the application is activated at the specific location, the user is then matched with others who have answered the questions in a similar manner based on a pre-determined threshold. Matching profiles can be displayed on user’s mobile phone and related electronics. Downloading and checking-in will be accomplished through direct user input, a physical marker including a QR (Quick Response) code, RFID (Radio Frequency Identification), or the user can opt-in for automatic check-in GPS (Global Positioning System).

Additionally, the Company, on July 31, 2010, acquired intellectual property consisting of thirty-five (35) children’s songs to market and sell through distribution channels throughout the United States and foreign territories. Our music library consists of our thirty-five (35) songs, having personalization for approximately 200 children’s names, being marketed in three (3) primary formats consisting of Compact Disc (CD), Video (DVD) and MP3 (Direct Download). The present strategy of marketing these products to the end user (the consumer’s point of purchase) is through the efforts of independent distributors specializing in marketing these types of formats. The ultimate consumer will be able to purchase our products through the normal source of physical retailers allowing the consumer to purchase inventories of our CD/DVD products and ecommerce through the internet via direct downloads.

Going Concern

Our financial statements have been prepared on the basis of accounting principles applicable to a going concern. As a result, they do not include adjustments that would be necessary if we were unable to continue as a going concern and would therefore be obligated to realize assets and discharge our liabilities other than in the normal course of operations. As reflected in the accompanying financial statements, the Company is a development stage entity having generated no revenues from inception through February 28, 2013. We have provided cash flows in operations of $184,321 from inception (June 2, 2008) to February 28, 2013 and has an accumulated deficit of ($1,421,000) through February 28, 2013.

This raises substantial doubt about our ability to continue as a going concern, as expressed by our auditors in its opinion on our financial statements included in this report. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.

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We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. Our ability to continue as a going concern is dependent on us obtaining adequate capital to fund operating losses until we become profitable. If we are unable to obtain adequate capital, we could be forced to cease operations. There can be no assurance that we will operate at a profit or additional debt or equity financing will be available, or if available, can be obtained on satisfactory terms.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, management evaluates these estimates and assumptions, including but not limited to those related to revenue recognition and the impairment of long-lived assets, goodwill and other intangible assets. Management bases its estimates on historical experience and various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Stock Compensation
(included in ASC 718 “Compensation-Stock Compensation”)

The Company adopted SFAS No. 123R,Share-Based Payment(“SFAS 123R”), which requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. The Company accounts for stock-based compensation arrangements with nonemployees in accordance with the Emerging Issues Task Force Abstract No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. The Company records the expense of such services to employees and non employees based on the estimated fair value of the equity instrument using the Black-Scholes pricing model.

Revenue Recognition
(included in ASC 605 “Revenue Recognition”)

The Company recognizes revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements’ and No. 104, “Revenue Recognition”. In all cases, revenue is recognized only when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.

Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Return allowances, which reduce product revenue, are estimated using historical experience. Revenue from product sales and services rendered is recorded net of sales taxes. Amounts received in advance for subscription services, are deferred and recognized as revenue over the subscription term.

Outlook

The most important metric by which we judge the Company’s performance now and in the near term is generating revenues on the top line and sales growth. Our current commitment to develop and deliver quality products means that, for the near future, bottom line profitability will be a poor indicator of our success.

Since investors are certain to be the primary, near term source of liquidity to support our development and marketing efforts, our liquidity will be driven by our ability to attract repeat investments from current shareholders and to find new ones. All investors must fully understand that an investment in our company is of high risk and they can lose their total invested capital.

Our primary marketing challenge for the coming twelve (12) months is to implement and “go live” with our initial networking applications to achieve market awareness and acceptance. Additionally, we plan to market our children’s music library from and through independent distributors (including CDs, DVDs, web downloads (MP3 format) currently under development and anticipated to be completed for beta testing in the fourth quarter of 2013. Additionally, management is seeking new acquisitions to complement existing products.

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Revenues

These forward-looking statements, pertaining to revenues, are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. As our revenues commence, we plan to invest in marketing and sales by increasing the number of direct sales throughout our web portal to build brand awareness. We expect that in the future, marketing and sales expenses will increase in absolute dollars commencing in the fourth quarter of 2013. We do not expect our revenues to increase significantly until first quarter of 2014.

General and Administrative Expenses

We expect that general and administrative expenses associated with executive compensation will substantially increase in the future as our products commence their marketing potential. In addition, we believe in the last part of the 2013 fiscal year that the compensation packages required to attract the senior executives of the Company will require management to execute against its business plan which will increase our total expenses, including, but not limited to, general and administrative, legal, accounting, marketing and compensation.

Summary of Condensed Results of Operations

Any measurement and comparison of revenues and expenses from continuing operations should not be considered necessarily indicative or interpolated as the trend to forecast our future revenues and results of operations.

Results for the Three Months Ended February 28, 2013

Revenues. The Company’s revenues for the three months ended February 28, 2013 were $0. Additionally, the Company has not had any revenues from inception (June 2, 2008) to February 28, 2013.

Legal and Accounting Expenses.Legal and Accounting expenses for the three months ended February 28, 2013 were $15,300 as compared to $6,500 for the three months ended February 29, 2012. These increase costs of legal and accounting expenses were a direct result of product development commencing an activity phase whereby additional expenses are required.

General and Administrative Expenses. General and administrative expenses for the three months ended February 28, 2013 were $2,442 as compared to $7,239 for the three months ended February 29, 2012. These expenses are normal and reoccurring for our Company as a development stage entity.

Compensation. Compensation expense for the three (3) months ended February 28, 2013 was $92,520 as compared to $42,900 for the three (3) months ended February 29, 2012. These increase costs of $49,620 were a direct result of hiring three (3) employees and the commencing of activity.

Net Loss. Net loss for the three months ended February 28, 2013 was ($803,039) as compared to ($196,550) for the three months ended February 29, 2012. The substantial increase of net loss of $606,489 was a result of hiring corporate officers entering into the company’s development stage of internet and mobile applications.

Results for the Six Months Ended February 28, 2013

Revenues. The Company’s revenues for the six months ended February 28, 2013 were $0. Additionally, the Company has not had any revenues from inception (June 2, 2008) to February 28, 2013.

Legal and Accounting Expenses.Legal and Accounting expenses for the six months ended February 28, 2013 were $24,470 as compared to $9,000 for the six months ended February 29, 2012. These legal and accounting expenses were a direct result of professional fees associated with the company’s filings required by the Securities and Exchange Commission.

General and Administrative Expenses. General and administrative expenses for the six months ended February 28, 2013 were $5,953 as compared to $5,750 for the six months ended February 29, 2012.  These expenses are normal and reoccurring for our Company as a development stage entity.

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Consulting. Consulting expenses for the six months ended February 28, 2013 were $650,800 as compared to $81,000 for the six months ended February 28, 2012.  The substantial increase ($569,800) in expenses for the period ended February 28, 2013 were a result of the company entering into the development phase of software applications for the internet and smart phone industries.

Net Loss. Net loss for the six months ended February 28, 2013 was ($862,739) as compared to ($209,850) for the six months ended February 28, 2012.  The substantial increase of net loss ($652,889) was a result of an increase of $569,800 expense for consultants entering into the company’s development stage of internet and smart phone applications and increase in payroll of $92,520.

Impact of Inflation

We believe that the rate of inflation has had negligible effect on our operations. We believe we can absorb most, if not all, increased non-controlled operating costs by increasing sales prices, whenever deemed necessary and by operating our Company in the most efficient manner possible.

Liquidity and Capital Resources

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan. Since its inception, the Company has been funded by advances from related parties, conversion of debt to common shares and the sale of common shares to related parties and others.

As of February 28, 2013, total current assets were $ 2,529.

As of February 28, 2013, total current liabilities were $217,783, which consisted of $188,933 for accrued expenses and $28,850 of loans from related parties. As of August 31, 2012, total current liabilities were $144,424, which consisted of $136,924 of accrued expenses and $7,500 of accounts payable. We had net working capital deficit of ($215,254) as of February 28, 2013, compared to net working deficit capital of ($140,015) at August 31, 2012.

During the three months ended February 28, 2013, our operating activities used cash of $93,230.

Material Commitments

The Company does not have any material commitments as of February 28, 2013.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements or any anticipate entering into any off-balance arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Recent Accounting Pronouncements

The company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable for a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Exchange Act. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible

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disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Based on his evaluation as of the end of the period covered by this report, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

Item 1. Legal Proceeding.
	None.
Item 1A. Risk Factors.
	Not required
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
	In February 2013 the Company issued 7,666,667 shares of the common stock in the Company at $0.09 per share for compensation to consultants and officers the total value of shares issued was $690,000.
	On May 31, 2013 the Company authorized a 3:1 Reverse Stock Split. The financial statements have been retroactively adjusted to reflect the stock split.
	Management believes the above shares of common stock were issued pursuant to the exemption from registration under Section 4(2) of the Securities Act of 1933 as amended.
Item 3. Defaults Upon Senior Securities.
	None.
Item 4. Mine Safety Disclosures.
	Not applicable.
Item 5. Other Information.
	None.
Item 6. Exhibits

(a) Exhibits

Exhibit No.	Description
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer
32.2	Section 1350 Certification of Chief Financial Officer
101 *	XBRL data files of Financial Statements and Notes contained in this Quarterly Report on Form 10-Q.

* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	FIRST LEVEL ENTERTAINMENT GROUP, INC.
Date: July 11, 2013	By:	/s/ Steve Adelstein
		Steve Adelstein
		Chief Executive Officer

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