First Level Entertainment 10-Q 2014 Q3 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 endedMay 31, 2014

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 May 31, 2014
Common Stock, $0.001	35,000,000 shares

FIRST LEVEL ENTERTAINMENT GROUP, INC.

TABLE OF CONTENTS

	PAGE
Part I Financial Information	4
Item 1. Financial Statements	4
Condensed Balance Sheets at May 31, 2014 (unaudited) and August 31, 2013 (audited)	4
Condensed Statements of Operations for the three months ended May 31, 2014 and 2013 and the cumulative period from June 2, 2008 (inception) through May 31, 2014 (unaudited)	5
Condensed Statements of Cash Flows at May 31, 2014 (unaudited)	6
Notes to Condensed Financial Statements	7-8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	9-12
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	12
Item 4. Controls and Procedures.	13-14
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.	15
Item 4. Mine Safety Disclosures.	15
Item 5. Other Information.	15
Item 6. Exhibits.	15
Signatures	15

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, 2013, 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

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. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEETS

	May 31,			August 31,
	2014			2013
	(unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents	$	4,245		$	253
Prepaid expenses		14,000			—
Total Current Assets		18,245			253
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable		225,000			1,500
Accrued expenses		234,690			265,138
Advance from related parties		30,564			50,000
Notes payable		32,000			—
Total Current Liabilities		522,254			316,638
STOCKHOLDERS’ DEFICIT:
Preferred Stock, par value $.001; 10,000,000 shares authorized;
0 issued and outstanding at November 30, 2013 and August 31, 2013		—			—
Common stock , par value $.001;  500,000,000 shares authorized;
35,000,000 shares issued as of May 31, 2014 and
30,000,000 shares issued as of August 31, 2013 and		35,000			30,000
Additional paid in capital		1,565,000			1,135,000
Deficit accumulated during the development stage		(2,104,009	)		(1,481,385	)
Total Stockholders’ Deficit		(504,009	)		(316,385	)
Total Liabilities and Stockholders’ Deficit	$	18,245		$	253

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

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FIRST LEVEL ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

													Cumulative
													from
	For the Three						For the Nine						June 2, 2008
	Months Ended						Months Ended						(Inception)
	May 31,						May 31,						May 31,
	2014			2013			2014			2013			2014
Revenue	$	—		$	—		$	—		$	—		$	—
Operating Expenses:
Advertising and Marketing		25,045			—			43,484			—			43,484
Legal and Accounting		4,025			9,073			13,575			37,793			122,605
Consulting and Software Development		289,000			36,047			557,200			113,517			1,601,797
General and Administrative		3,598			5,765			8,163			14,355			49,663
Total Operating Expenses		321,668			50,885			622,422			165,665			1,817,549
Operating Loss		(321,668	)		(50,885	)		(622,422	)		(165,665	)		(1,817,549	)
Other Income(expense)
Interest Expense		(202	)		(3,375	)		(202	)		(11,834	)		(23,960	)
Impairment		—			—			—			—			(262,500	)
Total Other Income(Expense)		(202	)		(3,375	)		(202	)		(11,834	)		(286,460	)
Net (loss) before Income Taxes		(321,870	)		(54,260	)		(622,624	)		(177,499	)		(2,104,009	)
Provision for Income Taxes		—			—			—			—			—
Net (loss)		(321,870	)		(54,260	)		(622,624	)		(177,499	)		(2,104,009	)
Basic and diluted net loss per common share	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)
Weighted average number of common shares outstanding		32,495,652			25,192,029			31,241,020			20,120,269

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

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FIRST LEVEL ENTERTAINMENT GROUP, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

							Cumulative
							from
	For the Nine						June 2, 2008
	Months Ended						(Inception)
	May 31,						May 31,
	2014			2013			2014
OPERATING ACTIVITIES:
Net loss	$	(622,624	)	$	(177,499	)	$	(2,104,009	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of intellectual assets, net		—			—			262,500
Expenses paid on behalf of the company		130,464			6,901			196,132
Stock issued for services		249,600			71,408			1,037,182
Changes in operating assets and liabilities:
Prepaid expenses		(14,000	)		—			(14,000	)
Accounts payable and accrued expenses		193,052			51,684			459,690
Net cash used in operating activities		(63,508	)		(47,506	)		(162,505	)
FINANCING ACTIVITIES:
Increase/(decrease) in notes payable		32,000			—			32,000
Cash increase due to related notes payable		—			43,350			102,150
Payments on related party debt		(7,500	)		—			(15,400	)
Issuance of common stock for cash		43,000			—			48,000
Net cash provided by (used in) financing activities		67,500			43,350			166,750
NET INCREASE IN CASH		3,992			(4,156	)		4,245
CASH BEGINNING BALANCE		253			4,409			—
CASH ENDING BALANCE	$	4,245		$	253		$	4,245
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Taxes paid		—			—			—
Interest paid		—			—			—
NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES:
Stock issued for intellectual property		—			—			262,500
Stock issued for debt		—			—			109,918
Stock issued for related party debt settlement		142,400			—			142,400

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

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FIRST LEVEL ENTERTAINMENT GROUP, INC.

(A Development Stage Company)

Notes to Consolidated Financial Statements

May 31, 2014 (Unaudited)

NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION

First Level Entertainment Group, Inc. (“the Company”), formerly known as Sound Kitchen Entertainment Group, Inc., is in the development stage commencing operations in February 1, 2012 and has incurred losses since entering the development stage totaling $2,104,009. The Company was incorporated on June 2, 2008 in the State of Florida and established a fiscal year end of August 31. The Company is in the entertainment business presently focusing on mobile applications. The Company has following wholly-owned subsidiaries: i) Mobile Sonars Inc.; ii) Am I There Inc.; iii) Message Attic Corp; VIP Wink Corp.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The financial statements present the consolidated balance sheet, statements of operations, stockholders’ equity and cash flows of the Company including its wholly owned subsidiaries. These consolidated financial statements are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.

Principles of Consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries.  All significant intercompany balances and transactions within the Company and subsidiary have been eliminated upon consolidation.

Use of Estimates and Assumptions

Preparation of the consolidated 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.

Basic and Diluted Net Loss per Common Share

Basic loss per share is calculated by dividing the Company’s net loss applicable to common stockholders by the weighted average number of common shares during the period. Diluted loss per share is calculated by dividing the Company’s net loss available to common stockholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is adjusted for any potentially dilutive debt or equity. There are no such common stock equivalents outstanding as of May 31, 2014 or 2013 which were excluded from the calculation of diluted loss per common share as their effect would have been anti-dilutive.

Recent Accounting Pronouncements

The Company has evaluated all the recent accounting pronouncements through May 31, 2014 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 consolidated 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, 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 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 by way of issuing common shares and through advances made by related parties.  These consolidated 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.

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FIRST LEVEL ENTERTAINMENT GROUP, INC.

(A Development Stage Company)

Notes to Consolidated Financial Statements

May 31, 2014 (Unaudited)

NOTE 4 – RELATED PARTY TRANSACTIONS

As of August 31, 2013 the Company owed $50,000 to related parties for operating expenses paid on the Company’s behalf. During the nine months ended May, 2014 this related party paid for $130,464 of additional operating expenses on the Company’s behalf. The Company paid $7,500 in cash against the outstanding payable and paid 320,000 shares of common stock at $0.025 per share in settlement of $8,000 of the outstanding payable and 580,000 shares of common stock at $0.18 per share in settlement of $104,400 leaving an ending balance due of $30,564. All related party balances bear no interest and are due on demand.

NOTE 5 – NOTES PAYABLE

On April 10, 2014, the Company entered into a note agreement with an unrelated third party to borrow a maximum amount of $150,000 (determined from time to time as advances are made) having a stated interest rate of six (6) percent and is convertible into common shares at fair market value at the discretion of the note holder both principal and interest are due April 10, 2015 and can be prepaid without penalty. At May 31 2014, the principal balance of the note outstanding was $32,000 with accrued interest of $202.

NOTE 6 – STOCKHOLDERS’ DEFICIT

During the year ended August 31, 2013, the Company issued 3,590,000 (post stock-split) shares of common stock valued at $0.025 per share in extinguishment of related party notes and advances payable. The total value of shares issued was $89,751 and no gain or loss on extinguishment was recognized in the transaction.  The Company also issued 8,910,000 (post stock-split) shares of common stock valued at $0.025 per share for services valued at $222,749.  The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties.

On November 30, 2013 we issued 1,200,000 shares of common stock to consultants the total value of the services were $20,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.025 per share).

On April 10, 2014 we issued 1,800,000 shares of common stock to consultants the total value of the services were $45,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.025 per share).

On April 23, 2014 we issued 100,000 shares of common stock for cash at $0.18 per share proceeds received were $18,000.

On May 6, 2014 we issued 700,000 shares of common stock to consultants the total value of the services were $126,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.18 per share).

On May 28, 2014 we issued 1,200,000 shares of common stock to consultants the total value of the services were $216,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.18 per share).

NOTE 7 – SUBSEQUENT EVENTS

We have evaluated events and transactions that occurred subsequent to May 31, 2014 through the date of this report, the date the consolidated financial statements were issued, for potential recognition or disclosure in the accompanying consolidated financial statements.

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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 during June 1 and June 15, 2014.

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).

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 May 31, 2014. We have used cash flows in operations of $162,505 from inception (June 2, 2008) to May 31, 2014 and has an accumulated deficit of ($2,104,009) through May 31, 2014.

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.

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.

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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 follows the provisions of ASC 718, “Share-Based Payment.” which requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.  The Company uses the Black-Scholes pricing model for determining the fair value of stock based compensation.

The Company accounts for non-employee share-based awards based upon ASC 505-50, “Equity-Based Payments to Non-Employees.”  ASC 505-50 requires the costs of goods and services received in exchange for an award of equity instruments to be recognized using the fair value of the goods and services or the fair value of the equity award, whichever is more reliably measurable. The fair value of the equity award is determined on the measurement date, which is the earlier of the date that a performance commitment is reached or the date that performance is complete.  Generally, our awards do not entail performance commitments.  When an award vests over time such that performance occurs over multiple reporting periods, we estimate the fair value of the award as of the end of each reporting period and recognize an appropriate portion of the cost based on the fair value on that date.  When the award vests, we adjust the cost previously recognized so that the cost ultimately recognized is equivalent to the fair value on the date the performance is complete.

The Company recognizes the cost associated with share-based awards that have a graded vesting schedule on a straight-line basis over the requisite service period of the entire award.

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, 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 do not expect our revenues to increase significantly until fourth 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 2014 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 May 31, 2014

Revenues. The Company’s revenues for the three months ended May 31, 2014 were $0. Additionally, the Company has not had any revenues from inception (June 2, 2008) to May 31, 2014.

Legal and Accounting Expenses.Legal and Accounting expenses for the three months ended May 31, 2014 were $4,025 as compared to $9,073 for the three months ended May 31, 2013. These decrease in costs of legal and accounting expenses were a direct result reduce costs related to auditing and reporting.

Advertising and Marketing Expenses. Advertising and Marketing expenses for the three months ended May 31, 2014 were 25,045 as compared to $-0- for the three months ended May 31, 2013. The increase is a result of the introduction of our VIP wink application.

General and Administrative Expenses. General and administrative expenses for the three months ended May 31, 2014 were $3,598 as compared to $5,765 for the three months ended May 31, 2013. These expenses are normal and reoccurring for our Company as a development stage entity.

Consulting and Software Development. The expense for the three (3) months ended May 31, 2014 was $289,000 as compared to $36,047 for the three (3) months ended May 31, 2013. These increase costs of $252,953 were a result of the changes in software development activity.

Net Loss. Net loss for the three months ended May 31, 2014 was ($321,870) as compared to ($54,260) for the three months ended May 31, 2013. The substantial increase of net loss of $267,610 was a result of completion of the company’s development stage of internet and mobile applications.

Results for the Nine Months Ended May 31, 2014

Revenues. The Company’s revenues for the three months ended May 31, 2014 were $0. Additionally, the Company has not had any revenues from inception (June 2, 2008) to May 31, 2014.

Legal and Accounting Expenses.Legal and Accounting expenses for the nine months ended May 31, 2014 were $13,575 as compared to $37,793 for the nine months ended May 31, 2013. These decrease in costs of legal and accounting expenses were a direct result reduce costs related to auditing and reporting.

General and Administrative Expenses. General and administrative expenses for the nine months ended May 31, 2014 were $8,163 as compared to $14,355 for the nine months ended May 31, 2013. These expenses are normal and reoccurring for our Company as a development stage entity.

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Consulting and Software Development. The expense for the nine months ended May 31, 2014 was $557,200 as compared to $113,517 for the nine months ended May 31, 2013. These increase costs of $443,683 were a result of the changes in software development activity.

Net Loss. Net loss for the nine months ended May 31, 2014 was ($622,624) as compared to ($177,499) for the nine months ended May 31, 2013. The substantial increase of net loss of $445,125 was a result of completion of the company’s development stage of internet and mobile applications.

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 May 31, 2014, total current assets were $ 18,245.

As of May 31, 2014, total current liabilities were $522,254, which consisted of $225,000 in accounts payable $234,690 for accrued expenses and $30,564 of advances from related parties $32,000 in Notes Payable. As of August 31, 2013, total current liabilities were $316,638, which consisted of $265,138 of accrued expenses, $50,000 advances from related parties and $1,500 of accounts payable. We had net working capital deficit of ($504,009) as of May 31, 2014, compared to net working deficit capital of ($316,385) at August 31, 2013.

During the nine months ended May 31, 2014, our operating activities used cash of $63,508. $130,464 of our expenses were paid by our officers. We issued a note payable for $32,000, sold common stock for $43,000 we used $7,500 to pay our related party advances for a net proceeds from financing of $67,500.

Material Commitments

The Company does not have any material commitments as of May 31, 2014.

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.

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Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Treasurer, as appropriate, to allow timely decisions regarding required disclosures.  In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Treasurer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of our fourth fiscal quarter covered by this report. Based on the foregoing, our President and Treasurer concluded that our disclosure controls and procedures were not effective at the reasonable assurance level.  It should be noted that the design of any system of controls 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, regardless of how remote.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and financial officer and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

● Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of May 31, 2014.  In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.  The COSO framework is based upon five integrated components of control: control environment, risk assessment, control activities, information and communications and ongoing monitoring.

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer has concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were not effective as of May 31, 2014 (the “Evaluation Date”), to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.  Each of the following is deemed a material weakness in our internal control over financial reporting:

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● We do not have an audit committee.  While we are not currently obligated to have an audit committee, including a member who is an “audit committee financial expert,” as defined in Item 407 of Regulation S-K, under applicable regulations or listing standards; however, it is management’s view that such a committee .is an important internal control over financial reporting, the lack of which may result in ineffective oversight in the establishment and monitoring of internal controls and procedures.

● We did not maintain proper segregation of duties for the preparation of our financial statements.  We currently have only one officer overseeing all transactions.  This has resulted in several deficiencies, including the lack of control over preparation of financial statements and proper application of accounting.

Management believes that the material weaknesses set forth in the two items above did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.

Management’s Remediation Initiatives

In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to initiate the following series of measures once we have the financial resources to do so:

● We will create a position to segregate duties consistent with control objectives and will increase our personnel resources and technical accounting expertise within the accounting function when funds are available to us. And, we plan to appoint one or more outside directors to an audit committee resulting in a fully functioning audit committee, which will undertake the oversight in the establishment and monitoring of required internal controls and procedures, such as reviewing and approving estimates and assumptions made by management when funds are available to us.

● Management believes that the appointment of outside directors to a fully functioning audit committee, would remedy the lack of a functioning audit committee.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this report, which were identified in connection with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include an attestation report of the Company’s registered independent public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.

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.

On April 10, 2014 we issued 1,800,000 shares of common stock to consultants the total value of the services were $45,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.025 per share).

On April 23, 2014 we issued 100,000 shares of common stock for cash at $0.18 per share proceeds received were $18,000.

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On May 6, 2014 we issued 700,000 shares of common stock to consultants the total value of the services were $126,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.18 per share).

On May 28, 2014 we issued 1,200,000 shares of common stock to consultants the total value of the services were $216,000. The value of the shares was based on the most recent share price of common stock issued for cash to non-related parties ($0.18 per share).

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.”

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 15, 2014	By:	/s/ Steve Adelstein
		Steve Adelstein
		Chief Executive Officer

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