U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
[ ] 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 333-173119
Primco Management Inc.
(Exact name of registrant as specified in its charter)
Delaware |
| 27-3696297 |
State or other jurisdiction of incorporation or organization |
| (I.R.S. Employer Identification No.) |
6725 West Sunset Blvd, Suite 420
Hollywood, California 90028
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (323) 450-2780
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.00001 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act:
[ ]Yes [X] No
Indicate by check mark whether the registrant(1) has filed all reports required 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 day.
[X] Yes [ ] 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). [X] Yes [ ] No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulations S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
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 if the Exchange Act.
Large accelerated filter [ ] | Accelerated filter [ ] |
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Non-accelerated filter [ ] | Smaller 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]
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value of the voting common equity was $187,997,654.
As of September 30, 2014, the registrant had 4,979,119,725 shares of our common stock were issued and outstanding and 7,000,000 shares of our preferred stock were issued and outstanding.
Documents Incorporated by Reference: None.
EXPLANATORY NOTE
Primco Management, Inc. is filing this Amendment to our Annual Report on the Form-10-K for the fiscal year ended December 31, 2013 as filed with the U.S. Securities Exchange Commission on April 15, 2014, most notably to correct the omission of Item 11. Executive Compensation and the corresponding information in the footnotes made in the due course of the original filing.
No other changes have been made to the 10-K, and this Amendment has not been updated to reflect events occurring subsequent to the filing of the 10-K.
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Primco Management Inc.
Form 10-K/A
For the Fiscal Year Ended December 31, 2013
Table of Contents
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Part I |
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Item 1. Description of Business |
| 4 |
Item 1A. Risk Factors |
| 8 |
Item 1B. Unresolved Staff Comments |
| 8 |
Item 2. Properties |
| 9 |
Item 3. Legal Proceedings |
| 9 |
Item 4. Mine Safety Disclosures |
| 9 |
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Part II |
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Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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Item 6. Selected Financial Data |
| 11 |
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations |
| 11 |
Item 7A. Quantitative and Qualitative Disclosures about Market Risk |
| 13 |
Item 8. Financial Statements and Supplementary Data |
| 14 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
| 45 |
Item 9A. Controls and Procedures |
| 45 |
Item 9B. Other Information |
| 46 |
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Part III |
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Item 10. Directors, Executive Officers and Corporate Governance |
| 47 |
Item 11. Executive Compensation |
| 49 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
| 50 |
Item 13. Certain Relationships and Related Transactions, and Director Independence |
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Item 14. Principal Accountant Fees and Services |
| 52 |
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Part IV |
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Item 15. Exhibits, Financial Statement Schedules |
| 53 |
Signatures |
| 55 |
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Corporate History
Our Company was incorporated in Delaware on October 14, 2010 as a property management company.
On October 10, 2012, the Company’s board of directors adopted a resolution approving an amendment to our Articles of Incorporation to effectuate an increase of the authorized common shares from 25,000,000 par value $0.001 to 500,000,000 par value $0.001 and additionally authorized a 20 for 1 forward split increasing the number of issued and outstanding common shares from 9,245,600 common shares to 184,912,000 common shares. The forward split did not affect the number of authorized common shares or their par value. The Company obtained the written consent of stockholders representing 86.53% of the Company’s outstanding common stock approving the amendment to Company’s Articles of Incorporation to affect the above-mentioned corporate actions.
Effective as of January 31, 2013, the Company executed a reverse merger by entering into a stock purchase agreement whereby the Company acquired all of the assets, contracts and obligations of ESMG Inc. existing as of that date through a cashless exchange of stock. ESMG Inc., which was formed in the state of Nevada on October 9, 2012, is a formative multi-media entertainment enterprise with an active music production and distribution division, as well as having a business plan to launch a motion picture and TV production and distribution division. Accordingly, as of January 31, 2013, through the acquisition of ESMG Inc., we expanded our operations to include entertainment in addition to continuing to offer real estate management services.
On May 30, 2013, the Company completed and funded the acquisition of Top Sail Productions, “Top Sail” a music production company and record label with a multi-year US distribution agreement through WEA, a Warner Music Group Company. The Company purchased Top Sail from Chuck Gullo, the principal of Top Sail, who has continued as Senior Executive Consultant to assist in the operation of Top Sail and other entertainment entities owned by the Company. The Company purchased the membership interests in Top Sail for a total of $440,000. The initial payment was $75,000 and $15,000 worth of the Company’s 5,000,000 restricted common shares. The remaining $350,000 is being paid in installments through June 30, 2016 pursuant to a three year consulting agreement with Mr. Gullo. As of December 31, 2013, the Company has paid a total of $37,500 ($6,250 per month) pursuant to the payment terms of the consulting agreement..
On June 1, 2013 the board of directors entered into an Amendment and Plan of Reorganization with D & B Music, Inc. (previously known as D & B Records, Inc.) a Delaware corporation, in which D & B Music, Inc. merged with and into the Company. D & B Music, Inc, has a music catalog of 41 titles. The consideration paid by the company was the assumption by the Company of a promissory note for $242,000 due Pegasus Group, Inc. together with accrued and unpaid interest thereon of $114, 841 and the issuance of 7,000,000 of the Company’s Series A preferred stock and 20,000,000 of the Company’s common stock to the sole shareholder of D & B Music, Inc., David Michery, who is also CEO and director of the Company
On June 10, 2013, the Company’s board of directors adopted a resolution approving an amendment to the Articles of Incorporation increasing the authorized common shares from 500,000,000 par value $0.001 to 2,000,000,000 par value $0.00001 and to designate 10,000,000 preferred shares, par value $0.00001, to be issued from time to time in one or more series as determined by the board of directors, with the balance being designated as 1,990,000,000 common shares.
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On August 6, 2013, the Company filed a Certificate of Designation with the State of Delaware to create and issue a series of 10,000,000 preferred shares to be designated the “Series A Preferred Stock”. These shares rank senior to the common stock with respect to distributions or payments in the event of any liquidation, dissolution, or winding up of the Company.
On August 19, 2013, the Company’s board of directors adopted a resolution approving an amendment to the Articles of Incorporation increasing the authorized common shares from 2,000,000,000 common shares, to 4,990,000,000 common shares.
Our Business
The Company (OTCQB: PMCM) currently operates in the medical marijuana, real estate management and multi-media industries.
Previous operations
The Company is considered to be a development stage company. From the date of incorporation on October 14, 2010, until a management change occurred on January 31, 2013, the Company had been devoting substantially all of its efforts to establishing new customized real estate management programs for its clients. These efforts however produced only minimal revenues.
New real estate business model
During 2013, the Company began to evaluate the feasibility of acquiring residential real estate properties which had already purchased viable land for such construction and for which building permits and tract maps were already in existence. One such project related to the possible construction of up to 60 townhouses on undeveloped land located in Corona, California called “Tuscany Villas”. The Company obtained a certified appraisal of the property and placed a deposit into escrow towards its purchase. However, the Company was subsequently unable to close escrow because it was ultimately unable to secure the financing of a substantial portion of the purchase price, which was a condition precedent to the closing. The Company continues to seek out and evaluate however other real estate investment opportunities in areas such as the medical marijuana industry.
Entertainment business model
Following the reverse merger/acquisition on January 31, 2013 of the entertainment related business, ESMG Inc., followed shortly thereafter by the acquisition of Top Sail Productions, LLC and the merger of D & B Music, Inc., the Company expanded its operations to include the production and distribution of recorded music, coupled with the prospect of potentially engaging in the production and distribution of lower budgeted motion pictures and television programs.
Music operations
The Company has financed the various music related assets that have been acquired by its wholly-owned subsidiary ESMG Inc. through the issuance of convertible debt.
The Company’s business model is to:
(a) acquire, through its joint venture relationship with Phoenix 51, distribution rights to new and original recorded music created by a stable of music artists having a history of multi-platinum sales, and to support those artist releases through the further investment by the Company in radio and marketing support provided by Phoenix 51;
(b) to selectively develop and invest in emerging music artists which the Company believes will be successful and to also support the release if such recorded music with targeted radio promotion and social media marketing; and
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(c) to market and distribute existing catalog titles of recorded music, such as physical CD’s from Top Sail Productions’ series of Casey Kasem’s compilations of “America’s Top The Hits” of the 1950’s through the 1990’s, and from the digital re-release of D & B Music catalog of mainly hip hop artists from the 1980’s and 1990’s.
The Company’s ESMG subsidiary released its first single to digital markets in the United States (including iTunes) by Tion Phipps entitled “Break Necks” on September 3, 2013; followed by Kamp Hustle’s single “Round She Go” on September 17,2013; V.I.C.’s single “Turn Up” on September 24, 2013; and Bungle Knot Dred’s single “Oh Yes, My Baby” on November 12, 2013. To date however, despite a significant investment by ESMG in marketing and promotion, digital sales have been extremely disappointing and revenues have been minimal. Management has established a reserve for loss at December 31, 2013 on its investment accordingly.
Other music artists contracted through Phoenix 51 include Jesse Scott and Hurricane Chris. The first single from Jesse Scott “F*ck My Life” was released digitally in the United States on February 18, 2014, again to only minimal sales.
Artists contracted by ESMG and under development include Choo Biggz, whose first single “Bong” was digitally released on February 9, 2014, Downtown Attraction, presently recording its first singles and emerging hip hop artist, Bruce-E-Bee.
The Company is presently reassessing its strategy with respect to the selection of, and investment in, music artists. All losses accumulated since October 14, 2010 are considered as part of the Company's development stage activities. The Company has not yet generated any significant revenues from its music related operations. To the contrary, the Company’s investment in the marketing and promotion of individual singles associated with its music artists has resulted in significant costs, which are not expected to be recouped.
Commencing June 1, 2013, through its acquisition of Top Sail Productions, the Company began to distribute through WEA (a member of the Warner Music Group) physical CD’s in the United States of the Casey Kasem branded “America’s Top The Hits” of the 1950’s through the 1990’s. CD sales are made primarily through Publishers Clearing House since the sale of CD’s through traditional retail stores has diminished significantly. While the Company intends to continue this sales strategy, because catalog sales have been modest. The Company is also exploring direct-to-consumer sales opportunities through the use of infomercials and direct marketing.
The Company began to exploit the D & B Music Catalog with the first digital release on November 5, 2013 of a compilation album of hip hop music entitled “Str8 Hip Hop Jams”, followed by other compilation albums from this music catalog. Because sales results to date have been below expectation, the Company is currently evaluating its sales strategy for catalog sales to determine if alternative marketing methods (e.g. targeted social media marketing campaigns) can produce higher revenues. All losses accumulated since October 14, 2010 through December 31, 2013 are considered as part of the Company's development stage activities. As such, the Company has not yet generated significant revenues from its operations and has no assurance of future revenues.
Motion picture operations
During 2013, ESMG began to selectively invest, through co-production opportunities, in the production of lower budget motion pictures for platform release to a limited number theaters, followed by a wide rollout to digital video-on-demand outlets (including Netflix) and to international distributors. The first of such projects being developed is the sequel to the successful animated family entertainment movie “The Legend of Sasquatch” starring William Hurt and John Rhys-Davies, called “Big Foot’s Big Halloween Adventures”. Subject to ESMG obtaining the financing necessary to fulfill its co-production obligation to the physical producer Gorilla Pictures, full production of the animated sequel is expected to begin in the
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second half of 2014. The second motion picture project is entitled “Halloween Hell” starring Eric Roberts, which is a co-production with veteran producers Herb Linsey and Edward Hunt, and which completed principal photography in January 2014. Although revenue expectations are very encouraging, it will not be known how successful these motion picture projects will be until release.
New real estate business model supporting the medical marijuana industry
On February 12, 2014, the Company decided to re-direct in its real estate business, with a new emphasis on providing locations and services to marijuana based companies. It announced that it plans to acquire certain properties, which it will lease to licensed retailers and manufacturers of medical marijuana, beginning initially in the greater Los Angeles area, with subsequent plans to extend its operations to Western States where medical marijuana is permitted by state law. The leased facilities will meet all zoning and licensing requirements for the ongoing, legal dispensing of medical cannabis. The Company does not intend to engage in the actual cultivation or sale of medical cannabis or any of its byproducts.
Implementation of the new business model
On February 14, 2014, the Company signed a conditional lease for the launch of its first medical cannabis cultivation center. Plans call to subdivide the property into up to 6 separate nurseries to be sublet to fully licensed dispensaries in Los Angeles. Final execution of the lease is contingent upon acquiring permits from the local municipality.
On February 24, 2014, the Company entered into a Joint Venture agreement with CanMed Ventures, a British Columbia company, to own, build and operate a 30,000 square foot cultivation facility for the production of medical marijuana. The Joint Venture will produce and dispense legal medical cannabis to Health Canada patients in British Columbia. CanMED expects to complete the licensing process in the next few months, Construction is expected to begin once the Company secures a suitable location. Under this agreement, the Company granted CanMED a 10-year management contract for the operation of the Joint Venture.
On March 19, 2014, the Company entered into an agreement to acquire Seattle based Suzie Q's, a medical marijuana collective fully licensed by the City of Seattle. Suzie Q's has been in operation for more than 4 years and serves over 1,500 patients. The agreement calls for the purchase of 100% of the assets of the Co-Op, as well as the purchase and transfer of a Tier I Production License granted by the Washington State Liquor Board. April 4, 2014 construction began on Suzie Q's first medical-marijuana collective. Once completed, the new upgraded and fully compliant facility will pave the way for the issuance of the Producer/Processor License.
Competition
There are a significant number of writer/composers, producers and distributors of recorded music, both original music distributed digitally and catalog product distributed via physical CD’s who are, or maybe, in competition with us in marketing, promoting and reaching the same music consumer marketplace (e.g. posting music digitally on iTunes or Amazon). However, for individual singles produced and distributed by artists under contract with us, we have obtained copyright registration (see below).
The U.S. commercial real estate services industry is large and highly fragmented, with thousands of companies providing asset management, investment management and brokerage sales and leasing transaction services. In recent years, the industry has experienced substantial consolidation, a trend that is expected to continue.
Intellectual Property
We do not own any trademarks. However, we have registered our music rights with the US Copyright Office in Washington, DC.
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Research and Development
Research and development expenses incurred during the year ended December 31, 2013 were zero, compared with $110,000 incurred in the year ended December 31, 2012 generally related to the real estate industry.
Government Regulation
Our business may be subjected to governmental regulation and required to comply in the following areas:
Acquisition of property and entry into joint ventures associated with the cultivation of medical marijuana
Under federal law, it is not legal to grow marijuana because it is listed as a controlled substance under the U.S. Controlled Substances Act. However, in certain states, the growth and cultivation of marijuana for medical purposes is legal under their own state law (e.g. California, Colorado, Washington state) although other states have been resistant to allow the cultivation of marijuana due to resistance from the U.S. Department of Drug Enforcement Agency and prohibition under federal law. Upon the production and sale of medical marijuana products to consumers, our facilities and our joint venture arrangements will be required to comply with various state and local regulation and licensing.
Distribution Arrangements.
We intend to release our films in the United States through existing distribution companies. We will retain the right for ourselves, or through our co-producing partner, to market the films on a jurisdiction-by-jurisdiction basis throughout the rest of the world and to market television and other uses separately. To the extent that we may engage in foreign distribution of our films, we will be subject to all of the governmental regulations of doing business abroad including, but not limited to, government censorship, exchange controls, and copying, and licensing or qualification. At this point it is not possible to predict, with certainty, the nature of the distribution arrangements and extent of exact governmental regulations that may impact our business.
Intellectual Property Rights.
Rights to original music compositions and to motion pictures are granted legal protection under the copyright laws of the United States and most foreign countries, including Canada. These laws provide substantial civil and criminal penalties for unauthorized duplication and exploitation (“piracy”) of music and motion pictures. Motion pictures, musical works, sound recordings, artwork, and still photography are separately subject to copyright under most copyright laws. The results of such investigations may warrant legal action by us as the owner/co-owner of the rights.
Employees
We currently have three employees, David Michery (President, Secretary and CEO), Steven John Corso (CFO) and Ramiro Guzman (SVP, Real Estate Division). Our employees devote such efforts and spend as much time as is necessary for the Company to conduct its operations. We will hire additional necessary personnel solely as needed, and on a per contract basis as independent consultants.
ITEM 1A. RISK FACTORS
Not applicable to a “smaller reporting company”.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable to a “smaller reporting company”.
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ITEM 2. PROPERTIES.
Our current executive offices are located at 1875 Century Park East, 6th Floor, Suite 73, Century City, CA, 90067. Our telephone number at our executive office is (310) 407-5452. These offices continue to be provided free of charge by Alan J. Bailey, an officer and director of the Company until his resignation on February 14, 2014 and consist of 140 square feet, with access to a common reception area and adjacent conference rooms.
In addition, commencing August 1, 2013, the Company entered into a lease for offices at 6725 Sunset Boulevard, Suite 420, Los Angeles, CA 90028 to house the Company’s music and motion picture production and distribution operations. The offices consist of 2,592 square feet for a lease term of 66 months. As an inducement for the Company to lease the space, a 50% rent abatement of $ 45,100.80 was allowed by the landlord for the first 12 months’ of occupation, so that the annualized rent for the first 12 months is $ 45,100.80, plus common areas charges. Thereafter, the rent becomes $92,897.28 in year two; $ 95,696.64 in year three; $ 98,573.76 in year four; $101,528.64 in year 5 and $ 52,280.64 for the final 6 months in year 6, plus an applicable increment for common area costs in all years. As a further concession, the landlord granted a tenant improvement allowance of up to $ 25,920 to cover the cost of initial (move-in) construction build and certain equipment required by the Company.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Item 5(a)
Market Information
a)Market Information. Our common stock was not quoted on a market or securities exchange until February 6, 2013, when our common stock first began to trade on OTC.QB. Since that date, our common stock is traded on the OTC .QB under the symbol “PMCM”.
The following table sets forth the reported high and low closing bid prices for our common stock as reported on the OTC Bulletin Board for the following periods. These prices do not include retail mark-ups, markdowns or commissions, and may not necessarily represent actual transactions.
Year ended December 31, 2013
High Low
First quarter $ 0.2500 $ 0.0223
Second quarter 0.0420 0.0012
Third quarter 0.0150 0.0012
Fourth quarter 0.0018 0.0001
b) Holders. At April 15, 2014, there were 2,144 shareholders of the Company.
c)Dividends. Holders of the Company’s common stock are entitled to receive such dividends as may be declared by our board of directors. No dividends on the Company’s common stock have been declared or paid to date.
d) Securities authorized for issuance under equity compensation plans. No securities are authorized for issuance by the Company under equity compensation plans.
e) Performance graph. Not applicable.
f) Sale of unregistered securities. Not applicable
Item 5(b)
Use of Proceeds.
Not applicable.
Item 5(c)
Purchases of Equity Securities by the issuer and affiliated purchasers.
Not applicable
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ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CERTAIN STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K (THIS “FORM 10-K”), CONSTITUTE “FORWARD LOOKING STATEMENTS” WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1934, AS AMENDED, AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (COLLECTIVELY, THE “REFORM ACT”). CERTAIN, BUT NOT NECESSARILY ALL, OF SUCH FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS “BELIEVES”, “EXPECTS”, “MAY”, “SHOULD”, OR “ANTICIPATES”, OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE TERMINOLOGY, OR BY DISCUSSIONS OF STRATEGY THAT INVOLVE RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF MASS HYSTERIA ENTERTAINMENT COMPANY, INC. (“THE COMPANY”, “WE”, “US” OR “OUR”) TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. REFERENCES IN THIS FORM 10-K, UNLESS ANOTHER DATE IS STATED, ARE TO DECEMBER 31, 2012.
Since our incorporation on October 14, 2010 in the state of Delaware we have been a development stage company. We began by offering a general array of real estate management services, which continued until January 31, 2013. We then redirected our real estate focus to seeking out properties which had obtained the necessary building permits but which needed finance to start construction. In addition, as of January 31, 2013 with our acquisition of ESMG Inc. we added an entertainment related business segment. Our performance can be significantly affected by changes in general economic conditions and, specifically, shifts in consumer confidence and spending. Additionally, our performance can be affected by competition. Management believes that, as both industries continue to consolidate, competition with respect to pricing will intensify. Such a heightened competitive pricing environment will make it increasingly important for us to successfully distinguish ourselves from competitors based on quality and superior service and content and on our operating efficiency. We are currently not aware of any other known material trends, demands, commitments, events or uncertainties that will have, or are reasonable likely to have, a material impact on our financial condition, operating performance, revenues and/or income, or results in our liquidity decreasing or increasing in any material way.
Going Concern
Our ability to continue as a going concern is dependent upon our ability to obtain the necessary financing to meet our obligations and repay our current and future liabilities when they become due until such time, if ever, that we are able to generate sufficient revenues to attain profitable operations. We have experienced losses and negative cash flows from operations since inception and, at December 31, 2013, we had a working capital deficit of $1,943,029 and an accumulated deficit of $3,691,313. The report of our independent registered public accounting firm on our financial statements for fiscal 2012 contained an explanatory paragraph regarding our ability to continue as a going concern. There can be no assurance that acceptable financing to fund our ongoing operations can be obtained on suitable terms, if at all. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. In that event, we may be forced to cease operations and our stockholders could lose their entire investment in our company.
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Results of Operations
For the year ended December 31, 2013, we generated gross revenues of $72,116 compared with revenues of $0 for the year ended December 31, 2012.
Our operating expenses for the year ended December 31, 2013 totaled $896,405, which included management compensation of $374,212; consultants fees of $ 239,500, legal and audit fees of $43,860 and all other operating costs of $239,500. The net operating loss was $868,412 for the year. By comparison, our operating expenses for the year ended December 31, 2012 totaled $5,000, which was entirely from stock issued to consultants, resulting in a net operating loss of $137,540.
For the year ended December 31, 2013, we incurred non-operating expenses totaling $2,817,901, including interest expense of $ 888,286, loss (net) on change in fair value of derivatives of $1,891,115 and a provision for loss on property development of $38,500. This resulted in a net loss for the year ended December 31, 2013 of $3,686,313, compared with a net loss of $5,000 for the year ended December 31, 2012.
For the period from inception (October 14, 2010) through December 31, 2013, we generated cumulative gross revenues of $72,116 or $27,993 after cost of sales. Our operating expenses for the same period cumulatively totaled $873,412, resulting in a cumulative loss from operations of $873,412. After deducting a total of $2,817,901 for cumulative non-operating expenses (including interest expense of $888,286, loss on change in fair value of derivatives and $38,500 reserve for loss on property development) the overall cumulative net loss from inception through December 31, 2013 totaled $3,691,313.
Our operating expenses consisted mainly of developing and rolling out our business plans and the cost of our convertible debt financing arrangements, as well as the cost of management, consultants and office operations.
Liquidity and Capital Resources
Our cash resources totaled $64,771 at December 31, 2013 (an increase from $0 at December 31, 2012). However, our total current assets at December 31, 2013 amounted to $181,325 against total current liabilities of $2,124,354. Accordingly, we need a new infusion of capital to sustain our operations from third-party sources.
We have had no off balance sheet arrangements since inception through December 31, 2013.
The Company has not generated sufficient revenue from its operations and needs to raise capital to meet the operating requirements over the next twelve months. The Company’s financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The report from the Company’s independent registered public accounting firm states that there is substantial doubt about the Company’s ability to continue as a going concern.
Plan of Operation for the Next 12 months
To help improve our current limited financial position, we plan to carefully seek out and secure third-party equity financing, both short-term and long-term, to both replace our current convertible debt financing and to provide a new and more stable source of capital. Our convertible debt financing to date has been expensive and highly dilutive and detrimental to our stock and needs to be replaced with less costly equity investment.
We intend to more carefully review investment in any future music artist so that we can more effectively manage our risk and downside. We view investment in a well packaged, well cast lower budget motion picture to be preferable than and investment in a higher risk one-off/unproven music artist.
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We have redirected our real estate focus to acquiring properties specifically for lease to legalized medical marijuana cultivation growers and to investment, potentially with joint ventures, in business associated with the legalized growing of medical marijuana.
We also intend to include potential strategic business partners and alliances as possible sources of financing, as well as traditional institutional and venture capital sources.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable for smaller reporting companies.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PRIMCO MANAGEMENT INC.
(A Development Stage Company)
Index to
Financial Statements
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Report of Independent Registered Public Accounting Firm (Restated) |
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Consolidated Balance Sheets as of December 31, 2013 and 2012 (Restated) |
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Consolidated Statements of Operations for the years ended December 31, 2013 and 2012 (Restated) |
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Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2012 (Restated) |
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Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012 (Restated) |
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Notes to Financial Statements (Restated) |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and shareholders of
Primco Management, Inc.
Century City, California
I have audited the accompanying consolidated balance sheets of Primco Management, Inc. and its subsidiaries (the “Company”) as of December 31, 2013 and 2012 and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years ended December 31, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these consolidated financial statements based on my audits.
I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were I engaged to perform, an audit of its internal control over financial reporting. my audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, I express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2013 and 2012 and the consolidated results of its operations and its cash flows for the years ended December 31, 2013 and 2012, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 of the accompanying consolidated financial statements, the Company has no revenues, has incurred losses since inception, and has a negative working capital balance at December 31, 2013, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to this matter are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Terry L. Johnson, CPA
Casselberry, Florida
April 15, 2014
Restated May 15, 2014
15
Primco Management Inc.
(A Development Stage Company)
Consolidated Balance Sheets
| (Restated) | (Restated) |
| December 31, | December 31, |
| 2013 | 2012 |
ASSETS |
|
|
Current Assets: |
|
|
Cash and cash equivalents | $ 64,771 | $ - |
Accounts receivable, net | 26,026 | - |
Inventory, net | 70,528 | - |
Advances to related party | - | - |
Intellectual property rights: Music, net of impairment | - | - |
Intellectual property rights: Motion Picture | - | - |
Prepaids | 20,000 | - |
Total Current Assets | 181,325 | - |
|
|
|
Property and equipment, net | 7,885 | - |
|
|
|
Other Assets: |
|
|
Music catalog | - | - |
Lease deposit | 8,714 | - |
Total Other Assets | 8,714 | - |
Total Assets | $ 197,924 | $ - |
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
Current Liabilities: |
|
|
Accounts payable | $ 97,979 | $ - |
Accrued liabilities | 301,175 | - |
Due to related party | 13,928 | 25,750 |
Short-term notes payable | 713,000 | 1,025,000 |
Short-term convertible notes payable, net of discounts | 711,201 | - |
Derivative liability | 287,071 | - |
Total Current Liabilities | 2,124,354 | 1,050,750 |
Total Liabilities | 2,124,354 | 1,050,750 |
|
|
|
Stockholders' Equity: |
|
|
Preferred Stock, $0.00001 par value, 10,000,000 shares authorized, |
|
|
7,000,000 and -0- shares issued and outstanding, respectively | 70 | - |
Common Stock, $0.00001 par value, 4,990,000,000 shares authorized |
|
|
1,873,002,181 and 5,000,000 shares issued and outstanding, respectively | 18,730 | 50 |
Additional paid in capital | 1,746,083 | (1,045,800) |
Accumulated deficit during development stage | (3,691,313) | (5,000) |
Total Stockholders' Equity (Deficit) | (1,926,430) | (1,050,750) |
|
|
|
Total Liabilities and Stockholders' Equity | $ 197,924 | $ - |
The accompanying notes are an integral part of these financial statements
|
|
|
| From inception | |
|
|
|
| (October 14, | |
| For the Year Ended | 2010) through | |||
| December 31, | December 31, | |||
| 2013 |
| 2012 | 2013 | |
|
|
|
|
| |
Revenues | $ 72,116 |
| $ - | $ 72,116 | |
Costs of services | 44,123 |
| - | 44,123 | |
|
|
|
|
| |
Gross Margin | 27,993 |
| - | 27,993 | |
|
|
|
|
| |
Operating Expenses: |
|
|
|
| |
Consulting | 239,500 |
| - | 239,500 | |
General and administrative | 238,833 |
| 5,000 | 243,833 | |
Management salaries | 374,212 |
| - | 374,212 | |
Professional fees | 43,860 |
| - | 43,860 | |
Total Operating Expenses | 896,405 |
| 5,000 | 901,405 | |
|
|
|
|
| |
Loss from Operations | (868,412) |
| (5,000) | (873,412) | |
|
|
|
|
| |
Other Expenses: |
|
|
|
| |
Interest expense | 888,286 |
| - | 888,286 | |
Interest expense - derivative | 1,891,115 |
| - | 1,891,115 | |
Provision for loss on property development | 38,500 |
| - | 38,500 | |
Total Other Expense | 2,817,901 |
| - | 2,817,901 | |
|
|
|
|
| |
Net Loss Before Income Taxes | (3,686,313) |
| (5,000) | (3,691,313) | |
|
|
|
|
| |
Provision for Income Taxes | - |
| - | - | |
|
|
|
|
| |
Net Loss | $ (3,686.313) |
| $ (5,000) | $ (3,691,313) | |
|
|
|
|
| |
Net Loss per Share - Basic and Diluted | $ (0.00) |
| $ (0.00) |
| |
|
|
|
|
| |
Weighted average number of shares |
|
|
|
| |
outstanding - Basic and Diluted | 1,881,476,718 |
| 5,000,000 |
| |
The accompanying notes are an integral part of these financial statements
|
|
|
|
|
| Accumulated |
|
|
|
|
|
|
| Deficit |
|
|
|
|
|
| Additional | During | Stockholders' |
| Preferred Stock | Common Stock | Paid in | Development | Equity | ||
| Shares | Amount | Shares | Amount | Capital | Stage | (Deficit) |
Balance at October 14, 2010 | - | $ - | - | $ - | $ - | $ - | $ - |
|
|
|
|
|
|
|
|
Balance, December 31, 2010 | - | - | - | - | - | - | - |
|
|
|
|
|
|
|
|
Balance, December 31, 2011 | - | - | - | - | - | - | - |
|
|
|
|
|
|
|
|
Acquisition of music and picture rights | - | - | - | - | (1,050,750) | - | (1,050,750) |
Stock issued for services | - | - | 5,000,000 | 50 | 4,950 | - | 5,000 |
Net loss | - | - | - | - | - | (5,000) | (5,000) |
Balance, December 31, 2012 | - | - | 5,000,000 | 50 | (1,045,800) | (5,000) | (1,050,750) |
|
|
|
|
|
|
|
|
Recapitalization |
|
| 179,912,000 | 1,799 | (225,076) | - | (223,277) |
Issuance of stock in part consideration |
|
|
|
|
|
|
|
for purchase of Top Sail Productions, LLC | - | - | 5,000,000 | 50 | 14,950 | - | 15,000 |
Issuance of stock for D&B Music acquisition | 7,000,000 | 70 | 20,000,000 | 200 | (357,111) | - | (356,841) |
Issuance of stock to settle convertible debt | - | - | 1,663,090,181 | 16,631 | 808,009 | - | 824,640 |
Derivative liability adjustment | - | - | - | - | 2,551,111 | - | 2,551,111 |
Net loss | - | - | - | - | - | (3,686,313) | (3,686,313) |
Balance, December 31, 2013 | 7,000,000 | $ 70 | 1,873,002,181 | $ 18,730 | $ 1,746,083 | $ (3,691,313) | $ (1,926,430) |
The accompanying notes are an integral part of the financial statements.
|
|
|
| From inception |
|
|
|
| (October 14, |
| For the Years Ended | 2010) through | ||
| December 31, | December 31, | ||
| 2013 |
| 2012 | 2013 |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
Net Income (Loss) for the Period | $ (3,686,313) |
| $ (5,000) | $ (3,691,313) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
provided by operating activities: |
|
|
|
|
Common stock issued for services | - |
| 5,000 | 5,000 |
Depreciation and amortization | 1,527 |
| - | 1,527 |
Interest expense- derivative | 287,162 |
| - | 287,162 |
Changes in Operating Assets and Liabilities |
|
|
|
|
Decrease (Increase) in accounts receivables | (26,026) |
| - | (26,026) |
Increase in inventory | (70,528) |
| - | (70,528) |
Increase in prepaid expenses | (28,714) |
| - | (28,714) |
Increase in advances to related party | 13,928 |
| - | 13,928 |
Increase in accounts payable | 97,979 |
| - | 97,979 |
Increase in accrued liabilities | 291,175 |
| - | 291,175 |
Discount on short-term convertible debt | (128,463) |
|
| (128,463) |
Net Cash Proceeds (Used) in Operating Activities | (3,248,273) |
| - | (3,248,273) |
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
Purchase of property and equipment | (9,412) |
| - | (9,412) |
Net Cash Used In Investing Activities | (9,412) |
| - | (9,412) |
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from convertible debt | 1,552,664 |
| - | 1,552,664 |
Share capital | 18,051 |
| - | 18,051 |
Additional paid in capital | 1,751,741 |
| - | 1,751,741 |
Net Cash Provided by Financing Activities | 3,322,456 |
| - | 3,322,456 |
|
|
|
|
|
Net (Decrease) Increase in Cash | 64,771 |
| - | 64,771 |
|
|
|
|
|
Cash at Beginning of Period | - |
| - | - |
|
|
|
|
|
Cash at End of Period | $ 64,771 |
| $ - | 64,771 |
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
| |
Cash paid during period: |
|
|
|
|
Interest | $ - |
| $ - | $ - |
Franchise and Income Taxes | $ - |
| $ - | $ - |
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
| |
|
|
|
|
|
Issuance of short term note payable to purchase intellectual property |
|
|
| |
rights: Music | $ - |
| $ - | $ 1,442,402 |
Issuance of short term note payable to purchase intellectual property |
|
|
| |
rights: Motion Picture | $ - |
| $ - | $ 315,000 |
Issuance of short term note payable by Southridge for S-1 legal fees | $ 20,000 |
| $ - | $ 20,000 |
The accompanying notes are an integral part of the financial statements.
Notes to the Consolidated Financial Statements
NOTE 1 – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company records research and development expense as incurred.
Recent accounting pronouncements
NOTE 3 - ACCOUNTS RECEIVABLE AND INVENTORY
NOTE 4 – REVERSE MERGER WITH ESMG, INC.
Other various Hip Hop catalog artists
Intellectual Property - Picture
NOTE 6 – ACQUISITION OF D&B MUSIC, INC.
The cost of $357,111 represents:
NOTE 7 – FIXED ASSETS: FURNITURE AND EQUIPMENT
Property and equipment consists of the following at December 31, 2013:
| December 31, 2013 |
| ||||
Property and equipment, net |
|
| $ 9,412 |
| ||
Less: accumulated depreciation |
|
| 1,527 |
| ||
Property and equipment, net |
|
| $ 7,885 |
| ||
Depreciation expense for the three months ended March 31, 2014 was $728.
Accrued liabilities at December 31, 2013 represent the following:
Accrued interest: D & B Music, Inc. (See Note 6) | $134,805 |
Other accrued interest on short-term debt | 40,658 |
Accrued management compensation due CEO and CFO | 125,712 |
Total accrued liabilities | $301,175 |
NOTE 9 – DUE TO AFFILIATED COMPANY
NOTE 10 – COMMITMENTS & CONTINGENCIES
Minimum future rental payments under the agreement are as follows:
Consulting agreement with Chuck Gullo
| Year ended December 31, 2013 | Year Ended December 31, 2012 | Year Ended December 31, 2011 | Inception to Year Ended December 31, 2010 |
Net loss for period | $(4,048,486) | $(137,540) | $(48,744) | $(12,000) |
Potential tax benefit at statutory rates | $(1,376,485) | $(46,764) | $(16,473) | $(4,080) |
Change in valuation allowance | 1,376,485 | 46,764 | 16,473 | 4,080 |
Provision for income taxes | $0 | $0 | $0 | $0 |
| 2013 | 2012 |
Deferred tax asset | $1,443,802 | $67,417 |
Valuation allowance | (1,443,802) | (67,417) |
Net deferred tax asset | $0 | $0 |
NOTE 12 – RELATED PARTY TRANSACTIONS
Acquisition of Bruce-E-Bee artist recording contract
Short-term debt at December 31, 2013 represents the following:
Balance of Promissory Note due GGAG, Inc. | 200,000 |
Balance of Promissory Note due Pegasus Group, Inc. | 228,000 |
Promissory Note due Southridge Partners II, LLC | 20,000 |
Balance of Promissory Note due Gorilla Pictures | 265,000 |
Total Notes Due | $713,000 |
NOTE 14 - SHORT-TERM CONVERTIBLE DEBT AND DERIVATIVE LIABILITY
Convertible Notes – Asher Enterprises
Convertible Notes – Magna Group, LLC
Convertible Notes – Redwood Management LLC
Convertible Note – Redwood Fund II, LLC
Convertible Notes – WHC Capital, LLC (1)
Convertible Note – WHC Capital, LLC (2)
Convertible Note – Hanover Holdings I, LLC
Convertible Note – Anything Media
Convertible Note – Fourth Street Funding, LLC
Short –term convertible debt at December 31, 2013 represents the following:
Convertible Debt Due: | Original Principal | Reduction through conversion to stock | Balance at December 31, 2013 | Unamortized Discount | Convertible Debt, net |
Asher Enterprises, Inc. | $ 220,500 | $ (95,500) | $125,000 | $ 0 | $ 125,000 |
Magna Group, Inc/Hanover Holdings | 222,500 | (177,500) | 45,000 | (34,619) | 10,381 |
Redwood Management, LLC | 200,000 | (200,000) | 0 | 0 | - |
Redwood Fund II, LLC | 150,000 | (30,336) | 119,664 | (24,401) | 95,263 |
WHC Capital, LLC | 800,000 | (300,000) | 500,000 | (69,443) | 430,557 |
Fourth Street Fund LP | 50,000 | 0 | 50,000 | 0 | 50,000 |
Total | $1,678,000 | $(802,336) | $839,664 | $(128,463) | $711,201 |
Nature of Derivative Liability
| Derivative liability |
Magna Group, Inc. | $45,166 |
Redwood Fund II, LLC | 145,773 |
Southridge Partners II, LLC | 25,998 |
WHC Capital, LLC | 70,134 |
| $287,071 |
Annual dividend yield | 0 |
Expected life (years) of | 0.08 - 1.43 |
Risk-free interest rate | 0.02 - 0.17% |
Expected volatility | 170.8 - 400.9% |
NOTE 15 – STOCKHOLDERS’ EQUITY
- There are Ten Million (10,000,000) Series A Preferred Shares with a par value of $0.001.
- These shares are not entitled to receive any cash dividends.
Joint Venture Agreement with CanMed Ventures, Inc.
Legal Status of Marijuana Industry in Canada
Asset purchase agreement with Susie Q and Puget Power Co LLC
Conditional Leases in the Los Angeles area
Convertible Note – Elegant Funding, Inc.
| December 31, 2013 | ||||
| Originally |
|
|
|
|
| Reported |
| Restated |
| Difference |
ASSETS |
|
|
|
| |
Current Assets: |
|
|
|
|
|
Cash and cash equivalents | $ 64,771 |
| $ 64,771 |
| $ - |
Accounts receivable, net | 26,026 |
| 26,026 |
| - |
Inventory, net | 70,528 |
| 70,528 |
| - |
Advances to related party | - |
| - |
| - |
Intellectual property rights: Music, net of impairment | 688,945 |
| - |
| 688,945 |
Intellectual property rights: Motion Picture | 315,000 |
| - |
| 315,000 |
Prepaids | 135,000 |
| 20,000 |
| 115,000 |
Total Current Assets | 1,300,270 |
| 181,325 |
| 1,118,945 |
|
|
|
|
|
|
Property and equipment, net | 7,885 |
| 7,885 |
| - |
|
|
|
|
|
|
Other Assets: |
|
|
|
|
|
Music catalog | 357,111 |
| - |
| 357,111 |
Lease deposit | 8,714 |
| 8,714 |
| - |
Total Other Assets | 365,825 |
| 8,714 |
| 357,111 |
|
|
|
|
|
|
Total Assets | $1,673,980 |
| $ 197,924 |
| $1,476,056 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
| |
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
Accounts payable | $ 97,979 |
| $ 97,979 |
| $ - |
Accrued liabilities | 301,175 |
| 301,175 |
| - |
Due to related party | 13,928 |
| 13,928 |
| - |
Short-term notes payable | 793,000 |
| 713,000 |
| 80,000 |
Short-term convertible notes payable, net of discounts | 746,201 |
| 711,201 |
| 35,000 |
Derivative liability | 287,071 |
| 287,071 |
| - |
Total Current Liabilities | 2,239,354 |
| 2,124,354 |
| 115,000 |
|
|
|
|
|
|
Total Liabilities | 2,239,354 |
| 2,124,354 |
| 115,000 |
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
|
Preferred Stock, $0.00001 par value, 10,000,000 shares authorized, |
|
|
|
| |
7,000,000 shares issued and outstanding, respectively | 70 |
| 70 |
| - |
Common Stock, $0.00001 par value, 4,990,000,000 shares authorized |
|
|
|
| |
4,979,119,725 and 1,983,002,181 shares issued and outstanding, respectively | 19,830 |
| 18,730 |
| 1,100 |
Stock subscription payable | - |
| - |
| - |
Additional paid in capital | 3,661,496 |
| 1,746,083 |
| 1,915,413 |
Accumulated deficit during development stage | (4,246,770) |
| (3,691,313) |
| (555,457) |
Total Stockholders' Equity (Deficit) | (565,374) |
| (1,926,430) |
| 1,361,056 |
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity | $1,673,980 |
| $ 197,924 |
| $ 1,476,056 |
| For the Year ended |
| From Inception (Oct 14, 2010) | ||||
| December 31, 2013 |
| through December 31, 2013 | ||||
| Originally |
|
| Originally |
|
| |
| Reported | Restated | Difference | Reported | Restated | Difference | |
|
|
|
|
|
|
| |
Revenues | $ 72,116 | $ 72,116 | $ - | $ 72,116 | $ 72,116 | $ - | |
Costs of services | 44,123 | 44,123 | - | 44,123 | 44,123 | - | |
|
|
|
|
|
|
| |
Gross Margin | 27,993 | 27,993 | - | 27,993 | 27,993 | - | |
|
|
|
|
|
|
| |
Operating Expenses: |
|
|
|
|
|
| |
General and administrative | 805,121 | 896,405 | (91,284) | 810,121 | 901,405 | (91,284) | |
Reserve for losses on artists contracts | 453,457 | - | 453,457 | 453,457 | - | 453,457 | |
Total Operating Expenses | 1,258,578 | 896,405 | 362,173 | 1,263,578 | 901,405 | 362,173 | |
|
|
|
|
|
|
| |
Loss from Operations | (1,230,585) | (868,412) | (362,173) | (1,235,585) | (873,412) | 362,173 | |
|
|
|
|
|
|
| |
Other Expenses: |
|
|
|
|
|
| |
Interest expense | 888,286 | 888,286 | - | 888,286 | 888,286 | - | |
Interest expense - derivative | 1,891,115 | 1,891,115 | - | 1,891,115 | 1,891,115 | - | |
Provision for loss on property develop | 38,500 | 38,500 | - | 38,500 | 38,500 | - | |
Total Other Expense | 2,817,901 | 2,817,901 | - | 2,817,901 | 2,817,901 | - | |
|
|
|
|
|
|
| |
Net Loss Before Income Taxes | (4,048,486) | (3,686,313) | (362,173) | (4,053,486) | (3,691,313) | (362,173) | |
|
|
|
|
|
|
| |
Provision for Income Taxes | - | - | - | - | - | - | |
|
|
|
|
|
|
| |
Net Loss | $(4,048,486) | $ (3,686,313) | $(362,173) | $(4,053,486) | $(3,691,313) | $(362,173) | |
|
|
|
|
|
|
| |
Net Loss per Share - Basic and Diluted | $ (0.00) | $ (0.00) | $ (0.00) |
|
|
| |
|
|
|
|
|
|
| |
Weighted average number of shares |
|
|
|
|
|
| |
outstanding - Basic and Diluted | 1,983,002,181 | 1,881,476,718 | 101,525,463 |
|
|
| |
| For the Year Ended |
| From Inception (Oct 14, 2010) | |||||
| December 31, 2013 |
| through December 31, 2013 | |||||
| Originally |
|
| Originally |
|
| ||
| Reported | Restated | Difference | Reported | Restated | Difference | ||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
| ||
Net Income (Loss) for the Period | (4,048,486) | (3,686,313) | (362,173) | (4,053,486) | (3,691,313) | (362,173) | ||
Adjustments to reconcile net loss to net cash |
|
| - |
|
|
| ||
provided by operating activities: |
|
| - |
|
|
| ||
Common stock issued for services | - | - | - | 5,000 | 5,000 | - | ||
Depreciation and amortization | 1,527 | 1,527 | - | 1,527 | 1,527 | - | ||
Changes in Operating Assets and Liabilities |
|
|
|
|
|
| ||
Decrease (Increase) in accounts receivables | (26,026) | (26,026) | - | (26,026) | (26,026) | - | ||
Increase in inventory | (70,528) | (70,528) | - | (70,528) | (70,528) | - | ||
Increase in prepaid expenses | (143,714) | (28,714) | (115,000) | (143,714) | (28,714) | (115,000) | ||
Increase in advances to related party | 13,928 | 13,928 | - | 13,928 | 13,928 | - | ||
Increase in accounts payable | 97,979 | 97,979 | - | 97,979 | 97,979 | - | ||
Increase in accrued liabilities | 291,175 | 291,175 | - | 291,175 | 291,175 | - | ||
Discount on short-term convertible debt | (128,463) | (128,463) | - | (128,463) | (128,463) | - | ||
Change in fair value of derivative liability | 287,162 | 287162 | - | 287,162 | 287,162 | - | ||
Net Cash Proceeds (Used) in Operating Activities | (3,725,446) | (3,248,273) | (477,173) | (3,725,446) | (3,248,273) | (477,173) | ||
|
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
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Investments in music rights and artists | (1,046,056) | - | (1,046,056) | (1,046,056) | - | (1,046,056) | ||
Investments in movie rights and co-productions | (315,000) | - | (315,000) | (315,000) | - | (315,000) | ||
Purchase of property and equipment | (9,412) | (9,412) | - | (9,412) | (9,412) | - | ||
Net Cash Used In Investing Activities | (1,370,468) | (9,412) | (1,361,056) | (1,370,468) | (9,412) | (1,361,056) | ||
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Short term debt | 1,667,664 | 1,552,664 | 115,000 | 1,667,664 | 1,552,664 | 115,000 | ||
Share capital | 18,051 | 18,051 | - | 18,051 | 18,051 | - | ||
Additional paid in capital | 3,474,970 | 1,751,741 | 1,723,229 | 3,474,970 | 1,751,741 | 1,723,229 | ||
Net Cash Provided by Financing Activities | 5,160,685 | 3,322,456 | 1,838,229 | 5,160,685 | 3,322,456 | 1,838,229 | ||
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Net (Decrease) Increase in Cash | $ 64,771 | $ 64,771 | $ - | $ 64,771 | $ 64,771 | $ - | ||
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Cash at Beginning of Period | $ - | $ - | $ - | $ - | $ - | $ - | ||
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Cash at End of Period | $ 64,771 | $ 64,771 | $ - | $ 64,771 | $ 64,771 | $ - | ||
The accompanying notes are an integral part of these financial statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Management’s Annual Report on Internal Control over Financial Reporting
Evaluation of Changes in Internal Control over Financial Reporting
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
February 7, 2013 to February 14, 2014
Business Experience of Officers and Directors
Mr. David Michery, President, Chief Executive Officer and Director (February 7, 2013 to present)
Steven John Corso , Chief Financial Officer ( February 18, 2014 to Present)
Mr. Corso has been working as a self-employed SEC consultant, attorney, and accountant/ auditor since January of 2000. He received a JD from George Washington University in 1989. He received an MBA in accounting taxation from New York University in 1985, and received a BA in economics and finance from Cornell University in 1984.
Non-Qualified and Incentive Stock Option Plans
The Company does not currently have any stock option plans.
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Section 16(a). Beneficial Ownership Reporting Compliance
To the Company’s knowledge, no director, officer or beneficial owner of more than ten percent of any class of equity securities of the registrant failed to file on a timely basis reports required by Section 16(a) of the Exchange Act during the year ended December 31, 2013.
Code of Ethics Policy
We adopted a Code of Ethics policy effective February 7, 2013 that applies to our principal executive officer, principal financial officer and persons performing similar functions.
Corporate Governance
There have been no changes in any state law or other procedures by which security holders may recommend nominees to our board of directors, and we have no nominating committee for this purpose. We first established an audit committee on February 7, 2013 and we had an audit committee financial expert with the appointment of Alan J. Bailey on February 7, 2013 until February 14, 2014 as our CFO, Secretary and Director. Subsequent to Mr. Bailey’s resignation we continue to have an audit financial export on board with the appointment of Steven John Corso as CFO on February 18, 2014. We believe that our business affairs are simple, any such committees are excessive and beyond the scope of our current business and needs.
Family Relationships
None
Change-In-Control Arrangements
There are currently two executed employment agreements with our officers or directors which are reference in footnote 10 in our financial statements . There are no compensation plans or arrangements, including payments to be made by us, with respect to our officers, directors or consultants that would result from the resignation, retirement or any other termination of any of our directors, officers or consultants. There are no arrangements for our directors, officers, employees or consultants that would result from a change-in-control.
Involvement in Certain Legal Proceedings
None of our directors, executive officers and control persons have been involved in any of the following events during the past ten years:
a.
Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time,
b.
Any conviction in a criminal proceeding or being subject to any pending criminal proceeding (excluding traffic violations and other minor offenses);
c.
Being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; or
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d.
Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
ITEM 11. EXECUTIVE COMPENSATION
We do not have any standard arrangements by which directors are compensated for any services provided as a director. No cash has been paid to the directors in their capacity as such.
SUMMARY COMPENSATION TABLE
The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our principal executive officers during the years ended December 31, 2013 and December 31, 2012.
Summary Compensation Table |
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Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) |
David Michery, CEO and Director | 2013 2012
| 240,000 - | - -
| - -
| - -
| - -
| - -
| - -
| 240,000 - |
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Alan Bailey, CFO and Secretary | 2013 2012 | 120,000 - | - - | - - | - - | - - | - - | - - | 120,000 - |
(1)
David Michery: age 47: President, CEO, Director: February 7, 2013 to present.
(2)
Alan J. Bailey: age 66: CFO, Secretary, Director: February 7, 2013 to February 14, 2014.
Employment Agreements
On February 7, 2013, the Company executed an employment agreement with its CEO, David Michery and its CFO, Alan Bailey. The employment agreement with Mr. Michery is for two years with an annual salary of $240,000 with no bonus or stock options. The employment agreement with Mr. Bailey is for two years with an annual salary of $120,000 with no bonus or stock options. As of December 31, 2013, the Company had an accrued salary liability to Mr. Michery in the amount of $83,808 and an accrued salary liability to Mr. Bailey in the amount of $41,904. In the year ended December 31, 2013, the Company actually paid $130,000 in cash payments to Mr. Michery pursuant to his salary agreement. In the year ended December 31, 2013, the Company actually paid $77,500 in cash payments to Mr. Bailey pursuant to his salary agreement.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth, as of April 15, 2014, the number and percentage of outstanding shares of the registrant’s common stock owned by (i) each person known to us to beneficially own more than 5% of its outstanding common stock, (ii) each director, (iii) each named executive officer and significant employee, and (iv) all officers and directors as a group.
Name and Address | Number and Class of Shares | Precentage of Class Owned (1) | Percentage of Outstanding Voting Shares | |||
David Michery | 135,880,000 common | 2.81% |
| 1.15% | ||
6725 West Sunset Blvd | 7,000,000 preferred | 100.00% |
| 59.14% | ||
Suite 420 |
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Hollywood, CA 90028 |
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Steven John Corso | 0 common |
| 0% |
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6725 West Sunset Blvd |
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Suite 420 |
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Hollywood, CA 90028 |
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Directors/ Officers as a group: | 135,880,000 common | 2.81% |
| 1.15% | ||
Two (2) persons | 7,000,000 preferred | 100.00% |
| 59.14% | ||
Securities authorized for issuance under equity compensation plans.
We have no equity compensation plans.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Acquisition of Bruce-E-Bee artist recording contract
In 2012, the Company reported the following related party transactions at that time:
Acquisition, through merger, of D & B Music, Inc.
Acquisition of Bruce-E-Bee artist recording contract
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) List of Financial statements included in Part II hereof
Consolidated Balance Sheets, December 31, 2013 and 2012
Consolidated Statements of Operations for the years ended December 31, 2013 and 2012
Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2013 and 2012
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012
Notes to the Financial Statements
(a)(2) List of Financial Statement schedules included in Part IV hereof: None.
The following exhibits are included herewith:
Exhibit No. | Description |
31 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32 | Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Taxonomy Extension Schema Document |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document |
NO. | DESCRIPTION | FILED WITH | DATE FILED |
3.1 | Articles of Incorporation | Form S-1 | March 28, 2011 |
3.2 | Bylaws | Form S-1 | March 28, 2011 |
10 | New Visions Agreement | Form S-1/A | August 1, 2011 |
14.1 | Code of Ethics | Form 8-K | February 20, 2013 |
99.1 | Audit Committee Charter | Form 8-K | February 20, 2013 |
99.2 | Insider Trading Policy | Form 8-K | February 20, 2013 |
99.3 | Memorandum of Financial and Internal Control Policies and Procedures | Form 8-K | February 20, 2013 |
/s/David Michery |
| CEO/ Director |
| September 30 , 2014 |
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/s/Steven John Corso |
| CFO |
| September 30 , 2014 |