U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
_X_ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE YEAR ENDED DECEMBER 31, 2008
___ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to _______________
Commission File Number 333-156235
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BETA MUSIC GROUP, INC.
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(Name of small business issuer in its charter)
Florida 26-0582871
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
150 East Angeleno, Suite 1426, Burbank California 91502
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(Address of principal executive offices) Zip Code
(818) 539-6507
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(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation 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 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] 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]
The aggregate market value of the voting stock and non-voting common equity
(based on the closing price on that date) held by non-affiliates of the
registrant as of March 2, 2009 was approximately $7,962.
At March 2, 2009 the issuer had outstanding 10,189,710 shares of Common Stock,
par value $.01 per share.
PART I
FORWARD-LOOKING INFORMATION
The statements contained in this Annual Report on Form 10-K that are not
historical fact are forward-looking statements (as such term is defined in the
Private Securities Litigation Reform Act of 1995), within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The forward-looking statements contained
herein are based on current expectations that involve a number of risks and
uncertainties. These statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "will," "should," or
"anticipates," or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
The Company wishes to caution the reader that its forward-looking statements
that are not historical facts are only predictions. No assurances can be given
that the future results indicated, whether expressed or implied, will be
achieved. While sometimes presented with numerical specificity, these
projections and other forward-looking statements are based upon a variety of
assumptions relating to the business of the Company, which, although considered
reasonable by the Company, may not be realized. Because of the number and range
of assumptions underlying the Company's projections and forward-looking
statements, many of which are subject to significant uncertainties and
contingencies that are beyond the reasonable control of the Company, some of the
assumptions inevitably will not materialize, and unanticipated events and
circumstances may occur subsequent to the date of this report. These
forward-looking statements are based on current expectations and the Company
assumes no obligation to update this information. Therefore, the actual
experience of the Company and the results achieved during the period covered by
any particular projections or forward-looking statements may differ
substantially from those projected. Consequently, the inclusion of projections
and other forward-looking statements should not be regarded as a representation
by the Company or any other person that these estimates and projections will be
realized. The Company's actual results may vary materially. There can be no
assurance that any of these expectations will be realized or that any of the
forward-looking statements contained herein will prove to be accurate.
2
ITEM 1. DESCRIPTION OF BUSINESS.
BUSINESS DEVELOPMENT
Beta Music Group Inc. ("BETA", the "Company" or the "Registrant") is a Florida
corporation incorporated in the state of Florida on July 5, 2006 under the name
Pop Starz Productions, Inc. On November 15, 2007 we changed our name to The Next
Pop Star Inc. Our original business endeavor was to produce live entertainment
competitions (in installments or episodes) to be taped and/or filmed for
distribution by television and/or internet means. We were not successful and
decided to refocus our operations. In conjunction with this change on October
23, 2008, we changed our name to Beta Music Group, Inc.
On August 21, 2008, the Company formed a wholly owned subsidiary, Famous Records
Corp., ("Famous Records'). Famous Records is a Florida corporation.
The Registrant is currently a holding company. All of our operations are
currently conducted through our subsidiary, Famous Records. Famous Records is a
development stage company that is engaged in the business of "branding"
recording artists.
PRODUCT LINE
Identifying Emerging Artists
Our objective is to establish contact with new artists who write their own songs
("singer-songwriters") and produce their own work. We will also independently
search for new and existing singer-songwriters to market and produce and will
take advantage of the increasing industry consolidation that will leave
established artists without contracts. We will pursue these artists within
established sales and fan bases. We may sign these artists to exclusive services
agreements or license the artists' products for exploitation in domestic and
foreign markets. A primary element of the Company with respect to signing new
artists is based upon an exclusive agreement with the artist that encompasses a
marketing approach of the whole persona, with revenues to the artist as well as
the Company from multiple facets of the artists in the marketplace.
CORPORATE PROMOTIONAL PREMIUMS
We intend to produce corporate promotions. Instead of providing "disposable
premiums" such as T-shirts and golf balls, we will provide music oriented
promotions that fully reflect the brand's positioning and values.
COMPILATIONS IN CD AND DVD FORMAT (REGULAR AND REMIXED)
We intend to produce and sell music CD and DVD compilations of content derived
from established labels with catalogues of popular songs. These would include
Billboard, traditional music, holiday and compilations that can also include
videos. These compilations will be different from more traditional music
compilations because there will be bonus remix tracks by up and coming
DJ/producers. The packaging will be high-quality art: energetic and powerful.
SOUNDTRACKS
We plan to produce and sell movie soundtracks and videogame soundtracks. In our
integrated media marketing model, the soundtrack will be used to market the
music contained in the soundtrack and the brands promoting the movie as well as
the artist(s).
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PUBLISHING
We plan to place musical compositions in media products such as video games,
television and online commercials, other musical works (such as authorized
sampling), films, home video, mobile phone ringtones, Internet and wireless
streaming and downloads by marketing and promoting our music catalog to
producers of these media in new and original ways.
DIGITAL AND PHYSICAL DISTRIBUTION
We will distribute our product through our own website which will have
e-commerce capabilities and by agreement digitally through INgrooves. Ingrooves
is an online and mobile distributor, marketing and licensing organization with
numerous top retailers, including iTunes, Napster, Rhapsody, Amazon, Starbucks
and many others, and other leading mobile communications carriers, plus Groove
Mobile, Boost Mobile, Jamba/Jamster and others.
o INgrooves will facilitate download of artists' music.
o Distribution in the retail market
o Video Service Distribution ; and
o Video and Ring tone distribution
In consideration for the services to be provided by INgrooves, we will receive
75% - 85% of the revenues generated from these services. The term of the
Agreement shall be for one (1) year (the "Initial Term"). The Initial Term shall
automatically renew for successive one (1) year periods (the "Renewal Term").
After the Initial Term, either Party may terminate the Agreement upon thirty
(30) days written notice to the other.
We believe that this distribution method is a vehicle for new artists to gain
exposure in the most cost effective manner.
COMPETITIVE BUSINESS CONDITIONS AND THE ISSUER'S COMPETITIVE POSITION IN THE
INDUSTRY AND METHODS OF COMPETITION
The industry in which our company operates is very competitive. Musical talent
exists throughout the country. We have limited resources to conduct auditions.
Even if we identify talented individuals, we face competition from large record
labels with significantly greater financial resources, technical, promotional,
marketing resources and greater name recognition. This will enable these
competitors to attract new artists and most likely, compete more effectively on
a cost basis. We believe our approach of marketing the entire persona will give
us an advantage over others in the industry. Our Management believes that
relationship building is key to the success of our business model. Our
management team consists of professionals with years of experience in the
entertainment and media industry including marketing, distribution, finance
management, information technology, operations management, international
business, and human resource management.
NUMBER OF FULL TIME EMPLOYEES
We currently have two part time employees, and no full time employees.
4
EMPLOYMENT AND DIRECTOR AGREEMENTS
In October 2008, we entered into an employment agreement with Michelle Tucker,
whereby she is to receive compensation in the amount of $3,000 per month for
serving as the Company's President. Michelle Tucker also receives 5,000 shares
of common stock per month for serving as the Chief Financial Officer to the
Company and an additional 5,000 shares per month for serving as a Director. If
she serves as a Chairman of any committee, she is to receive an additional 2,500
shares, and if she serves on any committees, she is to receive 1,250 shares per
month served.
Effective October 1, 2008, the Company, through its subsidiary Famous Records
Corp., entered into an employment agreement and a Director agreement with
Jeffery Collins to act as President of Famous Records and as a member of the
Board of Directors of Famous Records. Mr. Collins is to receive compensation in
the amount of $4,000 per month for his services as President of Famous Records.
Additionally, in relation to his employment agreement, Mr. Collins was issued
1,230,942 shares of the Registrant's common stock. . The shares are subject to
forfeiture on a prorate basis if Mr. Collins does not fulfill the three year
term of his employment agreement. Mr. Collins is to receive 5,000 shares of
Famous Records common stock per month for being a member of the Board of
Directors of Famous Records. Additionally, if he should serve as Chairman of any
committee, he shall receive 2,500 Famous shares per month, and for service on
any other committee he shall receive an additional 1,250 Famous shares per
month.
In January and May 2008, we entered into agreements with Francisco Del and
Marshall Friedman to serve as corporate directors. The agreements provide in
part for each Director to receive 5,000 shares of our common stock for each
month that they serve as a Director. If the Director serves as a Chairman of any
committee, he is to receive an additional 2,500 shares per month, and if he
serves on any committee, he is to receive an additional 1,250 shares per month.
PRESSING AND DISTRIBUTION AGREEMENTS
Through December 31, 2008, we have entered into pressing and distribution
agreements with various production companies including 1-A Chord Records, 360
Muzic Group, Inc., Bro West Records, CEO Records, LLC, SD Entertainment, Get
Money Enterprises, KWA, Unyted Records, and SoberCutie.com LLC. Under these
agreements the various production companies will supply us with a "Master
Recording" from an artist that has signed with the production company. These
agreements will generally provide that we will pay for labels, pressings and CDs
including shipping, artwork and printing as well as the payment of any
mechanical & copyright royalties. We may, in our sole discretion, spend up to
$25,000 for promotional purposes. The production companies will also help to
promote the artist and recordings. Any funds expended on behalf of the
production company will first be recouped from our distributor. After our
initial expenditures have been recouped, revenues from advances and royalties
will generally be allocated 60/40 (we will receive 40% and the production
company will receive 60%) for domestic sales and 50/50 for international sales.
The terms of the agreements are generally five years.
ITEM 1A.
There have been no material changes in our risk factors since the filing of our
Form S-1 as filed with the Securities and Exchange Commission on December 12,
2008.
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ITEM 2. DESCRIPTION OF PROPERTY
LOCATION:
Our administrative office is located in Burbank, California. An affiliate of our
chief executive officer, the Tucker Family Spendthrift Trust, provides this
space to the Company at a cost of $1,500 per month. Included within this cost
are telephone and fax lines, computers and other related office equipment.
Our operational headquarters are located in Coral Springs at the personal
residence of Mr. Collins, the president of Famous Records. Mr. Collins provides
this space rent free. We believe that this space is sufficient to meet our short
term needs. We do not believe that there will be any problem in securing office
space at a commercially reasonable rate when our business requires additional
space.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET FOR COMMON STOCK
There is currently no public trading market for our common stock. The Company
intends to apply for trading of its shares on the Over-the-Counter Bulletin
(commonly known as the OTCBB). The Company can provide no assurances that they
will apply or that their application will be accepted.
HOLDERS
As of March 2, 2009 there were approximately 140 holders of record of our common
stock.
DIVIDENDS
The Registrant has not declared any cash dividends on its common stock since the
company's inception and does not anticipate doing so in the foreseeable future.
EQUITY COMPENSATION PLAN INFORMATION
We have not established any equity compensation plan. However, we have entered
into agreements with four individuals whereby they receive shares of our common
stock pursuant to their employment and directors agreements. Pursuant to these
agreements, during the year ended December 31, 2008, the Company issued
1,715,942 shares of common stock of the registrant.
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RECENT SALES OF UNREGISTERED SECURITIES
At various dates since our incorporation through December 31, 2008, we issued a
total of 6,800,210 unregistered shares of our Common Stock. Sales of
unregistered shares of Common Stock were made to in reliance on Section 4(2) of
the Securities Act. In each case, the subscriber was required to represent that
the shares were purchased for investment purposes, and the certificates were
legended to prevent transfer except in compliance with applicable laws. In
addition, each subscriber was provided with access to the Registrant's officers,
directors, books and records to obtain any information.
Date: No. of Shares Name Consideration
- ----------------- ------------- ------------------------ -------------
July 5, 2007 10,000 Pop Starz Records, Inc. $ 100
March 31, 2008 1,800,000 Pop Starz Records, Inc. 18,000
March 31, 2008 360,087 Tucker Family
Spendthrift Trust (2) 3,601
April 24, 2008 244,000 Tucker Family
Spendthrift Trust (2) 2,440
May 27, 2008 940,091 Tucker Family
Spendthrift Trust (2) 9,401
May 31, 2008 25,000 Michelle Tucker(1) 250
May 31, 2008 25,000 Francisco Del (1) 250
May 31, 2008 10,000 Marshall Freeman (1) 100
August 21, 2008 55,000 Michelle Tucker(1) 550
August 21, 2008 15,000 Francisco Del (1) 150
August 21, 2008 15,000 Marshall Freeman (1) 150
August 21, 2008 298,000 Tucker Family
Spendthrift Trust (2) 2,980
September 4, 2008 1,106,590 Tucker Family
Spendthrift Trust (2) 11,066
September 4, 2008 10,000 Michelle Tucker(1) 100
September 4, 2008 5,000 Francisco Del (1) 50
September 4, 2008 5,000 Marshall Freeman (1) 50
October 22, 2008 325,500 Tucker Family
Spendthrift Trust (2)(3) 3,255
October 22, 2008 310,000 Michelle Tucker(1) 3,100
October 22, 2008 5,000 Francisco Del (1) 50
October 22, 2008 5,000 Marshall Freeman (1) 50
October 22, 2008 1,230,942 Jeffrey Collins (1) 12,309
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6,800,210 $ 68,002
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(1) All stock issued were issued pursuant to employment, directors and
consulting agreements entered into between the respective shareholders and the
Company.
(2) Shares were issued as repayments of advances made to the Company.
(3) Shares were issued as repayment for accrued rent expense.
ITEM 6. SELECTED FINANCIAL DATA
As a smaller reporting company, we are not required to provide the information
required by this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS
The statements contained herein that are not historical facts are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act. Forward-looking statements are made based upon
management's current expectations and beliefs concerning future developments and
their potential effects upon the Company. There can be no assurance that future
developments affecting the Company will be those anticipated by management.
Actual results may differ materially from those included in the forward-looking
statements. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date set forth on the
cover. Changes to the information contained in this prospectus may occur after
that date and the Company does not undertake any obligation to update the
information unless required to do so by law.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
GENERAL
We are a developmental stage company. We operate our business through our wholly
owned subsidiary, Famous Records Corp. Famous Records is a development stage
company that is engaged in the business of "branding" recording artists. Famous
Records plan is to sign artists to contracts in which the artist is brought into
the process as part of the "team." The artist will participate in achieving the
business goals while at the same time reinforce their creative energies. Our
goal is to focus on a different aspect of emerging opportunities in the music
industry. We will primarily rely on digital distribution of music. In this way,
we will be able to tap a worldwide market with limited costs.
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of our results of
operations and financial condition for the periods presented. The following
selected financial information is derived from our historical consolidated
financial statements and should be read in conjunction with such consolidated
financial statements and notes thereto set forth elsewhere herein and the
"Forward-Looking Statements" explanation included herein.
8
RESULTS OF OPERATIONS
For the years ended December 31, 2008 and 2007, we had a net loss of $75,614 and
$21,522 respectively. From date of Inception (July 5, 2006) through December 31,
2008 we have a cumulative loss totaling $97,236. We had no revenues for the year
ended December 31, 2008. Revenues for the year ended December 31, 2007 and from
the Date of Inception, July 6, 2006 through December 31, 2008 were $2,760. The
current year increase in net loss is due to legal fees incurred in relation to
our filing of Form S-1 on December 17, 2008, Officer's Compensation, and
accounting fees.
LIQUIDITY AND CAPITAL RESOURCES
We have through December 31, 2008 relied on advances made to the Company by our
president and/or affiliated entities of our president who have advanced a total
of $35,538. On various dates throughout 2008, these advances have been repaid
through the issuance of 3,124,300 shares of our common stock. There can be no
assurance that Ms. Tucker, or any affiliate, will continue to make these
advances.
At December 31, 2008 we have negligible cash on hand, and prepaid expenses of
$18,992, which primarily consists of a prepayments through the issuance of
common stock pursuant to an employment agreement and a consulting agreement. We
have a deficit in working capital of $29,234, and have a Deficit Accumulated in
the Development Stage of $97,236.
Subsequent to December 31, 2008, the Company has issued 940,000 shares of common
stock at par value of $.01 as repayment towards the liabilities at December 31,
2008. The Tucker Family Spendthrift Trust has advanced the Company approximately
$5,000 subsequent to year end, a portion of which has been repaid through the
issuance of 400,000 shares of common stock at par value in February 2009.
Over the next twelve months, we plan to market and promote the services offered
by Famous Records. We intend to rely on word of mouth referrals and use the
personal contacts of Jeffrey Collins, the principal executive officer of Famous
Records, and our Board of Directors, to expand operations. If revenues are
sufficient, we may also rely on display advertising in trade journals.
We will need to raise additional funds, either from loans from our officers or
other debt sources. We may also raise additional funds through the sale of our
common stock. No assurance can be provided however, that such additional funding
will be available, or if available, on terms acceptable to the Company. If we
cannot identify additional funding sources in the future and we do not generate
revenues in excess of our expenses, there is a substantial likelihood that we
will have to cease operations.
The Company has entered into pressing and distributions agreements with various
artists. These agreements could have a future effect on our financial condition,
changes in our financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that would be material to
investors, however, as of December 31, 2008, we have not generated any revenues
or incurred any expenses in relation to the agreements and there can be no
assurances that we will be successful in our endeavors to "Brand" the artists,
and thereby generate revenues.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS.
The financial statements and schedules are included herewith commencing on page
F-1.
Reports of Independent Registered Public Accounting Firms ................ F-2
Consolidated Balance Sheets .............................................. F-3
Consolidated Statements of Operations .................................... F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit) ..... F-5
Consolidated Statements of Cash Flows .................................... F-6
Notes to Consolidated Financial Statements ............................... F-7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"), as of the end of the period covered by this Annual
Report on Form 10-K, the Company's management evaluated, with the participation
of the Company's principal executive and financial officer, the effectiveness of
the design and operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Disclosure
controls and procedures are defined as those controls and other procedures of an
issuer that are designed to ensure that the information required to be disclosed
by the issuer in the reports it files or submits under the Act is recorded,
processed, summarized and reported, within the time periods specified in the
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Act is accumulated and communicated to the issuer's management,
including its principal executive officer and principal financial officer, or
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. Based on their evaluation of these disclosure
controls and procedures, the Company's chairman of the board and chief executive
and financial officer has concluded that the disclosure controls and procedures
were effective as of the date of such evaluation to ensure that material
information relating to the Company, including its consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Annual Report on Form 10-K was being prepared.
10
ITEM 9A(T) CONTROLS AND PROCEDURES
INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting. The Company's internal
control over financial reporting has been designed 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 generally accepted in the United States of
America.
The Company's internal control over financial reporting includes policies and
procedures that pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect transactions and dispositions of assets of
the Company; provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
accounting principles generally accepted in the United States of America, and
that receipts and expenditures are being made only in accordance with
authorization 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 Company's financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to
financial statement preparation and presentation. 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.
Management assessed the effectiveness of the Company's internal control over
financial reporting at December 31, 2008. In making this assessment, management
used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO") in Internal Control--Integrated Framework. Based on
that assessment under those criteria, management has determined that, at
December 31, 2008, the Company's internal control over financial reporting was
effective.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by the Company's
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.
ITEM 9B. OTHER INFORMATION.
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Information regarding our directors and executive officer is provided below:
NAME POSITION
- ---- --------
Michelle Tucker President/Secretary/Treasurer/Director
Marshall Freeman Director
Francisco Del Director
Jeffrey Collins President and Director of Famous Records
MICHELLE TUCKER, age 50, serves as our sole officer and serves on our
Board of Directors. She also serves as an officer and director of Apollo
Entertainment Group, Inc. and Pop Starz Records, Inc. Prior thereto, she served
as the president and a director of Pop Starz, Inc. Ms. Tucker received a
Bachelor of Science Degree in Criminal Justice from the University of Florida in
1979. From 1984 to 1986, Ms Tucker continued her education toward a Masters
Degree by attending Florida Atlantic University and Florida International
University
JEFFREY COLLINS, age 68, serves as the president of Famous Records and
serves on the Famous Records Board of Directors. He is also an officer of Alpha
Music Group, Inc. Mr. Collins has over 50 years working in various divisions of
the music industry. He began his career in the United Kingdom where he owned a
chain of record stores, a wholesale distribution company and a record label. He
has produced records and worked with many major label record companies including
MCA and Jive records. Mr. Collins holds degrees from both Leeds College of
Commerce and the University of London.
FRANCISCO DEL, age 38, who is professionally known as "Del," serves as
a director of the Company. He has held similar positions in Beta Music Group,
Inc., and Pop Starz Records, all affiliated entities. An independent
singer-songwriter-producer, Mr. Del was the free-lance producer on Jon Secada's
2005 recordings for Big 3 Records and also wrote songs for Big Band Radio during
that year. In addition, he won a 2005 Telly Award for his performance of
"Careless Whisper." During 2004 he wrote songs for Pitbull on TVT Records. In
2003, he formed a production company, B Smooth Productions, with Dennis
Dellinger, and together they produced Del's debut CD, "Go All Night,." Mr. Del
continues to work as a producer for R&B artists.
MARSHALL FREEMAN, age 26, serves as a director. Since 2003, Mr. Freeman
has served as President of JamRock Entertainment Group, Inc. in Miami Florida.
Mr. Freeman has knowledge of logistical and technical aspects of performances,
concerts, recordings and events; worked with various recording artists within
the entertainment industry; worked as Creative Director of national championship
dance theatre; choreographed numerous events, concerts, dancers ,parades and
events; worked on various music videos; worked as dance instructor for various
camps and schools
FAMILY RELATIONSHIPS.
There are no family relationships among the Registrant's directors and executive
officers.
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors and executive officers, as well as persons beneficially owning more
than 10% of our outstanding common stock, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC")
within specified time periods. Such officers, directors and shareholders are
also required to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of such forms, or written representations from
certain reporting persons, we believe that all Section 16(a) filing requirements
applicable to our officers, directors and 10% shareholders were complied with
during the fiscal year ended December 31, 2008.
CODE OF ETHICS
We have adopted a Code of Ethics that applies to all of our directors and
executive officers serving in any capacity for our Company, including our
principal executive officer, principal financial officer, principal accounting
officer or controller or persons performing similar functions.
CORPORATE GOVERNANCE
We have three directors. We do not have an audit committee, compensation
committee or nominating committee. We do not have sufficient funds to secure
officer and directors insurance and we do not believe that we will be able to
retain an independent Board of Directors in the immediate future. We do not
believe that we will be able to attract independent board members until such
time as a market for our common stock develops.
ITEM 11. EXECUTIVE COMPENSATION.
The following table summarizes all compensation paid to our Chief Executive
Officer and the president of Famous Records for each of the fiscal years ended
December 31, 2008 and 2007. We did not have any other executive officers whose
total annual salary and bonus exceeded $100,000 for the periods presented.
SUMMARY COMPENSATION TABLE
STOCK
NAME AND AWARDS
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1)
- ------------------- ---- ---------- --------- ------
Michelle Tucker,
Chief Executive and 2008 $ 10,200 $ - $ -
Financial Officer 2007 - - -
Jeffery Collins, 2008 $ 12,015 $ - $ 684
President of Famous 2007 - - -
13
SUMMARY COMPENSATION TABLE (CONTINUED)
NON-QUALIFIED
NONEQUITY DEFERRRED
OPTION INCENTIVE PLAN COMPENSATION ALL OTHER
NAME AND AWARDS COMPENSATION EARNINGS COMPENSATION TOTAL
PRINCIPAL POSITION YEAR ($) ($) ($) ($) ($)
- ------------------- ---- ------ -------------- ------------- ------------ -------
Michelle Tucker,
Chief Executive and 2008 $ - $ - $ - $ - $10,200
Financial Officer 2007 - - - - -
Jeffery Collins, 2008 $ - $ - $ - $ - $12,699
President of Famous 2007 - - - - -
(1) Reflects the dollar amount recognized for financial statement reporting
purposes in accordance with SFAS 123(R). Amounts are calculated using the
par value of the common stock as there is no trading market, and management
believes that par value is the best estimate of the fair market value of the
stock on the date of grant.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth certain information, as of March 2, 2009,
concerning the beneficial ownership of shares of Common Stock of the Company by
(i) each person known by the Company to beneficially own more than 5% of the
Company's Common Stock; (ii) each Director; (iii) the Company's Chief Executive
Officer; and (iv) all directors and executive officers of the Company as a
group. To the knowledge of the Company, all persons listed in the table have
sole voting and investment power with respect to their shares, except to the
extent that authority is shared with their respective spouse under applicable
law.
Shares Beneficially
Owned (1)
Title of Name and Address of ---------------------------
Class Beneficial Owner Number Percent of Class
- ------------ ----------------------------------- --------- ----------------
Common Stock Tucker Family Spendthrift Trust (2) 5,661,680 55.6%
150 E. Angeleno Avenue #1426
Burbank, CA 91502
Common Stock Michelle Tucker (2) 2,384,124 23.4%
150 E. Angeleno Avenue #1426
Burbank, CA 91502
Common Stock Jeffery Collins (3) 1,230,942 12.1%
5645 Coral Springs Drive #207
Coral Springs, FL 33076
Common Stock All Officers and Directors as a
group (4) 9,426,746 92.5%
(1) All shares of common stock are owned directly.
(2) Michelle Tucker is a co-trustee of the Tucker Family Spendthrift Trust. Ms.
Tucker, together with the Tucker Family Spendthrift Trust is the primary
shareholder of Beta Music, Inc., owning approximately 79% of the currently
issued and outstanding shares of common stock.
(3) Jeffery Collins is the Chief Executive Officer and President of Famous
Records.
(4) Includes the shares which are beneficially owned by Michelle Tucker.
14
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Except as set forth below, the Company did not have any transactions during
fiscal years 2008 and 2007 with any director, director nominee, executive
officer, security holder known to the Company to own of record or beneficially
more than 5% of the Company's common stock, or any member of the immediate
family of any of the foregoing persons, in which the amount involved exceeded
the lessor of $120,000 or the average of the registrants Total Assets for the
preceding two fiscal years.
During the years ended December 31, 2008 and 2007, the Tucker Family Spendthrift
Trust has advanced the Company $26,672 and $21,601, respectively. Michelle
Tucker, our President and Chief Executive and Financial Officer is a trustee of
the Tucker Family Spendthrift Trust. The Company has issued the Tucker Family
Spendthrift Trust 3,124,000 shares as repayment towards the advances made to the
Company through December 31, 2008. At February 5, 2009, the Company has an
outstanding balance to the Tucker Family Spendthrift Trust of $723.The advances
are considered short-term in nature, and are non-interest bearing.
DIRECTOR INDEPENDENCE
Our directors are Michelle Tucker, Jeffery Collins, Marshall Freeman, and
Francisco Del. Ms. Tucker is also our President and Chief Executive and
Financial Officer and is therefore not considered independent.
"Independent director" means a person other than an executive officer or
employee of the company or any other individual having a relationship which, in
the opinion of the issuer's board of directors, would interfere with the
exercise of independent judgment in carrying out the responsibilities of a
director. Mr. Freeman and Mr. Del are independent directors. The following
persons shall not be considered independent:
(A) a director who is, or at any time during the past three years was,
employed by the company;
(B) a director who accepted or who has a Family Member who accepted any
compensation from the company in excess of $100,000 during any period of twelve
consecutive months within the three years preceding the determination of
independence, other than the following:
(i) compensation for board or board committee service;
(ii) compensation paid to a Family Member who is an employee (other
than an executive officer) of the company; or
(iii) benefits under a tax-qualified retirement plan, or
non-discretionary compensation.
Provided, however, that in addition to the requirements contained in this
paragraph (B), audit committee members are also subject to additional, more
stringent requirements under Rule 4350(d).
(C) a director who is a Family Member of an individual who is, or at
any time during the past three years was, employed by the company as an
executive officer;
15
(D) a director who is, or has a Family Member who is, a partner in, or
a controlling shareholder or an executive officer of, any organization to which
the company made, or from which the company received, payments for property or
services in the current or any of the past three fiscal years that exceed 5% of
the recipient's consolidated gross revenues for that year, or $200,000,
whichever is more, other than the following:
(i) payments arising solely from investments in the company's
securities; or
(ii) payments under non-discretionary charitable contribution
matching programs.
(E) a director of the issuer who is, or has a Family Member who is,
employed as an executive officer of another entity where at any time during the
past three years any of the executive officers of the issuer serve on the
compensation committee of such other entity; or
(F) a director who is, or has a Family Member who is, a current partner
of the company's outside auditor, or was a partner or employee of the company's
outside auditor who worked on the company's audit at any time during any of the
past three years.
(G) in the case of an investment company, in lieu of paragraphs
(A)-(F), a director who is an "interested person" of the company as defined in
Section 2(a)(19) of the Investment Company Act of 1940, other than in his or her
capacity as a member of the board of directors or any board committee.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The following table sets forth fees billed to us by our auditors during the
fiscal years ended December 31, 2008 and 2007 for: (i) services rendered for the
audit of our annual financial statements and the review of our quarterly
financial statements, (ii) services by our auditors that are reasonably related
to the performance of the audit or review of our financial statements and that
are not reported as Audit Fees, (iii) services rendered in connection with tax
compliance, tax advice and tax planning, and (iv) all other fees for services
rendered. All other fees consist primarily of fees incurred to review our
registration statement filings, proxy statements, and 8-K's related to the asset
sales.
December 31, 2008 December 31, 2007
----------------- -----------------
(i) Audit Fees $8,000 $8,000
(ii) Audit Related Fees $ - $ -
(iii) Tax Fees $ - $ -
(iv) All Other Fees $ - $ -
AUDIT COMMITTEE APPROVAL POLICIES AND PROCEDURES
The entire board of directors acts as the Company's Audit Committee. The Audit
Committee does not have a financial expert serving on its committee at this time
due to the size and nature of the Company. The Company intends to seek such an
expert at such time as we develop a market for our common stock.
16
All audit and non-audit services are approved by the Audit Committee, which
consists of the members of the board of directors which considers, among other
things, the possible effect of the performance of such services on the auditors'
independence. The Audit Committee approves the annual engagement of the
principal independent registered public accounting firm, including the
performance of the annual audit and quarterly reviews for the subsequent fiscal
year, and approves specific engagements for tax services performed by such firm.
The Audit Committee has also established policies and procedures for certain
enumerated audit and audit related services performed pursuant to the annual
engagement agreement, including such firm's attendance at and participation at
Board and committee meetings; services associated with SEC registration
statements approved by the Board of Directors; review of periodic reports and
other documents filed with the SEC or other documents issued in connection with
securities offerings, such as comfort letters and consents; assistance in
responding to any SEC comments letters; and consultations with such firm as to
the accounting or disclosure treatment of transactions or events and the actual
or potential impact of final or proposed rules, standards or interpretations by
the SEC, Public Company Accounting Oversight Board (PCAOB), Financial Accounting
Standards Board (FASB), or other regulatory or standard-setting bodies. The
Audit Committee is informed of each service performed pursuant to its policies
and procedures. The Audit Committee has considered the role of Moore &
Associates, Chartered in providing services to us for the fiscal year ended
December 31, 2008 and has concluded that such services are compatible with such
firm's independence.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
3(i).1* Articles of Incorporation
3(i).2* Amended Articles of Incorporation
3(i).3* Second Amended Articles of Incorporation
3(ii).1* By-laws
10.1* Service Agreement for Digital Distribution between Isolation Network,
Inc. and Famous Records
10.2* Pressing and Distribution Agreement between 1-A Chord Records and
Famous Records
10.3* Director Agreement Michelle Tucker
10.4* Employment Agreement Michelle Tucker
10.5* Director Agreement Jeffrey Collins
10.6* Employment Agreement Jeffrey Collins
10.7* Director Agreement Francisco Del
10.8* Director Agreement Marshall Freeman
23 Consent of Moore & Associates, Chartered
31 Certification pursuant to Rules 13a-14(a) and 15d-14(a)(5) of the
Securities Exchange Act of 1934
32 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002
* Incorporated by reference to the Company's S-1 filed on September 15, 2008.
17
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Beta Music Group, Inc.
/s/ Michelle Tucker
-------------------
Michelle Tucker, President and
Chief Executive and Financial Officer
(Principal Executive Officer)
Dated: March 5, 2009
In accordance with the Securities Exchange Act of 1934, this Report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ Michelle Tucker President, CEO, CFO March 5, 2009
- ------------------- and Director
Michelle Tucker (Principal Executive and
Financial Officer)
/s/ Francisco Del Director March 5, 2009
- -----------------
Francisco Del
/s/ Marshall Freeman Director March 5, 2009
- --------------------
Marshall Freeman
18
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELPOMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECMEBER 31, 2008 AND 2007
F-1
MOORE & ASSOCIATES, CHARTERED
ACCOUNTANTS AND ADVISORS
------------------------
PCAOB REGISTERED
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------
TO THE BOARD OF DIRECTORS
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
We have audited the accompanying consolidated balance sheets of Beta Music
Group, Inc. and Subsidiary (A Development Stage Company) as of December 31, 2008
and December 31, 2007, and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 2008 and
December 31, 2007 and since inception on July 5, 2006 through December 31, 2008.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conduct our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Beta Music Group, Inc. and
Subsidiary (A Development Stage Company) as of December 31, 2008 and December
31, 2007, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 2008 and December 31,
2007 and since inception on July 5, 2006 through December 31, 2008, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 7 to the
financial statements, the Company has an accumulated deficit of $95,780, which
raises substantial doubt about its ability to continue as a going concern.
Management's plans concerning these matters are also described in Note 7. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/S/ MOORE & ASSOCIATES, CHARTERED
Moore & Associates, Chartered
Las Vegas, Nevada
February 20, 2009
6490 West Desert Inn Rd, Las Vegas, NV 89146 (702) 253-7499 Fax (702) 253-7501
------------------------------------------------------------------------------
F-2
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2008 2007
------------ ------------
ASSETS
Current Assets:
Cash ......................................... $ 8 $ 79
Prepaid expenses ............................. 18,992 -
-------- --------
Total Assets ............................... $ 19,000 $ 79
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable ............................. $ 16,456 $ -
Accounts payable-related parties ............. 5,363 21,601
Accrued wages related party .................. 18,415 -
Accrued liabilities .......................... 8,000 -
-------- --------
Total Current Liabilities .................. 48,234 21,601
-------- --------
Total Liabilities .............................. 48,234 21,601
-------- --------
Stockholder's Equity:
Common stock, $.01 par value 100,000,000
authorized 10,000 and 6,800,210 issued
and outstanding, respectively ............... 68,002 100
Additional Paid in Capital ................... - -
Deficit Accumulated in the Development Stage . (97,236) (21,622)
-------- --------
Total Stockholder's Equity ............... (29,234) (21,522)
-------- --------
Total Liabilities and Stockholder's Equity $ 19,000 $ 79
======== ========
The accompanying notes are an integral part of these
consolidated financials statements.
F-3
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
From
July 5, 2006
(Date of Inception)
December 31, December 31, to December 31,
2008 2007 2008
------------ ------------ -------------------
Revenue ............................... $ - $ 2,760 $ 2,760
Cost of sales ......................... - 2,251 2,251
----------- ----------- -----------
Gross profit .......................... - 509 509
General administrative expenses ....... 75,614 22,031 97,745
----------- ----------- -----------
Loss before provision for income tax .. (75,614) (21,522) (97,236)
----------- ----------- -----------
Income tax expense .................... - - -
----------- ----------- -----------
Net Loss .............................. $ (75,614) $ (21,522) $ (97,236)
=========== =========== ===========
Basic and Diluted Loss per Common Share $ (0.02) $ (0.46) $ (0.07)
=========== =========== ===========
Basic and Diluted Weigted Average
Common Shares Outstanding ........... 3,265,157 10,000 1,328,682
=========== =========== ===========
The accompanying notes are an integral part of these
consolidated financials statements.
F-4
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
Accumulated
in the Total
Common Paid in Development Stockholders'
Stock Amount Capital Stage Equity
--------- --------- ------- ----------- -------------
Balance, July 5, 2006,
date of inception ...... - $ - $ - $ - $ -
Proceeds from Founders
shares issued on
July 14, 2006
at $.01 per share ...... 10,000 100 - - 100
Net Loss ................. - - - (100) (100)
--------- --------- ------- ---------- ------------
Balance December 31, 2006 10,000 100 - (100) -
Net Loss ................. - - - (21,522) (21,522)
--------- --------- ------- ---------- ------------
Balance, December 31, 2007 10,000 100 - (21,622) (21,522)
Shares issued for
conversion of accounts
payable-related parties
at $.01 per share on
March 31, 2008 ......... 2,160,087 21,601 - - 21,601
Shares issued for
conversion of accounts
payable-related party
at $.01 per share on
April 24, 2008 ......... 244,000 2,440 - - 2,440
Shares issued for
conversion of accounts
payable-related party
and accrued wages-
related parties on
May 27, 2008 ........... 1,000,091 10,001 - - 10,001
Shares issued for
conversion of accounts
payable-related party
and accrued wages-
related parties on
August 21, 2008 ........ 383,000 3,830 - - 3,830
Shares issued for
conversion of accounts
payable-related party
and accrued wages-
related parties on
September 4, 2008 ...... 1,126,590 11,266 - - 11,266
Shares issued for
conversion of accounts
payable-related party
and accrued wages-
related parties on
October 22, 2008 ....... 645,500 6,455 - - 6,455
Shares issued for prepaid
expenses on
October 22, 2008 ....... 1,230,942 12,309 - - 12,309
Net Loss ................. - - - (75,614) (75,614)
--------- --------- ------- ---------- ------------
Balance December 31, 2008 6,800,210 68,002 - (97,236) (29,234)
========= ========= ======= ========== ============
The accompanying notes are an integral part of these
consolidated financials statements.
F-5
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
From
July 5, 2006
(Date of Inception)
December 31, December 31, to December 31,
2008 2007 2008
------------ ------------ -------------------
OPERATING ACTIVITIES:
Net loss .............................. $(75,614) $(21,522) $(97,236)
Adjustments to reconcile net loss to
net cash provided (used) by operating
activities:
Rent expense paid through issuance of
common stock ....................... 9,750 - 9,750
Changes in Assets and Liabilities:
Prepaid expenses .................. (3,750) - (3,750)
Accounts payable .................. 16,456 - 16,456
Accounts payable-related parties .. 26,672 - 48,288
Accrued wages related party ....... 18,415 21,601 18,400
Accrued liabilities ............... 8,000 - 8,000
-------- -------- --------
Net Cash Provided (Used) by
Operating Activities ........... (71) 79 (92)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from issuance of common
stock .............................. - - 100
-------- -------- --------
Net Cash Provided by Financing
Activities ......................... - - 100
-------- -------- --------
Net Increase in Cash ................ (71) 79 8
-------- -------- --------
Cash at Beginning of Period ........... 79 - -
-------- -------- --------
Cash at End of Period ................. $ 8 $ 79 $ 8
======== ======== ========
Supplemental Disclosures:
Cash paid for income taxes .......... $ - $ - $ -
======== ======== ========
Cash paid for interest .............. $ - $ - $ -
======== ======== ========
Non Cash Transactions:
Repayment of related party
advances, accrued wages, and rent
expense through issuance of common
stock ............................. $ 67,902 $ - $ 67,902
======== ======== ========
The accompanying notes are an integral part of these
consolidated financials statements.
F-6
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND USE
OF ESTIMATES:
NATURE OF BUSINESS AND BASIS OF PRESENTATION
Beta Music Group, Inc. ("the Company") was incorporated in the State of Florida
on July 5, 2006 under the name Pop Starz Productions, Inc. On November 14, 2007,
the Company changed its name to The Next Pop Star, Inc. On October 20, 2008, the
Company changed its name to Beta Music Group, Inc. As The Next Pop Star, Inc.
the principal business purpose of the Company was producing live entertainment
competitions (in installments or episodes) to be taped and/or filmed for
distribution by television and/or internet means and become a reporting company
under federal securities laws with a publicly-traded class of securities. We
were not successful, and therefore, in October 2008, in conjunction with our
name change, the Company changed its business focus to "branding" recording
artists.
On August 21, 2008, the Company filed Articles of Incorporation in the State of
Florida for Famous Records, Corp. ("Famous" ) Famous' principal business purpose
is to commercially release and promote finished "Master" recordings for
distribution on an exclusive basis during a specific term to record stores,
other non traditional outlets and digitally through downloads & ringtones. At
December 31, 2008, Famous is a wholly owned subsidiary of Beta Music Group, Inc.
The accompanying financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
pursuant to the rules and regulations of the Securities and Exchange Commission
("SEC").
PRINCIPALS OF CONSOLIDATION
The consolidated financial statements include the accounts of Beta Music Group,
Inc. and its wholly owned subsidiary Famous Records, Corp. All intercompany
accounts and transactions have been eliminated in consolidation
USE OF ESTIMATES
The preparation of financial statements, in conformity with accounting
principals generally accepted in the United States of America requires
management to make estimates and assumptions, which affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period.
CASH AND CASH EQUIVALENTS:
Cash and cash equivalents are considered to be all highly liquid investments
purchased with an initial maturity of three (3) months or less.
REVENUE RECOGNITION:
Revenue will be generated through the sale and licensing of recorded music, live
performances, merchandising, and other activities related to acting and
modeling. Revenues will be recognized when all of the following have been met:
F-7
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
o Persuasive evidence of an arrangement exists;
o Delivery or service has been performed;
o The customer's fee is deemed to be fixed or determinable and free of
contingencies or significant uncertainties
o Collectability is probable.
FINANCIAL INSTRUMENTS:
Financial instruments consist primarily of cash and accounts payable-related
parties. The carrying amounts of cash and accounts payable-related parties
approximate fair value because of the short maturity of those instruments.
ADVERTISING:
Advertising costs are charged to operations when incurred. Advertising costs for
the years ended December 31, 2008 and 2007 were nil and $11,381, respectively
INCOME TAXES:
The Company complies with the provisions of SFAS No. 109 "Accounting for Income
Taxes". Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts and are based on enacted tax
laws and rates applicable to the periods in which the differences are expected
to affect taxable income. Valuation allowances are established, when necessary,
to reduce deferred income tax assets to the amount expected to be realized.
INCOME (LOSS) PER SHARE:
In accordance with SFAS No. 128, "Earnings Per Share", the basic net loss per
common share is computed by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding. Diluted net loss
per common share is computed similar to basic net loss per common share except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. At December 31, 2008
and 2007, diluted net loss per share is equivalent to basic net loss per share
as there were no dilutive securities outstanding.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157 ("FAS 157"). The Statement
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles (GAAP), and expands disclosures about
fair value measurements. This Statement is effective for financial statements
issued for fiscal years beginning after November 15, 2007, and interim periods
within those fiscal years. The adoption of FAS 157 did not have a material
affect on our financial position or results of operations.
F-8
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities--Including an amendment of Statement
of Financial Accounting Standards Statement No. 115" ("SFAS 159"), which permits
entities to choose to measure many financial instruments and certain other items
at fair value at specified election dates. A business entity is required to
report unrealized gains and losses on items for which the fair value option has
been elected in earnings at each subsequent reporting date. This statement is
expected to expand the use of fair value measurement. SFAS 159 is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The adoption of SFAS 159 has not
had a material affect on our financial position or results of operations.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations ("FAS 141R"). FAS 141R replaces current guidance in FAS 141 to
better represent the economic value of a business combination transaction. FAS
141 establishes principles and requirements for how an acquiring entity
recognizes and measures all identifiable assets acquired, liabilities assumed,
any non-controlling interest in the acquired entity and the goodwill acquired.
The changes to be effected with FAS 141R from the current guidance include, but
are not limited to treatment of certain specific items such as expensing
transaction and restructuring costs and adjusting earnings in periods subsequent
to the acquisition for changes in deferred tax asset valuation allowances and
income tax uncertainties as well as changes in the fair value of acquired
contingent liabilities. FAS 141R also includes a substantial number of new
disclosure requirements that will enable users of financial statements to
evaluate the nature and financial effect of business combination. FAS 141R must
be applied prospectively to all new acquisitions closing on or after January 1,
2009. The impact of this pronouncement will depend on future acquisition
activity of the Company, if any.
In December 2007, the FASB issued FAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements -- An Amendment of ARB No. 51" ("FAS 160").
FAS 160 requires that accounting and reporting for minority interests be
recharacterized as noncontrolling interests and classified as a component of
equity. The standard is effective beginning January 1, 2009 and must be applied
prospectively. The Company does not expect that the adoption of FAS 160 will
have a material impact on its results of operations or our financial position.
In March 2008, the FASB issued SFAS No. 161 "Disclosures about Derivative
Instruments and Hedging Activities--An Amendment of FASB Statement No. 133."
("SFAS 161"). SFAS 161 establishes the disclosure requirements for derivative
instruments and for hedging activities with the intent to provide financial
statement users with an enhanced understanding of the entity's use of derivative
instruments, the accounting of derivative instruments and related hedged items
under Statement 133 and its related interpretations, and the effects of these
instruments on the entity's financial position, financial performance, and cash
flows. This statement is effective for financial statements issued for fiscal
years beginning after November 15, 2008. We do not expect its adoption will have
a material impact on our financial position, results of operations or cash
flows.
F-9
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONTROL BY PRINCIPAL STOCKHOLDERS
The directors, executive officers and their affiliates or related parties, own
beneficially and in the aggregate, the majority of the voting power of the
outstanding shares of the common stock of the Company. Accordingly, the
directors, executive officers and their affiliates, if they voted their shares
uniformly, would have the ability to control the approval of most corporate
actions, including increasing the authorized capital stock of the Company and
the dissolution, merger or sale of the Company's assets or business.
NOTE 2: DISTRIBUTION AGREEMENTS
Through December 31, 2008, Famous has entered into six (6) Pressing and
Distribution license agreements. The agreements have five year terms, which
commence on the date of each CD or DVD released. The Company will act as the
record label whereby the Company agrees to have an album commercially released
within six months following all finished product being submitted and accepted.
The Company will pay for labels, pressings and CDs including shipping, artwork &
printing on behalf of the production company as well as the payment of any
mechanical & copyright royalties. Additionally, the Company will be responsible
for all digital and download sales.
The Company will receive fifty percent of all advances and royalties derived
from overseas export sales under the agreements and forty percent on all
domestic sales. The royalties will be calculated after any manufacturing costs
incurred by the Company.
In relation to the agreements, the Company has committed to spend at least
$25,000, at its own discretion, per Pressing and Distribution license agreement,
towards promotion of the record released. The promotional expense will be
recouped by the Company from payments received from the record label's
distributor.
Subsequent to December 31, 2008, the Company has entered into seven additional
five year Pressing and Distribution license agreements with the same terms as
the aforementioned agreements. The Company also entered into one three year
agreement, with substantially the same terms as the aforementioned agreements.
As of December 31, 2008, there has not been any activity related to the
aforementioned agreements.
NOTE 3: RELATED PARTY TRANSACTIONS
In April 2008, the Company entered into a month to month lease agreement with
the Tucker Family Spendthrift Trust. Monthly rent expense is $1,500 and for the
year ended December 31, 2008, rent expense in the amount of $12,750 has been
recorded. Should the Company continue to lease the space beyond April 2009, the
monthly rent will increase to $1,750. Prior to April 2008, the Company had been
provided office space, telephone and secretarial services from a related party
at no charge.
F-10
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January and May 2008, the Company entered into agreements with individuals to
serve as Corporate Directors. Per the terms of the agreements, the Directors are
to receive 5,000 shares of common stock of the company for each month that they
serve as a Director. If the Director serves as a Chairman of any committee, he
is to receive an additional 2,500 shares per month, and if he serves on any
committee, he is to receive an additional 1,250 shares per month. For the year
ended December 31, 2008, the Directors did not serve as Chairman or on any
committees.
In October 2008, the Company entered into an employment agreement with Michelle
Tucker, whereby she is to receive compensation in the amount of $3,000 per month
for serving as President to the Company. Michelle Tucker also receives 5,000
shares of common stock per month for serving as the Chief Financial Officer to
the Company.
Effective October 1, 2008, the Company, through its subsidiary Famous Records
Corp., entered into an employment agreement and a Director agreement with
Jeffery Collins to act as President to Famous and as a member of the Board of
Directors of Famous. Mr. Collins is to receive compensation in the amount of
$4,000 per month for his services as President of Famous. Additionally, on
October 22, 2008, the Board of Directors approved the issuance of 1,230,942
shares of Company common stock to Mr. Collins in relation to his employment
agreement. The Company shares vest over a period of three years, and should his
employment with Famous cease prior to the end of the three year term, the shares
are subject to forfeiture on a pro-rata basis. Per the terms of his Director
Agreement, Mr. Collins is to receive 5,000 shares of Famous common stock per
month for being a member of the Board of Directors of Famous. Additionally, if
he should serve as Chairman of any committee, he shall receive 2,500 Famous
shares per month, and for service on any other committee he shall receive an
additional 1,250 Famous shares per month. At December 31, 2008, Mr. Collins was
due 15,000 shares of common stock of Famous, however, those shares have not yet
been issued.
During the years ended December 31, 2008 and 2007, the Tucker Family Spendthrift
Trust made cash advances to the Company $26,672 and $21,601, respectively, for
general operating expenses.
During the year ended December 31, 2008, the Company issued 5,552,968 shares of
common stock to related parties as payment for services, rent expense and
advances from a related party.
NOTE 4: INCOME TAXES
At December 31, 2008 and 2007 deferred tax assets consist of the following:
December 31,
2008 2007
-------- --------
Federal loss carryforwards ....... $ 32,000 $ 7,000
State operating loss carryforwards 7,000 2,000
-------- --------
39,000 9,000
Less: valuation allowance ........ (39,000) (9,000)
-------- --------
$ - $ -
======== ========
F-11
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has established a valuation allowance equal to the full amount of
the deferred tax asset primarily due to uncertainty in the utilization of the
net operating loss carry forwards.
During the year ended December 31, 2008, the valuation allowance increased by
$30,000.
As of December 31, 2008, the effective tax rate is lower than the statutory rate
due to net operating losses.
The net operating loss carry forwards begin to expire in 2026 for both federal
and state purposes.
NOTE 5: STOCKHOLDERS' EQUITY
At December 31, 2007, the authorized capital of the Company consisted of 10,000
shares of common stock with a par value of $.01. There were 10,000 shares of
common stock issued and outstanding. Effective March 31, 2008, the Articles of
Incorporation were amended to increase the authorized number of shares of common
stock to 100 million shares of common stock. At December 31, 2008, there are
6,800,210 shares outstanding.
On March 31, 2008, the Company issued 2,160,087 shares of common stock as
repayment of $21,601 of amounts due to related parties.
On April 24, 2008, the Company issued 244,000 shares of common stock as
repayment of $2,440 of advances made by the Tucker Family Spendthrift Trust to
the Company.
On May 27, 2008, the Company issued 940,091 shares of common stock to the Tucker
Family Spendthrift Trust as repayment of advances made to the Company in the
amount of $9,401. Also on that date, the Company issued 60,000 shares to
Officers and Directors for their services to the Company.
On August 21, 2008, the Company issued 298,000 shares of common stock to the
Tucker Family Spendthrift Trust as repayment of advances made to the Company in
the amount of $2,980. Also on that date, the Company issued 85,000 shares of
common stock to Officers and Directors for their services to the Company.
On September 4, 2008, the Company issued 1,106,590 shares of common stock to the
Tucker Family Spendthrift Trust as repayment of $2,816 of advances made to the
Company and $8,250 of accrued rent. Also on that date, the Company issued 20,000
shares of common stock to Officers and Directors of the Company for their
services.
On October 22, 2008, the Board of Directors approved the issuance of 1,230,942
shares of Company common stock to Mr. Collins in relation to his employment
agreement. The Company issued 325,500 for repayment of $1,755 in advances from
the Tucker Family Spendthrift Trust, $1,500 in accrued rent, as well as 320,000
shares to Directors and Officers for their services to the Company.
F-12
BETA MUSIC GROUP, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6: MINORITY INTEREST
The Company has a minority shareholder in Famous owning approximately 2%. Due to
the operating loss of the subsidiary, the minority interest has not been reduced
from the operating loss as there is no obligation of the minority shareholder to
make good on such losses. However, if future earnings do materialize, the
majority interest will be credited to the extent of such losses previously
absorbed by the majority shareholders. The minority shareholder is an executive
of the operating subsidiary, and as such, the minority shareholder may request
that his minority interest be exchanged for shares in the parent company on a
fair market value basis. The minority interest in the subsidiary was issued
pursuant to the employment agreement with Jeffery Collins.
NOTE 7: GOING CONCERN
At December 31, 2008, the Company has a working capital deficit in the amount of
$29,324 and has and a Deficit Accumulated in the Development Stage of $97,236.
As such, the accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. The Company does not have
sufficient working capital for its planned activities, which raises substantial
doubt about its ability to continue as a going concern.
Continuation of the company as a going concern is dependent upon obtaining
additional working capital and the management of the Company has developed a
strategy, which it believes will accomplish this objective through short-term
loans from related parties and additional equity investments, which will enable
the Company to continue operations for the coming year.
NOTE 8: SUBSEQUENT EVENTS
Subsequent to December 31, 2008, the Tucker Family Spendthrift Trust has
advanced the Company $1,600. Additionally, during January 2009, the Company
converted $5,595 of advances from the Tucker Family Spendthrift Trust to 595,000
shares of common stock and issued 450,000 shares of common stock for accrued
rent and rent expense for January 2009. The Company issued 960,000 shares of
common stock to its Officer and Directors for accrued wages and for Officer and
Director compensation for the month of January. The Company also issued 50,000
shares to a consultant for services provided in January 2009.
In February 2009, the Company received advances from the Tucker Family
Spendthrift Trust in the amount of $2,448. The Tucker Family Spendthrift Trust
was issued 550,000 shares in February for repayment of advances made to the
Company and for February 2009 rent expense. The Company also issued 320,000
shares of common stock to its Officer and Directors for February 2009.
F-13